The Evolution and Impact of the

WTO : A Historical Perspective

TERM PAPER
Subject: Company & Corporate Management
Submitted to:
Bright Vision Law College,
Purbanchal University,
Biratnagar, Nepal

Submitted by:
LL.M. 2nd Year
Reg. No. 156-5-2-09194-2019
Roll No. 521447
Table of Contents

1. Introduction
1.1. Background of the World Trade Organization (WTO)
1.2. Significance of Studying the Evolution of the WTO
1.3. Objectives of the Paper
Historical Development of the WTO
2.1. The Formation of the General Agreement on Tariffs and Trade (GATT)
2.1.1. GATT’s Role in Post-World War II Global Trade
2.1.2. The GATT Rounds: From Geneva to Uruguay
2.2. The Creation of the WTO
2.2.1. The Uruguay Round and Its Negotiations
2.2.2. The Establishment of the WTO in 1995
2.3. Key Differences Between GATT and WTO
2.3.1. Institutional Structure
2.3.2. Dispute Settlement Mechanism
2.3.3. Coverage of Services and Intellectual Property
2.4. The First Decade of the WTO (1995–2005)
2.4.1. Early Challenges and Successes
2.4.2. Integration of Developing Countries
2.4.3. The Doha Development Agenda
2. Key Functions and Objectives of the WTO
3.1. Market Access and Trade Liberalization
3.1.1. Tariffs and Non-Tariff Barriers
3.1.2. Trade Negotiations
3.2. Dispute Settlement Understanding (DSU)
3.2.1. Overview of the Dispute Settlement Process
3.2.2. Case Studies of WTO Disputes
3.3. The WTO’s Role in Trade Policy Review Mechanism (TPRM)
3.4. Promoting Fair Competition and Trade Remedies
3.5. The Role of the WTO in Regulatory Issues (e.g., SPS, TBT)
3. Impact of the WTO on Global Trade
4.1. The WTO and Global Trade Expansion
4.1.1. Growth in World Trade Volume Post-WTO
4.1.2. Shifts in Trade Patterns and Trade Relations
4.2. The WTO and Developing Countries
4.2.1. Access to Markets
4.2.2. Special and Differential Treatment (SDT)
4.2.3. Challenges for Developing Countries in WTO Negotiations
4.3. The WTO and the Global Economy
4.3.1. Contribution to Economic Growth
4.3.2. The WTO’s Influence on Regional Trade Agreements
4.4. The Role of the WTO in the Digital Economy
4.4.1. E-commerce and Trade in Services
4.4.2. Trade Barriers in the Digital Age
4. Challenges Faced by the WTO in the 21st Century
5.1. The Rise of Protectionism
5.1.1. US-China Trade War and Its Impact on the WTO
5.1.2. The Shift Towards Bilateral and Regional Trade Agreements
5.2. Reforming the WTO: Calls for Change
5.2.1. Institutional and Decision-Making Challenges
5.2.2. Dispute Settlement Mechanism Reforms
5.3. The Impasse in the Doha Round Negotiations
5.4. The WTO and Environmental and Social Issues
5.4.1. Trade and Environmental Sustainability
5.4.2. Labor Standards and Human Rights in Trade
5. The WTO’s Role in Nepal's Trade Policy
6.1. Nepal’s Accession to the WTO
6.1.1. Nepal’s Negotiation Process
6.1.2. Key Commitments and Challenges
6.2. Impact of WTO Membership on Nepal’s Economy
6.2.1. Trade Liberalization and Economic Growth
6.2.2. Access to Global Markets
6.3. Nepal’s Participation in WTO Disputes and Rounds
6.4. The Future of Nepal in the WTO Framework
6.4.1. Opportunities for Nepal in WTO Reforms
6.4.2. Enhancing Nepal’s Trade Competitiveness
6. The Future of the WTO: Moving Beyond the Challenges
7.1. Reform Proposals and the Road Ahead
7.2. The WTO in the Context of a Changing Global Trade Landscape
7.3. The Role of Emerging Economies in Shaping the WTO’s Future
7.4. The WTO and Multilateralism in the 21st Century
7. Conclusion
8.1. Summary of Key Findings
8.2. The Importance of the WTO in Global Trade Governance
8.3. Policy Recommendations for Strengthening the WTO
8.4. Future Research Directions on WTO and International Trade
8. References
9.1. Books and Articles
9.2. WTO Legal Documents and Reports
9.3. Case Law and Judicial Interpretations
9.4. Other Relevant Sources
 Chapter I

1. Introduction

The introduction sets the stage for understanding the significance and evolution of the World
Trade Organization (WTO) in the context of international trade law. It provides the background,
outlines the relevance of studying the WTO's development, and clarifies the purpose of the
paper. The structure will guide the reader through the history, key functions, challenges, and
impact of the WTO on global trade.

1.1. Background of the World Trade Organization (WTO)

The World Trade Organization (WTO) is an intergovernmental organization that governs

international trade. Established in 1995, it replaced the General Agreement on Tariffs and Trade
(GATT), which had been created in the aftermath of World War II to facilitate the reduction of
barriers to international trade. The WTO’s core function is to ensure that trade flows as
smoothly, predictably, and freely as possible between nations. The organization provides a
framework for negotiating trade agreements, resolving disputes, and monitoring global trade
policies.

Before the WTO's establishment, the GATT served as the primary international agreement
regulating trade, though it lacked the institutional and legal authority needed to resolve disputes
effectively. With the expansion of global trade and the growing complexity of international
economic relations, the need for a more robust regulatory body led to the creation of the WTO
during the Uruguay Round of negotiations in the early 1990s.

The WTO’s founding marks a pivotal moment in the history of global economic cooperation, as
it represents a formalized attempt to integrate trade into broader policy frameworks. This
includes promoting fair competition, sustainable development, and adherence to international
legal standards in the trading system. The WTO encompasses a range of trade areas, including
goods, services, intellectual property, and dispute resolution.

1.2. Significance of Studying the Evolution of the WTO

Studying the evolution of the WTO is crucial for several reasons. First, understanding the
WTO’s historical development helps explain the current structure and functioning of the
international trading system. The WTO is not just a product of legal negotiations but also a
response to changing political, economic, and technological environments. Analyzing how the
WTO evolved from its predecessors, like the GATT, provides insight into how international
trade agreements are shaped by the geopolitical realities of their time.

Second, the WTO has a significant impact on global trade practices. Its role in shaping trade
rules, dispute resolution, and economic development policies has far-reaching implications for
both developed and developing nations. With ongoing debates over trade liberalization,
protectionism, and global inequality, understanding the WTO’s evolution is key to evaluating its
future role in global governance.
Finally, examining the WTO’s historical development helps to appreciate the challenges and
criticisms it faces today. For instance, the stagnation of the Doha Round of trade negotiations,
the rise of regional trade agreements, and challenges to the WTO’s dispute settlement
mechanism all underscore the need for reform and adaptation in an increasingly complex global
economy.

