World Trade Organization (WTO): Objectives, Functions, Significance, Goals, Principles

By K Balaji|Updated : June 28th, 2022

World Trade Organisation, popularly known as WTO, is the global organization that directly works in the field of trading. The WTO's primary goal is to develop international trade rules and regulations to assist the trading population involved in importing, exporting, and providing goods and services businesses.

The WTO has 164 members (including European Union) and 23 observer governments. Set up in 1995, WTO provides a forum for countries to negotiate trade rules and settle economic disputes between them. The headquarters of the World Trade Organisation is located in Geneva, Switzerland. Currently, the Director-General of WTO is Roberto Azevedo.

World Trade Organisation is a relevant topic of the UPSC Syllabus and is important from the Current Affairs point of view too. Through this article, we will be covering all the major aspects of WTO like the history of WTO, its functions, agreements, and its significance of WTO. Go through the entire article to prepare the topic well for your upcoming UPSC Exam.

Table of Content

What is World Trade Organisation?

The World Trade Organisation is a Global organization that deals directly with making rules and regulations among the Nations with respect to trading.

  • It was constituted on the 1st of January 1995. India also joined the WTO in 1995 and is a founding member of the WTO.
  • WTO is headquartered in Geneva, Switzerland. The WTO consists of 164 countries, where 160 are the UN countries, along with the EU, Hong Kong, Macau, and Taiwan.
  • Apart from this, WTO also acts as a forum that negotiates the trading agreement and settles down the trading disputes among the countries by providing support and full feeling of the needs of developing countries.
  • The main and prime focus of the World Trade Organisation is to provide benefits to all the traders in the world.
  • The World Trade Organisation has a body called the Ministerial Conference, which is the highest decision-making body.
  • This conference consists of all the member states and holds a meeting twice a year.
  • The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the Ministerial Conference and they can take decisions on all matters covered under any multilateral trade agreements.

History of World Trade Organization

The World Trade Organisation (WTO) was established on 1st January 1995, but its working dates back to about 50 years ago. Before the WTO, GATT was in existence in 1948, which was replaced by it.

  • According to the General Agreement, a body named GATT(General Agreement on Tariff and Trade) was formed, which underwent evolution over the years of rounds of negotiations.
  • This GATT witnessed its last conference in 1994 which started in 1986. This last round was called the Uruguay Round.
  • A year later, the WTO was formed in 1995. Where, the GATT, only dealt with trading, the WTO focused on goods trading along with services and intellectual properties.

Why WTO replaced GATT

The GATT failed to achieve its goals the World Trade Organisation replacing it was not a major game but an important demand during the last of the 1990 century.

  • In addition to legal problems, a number of factors contributed to the failure of GATT that including the legal problems specifically in the agriculture and textile areas.
  • For example in the GATT framework, the United States could not convince China and Japan to open up their markets to our goods and services.
  • Furthermore, the GATT excluded the services and intellectual property rights and there was no International mechanism to resolve such trade-related disputes.
  • Therefore, GATT started to face very serious problems and eventually converted to the World Trade Organisation. Hence it can also be said that the WTO is a new form of the existing GATT that exhausted its purpose and was not capable enough to intermediate the Global economic consequences and achieve the industrial interest of countries

Governance Structure of WTO

The Governance of WTO is composed of many higher delegations. Authorities include the representatives of all the WTO country members who meet at least after every 2 years and take major decisions related to the multilateral trading system and make agreements.

The governance structure of WTO is-

  • The Ministerial Council
  • General Council
  • Goods Council
  • Intellectual Property Council
  • Services Council
  • The work between the ministerial conferences is handled by three bodies namely the General Council, Disputes Settlement Body, and Trade Policy Review Body. The General Council is headed by David Walker of New Zealand.
  • The Council for Trade in Goods oversees about 11 committees and each one of them has separate responsibilities. All the committees consist of the existing WTO members only. This is also led by the chairman.
  • The Council on Trade-Related Aspects of Intellectual Property Rights promotes trade aspects of the same. The news and official records regarding the TRIPS Council and WTO collaboration with other international organizations on intellectual property at the World Trade Organisation are provided by him.
  • The Council for Trade Services is directed by the General Council which Oversees the operations of general agreements on trade in services means GATS.

