Main Roles of the World Trade Organization

Abstract

This paper provides an analysis of the role and functioning of the World Trade Organisation (WTO) as it relates to Newland. Details about the WTO Agreement are presented as well as about the full impact of WTO membership. Positive and negative aspects of WTO membership are outlined in order to provide a relevant account of the role and impact of this international institution on the functioning of member states, including Newland. The paper also presents information about the traditional notion of state sovereignty and how the process of globalisation forces people to rethink this notion and replace it with the idea of welfare states.

Introduction

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The World Trade Organisation (WTO) has been equally praised and criticised as a global institution which is responsible for the maintenance of trade between countries (Devuyst and Serdarevic, 2007). Representatives of different movements, such as Globaphile and Globaphobe, have introduced their arguments regarding the impact of WTO. Clarifying the purpose of WTO and the WTO Agreement is important to provide significant insights into the functioning of organisations in the field of global trade (Daemmrich, 2011). The objective of this paper is to critically analyse the role and functioning of WTO as it relates to Newland.

Purpose of WTO and WTO Agreement

The World Trade Organisation (WTO) emerged as an influential body in the global business environment. As an international organisation, WTO deals with the global principles of trade between different nations. The major function of WTO is to ensure that global trade relations are conducted in a free, proper and smooth manner (Devuyst and Serdarevic, 2007). The core of the system is represented by the nature of multilateral trade relations which have been specified as WTO’s agreements. The majority of trading countries is responsible for signing and negotiating these agreements. Some of the main agreements presented by this institution include Agreement on Agriculture (AoA), General Agreement on Trade in Services (GATS) and Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Therefore, such agreements emerge as a solid legal foundation for international trade (Matsushita et al. 2006). As a result, member countries are guaranteed essential trade rights. In addition, national governments are required to maintain their trade policies within specific limits in order to comply with the interests of all global stakeholders (Devuyst and Serdarevic, 2007).

The primary goal of WTO is to contribute to the improved welfare of the populations of the member countries. WTO is also responsible for providing a forum for negotiations among countries. It ensures the proper functioning of a dispute settlement mechanism (Devuyst and Serdarevic, 2007). Standards of living can substantially increase along with economic growth. Countries can achieve these objectives by allowing for the optimal use of global resources in line with the broader perspective of sustainable development (Matsushita et al., 2006). The core WTO rules and disciplines are about opening foreign markets for the benefit of multinationals, the EU and the United States. It would be in the interest of Newland to accept a series of new international obligations. It has been argued that WTO’s system for resolving trade disputes between member countries has achieved a substantial success (Van den Bossche and Zdouc, 2013).

The WTO Agreement indicates the condition that each WTO member should ensure compliance with its laws and regulations. A significant part of the commitments in this sector refer to the issue of reviewing and appealing administrative decisions. The WTO Agreement will prevail over Newland’s Constitution in terms of requiring a revision of the country’s laws and regulations (Daemmrich, 2011). Newland’s laws should be consistent with the requirements specified by the WTO Agreement. For instance, Newland may consider the opportunity to create tribunals or relevant processes for the review of all administrative actions (Milner, 2005). The implementation of national treatment and conformity assessment is required to improve Newland’s courts. The country may confirm that all laws and legislative aspects or tools pertaining to WTO provisions may be adopted. It has been reflected in the literature that most constitutions enable central governments with an opportunity to regulate trade and commerce relations with other nations (Devuyst and Serdarevic, 2007). Yet, the interpretation of these legal provisions remains challenging and unclear. The wide objective of the WTO Agreement has become a complex factor. Newland is expected to describe its constitutional arrangements and thus its WTO obligations need to be applied in a uniform manner throughout the country’s territory (Van den Bossche and Zdouc, 2013).

Impact of WTO Membership

The full impact of WTO membership reflects in the promotion of peace between countries, handling of dispute by applying constructive thinking and in the idea that rules are established easier for all members (Devuyst and Serdarevic, 2007). In addition, free trade tends to reduce the cost of living by providing a wide range of choices to consumers in terms of products and quality. Other significant effects that may improve the economic performance of Newland relate to extensive economic growth, increased national income and appropriate governance which adhere to solid legal principles and standards (Milner, 2005).

WTO membership can help Newland present a balanced view of trade policy. The focus is on balance in the international economic and political system. As a result, the country’s government would be better placed to defend itself against lobbying practiced by narrow interest groups (Narlikar, 2005). Emphasis would be set on trade-offs that represent the interests of all stakeholders in the economy. Newland should be committed to an independent judicial review as part of WTO’s paradigm for the governance of legal principles (Devuyst and Serdarevic, 2007). It is important to improve the body of legislation and judicial interpretations which could be achieved through WTO membership.