1.3. Objectives of the Paper

The primary objective of this paper is to explore the evolution of the WTO from its origins in the
GATT to its establishment and growth as an organization influencing global trade. This paper
aims to:

 Provide a detailed historical account of the WTO's formation and its transition from the
GATT.
 Analyze the key functions and objectives of the WTO in regulating international trade,
including its role in trade liberalization, dispute resolution, and development.
 Assess the impact of the WTO on global trade patterns, especially its influence on
developing countries, and examine how it shapes international economic relations.
 Critically evaluate the challenges faced by the WTO in the 21st century, particularly the
rise of protectionism and the limitations of its dispute settlement mechanism.
 Investigate the WTO’s role in Nepal's trade policy and its contribution to Nepal’s
integration into the global trading system.

1.4 Scope and Limitations

 Scope:
o Examines the WTO's impact on global trade, focusing on developing countries.
o Analyzes Nepal’s experience and challenges with WTO membership.
o Explores WTO functions like market access, dispute resolution, and trade
liberalization.
o Investigates the future of the WTO in addressing digital trade and sustainability.
 Limitations:
o Limited primary data (e.g., interviews or surveys with stakeholders).
o Complexity of global trade may limit comprehensive coverage of all issues.
o Changing geopolitical dynamics may affect the relevance of findings.
o Focus on WTO, without examining other trade frameworks.

1.5 Research Questions

 How has the WTO contributed to the expansion of global trade?

 What challenges has the WTO faced in the 21st century?
 How does WTO membership impact developing countries, particularly Nepal?
 How can the WTO address emerging issues like digital trade and sustainability?
 What reforms are needed to strengthen the WTO?
 How can Nepal improve its trade competitiveness within the WTO framework?
1.6 Methodology and Approach

 Research Design: Descriptive and qualitative analysis of WTO's functions and Nepal’s
trade policy.
 Data Collection:
o Secondary data: WTO reports, academic articles, and policy papers.
o Primary data (if available): Interviews with trade experts and government
officials.
 Data Analysis:
o Content and comparative analysis of WTO documents and global trade trends.
o Thematic analysis from interviews and surveys to identify key challenges and
opportunities.
 Limitations: Limited primary data, complex global trade dynamics, and evolving
political factors.
 Chapter II

2. Historical Development of the WTO

This section provides a detailed historical account of the evolution of the World Trade
Organization (WTO), tracing its origins to the General Agreement on Tariffs and Trade (GATT)
and the subsequent establishment of the WTO in 1995. The section also examines the key
milestones in the development of the global trade system and the major events that led to the
creation of the WTO.

2.1. The Formation of the General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) was established in 1947 as a multilateral
agreement aimed at reducing barriers to international trade, such as tariffs and quotas, following
the disruptions caused by World War II. It emerged from the vision of creating a more open,
integrated global economy that would prevent trade wars and foster economic cooperation.

2.1.1. GATT’s Role in Post-World War II Global Trade

After World War II, the global economy was marked by high levels of protectionism, which
hindered economic recovery. To counter this, countries came together at the Bretton Woods
Conference in 1944 and created the International Monetary Fund (IMF) and the World Bank,
which aimed at stabilizing the global financial system. At the same time, the need for a global
trade framework was recognized to promote free trade and economic reconstruction.

The GATT was instrumental in reducing tariffs and encouraging trade liberalization. It sought to
eliminate trade barriers through successive rounds of negotiations among member countries,
encouraging cooperation and creating a framework that promoted international commerce. Over
the years, GATT played a pivotal role in increasing trade flows and integrating developing
nations into the global trading system.

Despite its successes, GATT had limitations, including its lack of institutional support and its
failure to address emerging trade issues, such as services and intellectual property rights.

2.1.2. The GATT Rounds: From Geneva to Uruguay

The process of trade liberalization under GATT took place through a series of negotiation
rounds. Each round resulted in incremental reductions in tariffs and trade barriers.

 Geneva Round (1947): The first round focused on reducing tariffs, with 23 countries
signing the agreement, covering approximately 20,000 items.
 Dillon Round (1960–1961): This round made progress in tariff reductions, but it was
limited in scope.
 Kennedy Round (1964–1967): It introduced anti-dumping measures and further tariff
reductions.
  Tokyo Round (1973–1979): Focused on non-tariff barriers and introduced codes of
conduct in areas like technical standards and government procurement.
 Uruguay Round (1986–1994): This was the most comprehensive and ambitious round,
which sought to address trade in services, intellectual property, agriculture, and textiles.
The Uruguay Round ultimately led to the creation of the WTO, expanding the global
trade system beyond goods to include services and intellectual property protections.

The Uruguay Round marked a fundamental shift in the way global trade was regulated, laying
the groundwork for the transition from GATT to the WTO.

2.2. The Creation of the WTO

In 1995, the World Trade Organization (WTO) was established, replacing GATT as the primary
institution regulating international trade. The WTO was created to address the shortcomings of
GATT and to create a more robust system that could regulate trade across goods, services, and
intellectual property.

2.2.1. The Uruguay Round and Its Negotiations

The Uruguay Round was the last and most significant round of negotiations under GATT,
running from 1986 to 1994. It involved 123 countries and resulted in agreements that laid the
foundation for the WTO. The Uruguay Round addressed several key areas:

 Agriculture: Negotiations aimed at reducing agricultural subsidies and tariffs, which

were a major point of contention in international trade.
 Services: The round expanded the scope of GATT to include services for the first time,
giving rise to the General Agreement on Trade in Services (GATS).
 Intellectual Property: The introduction of the Trade-Related Aspects of Intellectual
Property Rights (TRIPS) agreement aimed at protecting patents, copyrights, and
trademarks on a global scale.
 Dispute Settlement: The establishment of a more structured and binding dispute
settlement mechanism, which would become one of the WTO's key features.

The Uruguay Round negotiations were complex and involved intense bargaining, but the result
was a groundbreaking agreement that transformed global trade governance.

2.2.2. The Establishment of the WTO in 1995

The World Trade Organization was formally established on January 1, 1995, replacing the
GATT. The WTO incorporated the agreements resulting from the Uruguay Round and expanded
the scope of trade regulation. Unlike GATT, which was a legal framework with no permanent
institutional body, the WTO was created as a full-fledged international organization with the
power to enforce rules and resolve disputes among member countries.

The WTO's primary objectives were to facilitate the flow of trade, resolve disputes, and ensure
that trade rules were followed in a fair and predictable manner. It also aimed to integrate
developing countries into the global trade system by offering technical assistance and special
treatment provisions.

2.3. Key Differences Between GATT and WTO

Although GATT and the WTO both aim to promote international trade, there are significant
differences in their structure, scope, and enforcement mechanisms.

2.3.1. Institutional Structure

The GATT lacked a formal institutional structure; it was essentially a legal agreement that
operated on a consensus-based model, without a permanent organization. In contrast, the WTO is
a full-fledged international organization with its own Secretariat, a Director-General, and a
formalized governance structure. It provides a more effective mechanism for coordinating global
trade rules and dispute resolution.

2.3.2. Dispute Settlement Mechanism

One of the most notable differences between GATT and the WTO is the dispute settlement
mechanism. Under GATT, dispute resolution was a lengthy and often ineffective process, with
countries being able to block resolutions. The WTO introduced a more formalized and binding
dispute settlement mechanism, where countries are required to comply with panel decisions. This
enhanced the credibility of the WTO as an institution that could enforce its rules.

2.3.3. Coverage of Services and Intellectual Property

GATT was focused primarily on trade in goods. However, the WTO expanded the scope of trade
regulation to include services (under the General Agreement on Trade in Services - GATS) and
intellectual property (under the TRIPS Agreement). This expansion reflects the changing nature
of global trade, where services and intellectual property have become increasingly important.

