UNIVERSIDAD DE LAS AMERICAS

THE WORLD TRADE

ORGANIZATION AND ITS
ECONOMICAL IMPACT
Is the World Trade Organization really beneficial for global economy?

MARIA PAZ ALVAREZ
30/10/2013




Is the World Trade Organization really beneficial for global economy?
In the worlds actuality, the World Trade Organization (WTO) has become the
biggest and more powerful organization of commerce around the whole world. With 152
members, this organization has the power to control and regulate the international trade
between its members by signing different types of agreements and policies. But, how has
this organization became such a worldwide influence? The answers are many, but the
most important one, is because of how this organization helped the worlds economy
recover after the World War II. After this war, there were not any organizations that could
regulate the laws of commerce between countries or create any type of bilateral
agreements to control their commercial policies. This led as a consequence the hesitation
of economies to export, import any of their goods and services, or invest in other
economies because they were scared of being swindled by a larger economy that could
apply any of the disloyal practices of commerce. After the creation of what was the old
WTO, the General Agreement on Tariffs and Trade (GATT), the worlds economy
experienced a high increment, because of the stability these agreements brought for
international trade. (World Trade Organization [WTO], 2013). The WTO benefits the
worlds economy in many ways. This organization has adjusted their principles and goals
so that every member has the same opportunity of reaching an efficient and sustainable
development.
One of the main goals of the WTO is to liberate international trade between its
members. Free Trade Agreements (FTD) are one of the most used tools by the WTO. The
WTO considers FTAs as an impulse for economies due to the fact that protectionism is
expensive for an economy. Protectionism Policies are created with the main goal of
protecting the local industries by restricting the importations of any type of goods or
services from another country. These restrictions can be done in a form of a tariff or by
limiting the quantity of importation of the good or service. As a result, the imported product
is more expensive than the national product so that the local competitors have the price as
an advantage. The consequence of these policies is released on the consumers, products
and services become more expensive, furthermore, the cost of living becomes more
expensive. (Asia Economic Institute [AEI], 2013). The main principle of the WTO is the non
discrimination policy, this policy stands that every country member of this organization has
to have to same treat and so they have to have their goods and services. When a country
becomes a member of the WTO, its commercial policies and tariffs have to apply equally
to every member. Due to the worries the WTO has about the developing countries, this
policy has an exception; economies can regulate its tariffs for products or services of
countries that have better prices and the country feels that they are not competitive
enough to compete with these prices. Another exception for this policy is when a group of
countries had decided to become a commercial block; an example of this is the
Comunidad Andina (CAN). This principle supports the equal economic growth of the
countries and their products by giving every country and their products the same treat at
their final destination of exportation. Finally the last reason of why the OMC is such a
positive impact on the equal and sustainable economic growth of the world is supported by
the creating of their agreements which supports environmental stability, consumer and
worker safety and public health. An example of this is the agreement.
On the other hand, WTO principles and goals can also affect economies
negatively. First protectionism can have a positive impact on economies do to the fact that
in every developing country there is an infant economy. Infant industries need
protectionism until they have had developed the sufficient experienced and capacities to
compete with a mature industry. (Marrota, 2013). Secondly, the WTO stands for a non
discrimination principle, but, why are United States of America (USA) and China more
powerful than other countries inside the organization? This is because the WTOs power
politics, decisions in this organization are taken by a process called consensus, where
three thirds of the countries have to agree. Within this consensus there are not any
regulations of how many votes each country has, and countries like USA and China have
a lot of members and influences because of their economic contributions for the
organization. (Kwa, 2003). Finally, WTO agreements can make it harder for nations to
enforce their own laws. This final argument is also based on the WTO agreements where
they regulate not only its tariffs but also their customs processes. When a country
becomes a member of the WTO, the country has to regulate all of its commercial policies
so that they go with all the WTO policies of international trade. To enforce this, the WTO
controls every member by evaluations of their development. These evaluations are
measured by a test that every member has to take every 6 years.
It is true that the WTO can hurt an economy in many ways; especially if the country is in a
stage of development. But, if these principles and goals are focused on a long term period,
they are all beneficial. FTAs can have many positive and negative effects on a economy,
but un a long term perspective these Agreements bring investment and economic growth
to an economy. An example of this is Chile, this country has signed several FTA, and
since then the country has had experienced an economic development due to the
comparative advantage the country has in several goods. It is very important that even if
some countries have more voting power over the organization, the WTO principles focus
on the development of economies that are just rising. To aim this, the WTO gives a special
treat to developing countries in the time of the adjustment to the organization and it also
give this economies support by councils that visit this country in order to educate on how
can they create a sustainable efficient economic growth. Also, the WTO is very flexible
with developing countries, WTO members can ask for an exception depending on the
treaties depending on its circumstances. Trade-Related Aspects of Intellectual Property
Rights (TRIPS) has had a big impact on the pharmaceutical sector and access to
medicines, this agreement focuses on the intellectual property on the manufacturing of the
medicines. This agreement had a negative impact on poor countries because in these
countries, generic medicines are more consumed and common due to its prices. Because
of this, the WTO made an exception and introduced minimum standards of these
agreement for the production of these generic medicines (World Health Organization
[WHO], 2013)
In conclusion, WTO treaties and agreements are based on the organizations main
principles, which benefit every member equally. On a long term perspective the WTO has
helped the global economy by the impulse of economic growth through the worlds
liberalization of international trade. These treaties and agreements had worked through all
these years, but it is important to consider the future of this organization. Along history, this
organization has been the most powerful in the international trade field, every member
followed exactly every policy and rule that this organization has given. These days, there is
a group of members (G20) conformed mostly by developing nations that are speaking up
against the WTO. This group of countries is fed up of the power and priorities the WTO
has given to larger economies such as the European Union, China and USA. The G20
stands that the WTO agreements and policies do not evaluate the behavior of each
countries economy and that without considering this important fact, WTO treaties and
agreements can destroy them. These manifestations had been a reason of considering the
future of this organization, which brings to the conclusion that it may not be as powerful
and accepted by its members in the future as it is now.

References:
World Trade Organization. (2013). 10 things the WTO can do. Retrieved from
http://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi00_e.htm
Asia Economic Institute. (2013).How protectionism can hurt: Impact of
protectionism in the East .Retrieved from
http://www.asiaecon.org/special_articles/read_sp/12200
Kwa, A. (2003). Power Politics in the WTO(2th ed.). Retrived from
http://www.citizen.org/documents/powerpoliticsKWA.pdf
Marrota, J. (2013, May). Do Tariffs Protect an Infant Industry?.Forbes. Retrieved
from http://www.forbes.com/sites/davidmarrotta/2013/05/05/do-tarrifs-protect-an-infant-
industry/
World Health Organization. (2013). WTO and the trips agreement. Retrieved from
http://www.who.int/medicines/areas/policy/wto_trips/en/