Discuss the objectives, principles and functions of the world trade organizations.

Published: 23rd March 2011
Views: N/A



The General Agreement on Tariffs and Trade (GATT) regulated the world trade since 1947.

On 1st January 1995 in its Uruguay Round (GATT 8th round ), it was transformed into World Trade Organisation (WTO) to deal with all the major aspects of international trade.


World Trade Organisation (WTO) is defined as :

"the legal and institutional foundation of the multi-lateral trading system"

It is a permanent organization having a global status.

At present, the membership of the WTO is 153 countries.

The WTO frames its rules and policies as per the negotiations among its members and hence, it is a member – driven consensus based organization.


i)raising standard of living :

WTO aims at improving the standard of living of the people of the member nations and ensuring full employment.

ii)Optimum Use of World’s Resources :

WTO aims at making an optimum use of world’s resources and expanding world production and trade of goods and services.

iii)Protection of environment :

WTO promotes the idea of sustainable development and the need to protect and preserve the environment so as to benefit all the nations of the world.

iv)Growth of developing Countries :

WTO promotes the need for positive efforts to ensure that the developing countries get a better share of growth in international trade.

• Principles:

The WTO agreements are lengthy and complex as they cover a wide range of activities.

However, there are a member of simple, fundamental principles that guide the working of WTO and hence, they are the foundation of the multilateral trading system.

The following are the important principles of the WTO:

i)Non – discrimination : the principal of non – discrimination covers two aspects :

* Most – favoured Nation (MFN) : It means treating other people equally. MFN indicates that each member should treat other members equally as the most favoured nation.

Hence, the product made in the member’s own country is treated equally favourable as the goods produced in any other member’s country. The MFN principle forbids discrimination between the nationals of member countries.

• National treatment : It means treating foreigners and locals equally. This principle forbids discrimination between a member’s own nationals and nationals of other members.

This means that the foreign products should be treated as favourably as the identical domestic products.

ii)Free Trade :

though absolutes free trade is not possible, the WTO encourages world trade by lowering trade barriers. The WTO agreements permit countries to introduce gradual changes through ‘progressive liberalization .’ In fact, developing countries are given longer time to fulfil their obligations.

iii)Predictability :

the multitaleral trading system aims at making business environment stable and predictable through binding and transparency.

• Binding : when member countries open their markets for goods and services, they ‘bind’ their commitments on tariffs levels. A country can change its bindings only after negotiating with its trading partners.

• Transparency : the member countries’ trading rules are made very clear and transparent so as to improve predictability and stability of the business environment.

iv) Promoting fair Competition :

the WTO aims at promoting open, fair and undistorted competition among the member nations.

The rules establish what is fair or unfair and the members can calculate the compensation for damage caused by unfair trade.

v) Encouraging Development and Economic Reform :

WTO encourages economic reforms in developing countries especially by giving them special assistance and trade concessions.


I)Administration of Agreements :

The WTO looks after the administration of various agreements signed at the end of the Uruguay Round and thereafter.

These include GATS, Agreement on Agriculture, TRIPs and TRIMs

ii) Reduction in Trade Barriers :

the WTO aims at reduction in trade barriers. Hence, it checks the implementation of the tariff cuts and reduction of non- tariff measures agreed upon by the member nations.

iii) Examination of Member’s Trade Policies :

it regularly examines the foreign trade policies of the member nations so that they are in line with WTO’s guidelines.

iv) Settlement of Disputes :

the WTO tries to bring about an amicable solution to trade conflicts among member nations by conciliation.

The WTO Dispute Settlement Body adjndicates conflicts that cannot be solved by bilateral negotiations

v) Negotiation Forum : the WTO acts as a negotiation forum through which member nations negotiate over exchange of trade concessions, trade restrictions of good and services, etc.

vi) Consultancy Services :

the WTO keeps a watch on the developments in the world economy. It also provides consultancy services to member nations, especially to developing countries to increase trade and production.

vii) Collection of Foreign Trade Information :

the WTO collects information related to :

export-import trade

• Trade measures

• Other trade statisties and policy measures of member nations

viii) Assistance to IMF and IBRD :

the WTO assists IMF and IBRD in achieving world economic development.


Report this article Ask About This Article

More to Explore