2.4. The First Decade of the WTO (1995–2005)

The first decade of the WTO was marked by both successes and challenges, as the organization
navigated its new role in global trade regulation.

2.4.1. Early Challenges and Successes

One of the early successes of the WTO was its effective use of the dispute settlement
mechanism, which helped resolve numerous trade disputes, thereby reinforcing the organization's
credibility. However, the WTO also faced several challenges, including criticisms of its bias
towards developed countries and its inability to fully integrate developing countries into the
global trade system.
2.4.2. Integration of Developing Countries

A significant challenge for the WTO during its first decade was the integration of developing
countries into the global trading system. While many developing nations joined the WTO,
concerns remained regarding the fairness of trade rules, particularly in areas such as agriculture
and intellectual property. Special and differential treatment provisions were introduced to
address these concerns, allowing developing countries more flexibility in implementing WTO
rules.

2.4.3. The Doha Development Agenda

In 2001, the WTO launched the Doha Development Agenda (DDA) in Doha, Qatar, aiming to
address issues particularly important to developing countries, such as agricultural subsidies,
access to medicines, and trade barriers in developing countries. However, the Doha Round
encountered significant challenges and ultimately stalled due to disagreements over agricultural
subsidies and market access. The DDA remains an ongoing issue in WTO negotiations.
 Chapter III

3. Key Functions and Objectives of the WTO

The World Trade Organization (WTO) is central to the regulation of international trade. Its key
functions and objectives include promoting trade liberalization, resolving trade disputes,
ensuring fair competition, and regulating various trade-related issues. This section explores these
key functions in detail, focusing on market access, dispute settlement, and the WTO's role in
promoting fair competition and regulatory issues.

3.1. Market Access and Trade Liberalization

Market access and trade liberalization are fundamental to the WTO’s mission of reducing
barriers to trade and promoting an open global economy. This involves negotiating trade rules
and commitments that encourage member states to reduce tariffs, eliminate non-tariff barriers,
and ensure that markets are accessible for goods and services.

3.1.1. Tariffs and Non-Tariff Barriers

Tariffs are taxes imposed on imported goods, often used as a tool by governments to protect
domestic industries from foreign competition. One of the WTO's core functions is to reduce
tariffs through successive rounds of negotiations. Over the years, the WTO has facilitated
significant reductions in tariffs, contributing to the global expansion of trade.

However, tariffs are not the only trade barriers that impede market access. Non-tariff barriers
(NTBs) are policies and practices other than tariffs that restrict trade. These can include quotas,
licensing requirements, technical regulations, and sanitary and phytosanitary measures. NTBs are
often seen as more subtle and harder to address than traditional tariffs, yet they can have a
profound impact on global trade. The WTO has worked to reduce these barriers by encouraging
transparency in regulations and requiring member states to justify and streamline any barriers
that are introduced.

The WTO agreements are designed to address both tariffs and non-tariff barriers to trade. For
example, the Agreement on Agriculture aims to reduce agricultural subsidies and trade barriers,
while the Agreement on Technical Barriers to Trade (TBT) seeks to prevent unnecessary
restrictions on trade through standards and regulations that are not discriminatory.

3.1.2. Trade Negotiations

Trade negotiations are at the heart of the WTO's function. These negotiations occur in
multilateral settings where member countries meet to discuss and negotiate agreements on
various trade-related issues. Negotiations under the WTO follow a consensus-based approach,
where all member countries must agree to the terms of any agreement.

Over time, the WTO has facilitated several rounds of trade negotiations, each aimed at
progressively liberalizing international trade. The Doha Development Agenda (DDA), for
example, was launched in 2001 to address issues such as agriculture, trade in services, and the
trade-related aspects of intellectual property. The WTO has also been instrumental in pushing for
the inclusion of intellectual property rights (TRIPS), trade in services (GATS), and trade-related
investment measures (TRIMS) into the global trade framework.

These negotiations aim to create a balance between trade liberalization and the protection of
individual member states’ interests, especially for developing countries. For example, the WTO
provides special and differential treatment (SDT) for developing countries, allowing them more
time to implement trade commitments.

3.2. Dispute Settlement Understanding (DSU)

One of the key features that distinguishes the WTO from its predecessor, GATT, is the
introduction of a formalized and binding dispute settlement process. The Dispute Settlement
Understanding (DSU) is a cornerstone of the WTO, designed to resolve conflicts between
member states regarding the interpretation and application of WTO agreements.

3.2.1. Overview of the Dispute Settlement Process

The dispute settlement process under the WTO is designed to provide a neutral platform for
resolving trade conflicts. The process involves several stages, including consultations, panel
reports, appeals, and the implementation of rulings.

1. Consultations: When a country believes that another member has violated a WTO
agreement, it can request consultations to resolve the issue. If consultations fail, the
complaining country can request the establishment of a panel.
2. Panel Process: The WTO appoints a panel of independent experts to review the dispute
and issue a ruling based on WTO rules. The panel’s decision can be appealed.
3. Appeal Process: If one of the parties disagrees with the panel's ruling, it can appeal the
decision to the Appellate Body (AB), which is composed of seven members who review
the case.
4. Implementation and Compliance: Once the dispute settlement panel and the Appellate
Body have issued their rulings, the losing party must comply with the decision. If the
losing party does not comply within a reasonable timeframe, the winning party can
request the right to impose trade sanctions, such as retaliatory tariffs.

The DSU has played a vital role in providing a structured, legal approach to resolving disputes,
making it one of the most significant advances in international trade law.

3.2.2. Case Studies of WTO Disputes

Several high-profile disputes illustrate the importance of the DSU in maintaining fair trade. For
instance, the US–EU Ban on Hormone-treated Beef case (1996) saw the WTO rule against the
European Union's ban on hormone-treated beef, arguing that it violated trade agreements by
imposing unnecessary barriers. Similarly, the US–China Intellectual Property Rights case (2007)
dealt with issues related to intellectual property violations, highlighting the WTO’s role in
enforcing global standards for intellectual property protection.

3.3. The WTO’s Role in Trade Policy Review Mechanism (TPRM)

The Trade Policy Review Mechanism (TPRM) is another important function of the WTO. The
TPRM is designed to monitor the trade policies and practices of WTO members, ensuring
transparency and consistency with WTO agreements. The TPRM allows members to assess each
other’s trade policies and helps identify areas where adjustments are needed.

The TPRM is conducted regularly, and members submit reports that are reviewed by other
members in a collaborative process. This mechanism encourages greater openness and
accountability in trade practices, which helps prevent the emergence of protectionist policies and
ensures that members comply with their trade obligations.

3.4. Promoting Fair Competition and Trade Remedies

The WTO plays a crucial role in promoting fair competition in international trade. It sets rules to
prevent anti-competitive practices such as price-fixing, dumping, and subsidization. The WTO
also provides mechanisms for members to challenge such practices when they occur.

Trade Remedies

The WTO allows members to apply trade remedies such as anti-dumping duties, countervailing
duties (to counter government subsidies), and safeguard measures to protect domestic industries
from unfair trade practices. These remedies are subject to WTO rules to ensure that they are
applied fairly and only when necessary.

