As it is known the WTO agreements is very huge in and documents full of complexity which cover range of activities such as banking, government procurement, agriculture, and etc. Therefore there are five clear principles that go into all documents, and they are considered as the basis of multilateral trading system (WTO, n.d.). These principles are briefly introduced bellow:
The first principle to introduce is trading without discrimination, having two important components which are most-favoured-nation (MFN) and national treatment. Both are inserted as main rules in WTO on goods, intellectual property and services (Hoekman & Kostecki, 2009). However, the MFN rule can be briefly explained as a rule that makes a product made in a particular member country to be treated not less favourably (WTO, n.d.), or in simple language to be treated the same as a similar product that is made in another country.
Although exceptions can be allowed, such as creating Free Trade Agreements such as the Gulf Cooperation Council (GCC), or developing countries may be given special access into their markets. But generally, if a country decided to the lowering of trade barrier or market opening, the same must happen to the same products from all members and partners no matter the circumstances (Hoekman & Kostecki, 2009). The second component of non-discrimination trading principle is national treatment. After the foreigner goods enter a specific market, it has to be treated equally with local goods (WTO, n.d.). National treatment is applied on services, trademarks, patents and copyrights as well.
The second principle of the trading system is freer trade. Encouraging trade makes trading much simpler to the members, by lowering trade barriers more members are encouraged. Customs duties, tariffs, import bans, or quotas are well known discouraging barriers. The treatments focused in decreasing custom duties or tariffs on imported goods. Regulations are always important to consider in order to open beneficial markets, thus the agreements allows gradual changes to be introduced by countries, which can be done by progressive liberalization, that gives some developing countries longer to achieve their requirements (WTO, n.d.).
Thirdly is predictability, which is supported by promises and transparency. Promises are important whether they are beneficial to businesses or the opposite, because with transparency businesses can get clear pictures and with promises the businesses can predict future opportunities and have better and fairer plans (Hoekman & Kostecki, 2009). This also leads to stability in businesses which in result can increase job creation and more investments (WTO, n.d.). When goods or services are agreed and opened by specific members to enter their market, the members must bind their commitments. Such as, ceilings on customs or tariff rates on goods. Although, members are able to change their bindings only if trading partners agree on the changes, and in most times need to compensate if there are loss (WTO, n.d.).
Promoting Fair Competition
The fourth principle of trading system is about being fair, that is generally by protection, the trading system allows for tariffs and other forms for protection. How the governments respond to complex issues regarding fair or unfair is by charging additional duties on import to compensate damage caused by unfair trade (WTO, n.d.). Other WTO agreements also support fairness in competition for industries like agriculture, services, and intellectual property. Although, WTO has been criticized in this are by Dr. Rufus Pollock who is a co-founder and director of the Open Knowledge Foundation, particularly, the promoting fair competition principle regarding the agriculture industry was criticized, claiming that the agriculture market in unfair, and mostly favouring the rich northern countries, and saying that while many poor members liberalized their markets and removed subsidies, the EU and US did not (Pollock, 2003).
Development and Economic Reform Encouragement
WTO has always and still contributing to development. While developing countries get different response regarding the time needed to implement the system’s agreements than developed countries. Even before WTO, GATT allowed for the developing countries to receive special assistance and trade concessions. According to stats, over 75% of WTO members are considered developing countries which are in the timeframe of market and economy transition (WTO, n.d.).
During the Uruguay Round from 1986 to 1994, more than 60 countries implemented trade liberalization programs without difficulties, and in the same period the activity and influence of developing countries and economic transitions were higher than any previous rounds. The poorer and least development countries could face more difficulty in adjusting to WTO provisions, so transition periods were given to similar countries to be more familiar with WTO provisions. Additionally, developed countries have recently allowed imported products from the least developed countries to be quota free and duty free (WTO, n.d.).
Hoekman, B.M. & Kostecki, M. M. (2009) The political economy of the world trading system The WTO and Beyond. 3rd ed. Oxford: Oxford University Press Pollock, R. (2003) Criticism of WTO Practices and Structures [Online] Available from: http://www.rufuspollock.org/wto/wto_crit_prac.htm (Accessed 26 September 2012) WTO (n.d.) Principles of the trading system [Online] Available from: http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm (Accessed 25 September 2012)
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 25 December 2016
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