Analysis of WTO Principles and Global Trading System (LAW201)

This report delves into the intricacies of transnational commercial law, focusing on the World Trade Organization (WTO) and its influence on the global trading system. The introduction establishes the significance of the WTO as the primary international institution governing trade. The main body critically evaluates the fundamental principles underpinning the WTO, such as non-discrimination, national treatment, free trade through negotiation, predictability, promotion of fair competition, and encouragement of development and economic reform. It examines the WTO's role in resolving trade disputes and promoting free trade among member countries. The report further analyzes arguments regarding the WTO's operations, including criticisms related to human rights, transparency, and the impact on developing countries. It presents diverse perspectives on trade liberalization, poverty reduction, and the fairness of the global trading order. The report concludes by summarizing the key findings and offering recommendations for reforming the global trading system to ensure equitable and sustainable trade practices.

TRANSNATIONAL
COMMERCIAL LAW 2

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Critically evaluating the statement with the fundamental principles which underpinning the
WTO............................................................................................................................................1
Arguments on the way WTO operates in global trading order...................................................4
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Transnational commercial law is the set of rules which is developed to provide guidelines
for international commercial transactions which is common for number of legal systems. Motive
of this body is to establish laws and uniform more clearly so that business lawyers will able to
deal with daily routine activities which opposed by other associated terms (Jupille, 2018). Thus,
world trade organisation is the only international institution which is established to deal with
trade between countries across the world. In this report, explanation will be provided on role of
WTO and its impact on developing countries. Further, rules of WTO will be discussed with
appropriate recommendation in order to reform global trading system.
MAIN BODY
Critically evaluating the statement with the fundamental principles which underpinning the WTO
WTO is a set of body which plays a crucial role in international trade, global economies,
political and in legal issues which arises because of globalisation in international businesses. It is
considered as most powerful institution in resolving trade related barriers (Aman and
Greenhouse, 2017). Its goal is to help in services like import, export to its member countries so
that business activities get developed in very peaceful manner. Thus, role of WTO in
international businesses are as follows-
 It assists implementation and also operations for conducting smooth flow of operations of
trade agreements between the countries.
 Through effective rules and regulations, it provides settlement disputes for its member
countries.
 The body also provide its cooperate with international monitory fund and to world bank
in order to develop smooth global economic practises.
Thus, it can be said that main role of WTO is to settle trade related disputes through its
guidelines and through agreement so that trade related war get settled. It is a body which
concerned with regulations of international trade between nation. It also deals with regulation of
trade in relation to goods and services and also for intellectual property between its member
countries so that smooth flow of trade relations will get developed (Zumbansen, 2019).
World Trade organisation which designed to improve free trade between its member
countries
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It is said that agenda of WTO is to implement agreement between its member country so
that smooth flow of business trade get developed. But it is also true that its agenda is to maintain
good trade system between develop and developing countries. It is also the motive of WTO that
the least developed countries get marginalised in world trade system and their products will able
to get serve in other countries too (Watt, 2016).
It is also true that role of WTO is to improve free trade between its member countries, it
is because to raise living standard of people who live in such countries and to increase their
economy. This body generally deal with agriculture, textiles and clothing, banking,
telecommunication, government purchases, industrial standards, product safety, food sanitation
regulations and for much more. However, its main principles of trading system are as follows-
Trade without discrimination:
This is the type of agreement where countries cannot able to discriminate with their
trading partners. This is the principle which considered as most-favoured-nation treatment. This
is the principle which state that each agreement is handled sightly different for covering all the
main areas of trade. However, some exceptions are allowed in this principle where countries will
able to set up free trade agreement which applies to goods which only traded within groups.
Motive of this principle is to provide special access to developing countries for their market
business. It is also a motive of this principle to raise barrier against such products which
considered to be treated unfairly in specific countries and there has been a discrimination on
goods and services which get imported (Sen, 2018). The rule also stated that when a country
lower its trade barrier or opens up a market then they also have to do this for their trading partner
also whether they are rich, poor ,weak or strong.
