Why Is the WTO Important for World Business?
Why is the WTO Important for International Business?
Since its launch in 1995, the World Trade Organisation (WTO) has played a crucial role in regulating global trade and settling international disputes. With trading tensions between nations on the rise, and some parties calling for the body to be reformed, it’s worth exploring why the WTO is an important part of international business.
A Brief History of the WTO
The World Trade Organisation (WTO) was set up in 1995 in Geneva. It came about to replace another international organisation called the General Agreement on Tariffs and Trade (Gatt), which was formed in 1948 between 23 countries, with the aim of reducing customs tariffs and creating a fair platform for member countries.
The WTO has replaced this – and more. It has a much wider scope – Gatt regulated trade in merchandise goods, while the WTO is also involved in trade between services, such as telecommunications and banking, as well as a number of other issues, such as intellectual property rights.
Eight years on in 2003, it had 145 members, with another 25 countries negotiating their membership. By this point, the organisation had handled more than 280 trade disputes between member countries concerning political and legal issues, and those concerning international trade and global economics.
It now has 162 members, and a further 21 countries who have applied to join, including Iran, Iraq and Syria. The European Union countries are all members, but they come under one EU bloc.
Some countries have faced obstacles to joining the body. China formally joined in 2001 following a 15-year battle, while Russia joined after convincing the EU and US it had reformed its business practices.
The Importance of the WTO to World Trade
The WTO is at the forefront of efforts to ensure unimpeded global free trade and reduce trade barriers, operating on a rules-based multilateral system.
It has made important contributions to the progress made around the world towards promoting global trade. This has led to the growth of a number of economies, the emergence of new markets – all important factors not only in improving business, but also in lifting people out of poverty.
It does this by implementing, regulating and operating trade agreements between countries, and provides a fair forum for trade negotiations between member countries, mediating on disputes as they arise. It aims to help with imports, exports and conducting trade fairly.
The WTO also cooperates with the IMF (International Monitory Fund) and World Bank to ensure global economic policies are fair and cohesive. Therefore, it isn’t a matter of the WTO being important for international business, but of it being absolutely fundamental.
Different countries operate on different regulations and rules between different countries, and it’s not easy for an international business to stay on top of these when it operates in multiple countries. But the job would be a lot more difficult if these rules were unfair or unreliable, or not consistently applied.
The importance of a regulatory body such as the WTO is especially pressing at a time of such pronounced global uncertainty – several of its members are currently using it to dispute President Trump’s Trade tariffs, while a no-deal Brexit scenario would likely see the UK revert to WTO rule.
Understanding the work and nature of the WTO is therefore an important part of remaining aware of the changing landscape of international landscape. In uncertain times, having the right advice and support is crucial – Galvin International can provide your business with the clarity and expertise that you need to ensure your international market expansion is a success. Get in touch to find out more.
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