World Trade Organisation (WTO) was formed in the year 1995 to promote the access of free trade across all the member nations. This organization was formed by replacing the already existing General Agreement on Trade and Tariffs (GATT).
The World Trade Organization (WTO) is an organization with 164 members and 25 observer governments and aims to liberalize international trade. At the international level, the World Trade Organization has pressured developing countries to liberalize trade and investment.
Formation of WTO
World Trade Organisation (WTO) was formed in the year 1995 to promote the access of free trade across all the member nations. This organization was formed by replacing the already existing General Agreement on Trade and Tariffs (GATT). The basic objective of WTO was to promote good trade relations among different countries of the world. World Trade Organization also helps in establishing interlinkages among the different countries of the world.
Moreover, this organization also helps in establishing a framework for negotiating and formalizing the trade agreements among the different countries of the world. Free trade among different nations of the world is facilitated through a reduction in tariff and non-tariff barriers.
Further, in order to accelerate the social and economic development of the developing nations of the world, it was necessary to integrate their economies with the economies of the developed nations of the world. Thus, the setting up of WTO was a major step in the developmental path of the world economy.
Objectives of WTO
- The main aim of the WTO is to implement the new world trade system.
- To promote world trade in a way that it benefits every country.
- To ensure that developing countries secure a better balance in sharing the advantages, resulting from the expansion of international trade, corresponding to their developmental needs.
- To remove all the restrictions to an open world trading system and introduce international economic renaissance because world trade is an effective instrument to faster economic growth.
- To enhance competitiveness among all trading partners to benefit consumers and help in global integration.
- To expand and use the available resources to the maximum level.
- To improve the standard of living for the global population and speed up economic development of member nations.
Benefits of WTO
Some of the benefits for an economy as a member of the World Trade Organization are as follows.
Provides equal opportunities to all: WTO provides equal opportunities to all its member countries to trade in the international market. With all countries having equal access to growth, being a member of WTO was a major benefit for any economy of the world.
Avenues for greater export: It provides its member countries with a wider scope to produce at a large scale and to cater to the needs of people across international boundaries. This provides ample scope to utilize world resources optimally and greater market access. Accordingly, the share of a country’s trade in international trade increases.
Removal of barriers: WTO advocates for the removal of tariff and non-tariff barriers, thereby, promoting healthier and fairer competition among different producers of different countries. The removal of barriers assures greater penetration of exports to developed countries, thereby, directly boosting a country’s exports. Moreover, the countries of similar economic conditions (say Asian countries), on attaining membership of WTO, can raise a united voice to safeguard their common interests.
Safeguards common interests: The countries having similar economic conditions, being members of WTO can raise their voice to safeguard their common interests.
Achievements of WTO
- The WTO has changed the trade scenario of the entire world.
- It has revolutionised changes in media, transport and communication.
- It has created free trade and services without any restrictions.
- The WTO has ensured an increase in the export of agricultural products.
- It has resulted in the increase in the industrial efficiency and improvement in the quality of domestic products.
- The WTO has removed the barrier to foreign investment
WTO and Indian Economy
As a member of WTO, India has also benefited from the trade front. India is expected to benefit From WTO on the following grounds.
- As a member of WTO, India is expected to gain in terms of rising in income. India is expected to add 3.5 to 7 billion US dollars annually as a result of the rise in the volume of trade.
- The exports of traditional items of India, particularly textile and clothing are expected to experience a boost.
- With the reduction in the quantitative restrictions, the agricultural exports of India are likely to increase.
- WTO has resulted in a greater discipline in world trade. This creates a secure and predictable environment for international trading.
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