The world trade organization is a global body that sets business rules across countries. No doubt, it has significant roles in the advancement of trade around the world. It facilitates making trade policies and trade negotiations across countries, settles business disputes, helps avoid trade wars, and monitors the implementation of trade agreements. Consequently, it has lowered trade barriers and increased trade in the world with its binding trade rules. Without this important trade organization which is based on agreements signed by a majority of the world’s trading nations and supervises more than ninety percent of the global trade, it would have been difficult to foster trade across countries quickly. But there are some loopholes that make it difficult for the organization to play its desired roles in fostering trade among nations.
Of course, there has been a competition between protectionism and free trade among countries for a long. Protectionists are in favor of the protection of business for boosting national economies. Contrarily, advocates of free trade hold that free trade is beneficial to business and support the free market economy across countries. Even if free trade is mostly preferred by countries, there exists a protectionist stance on world trade. Here, the organization has been playing significant roles. The trade organization, an international institution that was created in 1995 and superseded the 1947 General Agreement on Tariffs and Trade which was created in the wake of World War II to oversee the rules for global trade among nations and whose rules created the modern multilateral trading system, has boosted globalization and free trade across countries.
No doubt, there are many benefits of the largest trade body in different countries around the world. But there are some decision making based, dispute settlement oriented, tariff protectionism based and some other limitations of the organization. Decision making in the organization, which happens at the Ministerial Conference, has been criticized for a long. Notably, changes were made in the decisions making process several times but there are still some loopholes in the decision making. It is often criticized that industrialized countries negotiate the most important decisions in the organization that are favorable to them. Of course, the WTO’s trade deals have been quite difficult to form a consensus, meaning that all members must agree. Indeed, as is often criticized, trade rounds have been notoriously slow and difficult to reach an agreement. Moreover, its dispute settlement process is inadequate and can lead to the pending of appeals indefinitely.
The tariff-based rules of the organization are rendered as a systematic bias toward rich countries. Such a stance of the world trade organization is mostly criticized with an infant industry argument and the discriminatory free trade in agriculture. An infant industry argument indicates that developing countries need some trade protection for developing new industries that are prevented by free trade. Indeed, if a developing economy tries to diversify its economy to develop a new manufacturing industry, it may be unable to do it without some tariff protectionist measures. No doubt, developed countries went through some tariff protection earlier that helped them to protect new and emerging industries and their industries to grow. Moreover, free trade is not equally sought across industries such as agriculture. Protectionist tariffs in some areas including agriculture benefit rich nations.
Of course, there are some other limitations in the trade organization. The most favored nation principle, a core tenant of the rules of the WTO, indicates that countries need to trade without any discrimination. Consequently, multinational corporations are believed to be given an unfair advantage and local firms fail to compete with multinational corporations. Moreover, the trade organization has implemented a strong defense of the Trade Related Intellectual Property Rights. These allow firms to implement patents and copyrights. But the problem arises in some areas including life-saving drugs. The organization is thus systematically favorable to multination corporations for raising the price and making it less affordable for developing countries at their discretion. Indeed, the proposal for a waiver of COVID-19 vaccines was halted due to the TRIPS. Also, environmentalists criticize some of its decisions including the decision on genetically modified foods as discriminatory or environmentally harmful.
The organization, consequently, serves the interest of rich nations and multinational corporations more and undermines the interests of developing economies and small firms and hence local development at least on some occasions. But it is not unresponsive to developing economies altogether. The free trade that the organization promotes has been an important engine of growth for developing countries, though its rules ahs some negative effects on developing economies. The organization allows a nation to protect certain industries if the removal of tariffs would have undesirable side effects including the loss of vital domestic industries. Also, the WTO is flexible enough to give less-developed countries greater flexibility to help them adjust to new rules. No less important is that the WTO has sought to give exemptions to developing countries by enabling in principle the idea that developing countries should be allowed to limit imports more than developed countries.
But there are some undeniable negative consequences driven by the limitations of the WTO. It tramples over human rights, disregards environmental consequences, provides fewer opportunities to secure from the cultural aggression of multinational corporations and brings some other notable negative consequences. No doubt, the free trade that the organization fosters enables countries to import goods from countries that have lower environmental protection. This is not unexpected at all since the main objective of the trade organization is the increase in GDP growth, which is, no doubt, undeniably important for every country in the world. Also, free trade enables multinational industries to change local cultures, no matter whether the global cultures especially those which are promoted by the multinational corporations, are suitable for local cultures or not.
It is, thus, very important to address various flaws in the trade organization to make it beneficial across countries. In this respect, decision making needs to be made more acceptable. Small economies deserve to be given some sort of tariff protection and the agricultural policy of the organization needs to be revised to make it friendlier to all countries. On some occasions, the infrequently used plurilateral negotiation approach, which indicates agreements among sub-sets of the WTO members to which all members are not bound by their terms, may be considered. Of course, measures need to be taken to protect local industries and environmental concerns within the WTO need to be well-addressed. No less important is that the world trade organization needs to take the importance of good local cultures into consideration.
But it is undeniable that addressing flaws in the world trade organization may not necessarily lead to the economic development of all across countries. No doubt, there are flawed economic processes, a lack of incentives for good economic initiatives, economic mismanagement, corruption and many other problems in many countries around the world. As a consequence, many do not get economic opportunities in different countries or get fewer economic opportunities. Thus, along with making bilateral and multilateral trade agreements beyond the WTO, governments across countries need to make sure that they serve the economic interests of all. In this respect, all unjust economic barriers within-state boundaries need to be removed and economic initiatives need to be encouraged.
DISCLAIMER: The views expressed are those of the authors and do not necessarily reflect the official policy or position of the Magazine, its employees or any other authors. Views published are the sole responsibility of the author(s).
