The World Trade Organization (WTO) is an intergovernmental organization that regulates international

trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by
123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which
commenced in 1948. It is the largest international economic organization in the world.[5][6] The WTO
deals with regulation of trade in goods, services and intellectual property between participating
countries by providing a framework for negotiating trade agreements and a dispute resolution process
aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of
member governments[7]:fol.9–10 and ratified by their parliaments.[8] Most of the issues that the WTO
focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994).

The WTO's current Director-General is Roberto Azevêdo,[9][10] who leads a staff of over 600 people in
Geneva, Switzerland.[11] A trade facilitation agreement, part of the Bali Package of decisions, was
agreed by all members on 7 December 2013, the first comprehensive agreement in the organization's
history.[12][13]. On 23 January 2017, the amendment to the WTO Trade Related Aspects of Intellectual
Property Rights (TRIPS) Agreement marks the first time since the organization opened its doors in 1995
that WTO accords have been amended, and this change should secure for developing countries a legal
pathway to access affordable remedies under WTO rules.

Principles of the WTO Trading System

WTO establishes a framework for national trade policies. Five core WTO principles are especially
important to Afghanistan.

Principle 1: Non-Discrimination

Fundamentally, WTO is built on a foundation of non-discrimination which has two major components:
the Most Favored Nation rule and the National Treatment Policy.

Most Favored Nation Rule

The Most Favored Nation rule (MFN) has been a main feature of international trade policy for a long
time. The Most Favored Nation rule prohibits discrimination between like products originating in, or
destined, for different countries.

Once Afghanistan joins WTO, all 159 other members must apply to Afghan exports the best treatment
that they apply to the goods of any other WTO member country. This will be an advantage for Afghan
exports.

MFN treatment covers both discrimination de facto and de jure. It does not matter if a measure legally
treats goods from all countries the same, if the goods from one country are in fact given treatment less
favorable than goods from another country, discrimination applies.

MFN covers all goods, bound or unbound (see Principle 2 below). A country cannot select which imports
get MFN treatment.
MFN treatment must be granted immediately and unconditionally. For instance, a country cannot tie
MFN treatment to certain conditions, such as importing a specific amount, or following a specific
environmental standard.

There are exceptions to MFN treatment. In fact, much of the world’s trade is not conducted in
accordance with the MFN treatment obligation. There are hundreds of bilateral and regional treaties
which offer special treatment to the goods of neighboring countries or strategic partners.

Afghan exports already receive preferential treatment from many countries because Afghanistan is
considered a Least Developed Country. Preferential treatment is an exception to the MFN
principle. However, preferential treatment is granted at the discretion of the granting country, meaning
that it can be removed from the special treatment anytime.

By contrast, MFN treatment is guaranteed to all WTO member countries and cannot be removed. For
this reason, joining WTO and getting MFN treatment for Afghan exports will be such an important
advantage for Afghanistan.

National Treatment

National Treatment means that foreign imported goods, after they cross the border, should be treated
no less favorably than domestically-produced goods. The underlying rationale behind national
treatment is to ensure that tax and domestic regulation are not used to restrain trade.

The national treatment obligation is found in Article III of GATT, 1994. It compels member states to
avoid using taxes or regulations so as to afford protection to domestic production. For instance, the
government of Afghanistan cannot put a special tax on foreign cement in order to protect Afghan-
produced cement.

National treatment only applies after imported goods have crossed the border. Foreign imports are
obviously subject to tariffs at the border. Additionally, national treatment only applies to government
measures. National companies like banks or manufacturers are free to give better treatment to special
customers.

Like Most Favored Nation (MFN) treatment, national treatment applies to all products, not just bound
products. Incentives for importing manufacturers to source their inputs locally or other domestic
content rules are strictly forbidden.

In practice, national treatment raises many issues for governments around the world. There are many
legitimate regulatory measures a government would like to place on imports. For instance, these could
relate to health or environmental protection. Article XX of GATT, 1994 allows a government to place
restrictions on imports for listed reasons such as human, animal or plant life and health, protection of
national treasures, protection of public morals or the conservation of natural resources.
These exceptions to national treatment cannot be disguised restrictions on trade. A similar type of
constraint has to be applied to the locally-produced product as well or a WTO panel will ultimately
consider it as a disguised restriction on trade.

The WTO has not permitted countries to place even modest restrictions on imports for reasons not
enumerated in Article XX. Therefore, taxes on foreign gasoline for environment protection goals, a ban
on advertising foreign cigarettes, or a tax benefit for advertisers in local magazines to protect national
culture, were all considered inconsistent with the WTO national treatment obligation.

WTO panels especially look at whether a measure has given protection to a local industry in determining
if there’s been a breach of the national treatment obligation.

Other than agreed during tariff negotiations, the Afghan government will not be able to put restrictions
on imported goods in order to afford protection to domestic industry.

Principle 2: Binding and Enforceable Commitments

Tariff commitments are made by WTO members during trade negotiations. These negotiations are
bilateral (one country to one country) during the accession process, and then become multilateral (all
countries together) after a country has joined WTO.