National treatment: treating foreigners and local equally-
According to this principle which states that after foreign goods entered market then
such imported and locally produced goods must be treated equally. This is the rule which applied
to both foreign and domestic services and to local trademarks, copyrights and patent as well. The
national treatment will only get applied when a item of intellectual property, product or services
get entered in the market of trade. Thus, to charge custom duty on import is not a type of
violation of national treatment.
Free trade: gradually through negotiation:
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This is the principle in which motive of the WTO is to encourage trade by lowering its
trade barrier. Under this concern include custom duties and measures such as import bans or
quotas which will restrict the quantities (Soprano, 2018). This is the type of agreement which
allow countries for introducing changes gradually so that it gives progressive liberalisation where
to developing countries longer time of period will be given for fulfilling their obligations.
Predictability: through binding and transparency:
Through this principle motive of the WTO is to raise stability and predictability so that
more investment in developing countries get encouraged, jobs get creates and consumers will
fully able to enjoy the benefits which provided by their competitors. It is an attempt which
develop by government to develop multilateral trading system so that business environment
develop as stable and predictable. When developing countries agree to open their market in terms
of goods and service trade they get bind with the types of commitments. Thus, for goods this
binding amount increases customer tariff rates. This is the case with developing countries where
the rates are actually charges and bound rate remain same only.
Foe example: the percentage of chart which shows tariff bound before and after 1986-94 between
countries are as follows-
This principle states that a company will able to change its binding, only after it get
negotiate with trading partner. From the above table, it is analysed that there has been an increase
in multilateral trade under the commitments of binding. 100% of security has been provided for
trader and investor which deals in the market of agriculture. Thus, through this principle, motive
of WTO is to encourage transparency at both domestic and multilateral level.
Promotion of fair competition:
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It is said that WTO is described as free trade institution but it is not always true because
system does not allow tariffs in limited circumstances and for other forms of protection. It is the
system which dedicates to establish true and fair competition. The establishment of this
agreement is to support fair competition whether it is in agriculture, intellectual property,
services (Betz and Kerner, 2016). Thus, in context of developing countries, this principle
encourage companies for trading in foreign countries and to provide true and fair competition.
Encouragement development and economic reform:
Motive of WTO is to contribute development. Thus, in context of developing countries
they generally need flexibility at times when consider system agreements. Therefore, according
to the provision of GATT, special provision will be allowed to developing countries in terms of
trade concessions. It is also fact that from past three years, members of WTO are developing
countries in relation to transition in market economies and such countries also implemented trade
liberalisation programmes because of that economies of developing countries are now much
more active and influential where companies across the nations wants to set up their business
functions.
Thus, these are the principles of WTO which is designed for improving free trade
amongst its member countries where the agenda of the institution is to improve flow of trade
system in developing countries.
Arguments on the way WTO operates in global trading order
As per the views of Lumina (2019) WTO has been criticised in lacking sensitivity
towards development of human right and for lack of transparency in its process. It is been argued
that provisions which develop by WTO as an agreement majorly affecting agriculture trade and
intellectual property where the ability of the government also get affected to fulfil human right
obligations for their citizens.
However, on the critical note it is also been argued that with the expansion of global trade
in countries producers of the businesses will able to raise standards of living around the world. It
is because by developing free trade, companies will able to expand their business globally which
helps in developing more job opportunities which overall lead to increase economic growth of
the country (Chaudoin, Kucik and Pelc, 2016). It is also notable that developed countries
demanding more broader international trade agenda which will help in solving issues which
relates to non-trade activities such as environmental standards, labour standards and human
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rights. Concern of developed country is that the rules which is currently formulated by WTO
does not permit a country for imposing trade sanctions by which other country will able to
improve their human right practises.
However, the concern has been opposed by developing nation due to a concern which
state that such right in trade agreements could by used as a tool by developed nation for denying
market access of products from developing countries. Thus, the argument has been developed in
favour of the guidelines which created by WTO in order to conduct smooth flow of trade
operations around the world. It is mentioned by economists of developing nation that such
guidelines by WTO contributes in reducing poverty level and provides a way to increase living
standards of the people.
