The WTO is an intergovernmental organization whose mandate has been the regulation of international trade (Ruddy 475). About 123 countries signed the Marrakesh agreement in 1994 to officiate the operations of the WTO, which was formed to replace the GATT (General Agreement on Tariffs and Trade. Therefore, the organization commenced its operations in 1995. The primary role of the WTO has been the regulation of trade between the participating countries by creating frameworks to facilitate trade agreements and dispute resolution mechanisms (Davis 1). Most importantly, the WTO operates through setting up policies, which govern the international trade (Ruddy 476). The organization has specific agreements that the majority of participating countries in the international trade negotiate and sign. As such, the policies and rules become the ground rules on which the international commerce occurs (Ruddy 475).
Therefore, the rules act in the form of contracts by which the participating governments would have to observe and operate within the agreed limits. Therefore, although negotiated and agreed by governments, the policies of the WTO are meant to help the producers, importers, and exporters to conduct business and at the same time allow the respective governments meet the environmental and social objectives (Rena 77). Therefore, the justification of this paper is to offer a conclusive discussion on the relevance and similarity of WTOA policies in the modern world.
WTO Organizational Structure and Operations
The WTO’s system has the overriding purposes of facilitating the flow of trade as freely as possible so long as the participants do not realize undesirable side effects. Besides removing possible trade barriers, WTO ensures that the trading companies, individuals, and governments understand and abide by the trading rules while assuring them of the stability of the policies (Rena 77). Therefore, transparency and predictability are basic features in the operations of the WTO. However, in the time of disputes, the organization has a well-crafted dispute settlement procedures outlined in the WTO agreements. The organization advocates for harmonious trade relations that are realized through set neutral procedures, which are based on agreed legal foundations (Brink 25).
The organization has established bodies, which facilitate the operations of different committees in the different areas of interest. These bodies are in the form of councils and committees (Ruddy 485). They include the council of trade in goods, council of trade in services, trade negotiations committee, and the council on intellectual property rights (Davis 1). These subdivisions, therefore, facilitate the operations of the WTO through dispute settlement, membership, and accession and in decision-making. However, the operations of the WTO are not mutually exclusive as it cooperates with the World Bank and International Monetary Fund to realize higher efficiencies in the policy making process (Mavroidis 376).
The WTO has indicated a higher preference to tariffs over the other kinds of instruments of protection. The tariff concessions that individual countries give up on accession into the WTO are indicated in their respective tariff schedules as “bound.” According to the positive approach list, not all countries take responsibility for all goods not listed in the schedule. However, for the goods included in the schedule, no country would be allowed to impose trade tariffs on member countries to the WTO.
Fair, transparent, and uniform procedures in valuation standards at the border are highly anticipated by the WTO (Brink 23). Accordingly, the organization has the policy requirement that any such standards imposed on goods be guided by the invoice or transaction value of the products to minimize the cases of victimization. However, the customs officials would be encouraged to go an extra mile in confirming the values indicated on the vouchers through consulting similar or related goods. Other elements involved in the analysis of the policy are on the logistical issues and the associated implications to trade in a given country. The policy works to facilitate ease of movement, storage, and management of the products before they reach the consumer.
Quantity Restriction Policies
The Article XI of GATT 1994 stipulates that the long-run measures of quantitative restrictions are highly restricted unless when applied in the confines of the law or special creations by the regulatory body. For example, the WTO permits temporary restrictions on the management of critical shortages of foodstuffs or other essential substances (Davis 1). Nevertheless, the WTO policy framework dictates that when such special measures are embraced, then all countries would be subjected to equal treatment as against special treatment as such would intervene in the provision of equal treatment.
The WTO rules highly prohibit the use of subsidies more so when intended to expand exports and lower respective prices below the prevailing rates in the domestic market. However, in the GATT era, such provisions were not defined, but were to be defined and imposed by the WTO. The organization, therefore, imposes the countervailing policy by introducing the specific policies (Brink 23).
Other policies that are considered critical to the operations of the WTO are together with anti-dumping policy, the emergency protection policy, and other trade-related measures (Pianta 214). Therefore, the WTO organization would be argued to have developed a quite elaborate system for managing trade across the globe. It is worth appreciating that while countries are not coerced to join WTO, there would be mixed feelings on whether the WTO organization is protectionist or otherwise facilitate the free trade (Pianta 214).
The WTO was responsible for developing a working framework of trading policies for the member countries. The policies and principles are non-discriminatory, reciprocity, binding/enforceable commitments, safety, and transparency (Rena 78). As legal texts and covering an arguably wide range of operations, the WTO agreements become lengthy as well as complex. The principles and policies target nearly all industries such as agriculture, banking, textile and clothing, telecommunications, product safety and industry standards, government purchases, food sanitation, and intellectual property among others. Therefore, the principles are perceived as the foundation of all multilateral trade agreements that the WTO oversees (Ruddy 492). There are various trade policies and principles as illustrated in the following discussion.
