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The Principles of the WTO

Describe about the World Trade Organization for Effective Business Organization.

This paper is designed to provide a broad scope analysis of the World Trade Organization (WTO). The objectives, policies and foundational reasons upon which its operation is built, are the things discussed in the paper. The paper evaluates how effective the organization has been to the members in creating a favorable, competitive and open market trade. It dwells on some of the member countries by evaluating the winners and losers on the trade improvements of WTO. World Trade Organization is an organization with a vested interest in the free and negotiable trade environment. It creates open trading conditions to members by eliminating barriers and regulations hindering business partners from trading freely. It provides an elaborative and well-defined platform for country members to solve their business disputes and differences. Often, less developed members enjoy the opportunity to develop their market capacity among the developed nations.

The WTO has it's headquartered in Geneva Switzerland where delegates, ambassadors or ministers of members states meet in a span of one per two years (Chien-Huei. 2012). Its ideologies are developed and evaluated by the secretariats who are experts in various professions. They deliberate and discuss upon the fate of the organization. Progress, challenges, and changes about market dynamisms are identified and implemented by the Secretariat. Every member country must have its representative in the meetings secluded to evaluate the progressiveness of the WTO (World Trade Organization 2014). The WTO is about peaceful trade coexistence and round table solution of trade conflicts and disputes (Amrita et al.  2012). It champions for progress in negotiating business and commerce opportunity among member states without discriminations on financial capacity or production level. Evidently, it has enhanced market opening, barrier removal and consumer protection against harmful and substandard commodities.

Free flow of trade promoted by WTO, helps nations to create employment opportunities, improve global trade integration of both developed and developing countries and creates confidentiality among companies, industries, firms and governments on the business requirements establishment for guidance on business commodities and practices (Kateryna 2014). The rules enhance certainty on what to trade and how to make a trade in the global market. The above benefits accrued by producers, distributors, and consumers due to the existence of the WTO aim at maximizing global economic growth. In situations where member countries have conflict in interest, the WTO intervenes to offer a consultative and directive solution in a manner that embraces accommodative and cohesive operations (Amrita et al.  2012).

Non-Discriminatory System

The WTO was formed to adhere to the objectives of The General Agreement on Tariffs and Trade (GATT). GATT was established in 1947, but the formation of WTO picked its dream of creating a free trade environment with regulations and rules well known to all members of the global market registered as members. The structured systems of the WTO are to streamline the market system to incorporate market economy in the international trade system to eliminate complicated barriers and tariffs that are not important in the global market and to use good rules that are not aimed at preventing a given party from participating in the market.

This concept motivates the productive use of limited resources to provide a maximized satisfaction of needs to a potential population globally.  Upon creating an accommodative environment for trading partners, the organization facilitates sustainability, protection, and preservation of business trade environment. Thereby, fueling fertile conditions to make the deal without uncertainty or unreliability of environmental challenges to arise in a global market (Chien-Huei 2012). The WTO do consider the need to cater for developing countries interests in the structured document of rules and regulations to facilitate their economic expansion in trade. This is evident in the membership register which contains the majority of less developed countries.

The WTO operates under the legalized conditions. They are the principles of the WTO and include;

A) Non-Discriminatory System

The trading system laid by the WTO Is aimed at eliminating any indication of discriminatory behavior in the market (Aik and Bart 2014). The trading partners are, therefore, tried to remain fair and equal to all member countries. It is the most integrated principal of the WTO, with two categories:

a) The Most favored nation principle. It states that members of the WTO are supposed to get equal treatment. In case two partners are involved in a trade and they are all members of the WTO then an advantage is realized, the members are all guaranteed to enjoy the benefit without favoring a member. Therefore, all members should treat each other with a level of equality in the case of any advantage in the trading process (William 2012). About tariffs and barriers, a change of their restriction should be projected to all members of the WTO without subjecting others to different restriction levels. However, a member can decide to provide this advantage to a member of the WTO but deny a similar position to a non-member. Thus exempting a non-member from enjoying an advantage enjoyed by members of the organization. This principle is often followed by members due to its significant benefits it provides to countries. These advantages are;

Open Operation Principle

Provision of equal access to international markets accrued from the agreement terms enabling all countries regardless of financial muscles to access freely international markets without overestimated restrictions (William 2012).