The Anti-Dumping Agreement governs the use of anti-dumping measures, allowing countries to
impose tariffs on imported goods that are sold below fair market value. Similarly, the Subsidies
and Countervailing Measures (SCM) Agreement helps members address trade distortions caused
by subsidies.

3.5. The Role of the WTO in Regulatory Issues (e.g., SPS, TBT)

In addition to reducing tariffs and regulating trade, the WTO also plays a key role in overseeing
the regulatory frameworks that govern global trade. These include the Sanitary and Phytosanitary
(SPS) Measures and the Technical Barriers to Trade (TBT) agreements.

 Sanitary and Phytosanitary (SPS) Measures: These measures relate to food safety and
animal and plant health regulations. The WTO’s Agreement on SPS ensures that member
countries do not use health and safety standards as disguised trade barriers. While
countries have the right to impose SPS measures to protect health, the WTO ensures
these measures are not unnecessarily restrictive to trade.
 Technical Barriers to Trade (TBT): The TBT Agreement seeks to ensure that technical
regulations, standards, and conformity assessments are transparent, non-discriminatory,
 and do not create unnecessary barriers to trade. This includes product standards, labeling
requirements, and testing procedures that might restrict trade.

The WTO ensures that these regulations are applied consistently and do not discriminate against
foreign goods or services. It promotes a balance between legitimate regulatory concerns and free
trade principles.
 Chapter IV

4. Impact of the WTO on Global Trade

The World Trade Organization (WTO) has had a profound impact on global trade since its
establishment in 1995. As the primary body responsible for regulating international trade, the
WTO has contributed to the expansion of world trade, the integration of developing countries
into the global economy, and the modernization of trade practices, particularly in areas such as
services and digital trade. This section explores the various ways the WTO has influenced global
trade, focusing on trade expansion, the role of developing countries, the global economy, and
emerging issues such as the digital economy.

4.1. The WTO and Global Trade Expansion

One of the central goals of the WTO has been to facilitate the expansion of global trade by
reducing trade barriers and promoting trade liberalization. Since its inception, the WTO has
played a key role in fostering greater economic integration across countries.

4.1.1. Growth in World Trade Volume Post-WTO

The creation of the WTO was followed by a significant increase in global trade volumes.
According to the WTO's own statistics, world merchandise trade grew at an average rate of 5.4%
annually between 1995 and 2007, outpacing global GDP growth during the same period. This
growth was partly driven by the trade liberalization efforts under the WTO, which led to the
reduction of tariffs and non-tariff barriers. The Uruguay Round agreements, which established
the WTO, played a pivotal role in expanding market access for goods, services, and intellectual
property rights.

For instance, tariffs on industrial products have decreased significantly, with global average tariff
rates falling from around 10% in 1995 to approximately 5% in the years following the
establishment of the WTO. This reduction in tariffs has made it easier for countries to access
foreign markets, stimulating international trade and creating new opportunities for businesses.

4.1.2. Shifts in Trade Patterns and Trade Relations

The WTO has not only increased global trade volume but also altered global trade patterns.
Trade has become more geographically diversified, with emerging economies playing a more
prominent role in global markets. The WTO's inclusion of developing countries in the
multilateral trading system has led to their greater integration into the global economy.

For example, the rise of China and India as major trading partners is a direct result of the
opportunities created by WTO membership and the liberalization of trade in Asia. The expanding
trade relations between countries in the Global South and the North have reshaped trade flows,
emphasizing the importance of interdependence and the interconnectedness of economies.
The WTO has also facilitated the formation of regional trade agreements (RTAs), which
complement the multilateral trade framework. Countries often use RTAs to deepen economic
ties, while still benefiting from the broader global trade rules established by the WTO.

4.2. The WTO and Developing Countries

The WTO's impact on developing countries has been multifaceted. While the WTO has enabled
many developing countries to access global markets, it has also presented challenges, particularly
in the negotiation of trade agreements that align with their developmental priorities.

4.2.1. Access to Markets

One of the key benefits that developing countries have derived from WTO membership is
increased access to foreign markets. The WTO's commitment to reducing tariffs has allowed
many developing countries to export goods and services to markets that were previously closed
or subject to high tariffs. In particular, developing countries have seen an expansion of their
exports in agricultural products, textiles, and manufactured goods, thanks to the multilateral
trading system and the opportunities presented by the WTO's non-discriminatory principles.

The WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement has
also allowed developing countries to attract foreign investment by improving the protection of
intellectual property, creating a more stable and predictable legal environment for trade and
business activities.

4.2.2. Special and Differential Treatment (SDT)

Recognizing the economic disparities between developed and developing countries, the WTO
has incorporated Special and Differential Treatment (SDT) provisions to ensure that developing
countries receive more flexibility in implementing WTO rules. SDT provisions allow developing
countries more time to adjust to trade liberalization, as well as greater access to technical
assistance and capacity-building programs.

For example, under SDT, developing countries are allowed to maintain higher tariffs on certain
agricultural products to protect domestic industries. This provides a cushion for vulnerable
sectors during the adjustment process, helping to mitigate the potential negative impacts of
global competition.

4.2.3. Challenges for Developing Countries in WTO Negotiations

Despite the advantages, developing countries face significant challenges in WTO negotiations.
These challenges include limited negotiating power, as the WTO's decision-making process often
favors the interests of larger, wealthier economies. Developing countries have raised concerns
about the lack of adequate representation and influence in negotiations that affect their trade
interests, particularly in areas such as agriculture and intellectual property.
Furthermore, the Doha Development Agenda (DDA), which was launched in 2001 to address
development issues, has struggled to make significant progress. Developing countries have
demanded greater market access for their agricultural products and improved terms for their
participation in global trade, but disagreements over issues such as agricultural subsidies have
stalled negotiations.

4.3. The WTO and the Global Economy

The WTO has not only been instrumental in increasing trade volume but also in shaping the
broader global economic landscape. Through its efforts to promote free trade, the WTO has
contributed to the globalization of the world economy.

4.3.1. Contribution to Economic Growth

The WTO has played a central role in fostering economic growth globally by reducing trade
barriers and providing a stable and predictable framework for international trade. By creating a
rules-based system for trade, the WTO has helped boost foreign investment, enhance economic
cooperation, and create new job opportunities worldwide. The liberalization of trade has
encouraged innovation, productivity growth, and competition, contributing to long-term
economic development.

The Trade Policy Review Mechanism (TPRM) and the Dispute Settlement Understanding (DSU)
have enhanced the transparency and stability of the global trading system, fostering confidence
among investors and businesses.

4.3.2. The WTO’s Influence on Regional Trade Agreements

The WTO has influenced the development of regional trade agreements (RTAs) by providing a
framework for countries to negotiate deeper economic integration while adhering to global trade
rules. While some critics argue that RTAs undermine the multilateral trading system by creating
preferential treatment, the WTO’s rules allow for RTAs as long as they are transparent and do
not discriminate against other member countries.

Countries increasingly view RTAs as complementary to the WTO, allowing them to address
issues that may not be covered in global negotiations. For example, the North American Free
Trade Agreement (NAFTA) and the European Union (EU) represent major regional trade
initiatives that have helped to solidify trade relationships while aligning with broader WTO
principles.

