Cases in the Global Business Environment
The World Trade Organisation (WTO)
It has been suggested that “of all major economic institutions, the WTO has the worst reputation”. Outline the role of the WTO, and explain why it has proved difficult to reach agreement in recent WTO meetings in Doha, Geneva and Hong Kong.
The World Trade Organisation (WTO)
The WTO was founded in 1995 after the 8 year Uruguay round of talks, and it succeeded the General Agreement on Tariffs and Trade (GATT) created in 1947. Most of the WTO's current work comes from the Uruguay Round of negotiations (1986-1994). Headquartered in Geneva, Switzerland, the WTO has 151 members (as at 27th July 2007), ...view middle of the document...
The WTO is also responsible for negotiating and executing new trade agreements and is also in charge of policing the adherence by its members.
Over three quarters of WTO members are developing or least developed countries, and WTO agreements contain special provision for them. These include longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and infrastructure support.
The principles and objectives of the WTO try to emphasize the benefits for all its members, and with 150 of them and 30 others negotiating membership, the vast majority of the world’s nations therefore believe in the organisation. However the organisation still has a bad reputation with most criticism from people worried about the effects of free trade and globalisation. While the WTO pushes the implementation of its objectives and policies, questions are still raised about the absolute cost of free trade especially on poor countries, and the environment.
There is the perception that the organisation is run by the rich countries, for the rich countries and worsening the situation of the poor and this ‘free trade’ certainly isn’t free. For example in 2005, US customs officials collected $280 million on Cambodia’s modest $1.8 billion in exports – nearly as much as the $350 million on $34 billion worth of French exports. Developing countries increasingly have to give up safeguards that developed nations had during their early stages of growth. The International Monetary Fund (IMF) admitted that forcing free trade onto developing countries does not work and would actually increase the risk of financial crisis.
One major contentious issue is about subsidies by rich countries to their farmers. The WTO is criticised for allowing these countries especially in the European Union (EU) and United States (US) to allow payments of subsidies to their farmers, while tariff protections which are a key source of income for farmers in developing countries have been reduced in the same period. EU olive-oil subsidies for example pay Spanish, Greek and Italian growers $2.5 billion a year to produce, more than double the value of the world’s olive-oil trade. This prevents Moroccan and Tunisian olive oil, dubbed the world’s best extra virgin oil from appearing in any Western stores.
The WTO is considered too powerful and its decisions are absolute and member nations must abide by its rulings. The WTO is able to enforce its decisions by imposing trade sanctions against countries that have breached the rules. In one case in the long running EU-US trade battles, a decision was made that that the EU could impose sanctions of $4billion on the United States. This related to special tax concessions enjoyed by American Multinationals, and which the WTO judged constituted unfair competitions.
Over 300 cases have been brought before the WTO by member states, under its dispute settlement system since 1995. This may be considered a sign of...