In the views of developed nations economists, it is been again argued that trade
liberalisation mainly provides its impact upon poverty in three ways: it is through impact on
prices of goods, impact on profits which affect employee remuneration. It is said by such
economists that the rules which created by WTO is in favour of developing nation and mainly
affect the operations of the country which have effective practises for improving poverty
standards (Bown and Reynolds, 2017).
It is again argued by advocates of developed nation by saying that is it a free trade or is it
a just trade system between developed and developing nations which is taking place as coercive
and in uneven lines, they provide their argument by saying that trade relations between rich and
poor countries only contributing unfair practises. Such guidelines only protecting poor countries
in the views of such economists. They also raised their concern by saying that current terms of
free trade only prevailing market prices of goods which are produced in developed countries and
wages in such countries also get increasing with this establishment.
Economists also argue in favour of developing countries that lack of free trade are caused
by dumping practises and with protectionism which incurred by rich countries. According to the
views developed countries are criticising for issue which is raised by them regarding against poor
countries which is particularly for agriculture producers. It is because agriculture products are
mainly imports with developing nations and it is a fact that by removing barrier of free trade
export prices of such items increases by four times as it has now.
On the other hand it is been argued by economists of developing nation that free trade has
been consistent with the demand and justice long term and will provide benefits to all the
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countries whether it is rich or poor. But it will happen when market are allowed to come to
equilibrium (Bagwell, Bown and Staiger, 2016). Thus, their argument is consistent with free
trade as a fair trade. Reason being is that it involves voluntary exchanges which imply an
absence of coercion. They said that the best way is to allow country for trading freely but the
other one argue that these trade liberalisation would essentially allow unevenness in trade system
of the country.
Thus, these are the arguments which has been developed for the way WTO operates in
global trading system. It is analysed with the above arguments that rich countries did not want
much of the flexibility in trade liberalisation and poor countries allows doing so because it
helping them to improve economic activity of the nation which contributes in increasing living
standards of people.
Impact of WTO rules on the developing countries in current international trade regime
According to the analysis of arguments it is analysed that WTO rules has mainly
provided positive impact upon developing nations (Rena, 2015). It helps them in increasing the
living standards of people by removing restrictions on free trade. Thus, it can be said that WTO
plays an important role for shaping trade element in developing nation where organisations are
now more able to achieve their goals and objectives. The body allows developing nation to
participate in world economic arena where domestic companies of such countries will able to
improve their quality of goods and services with those of foreign countries as well.
It also helps in developing effective trade relationship between across the nation so that
trade and development activities go hand in hand. The Biggest positive impact which has on
developing countries is that it helped market of developing nation for manufacturing goods
which helps in enhancing export at higher rate. Fair trade conditions has been created in
developing nation because of WTO guidelines which helps in solving any kind of dispute arises
out of it.
It is also a true that developing countries are making up a two-third of WTO membership
with their vote only influence the agenda and outcomes of trade negotiation. This is the way that
it mainly provides a greater benefit to developing nation where they will bale to create more
industrial development which will provide more jobs to the people of such countries (Wu, 2019).
Trade negotiation is the type of agreement which state that if one country gives a concession in
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terms of lowering of tariffs on certain products then in return another country have to agree to
such agreement. This will help economies to evolve availability of more foreign goods in
country. WTO rules also helps in developing more human and technical resources by which they
will able to enter negotiations with more preparation as compared to developed country.
However, success of WTO in developing countries is as follows-
Main function of the WTO is to ensure smooth and free flow of global trade and it has
been found that due to development of their guidelines, there is an increase in economic
uncertainties.
 It not only helps in increasing value and quantity of trade but it also allows eradicating
trade and non trade barriers. It also strengthen trade governance scope by which there is
an easy flow of investment, services and in intellectual property.
 It also has expanded agenda which helped in developing settlement for disputes and to
improve monitoring of trade of goods and services by introducing trade policy review as
well as by increasing transparency with the removal of green room negotiation.
