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Analyze the role of the World Trade Organization (WTO) in international trade and freight distribution. Provide an example.
World Trade Organization (WTO) has a crucial role to play in the international trade, global economics, political and legal issues arising in the international business because of the globalization.” (Roy, 2015) The WTO was established on January 1, 1995 to take the place of the General Agreement on Tariffs and Trade (GATT) which was created in 1948. The WTO’s goal is to provide fair trade rules for the 164 member states. Also, the WTO facilitates trade negotiations like maritime services. This negotiation started in 1996 and resumed in 2000 concerning access to and use of port facilities, auxiliary services, and ocean transport. Second, the WTO implements and monitors the agreements they have negotiated. The members use transparency to discuss the laws and other issues in the committees. Third, the WTO acts as a dispute settlement body whenever there is a trade conflict e.g., the United States 2016 dispute that China was taxing exports of high demand raw materials. Since China exports more than two-thirds of magnesia, graphite, and antimony the export taxed increased from between 5 to 20 percent. The WTO also helps developing countries build trade capacity with more developed countries. By doing this, the WTO launched a new publicly database on preferential trade agreements in which the developed countries grant preferential tariffs to imports from developing countries. Finally, there is outreach that the WTO do for countries. “They try to persuade governments to reduce barriers to trade to free, fair, and open markets around the world.” (CFI, n.d.)
CFI, (n.d.), World Trade Organization (WTO) A multilateral organization that functions as a central body that facilitates global trade, Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/economics/world-trade-organization-wto/
Dr. Padmavathi Roy, (February 26, 2015), World Trade Organization Role of WTO in International Business, Retrieved from https://www.linkedin.com/pulse/role-wto-international-business-dr-padmavathi-bhamidipati/
While conducting international trade and freight distribution there is an inherent need for standardization and basic ground rules. The Word Trade Organization facilitates this standardization and regulation groundwork between nations. Take for example vaccine distribution from America to other nations, it’s not a simple procedure of getting the product from A to B, or ensuring the proper equipment exists to facilitate onward distribution after the fact. Felter (2021), points out that even when authorities approved the COVID-19 vaccine for distribution in America, it still needed regulatory approval in each country targeted for distribution before America could ship supplies that way. This means that even though the need was urgent, and the supplies existed there was a regulatory disconnect. Felter (2021) further clarifies that the countries invested in WTO were instrumental in bridging that gap and have even pressed to further simplify such distribution by attempting to secure approval to bypass patents. By working as a negotiator WTO was able to streamline regulatory processes amongst nations and establish trade rules to facilitate distribution in a timely manner.
International trade and freight distribution has a complex web of barriers to entry. By facilitating the standardization and ground rules WTO is able to ensure entities operating within that complex web of political barriers, have clear and concise left and right limit of operations. The WTO not only provides protection for the entities operating in countries foreign to them but also gives certain protection to the foreign countries in which they are operating. As disputes arise between nations doing business amongst each other WTO finds a common ground and sets a precedence for others to immolate.
Felter, C. (2021, June 30). A guide to global covid-19 vaccine efforts. Council on Foreign Relations. https://www.cfr.org/backgrounder/guide-global-covid-19-vaccine-efforts.