Why the World Trade Organization?

What is the World Trade Organization (WTO)? Why do we need the WTO or better yet, who even is the World Trade Organization (WTO)?  A search online will reveil four consistant vantage 4 points of the WTO: 1) An assemblage of 153 countries with a common denominator of interest in trade; 2) A reincarnation and further development of the 1948 International Trade Organization (ITO); 3) An organization that operates a system of trade rules and affirms a solid vision of free trade verses protectionism; 4) A monopoly that is inevitable to avoid in membership and is neither beneficial nor developmental for nations. As it may be apparent, a simple description of the WTO varies depending on who you ask and at what point in history you direct the acquisition.

Let us return to the original question(s): what is/ who is the World Trade Organization? As we examine the first point, “An assemblage of 153 countries with a common denominator of interest in trade,” it is most notable to recognize the vast membership of this program. Of the 193 countries recognized by the United Nations, nearly 80% are also members of the WTO—indicating a massive support basin and acceptance of the values and stances this program represents—or so this high number suggest (WTO).

Moving along to the second section of this statement, “…a common denominator of interest in trade,” this too represents a strong classification of direction. Directly from the WTO Director-General, he defines the organization as “The international organization whose primary purpose is to open trade for the benefit of all (WTO).” Providing the legal grounds for international trade, the WTO acts as both judge and cop of global trade—a role it has played since its declaratory founding in 1995.

Stemming off the foundational year of the WTO in 1995, we can next examine the definition, “A reincarnation and further development of the 1947 International Trade Organization (ITO).” Historically, the roots of the WTO stretch back to the early 1930s, after the grave-ridden WWII had left an economic skeleton for most nations and shattered the trade relationships of nearly every major power in the world.

At the heart of the 1930s meltdown was later determined to be hectic and hasty move towards protectionism which had been caused by the large fluctuation of exchange rates and prohibitively high tariffs (Snow 173). Protectionism is defined as, “Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition (Protectionism).”

A snowball effect of reaction caused many countries to close their trade borders, protect and rely upon domestic goods, and restrict unpredictable international commerce (Snow 173). With the global economy in increasing havoc, a conference was called in Bretton Woods, New Hampshire in July 1944 to plan for a post war economic Band-Aid.

The conference convened with 44 countries gathered at the Washington Hotel at the base of Mt. Washington, and a series of agreements were melted into existence. Two major international organizations were established at the conference, both of which have lasted to this day: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD or World Bank).

Dealing directly with the currency fluctuations and the granting of loans to war-poor countries (Snow 174), the IMF and World Bank were seen as major milestones for needed international interaction—and what many believe to be the beginnings of the current universal theme song: globalization (Snow 177).

However, the emergence of regulated free trade was not as well embraced by the Bretton Woods countries. There are a multitude of reasons as to why this coalition did not endure (become ratified), but one major speed bump was vastly clear: the designation of ‘proper authority’ for trade agreement enforcement was not agreed upon (Snow 175). Is it just to allow one organization to hold such power? Can there ever be a legitimate, unbiased source of power? It is beneficial to note the history behind this problem, all of which began and ended with the United States of America.

Championed by the U.S. government, explicitly by the Truman administration, the mission for the ITO initially gained headway in the U.S. Department of State. At the United Nations Conference on Trade and Development (UNCTAD) in 1946, the Truman administration proposed the idea of drafting the outline for an International Trade Organization—one that would act as a backbone for the all-body issue of free trade (Snow 175).

There were two staples of ITO as initially proposed: 1) the organization would “provide an institutional base for the reduction of trade barriers and tariffs (Snow 175).” 2) (the most controversial issue) the creation of a just authority figure to enforce the agreements of the free traders (Snow 175).

This second quality was questioned by both opponents and proponents of free trade due to its infringement on national and individual sovereignty (specifically, American sovereignty). However, looking back at the history books now—even this con of the ITO could have possibly been overturned if the proper amount of time had been allotted to the proposal. However, an alternate political agenda stole the lime light from the ITO that very same year: the North America Treaty Organization (NATO) proposal—“the first peacetime alliance in American history (Snow 175).”

The story concludes here, with the ITO never reaching ratification. A year later however, at meeting in Geneva, Switzerland, the General Agreement on Tariffs and Trade (GATT) was ratified. Where did this come from? Proposed as a short-term, temporary solution to the free trade issue, GATT was originally supposed to act as an interim for the proposal of an ITO—till it could be agreed upon and internationally accepted (Snow 176).

Thus, because the organization needed ratification, the major discrepancies were avoided, like the lack the enforcement capability that the ITO had proposed, which had ultimately led to its demise. A safe, vague resemblance of the ITO resulted and came to be known as the GATT.  However, what was meant to last only a couple of years till formal agreement upon free trade disciplines eventually transformed into the standard operating procedure for trading amongst nations till the creation of the WTO in 1995—almost 50 years later (Snow 177).

