Principles of Trading System

World Trade Organization provides a platform for governmental organizations for trade agreements negotiations. Government bodies settle their trade disputes on this platform. WTO is a stage where different nations come to sort out their trade problems with other nations. There is no use of any international trade agreement if the organizations fails to enforce its policies when any of the members of signatories fail to comply with such policies. Therefore settling disputes rises the applied cost of the obligations by the guarantors which they commence on the global trade contract, which is why it is considered to be an effective mechanism. Factually, the members of WTO came together during the “Uruguay Round of Multilateral Trade Negotiations”, which demonstrates that the members are obliged to comply with the policies and regulations of WTO.

Principles of Trading System

The principles of trading system include;

Trade without discrimination: this principle includes most favorable nation and trade at liberty. Under the policies of WTO, no member of the committee can discriminate nations on any basis regarding trade. For example, granting a nation to pay less duty as compared to other nations, but under the WTO agreement, nations have to favor no one. This aspect is also included in the “General Agreement on Tariffs and Trade” (GATT) of the first article. It’s also included in other trade agreements such as GATS and TRIP. Trade at liberty or freer trade is lowering trade barriers for favored nations which is the most efficient method of encouraging trade. Barriers include import quotas, custom duties and removing import bans on some items. There have been eight round of trade consultations since the birth of GATT in 1947-48, and the ninth round of trade negotiation is underway after the Doha Development Agenda.

Another principle of the trading system is predictability. Often times committing someone not to raise a barrier for import holds same significance as lowering one, because a business can see its future opportunities clearly with a commitment. Predictability and stability provides support to the business in terms of job opportunities, investment opportunities and also competition benefits for consumers in terms of lower prices and increased choices. Government tries to stabilize the environment of the businesses through multilateral trading system.

The third principle of trading system is promoting fair competition; some nations consider WTO as a platform of free trade, however it is not accurately true. The platform provides protection to trade of nations and also allows tariffs. However, WTO is a platform that states some rules and policies for undistorted, open and fair trade competition. These rules are also implemented on subsides and nations who dump (export at lower price to gain extra market share). Economic reforms and encouraging development; WTO was established to contribute towards the development of nations whereas some emerging countries take ample amount of time to implement their strategies with the agreement of the system. The agreement itself contains the provisions from GATT, which briefs to allow the developing countries trade concessions and special assistance. Three-fourth of the members of the WTO are developing countries and one-fourth are the countries that are in transition to the market economies. Autonomously, around 60 members implemented their programmes of trade liberalization during 7.5 years of Uruguay Round. In the same time span, transition economies and the developing countries played an influential and active part during the Uruguay Round compared to the previous rounds and they are much more active in the Doha Development Agenda.