 It also encountered sustainable trade development by expanding number of trade volumes
which is by country to country (Qin, 2017). This is also a fact that this expansion in trade
also create greater chances of occurring disputes where WTO guidelines also helps in
solving such disputes peacefully and constructively.
However, these are some positive aspect but there is also a fact which states that WTO in
developing nation gets failed in order to deliver pro-development change in the countries. Thus,
developing countries completely sidelined by global power in terms of economy and political
interest. At some point of the failure western government conclude that 'Doha Development
Agenda' is the one which kept agriculture economies in Africa trapped in poverty.
Doha Development Agenda is a series of doing trade negotiations with the aim of
reforming international trade system by introducing lower trade barriers and with trade rules.
Thus, 10 examples which shows WTO failure in developing nation are as follows-
Cotton: the Fairtrade foundation which was revealed last year shows that almost $47
billion in subsidies has been paid to producers of rich country (Bahri, 2018). It is been found that
in past 10 years it has created a barrier for almost 15 million cotton farmers in west Africa. With
a try to reduce poverty it is also been analysed that world's poorest farmer families has been
forced out from their businesses into deeper poverty.
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Agriculture subsidies: other than cotton, WTO members also got failed for reducing
huge subsidies of agriculture farmers where overproduction of such continues to threaten the
living standards of farmers which lives in a developing nation.
Trade agreements: WTO also get failed to clarify the rules which is developed to
provide benefits to poor countries in order to be manipulated by rich states. For example: Africa
has been forced to eliminate tariffs up-to 90% of the trade. This happened because there is no
clear rule for protecting farmers of the agriculture.
Special treatment: in order to provide special and differential treatment rules, WTO gets
failed for working through 88 proposals which will feel legal protection to developing nation in
terms of free trade (Anderson, 2016).
Medicine: WTO also gets failed in developing practises which provides benefits to
people of poor country in terms of medical treatment. It is because members of the WTO gets
failed in clarifying the needs of people to government in order to protect public health. Members
also did not provide protection in terms of intellectual property rights to pharmaceutical
companies.
Legal costs: WTO also gets failed for improving access to its expensive and complex
legal system. It is estimated that in 15 years of dispute settlement under the WTO, there are
almost 400 cases which has been initiated where no complaint has been claimed by developing
countries.
Protectionist economic policies: motive of the WTO is to achieve more smooth
functioning of global trade economic policy. But it has been found that WTO gets failed in
implementing such increase and to protect the countries regarding global economic crisis. Thus,
it can be said that in order to achieve its objectives, members of the institution gets failed.
Decision-making: WTO is the body which makes most of the decision depending upon
the consequences. But this is the another failure which has been achieved by this body where
they have to break the link between the market size and with political weight where small and
poor counties will able to raise their voice in trade negotiation.
Fair trade: after the start up of Doha Development round, government failed in
developing effective trade fair practices. This is because developed nation did not want to
continue with the rules which provided by WTO. Reason behind opposition of developed nation
is that development of free trade practises affect export rate majorly (Tobin and Busch, 2019).
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Appropriate recommendation for reforming global trading system
WTO is the body which serves as a place where trade policy issued and developed to
address disputes through arbitrated and through legal frameworks. There main role is to create
practises which only inspire fairness in world trading system (What Needs to Change at The
WTO, 2018). Therefore, there are some recommendation where the body will able to solve the
issues which are arising with the practises developed by WTO.
 Members must have to analyse and provide proper guidelines to WTO bodies while
forming any type of guidelines and to implement existing agreements in identifying the
gaps which needs to improve and to update.
 Proper discussion needs to be developed where analysis must be done on operation of
WTO. All members must need to participate in mega-regional trade agreements which
will offer a proper contribution towards the development of trade policies.
 WTO members must need to establish a new work of programs which helps them in
addressing both long term and trade distorting policies which is specifically important in
building an effective practise.
 It is also a duty of member to consider that whether all member are participating in
development of new initiative or not. It will be very important that all member will
provide their views and share so that with the views of everyone, proper development of
initiative will take place.
 Members of WTO must have to enhance the scope where secretariat will able to
contribute their participation. This will support body for maintaining policy dialogue
which provide effective initiative for conducting smooth trading system.
