WTO

Merits of the WTO

1) MFN rule 2) The WTO has continued the work of GATT by keeping tariffs low. 3) The WTO provides legal framework for negotiation of trade disputes.

Criticisms of the WTO

1) The structure of the WTO has been criticised for its large membership and infrequent Ministerial Conferences. 2) The lack of consideration by the WTO for human rights and environmental considerations has also been criticised. 3) The WTO's focus on free trade benefits developed countries more than developing countries. 4) The WTO has been unable to stop recent trade wars between members such as the USA and China. 5) The MFN rule has proven to be weak.

1) MFN rule

164/195 sovereign states are members and 97% of world trade is carried out by WTO members. One benefit of WTO is that its membership provides most favoured nation treatment, which means equal access for all WTO members to the markets of all members. This allows nations to be open to larger markets; for example, Belarus' membership of the WTO is currently a work in progress but if they successfully join then $1.3 billion of potential goods and services exports from Belarus to the 164 WTO Members will be unlocked. Overall, larger markets lead to greater sales, more jobs and economic growth.

WTO

It was established in 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT). It has a membership of 164 states and is designed to facilitate free trade by encouraging global trade deals and resolving trade disputes between member states.

5) The MFN rule has proven to be weak.

The MFN rule has proven to be weak. A core tenant of the WTO rules is the most favoured nation (MFN) principle whereby countries should trade without discrimination. However, regional trading blocs are able to avoid the MFN rule and with the rise of regional trading blocs such as the EU and NAFTA weaker countries are being negatively impacted. The WTO claims to give the weak a stronger voice however these trading blocs means that it's not necessary for the larger, more economically powerful countries to trade with the weak and thus reduces their market and opportunity to grow.

2) The WTO has continued the work of GATT by keeping tariffs low.

The WTO has continued the work of GATT by keeping tariffs low and currently, the average tariff is below 5%. This helps to reduce the costs of production (as imports used in production and cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living. For example, when the US limited Japanese car imports in the early 1980s, car prices rose by 41% between 1981 and 1984 - nearly double the average for all consumer products. Therefore, the WTO is beneficial as trade barriers around the world are lower than they have ever been in modern trading history which cuts the cost of living.

3) The WTO provides legal framework for negotiation of trade disputes.

The WTO provides legal framework for negotiation of trade disputes which aims to provide greater stability and predictability in trade. Since 1995, 600 disputes have been brought to the WTO and over 350 rulings have been issued, showing that the WTO is a forum for helping to solve disputes. Without a means of tackling these constructively and harmoniously, some could have led to more serious political conflict. For example, the WTO solved the Banana Trade War between the US and EU.

3) The WTO's focus on free trade benefits developed countries more than developing countries.

The WTO's focus on free trade benefits developed countries more than developing countries. Arguably, developed countries need some trade protection to be able to develop their infant industries. For example, if a developing economy was trying to diversify their economy to develop a new manufacturing industry, they may be unable to do it without some tariff protection.

2) The lack of consideration by the WTO for human rights and environmental considerations has also been criticised.

The lack of consideration by the WTO of human rights and environmental considerations has also been criticised. On some occasions, the WTO's rules infringe human rights. For example, the TRIPs agreement requires each WTO member to provide patent protection on pharmaceutical products. This reduces countries' capacity to produce medicines and the result of this has been particularly harsh in Sub-Saharan Africa where drugs to treat AIDS are hugely expensive and thus out of most people's reach. Furthermore, the WTO requires that member states do not distort trade when they try to advance human rights at home and abroad. With regards to the environment, a WTO Secretariat report admitted that expanding trade often creates greater pollution and irreversible environmental damage, including toxic contamination, extinction and soil damage. In addition to this, the fact that the WTO has no specific agreement dealing with the environment and justifies this by saying that they aren't an environmental agency highlights their disregard. Essentially, economic issues take precedence over human rights and the environment.

1) The structure of the WTO has been criticised for its large membership and infrequent Ministerial Conferences.

The structure of the WTO has been criticised for its large membership and infrequent Ministerial Conferences. It's large membership of 164 and need for consensus among members in order to make decisions has made it difficult to reach agreements. For example, the current negotiating round of the WTO (the Doha Round) begun in 2001 and was effectively abandoned without agreement in 2015. The WTO's failure to agree a new comprehensive trade deal since 2001 has put its effectiveness in jeopardy. Furthermore, the WTO's Ministerial Conferences are too infrequent. This has resulted in states seeking to make trade deals outside of the WTO. For example, the Trans-Pacific Partnership, a trade agreement between the states of the Pacific Rim, excluding China. A deal was made in 2016 where the member states, who amount to 40% of global GDP, agreed to cut 18,000 tariffs. The fact that states have begun to bypass the WTO and make trade deals outside of it highlight its disadvantages.

4) The WTO has been unable to stop recent trade wars between members such as the USA and China.

Unable to stop recent trade wars between members such as the USA and China. The Yuan became artificially low which made Chinese exports cheap and in response the USA imposed tariffs but this should've gone through the WTO.