ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
WORLD TRADE ORGANIZATION: SUCCESSES AND
FAILURES
Vinati
D/o Jaiveer S. Dhankhar
UGC NET (Economics)
H. No. 13/9 J
M. D. University Campus
Rohtak, Haryana, India
Abstract:
We are in the era of globalization since the beginning of the third millennium. This is because
economies began to be integrated since then in terms of products, culture, trade, investments and
many more. According to the International Monetary Fund (IMF), among the most basic aspects
of globalization includes the (1) trade and transactions; (2) movements of capital and
investments; as well as (3) migration or movement of people; and (4) dissemination of
knowledge.
The World Trade Organization (WTO) holds its special place in this era of globalization as it is
the only global international organization dealing with the rules of trade between nations. At its
heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations
and ratified in their parliaments. As an international organization it has seen its own share of
successes and failures in different contexts. Present paper tries to get a view of both and critically
analyze the implications of having and not having WTO on world scenario.
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
Introduction
The WTO was established in 1995 but it really has a much longer history than that. After the
Second World War many countries were economically depressed and the Allied countries, led by
the US, thought that it was vital to promote the spread of liberal capitalism, economic co-
operation and increased world trade as a means of preventing future global conflict and the
spread of communism. As a result of the Bretton Woods Conference in 1944, the 44 Allied
countries signed an agreement to set up institutions that would regulate the global monetary
system – the World Bank and the International Monetary Fund. The original intention was to
create a third institution to handle the trade side of international economic co-operation. This was
to be known as the International Trade Organization (ITO), which was to be a specialized agency
of the United Nations. The draft ITO Charter was ambitious and complex. It included rules on
employment, commodity agreements, restrictive business practices, international investment and
services. The aim was to create the ITO at a UN Conference on Trade and Employment in
Havana, Cuba, in 1947.
However, the US refused to sign the original ITO charter, with the result that it was never
ratified. Instead, over the following years there were a series of General Agreements on Tariffs
and Trade (GATT) on specific trade-related issues that were a consequence of negotiations in
Geneva (1964-7), Tokyo (1973-9), Uruguay (1986-94) and the current round of negotiations that
began at Doha in 2001. Each round of negotiations included separate Ministerial Conferences to
evaluate progress. At the Uruguay round of talks, countries reached an agreement to replace
GATT with the World Trade Organization. TheWTO was founded on 1 January 1995 but China
only joined in 2001 and Russia was not granted membership until 2012, after 19 years of
negotiation. There are currently 159 member states.
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
The objective of the WTO and GATT has always been to lower trade barriers to help trade flow
as freely as possible because increasing trade is seen as important for economic development.
This neoliberal view of global trade is based on the belief that unrestricted flows of goods and
services will sharpen competition, motivate innovation and breed success in
participating countries.
The WTO has three major functions:
• To host negotiations between member countries
• To remove obstacles to trade
• To resolve conflicts of interest between member countries.
WTO Successes
The WTO has not only enhanced the value and quantity of trade but has also helped in eradicated
trade and non - trade barriers. WTO has also broadened the trade governance scope to trade in
investment, services and intellectual property.It has emerged as a greater institution than GATT
and expanded the agenda by including developmental policies which further helped in settlement
of disputes and improved monitoring by introducing the Trade Policy Review and the World
Trade Report as well as increased transparency by removing green room negotiations.
WTO also encouraged sustainable trade developments. As trade expands in volume, in the
numbers of products traded, and in the numbers of countries and companies trading, there is a
greater a chance that disputes will arise. The WTO system helps resolve these disputes
peacefully and constructively - in reality, a lot of international trade tension is reduced because
countries can turn to organizations, in particular the WTO, to settle their trade disputes. The fact
that there is a single set of rules applying to all members greatly simplifies the entire trade
regime. The WTO cannot claim to make all countries equal. But it does reduce some inequalities,
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
giving smaller countries more voice, and at the same time freeing the major powers from the
complexity of having to negotiate trade agreements with each of their numerous trading partners.