Ministerial Conference of WTO

WTO has held its 12th Ministerial Conference at its Headquarters in Geneva, Switzerland. It was held between 12-17 June 2022.

  • This Conference was attended by the ministers present from all over the world(member countries) and discussed the functioning of this multilateral trading system and taking actions regarding the future work of the World Trade Organisation.
  • This conference was chaired by Timur Suleimenov, who is the Deputy Chief of staff of the Kazakhstan President. Earlier this conference was supposed to be held in 2020 but got postponed due to the covid-19 but it concluded successfully on 17 June 2022.

Objectives of the World Trade Organization

The WTO works on the following objectives:

  • To limit the trading barriers by negotiating. This results in a reduction in the prices of goods and services, which in turn results in a reduction in the cost of living.
  • Stimulating economic growth and employment opportunities
  • Limit the cost of international business activities.
  • To promote the concept of good governance.
  • To reduce the trade disputes among the countries.
  • Collaborating with the leading financial institutions to boost economic management.

Agreements of World Trade Organization

The major agreements under the WTO are:

  • The goods, services, and intellectual property will be under the control of the WTO.
  • They will resolve the issues related to the trading.
  • They advise and compel countries to enact their own trade regulations and notify the WTO.
  • It has agreed to over 60 agreements that are primarily legal texts.
  • A country has to sign and ratify the accords of the WTO before joining it.

Functions of World Trade Organization

WTO-related functions include the following.

  • It regulates the laws related to trade agreements.
  • Organize the conferences for trade negotiations.
  • Sort out and resolve the issues related to trading.
  • examines trade-related policies
  • Consult and cooperate with economic organizations.

Principles of WTO

WTO has 5 principles that are the foundation of a multilateral trading system. Following are the principles of WTO-

Trade Without Discrimination

As per the WTO agreement no countries can discriminate against each other or grand some special favors to any country. The WTO keeps all the members on the same page.

Also, the product imported and locally made goods should be given equal treatment at least even when those goods enter the foreign trade market.

Free trade through negotiations

There can be many barriers to free trade like the duties or tariffs, Bans, or Quotas which may affect effective trading. WTO also keeps on discussing such issues over time to reduce the fitness in business and marketing and make it relaxed and free trade.

Predictability through binding and transparency

Whenever any country opens to the market for services or goods gets bound under the WTO. The terrace binding for goods is mostly the ceilings on the rates of custom tariffs. At times some countries track imports below the bound rate and this problem is most common in the developing countries.

Promoting fair competition

In the fields of agriculture, intellectual properties, and services provided there are many agreements of WTO which provide fair competition. As a result of it the government procurement agreement competition rule applied to more than thousands of governments in all the countries.

Encouraging development and economic reform

Development is facilitated by the WTO system. In contrast to this, the developing countries name time and flexibility as they take a slow time to implement the agreement made by the WTO systems. In addition to these agreements, these agreements inherit the GATTs former provisions that provide special assistance and trade concessions.

Trade Agreements of WTO

WTO has a total of 60 agreements and decisions of 550 pages. These agreements are the result of Uruguay round negotiations which were signed at the Marrakesh Ministerial meeting in 1994.

  • After that many legal texts related to Information Technology agreement and accession protocols have been included in the WTO legal texts.
  • Some new negotiations that included negotiation on agriculture services and Intellectual Property Rights topics were declared in the Doha Ministerial declaration after November 2001.

Goals of WTO

The primary goal of WTO is to give an open and free trade space to the international traders where they can do trading without any obstruction.

  • It makes and implements the rules related to international trading.
  • It creates a venue for liberalization negotiation and trade monitoring.
  • It makes decisions that are more transparent and fair with all the member countries.
  • It also works with other important economical Institutions and works actively for Global economic management.
  • It opens the ground and provides a platform to the countries who can take advantage of WTO for the global Trading system.

WTO and India

India has been a member of the former GATT since 1948 and an active member of the World Trade Organisation since 1995. Being a developing nation India has contributed much in the trading field to WTO especially raising its own concerns as well as its fellow developing nations.

