The World Trade Organisation (WTO) is a global agency that oversees international trade. Created by the Marrakesh Agreement of 15th April 1994, the WTO commenced its operation on 1st January 1995 and today (October 2017) boasts of 160 members. This membership covers about 98% of the world, with about 20 countries undergoing the process of vetting to become members (Porter 105). Before its creation, the General Agreement on Tariffs and Trade (GATT) was the sole body coordinating trade activities in the global arena. Evidence gleaned from the WTO official website shows that the organization operates under the general administrative law (GAL) principles such as the General Agreement on Trade in Services (GATS) to oversee the free flow of trade activities amongst member states (Porter 106). This paper examines the formation of the WTO, its mandate, the proof of success, and the challenges it faces in the contemporary global trade.
The core goal of the WTO entails ensuring that there are no unnecessary trade barriers and that each member nation can reap maximum benefits from its trade activities with other members. It achieves this by creating a mutually beneficial platform for making trade agreements, setting trade rules, and the resolution of trade disputes(Porter 107). It also puts a specific focus on developing nations by encouraging them to enter into beneficial agreements with developed countries for the exchange of goods and services.
Even so, Shaffer posits that the WTO faces the problem of not meeting its obligations in creating a level playing ground for both developing nations and their developed counterparts (3). Individually, critics charge the organization of promoting trade agreements that favor developed countries at the expense of third world nations (Porter 108). Supporters of this criticism argue that the WTO should offer preferential treatment to developing countries to allow them to catch up with their developed counterparts (Porter 108). While some of this criticism does not have a firm basis, it is clear that still, the WTO has a challenge of attaining its core mandate of opening trade that benefits all members (Piewitt 65).
Creation and Purpose of the WTO
The WTO is a product of the Marrakesh Agreement. Representatives from about 124 nations met in Marrakesh, Morocco on 15th April 1994 to discuss, sign, and adopt the Marrakesh Agreement. The concession would set the ground for the creation of the present-day WTO and the beginning of the Uruguay Round talks which eventually bore fruits on 1st January 1995, when the WTO started its operations (Porter 108). Both the Marrakesh and the Uruguay Round built on the existing GATT, with several new agreements and rules establish to carter for trade in services and intellectual property as well as to eliminate any current technical barriers (Porter 106). The resultant blueprint also created clear and efficient methods for resolving disputes, making it easy for member nations to do business with each other and amongst themselves with increased confidence (Piewitt 65).
In a nutshell, the Marrakesh Agreement is a collection of agreements, rules, and policies that all member nations must ratify and comply with.According to Porter, additional contracts have since been brought into existence as the WTO attempts to address emerging geopolitical issues such as climate change, economic marginalization, war, and political ideologies (108). For example, the Doha Development Round of talks has been ongoing since 2001 (Porter 108). While looking back to the original intention surrounding the ratification of the Marrakesh Agreement, it is arguable that these emerging agreements are meant to lower trade barriers streamline global trade, with more focus on developing nations (Shaffer 4).
The formation of the WTO was purposely meant to create a free and efficient platform for global trade. Part of the Marrakesh Agreement that established the WTO outlines and acknowledges the need “… for favorable actions designed to help third world countries to develop(Piewitt 72). Mainly, WTO would ensure that the least industrialized amongst them should secure a share of growth in the global commerce commensurate with the needs of their economic development (Porter 109). This core undertaking is in tandem with the reality that at the time of incorporation, about 75% of all members were in the developing category.
In the same vein, researchers argue that the WTO was formed to address the plight of the developing nations. Porter supports this school of thought by asserting that developing countries should boast a platform to trade with the developed economies while still getting protection and space to grow their domestic economies (110).
For example, coffee and tea growing nations that are poor should be allowed to access developed nations’ markets but also get protection so that large multinational companies from developed countries do not destroy their domestic industries by cheap products (Shaffer 8). The example can be justifiable given the reality that large multinational corporations enjoy economies of scale and can produce goods at relatively low cost while some small businesses from developing nations experience enormous startup and operational costs. Such inequality needs to be addressed by an impartial organization that is committed to distributing the gains of global trade (Porter 110).
WTO Governance Structure
The WTO has three core divisions. Official organizational structure accessed from the organization’s official website demonstrates that the WTO follows a tripartite governance structure made up of the adjudicatory, administrative, and legislative arms. Each of these divisions oversees a distinct area (Piewitt 66). For example, the executive department is in charge of supervising the enforcement of agreements, rules and policies while the adjudicatory arm while the determining and settling trade disputes and the legislative unit is in the cost of developing trade laws and regulations (Porter 112).
For purposes of smooth operations, the adjudicatory arm operates independently while the other two divisions work in a more interdependent manner with significant influence from member states, more so those with more considerable clout such as the United States of America, China, United Kingdom, Germany, and Japan. Form a global regulatory and governance perspective; the WTO displays three core dimensions (Piewitt 72). These dimensions are internal governance, organizational disciplines, and relations with other global regulatory bodies (Piewitt 70).
The internal governance dimension concentrates on bodies such as the Ministerial Council, administrative agencies, and dispute resolution body while regulatory disciplines have to with making executive decisions where member nations participate (Porter 112). Further, the relations between WTO and other global regulatory agencies dimension concerns itself with creating a mutually cohesive and beneficial rapport with other supra bodies (Piewitt 72). The concept allows for easy compliance and implementation of the WTO agreements, rules, and policies. One can infer from the above tripartite governance structure and dimensions that the WTO is committed to not only improving the welfare gains of its members, but it is also determined to creating global economic empowerment (Porter 109).
