The World Trade Organization is an intergovernmental organization that facilitates and regulates international trade. The WTO is used by governments to set rules about international trade and to enforce them. Here are some facts about the WTO and how it works. Read on to learn more about this organization and its role in developing countries.
It upholds the international rules of trade among nations
The World Trade Organization is a global organization that deals with the rules of international trade and makes sure they are upheld. The organization has been around for over five decades and has helped to open markets for trading. Its members have benefited from the WTO’s rules by increasing their merchandise exports, which are up by 6% a year. The organization also aims to ensure that all members receive fair treatment in each other’s markets.
The WTO has the power to make rulings about national policies that affect international trade. It has addressed a variety of issues, including growth hormones in US beef and chicken production, and process-based patent laws in India that allow domestic pharmaceutical companies to re-engineer drugs developed in other countries. It has also addressed issues such as the way Mexico catches tuna and how shrimp harvesting techniques harm sea turtles.
When a dispute arises, WTO members agree to use the multilateral system to settle it. This means that members agree to follow rules and to respect judgements made by the other side. A panel can only reject a report if it has unanimous approval from all panelists.
Another issue that can be addressed by the WTO is labor issues. Labor standards affect the wages of workers and are crucial to free trade. Without adequate labor standards, wages will be artificially held down. This can be a problem if governments abrogate labor rights. Such policies are likely to violate the WTO’s free trade philosophy, as they are detrimental to workers.
While the WTO rules are not absolute, they are based on negotiations among its members. The current rules of the WTO largely reflect the Uruguay Round negotiations, which included major revision of GATT and the creation of new rules of trade in services and intellectual property. It also introduced new dispute settlement procedures. As a result, the WTO rules are about 30,000 pages long. In addition to the 30 agreements, individual members can make commitments to the rules of trade.
However, there are longstanding problems within the WTO that have been hampering its normal function. The US wants to abolish the role of the Appellate Body in dispute settlement, but most of the WTO members want to keep the existing dispute settlement mechanism in place. A solution has yet to be reached but there is considerable pressure to act.
Its financial sources
The WTO is a global trade organization that receives most of its funding from contributions from its members. Member countries contribute based on their share of international trade. Nigeria’s Ngozi Okonjo-Iweala was recently elected as the WTO’s seventh Director-General.
Its appeals system
The WTO appeals system is set up to resolve trade disputes between members. Appeals are heard by a standing Appellate Body, made up of seven members. The body must complete its review within sixty days and should not take more than ninety days. If a dispute cannot be resolved by the panel, the Appellate Body may adopt a panel report.
The US is critical of the appeals process and believes that it is tainted with politics. While there is no evidence that the US blocked Chang’s reappointment, it has accused him of turning the appellate body into a lawmaking body. This claim was based on Chang’s participation in several decisions against the US.
The US has also objected to Rule 15 of the Appellate Body’s Working Procedures, which allows an Appellate Body member to complete an appeal without consulting the DSB. The Appellate Body drafts its Working Procedures in consultation with the Director-General of the WTO and the Chairman of the DSB. The US’s objection to this rule is related to the idea that members should not take new cases.
The World Trade Organization’s Appellate Body was intended to consist of seven jurists from different countries. But now, there is only one member left, a Chinese judge named Hong Zhao. The Trump administration has refused to approve any new appointments, leaving the body short of quorum. If Zhao is not replaced before the end of the month, the WTO Appellate Body will cease to operate.
Besides US complaints, the EU has also complained to the WTO over its trade remedies. This includes steel import duties of 25 percent and aluminium import duties of 10 percent. While these cases are outside the WTO’s jurisdiction, the WTO’s adjudication system is slow. Currently, there are a record number of trade disputes in the WTO. If a dispute proceeds to adjudication, the defendants must either accept or reject the decision. This process could take many months. Ultimately, it could take two years for the decision to be deemed final.
In March 2020, the 16 members of the WTO decided to establish a separate appeals system for trade disputes. This is called the Multiparty Interim Appeal Arbitration Arrangement, or MPIA. MPIA will use arbitration to provide binding trade disputes resolutions between members. The process also requires independent review of panel reports.
Its impact on developing countries
Trade disputes have a negative impact on developing countries. They can lead to a country’s economy suffering a substantial setback. Even with the WTO, developing countries have no control over the amount of subsidies they receive from developed countries. Subsidies from the rich countries are threatening the livelihoods of poor farming families.
Developing countries depend on the growth of the world economy for their survival. The benefits of international trade are widely recognized, ranging from helping to eradicate extreme hunger to cutting poverty in half. International trade is also essential to developing a global partnership for development. This initiative aims to address the needs of least-developed countries and reduce trade barriers, improve debt relief, and help developing countries become more competitive. Developed countries also support international trade by increasing their official development assistance.
Although the WTO has facilitated increased trade among its members, there have been major inequities among developing countries and in some sectors. The impact on developing countries has been uneven, with the US dominating the WTO’s decision-making. In addition, the gains from increased world trade have been disproportionately concentrated in the developed world. In addition, many countries have experienced significant barriers to export diversification.
Another problem with the WTO is its failure to deal with natural disasters. In 2010, for example, the WTO took almost two years to agree on temporary trade concessions for Pakistan, despite the fact that severe flooding in Pakistan had cost $10bn of damage. If these concessions had been made sooner, Pakistan’s exports to the EU would have soared by EUR100m this year.
There are a number of policy recommendations that have been made to improve the WTO’s impact on developing countries. One of these is to remove the TRIPS (Trade Related Intellectual Property Rights) regime. This agreement enables rich countries to patent indigenous knowledge, which can only hurt developing nations.
A major concern is that the Millennium Round talks scheduled for late 1999 will be focused on the US’s plan to push for liberalization across a range of issues. This will be detrimental to developing countries as they will not be prepared to compete with the US in the increasingly competitive global marketplace.