Ensuring maximization of efficiency through importation from most talented producer or supplier of a product and services

Reduction in the cost of administering the trade rules due to the ability of equal level of treatment among the member states (Uri and Chiedu 2015).

Minimization of the costs of trade negotiations. This is practical due to a multilateral kind of agreement that pools many countries together to avoid the use of the bilateral system with expensive procedures (Aik and Bart 2014).

b) The principle of nation treatment. This principle argues that both foreigners and locals are treated equally as long as they are members of the WTO. It does not allow for segmentation on the foreign and domestic products and services. It prevents a nation from favoring its goods and services against foreign goods from a member country. Its baseline is to create an opportunity for fair competition among the products and services in the market.

The organization is founded on the importance of having a free tariff and barriers kind of business activity (Aik and Bart 2014). The blocks created by some of the trading partners are not part of the WTO agreement. It limits the rate of tariff and barrier applications as a means of encouraging a free trade among the members. The reduction or elimination of trade barriers and tariffs require a continuous process with the benchmark of the WTO. Under the principle, import taxes are not encouraged in business. It provides an advantage to local good while restricting the competitiveness of foreign commodities in the market. Even though import tariff is a common practice that provides a government of domestic goods with revenue, it is as per the WTO appropriate to regulate the level of its application about member states. Through multilateral agreements, it is being reduced with general global levels of tariffs.

The members are demanded to abide by the negotiations of embracing an approved amount to be charged to achieve an optimal level of taxes charged on imports efficiently. This is made predictable and stable through records in the schedules of agreements. Apart from tariffs on imports, the WTO can have a quantitative restriction. This is a limitation on the quantity allowed for importation or exportation at a defined period of trade (World Trade Organization 2016).  This enhances a general identification on the level of the products or services needed for importation or exportation in a given member country.

Predictability and Transparency

The operations among the members are it in a foreign or domestic country should not feel frustrated by expectations of changes in barriers or tariff level (Aik and Bart 2014). Both investors and traders are usually able to predict the variations in these restrictions due to guidelines outlined in the WTO agreements and terms. Thus enhances persistence and likely economic changes. Often, predictable and stable economic environment boosts employment opportunity creation and motivates levels of investments because important partners can predict and determine the revenue accrual ability. Member States enjoy skilled trade among members if there is a transparency criterion on the practices of countries and their respective governmental regulations (Aik and Bart 2014). Thus a member remains upright on the projected changes. The following practices are encouraged by the WTO to practice transparency, exhaustively;

Publication of trade regulations by a domestic country

Notifying the WTO on the trade measures a country has decided to put in place

Having a database where all changes in respective country’s terms of trade are pooled

D) Competitiveness

The WTO encourages competitions that are healthy in the market. It does not allow for the use of subsidies to attract consumers and use of products in the market which are below the standard products value. Dumping of goods is also prohibited by WTO.

E) Protection of the Environment

The organization agrees on the need to provide protection to not only the environment but also the health sectors considered necessary. These health sectors are; plant, public and animal (Andrew 2013). While in business either in a foreign or domestic country, the protection of the environment is critical, and any use of environment contrary to WTO agreements is punishable as per the policies.

F) Developing Less Developed Countries than Developed Countries

The aim of the WTO formation was to create an environment that creates equal opportunities for member nations. It sought to boost economic levels of less developed countries to at least improve towards those of the developed countries. Among the factors influencing this principle is the need to provide benefits to less developed countries. These countries are known for their economic size and transition ability.  These countries are lagging behind on the poverty and financial standards. Their main exports are in raw form without undergoing any processing stage thus accruing low-income capacity compared to countries exporting finished products. Such countries are favored through;

Flexibility if rights directly aimed at them in the WTO process of decision making.

