eBusiness Weekly
Are you tired of hearing, with great puzzlement, about “trade liberalisation”, “trade barriers”, “trade policy review” and some such high sounding terms of international trade?
Please do not despair. At some point I was also blissfully clueless about these terms. I believed that international trade is an economic activity best left to large companies.
Of course I was wrong. When my modest herd of Boer goats grew to a decent size, I found myself attempting, but failing dismally, to penetrate international goat meat markets. I suddenly realised that all entrepreneurs, great or small, should have an elementary grasp of how global trade works.
SMEs should participate in international trade
SMEs make up the vast majority of firms in most countries, about 95 percent on average, and account for the most jobs.
Clearly, the significance of SMEs cannot be overemphasised, yet, as illustrated by my little ditty about goat meat, SMEs have been largely absent from the broad trade debate.
It is high time every entrepreneur, regardless of size, developed an interest in international trade.
History of the WTO
The World Trade Organisation (WTO) is a global institution which administers the global rules of trade. Its aim is to facilitate the smooth and predictable flow of international trade.
It was created in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT) which was established after the Second World War.
The WTO itself is a fairly young institution but the multilateral trading system which preceded it is more than 70 years old. Principally, the WTO seeks to eliminate trade barriers through negotiations among member governments.
WTO Agreements
At its very heart, the WTO system comprises the WTO’s agreements, negotiated and signed by most of the world’s trading economies.
These agreements form the legal basis for international trade and provide the legal ground rules for international commerce. They confer important trade rights on WTO members.
Further, signatories are obligated to maintain transparent and predictable trade policies. This has resulted in a stable and predictable framework to help producers of goods and services, exporters and importers to conduct their business while allowing governments to fulfil social and environmental objectives.
Functions of the WTO
- Implementation of the WTO Agreements
The first function of the WTO is to facilitate the implementation, administration and operation of the WTO Agreement and the multilateral and Plurilateral agreements attached to it. These agreements are quite numerous but, include, among others, the following:
The Multilateral Agreements on Trade in Goods;
General Agreement on Tariffs and Trade 1994;
Agreement on Technical Barriers to Trade;
Agreement on Trade-Related Investment Measures;
Agreement on Subsidies and Countervailing Measures;
General Agreement on Trade in Services;
Agreement on Trade-Related Aspects of Intellectual Property; and
Understanding on Rules and Procedures Governing the Settlement of Disputes.
Facilitating the implementation, administration and operation of the WTO agreements and furthering the objectives of these agreements is a crucial function of the WTO. Most of its bodies are involved in that function and expend the better part of their time doing so.
This involves making sure that individuals, companies, and governments around the world are aware of the applicable trade rules. It also concerns assuring all stakeholders that there will be no sudden changes of trade policies.
- Platform for trade negotiations
The WTO is a product of negotiations. Every achievement that the WTO takes credit for is born of negotiations. It is a permanent forum for negotiations amongst its membership.
The WTO is a platform where countries attempt to resolve the trade problems they have with fellow members. These negotiations include issues already covered in the WTO agreements but also frequently concern trade matters that are not currently covered under WTO law.
Countries confronted with trade barriers have used negotiations to open trade markets. However, the WTO is not just about creating market access, in certain instances; it actively seeks to maintain trade barriers. A good example is where barriers are necessary to prevent the spread of disease.
The greater part of the WTO’s current work comes from the 1986-94 negotiations known as the “Uruguay Round” as well as earlier negotiations under the General Agreement on Tariffs and Trade.
Presently, the WTO is facilitating new negotiations under the “Doha Development Agenda” launched at the Doha Session of the Ministerial Conference in Qatar, in November 2001.
- Dispute Settlement
Facilitating the settlement of trade disputes is the third most important function of the WTO. It is not uncommon for trading countries to have conflicting interests. Such is the nature of global commerce.
Further, sometimes parties hold different interpretations of the provisions of trade agreements.
There is no better way to maintain commercial harmony than settling these disputes through an agreed procedure based on a mutually accepted legal foundation. This is exactly what the dispute settlement process embedded in the WTO agreements seeks to achieve.
Disputes are resolved within the framework of the Understanding on Rules and Procedures Governing the Settlement of Disputes.
Judgments are handed down by specially appointed independent experts. These rulings are based on the interpretation of the agreements and the individual members’ undertakings.
- Monitoring Trade Policies
Another essential function of the WTO is the administration of the trade policy review mechanism (the TPRM).
The TPRM facilitates regular surveillance of national trade policies and evaluation of their effect on the functioning of the multilateral trading system.
This fosters transparency both domestically and at the multilateral level. It also encourages members to operate within the bounds of the WTO agreements.
- Cooperation with other organisations
The WTO is also seized with the task of cooperating with international organisations and non-governmental entities. Article III:5 of the WTO Agreement specifically mentions cooperation with the International Monetary Fund (IMF) and the World Bank.
Such combined effort facilitates greater consistency in global economic policy making. To date, the WTO has entered into agreements with the IMF and the World Bank to give effect to this collaboration.
The WTO also cooperates with non-governmental organizations (NGO’s). It has concluded collaborative agreements, with, among others, the International Labour Organisation (ILO), the World Intellectual Property Organisation (WIPO) and the United Nations Conference on Trade and Development (UNCTAD). The WTO jointly runs the International Trade Centre (ITC) with UNCTAD.
- Capacity building
WTO agreements have special provisions that accord lenient treatment to developing countries by allowing them longer time frames to implement agreements and commitments.
Other kid glove measures include provisions that increase trading opportunities of developing nations, support to enable them to build their trade capacity, boosting their proficiency to handle disputes and improving their competence in implementing technical standards.
The WTO facilitates numerous technical co-operation missions to developing countries every year. Moreover, it holds a bunch of courses in Geneva for government officials.
Conclusion
Clearly, therefore, the WTO is an organisation dedicated to opening up markets. It is a platform for countries to negotiate trade agreements.
The WTO also provides a mechanism for the resolution of trade disputes while simultaneously operating a system of trade rules.
In a nutshell, it is a forum where states try to iron out the trade issues they have with each other.
Jacob Mutevedzi is a commercial lawyer and a commercial arbitration practitioner contactable on [email protected]/Twitter: @jmutevedzi-ADR. He writes in his personal capacity
