Understanding The World Trade Organization’s Rules and Regulations

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The World Trade Organization (WTO) is an international organization that supervises international trade. Initiated on January 1st, 1995, the organization provides a framework for formalizing and negotiating trade agreements so that disputes can be easily settled and all the countries can work seamlessly.

The organization currently has 157 member states that follow its framework. It understands the need for regulations and has a set of principles that must be followed by member nations. They are explained below in detail:

Non-Discrimination

The organization has ‘national treatment policy’ and ‘most favored nation’ rule that are embedded in the organization’s main set of laws on services, goods and also intellectual property. As per the rules and regulations under the most favored nation, a WTO member is required to apply the similar conditions on all kinds of trade with any other member of the organization.

I.e.: If a country gives any kind of special favor to a member country then it must give the same favor to other member countries. This means that a country cannot give any kind of trade related favor to a country on grounds such as friendship etc. because as per the WTO all the countries are equal and should be treated that way.

In the same way the national treatment policy also guards countries’ rights. As per the policy, the imported goods should enjoy the same rights or be treated in the same way as the goods produced in the country. The aim of this policy is mainly to control trade barriers such as technical and security standards that stop a country from reaching other markets and growing.

Reciprocity

Reciprocity is mainly there to control free-riding, which is a situation in which a country or organization enjoys benefits without putting in efforts. Since free-riding may be caused by national treatment policy, the WTO has strict sets of laws to control it.

The main aim of reciprocity is to allow a country’s own corporations to grow and nurture. For a nation to bargain, it is important that its growth is larger than the growth it may enjoy from unilateral liberalization. The main function of reciprocity is to make sure that countries meet this requirement.

Binding and Enforceable Commitments

World Trade Organization’s members prepare tariff commitments that are spelt out in a detailed schedule. The points tell about multilateral trade negotiations so that problems regarding such trade can be easily solved.

These schedules are used to create boundaries or ceilings that every member country must adhere to. However, if a country feels the need to change its limitations, it has the right to apply for a change in the schedule. Nonetheless, the country needs to negotiate with other trading partners and reach a settlement with their consent making sure that no country has to face any kind of loss due to the change. Yet, if that does not result in satisfaction the country has the right to opt for dispute settlement.

Transparency

As per rules it is obligatory for all the members of the WTO to issue their trade regulations. The main purpose of this law is to allow the organization to go through the details so that decisions are taken keeping the member countries’ situations in mind.

Safety Valves

In certain scenarios governments have the right to put restrictions on trade. If a country feels that trade puts its environment or nation’s health (population, animals or plants) at risk then it may impose bans. However, it must still meet certain criteria and must be done with a fair view without any mala fide intentions.

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