2020-01-14
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Objectives, main functions, principles
Objectives.
The objectives of the WTO include the followings:
- To raise standards of living
- To ensure full employment of members’ economies
- To promote the steady growth of real incomes and effective demand in their markets
- To expand the production of and trade in goods and services
- Sustainable development and environmental protection
- To ensure developing countries, and especially the least developed to secure a share in the growth in international trade commensurate with the needs of their economic development
Main functions.
There are five main functions of the WTO:
To facilitate formulation, implementation, administration and operation of the covered Agreements
Modern market economy must rely on international regulations or standardized global economic operations. Who should be the one to formulate these regulations? Should it be the US simply because of its strong economy? No single country is appropriate to make the rules. Only an international organization, like the GATT in the past and now in the form of the WTO, should formulate rules through many rounds of negotiations. Once the regulations and rules are set, there must be an organization to supervise and facilitate the implementation, administration and operation of these regulations and rules.
To provide the forum for negotiations on multilateral trade
The WTO provides the forum for negotiations on multilateral trade relations in matters covered by its various agreements. It may also, on decision by the Ministerial Conference, provide a forum for further negotiations, and a framework for the implementation of their results, on other issues arising in the multilateral trade relations among its Members. To put it simply, this is a matter of opening up the market. The founding of GATT in 1948 was based on the historical lessons of World War I and II, with the purpose of avoiding fighting for resources and market shares as a result of countries being divided up by different groups and because of closed markets. It was believed that opening market to each other could avoid the breakout of new wars. So far, this opening process has been extended from trade in Goods to trade in Services (finance, banking, insurance, securities, telecommunications, air shipment, accounting, law, and tourism), trade-related aspects of intellectual property rights, and trade-related investment measures or mutual opening of the investment market. The WTO is the direct result of multilateral negotiations, and will provide the forum for further negotiations on multilateral trade.
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To administer the integrated dispute settlement system.
Along with increasing international exchanges, countries cannot avoid frictions in their trade business, and disputes will also become more frequent. For a long time, the situation was that big countries bullied the small ones that had no means to go to court to win their cases. This is why the US often used the “special clause 301”and “super-301”(introduced in 1988, under which the US could unilaterally find other countries’ trade practices as ‘unfair’ and impose trade sanctions if the offending country did not reach a satisfactory settlement with the US Trade Representative) to solve disputes. Now, the WTO has provided a more effective dispute settlement system.
To review national trade policies (see p.14. TPRM).
To achieve greater coherence in global economic policy-making by cooperating with the IMF and with the World Bank
The World Bank is the world’s biggest development bank, providing finance, research and policy advice to developing countries, with an annual turnover in new loan commitments to developing nations of over 20 billion $US. The Bank loans are primarily for specific development projects. Like the World Bank, the IMF emerged from the United Nations Monetary and Financial Conference, held at Bretton Woods, New Hampshire, in July 1944. According to its constitutional instrument, the Fund exists:
(a) to promote international monetary cooperation;
(b) to facilitate the expansion and balanced growth of international trade;
(c) to promote foreign exchange stability;
(d) to create a multilateral system of payments between members;
(e) to assist in the correction of maladjustments in members’ balance of payments; and
(f) to reduce the duration and severity of disequilibria in members’ balance of payments.
During the first quarter-century after it started operations in 1945, the Fund was mainly concerned to establish and manage the international regime of fixed (but adjustable) exchange rates. Its interventions were mainly restricted to monetary and trade policy measures. The IMF lost much of its old role with the end of the dollar-centered fixed-rate system in 1971; however, the rapid globalization of money and finance since the 1960s has prompted the Fund to reinvent itself with an expanded agenda: First, the Fund has since the late 1970s exercised comprehensive and detailed surveillance, both of the economic performance of individual member states and of the world economy as a whole. Second, the Fund has since the 1970s intervened more intensely in many countries by designing for them not only traditional stabilization measures for short-term corrections of the balance of payments, but also structural adjustment packages for medium- and long-term economic reconstruction. Third, the ‘second-generation’ IMF has undertaken major training and technical assistance activities, largely in order to provide poorly equipped states with staff and tools that can better handle the policy challenges of contemporary globalization. Fourth, the IMF has pursued various initiatives to restore stability to global financial markets. The IMF has its membership risen from 62 states in 1960 to 182 states in 1998.
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Principles.
WTO establishes the following key principles, which occur in all agreements under the umbrella of WTO. These are:
· Trade without discrimination: 1) Most-favored-nation treatment, 2) National treatment;
· Transparency
· Predictable and growing access to markets
· Single undertaking