4.4. The Role of the WTO in the Digital Economy

In the digital age, the WTO faces new challenges and opportunities related to e-commerce, trade
in services, and digital goods. The rise of the digital economy has transformed global trade by
creating new markets, reducing transaction costs, and facilitating cross-border business activities.

4.4.1. E-commerce and Trade in Services

E-commerce has become one of the most significant sectors in global trade, and the WTO has
played an essential role in facilitating this transformation. The General Agreement on Trade in
Services (GATS), which was introduced during the Uruguay Round, laid the groundwork for the
regulation of trade in services, including e-commerce. By addressing issues such as cross-border
data flows, privacy, and online trade, the WTO has worked to ensure that digital trade operates
within a framework of predictable and transparent rules.

The WTO is also exploring ways to address digital trade barriers, such as restrictions on cross-
border data flows and unjustified data localization requirements, which can hinder the growth of
e-commerce.

4.4.2. Trade Barriers in the Digital Age

The digital economy has created new forms of trade barriers, such as restrictions on access to
digital platforms, cybersecurity regulations, and intellectual property protections for digital
goods. The WTO has recognized the importance of addressing these barriers to ensure that the
digital economy remains open and accessible to all members.

While the WTO's existing agreements, such as TRIPS, are relevant in regulating digital trade,
new discussions and potential reforms are necessary to create a comprehensive framework that
reflects the complexities of digital trade. Negotiations in this area continue, as member countries
seek to balance trade liberalization with the protection of sensitive information and national
security interests.
 Chapter V

5. Challenges Faced by the WTO in the 21st Century

Since its creation in 1995, the World Trade Organization (WTO) has played a critical role in
shaping the global trade system. However, as the world economy has evolved, the WTO has
faced significant challenges. These challenges include rising protectionism, the need for
institutional reforms, and an inability to conclude multilateral negotiations, such as the Doha
Round. Additionally, there are growing concerns regarding the WTO's handling of
environmental and social issues. This section explores the major challenges faced by the WTO in
the 21st century.

5.1. The Rise of Protectionism

In recent years, there has been a noticeable shift towards protectionist policies in many countries,
undermining the WTO's role in promoting free and open trade. Protectionism, which involves
countries imposing tariffs, quotas, and other barriers to protect domestic industries, has become
more prominent in the global trade landscape.

5.1.1. US-China Trade War and Its Impact on the WTO

The US-China trade war, which began in 2018, is a clear example of the rise of protectionism in
the 21st century. The United States imposed tariffs on hundreds of billions of dollars' worth of
Chinese goods, citing concerns over unfair trade practices, intellectual property theft, and trade
imbalances. In response, China retaliated with tariffs of its own.

The trade war has had a profound impact on the global economy and the WTO's ability to
manage disputes. The WTO's dispute settlement mechanism (DSU) was unable to address the
US's unilateral actions effectively. The United States, a major WTO member, has also criticized
the organization for not being able to enforce its rulings or prevent unfair trade practices.

The trade war between the US and China has exacerbated the divide between developed and
developing economies, leading to a decline in multilateral cooperation. This reflects a broader
shift away from multilateral trade agreements towards unilateral and bilateral trade actions,
making it more difficult for the WTO to mediate disputes and promote global trade
liberalization.

5.1.2. The Shift Towards Bilateral and Regional Trade Agreements

In response to the difficulties encountered in the multilateral WTO framework, many countries
have turned to bilateral and regional trade agreements (RTAs). These agreements are often seen
as more flexible and quicker to negotiate than global agreements under the WTO.

For example, after the breakdown of the Doha Round negotiations, countries such as the United
States, Canada, and Mexico renegotiated the North American Free Trade Agreement (NAFTA)
and replaced it with the United States-Mexico-Canada Agreement (USMCA). Similarly, the
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade
agreement involving countries around the Pacific Rim, was signed without the participation of
the United States.

While regional agreements have facilitated trade in specific regions, they often undermine the
multilateral trading system by creating preferential trading arrangements that exclude other
countries. The rise of RTAs has led to concerns that global trade could become fragmented, with
different rules governing different regions, creating complexities for countries that are not part of
these agreements.

5.2. Reforming the WTO: Calls for Change

As the challenges facing the WTO have intensified, there have been increasing calls for
reforming the organization to better respond to the evolving global trade landscape. These
reforms are needed to address institutional inefficiencies, enhance decision-making processes,
and ensure the effectiveness of dispute resolution.

5.2.1. Institutional and Decision-Making Challenges

One of the key challenges facing the WTO is its decision-making process. The WTO operates on
a consensus-based system, which means that all 164 member countries must agree on any
decision. This system has become increasingly difficult to navigate as the number of members
has grown, with diverging economic interests and political priorities.

The WTO's structure, which was designed to facilitate decision-making among a smaller number
of countries, has struggled to adapt to the complexities of a globalized economy. Critics argue
that the decision-making process is too slow, and that the organization is often unable to act in a
timely manner to address emerging trade issues.

Moreover, the expansion of membership and the growing complexity of trade issues have made
it difficult to achieve consensus on key trade matters. As a result, some countries have expressed
frustration with the WTO's ability to deliver results, especially in the context of broader global
challenges such as digital trade, environmental sustainability, and inequality.

5.2.2. Dispute Settlement Mechanism Reforms

The WTO's Dispute Settlement Understanding (DSU) is considered one of its most successful
features, providing a formal process for resolving trade disputes between member countries.
However, the system has faced significant challenges, especially in recent years. A major issue is
the blockage of appointments to the Appellate Body (AB), the highest authority in the dispute
settlement process.

In 2019, the United States blocked the appointment of new members to the Appellate Body,
effectively paralyzing its ability to function. As a result, the dispute settlement process has been
severely delayed, undermining the WTO's ability to enforce its rulings and maintain the
credibility of the global trade system.
Calls for reforming the dispute settlement system focus on addressing the blockage of
appointments, improving the efficiency of the process, and ensuring that the system can handle
modern trade disputes, particularly those related to e-commerce and intellectual property.

5.3. The Impasse in the Doha Round Negotiations

The Doha Development Agenda (DDA), launched in 2001, was intended to address the concerns
of developing countries and facilitate a more inclusive global trade system. However, the
negotiations have been stuck in a deadlock for nearly two decades, with no major breakthroughs.

The main issues at the heart of the impasse include disagreements over agricultural subsidies,
market access for developing countries, and intellectual property rights. Developed countries,
particularly the United States and the European Union, have been unwilling to make significant
concessions on agricultural subsidies, while developing countries have demanded greater market
access for their goods.

The failure of the Doha Round highlights the difficulty of reaching consensus on trade rules that
balance the interests of developed and developing countries. As a result, the WTO has struggled
to advance the multilateral trade agenda, leading to a rise in regional and bilateral trade deals.

5.4. The WTO and Environmental and Social Issues

The WTO's traditional focus has been on the regulation of trade in goods and services, but in
recent years, there has been growing pressure to address environmental and social issues within
the global trade framework. These include concerns about sustainability, labor rights, and the
social impacts of trade policies.

5.4.1. Trade and Environmental Sustainability

The growing recognition of environmental sustainability has led to calls for the WTO to better
integrate environmental protection into its trade rules. Trade and environmental sustainability are
increasingly seen as interconnected, with some arguing that trade liberalization can either
promote or undermine environmental protection, depending on the policies in place.

