Page 24 - DMGT547_INTERNATIONAL_MARKETING

Unit 2: World Trade Organization

Introduction Notes

Our review of the classical trade theories of Smith, Ricardo, and Heckscher-Ohlin in showed
that, in a world without trade barriers, trade patterns are determined by the relative productivity
of different factors of production in different countries. Countries will specialize in products
that they can make most efficiently, while importing products that they can produce less
efficiently.
In this unit we look at the political reality of international trade. The political reality is that
which many nations are nominally committed to free trade, they tend to intervene in international
trade to protect the interests of politically important groups.
In this unit we explore the political and economic reasons that governments have for intervening
in international trade. When governments intervene, they often do so by restricting imports of
goods and services into their nation, while adopting policies that promote exports. Normally
their moves are to protect domestic producers and jobs from foreign competition while increasing
the foreign market for products of domestic producers.

2.1 World Trade Organization

The World Trade Organization deals with the rules of trade between nations at a near-global
level; it is responsible for negotiating and implementing new trade agreements, and is in charge
of policing member countries’ adherence to all the WTO agreements, signed by the bulk of the
world’s trading nations and ratified in their parliaments. Most of the WTO’s current work comes
from the 1986–94 negotiations called the Uruguay Round, and earlier negotiations under the
GATT. The organization is currently the host to new negotiations, under the Doha Development
Agenda (DDA) launched in 2001.
The WTO is governed by a Ministerial Conference, which meets every two years; a General
Council, which implements the conference’s policy decisions and is responsible for day-to-day
administration; and a director-general, who is appointed by the Ministerial Conference. The
WTO’s headquarters are in Geneva, Switzerland.

2.1.1 Mission, Functions and Principles

Following are the mission, functions and principles of WTO:

Mission

The WTO’s stated goal is to improve the welfare of the peoples of its member countries,
specifically by lowering trade barriers and providing a platform for negotiation of trade. Its
main mission is “to ensure that trade flows as smoothly, predictably and freely as possible”.
This main mission is further specified in certain core functions serving and safeguarding five
fundamental principles, which are the foundation of the multilateral trading system.

Functions

Among the various functions of the WTO, these are regarded by analysts as the most important:

It oversees the implementation, administration and operation of the covered agreements.
It provides a forum for negotiations and for settling disputes.
Additionally, it is the WTO’s duty to review the national trade policies, and to ensure
the coherence and transparency of trade policies through surveillance in global economic

LOVELY PROFESSIONAL UNIVERSITY 19