Simply put: the World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. But there is more to it than that.
Is it a bird, is it a plane?
There are a number of ways of looking at the WTO. It's an organization for liberalizing trade. It's a forum for governments to negotiate trade agreements. It's a place for them to settle trade disputes. It operates a system of trade rules. (But it's not Superman, just in case anyone thought it could solve or cause all the world's problems!)
Above all, it's a negotiating forum
Essentially; the WTO is a place where member governments go, to try to sort out the trade problems they face with each other. The first step is to talk. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations.
The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system. (The second WTO ministerial meeting, held in Geneva in May 1998, included a celebration of the 50th anniversary of the system.)
Principles of the trading system
The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system.
What is International Trade?
According to Steven Shrybman, Canadian Centre for Policy Alternatives (2001),
"International trade had grown for many years due to the progress many benefits in various countries around the world. International trade is the exchange of goods and services and capital between different countries and regions, without a lot of obstacles. International trade accounts for a large part of the GDP of the country. It is also one of the main sources of income for developing countries".
Benefits of Trade
"International trade gives companies a platform to display their products, goods and services. Have access to a larger market, allowing them to benefit more from economies of scale. They can also purchase raw materials and other spare parts easily and at low cost. It's not just in the interests of producers but also consumers. They can buy goods from other countries in the local market. They have more variety to choose from. Just because of competition for every consumer get better quality products at low prices. Growth of international trade increase in world output as well".
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Some important benefits of International Trade
Increases the local competitiveness
Takes benefit of international trade technology
Increase sales and profits
Extend sales prospective of the surviving products
Maintain cost competitiveness in your domestic market
Develop potential for extension of your business
Gains a international market share
Reduce dependence on existing markets
Stabilize seasonal market fluctuations
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20th Century Benefit
"The advantages of international trade have been the main drivers of growing for the last half of the 20th century. Nations become a thriving international trade and strong, they have the right to control the global economy. World Trade could become one of the major contributors to the poverty reduction in the country".
According to David Ricardo (1998),
"A classical economics, the principle of absolute advantage explains how trade can be beneficial to all parties such as individuals, companies and countries involved, if the goods are produced in different relative costs. The net benefits of these activities are known as gains from trade. This is one of the most essential conceptions in international trade".
According Adam Smith, (famous economist),
"Another classic economist, using the principle of absolute benefit indicates that the country could advantage from trade, where he became at least the production of goods, like per unit input yields a higher volume of output".
Principle of comparative advantage
According to David Ricardo (1991),
"In accordance with the principle of comparative advantage, and the benefits of trade depends on the opportunity cost of production. The opportunity cost of production of goods and to reduce a good amount of aid to increase production output by one unit of another good. Country which is not an absolute priority for any product, like if any state which is not productive in the most competent of any goods, you can still benefit from focusing on the export of goods, and who has the opportunity cost of production".
What is Trade Barrier?
According to Hendrik Van den Berg, Joshua J. Lewer (2007),
"Barriers to trade restrictions, which tend to impede the motivation to address national importing or exporting of goods. Most common examples of trade barriers imposed by the government on the economic barriers such as tariffs or quotas. Depending on the trade barriers imposed in various industries through the provision of goods and services sold in the markets, the International Bank, or refrain from buying products for sale in the country.
A trade barrier usually causes certain types of financial problem, which increases the cost of exported goods or material. For example, tariffs on imports to help companies avoid the selection of goods produced outside the country, while the increase in potential sales of locally produced goods".
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Issues covered by the WTO's committees and agreements
Technical barriers to trade
"Technical regulations and product standards may vary from country to country. Having many different regulations and standards makes life difficult for producers and exporters. If regulations are set arbitrarily, they could be used as an excuse for protectionism".
"The Agreement on Technical Barriers to Trade tries to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles".
Advantages of international Trade
Monetary increases to the relevant country including in trade
Additional variety of goods available for consumers
Best quality of goods
Competition both at the international level as well as local level
Closer ties between countries
More conversation of technical know - how
Local manufacturers will try to improve the worth of their products
Rise in employment locally
Disadvantages of international trade
Local production may effected
Local industries may be overshadowed by their world-wide challenger
Rich states may effect political matter in other countries and gain control over weaker nations
Ideologies differences may develop between countries with honour to the processes in trade practices.
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Recommendation
Trade is beneficial for both countries that are doing trade means exchanges goods with each other like for example if any cannot produced mangoes but they are rich in fish so they can exchange fish from mangoes by those countries who are willing to carry trade. This will increase to earn revenue as well; in my understanding and suggestion any country cannot live in isolation and have to equally share their prosperity, and the absolute knowledge of technical issues, it's very important for every country to maintain the trade relation with every other country. International trade is always beneficial for world economy its improve the monetary level of country and help for local people for buying imported items and as well as for those people who are doing export business. First it is important to give all the benefit to the local people of the country and after that dispose the surplus goods to other countries. Take a help of new and advance techniques of production and extremely advanced transportation systems, the international trade system is increasing and spreading very fast if the outsourcing of manufacturing and services, and fast industrial development. Trade is also important because when small and local trader look that the trend is going on international market in that case local producers will try to improve the quality of their product to get more interest of people and benefits.
Conclusion
International trade is a heart of every country and provides a large platform to other countries to start a joint venture and the both countries can take great advantage to increase in economic scale, and also increase in global market share. Sometimes it's effect on local market producers, but in other hand it enhances the local market competitiveness. International trade increase world output and improve the living standard and style of the people, it create a number of variety of products, goods and services to the customers. The major factor or important factor of international trade is that increase opportunities of employment and jobs and help to control over poverty in the country and people can enjoy the various varieties of goods from other countries.
However if we are taking positive impact of international trade but international trade alone cannot make a change in economic growth and implementations in the country until and unless the all the major factors are in the favour of trade, like policies are flexible, positive macroeconomic scenario and the stability in the politics, so that country make prosperity in this regard. In conclusion it can be said that, international trade leads to economic growth provided the policy measures and economic infrastructure are accommodative enough to cope with the changes in social and financial scenario that result from it. Open trades policies can also include the related opportunities for other countries to involved in the trade system and insure them that political and economic stability is not effect in the trade business.
