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What is the World Trade Organization (WTO)?

2017-02-02T18:47:52+00:00

The term 'World Trade Organization (WTO)' is included in the Economics edition of the Financial Dictionary. Get yours now on amazon in ebook or paperback format. Read more here...

The World Trade Organization, or WTO, proves to be an organization that is intergovernmental in scope and signatories. Its ultimate purpose is to regulate international trade. This WTO began in 1995 on January 1 under the auspices of the Marrakesh Agreement that 123 different nations signed on April 15th of 1994. It then replaced the preexisting General Agreement on Tariffs and Trade, or GATT that had begun functioning from 1948.

The World Trade Organization handles the legal regulating of trade between those nations that participate. It does this via a framework that helps to negotiate trade agreements and resolve disputes, all the while enforcing the obedience of participating members to the agreements of the WTO (which member nation governmental representatives have previously signed). Their parliaments or congresses had to ratify the signatories as well. The majority of the issues which the WTO itself concentrates on come from prior trading negotiations, particularly from the lengthy Uruguay Round which went on from the years of 1986 through 1994.

The World Trade Organization has long struggled to finalize negotiations on what is now referred to as the Doha Development Round. They launched this latest endeavor back in 2001 to concentrate on the developing nations of the world. Its future remained uncertain as the 21 subjects whose deadline expired in 2005 continued to stymie participants of the trade regulating organization.

Among the major obstacles were the arguments between free trading of industrial goods and associated services while still keeping farm subsidies for the agricultural sector (which developed nations insisted on), as well as the fleshing out of fair trade rules on agricultural products (insisted on by developing nations). These obstacles ensured that no further negotiations or initiatives could be launched to go beyond the Doha Development Round.

The present day Director General of the World Trade Organization turns out to be Roberto Azevedo. He heads a staff of more than 600 individuals based in Geneva, Switzerland. The first comprehensive arrangement which the member states agreed upon was the Bali Package, a facilitation of trade agreement. They finally signed off on this on December 7th of 2013.

The immediate predecessor to the World Trade Organization was the GATT General Agreement on Tariffs and Trade. The member states of the world established this group following the conclusion of the Second World War. This occurred as part of the marathon cooperation efforts of the victors of the world war. They were dedicated to expanding the cooperation in spheres of international economics to help rebuild the devastated world.

Among these organizations which have stood the test of time are both the International Monetary Fund, or IMF, and the World Bank. The negotiators attempted to set up a similar international group to focus on trade and trading rules called the ITO International Trade Organization at that time. It never got off the ground effectively since the United States and several other signatories never approved it. This left the GATT to gradually evolve into the eventual de facto world trade organization.

By the 1980s, the GATT was struggling to adapt to the increasingly globalizing and expanding world economy. The member states came to the conclusion that the existing system would not suffice to deal with problems of this brave new world order. This was the reason they launched the eighth GATT round of talks which eventually became famous under the name of the Uruguay Round. These were held in Punta del Este, Uruguay.

It represented the largest mandate to negotiate trade in the history of the world (which actually was mutually agreed upon and signed). It covered an expansion of trade system ideals into intellectual property and services trade. The Marrakesh Agreement finally emerged from the last ministerial meeting held in Marrakesh, Morocco. Fully 60 different agreements, decisions, annexes, and understanding became adopted as a result. This led to the eventual creation of the WTO.

The term 'World Trade Organization (WTO)' is included in the Economics edition of the Financial Dictionary. You can get your copy on amazon in Kindle or Paperback version. See more details here.