WTO’s Success Stories
The WTO offers technical training to its members. Prewitt maintains that the WTO has been actively engaged in training officials from member countries in trade areas such as negotiation skills, production, and general trade skills (68). The organization holds hundreds of seminars and workshops each year where officials from all member nations attend. Also, as Porter states, the Ministerial Council, as well as the secretariat, disseminate training materials to member nations all the time when requested (108). While this training meant to make the global trade system more efficient and mutually beneficial to all members, more emphasis is put on developing nations.
Scholars argue that by training officials from developing countries, the WTO keen to create a level playing field for all members to participate (Shaffer8). Moreover, the training is meant to impart members with the necessary tools for complying with the organization’s agreements, rules, and laws (Piewitt 70). Increased knowledge and awareness of these transactions, regulations not only enhance compliance but also empowers member nations to engage their peers in a more mutually beneficial manner.
Another area that the WTO has scored well is lowering trade barriers. According to Prewitt,the WTO requires member nations to reduce their tariffs when trading with other member nations (72). Besides, the organization has been at the forefront in the campaign for the creation of bilateral and multilateral trade agreements between and among member nations (Shaffer 9). Such contracts result in lowered tariffs and elimination of other forms of trade barriers. The emphasis lies in developing states by giving them preferential treatment such as increasing the set trade quotas for agricultural goods from developing countries (Porter 112). In effect, the lowered trade barriers have increased the volume of trade at the global marketplace, with increased activity in services and other intangible trade goods such as intellectual property and digital products.
Again, lowered trade barriers and increased trade volume have compelled member nations to switch to more sustainable trade activities such as fair trade and green energy (Piewitt 73). While several other global organizations have also advocated for a viable business, the WTO has continued to lead the way in campaigning for fair trade and green energy measures receive immense success (Porter 110). The milestone is achievable through grants and other incentives such as tariff exemption (Shaffer 9). For example, farmers who subscribed to the fair trade coffee beans from Brazil receive huge returns by way of high prices and relatively low tariffs when selling their coffee in North American and European markets Porter (112).
Challenges Facing the WTO
It is interesting to note that the WTO has hardly met its promises. Shaffer shows that the WTO has not fully achieved its obligations of creating liberalizing trade and generating welfare gains to all member nations considering that there are still high trade barriers between countries(10). For example, the Doha Development Round has barely made an impact in the areas of lowering trade barriers and growing global trade more so among developing nations that have low clout when compared to their developed counterparts (Shaffer 10). Moreover, most developing countries have registered minimal growth despite the lowered trade barriers (Piewitt 70). The reality can better explain this failure that the WTO has not achieved its core goal of growing economic power by liberalizing the distribution of welfare gains at the global marketplace (Shaffer 11).
Moreover, there have been several cases of disgruntled member nations who feel that the dominant developed countries do not reciprocate the fair trade gestures they offer when engaging in trade activities (Piewitt 70). For example, free trade is evident in the area of industrial goods and services coming from developed nations, yet it is absent in the field of agricultural products coming from developing countries (Porter 116). Critics argue that developed countries have succeeded in protecting their manufacturing sector through subsidies while the developing notations have not succeeded in getting protection in their agricultural sector. This impasse has increased the bilateral agreements between member nations (Shaffer 12).
The WTO faces criticism of being undemocratic. Critics argue that while the activities of the WTO have global implications, the organization is not run in a transparent manner (Piewitt 74).
Large multinational corporations from developed countries have always been accused of lobbying and influencing the process of making core decisions by the organization’s organs (Piewitt 70). While it is true to note that the WTO has created a liberalized global market and enhanced efficiency when nations enter into trade deals, the organization is not as democratic as member nations would expect. Political leaders and trade policy experts from powerful countries have been accused of influencing policies that favor their situation (Porter 114). For example, the making of anti-dumping regulations is meant to bar developing nations to sell their industrial products in developed countries.
Again, developed nations have been accused of blocking imports from developing countries by putting up high import duties and quotas on specific products such as clothing and electronics. According to Shaffer, the WTO also advocates for the privatization of public services such as education, health, and water (14). Such a policy approach allows large corporations from developed nations to acquire critical public assets in developing countries at the alow price (Piewitt 75). Arguably, these criticisms are supported by the slow economic growth of developing countries at a time when developed countries continue to experience relative economic prosperity.
The WTO has helped to open up the global marketplace for both developed nations and their developing counterparts to thrive. This essential benefit is in tandem with the organization’s mandate to facilitate global trade by way of negotiating agreements and settling disputes. Even so, it is necessary to note that the conventions, rules, and policies that form the body of GAL that governs the mandate of the WTO cannot alone solve the challenges that the organization faces.
There is a growing need for developed nations to show goodwill in operating reciprocally to give their developing counterparts room to thrive and grow their nascent economies. Large multinational organizations from developed countries should work ethically to avoid cannibalizing small corporations working in developing nations. While it can be argued that strengthening the WTO’s internal administrative, adjudicatory, and legislative mechanism could solve the ongoing challenges, it is justifiable to assert that every nation operates in a competitive way against other countries. In this regard, the WTO should encourage member states to enter into more bilateral and multilateral agreements to open up free trade opportunities.
Piewitt, Martina. “The Creation of the World Trade Organization and the Establishment of an Advocacy Regime.” Journal of Public Affairs (14723891), vol. 15, no. 1, 2015, pp. 62-75.
Porter, Roger B. “The World Trade Organization at Twenty.” Brown Journal of World Affairs, vol. 21, no. 2, 2015, pp. 104-116.
Shaffer, Gregory. “How the World Trade Organization Shapes Regulatory Governance.” Regulation & Governance, vol. 9, no. 1, 2015, pp. 1-15.