The World Trade Organisation Opportunities and Threats

The World Trade Organisation has been faced with a barrage of criticisms from many sources, such as environmentalists, labour organisations, developing countries and groups opposing globalisation. In answer to these critics, the WTO often refers to various facts. These include the following:

Fact 1. The WTO is the result of half a century of international co-operation.
Fact 2. Today, the WTO has 135 member governments, with a combined population of about 4 billion, which accounts for over 90 per cent of world trade.
Fact 3. Over 30 more countries, whose populations account for a further 30 per cent of the world’s total, wish to join the WTO. This would leave only 4 per cent of the world’s people not under the WTO multilateral trading system.



Fact 4. Since 1948, world trade has consistently grown faster than world output (as the following diagram shows).
Fact 5. In 1998, world merchandise exports were worth over 5 trillion dollars ($5,235 billion). In volume or real terms, that represents an 18-fold increase since 1948. Within that total, exports of manufactures were 43 times larger than 50 years earlier. Over the same period world production of manufactures increased 10 fold.
Fact 6. All countries are now far more dependent on trade between one another than they were. In 1950 only 8 per cent of national output of goods and services was sold abroad. Today 26.4 per cent of national output is sold abroad.
Fact 7. The average tariff on manufactured products stood at 4 per cent on the completion of the Uruguay round of trade talks in 1994. This compares with an average tariff of 35 per cent in 1947.
Fact 8. As well as administering agreements in relation to goods, the WTO administers agreements in relation to trade in services and in trade-related aspects of intellectual property. In addition, the WTO is exploring new areas for agreement between its members. Such areas include, trade and investment, trade and competition policy, trade problems of the least-developed countries, and trade and the environment.
The facts do seem to suggest that the WTO has been hugely successful. It has presided over a global economy, and operated alongside other institutions (the IMF) and in line with various international agreements. It has been party to an era of unprecedented economic growth, in which trade has been a key component. But past performance is no guarantee of future success.

So what problems lie in wait for the WTO? What threats are there to its future, and the future of the world trading system?

In this case study, we will explore the opportunities and threats facing the WTO. We will first give a brief history of the WTO, and identify the foundations upon which it operates. We will then consider the rationale for pursuing free trade, and the conflicts such a pursuit generates. Finally, we will explore the WTO’s future and the hurdles it is likely to face.

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