For instance, some WTO members have pushed for trade rules that promote the use of green
technologies, while others have advocated for carbon tariffs to address climate change. The
WTO has responded with agreements such as the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), which allows for the protection of environmentally friendly
innovations.

However, there is still debate over the extent to which the WTO should regulate environmental
policies. Critics argue that the WTO’s current framework is insufficient to address the
environmental challenges of the 21st century, and that more ambitious reform is needed to
integrate sustainability into the trade regime.
5.4.2. Labor Standards and Human Rights in Trade

Labor standards and human rights have also emerged as significant issues in WTO discussions.
Many developing countries, especially those with lower labor standards, face criticism from civil
society groups and labor unions for their use of cheap labor, often in the garment and agriculture
sectors.

The WTO has faced pressure to include provisions on labor standards in its trade agreements,
particularly in the context of trade with developing countries. However, some member countries
have resisted these demands, arguing that trade agreements should focus solely on economic
issues and leave social issues to national governments.

Efforts to incorporate labor standards and human rights protections into the WTO framework
have been met with limited success. While the organization has created mechanisms for
monitoring the impact of trade on social and labor conditions, there remains a significant gap in
enforcing these standards at the international level.
 Chapter VI

6. The WTO’s Role in Nepal's Trade Policy

Nepal's membership in the World Trade Organization (WTO) has had a profound impact on its
trade policy, enabling the country to integrate into the global trading system. Since Nepal's
accession to the WTO in 2004, it has been actively participating in global trade negotiations and
benefiting from various WTO agreements that aim to foster trade liberalization. This section
explores Nepal's accession process, its commitments, and challenges, as well as the broader
impact of WTO membership on Nepal's economy.

6.1. Nepal’s Accession to the WTO

Nepal officially became the 147th member of the WTO on April 23, 2004, following a lengthy
and complex negotiation process. Nepal's accession to the WTO was a significant milestone for
the country, as it opened up new opportunities for accessing global markets while requiring
significant adjustments to its domestic trade policies and regulations.

6.1.1. Nepal’s Negotiation Process

Nepal's negotiations for WTO membership began in the mid-1990s, as the country sought to
become a part of the global trade regime after the end of the Cold War and the liberalization of
its economy. Nepal's initial application for WTO membership was submitted in 1995, and the
process took nearly a decade to complete due to the country's limited experience with
multilateral trade negotiations and its developing economy.

During the negotiation process, Nepal had to undergo a rigorous review of its trade policies,
legal frameworks, and commitments to liberalize various sectors. The WTO Working Party on
Nepal's Accession, which consisted of representatives from several member countries, worked
with Nepal to review and align its trade laws with WTO rules. Nepal had to make significant
reforms in areas such as customs procedures, tariffs, intellectual property rights, services, and
agriculture.

Nepal’s accession process also involved addressing issues specific to its economy, such as its
landlocked status and reliance on imports for various goods. These challenges required Nepal to
negotiate special provisions and transition periods to ease the adjustment to WTO rules.

6.1.2. Key Commitments and Challenges

Upon accession, Nepal made several key commitments to liberalize its economy, such as
reducing tariffs, eliminating non-tariff barriers, and opening up service sectors like banking,
insurance, and telecommunications. Nepal also agreed to comply with TRIPS (Trade-Related
Aspects of Intellectual Property Rights) and GATS (General Agreement on Trade in Services),
aligning its domestic laws with global standards.
However, Nepal faced several challenges during its accession process and after joining the
WTO. One of the key challenges was its dependence on trade with neighboring countries,
especially India, which accounts for a large share of Nepal's exports and imports. As a result,
Nepal's trade policy adjustments were sometimes limited by its bilateral trade agreements with
India.

Additionally, Nepal's domestic industries, particularly agriculture, faced significant pressure

from increased competition. Agricultural subsidies and tariff reductions meant that Nepal had to
make difficult choices regarding the protection of its local industries while complying with WTO
agreements.

6.2. Impact of WTO Membership on Nepal’s Economy

Nepal's accession to the WTO has had a mixed impact on its economy, with both positive and
negative consequences. On the one hand, WTO membership has provided access to global
markets and trade liberalization, but it has also introduced new challenges for Nepal's domestic
industries and agricultural sectors.

6.2.1. Trade Liberalization and Economic Growth

One of the key benefits of WTO membership for Nepal has been the trade liberalization
measures that came with it. By lowering tariffs and reducing barriers to trade, Nepal has been
able to improve access to international markets for its exports. This has facilitated the growth of
Nepal's manufacturing sector and has expanded opportunities for Nepalese businesses to
integrate into global supply chains.

While the overall impact on Nepal's economic growth has been positive, the results have been
mixed. For instance, the trade liberalization process has led to an increase in imports of goods
that were previously produced domestically, such as agricultural products. This has created
challenges for local producers, who have found it difficult to compete with cheaper foreign
imports.

Nonetheless, the broader effects of trade liberalization have contributed to an increase in foreign
direct investment (FDI), as companies from developed nations seek to take advantage of Nepal's
market and labor force. The tourism and services sectors have also benefited, with Nepal gaining
increased visibility in international markets.

6.2.2. Access to Global Markets

WTO membership has also provided Nepal with improved access to global markets by reducing
barriers and fostering trade relationships with countries around the world. For example, Nepal's
export of textiles, garments, and handicrafts has benefited from reduced tariffs in key markets
like the European Union and the United States.

Furthermore, Nepal's integration into the global trading system has enabled the country to
participate in regional trade agreements (RTAs) and has facilitated access to trade preferences
such as the Generalized System of Preferences (GSP). The WTO framework has also provided
Nepal with the ability to safeguard its interests in case of unfair trade practices by other countries
through the Dispute Settlement Understanding (DSU).

Despite these advantages, Nepal still faces challenges in accessing markets, particularly in high-
value sectors such as agriculture. Its landlocked geography and reliance on a limited number of
trading partners further complicate Nepal’s ability to fully capitalize on WTO membership.

6.3. Nepal’s Participation in WTO Disputes and Rounds

Since joining the WTO, Nepal has been an active participant in the organization's dispute
settlement mechanism and multilateral negotiations. Although Nepal has not initiated major trade
disputes, it has been involved in several important cases and discussions related to agricultural
trade and market access.

Nepal’s participation in WTO negotiations has allowed it to voice its concerns about global trade
issues, especially those that affect its domestic economy. Nepal has used the WTO framework to
advocate for special treatment for developing countries and has worked to ensure that its
agricultural sector receives adequate protection from external competition.

Nepal's involvement in multilateral negotiations, such as the Doha Round of trade talks, has also
been significant. While the Doha Round has largely stalled, Nepal has used the opportunity to
push for policies that protect the interests of developing nations, including preferential trade
terms for agricultural products and easier access to medicines.

6.4. The Future of Nepal in the WTO Framework

Looking forward, Nepal faces both challenges and opportunities as it continues to navigate the
WTO framework. As the global trade landscape evolves, Nepal must adapt its trade policies and
engage in WTO reforms to improve its position in the international trading system.

6.4.1. Opportunities for Nepal in WTO Reforms

Nepal’s future in the WTO will be shaped by ongoing reforms to the organization. As the WTO
confronts challenges such as the rise of protectionism, trade barriers in the digital economy, and
the need to address environmental and social issues, Nepal has opportunities to advocate for
reforms that can benefit its economy.