Competitiveness

Training and providing technical assistance to them to boost their morale of negotiation in the WTO decision processes.

Promoting programs such as Trade Initiatives to enhance their capacity building.

Developed nations are having a global exposure greater than less developed; the integration demonstrated by the WTO thus existed to expose these countries by mingling and trading together with developed nations. These are expected to gain more privileges as opposed to developed countries.

Perform negotiations on trade. The primary mandate of the WTO is to have trade talks about products, services and intellectual property (Justin et al. 2014). It forms the principles guiding the mechanisms of liberalizing business and eliminating reduced tariffs and barriers. It defines the agreement between countries depending on the product of specialization and how the product from various countries are accommodated in the same market situation under the similar market system. Providing solutions to disputes or conflicts. It has a framework on how to deal with conflicts or disputes resulting from production, distribution or consumption mechanisms (Elimma 2011). The rules made under the Dispute, and Settlement Understanding is used appropriately to iron differences among trading partners. In the process of solving disputes, affected countries are given the opportunity to analyze the guidelines of the agreement terms and finally, decide on their actions without being subjected to harsh judgments (Marina 2012).

Implementation and monitoring of agreements. To get a membership, a responsible country must comply with the contract terms. The terms require member countries to remain transparent and stable on their trade terms and be consistent with the WTO requirements (Elimma 2011). To ascertain the authenticity of holding the agreements conditions, the WTO always implement and monitors member country’s adherence. It is, therefore, an obligation to the organization to keep countries on track of performance through their abidance by the terms.

Provision of developmental support and trade capacity building. Among the agreements in the WTO documents, development of countries and building business capacity are taken care of through implementation of the regulations outlined (Kimberly 2016). Development of countries requires enough periods of operation with the WTO to enhance the possibility of identifying right projects to inject in a country. Also, it relies on a country’s commitment to the agreements outlined. Development of member countries incorporates infrastructural and trade expansion.

Organization of outreach activities. Through the incorporation of different relevant bodies to help in creating awareness about the WTO activities, it reaches many people who need the services and information disseminated (World Trade Organization 2016). The WTO in most cases uses non-organizational bodies to help in promoting its aims to capture a larger population. International agencies are also involved in the WTO as well as media fraternity. The outreach programs enlighten the global on the importance of creating a free global trade that does not hinder investors and traders from participating in businesses of their choice as much as guidelines are provided (Kimberly 2016).

Countries have joined the WTO due to the benefits enjoyed by the member states. Even though there is a principle that creates more benefits to some countries than others, countries and economic analysts believe that joining the WTO creates several global opportunities in trade. Among the benefits are; trade openness, reduced tariffs, and barriers, faith methods of solving disputes, lower retaliations from behaviors of ant partner, and business capacity buildings (Elimma 2011).

These benefits lure nonmembers to join and prevent members from leaving the organization. Currently, the organization has 162 member states who are mandated to equal trade opportunities in the countries of countries. A large percentage of the members are developing countries, with developed countries representing only a third of the total population. The remaining countries who do not belong are portraying different reactions. Some countries are prospects with few remaining processes to be registered as members.

Although the principles of the WTO demonstrate the need to provide an environment that promotes parallel developments and benefits to countries, there has been a lot of contradictions on the countries that benefits most. Most scholars, in agreement with the GATT arguments, declare that developed countries enjoy the WTO benefits as opposed to developing countries.  Developing countries lack well-placed structures to boost the policies and negotiations upon which the WTO operates (Julia 2011). Thus, developed countries exploit the gaps left by developing countries to benefit.

China and the USA have benefited most from the organization compared to other members of the group. These countries have structures and infrastructure required by the WTO to facilitate healthy and productive trade globally (Chien-Huei 2012). China being a new member, has enjoyed a lot of benefits due to institutionalization it carried while seeking for membership. It has enjoy maximized economic rise.  China has experienced a stable external financial exposure due to reduced restrictions that only favored its already finished products.  Apart from enjoying stable external financial exposure, China is at the helm of a steady economic growth at the expense of other countries. This is due to the efficient and re-allocation of resources it has embraced totally with the regulations of the WTO. Its technological and innovative ability necessitates the growth ladder in almost all the member states economies. It sells its products in every market approve free for access by the organization (Fact Sheets on the European Union 2016).

