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The WTO’s objectives and reason for existence is to help international trade
flow ‘smoothly, freely, fairly and predictably’. It does this by:
- Administering trade agreements
- Providing a forum for trade negotiations
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Providing a format for settling trade disputes
- Reviewing national trade
policies
- Assisting developing countries by giving technical assistance
and holding training programmes
- Cooperating with other international
organizations
All WTO trade agreements are based around two basic
principles: - Most-Favoured-Nation status
- National treatment
Most Favoured Nation status The principle of “Most-Favoured-Nation”
(MFN) status amounts to treating all countries equally. That is, if one country
grants another country lower custom duties for a particular product, it has to
grant the same lower duties for all other WTO members. This principle is
considered so important that it is the first article of the GATT, which pertains
to all trade in goods. It is in the second article in the General Agreement on
Trade in Services (GATS) and in the agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). The MFN rule says that every time a country opens
up a market for a particular good or service, for example by lowering a trade
barrier, it has to do the same for all its trading partners. Some exceptions
to this principle are allowed: - In case of goods traded only within
a group of countries, articles manufactured outside that group may be restricted.
-
Developing countries may be given special access to a country's markets.
National treatment The principle of national treatment says a
country should treat imported and locally-produced goods, services and intellectual
property equally, after these foreign products have entered its market.
This principle is found in all the three main WTO agreements: GATT, GATS and TRIPS.
Note: National treatment applies only once a product, service or item of intellectual
property has actually entered a country's market. Therefore, charging customs
duty on an import is not a violation of national treatment even if locally-produced
products are not charged an equivalent tax. More working principles
These two basic principles are supported by some more working
principles: - Countries work to negotiate towards freer trade.
That is, countries work to lowering trade barriers like duties, quotas and import
bans.
- Governments give a promise of stability that tariffs
and other trade barriers will not be changed. This predictability
gives trading partners some market security and a chance to plan and strategize
properly. When countries agree to open their markets for goods or services, they
are said to “bind” their commitments. For goods, these bindings amount
to ceilings on customs tariff rates. A country can change its bindings, but only
after negotiating with its trading partners, which could mean compensating them
for loss of trade.
- Many WTO agreements require governments
to disclose their policies and practices publicly within the country or by notifying
the WTO. This encourages transparency both domestically and at
an international, multilateral level.
- The WTO tries to
promote fair competition . Countries are not allowed
to ‘dump’ goods, meaning export at below cost price to gain market
share. The issues are complex, and the rules try to establish what is fair or
unfair, and how governments can respond.
- The WTO tries to encourage
development and economic reform .
The
WTO principles evolved from neo-classical economics and evidence that says freer
and open trade results in economic growth. According to this view, all protective
measures are counterproductive in the long run. Since the WTO is run by
its member governments, these principles were decided by the countries that make
up the membership of the WTO. All major decisions are made by the membership as
a whole, either by ministers, who meet at ministerial conferences, or by country
delegates who meet at scheduled occasions. Decisions are normally taken by consensus.
This makes the WTO radically different from the World Bank or the IMF. In the
WTO power is not delegated to a board of directors or a chairperson. | 