One opportunity lies in pushing for greater inclusion of developing countries in trade
negotiations. Nepal can leverage its position as a low-income, landlocked country to advocate for
provisions that protect its agricultural sector and promote sustainable development. Nepal can
also push for more inclusive trade rules that benefit small and medium-sized enterprises (SMEs)
and local producers.
6.4.2. Enhancing Nepal’s Trade Competitiveness

To enhance its trade competitiveness, Nepal needs to focus on improving its infrastructure,
reducing domestic trade barriers, and diversifying its export base. The country should take
advantage of trade facilitation measures under the WTO to improve customs procedures and
reduce transaction costs. Additionally, Nepal can benefit from developing its services sector,
including tourism, IT, and financial services, which are increasingly important in the global
economy.

Furthermore, Nepal should work to attract foreign direct investment (FDI) in key sectors and
promote its comparative advantages in labor-intensive industries like textiles, handicrafts, and
agriculture. By improving its trade competitiveness, Nepal can better integrate into global value
chains and benefit from its membership in the WTO.
 Chapter VII

7. The Future of the WTO: Moving Beyond the Challenges

The World Trade Organization (WTO) has faced a series of challenges in recent years, from the
rise of protectionism to the impasse in multilateral trade negotiations. However, despite these
challenges, the WTO remains the cornerstone of global trade governance. As the global trade
landscape continues to evolve, the WTO must adapt to meet the demands of a changing world.
This section explores proposals for reforming the WTO, the impact of emerging economies, and
the organization’s role in sustaining multilateralism in the 21st century.

7.1. Reform Proposals and the Road Ahead

The WTO's structure, decision-making processes, and dispute settlement mechanisms have come
under scrutiny in recent years, especially as new trade issues emerge. To ensure that the
organization remains relevant, several reform proposals have been put forward to address its
limitations and enhance its effectiveness.

Institutional and Governance Reforms

One of the most significant proposals for reforming the WTO focuses on its institutional
structure and decision-making processes. The WTO’s consensus-based decision-making model,
which requires all member countries to agree on any decision, has proven to be inefficient in the
face of an increasing number of members and the complexity of global trade issues. Critics argue
that this process is too slow and often leads to deadlock.

Reform proposals suggest moving towards flexible consensus or a majority voting system for
certain issues, which could allow for more rapid decision-making. Additionally, streamlining the
WTO Secretariat and empowering the Director-General to take a more active role in shaping
negotiations and policymaking are among other suggested reforms. These changes would make
the organization more responsive to global economic shifts and improve its operational
efficiency.

Dispute Settlement System Reforms

The Dispute Settlement Understanding (DSU), particularly the Appellate Body (AB), has been a
cornerstone of the WTO, ensuring the enforcement of trade agreements and providing an
impartial mechanism for resolving trade disputes. However, the US blockade of new
appointments to the AB in recent years has severely hampered the DSU’s effectiveness. To
resolve this issue, proposals for reform include revising the AB’s structure, enhancing
transparency in its decision-making process, and creating a more flexible approach to dealing
with disputes involving emerging issues like digital trade and climate change.

The WTO could also expand its focus on preventive diplomacy and alternative dispute resolution
methods, which might reduce the reliance on formal litigation and increase the speed and
flexibility of the dispute settlement process.
Addressing New Trade Issues

In addition to the structural reforms, the WTO must also adapt to the changing nature of global
trade. Issues such as digital trade, e-commerce, climate change, and sustainable development are
not sufficiently addressed by the current framework. The WTO will need to develop new rules
and regulations that accommodate these emerging trade issues while maintaining its core
function of trade liberalization. For instance, discussions on data flow regulations and the role of
artificial intelligence in trade will need to be incorporated into future negotiations.

7.2. The WTO in the Context of a Changing Global Trade Landscape

The global trade landscape has undergone profound changes over the past few decades, driven
by globalization, technological advancements, and shifting political dynamics. In this context,
the WTO faces both opportunities and challenges in adapting to new realities.

Shifting Power Dynamics in Global Trade

The rise of emerging economies, particularly China, India, and Brazil, has shifted the balance of
power in global trade. These countries are no longer just participants in global trade; they are
increasingly shaping the global economic order. As a result, the WTO will need to accommodate
the interests of emerging economies while maintaining the interests of developed countries.

This shift also raises questions about the WTO's ability to represent the diverse needs of its
members. Emerging economies, many of which have rapidly growing populations and increasing
demands for access to markets, often have different priorities compared to developed countries.
The challenge for the WTO will be to ensure that it remains inclusive and representative of all its
members while balancing the interests of developed and developing countries.

Technological Changes and Digital Trade

Technological advancements, particularly in digital trade, are reshaping the global economy. The
rise of e-commerce, cross-border data flows, and digital platforms has created new opportunities
and challenges for international trade. The WTO’s existing agreements do not adequately
address these emerging issues, and new frameworks will be needed to regulate digital trade,
intellectual property, and privacy concerns.

As digital trade becomes increasingly important, the WTO must also find ways to address the
growing digital divide between developed and developing countries. Ensuring that all countries
can benefit from digital trade will be crucial for fostering equitable growth in the global
economy.

7.3. The Role of Emerging Economies in Shaping the WTO’s Future

Emerging economies have become central players in the global trading system, and their role in
shaping the future of the WTO is increasingly important. As these countries continue to grow
and expand their share of global trade, they will play a critical role in the reform and evolution of
the WTO.

Expanding Influence in Trade Negotiations

Emerging economies, particularly China, India, and other developing countries, have gained
greater influence in global trade negotiations. These countries have increasingly sought a greater
say in the formulation of trade rules that reflect their developmental priorities. For example,
India has been vocal in demanding more flexible provisions for agriculture and services, while
China has pushed for stronger intellectual property protections.

As the balance of power shifts in global trade, the WTO will need to incorporate the concerns of
emerging economies into its decision-making processes. This will require a more inclusive
approach to trade negotiations, where the voices of developing countries are given equal weight
alongside those of developed nations.

Contributing to Multilateralism

Emerging economies also have a vested interest in promoting multilateralism and ensuring that
global trade remains open and non-discriminatory. By strengthening the WTO’s ability to
address global trade challenges, emerging economies can ensure that they continue to benefit
from an open and fair international trading system.

These economies also face the challenge of balancing domestic development needs with their
commitments to global trade rules. As such, the future of the WTO will depend on its ability to
foster cooperation between emerging and developed economies, ensuring that the benefits of
trade are distributed equitably across the globe.

7.4. The WTO and Multilateralism in the 21st Century

The WTO is the cornerstone of the multilateral trading system, but its future will be shaped by its
ability to maintain and enhance multilateralism in the face of growing protectionism and
regionalism.

Strengthening Multilateral Cooperation

In an era of growing protectionism and the rise of regional trade agreements, the WTO’s role in
promoting multilateral cooperation is more critical than ever. While RTAs have proliferated,
they often exclude the interests of smaller and less developed countries, creating fragmented
trade rules that may conflict with the principles of the WTO. The WTO’s strength lies in its
ability to offer a platform for all countries to engage in fair and transparent negotiations.

