World Trade Organization

The globalization process plays a significant role in the development of the contemporary world economic system. It defines the emergence of new methods of interstate cooperation in the sphere of production and trade. The broadening and deepening of transborder relationships in the modern world require the organization of new global institutions, the aim of which will be to create conditions and adjust to the process of cooperation between countries. One such organization is the World Trade Organization (WTO), which was implemented to achieve greater globalization of world commerce and trade integration of states. The world society usually asks questions whether the WTO is as efficient as it is said to be. Recent contradictions between the members of the union push to the idea that everything is not as smooth. A detailed consideration of the WTO’s usefulness for world trade and impact on the countries is necessary.

The Terms of Participation in the WTO

The first step towards international trade principles liberalization was done by the leaders of Western European countries in 1947 by establishing the GATT agreement. The organizers aimed to create conditions for the post-war reconstruction of destroyed economies by removing barriers to trade between them. Most experts later considered this forum as a helpful tool only for the developed countries. As for Grynberg, Dugal, and Razzaque, it (GATT) was then considered to be a forum promoting the interests only of developer countries (3). WTO is the ideological heir of this agreement, which developed its provisions and extended boundaries to the world. A circumstance that GATT was provided for the sake of developed countries can, to some extent, affect the fact that the modern form of WTO cannot provide the best conditions for cooperation among all member countries.

In any case, the process of accession to the WTO is quite complicated. The potential members should path through the negotiations with the current members of WTO and define the conditions for efficient cooperation. Article twelve of the WTO agreement does not set certain requirements for the nominees, but the requirements for applicants to entering are quite strict. The period of a massive expansion of the organization is over, that is why new members have to face and take stringent conditions of participation.

At the first stage, the WTO creates a Working Party, which consists of the member countries’ representatives. They perform negotiations with the nominee and define his economic and trade potential. They will later use this knowledge to evaluate the profits which they can achieve from the participation of a country in the WTO. The members of the WTO do not give a beneficial proposal instead that is why this stage is usually considered to be the one game play. A nominee has to give something to the WTO but does not get anything instead.

Later, when the Working Party decides that the potential member country can bring benefit, the nominee is allowed to perform negotiations from the point of their own benefit. At the same time during negotiations, the WTO participants have a special opportunity to extract as many concessions from the nominee, as possible. The practice of WTO is based on an irrespective attitude to the nominees during negotiations, irrespective of their size, income, and significance in global trade. According to Grynberg, Dugal, and Razzaque, since the new sectors, like agriculture, investment and services were added to the trade rules of WTO, the organization demanded more and more significant concessions in internal politics of the country (4). Most of all, it concerns the issue of privatization of state property.

The analysis of WTO participation terms shows that the organization provides significant demands for new members. Thus, the evaluation of appropriateness of these losses to the state is necessary. The researchers should understand whether participation in WTO is worth such losses and provides the appropriate advantages. Or the regional level of trade cooperation, which implies lower demands to the participants, which is better for everyone.

Advantages of Participation in the WTO

The WTO claims to be the organization that promotes new trade rules and standards throughout the world. The purpose of this organization is to make the world safer and more perfect by providing new conditions for countries’ economic growth and development. WTO aims to build a new world production redistribution mechanism, in which every state will specialize in the specific good, the production of which has the best competitive positions. WTO gives a variety of advantages to its participants, simplifying trading operation between the states. Further discussion of these advantages will help to determine whether they are worth the efforts and drawbacks, which are also available in the organization.

Providing Members with Much-needed Market Access

Participating in WTO, every country is supposed to open its markets for other participants’ goods. By removing customs barriers, WTO gives all the states the same possibilities to compete in each country’s market. The participants have no right to implement subsidies for the protection of their national companies throughout the world, under the threat of the WTO sanctions. Such a mechanism should equalize the rights of countries on trade cooperation; sometimes differences in countries’ goods quality and production capacity create precedents for international trading disputes. For such cases, WTO has a mechanism of dispute solution.