At the 2001 conference in Doha, Qatar India has been seen as the most outspoken advocate among all the countries. India has signed many agreements with the WTO whose implications can be seen in the Indian economy. These agreements are-

  • Reducing tariff and non-tariff barriers- In this agreement the total reduction of tariffs on the manufactured and finished goods.
  • TRIMS- It stands for Trade-Related Investments Measures. This measure restricts the host country to be Biased toward the internal trade and unbiased toward the foreign trade in their countries.
  • TRIPS- It stands for Trade-Related Intellectual Property Rights. It aims to recognize and protect the legal rights of the original creator of intangibles.
  • AOA- It means Agreement on Agriculture, which deals with the reduction of subsidies and giving market access to agricultural products.

India and WTO- latest Updations

Following are the latest updations in the meeting between WTO and India:

  • Banning of Chinese apps
  • Peace Clause-related issues
  • ICT tariffs case
  • Subsidies on fisheries.

Significance of World Trade Organization

The existence of the WTO is of great significance to all global trading systems.

  • It significantly enforces the rules and regulations for trading.
  • Because of the WTO, the import and export business has seen a great level of transparency and smoothness.
  • This allows the consumer to have a vast variety of topics.

World Trade Organization UPSC

The WTO aims to help the business-oriented populations involved in exporting and importing by making trading rules. WTO is covered in the UPSC Syllabus under International Relations and also part of the GS 2 paper. Every year UPSC aspirants can expect at least 1 to 2 questions from International relations and WTO. so those who are preparing for UPSC Prelims and UPSC Mains must have an in-depth understanding of WTO.

Download World Trade Organization UPSC Notes PDF

World Trade Organization UPSC Prelims Sample Question

Question:- Consider the following statements:

  1. WTO was established in 1995
  2. India is the founding member of the WTO
  3. WTO is the world’s largest economic organization

Choose the correct option below-

A) 1 only

B) 2 & 3 only

C) 1&2 only

D) All of the above

E) None of the above

Answer= Option D

Other Important UPSC Notes
Kyoto Protocol UPSC NotesPradhan Mantri Ujjwala Yojana Scheme
COP 26 Essay for UPSCCabinet Committees UPSC Notes
Green Climate Fund (GCF) UPSC NotesPublic Accounts Committee (PAC) UPSC Notes
BIMSTEC UPSC NotesTribunals UPSC Notes
Regional Comprehensive Economic Partnership (RCEP) UPSC NotesMoney Multiplier UPSC Notes
Statue Of Equality UPSC NotesInclusive Growth UPSC Notes
Disaster Management UPSC NotesLand Reforms in India UPSC Notes
One Nation One Ration Card Scheme UPSC NotesClimate Change UPSC Notes
Cyclone UPSC NotesOperation Twist UPSC Notes
Atal Innovation Mission UPSC NotesMajor Ports in India UPSC Notes

Comments

write a comment

FAQs on World Trade Organisation

  • India performs exceptionally to make the multilateral trading system fair and inclusive by putting in the efforts to Reform the WTO subsidy rules that let the developing countries participate in public food stockholding for security

  • The World Trade Organisation has both advantages and disadvantages and impacts the trade in India. In fact, WTO has introduced the general agreement on trade in service which actually has proved to be beneficial for India.

  • The WTO works in the field of ensuring the smooth flow of trade as freely as possible.

  • The most important area where WTO fails is holding the principle of democracy as it fulfills all the parameters that have an impact on the society but it does not have a transparent institution and neither it is Democratic.

  • There are 164 members in the WTO since July 2016 that deals with the global trading industry.

  • The complete control of WTO is under the members of the group. All the major decisions are taken by the members with a consensus.

  • (1) It allows the participation of members in constituting new rules and principles of trading.

    (2) WTO acts as a legal tool to protect discriminatory trade practices.

    (3) It guarantees stabilization and reduces investment risks.

    (4) WTO membership is a sign of increasing sovereign credit ratings.

    (5) WTO also strengthens the foreign partner positions in trade.

  • In terms of trading, the USA, China and Germany benefit the most from the WTO.

  • There are 14 countries that aren't part of the WTO. They are Aruba, Tuvalu, Eritrea, St. Maarten, Kiribati, San Marino, Kosovo, Palestinian Territories, Marshall Islands, Palau, Micronesia, North Korea, Nauru, and Monaco.

Follow us for latest updates