To strengthen multilateralism, the WTO will need to adapt to new global trade realities while
maintaining its role as the central institution for trade governance. This includes updating its
rules to reflect emerging trade challenges, such as digital trade and environmental sustainability,
and ensuring that its dispute settlement mechanisms remain effective in resolving conflicts
between members.

Promoting Sustainable Development and Inclusivity

The WTO’s future will also depend on its ability to promote sustainable development and
inclusivity. As trade becomes increasingly intertwined with social and environmental concerns,
the WTO must find ways to integrate environmental protection, labor rights, and human rights
into its trade framework. This will require balancing the goal of trade liberalization with the need
to address pressing global issues like climate change, inequality, and social justice.

The WTO will need to ensure that its policies support inclusive trade that benefits all countries,
especially the most vulnerable. This can be achieved through better integration of Special and
Differential Treatment (SDT) provisions and by promoting trade rules that facilitate sustainable
development and poverty reduction.
 Chapter VIII

8. Conclusion

The World Trade Organization (WTO) has played a pivotal role in shaping the global trade
system since its establishment in 1995. It has helped reduce trade barriers, resolve disputes, and
ensure a more predictable and transparent trading environment for its 164 member countries.
However, as global trade dynamics evolve, the WTO faces numerous challenges, including
rising protectionism, the need for institutional reforms, and the integration of emerging issues
like digital trade and environmental sustainability. This section provides a summary of the key
findings, discusses the importance of the WTO in global trade governance, offers policy
recommendations for strengthening the organization, and outlines future research directions.

8.1. Summary of Key Findings

This paper has explored the evolution of the WTO, its key functions, and its impact on global
trade. The key findings include:

 Historical Evolution: The WTO evolved from the General Agreement on Tariffs and
Trade (GATT), which was focused primarily on reducing tariffs. The WTO's broader
scope includes not only trade in goods but also services and intellectual property, and it
has developed mechanisms like the Dispute Settlement Understanding (DSU) to resolve
conflicts.
 Global Trade Expansion: The WTO has facilitated significant growth in world trade
since its inception. The reduction of tariffs and non-tariff barriers under the WTO
framework has helped integrate emerging economies into the global trade system,
particularly through the liberalization of agricultural products and services.
 Challenges for the WTO: The WTO has faced challenges such as rising protectionism,
the failure to conclude the Doha Development Agenda, and the inability to address
emerging issues like digital trade, climate change, and labor standards. Additionally, the
growing influence of bilateral and regional trade agreements has weakened the WTO's
central role in global trade.
 Impact on Developing Countries: For developing countries like Nepal, WTO
membership has provided access to global markets, but it has also posed challenges in
terms of domestic adjustment, particularly in agriculture and industry. The WTO's
provisions for Special and Differential Treatment (SDT) have provided some flexibility,
but concerns about unequal bargaining power remain.
 Reform Proposals: Several reforms have been proposed to address the WTO's
weaknesses, including changes to its decision-making process, dispute settlement
mechanisms, and the introduction of new rules to address issues like e-commerce and
environmental sustainability.
8.2. The Importance of the WTO in Global Trade Governance

The WTO remains the cornerstone of global trade governance, providing a multilateral
framework for managing trade relations. Despite facing numerous challenges, the WTO
continues to be essential for maintaining stability and predictability in the global trading system.

The organization serves as the primary forum for negotiating and implementing trade rules, and
its rules-based system ensures that trade flows are governed by established legal standards rather
than arbitrary or discriminatory measures. The WTO also plays a key role in addressing trade
disputes through its Dispute Settlement Understanding (DSU), providing an impartial
mechanism for resolving conflicts between member countries.

In an increasingly complex global economy, the WTO’s role in promoting fair competition and
reducing trade barriers is vital. It provides countries, especially smaller and developing ones,
with a platform to voice their concerns and negotiate trade terms that reflect their economic
realities. Additionally, the WTO’s influence on trade-related intellectual property rights (TRIPS)
and General Agreement on Trade in Services (GATS) has helped expand the scope of global
trade, ensuring that services and intellectual property are recognized as integral parts of the
global economy.

8.3. Policy Recommendations for Strengthening the WTO

To ensure that the WTO remains effective in the 21st century, several policy reforms are
necessary. The following recommendations are proposed to strengthen the organization:

1. Reform the Decision-Making Process: The WTO’s consensus-based decision-making

process needs to be reformed to allow for faster, more efficient decision-making. A
system that incorporates majority voting or flexible consensus could help resolve
deadlocks and expedite the negotiation process.
2. Enhance the Dispute Settlement Mechanism: The Appellate Body (AB) of the WTO
needs to be restructured and revitalized to address current challenges, particularly those
related to the blockage of appointments and the growing complexity of disputes. The
dispute settlement process must be modernized to handle emerging issues such as digital
trade and environmental disputes more effectively.
3. Address Emerging Trade Issues: The WTO must update its framework to
accommodate new and emerging issues such as e-commerce, intellectual property in the
digital age, sustainable trade, and climate change. Clearer rules for cross-border data
flows, cybersecurity, and privacy protection will be essential as digital trade continues to
grow.
4. Support for Developing Countries: The WTO must strengthen its efforts to assist
developing countries in implementing trade rules and enhancing their export
competitiveness. This includes providing technical assistance, capacity-building
programs, and more favorable terms under Special and Differential Treatment (SDT)
provisions.
5. Enhance Transparency and Inclusivity: To ensure that the WTO is a platform for all
nations, greater efforts should be made to ensure transparency in decision-making and
 inclusivity in trade negotiations. Developing countries must have equal representation
and opportunities to influence trade policies that impact them.
6. Focus on Environmental Sustainability: The WTO should adopt stronger provisions for
environmental sustainability, including carbon tariffs and the promotion of green
technologies. It must strike a balance between trade liberalization and environmental
protection to address global challenges such as climate change and resource depletion.

8.4. Future Research Directions on WTO and International Trade

As the global economy continues to evolve, the future of the WTO and international trade will be
shaped by several factors. Future research should focus on the following areas:

1. Impact of Digital Trade on Global Trade Governance: Research is needed on how the
WTO can regulate digital trade effectively and ensure that emerging issues such as data
privacy, artificial intelligence, and digital monopolies are incorporated into the global
trade framework. This will include studying how digital trade agreements can be
harmonized with existing WTO rules.
2. The Role of Regional Trade Agreements: As regional trade agreements (RTAs)
continue to proliferate, further analysis is required on how these agreements interact with
the multilateral system. Research should focus on their impact on the WTO, particularly
with regard to trade diversion and compatibility with WTO rules.
3. Environmental Trade Rules and Climate Change: There is a need for further research
on how the WTO can incorporate environmental concerns, particularly regarding trade
and sustainability. This includes evaluating the effectiveness of trade measures like
carbon tariffs, green subsidies, and their potential impact on global trade and
development.
4. Labor Rights and Human Rights in Global Trade: Research should also explore the
integration of labor rights and human rights protections within global trade
agreements. This could include examining the role of the WTO in ensuring fair labor
standards and assessing the effects of trade liberalization on working conditions in
developing countries.
5. Developing Country Perspectives: Further research is needed on how the WTO can
better serve the interests of developing countries. This involves examining the
effectiveness of Special and Differential Treatment (SDT) provisions and identifying
ways to enhance their participation in global trade discussions.
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