The World Trade Organisation (WTO), is an intergovernmental organisation that oversees, regulates and controls international trade. It acts as a forum where governments negotiate on trade agreements, deal with trade disputes and structures trade rules. The WTO also acts as a platform for solving international trade issues faced by the member nations. The objective of WTO is largely governed by the General Agreement on Tariffs and Trade (GATT) (WTO, 2016a). It operates under the philosophy of trade being the bearer of prosperity. Therefore, in order to foster better cross border trade, the WTO has lowered or supressed the trade barriers. As a result the nations can leverage the comparative advantage of one another, which will eventually improve the economic status of the nations through increased international trade (WTO, 2016b). This paper aims to discuss about the role of World Trade Organisation in international trade and how it benefits the member nations in terms of trade and economic development.
The WTO is composed of 164 member nations, among which 128 of them are GATT members (WTO, 2016c). The key objective of WTO is to facilitate trade at a global scale among all the member nations, so that they can achieve economic growth and prosperity. As highlighted by Matsushita (2015), International trade can be defined as the contract of buying and selling of products (good and services) between parties who are separated by national boundaries. It typically involves the import and export activities along with outsourcing of services and resources. The member nations of the WTO benefits from certain trade policies or sale contract, which acts as the agreement for the sale of goods and services from one nation to the other (Van den Bossche, 2008).
WTO has laid down clearly defined trade contracts which are on the following grounds:
The above mentioned trade contracts indicates that WTO governs the cross border trades between the member nations. Goldstein, Rivers and Tomz (2007) have mentioned that role of the WTO is highly crucial to ensure economic growth of the nations. It can be stated that no nations have the capability to produce all kinds of products and services, therefore the global trade acts as a platform for sourcing them from different regions. Moreover, not only does international trade helps in economic development through cash inflow and generation of jobs, but it also helps to foster global peace and harmony among the trading nations.
The role of WTO in trade agreements and trade policies have laid down several rules and regulations for the member nations to conduct business among themselves. These regulations have been designed to ensure equality of opportunity for all the member nations and facilitate ease of doing business among them. The key roles of WTO have been laid down as follows:
The above mentioned roles of WTO can be analysed on the basis of the contributions made by the organisation. According to the studies of Subramanian and Wei (2007), the WTO have had significant effects on the global economy and have helped a lot of developing nations to participate in international trade. However, the role of WTO have often been criticised on the grounds of equity. Even though the operations of the organisation is focused on enabling equal and justified trade rights, but it has been mentioned that in several instances such promises have been violated. Industrialised nations like US, Canada, Japan and EU have used their industrial influences to shift the global trade towards their own advantage. Their dominance over the trade channels have proved to be quite challenging for the developing nations to conduct their business with the developed nations (Hoekman and Kostecki, 2009). It has been further stated that owing to the presence of high trade traffic, it becomes quiet difficult for these developing nations to conduct business with the developed countries. However, new agreements have allowed the developed countries to gain access to the developing nations in areas like telecommunications, financial services and information technology. Nations like US are increasingly outsourcing services and natural resources from Asia and Africa.
Despite of the criticisms and dominance of the powerful nations, the positive contribution of WTO over the global economy cannot be ignored. The contribution of WTO over global trade have been discussed in the following section.
Universal Trade: WTO ensures, through its policies and regulations, that there are no discrimination in the international trade activities and allowances. It has been mentioned that the WTO members cannot grant preferential advantages to any particular nation. Any benefits such as lowering of trade taxes and ease of market entry should be given to all the member nations. This is in regards to the policy of MFN (Most Favoured Nation) treatment (McGrady, 2009).