CONCLUSION
From the above report it can be concluded that world trade organisation has played an
effective role in order to develop smooth flow of trading system. In this report, explanation has
been provided on the role of WTO in order to develop efficient dispute settlement mechanism.
Further, it is also discussed about fundamental principles of WTO for improving free trade in its
member countries and the impact of such policies on trade practises. However, it found that in
comparison to positive outputs there are various negative outputs which has been arises with the
implementation of WTO guidelines. Therefore, in order to properly understand the rules different
perception of the authors have been evaluated where argument conduct on the way WTO
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operates in global trading order. Thus, it is summarised from report that members of the body
must have ensured the benefits of act which provide only positive impact in both developing and
developed country.
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REFERENCES
Books and Journals
Aman, A.C. and Greenhouse, C.J., 2017. Transnational Law: Cases and Problems in an
Interconnected World. Carolina Academic Press.
Anderson, K., 2016. Contributions of the GATT/WTO to global economic welfare: Empirical
evidence. Journal of Economic Surveys. 30(1). pp.56-92.
Bagwell, K., Bown, C.P. and Staiger, R.W., 2016. Is the WTO passé?. Journal of Economic
Literature. 54(4). pp.1125-1231.
Bahri, A., 2018. Public Private Partnership for WTO Dispute Settlement: Enabling Developing
Countries. Edward Elgar Publishing.
Betz, T. and Kerner, A., 2016. Real exchange rate overvaluation and WTO dispute initiation in
developing countries. International Organization. 70(4). pp.797-821.
Bown, C.P. and Reynolds, K.M., 2017. Trade agreements and enforcement: evidence from WTO
dispute settlement. American Economic Journal: Economic Policy. 9(4). pp.64-100.
Chaudoin, S., Kucik, J. and Pelc, K., 2016. Do WTO disputes actually increase
trade?. International Studies Quarterly. 60(2). pp.294-306.
Jupille, J., 2018. Between Interests and Law: The Politics of Transnational Commercial
Disputes. By Thomas Hale. Cambridge: Cambridge University Press, 2015. 430p. $129.00
cloth, $103.00 eBook. Perspectives on Politics. 16(2). pp.582-584.
Qin, J.Y., 2017. Trade, investment and beyond: The impact of WTO accession on China’s legal
system. In Law and the Market Economy in China (pp. 265-286). Routledge.
Sen, N., 2018. Understanding the Role of the WTO in International Data Flows: Taking the
Liberalization or the Regulatory Autonomy Path?. Journal of International Economic
Law. 21(2). pp.323-348.
Soprano, R., 2018. WTO Trade Remedies in International Law: Their Role and Place in a
Fragmented International Legal System. Routledge.
Tobin, J.L. and Busch, M.L., 2019. The Disadvantage of Membership: How Joining the
GATT/WTO Undermines GSP. World Trade Review. 18(1). pp.133-160.
Watt, H.M., 2016. Theorizing transnational authority: a private international law perspective.
In Authority in Transnational Legal Theory. Edward Elgar Publishing.
Wu, Y., 2019. General Assessments of the Proposals Within the WTO Framework. In Reforming
WTO Rules on State-Owned Enterprises (pp. 217-249). Springer, Singapore.
Zumbansen, P.C., 2019. Can Transnational Law Be Critical? Reflections on a Contested Idea,
Field & Method. Field & Method (January 31, 2019). Emilios Christodoulidis (ed.)
Research Handbook on Critical International Theory (2019, Forthcoming).
Online
Lumina, C., 2019. Free trade or just trade? The World Trade Organisation, human rights and
development. [PDF]. Available through
<http://www.saflii.org/za/journals/LDD/2008/11.pdf>
Rena, R., 2015. Impact of WTO Policies on Developing Countries: Issues and Perspective.
[Online]. Available through
<https://www.tandfonline.com/doi/abs/10.1080/19186444.2012.11658336>
What Needs to Change at The WTO. 2018. [Online]. Available through
<https://ged-project.de/research/studies/revitalizing-wto-2/>
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