The World Trade Organisation (WTO) (SL IB Economics)

• The World Trade Organisation (WTO) was established in 1995 to promote free trade
  • They believe free trade is the best way to raise living standards, create jobs and improve people's lives
    
    
• Trade liberalisation is the process of rolling back the barriers to free trade e.g. removing tariffs
   
• The WTO has two main roles in liberalising trade

1. It brings countries together at conferences and encourages them to reduce or eliminate protectionist trade barriers between themselves e.g. The Doha Round conferences
2. It acts as an adjudicating body in trade disputes. Member countries can file a complaint if they believe a trading partner has violated a trade agreement. The WTO will then run a hearing and make a judgement
    

The Objectives and Functions of the WTO

Objectives of the WTO	Functions of the WTO
Improving people’s lives Promotion of fair competition Protecting the environment	Trade negotiations Implementation and monitoring of trade agreements Dispute settlement Building trade capacity between nations Outreach to governments and influential organisations on behalf of member countries

• In March 2022 there were 320 regional trade agreements globally
• While these are beneficial to the members in the agreement (as they strengthen ties and create more trade between them), they also create conflicts with the stated aim of the WTO - to liberalise trade
  • Regional agreements often shift trade from a non-member who is more efficient in producing certain goods/services, to a member country who is less efficient (trade diversion)
  • Regional trade members then often institute common trade barriers on non-members which is the opposite of trade liberalisation (protectionism)
    
    

Two key Factors Which Continue to Undermine the Influence of the WTO

Difficulties in reaching agreement on services and primary products	Unequal bargaining power of members
MEDCs continue to subsidise many firms producing primary products which allows them to dominate global markets LEDCs do not have the tax revenue to do the same for their firms and so they are unable to compete Firms from LEDCs are frequently blocked from offering services (which generate higher profit and income) in MEDCs This prevents free trade in services	Firms and individuals from MEDCs tend to be better networked and will unashamedly work their connections so as to gain better trading conditions Larger, wealthier countries will also pressurise WTO negotiations in order to secure the outcome they want It is much harder for LEDCs to gain preferential terms in trade negotiations due to this power imbalance