Contemporary World Issues

The World Trade Organization

The History of the WTO

In order to understand the World Trade Organization, it is important to understand the reasons for which it was created. Critics of the WTO have contended that the WTO was formed merely to ensure the continued economic dominance of powerful nations. Proponents defend the organization as a peace-bringing institution which works towards the abolition of trade barriers worldwide.

The facts are these:

The WTO was created in 1994 as an instrument organization of the GATT (General Agreement on Tariffs and Trade).

The GATT, which was established after World War Two, is an organization, continuing today, consisting of 150 members. Its stated purpose (from its own preamble) is to reduce tariffs and other trade barriers among nations. 

The GATT holds negotiations in “rounds.” There have been eight “rounds” since its inception. The eighth, the Uruguay Round (1986-1994), provided for the creation of the WTO, in order to implement the agreements of the round, which were to “reduce trade barriers and to create more comprehensive and enforceable world trade rules.”


WTO vs. Critics: Opposing Economic Policies

Point of View: WTO

If the WTO claims to be promoting peace and financial security for the peoples of the world, why then are massive protests, like the famous "Battle for Seattle" in 1999, staged whenever the organization meets? The answer lies in the fact that protestors think that the organization is broadcasting itself as an entity with motives and goals very different from its actual objectives. But, deeper than this, there is a fundamental split in economic ideologies.

Member nations of the WTO work on the premise that decreasing trade barriers and protectionism leads to greater economic gain and stability. They believe that the resulting lower prices on goods and services which result from lowering and eliminating tariffs not only allow the entities purchasing the goods wholesale to make more use of their capital, but that these gains are then passed on to the consumer, who pays a lower price for their goods.


 Point of View: Critics

The opposing school of economic thought, that embraced by protestors of the WTO, holds that protectionism is the only humane way to conduct trade. Protectionism, which places tariffs on foreign imports that are also produced domestically, consists of raising trade barriers. Those who support this policy argue that protectionism is the best way to shield poor farmers and producers of goods from losing their trade and their only scant means of supporting themselves and their families.  


Issue: Treatment of Developing Economies

One of the most serious criticisms leveled at the WTO is that it is an organization which was created expressly to ensure continued economic dominance in the world by a few already-powerful industrialized nations. To this effect, critics claim that the decision-making process within the WTO is commandeered by powerful Western nations, expressly the U.S.

The WTO, they claim, works in conjunction with the World Bank and the International Monetary Fund to provide loans to developing and impoverished nations in order to create the infrastructure necessary to mine these nations of their natural resources and goods. Construction of ports, roads, dams, oil pipelines and the like are all completed with World Bank and IMF funds. Critics accuse these organizations of in effect making these loans in order to reap the advantages of the cheap products while the poor on the ground see little of the profit from these infrastructural gains. In fact, they claim that many of these poor are evacuated and displaced as a result of these construction projects, while the environment around them is compromised.

Another way the World Bank and IMF come into play is through the loans they make to developing and mostly near-bankrup nations in return for structural adjustment programs. The purpose of the so-called "structural adjustment" is to bring prices of a nation's exports more in line with the global economy, to increase efficiency in production, and most importantly to control inflation. These goals are usually accomplished by restricting government spending, which most often is achieved by cutting domestic programs, such as education and health care. This, critics say, is once again demonstrative of how industrialized nations merely take control of poor countries in order to maximize profit while disregarding the rights of the poorest people on Earth.


Issue: Disregard for the Environment

Another very serious issue which troubles opposition to the World Trade Organzition and its partner financial institutions is whether or not these organizations are properly concerned with the environment and the effect their policies may have on it. Critics claim that as long as the WTO is able to promote new infrastructure within developing nations, it does not particularly concern itself with the methods used; methods which may have a negative impact on the environment.


Anothe argument of the critics is that the WTO opposes environmental regulations on the grounds that they act as barriers to trade. For example, say a nation places a tarrif on wood products, in order to reduce the market for wood and thereby save forests. Critics claim that the WTO would oppose this tarrif because it represents protectionism.


Who is right?

One of the reasons it is so hard to determine which economic system benefits poor farmers and manufacturers is the lack of concrete data. Each side presents convincing data. Proponents of the WTO argue that studies conducted at the University of Chicago have shown that trade with foreign nations, such as China, actually has reduced income inequity in America for the reason that lower goods prices are proportionately more beneficial to those of lower income. Critics cite data from the UN showing that 80 countries now have lower per capita income than they had ten years ago, and that it is countries which are becoming integrated into the world economy which are suffering the setbacks. For example, Sub-Saharan Africa's exports have reached 30% of their GDP while the number of poor has only increased.

While each argument backs itself up with studies and statistics, the issue at hand is more complicated than many would like to admit. The WTO is not simply an evil organization intent on maintaining the power status quo and not afraid to use any means necessary to do so. Nor is it a totally altruistic entity, despite its claims of fostering peace and prosperity among the poor of the world. It is, first and foremost, a trade organization, and everyone should recognize that if it wasn't necessary in 1994, or even 1944, it is today in this increasingly globalized world. Instantaneous communication with the advent of the internet, speedier travel, and increased world tensions have made the necessity of an organization such as the WTO apparent. It would be naive to believe that the organization is perfect, but just as naive to assume that the world would be a better place without it.

The world is in a serious age of transition, and global economies are faltering. As globalization starts on its course, there will be hardship for the poor of the world, and even for the well-off. But the course of globalization is irreversible. No resurgance in protectionism will be able to halt it. It is therefore imperative that the WTO continue to exist as a forum to resolve trade disputes and to work out cohesive trade policy among consenting nations. Isolated economies will no longer exist. However, that is not to say that there do need to be changes made within the organization. Some of the claims about the WTO's uncertain environmental policies are valid, and these are issues that need to be addressed. Likewise for concerns about exactly how the WTO treats developing economies. But to dissolve the WTO would be a grave error.




Sources

Beddoes, Zanny Minton. “Beyond Doha.” The Economist. 9 Oct. 2008. Huntsville High School Library, Huntsville, AL. 19 Nov. 2008. <http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=682268&story_id=12373720>

“EDITORIAL - Criticism of World Trade Organization, World Bank and International Monetary Fund - Editorial.” Ecologist, The. . FindArticles.com. 19 Nov. 2008. <http://findarticles.com/p/articles/mi_m2465/is_6_30/ai_65653637>

Seattle.Gov. Seattle Municipal Archives. 19 Nov. 2008. <http://www.seattle.gov/CityArchives/>

Topulos, Katherine. “GATT/WTO.” Duke Law: Library and Technology. Nov. 2008. 12 Nov. 2008 <http://www.law.duke.edu/lib/researchguides/gatt.html>

The World Trade Organization Website. 11 Oct. 2008. World Trade Organization. 10 Nov. 2008. <http://www.wto.org/index.htm>

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