As two of the three original Bretton Woods proposals were ratified and enacted (IMF and World Bank), the idea of an international trade organization (with power) was forgone and held more as a potential ideal for future trading. Acting a safety net for global free trade, the GATT did uphold the core idea of most favored nation (MFN) and the four branches of action that stem from that: nondiscriminatory, transparency, consultation/dispute settlements, and reciprocity—all of which were presented in the ITO (Snow 176). However, what the GATT lacked was the ‘action’ part of these branches AKA what the ratified ITO would have remedied.

Half a century later the last, or Uruguay, round proposed the founding of the World Trade Organization or the International Trade Organization “reincarnated (Snow 176).” With the promotion of free trade and the necessary mechanisms of enforcement, the WTO was ratified in December 1994, and enacted in January 1995 (WTO). Defined as an economic agreement—not a trade treaty—which is what the ITO had been proposed as—the WTO was met with astounding support and again championed by the U.S. (Snow 176).

The WTO as an economic agreement was vitally important in implementation because it isolated the proposal as a single, finished entity—not something that could be changed or tampered with before ratification. This also meant that only a simple majority was needed from both houses, not a 2/3 vote, which could have resulted in another disoriented, un-compromiseable affair (Snow 176). But as I will discuss later, perhaps this was only the beginning of the ‘cutting of corners’ and irregularity of the organization.

After 50 years of promoting a paper-frail treaty of trade that looked grand in theory but lackadaisical in action, the GATT (ITO) had finally upgraded to a powerful and influential agreement known none other as the World Trade Organization.

“An organization that operates a system of trade rules and affirms a solid vision of free trade verses protectionism.” From 70 members in 1995 to 153 members in 2008 (not including 30 nonmember countries that are currently in the five year process of gaining entry), the WTO is currently in control of 97% of world trade (Snow 177). With figures that claim almost global acceptance, the World Trade Organization appears powerful, influential, acceptable, and reputable…

When I initially began my research on the WTO, I started compiling information from the organization’s site itself first, for obvious reasons. I found that familiarizing myself with the goals and visions of the program itself was extremely helpful in my initial quest for knowledge because it offered the ‘ideal version’ of what the organization has set out to accomplish. Below, I have listed the set of activities that the WTO sets out to accomplish each session (WTO):

— Negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and agreeing on rules governing the conduct of international trade (e.g. antidumping, subsidies, product standards, etc.).
— Administering and monitoring the application of the WTO’s agreed rules for trade in goods, trade in services, and trade-related intellectual property rights.
— Monitoring and reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements.
— Settling disputes among our members regarding the interpretation and application of the agreements.
— Building capacity of developing country government officials in international trade matters
— Assisting the process of accession of some 30 countries who are not yet members of the organization.
— Conducting economic research and collecting and disseminating trade data in support of the WTO’s other main activities.
— Explaining to and educating the public about the WTO, its mission and its activities.

(Refer to WTO)

From this list, a summary of the actions of the WTO may include a forum of governments that negotiate, define, and enforce trade agreements as well as settle trade disputes. By formalizing the rules of trade among nations, it is the WTO’s heart to ensure the multilateral trading system and level the playing field of international commerce (WTO). Writing contracts that guarantee beneficial trading rights for all and binding governments to keep these trade policies within the agreed limits is the ideal aim of the WTO and what they have deemed necessary to ensure and improve the welfare of the peoples of the member countries.

It must be understood though, these are the ideal actions of the organization—not necessarily the true actions (Beattie). By simply reading these statements, I can equate them to the rules of my Sylvanian household: my parents set and enforce the rules, seek to know my whereabouts all the time, trust that I am where I say I am, and present consequences to the actions I take that they define as ‘corrupt’ or poor in judgment.

But 19 years later, I have learned that parents do not always uphold their defined rules; they bend with the right techniques applied. They enforce rules that they see beneficial to them and they can yearn to know my whereabouts all the time, but I can ultimately go wherever I want now. Even the consequences I face coming home may be malignant, but by the next day or week— the fight is benign and just another lesson to have been learned.

Through this comparison, it is evident that both actors can act ‘out of ideally.’ What remains important is the understanding and relationship between these self-driven groups. The WTO has been faced with a massive account of disapproval from various groups—including the enormous public protest that occurred in Seattle, Washington in 1999 (Beattie).

This anti-globalization movement aroused over 40,000 people to the scene of a Washington hotel (WTO) and even carried over into other international organizations mentioned in this essay i.e. IMF and the World Bank conferences. But is this protest the reflection of the WTO itself or the fact that it is an international, globalization-promoting program (Beattie)?

Perhaps the two questions should not be disjointed, but in fact harmonized. The last definition of this organization I presented to you stated, “A monopoly that is inevitable to avoid in membership and is neither beneficial nor developmental for nations.” As a Ricardian principle (Snow 178), free trade promotes comparative advantage and benefits the consumer. However, this is under the assumption that all players can be competitive AKA find domestic products and services that are advantageous to capitalize on.

