The World Trade Organization and Free Trade
Introduction
The World Trade Organization was established in 1995 to promote global free trade. It would achieve this goal by removing barriers to trade such as tariffs and non-tariff barriers. Nations involved in international trade would abide by the agreements and negotiations made with the other WTO member states. WTO council and committees come up with trade terms and policies that would enable nations to trade with each other and open up domestic markets to members. Without the body of WTO, the bilateral and multilateral agreements between states and trading blocs would be much more tedious and in conflict with one another. The WTO has helped nations participate in a rules-based global economy where even emerging markets have a chance to engage in global trade and not just the developed economies. The WTO has also helped to resolve trade disputes, and rein in on rogue nations who don’t follow the rules, and consequently imposes sanctions on them.
World Trade Organization performance in promoting free trade
The World Trade Organization helped unlock potential in member countries that have formed this alliance, but this has benefitted some nations more than others. The benefits of trade and investments may have propelled nations like China to unprecedented levels of growth. Though China came almost six years after WTO formation, it has overtaken the status of first world countries by being a leading importer and exporter in the world. China’s export lead continues to grow, and seems to exploit the rules of WTO to its benefit. One such rule is on dumping of cheap low quality goods onto other countries which would thrust China to the market economy status once the rule expires. China’s cheap exports prohibit countries with expensive high quality goods from accessing emerging markets due to the low purchasing power of such countries, thus China exploits such countries vulnerability at the expense of other member states. China continues to dump cheap goods in least developed economies; by simply joining the WTO, they got a pass to free trade, and it has paid off with China’s exponential GDP growth in the last 20 years.
Developing economies have traditionally brought grievances and disputes to the WTO, because developed nations are engaged powerful negotiations that favorably help their global trade. More recently, developed nations like the EU and the US have become more aggressive and engaged in disputes with China, often accusing it of flouting the rules and taking advantage of the WTO. Before WTO, democratized nations engaged in liberal trade since 1948 after the Second World War. They however, opened the space for other nations to benefit from global trade to help low income countries out of poverty. China was the outlier given that it is a state controlled economy, but one which was willing to engage in a free market economy through privately-owned companies. However, the state control of Chinese companies and the infringement on intellectual property of foreign companies in China has largely gone unpunished by the WTO. China continues to operate freely as a member, and has massive power and influence in the WTO that may have dwarfed the influence of traditional players in the west.
One may ask whether the WTO is leading us to free trade or exploitative trade, because while the vision of the WTO is to promote free trade, the rules may not apply equally, since some are allowed to trade freely but have not been sufficiently sanctioned when they break the rules of free trade. It is the failure by the WTO to punish China for flouting trade rules that leads nations like the US to impose tariffs since China hides behind free trade agreements in the WTO. The effect of individual nations retaliatory trade actions leads to an unstable global economy and volatile markets which would not have been the case had the WTO applied its rules.
World Trade Organization has helped globalization through free trade, but the benefits of free trade might have helped ASEAN countries than any other region in the world. These countries have passed free trade policies quickly at national level, while the US and European Union were more hesitant to open up their economies. Countries like Singapore, Malaysia and Indonesia, integrated quickly to the global economy, and were only left to tackle China, as they rose to economic power status but not as much as China. These countries allowed mostly duty free goods with minimal border tariffs, while the US and most EU countries remain closed with tedious border administration. Foreign and domestic access to markets by the US remained a hindrance giving priority to bilateral trade partners before WTO members. The US lagged behind while China filled the void of a large economy which had access to foreign and domestic markets.
Conclusion
WTO has opened up global markets for business, and helped grow companies to international status due to the ease of doing business and customer transactions. However, it failed to protect the most vulnerable of its members like African nations from exploitation by China by dumping of cheap low quality goods, and limiting other countries’ access to these markets. Emerging markets have not fully benefited from international trade due to prohibitive trade practices, thus trade imbalances persist because WTO fails to remove prevailing barriers to trade. China will continue to freely trade outside the rules of free trade leading to unfair trade practices that will hurt the economies of other members unless there is reform at WTO.