- The most-favored-nation: The principle ensures that none of the trading countries would discriminate against a trading partner and insists that all countries grant each other favor in the trading activities. Therefore, whenever a country decides to lower the duty rates or customers for particular products, then such would be applied to all WTO trading partners and not to some discriminatively.
- Equal treatment for the foreigners and the locals: The principle dictates that when the foreign goods reach a market, they should be treated as equal to the local products. The trademarks, the patents, and the copyrights applied in trade should also be applied non-discriminatively to all products. Similarly, customers should be treated fairly and equally, not by such features as the place of origin or race. Therefore, according to this principle, whenever a product or service and any item of intellectual property enter a domestic market, then the national treatment would have to apply.
- Freer trade: Through negotiations with member countries, the WTO embraces the policy of lowered trade barriers as a measure to encourage trade. The WTO focuses on such barriers to trade as tariffs and such measures as the quotas, which restrict quantities tradable. Besides, the organization focuses on exchange rate policies on the international market at some time.
- Predictability: The principle argues that by the WTO publicizing intentions to lower or raise trade barriers that enable the traders to have a clear view of future opportunities and, therefore, plan accordingly. Worth appreciating is that with predictability and stability, investments are encouraged and multilateral trade relations affirmed.
- Fair competition: The principle is defined by the commitment of the organization to have a system dedicated to an open, undistorted, and fair competition. Therefore, the system would have to apply some forms of protection, though in rare occasions to facilitate that fairness. Therefore, the rules of nondiscrimination would be pointed out as basic to ensuring that the fair competition is observed.
With the world realizing the most complex social, political, and economic systems, the WTO has evolved to become a great influence in the world trade relations in the modern day (Horn, Petros and André 1565). The operations of the organization have particularly focused on creating and strengthening institutions and frameworks for the international trade. The differences that would be observed between the traditional international trading relations and the modern ones are that the world trade organization works to facilitate the trade in the modern day through policy institutions. The WTO becomes part of the international governance structure and runs from the premise that international trade is a critical pillar to the global prosperity (Horn, Petros and André 1566).
Therefore, the unilateral decisions affecting the international trade are shown to be discouraged by the WTO, which emphasizes that all member countries should become responsible for the welfare of other trading partners. Worth appreciating is that the international trade has risen to become a pillar of the modern economy. Nevertheless, the challenges facing free trade are exceptionally threatening the welfare of the world, thereby necessitating the intervention of the WTO. Therefore, through the organization the countries open the markets for services and goods and indicate their commitments towards liberalized market systems (Horn, Petros and André 1567).
Through the policies provided, trading countries would have to consult with other players in the market before embracing and imposing changes in tariffs and the related trade regulatory frameworks (Davis 1). For instance, by the WTO enforcing a 100% tariff on all agricultural produce, the world trade organization ensures that all traders in the industry realize a high degree of security. The WTO system contributes to trade and development. It is worth noting that about 75% of all the WTO members are developing economies, striving towards realizing market economic status (Mavroidis 376). The majority, therefore, embraces and implements trade liberalization programs autonomously. However, the WTO has the obligation of guiding the transition process of the countries through policies and frameworks. The outcome of the facilitation process through policies has sharpened competition and motivated innovation, which then breeds success. Free trade has been credited for enlarging the market operations and facilitating economic growth in individual countries as contrasted to protectionism aspect, which leads to greater losses to the traders and the country at large (Brink 23). For example, Canada as a free economy operates under the framework of the WTO trade policies. Accordingly, after its formation, the WTO played a critical role in creating the trading partners across the world for the Canada. Currently, the country realizing over 50% of GDP from participating in the international trade and as such, the country’s economy depends on access to global markets (Horn, Petros and André 1565-1567).
Having been established in 1995, the WTO took over from the GATT and had been shown to encourage free trade. The working of the organization is through trade policies and international integration. Willing countries would consent into the policy frameworks set up by the organization after which the respective countries would commit to embracing fair trading practices. In fairness, a country would realize advancement in the trade by mutual gains from the other member states. While the protectionist regimes work to encourage private operations, the free trade policies encourage caring for others and equal involvement of all other member countries. The discussion presented has evaluated the policies, and the working of the WTO in the modern international trade as would have been contrasted with the traditional operations. Besides the principles that guide the operations of the WTO, the organization works through such policies, including tariffs, subsidies, quantity restrictions, customs procedures, anti-dumping policies, and the emergency protection policy among others. As such, the discussion confirms that the modern policies embraced by the WTO are holistic and comprehensive in ensuring the ease of trade in the international market.