Topic: International Organizations
Qn. “ With protectionism echoing around the world, examine the role and success of World Trade Organization in removing barriers to trade” (250 words)
Why this Question ?
The question has been framed in the background of the threats issued by the former US President Donald Trump to withdraw from the World Trade Organization (WTO) and due to the increasing protectionist stance taken by various nations across the globe.
The first part of the question needs to address the trend of rising protectionism across the world in the backdrop of COVID-19.
The second part of the Question is an examination into the success of the World Trade Organization in promoting the objective of Free Trade.
World trade growth has fallen by 5½ percentage points over the past year (Chart 3.8), of which around 2½ percentage points is accounted for by lower imports growth in the US and China.With job losses becoming a reality due to COVID-19 shutdowns, increasing calls for adopting a protectionist posture has become a global phenomenon.Added to this is the continuous calls for abolishing the World Trade Organization (WTO) by the champion of Free Trade the USA.
It is in this context the role of World Trade Organization (WTO) has to be examined.
Reasons for protectionist tendencies to grow around the world
- Trade Wars – Need to protect one’s own industries
- Calls for Going local- spurt in economic Nationalism.
- Failures of Globalization – spread of shocks across national boundaries.
- Unfair trade practices – eg. Dumping
- Geo- politics – arm twisting technique.
Has the World Trade Organization lived up to its promises ?
The High Points
The WTO is the world’s only international organization that supervises 95% of the world’s global trade.The WTO agreements include numerous provisions giving developing and least-developed countries special rights or extra leniency –“special and differential treatment”. Among these are provisions that allow developed countries to treat developing countries more favourably than other WTO members.
Non- discrimination between countries– the Most Favoured Nation principle is one of the most fundamental principles of the WTO. It requires member states to accord the most favourable tariff and regulatory treatment given to the product of any one member and/or non member at the time of export or import of “like products” to all other WTO members.
The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.
Criticisms against the failure of WTO:
An accusation against the WTO is that it tramples labor and human Rights, it’s rules put the “rights” of corporations to profit over human and labor rights. The WTO encourages a ‘race to the bottom’ in wages by pitting workers against each other rather than promoting internationally recognized labor standards.
The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products). This inequitable access has been alleges as the result of the Free Trade promoted by WTO.
The failure of the Doha round means that the rich countries of the world still protect themselves from goods produced by the poor nations. By 2005, average agricultural tariffs imposed by the USA and EU were 60%, against average industrial tariffs of only 5%. Since developing nations primarily produce agricultural products, the allegation that the WTO has not done much for the developing nations is not unfounded.
Developed nations such as USA have criticized the lack of adequate protection of Intellectual Property Rights.
The success of the World Trade Organization (WTO) has to be judged in transforming the nature of trade that was conducted in the pre 1991 era. Removal of trade barriers and advocacy of the interests of developing nations are an ongoing process. Inspite of the numerous concerns raised against the WTO, the agency has to carry out its task even more aggressively in the post COVID-19 situation when nations adopt protectionist posturing.