Created in 1995, the World Trade Organization (WTO) is an international institution that facilitates the rules for global trade among nations. It succeeded the 1947 General Agreement on Tariffs and Trade (GATT) established after World War II.
The WTO operates based on agreements signed by the majority of the world’s trading nations. Its primary function is to aid producers of goods and services, as well as exporters and importers, in protecting and managing their businesses.
As of 2021, the WTO boasts 164 member countries, with Liberia and Afghanistan being the most recent members, having joined in July 2016. Additionally, there are 25 “observer” countries and governments.
Key Takeaways
- The World Trade Organization (WTO) facilitates the rules of global trade among nations and mediates disputes.
- The WTO has promoted globalization, bringing both positive and negative effects.
- Multinational businesses generally support the WTO for its beneficial effect on international economic growth.
- Critics argue that it increases the wealth gap and negatively impacts local workers and communities.
Understanding the World Trade Organization (WTO)
The WTO serves as an alternative dispute resolution entity that upholds international trade laws among member nations. It provides a platform for member governments to negotiate and resolve trade issues.
Primarily, the WTO aims to facilitate transparent communication regarding trade among its members. The organization has successfully lowered trade barriers and fostered increased trade volumes among member countries, although it occasionally maintains barriers when beneficial for the global context.
WTO Leadership
On February 15, 2021, the WTO’s General Council appointed two-time Nigerian finance minister Ngozi Okonjo-Iweala as its director-general, making her the first woman and the first African to hold the position. She began her four-year term on March 1, 2021.
The WTO functions on foundational agreements that establish the legal ground-rules for international commerce. These agreements bind a country’s government to specific constraints that must be observed when setting future trade policies. They protect producers, importers, and exporters while urging world governments to meet social and environmental standards.
The U.S. and the WTO
Due to ongoing perceptions that the WTO does not adequately counteract China’s unfair trade practices, the U.S.’s relationship with the organization has been lukewarm.
Advantages and Disadvantages of the WTO
The WTO’s history reflects the tension between protectionism and free trade, contributing to globalization with both positive and adverse effects. Pro-Hotel enthusiasts support this organization for stimulating greater free trade and reducing trade disputes, beneficial for the global economy.
However, skeptics argue that the WTO undermines democratic processes and exacerbates the international wealth gap. They highlight the decline in domestic industries and increased foreign influence as substantial negative impacts on the global economy.
The Trump Administration and the WTO
During his term, then-President Donald Trump threatened the U.S. withdrawal from the WTO, criticizing it as a “disaster.” A withdrawal could have disrupted trillions of dollars in global trade. Nevertheless, Trump did not follow through on this threat.
Why Is the World Trade Organization Important?
The World Trade Organization (WTO) is pivotal in maintaining smooth and efficient global trade operations. It oversees the enactment of trade rules and mediates disputes among its 164 member and 25 observer nations out of a total of 195 nations in the world.
Main Functions of the World Trade Organization
The World Trade Organization (WTO) administers the trade agreements made among its member nations, playing a crucial role in mediating any trade disputes that arise.
Is the U.S. a Member of the World Trade Organization (WTO)?
The U.S. has been a member of the WTO since 1995, after signing the General Agreement on Tariffs and Trade (GATT) in 1948. In 1999, then-President Bill Clinton facilitated China’s entry into the WTO, an action that continues to invite considerable debate regarding its global impact.
Related Terms: General Agreement on Tariffs and Trade, international commerce, global economy, trade barriers.
References
- World Trade Organization. “Who We Are”.
- World Trade Organization. “WTO In Brief”.
- KRQE. “New WTO chief pushes for vaccine access, fisheries deal”.
- NPR. “Ngozi Okonjo-Iweala Makes History As WTO’s First African And Female Leader”.
- World Trade Organization. “Who We Are”.
- Politico. "‘All talk and no walk’: America ain’t back at the WTO."
- National Geographic. “Effects of Economic Globalization”.
- Foreign Policy. “U.S. Effort to Depart WTO Gathers Momentum”.
- World Trade Organization. “WTO In Brief”.
- Canadian Politics and Public Policy. “The Tragic Legacy of Bill Clinton’s China Doctrine”.