Notion of State Sovereignty and Impact of Globalisation

The traditional notion of state sovereignty refers to a non-physical entity present at the international legal system which is dominated by one centralised government. In accordance with international law, state sovereignty indicates that a sovereign state should have a strictly defined territory, permanent population and one government (Milner, 2005). However, the process of globalisation forces individuals to rethink this concept. Globalisation has presented a dual impact on the sovereignty of states. The framework of human rights has outlined a sense of obligation of the state towards its citizens. Yet, as a result of globalisation, the social contract has a welfare component attached to it (Narlikar, 2005). The process of economic integration facilitated through the mechanisms of trade and development as well as WTO membership has limited the provision of policy options to states. In turn, this aspect has led to countries’ diminished capacity to meet the expected economic and legal obligations (Milner, 2005). For instance, such countries may encounter difficulties in complying with essential legal standards and principles in the global context.

The traditional notion of state sovereignty has been replaced by growing understanding of nation states as welfare states. Such shift of perception has indicated that the focus on welfare is a leading element of the global concept of sovereignty. In other words, the idea of state sovereignty has been subjected to changes over time. The focus is on providing social security to the citizens of these states (Daemmrich, 2011). This may be the situation in the state of Newland. Economic globalisation has demonstrated an increased scope which reflected in the economic and legal functioning of Newland. Essential aspects of economic globalisation include the devaluation of currencies, strict regulation of capital markets and substantial public spending which has led to significant public deficits (Dhar, 2013). However, WTO membership can guarantee Newland better integration of its trade and legal system. The country may take proper risks, open up its fiscal market and determine its own policy outcomes.

In an attempt to provide the most reasonable course of action to Newland, it is essential to explore the negative effects associated with the country’s WTO membership. It has been stated that WTO is undemocratic, as this institution lacks transparency (Milner, 2005). The lack of transparency is a serious problem to countries considering the inappropriate mechanisms of governance undertaken by different states. The WTO rules are prepared for corporations that have an access to the negotiations. Moreover, WTO usually undertakes actions to privatise significant services, including education and health care. Another negative effect of WTO membership is that this international organisation undermines national sovereignty and local decision making (Dhar, 2013). An argument presented in this line is that developing countries are prevented from the opportunity to create local laws. It can be argued that developing countries are in a more unfavourable position with regards to the legal system compared to developed countries. The requirement of being internationally competitive poses significant challenges to WTO members (Devuyst and Serdarevic, 2007). That is why Newland should outweigh the advantages and negative effects associated with WTO membership in order to make an adequately informed decision.

Conclusion

The present paper analysed the role and functioning of WTO as it relates to Newland. Numerous arguments in favour and against WTO’s dominant role in international trade and development have been introduced (Narlikar, 2005). The prevailing function of the WTO Agreement has been discussed in the paper along with the full impact of WTO membership. Other important sections of the paper included the notion of state sovereignty and the impact of globalisation (Devuyst and Serdarevic, 2007). It has been argued that the process of globalisation has altered the way in which nation states function and regulate their trade. Yet, it has been concluded that Newland may benefit from WTO membership if it strictly adheres to essential economic and legal principles outlined by the international organisation.

References

Daemmrich, A. (2011). ‘The Evolving Basis for Legitimacy of the World Trade Organization: Dispute Settlement and the Rebalancing of Global Interests’. Harvard Business School. Working Paper 12-041.

Devuyst, Y. and Serdarevic, A. (2007). ‘The World Trade Organization and Regional Trade Agreements: Bridging the Constitutional Credibility Gap’. Duke Journal of Comparative & International Law, vol. 18(1), pp1-75.

Dhar, B. (2013). ‘The Future of the World Trade Organisation’. ADBI Working Paper.

Matsushita, M., Schoenbaum, T. J. and Mavroidis, P. C. (2006). The World Trade Organization: Law, Practice, and Policy. Oxford: Oxford University Press.

Milner, H. V. (2005). ‘Globalization, Development, and International Institutions: Normative and Positive Perspectives’. Review Essay, vol. 3(4), pp833-854.

Narlikar, A. (2005). The World Trade Organization: A Very Short Introduction. Oxford: Oxford University Press.

Van den Bossche, P. and Zdouc, W. (2013). The Law and Policy of the World Trade Organization: Text Cases and Materials. Cambridge: Cambridge University Press.

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