The system shields governments from narrow interests. Governments are better placed to defend
themselves against lobbying from narrow interest groups by focusing on trade-offs that are made
in the interests of everyone in the economy. It is the world’s only international organization that
supervises 95% of the world’s global trade.The WTO agreements include numerous provisions
giving developing and least-developed countries special rights or extra leniency — “special and
differential treatment”. Among these are provisions that allow developed countries to treat
developing countries more favourably than other WTO members. The General Agreement on
Tariffs and Trade (GATT, which deals with trade in goods) has a special section (Part 4) on
Trade and Development which includes provisions on the concept of non-reciprocity in trade
negotiations between developed and developing countries — when developed countries grant
trade concessions to developing countries they should not expect the developing countries to
make matching offers in return.
Both GATT and the General Agreement on Trade in Services (GATS) allow developing
countries some preferential treatment.The least-developed countries receive extra attention in the
WTO. All the WTO agreements recognize that they must benefit from the greatest possible
flexibility, and better-off members must make extra efforts to lower import barriers on least-
developed countries’ exports.
In addition, liberalization under the WTO boosts global GDP and stimulates world demand for
developing countries’ exports.
Critique / Failures
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
The foremost failure of WTO lies in the fact that it is highly dominated by some developed
nations which questions its democratic nature. In looking at how decisions are made, there is
clearly not an equality of decision making power in the WTO, as the ‘trading system is still to a
large degree a power-based as opposed to a rules-based system’.Whilst there is formally a one-
member, one-vote system in the WTO, it has never been used, and as is the case in most
international governance institutions, the interests of the powerful dominate. This is clearly
problematic; weaker states are in a position where they cannot influence the way in which trade
agreements are reached, which can be manifest in several ways, from basic resource issues such
as the inability ‘to establish permanent delegations in Geneva’,which means exclusion from day-
to-day administrative WTO activity, through to exclusion from the many “informal” (a
euphemism for non-democratic) decision-making sessions that occur within the WTO through
‘green room deals’ and ‘confessionals’ which are frequently lacking in transparency.
The WTO’s fierce defense of ‘Trade Related Intellectual Property’ rights (TRIPs)—patents,
copyrights and trademarks—comes at the expense of health and human lives. WTO has protected
for pharmaceutical companies’ ‘right to profit’ against governments seeking to protect their
people’s health by providing lifesaving medicines in countries in areas like sub-saharan Africa,
where thousands die every day from HIV/AIDS
Free trade is not working for the majority of the world. During the most recent period of rapid
growth in global trade and investment (1960 to 1998) inequality worsened both internationally
and within countries. WTO rules have hastened these trends by opening up countries to foreign
investment and thereby making it easier for production to go where the labor is cheapest and
most easily exploited and environmental costs are low .
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
In developing countries, as many as four out of every five people make their living from the
land. But the leading principle in the WTO’s Agreement on Agriculture is that market forces
should control agricultural policies-rather than a national commitment to guarantee food security
and maintain decent family farmer incomes. WTO policies have allowed dumping of heavily
subsidized industrially produced food into poor countries, undermining local production and
increasing hunger.
The WTO’s “Most Favored Nation” provision requires all WTO member countries to treat each
other equally and to treat all corporations from these countries equally regardless of their track
record. Local policies aimed at rewarding companies who hire local residents, use domestic
materials, or adopt environmentally sound practices are essentially illegal under the WTO.
Developing countries are prohibited from creating local laws that developed countries once
pursued, such as protecting new, domestic industries until they can be internationally
competitive.
WTO takes too long to arbitrate and settle disputes - it can take over five years from the initial
receipt of a complaint from one member to the final panel ruling. Despite the WTO operating as
a multilateral organisation, many member countries and trading blocs favour bilateral discussions
with partners or competitors. This is because bilateral negotiations can be fully focussed and
relatively quick to complete. The result is that many countries prefer to bypass the WTO process,
and deal directly with other countries. The failure of the most recent round of WTO negotiations,
the Doha round, is widely regarded as evidence of the inherent problems of multilateral
discussions.
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
For over 30 years, developed countries ignored GATT principles and restricted developing-
country exports of textiles and clothing. WTO rules on dumping, safeguards and subsidies have
been misused. Liberalization of trade in services has achieved little so far.