Countries like Cape Verde are favored by the principle clause that provides more benefits to countries with weak economic stability through support developmental programs and building capacity. Though, fewer benefits are realized due to a poor infrastructure network and poorly structured systems.  Cape Verde relies much on the supportive services offered through development programs to fill the gaps in its economic cycle. Though, in a real sense, the organization’s main agenda is to provide equal opportunities to members to exploit possible disparities in the trade to capture more consumers and thus attain a progressive economic growth.

Conclusion

The WTO has done and is still doing a lot of tremendous work to ensure integration of trade operations. It has created a rich opportunity for both developed and developing countries to use to achieve and maintain their economic status. Elimination of reduced tariffs on imported product and reduction of barriers in the global member markets are significant development through which free and the accountable market has been expanded to both producers of raw goods and finished goods. Even though the WTO has framed principles that guide members’ behaviors in the market, developing countries should wake from their slumber to make use of the great opportunities opened in the international markets. They are to embrace new technology and innovation like developed countries, an action that will increase the level of revenue recognition if they use the new technology to sell already processed products. The large market opened by the WTO should be enough to provide developing countries with an opportunity to decide and control their production sectors. This is made possible through free market interaction that can help one with ideological borrowing. To conclude, the WTO has alt of advantages as opposed to disadvantages. Therefore, a dedicated member cannot fail to accrue benefits at the long run. 

References

Aik H., and Bart D. Meester. 2014. WTO Domestic Regulation and Services Trade: Putting Principles into Practice. Cambridge University Press.

Amrita N., Martin D., and Robert M. 2012. The Oxford Handbook on the World Trade Organization. Published by OUP Oxford.

Andrew Linzey. 2013. The Global Guide to Animal Protection. Published by University of Illinois Press.

Chien-Huei WU. 2012. WTO and the Greater China: Economic Integration and Dispute Resolution. Publisher: Nijhoff

Elimma C Ezeani.  2011. The WTO and Its Development Obligation: Prospects for Global Trade. Anthem Press Publisher.

Fact Sheets on the European Union. 2016. The European Union and the World Trade Organization

James Harrison. 2013. The European Union and South Korea: The Legal Framework for Strengthening.., Edinburgh University Press.

Julia Selivanova.  2011. Regulation of Energy in International Trade Law: WTO, NAFTA, and Energy Charter. Kluwer Law International.

Justin M., Charles L., and Mark Davison. 2014. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. Published by Edward Elgar.

Kateryna Holzer. 2014. Carbon-related Boarder Adjustment and WTO Law. Published by Edward Elgar.

Kati Kulovesi. 2011. The WTO Dispute Settlement System: Challenges of the Environment Legitimacy. Kluwer Law International.

Kimberly Amadeo. 2016. WTO Membership Its Benefits and Importance. Retrieved: September, 27, 2016. https://www.thebalance.cm/wto-membership-benefits-and-importance-3306364

Marina Foltea 2012. International Organization in WTO Dispute Settlement. Published by Cambridge University.

Nuno Pires de Carvalho.  2011. The TRIPS Regime of Trademark and Designs. Published by Kluwer Law International.

Traccey E., Michael J. and Treblicock.  2013. Research Handbook on the WTO and Technical Barriers to Trade. Edward Elgar publisher.

Uri Dadush and Chiedu Osakwe 2015. WTO Accessions and Trade Multilateralism. Published by Cambridge University Press.

William J. Davey 2012. Non-discrimination in the World Trade Organization: The Rules and Exceptions. Martinus Nijhoff Publishers.

World Trade Organization. 2012. WTO Analytical Index: Guide to WTO Law and Practice, Published by Cambridge University Press.

World Trade Organization. 2014. The World Trade Organization.

World Trade Organization. 2016. Annual Report

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