The World Trade Organisation (WTO) (DP IB Economics)

The role of the WTO

• The World Trade Organisation (WTO) was established in 1995 to promote free trade

  • They believe free trade is the best way to raise living standards, create jobs and improve people's lives

• Trade liberalisation is the process of rolling back the barriers to free trade e.g. removing tariffs 

• The WTO has two main roles in liberalising trade

1. It brings countries together at conferences and encourages them to reduce or eliminate protectionist trade barriers between themselves e.g. The Doha Round conferences

2. It acts as an adjudicating body in trade disputes. Member countries can file a complaint if they believe a trading partner has violated a trade agreement. The WTO will then run a hearing and make a judgement
    

The Objectives and Functions of the WTO

Factors Affecting the Influence of the WTO

• In March 2022 there were 320 regional trade agreements globally

• While these are beneficial to the members in the agreement (as they strengthen ties and create more trade between them), they also create conflicts with the stated aim of the WTO - to liberalise trade

  • Regional agreements often shift trade from a non-member who is more efficient in producing certain goods/services, to a member country who is less efficient (trade diversion)

  • Regional trade members then often institute common trade barriers on non-members which is the opposite of trade liberalisation (protectionism)
    

Two key Factors Which Continue to Undermine the Influence of the WTO