The WTO faces considerable challenges as listed below
i. Decision-making within the organization.
ii. Streamline reforms related to its dispute settlement system.
iii. Implement development-oriented policies in an effective manner.
iv. Facilitate global trade liberalization in agriculture and textiles.
v. Encourage Non-Governmental Organizations or NGOs to become an important part of
world trade governance.
vi. Devise ways to increase staff and resources to ensure effective regulation.
Does the World Trade Organization help world development?
Assessing the value of the WTO to world development is always going to depend on which
political criteria you adopt. One approach is to ask is whether the world would be a better place
without the WTO and its predecessor GATT. If the global economy is going to be dominated by
liberal economics and transnational corporations, then a case can be made that an organization
such as the WTO is probably needed – even if its achievements are underwhelming. If its record
of achieving successful agreements is to be improved it will probably have to abandon its policy
of seeking full accord on all policies from all member nations. The process is too unmanageable
and is a recipe for deadlock. The latest agreement was actually reached after taking only some of
the elements from a much wider agenda that was originally proposed for discussion. The result is
a limited agreement that does not impress many people.
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
Another route for potential progress would be to move from multilateral talks involving all
members to ‘plurilateral’ talks where groups of countries agree to try and reach an accord on
liberalizing the rules on a good or service with other countries joining in as it suits them. The
idea would be to simplify the attempts to reach agreements and also to offer inducements to
countries to participate or get left behind by the countries who have reached agreement. The
agreements reached may turn into global agreements or not. The limited nature of the Bali
agreement is at least partial recognition that the negotiation process needs to be simplified if the
organization is to have any relevance in the future.
Individuals and organizations that see the global dominance of liberal economics as a catastrophe
for global development just see WTO as a part of the problem. It provides a structure for the
developed and wealthy nations to impose their rules on the weaker and less developed countries.
Negotiations are never conducted between equal partners and the dice are loaded in favour of the
developed countries. What use is a referee if they only give decisions that favour the home side?
Between these two opposing views there are a lot of people who see no alternative to an
organization such as WTO but also believe that its continued usefulness to development depends
on finding ways of working that are more flexible, less cumbersome and more representative of
the views of developing countries.
References
[1] The World Trade Organization website. Useful for historical detail and the aims and
objectives of the
organization.http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm
[2] Larry Elliott, The Guardian, 18 December 2013
http://www.theguardian.com/business/2013/dec/18/roberto-azevedo-wto-bali-global-
trading
ISSN (Online) : 2348 - 2001
International Refereed Journal of Reviews and Research
Volume 4 Issue 2 April 2016
International Manuscript ID : 23482001V4I2032016-111
(Approved and Registered with Govt. of India)
[3] Dr Kamal Monno, The Nation, 16 January 2014http://www.nation.com.pk/columns/25-
Dec-2013/wto-bali-deal-what-now
[4] Editorial, The Economist, 9 December 2013
http://www.economist.com/blogs/freeexchange/2013/12/world-trade-organisation
[5] Friends of the Earth International, Radio Mundo Real, 19 December 2013
http://www.foei.org/en/what-we-do/land-grabbing/latest-news/wto-talks-a-death-
sentence-more-business-and-trade-liberalization
[6] Alan Bjerga, Bloomberg News, 8 December 2013
http://www.bloomberg.com/news/2013-12-07/wto-deal-buys-trade-talks-time-to-craft-
elusive-broad-agreement.html
[7] Australia Network News, 8 December 2013
http://www.abc.net.au/news/2013-12-07/an-indonesia-wto/5142410
[8] Andrew Walker, BBC News, 7 December 2013 http://www.bbc.co.uk/news/business-
25274889
[9] http://www.legalservicesindia.com/article/article/successes-and-failures-of-the-world-
trade-organisation-1320-1.html
[10] http://www.e-ir.info/2014/04/29/the-wto-has-failed-as-a-multilateral-agency-in-
promoting-international-trade/
[11] http://www.chicagobooth.edu/capideas/magazine/winter-2015/is-the-wto-a-failure-or-a-
success?cat=policy&src=Magazine
[12] https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
