Evaluate the role of the WTO in promoting freer world trade [25 marks]
The World Trade Organisation is a global international organisation dealing with the rules of trades
between nations. The goal is to help producers of goods and services, exporters, and importers
conduct their business. The overall objective of the WTO is to help members use trade to raise living
standards, create jobs and improve peoples lives.
An advantage of the WTO is that they reduce the cost of international trade by removing tariffs. When
protectionist barriers such as tariffs are removed, countries have a greater marginal propensity to
import goods as the goods are now cheaper, which encourages more trade between countries. In
Figure 1, you can see that PQ is the equilibrium point of the domestic market. The international
markets with a tariff can supply at a lower price and there is more demand for this product. However,
when the World Trade Organisation is involved, they are able to supply much more where there is
greater demand in the domestic economy at P2Q5. A disadvantage of this is that domestic industries
may be affected as they are unable to provide at that price. An example of tariffs benefiting countries
is the recent removal of tariffs for ecommerce for two years during the 13 th Conference (Abu Dhabi).
This can and will encourage for greater online trading and ensure the growth of technology can
provide benefits to all. However, developing countries may not be able to access all the benefits from
this. This is because developing countries may struggle to break into a competitive and saturated
market. They may also struggle to provide goods and services at a certain quality as they have limited
capacity. Furthermore, developing countries may not have the knowledge and information needed to
engage in trade that is beneficial for both parties. The WTO plays a key role in this and provides time
and flexibility for developing countries to grow through special provisions. One of the roles of the
WTO is to increase transparency of the decision making process, which ensures all member states are
clear on the decision and allows these member states to voice when trade agreements feel unfair,
increasing accountability.
Another advantage of the WTO is that there is increased interconnectedness between countries which
leads to greater trade. This is because greater interconnectedness ensures countries have better
communication, even through barriers such as cultural barriers, 5 leads to better and fair negotiations.
A way the WTO does this is in Geneva, where they allow individual countries to get together and
organise trade agreements quickly and effectively. The WTO also act as the middle institution to
ensure that trade is happening as agreed, which ensures trade liberalisation. A disadvantage of this is
that there is now increased interdependence resulting in decreasing efficiency. This is because
countries are reliant on other countries and they no longer have a need to be efficient and use their
comparative advantage, which results in a decrease in efficiency. However, interdependence could
establish stronger links between countries, which can result in cheaper and effective trade
opportunities. For the countries that do not follow the rules of the World Trade Organisation, there are
sanctions which ensures that there is greater confidence between countries, which encourages greater
trade.