When a country accedes to the WTO, these commitments are listed in a schedule with ceiling bindingsor
maximum tariff rate. A country cannot exceed these bound rates without negotiating with its trading
partners. It could mean compensating them for loss of trade. If satisfaction is not obtained, the
complaining country may refer the matter to the WTO dispute settlement body.

Principle 3: Transparency

WTO members are required to publish their trade regulations and to make sure any decisions affecting
trade are notified to other WTO members and to the WTO Secretariat itself. The WTO also has a Trade
Policy Review Mechanism (TPRM) which periodically reviews the laws and regulations of a WTO-
member country.

Principle 4: Single Undertaking

All WTO agreements are held together as a single undertaking. This means that member countries
cannot selectively choose which agreement they will join. The WTO, and all of its agreements, is a single
package that member states must join on an all or nothing basis.

Principle 5: Safety Valves

In certain circumstances, governments are allowed to restrict trade. For instance, under the Agreement
on Safeguards, a country is allowed to restrict temporarily products from which a surge in imports
caused or is threatening to cause serious injury to a specific domestic industry.
Voting System

The WTO operates on a one country, one vote system, but actual votes are rarely taken. In fact, there
are only limited cases where a vote could be taken. Decision making is by consensus. The advantage of
consensus decision-making is that it encourages efforts to find the most widely acceptable decision, and
member countries are more likely to abide by a rule they agreed to.

The main disadvantages include large time requirements and many rounds of negotiation to develop a
consensus decision, and the tendency for final agreements to use ambiguous language on contentious
points that makes future interpretation of treaties difficult.

Objectives:

The important objectives of WTO are:

1. To improve the standard of living of people in the member countries.

2. To ensure full employment and broad increase in effective demand.

3. To enlarge production and trade of goods.

4. To increase the trade of services.

Functions:

The main functions of WTO are discussed below:

1. To implement rules and provisions related to trade policy review mechanism.

2. To provide a platform to member countries to decide future strategies related to trade and tariff.

3. To provide facilities for implementation, administration and operation of multilateral and bilateral
agreements of the world trade.

4. To administer the rules and processes related to dispute settlement.

5. To ensure the optimum use of world resources.

6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal
Economic Policy determination.

The World Trade Organisation (WTO) is committed to improving free trade amongst its member
countries. However, its role has been controversial – creating polarised views.

These are some of the criticisms of the WTO

 1. Free Trade benefits developed countries more than developing countries. It is argued,
developing countries need some trade protection to be able to develop new industries; this is
important to be able to diversify the economy. It is known as the infant industry
argument. Many developed economies used a degree of tariff protection in their development
phase. Economist Ha Joon Chang argues WTO trade rules are like ‘pulling away the ladder they
used themselves to climb up’ (Kicking away the ladder at Amazon)

2. Most favoured nation principle. This is a core tenant of WTO rules – countries should trade
without discrimination. It means a local firm is not allowed to favour local contractors. It is
argued this gives an unfair advantage to multinational companies and can have costs for local
firms and the right of developing economies to favour their own emerging industries.

3. Failure to reduce tariffs on agriculture. Free trade is not equally sought across different
industries. Both the US and EU retain high tariffs on agriculture, this hurts farmers in developing
economies who face tariff protection

4. Diversification. Arguably developing countries who specialise in primary products (e.g.

agricultural products) need to diversify into other sectors. To diversify they may need some
tariff protection, at least in the short term. Many of the existing industrialised nations used tariff
protection when they were developing. Therefore, the WTO has been criticised for being unfair
and ignoring the needs of developing countries.

5. Environment. Free trade has often ignored environmental considerations. e.g. Free trade has
enabled imports to be made from countries with the least environmental protection. Many
criticise the WTO’s philosophy that the most important economic objective is the maximisation
of GDP. In an era of global warming and potential environmental disaster, increasing GDP may
be the least important. Arguably the WTO should do more to promote environmental
considerations.

6. Free trade ignores cultural and social factors. Arguably a reasonable argument for restricting
free trade is that it enables countries to maintain cultural diversity. Some criticise the WTO for
enabling the domination of multinational companies which reduce cultural diversity and tend to
swamp local industries and firms.

7. The WTO is criticised for being undemocratic. It is argued that its structure enables the richer
countries to win what they desire; arguably they benefit the most.

8. Slow progress. Trade rounds have been notoriously slow and difficult to reach an agreement.

9. WTO becoming overshadowed by TIPP agreements which fall outside the purvey of WTO rules.

Evaluation – response to these criticisms

In response to these criticisms, we could mention.

 Failure of countries to agree tariff reduction in agriculture is not the fault of WTO, but countries
themselves.

 Free trade and growth of exports have been an important factor in raising living standards,
especially in south-east Asia, which has benefitted from the remarkable growth of world trade.

 The growth of world trade has helped reduce absolute poverty.

 In recent years, the WTO has made more efforts to consider the situation of developing
economies. Recent rounds have put pressure on developed countries to accelerate removing
restrictions on imports from the least-developing countries.

 The WTO has over 160 members representing 98 percent of world trade. Over 20 countries are
seeking to join the WTO.

 WTO has been given credit for helping to avoid trade disputes.