Many experts consider this potential to be of great importance for developed countries. Charles Kenny claims that WTO is the only hope for the U.S. to retain its leading position in world trade. The economist Arvind Subramanian predicts that the U.S. will obtain only 7% of world trade, in comparison to 50% after WWII. Kenny considers the WTO to be the most efficient tool of country’s progress in the existing trade system. According to him, if the U.S. wants to benefit from a stronger, fairer, truly global trading regime, it needs to reach out beyond Europe and the Far East to producers from Africa to Asia and Latin America (Kenny). WTO can give such a big market for him. The question is whether all the participants of WTO will win from such cooperation.

Adequate Rules for Trade Disputes Regulation

WTO protects its members from unfair trade policies of other members of the organization and gives a possibility to perform trade disputes to improve their position in the world trade system. Many specialists argue that trade disputes regulation system is not adequate and does not provide the proper protection for the weakest members of WTO developing and least developed countries. The research of Hoekman, Horn, and Mavroidis shows that the existing disputes solution system is quite just and answers the needs of majority of the WTO members. The authors have analyzed the statistics and compared the number of received and outstanding disputes between different groups of countries. They have found out that developing countries provide more complaints about the conditions of cooperation in the WTO but also receive more replies. According to them, the data on the other hand suggests that the rate of success in WTO DS cases if measured by the share of claims won is broadly similar across industrialized and developing countries (Hoekman et al. 14). It means that the WTO aims to protect the right of all its members, regardless of their economic development and political weight levels.

Privatization as a Tool for the Country’s Investment Climate Improvement

The child of the IMF, massive privatization of state property, was implemented by the WTO to give countries with low level of economic development and opportunity to attract foreign investments. In this case, WTO gives guarantees to the investors that the trade policy and political system of member country will remain stable. WTO becomes the representative of the country to the world of business, assuring consistency in all investments in this region. The privatization does not only give a country a possibility to achieve additional funds that can be focused on economic development, but it also transmits inefficient state-owned enterprises into the hands of capable owners who will be able to arrange things on a grand scale and restore the profitability of the business.

As an intermediate output, WTO seems to be the perspective organization that creates a variety of opportunities for its members. Nevertheless, it faces many problems and challenges nowadays, the WTO figures out to be necessary for the progress of the contemporary world. According to the Becalmed, If the world is unlikely to repeat the trade boom of the 2000s, there are nonetheless ways to prevent the trade from stagnating. Therefore, the WTO plays a vital part in this process. It has to unite all of its members to work for one target of international trade progress.

Nevertheless, there are still arguments heard that the WTO serves only developed countries and does not answer the real needs of economically weak and unprotected countries. Thus, the discussion of limitations of the WTO is the obvious need to completely understand its role in the modern world.

The Disadvantages of Participation in the WTO

Though the WTO figures out to be an efficient tool of countries cooperation in the field of international trade, the practice shows that more and more countries are becoming disappointed in it. One of the important reasons for such disappointment is that WTO cannot provide a trade agreement that could satisfy all participants in their negotiations. WTO is an international organization whose mission is to develop opportunities for international trade infrastructure improvement. WTO declares itself as a bearer of peace and development to the whole world. It implements projects that have to expand trade ties between countries and serve as a tool for the mutually beneficial cooperation of states. The practical results of the implementation of the WTO principles in various countries generate doubts about the expediency of such association. Many countries that had selected participation in WTO now suffer the negative consequences.

The Economic Benefits of the WTO are Not For All

The example of India, in this case, is very revealing. Seeking opportunities to improve trade balance and get better international trade conditions, India faced the disadvantageous rules of engagement. In such circumstances, the country had to agree to such rules of international trade, which only exacerbates the situation. WTO required India to remove trade barriers and open its markets to more competitive products. Though free trade rules could be profitable for high-tech sectors of the Indian economy, like outsourcing and programming, they would have been disastrous for uncompetitive Indian agriculture. This would be a harmful decision for the country, as 70% of its population lives in rural regions and faces the need to survive in conditions of low income and high inflation.

Refusing to ratify the trade facilitation agreement (TFA), India had something to lose. The new trade principles could create a big amount of new jobs and rapidly increase GDP. WTO also promised to help India boost its trade (Bailing Out from Bali). In fact, the organization was even ready to implement a peace clause program that would allow India to continue its protection policy for four years but still India was against the new agreement.