As a “handmaiden of the process of economic globalization (Snow 180),” this intertwining of policies and relationships may cause shadiness and a sort of forgetfulness of the individual state and a focus on braided, macroeconomics (Snow 179).

As an organization that encompasses almost 80 percent of the world’s nations (and rising) (WTO), is this monopoly even realistic to halt or even bicker with? Multinational corporations see the mass of interconnection as a valuable asset to their profit motive businesses, yet critics of the system claim the entire WTO to be an “unaccountable, corporate-based, government (Snow 180).” So who is correct? Or are perhaps both?

It is important to recognize the economic base of all of these negotiations and to note the difference between an economic treaty and government treaty, for the sake of discretion of influence. “The goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives (WTO).”

In other words, this organization is not meant to ensure the security of every member nation—it is only meant to extend formalized authority over deemed trade regulations to ensure economic transparency—not security. Thus, as a regulator of the relationship between foreign direct investment and trade, the WTO is not held accountable for any by-product of security centered dispute between nations.

It is also important to note that of the 156 members of the WTO, 117 are developing nations, or nearly two thirds (WTO). This speaks loudly of the ideal visionary hope of the program, which is to equalize trading opportunity, no matter government structure, militaristic action, social dissimilarity, or religious affiliation.  Special provisions are available to developing countries, including more flexible deadlines, implementations, and measurements of progress. In addition, the WTO offers hundreds of technical programs that are designed to aid new or developing trade networks (WTO). This program is often called the “Aid for Trade” and hopes to develop the efficiency and infrastructure of the developing nation (WTO).

Consumers and producers are the only applicable terms that can legitimately be used to describe the society of the WTO. Nouns like American, Asian, Caucasian, German-speaking, Jewish, or third-world are irrelevant in the context of the WTO because it does not seek an identity form within; it seeks an identity throughout. Every member nation has these terms that represent its body of beings, but the WTO is not a body of beings; it is a body of beliefs and those beliefs rest in the heart of free trade.

With all of these differing backgrounds, languages, government structures etc., it is a wonder how this organization even exist in harmony, much less add contributable productivity. So how does this happen? We have already discussed an outbreak of dispute that occurred in 1999, only four years after its founding. But as it has been stated, the WTO is run by its member governments—all decisions being approved/denied by a group of designated governmental ministers, known as the Ministerial Conference (WTO).

Every two years or so, these ministers meet in Geneva, Switzerland, where the headquarters of the WTO stands, to discuss bids for treaties, negotiations, and Dispute Settlement Understandings (a specially appointed group of independent experts that base infringement of trade agreement upon their singular interpretation of the commitments) (WTO).

Within those two years, a group of ambassadors and delegates from all member governments, known as the General Council, meet regularly and discuss proposals, ideas, and developments (WTO), all the while keeping tabs and a close watch on the current trading systems in place. Specialized subsidiary bodies such as the Councils Committee and other sub-committees administer and monitor the implementation of agreements between WTO members, reporting actions they deem as ‘corrupt’ or poor (WTO).

While the WTO is driven by its member states predominantly, it would be hard to omit the work and coordinated function of the Secretariats, who present a united front for the progression of the WTO (WTO). With over 700 staff members including experts, lawyers, statisticians, economists, communication experts, and so—these people assist delegates day in and out (WTO). Whether compiling information, following trends, coordinating trade activities, or observing the established negotiations in action—these employees provide invaluable services and resources for member nations.

Another function of these employees is to maintain regular dialogue with other governmental organizations and parliamentarians, as well as non-governmental organizations. The media and general public usually fall under the ladder of home governmental press, but with modern technologies, it is becoming progressively easier for general citizens to gain access to full WTO briefings, treaties, and communication warehouses, all in the “…aim of enhancing cooperation and increasing awareness of WTO activities, (WTO).”

As the columns of the ideal WTO include “non-discriminate, transparent, competitive, and beneficial agreements (WTO)”, it may seem a wonder that so much opposition to its participation has occurred since its founding 17 years ago. The IMF and World Bank have both evolved and changed somewhat since their beginnings in 1947, but their foundations have held strong and fit. Yet as a predecessor to the WTO, the ITO was shut down before it even reached open status.

There are many varying views as to where and what the World Trade Organization will become and proceed (or perhaps recede) to, but one outstanding feature that has and will remain constant throughout this entire process of evaluation: globalization is on the mount and as the first cousin to this trend, free trade ought to keep climbing—that is, till it is forced to face a consequence bigger than its intended actions.

Bibliography

  •   Snow, Donald M.Cases in   International Relations 5tf ed. “Free Trade: From ITO to WTO and   Beyond.”, Pearson Education, Inc. 2012
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