What is the World Trade Organization (WTO)? Here’s the History!

Bittime - Behind the complex dynamics of global trade, there is an organization that plays a key role in regulating the flow of goods and services between countries, namely the World Trade Organization (WTO).

This organization not only plays a role in regulating trade, but also becomes an arena where the economic interests of various countries clash. Read this article to find out what the World Trade Organization (WTO) is and its history!

What is World Trade Organization (WTO)?

The World Trade Organization (WTO) is an international trade organization founded in 1995, which aims to create fair, free trade and resolve disputes that arise between member countries.

As a multilateral organization, the WTO functions as a forum for governments in designing trade agreements and resolving trade disputes. 

Apart from that, the WTO also aims to help producers, exporters and importers run business more smoothly.

Until now, the WTO has voted until 164 member countries, including Indonesia, as well 23 observer countries, such as Iraq, Iran, Bjungle, and Libya.

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Main Goals of the World Trade Organization (WTO)

You already know what the World Trade Organization is (WTO). Following are some of the WTO's main objectives in supporting global trade.

1. Establish and enforce international trade rules to encourage economic growth and create jobs.

2. Facilitate trade negotiations and monitoring by reducing trade barriers and implementing the principle of non-discrimination.

3. Resolving trade disputes and contributing to world stability and peace.

4. Increase transparency in decision-making processes so that developing countries have a stronger voice.

5. Cooperate with other international economic institutions in managing the global economy.

6. Helping developing countries to make maximum use of the global trading system.

7. Encourage good trade governance by reducing non-transparent policies.

History of the World Trade Organization (WTO)

Here is the history of the World Trade Organization (WTO) that you need to know.

International Trade Organization (ITO)

After World War II, Western countries proposed the formation International Trade Organization (ITO) as part of global economic cooperation. 

This organization was designed as the third international trade institution after the two Bretton Woods financial institutions, viz IMF and World Bank.

However, this plan was unsuccessful as several countries, including the United States, failed to ratify the treaty. As a result, the ITO idea was not implemented.

General Agreement on Tariffs and Trade (GATT)

As an alternative to ITO, General Agreement on Tariffs and Trade (GATT) formed in 1948 by 23 countries in Geneva. GATT functions to eliminate import quotas and reduce international trade tariffs.

During the period 1948-1994, GATT became the main framework governing global trade. 

However, along with the increasing complexity of world trade, GATT is no longer considered effective in dealing with various trade problems.

The Uruguay Round and the Formation of the WTO

In 1986-1994, global trade negotiations entered a phase Uruguay Round, which was the largest trade negotiation in history. 

The result of these negotiations was the formation World Trade Organization (WTO) on January 1, 1995.

The WTO agreement was signed at the Ministerial Conference in Marrakesh, Morocco, in April 1994. 

All countries that have become members of GATT automatically become members of the WTO, and this agreement is also open to other countries who wish to join.

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World Trade Organization (WTO) Principles

For the global trade, following are the principles of the World Trade Organization (WTO).

1. Principle of Non-Discrimination

The WTO upholds the principle of non-discrimination in international trade, which includes:

1. Most Favored Nation (MFN): The WTO prohibits discrimination between member countries in trade. If a country provides certain benefits to one country, then the same benefits must be provided to all WTO members.

2. National Treatment Obligation: Imported and local products must be treated equally after entering the domestic market.

2. Free Trade and Market Access

The WTO aims to reduce trade barriers by:

1. Lower trade tariffs to encourage international trade.

2. Removing non-tariff barriers such as quotas and regulations that are not transparent.

3. Encourage Fair Competition

The WTO ensures that trade occurs fairly by monitoring practices such as dumping And export subsidies which can harm other countries.

4. Protection for Developing Countries

The WTO provides special treatment for developing countries, including:

1. Additional time to fulfill trading obligations.

2. Wider market access.

3. Support in overcoming global trade obstacles.

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Dispute Resolution at the World Trade Organization (WTO)

To resolve trade disputes between countries, the World Trade Organization (WTO) own Dispute Settlement Body (DSB). 

Process Dispute resolution includes:

1. Consultation (60 days): Disputing countries try to resolve problems peacefully.

2. Panel Formation (1 year): If there is no agreement, a panel is formed to render a decision.

3. Banding: The panel's decision can be appealed to Appellate Body, consisting of seven permanent members.

However, since 2019, Appellate Body experienced problems because the US blocked the appointment of new members so that this body could not operate effectively.

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Conclusion

World Trade Organization (WTO) is a global trade organization that plays a crucial role in regulating trade between countries. 

With the principles of free trade, non-discrimination and fair dispute resolution, the WTO continues to strive to create a trading system that is more stable and benefits all parties.

As a member country, Indonesia is also active in various WTO policies to increase the competitiveness of international trade.

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World Trade Organization (WTO) FAQs

What's that World Trade Organization (WTO)?

The WTO is an international organization that regulates and facilitates trade between countries, with the aim of creating a fair, transparent and predictable trading system. 

When was the World Trade Organization (WTO) founded?

The WTO was founded on January 1, 1995 as a result of the Uruguay Round negotiations (1986-1994) which replaced the General Agreement on Tariffs and Trade (GATT). 

How does the World Trade Organization (WTO affect Indonesian trade?

Indonesia's membership in the WTO increases market access, lowers trade barriers, and protects against trade discrimination, thereby increasing exports and national economic growth. 

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Reference

Next IAS, World Trade Organisation (WTO), accessed March 17, 2024.

Author: IPR