WTO The Successor Of GATT

The World Trade Organization (WTO), the successor of General Agreement on Tariffs
and Trade (GATT), was formed in January 1995. It comprises of 153 member nations
and 30 observers countries and accounts for approximately 97% of world trade and
is the only international organization dealing with the global rules of trade between
nations (Griffin & Pustay 2009). The main objective of the WTO is to make sure that
trade flows as smoothly, predictably and freely as possible by encouraging the
liberalization of multinational trade in goods, services and intellectual property. The
GATT was established in 1948 and is the only multilateral organization that lays
down agreed-upon rules for international trade. The GATT was initially mostly limited
to a tariff agreement, over time, as average tariff levels fell; it increasingly came to
focus on nontariff trade policies and domestic policies which are having an impact on
trade (Hoekman and Mattoo 2002)
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The WTO differs in a number of important aspects from the GATT. The GATT has been a rather flexible
institution; bargaining and deal-making lay at its central part, with main opportunities for countries to opt
out of specific disciplines. In contrast, WTO rules is relevant to all members, who are focus to binding
dispute settlement procedures. This is attractive to groups looking for to introduce multilateral disciplines
on a variety of subjects, ranging from the environment and labour standards to rivalry and investment
policies to animal rights.
WTO has 5 main functions:
To facilitate the implementation, administration and operation of the WTO agreement. The WTO
agreement creates an integrated legal order and establishing the WTO is to provide a unified institutional
framework for the conduct of the international trade among WTO members (Hajnal 2001).
To provide a forum for trade negotiations. This is where the WTO provides a forum for negotiations among
members concerning their multilateral trade relations in issues dealt with in the WTO agreement (Hajnal
2001).
To settle international trade disputes. The need of settling disputes is necessary, because the rules-based
system would be less effective if the rules could not be enforced. The WTOs procedure underscores the
rule of law, and it makes the trading system more secure and predictable. The system is based on clearlydefined rules, with timetables for completing a case (WTO 2007).
To monitor national trade policies. Transparency regarding the trade policies and practices of WTO
members is essential to the smooth functioning of the international trading system (Hajnal 2001). All WTO
members are reviewed, the frequency of each countrys review varying according to its share of world
trade (WTO 2007).
To cooperate with the International Monetary Fund (IMF) and the World Bank. One of the tasks expressly
assigned to the WTO is to cooperate with the IMF and the World Bank to achieve greater coherence in
global economic policy-making (Hajnal 2001)

3.2 The Comparison Of GATT And WTO

GATT is a multilateral trade agreement with the authority to regulate the trade regulations of its member
governments. As an international treaty, it has no authority over individuals, private firms, or public
corporations. Rather, it governs the interactions of countries that voluntarily agree to abide by its rules.
There are many similarities between the GATT and the WTO, but the basic principles remain the same.
The WTO continues to operate by consensus and to be member driven. There were,
however, a number of major changes. Most obviously, the coverage of the WTO is much wider. A change
of great importance is that in contrast to the GATT, the WTO agreement is a single undertaking; all its
provisions apply to all members. Under the GATT there was great flexibility for countries to opt out of
new disciplines, and in practice many developing countries did not sign specific agreements on issues such
as customs valuation or subsidies.
WTO is much more important for developing countries than the GATT was. Also important were changes
in the area of dispute settlement, which became much more automatic with the adoption of a negative
consensus rule. (All members must oppose the findings in a dispute settlement to block adoption of
reports). (Crowley 2003).

Effectiveness And Ineffectiveness Of WTO

Effectiveness
The overriding objective of the World Trade Organization is to help trade flow smoothly, freely, fairly and
predictably .One thing is clear, through all of the WTOs activities, and that is the fact that the organization
supports trade expansion for all of its members who are equipped to export its domestic products. It allows
all members to have a distinct, formalized meeting ground where all nations can openly discuss their trade
expectations, tariff initiatives, and call discussion surrounding competition and its effects on the global
economy.
Up until the World Trade Organizations inception, the process of mediating trade disputes often met with
continuing conflict. Today, the WTO is beset with problems (Herman 2005) and despite its drawbacks, the
organization seems well on its way to establishing a position of permanence in the global trade community.
Another effectiveness of the WTO corresponds to the economic benefits of free trade. The Australian
Department of Foreign Affairs and Trade estimated a ... 50 per cent cut in tariff and non-tariff protection
for agriculture, manufactures and ... services would total some US$400 billion annually. Of this, Australia
would expect ... to gain around US$5 billion. (www.dfat.gov.au).

Ineffectiveness Of WTO
The WTO has been criticized for its inability to enforce its members agreements. Kwa (2004) stated that
the WTO is undemocratic because small countries are powerless and weak countries are forced to join to
avoid the political and economic repercussions of displeasing the powerful Members. The WTOs role of
promoting free trade does not acknowledge the limitations of comparative advantage in the real world

including, the factor Proportions Hypothesis and specialization. Specialization depends on both the
availability and cost of resource factors; these in turn depend on a range of factors such as government
policy (http://www.economics.unimelb.edu.au/). According to Keohane and Joseph (2001), NGOs by
arguing for increased transparency and participation hope to improve accountability by opening up
negotiations and by providing outside views and critique.
Critics further challenge comparative advantage as the holy dogma of free trade and globalization. The
WTOs role of promoting free trade does not acknowledge the limitations of comparative advantage in the
real world including, the Factor Proportions Hypothesis and specialization. Specialization depends on
both the availability and cost of resource factors; these in turn depend on a range of factors such as
government policy (Ha-Joon 2006).
Most of the information surrounding the practices of discussing new objectives within the WTO does,
indeed, support the assumption that the WTO is slow to move on the requests of its members. Other
weaknesses of the WTO include, lack of concern for environmental protection and dictation on food safety,
human health and safety

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