Principles of WTO (World Trade Organization)

The WTO is based on nine principles. These principles are explained below :

Transparency – WTO aims at achieving transparency in world trade relations by obligating members to publish their respective laws, regulations, judicial decisions and administrative rulings pertaining to the classification or valuation of products for customs, rate of duty taxes or other charges affecting the sale, distribution, transportation, insurance and warehousing with the objectives of enabling governments and traders to become familiar with them. This helps exporters plan their trade and safeguard them against hassles. Besides WTO Conducts periodic review of trade policies of member countries to promote transparency in their trade policies.

MFN Treatment – Trade needs to be conducted without discrimination. Any member country shall not discriminate between its trading partners all countries are granted the “most favourer nation” of MFN status. MPN means that every time a member country lowers a trade barrier or opens up a market, it needs to emend the benefits to all partners. The basic principle that guided the erstwhile GATT and directs the present incumbent WTO is to promote trade without discrimination.

National Treatment – Nondiscrimination within a country. This principle implies that imported and locally produced goods should be treated equally. Articles III of GATT 1994 stales that “the products of the territory of any contracting party shall be accorded no less favorable treatment than that accorded to like products of national origin in respect of all laws, regulations, and requirements affecting their internal sale offering for sale purchase, importation, distribution or use”. This requirement continues in the WTO also.

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Free Trade Principle: Optimal utilization of resources. Lowering trade barriers is the best way of promoting Trade. Trade ensures optimum utilization of resources. All countries including the poorest have assets human, industrial, natural, financial which they can employ to produce goods and services for their domestic market or to compete overseas. “Comparative advantage” implies that countries prosper by taking advantage of their assets in order to concentrate on what they can produce best. Bigger markets, domestic as well as overseas, will help these countries produce more and reap economies of seals. Liberal trade policies that allow unrestricted flow of goods and services will result in expanded markets. On the other hand, protection and perpetual government subsidies lead to bloated, inefficient companies supplying consumers with outdated and unattractive products. Ultimately, factories close and jobs are lost despite protection and subsidies. If other governments pursue such policies overseas, markets contract and world economic activity are reduced. Hence the need for free and open trade is emphasized upon.

Dismantling trade barriers physical restriction on the import and export of goods are prohibited under GATT. However, member countries can protect the domestic industry through tariffs. The WTO is not a “free trade” institution. It permits tariffs and other forms of protection but only in limited circumstances.

Rule-based Trading System: The WTO stands for a rule-based trading system. Towards this end, the WTO sets and enforces rules necessary for conducting world trade fairly . through its automatic and speedier disputes settlement mechanism, the WTO adjudicates on disputes between members. This helps open trade between countries.

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Treatment of LDC’s: The WTO recognizes the need for positive policy efforts to help developing countries reap the benefits of trade liberalization. The WTO contains special differential treatment provisions.

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