One of the reasons for such a decision was the absence of confidence in the WTO in terms of compliance with the agreements. The Indian government was disappointed with the fact that in the mid-1990s WTO used double standards for its members. As it was written in the article Bailing Out from Bali:

At that time, rich countries were allowed to keep many protectionist policies in return for promising to reduce them progressively. India, which was deemed not to subsidize domestic agriculture at the time, was thus left with stricter limits on supporting farmers. (Bailing Out from Bali)

In this situation, India and China, which face almost the same threatening, have decided to refuse to support the project of a trade facilitation agreement (TFA). They have refused to collapse the agricultural support program and allow destroying its agriculture for the sake of world trade corporations and the WTO. According to Einhorn and Srivastava, the misunderstanding can go both ways, though, as people in China and India have inflated ideas about what sacrifices foreign governments can ask of their farmers.

WTO and the Double Standards in the Global Trade

First of all, a researcher should identify whether proposals and agreements, which the WTO offers to its members, are results of double standards implementation, or a consequence of the inability to reconcile the interests of all parties in the same sentence. Trying to provide best conditions for the world trade development, WTO usually provides decisions that can be dangerous for some participants. For example, the Doha Ministerial Declaration (DMD) was introduced to demonstrate the possibility to combine the interests of countries with different levels of economic development in one agreement. According to Rena, DMD had to be operationally effective and to enable developing countries like China and India and their development needs, including food security and rural development(3). In fact, this agreement was not ratified due to the unacceptable condition of agriculture subsidies prohibition for many developing countries.

Rena considers the differences in objectives for groups of interest in the WTO. He claims that developed countries, like Europe and Japan, put environmental sustainability as a higher objective during negotiations. For developing countries, like China and India socio-economic stability has a higher priority (Rena 8). That is why they can sacrifice economic benefits of trade development for the sake of preservation of food security.

According to this, the conclusion is that WTO does not try to implement double standards in its work. The issue is that it is impossible for the organization in its existing form to provide best solutions for every member government. The effect of pressure on developed countries and corporations prevents the development of new trade unions.

Privatization as an Example of Corporate Tyranny in the Modern World

WTO represents privatization as an efficient tool for the recovery of state’s economy. It brings additional funds to the budget and sends seedy business in the hands of a talented leader. But, in fact, the international practice shows that new owners do not necessarily behave as expected by WTO and IMF. The factories, which used to be on state property, are usually stopped and sold off piece by piece. The privatization is especially dangerous for objects that previously represented state monopoly. In this case, new owners usually use their position to increase the prices of their services and make enormous profits. To some extent, privatization is the form of multinational corporations’ influence on the sovereign states.

Dr. Patricia Ranald, Principal Policy Officer in Australia, finds privatization to be a powerful weapon in hands of corporations. It allows them to redistribute wealth from state and society to their hands. WTO does not just give them such an opportunity but also forbids domestic government of the country to regulate the process of privatized enterprises activities. According to her, thanks to the GATS agreement governments are now being pressured by global services corporations to change these rules. Local government and society have also faced the issue of the tyranny of corporations. They cannot influence the corporations pricing policy under the threat of the WTO sanctions. As Ranald said, Australian policies to assist local industry development through government buying products from local firms could come under challenge on the grounds that transnational corporations were not receiving the same treatment as local firms.

Another researcher, Joshua Sanders, fully agrees with Patricia Ranald in this question. He claims that many of WTO’s regulations were implemented by corporate management. These companies achieved the greatest trade profits later. He also said that the biggest corporations and banks dominate the WTO for their sake (Sanders). According to these estimations, privatization usually becomes a problem, which WTO brings to its members national market.

Conclusion

The WTO’s role in the modern trade system is quite ambiguous. It creates conditions for the economic progress of its participants and, at the same time, provides double standards policy in the proposal of trade agreements. It aims to build a new world trade model that will include all of the developing countries. The main condition is that these countries must have something to offer to the WTO. The organization claims that it focuses on the improvement of economic conditions in each country, and, at the same time, promotes harmful privatization tool. The main issue of the WTO is that it cannot offer trade agreements that would have granted all its member governments. As a result, WTO in its existing option is not the best solution for world trade problems. The reconsideration of its principals is necessary to make WTO a more democratic and fair institution.