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The World Trade Organisation

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The World Trade Organisation was established in 1995 following its creation as one of the outcomes of the Uruguay Round of negotiations of the General Agreement of Tariffs and Trade (GATT). GATT was very much an ad hoc organisation that dealt solely with trade in goods. The Uruguay Round sought to expand its terms of reference to include services and also intellectual property and create a more formal legal framework in which to carry out trade negotiations. By April 2000 136 countries were members of the WTO. The aims of the WTO are three-fold:

• To help trade flow smoothly, in a system based on transparent rules
• To settle trade disputes between countries
• To organise trade negotiations

The WTO provides a forum for its members to reach agreements through negotiation about how international trade should be liberalised to the benefits its members. It monitors and scrutinises the trade policies in the various regions of the world and those of member countries. It also facilitates solutions to trade disputes.

Currently the WTO has three Agreements, which are periodically re-negotiated:

• General Agreement on Tariffs and Trade - dealing with trade in goods
• General Agreement on Trade in Services (GATS) dealing with trade in services
• Agreement on Trade-Related Aspects of Intellectual property (TRIPS) dealing with copyright, trademarks, patents, industrial designs and trade secrets

One of the stated principles of the WTO is that of non-discrimination. All members are conferred with Most Favoured-Nation status. If one country grants another country a special favour then all members of the WTO should receive the benefit. However, there are some exceptions to this that have been negotiated by the member countries.

In 1994 economists, at what was then GATT, estimated that the agreements could contribute between $184 billion to $510 billion to the world economy by 2005. From the point of view of countries like Zambia the question is how much of this trade will benefit the poor countries. Freeing up international trade and breaking down protectionist barriers exposes many of the LDCs to competition that places great pressures on domestic industry and agriculture and local employment. As many LDCs lack a taxpaying base tariffs on imports are an important form of government revenue.

It should also be remembered that the economic success of many of the MDCs has occurred behind protectionist barriers. The Multi Fibre Agreement of 1961 was a short-term system of quotas on cotton textiles exported by LDCs. It is still in place although the Uruguay round required that it be phased out during the next five years. Despite being advocates of free trade and putting pressure on the LDCs through organisations such as the WTO and the IMF to liberalise trade, many of the MDCs still operate tariffs and other more subtle forms of non tariff barriers. Producer subsidies, and investment grants to depressed areas within trading blocs such as the European Union have the effect of lowering firms' costs in MDCs making their output more competitive than the firms in LDCs.

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Related Glossary Items:
Quotas
Tariff
Trading bloc
IMF
WTO
Protectionism

Related Issues:
Uruguay Round
Lome Convention
Protectionist Policies of Zambia
Zambia's Trade Policy

Related Theories:
Protection:
The Imposition of Quotas
The Imposition of Tariffs and Welfare Loss
The Benefits of Trade