The World Trade Organization (WTO) was created in 1995 and includes 159 member nations as of early 2016. Its goal is to increase free trade by reducing or eliminating tariffs and other impediments to the movement of goods around the world. WTO decisions are binding on all members, and the organization is involved in both tangible products and intellectual property protection. When the WTO was established, it replaced the General Agreement on Tariffs and Trade (GATT), which was formed in 1948 with the participation of 23 countries. The WTO has a broader membership than GATT, and this is one source of criticism from people who believe globalization unfairly penalizes the developing world. Despite the critics, the WTO is credited with several noteworthy accomplishments that justify the organization's existence.
Special Attention to Developing Countries
The rapid growth of the developing world is pushing millions of people away from poverty, but it is also creating the need for more advanced trading assistance. In 2016, 75% of WTO members are developing countries, and these members are provided special help to foster trade and build infrastructure systems to handle the exponential growth of countries such as China, India, Brazil and many African nations. Developing country status in the WTO comes with specific advantages including longer transition periods before the country is required to fully implement agreements. For example, in the agreement to abolish farming subsidies, developing countries do not have to implement the deal until the end of 2018. These countries also benefit from technical guidance in creating their trading organizations.
The WTO also categorizes 34 member countries as least developed; this list includes nations such as Cambodia, Angola and Haiti. Growth forecasts for all of the developing world imply a struggle between the emerging East and the declining West. In future decades, the former will dominate. It makes perfect sense that the WTO is placing emphasis on helping the developing countries make this transition.
Information Technology Agreement
In December 2015, the WTO scored a victory for international trade with the first global tariff-cutting deal since 1996. The Information Technology Agreement (ITA) cut tariffs on 200 information technology products including semiconductors, printed circuit boards, satellite systems and medical technology devices. Tariffs will be removed on trade worth $1.3 trillion per year. There are 80 WTO members participating in the ITA talks, representing 97% of global trade in information technology products.
The forecast for the elimination of the tariffs is aggressive. By mid-2016, 65% of tariff lines are expected to be fully eliminated, and by 2019, most of the products covered under the ITA are planned to be duty-free. Moreover, the agreement will be a benefit to both major technology companies and consumers. For example, the deal could add $190 billion to global gross domestic product (GDP), while 60,000 new jobs could be created in the United States alone. The ITA also contains a commitment to continually review the need to expand the covered product list created by technology innovations.
Farming Subsidy Agreement
In 2015, WTO member countries agreed to eradicate subsidies on farming exports, and the WTO called it the most significant agreement on agriculture since the organization's founding in 1995. The agreement in Nairobi abolishes $15 billion of subsidies on products including milk, sugar and rice. Subsidies include any financial support given by a government to firms exporting agricultural products. An attempt to end subsidies in 2005 never came into agreement. The Brookings Institution described the landmark deal as good news for both consumers and farmers. Abolishing export subsidies is intended to allow farmers in poorer countries to compete on a more even playing field.
The agreement also ended export credit guarantees. Although there are aspects of this agreement that are subject to criticism, it is the first step in the right direction. Subsidies distort the free market system and penalize some farming groups while rewarding others. The most encouraging comment was made by Kenya's Foreign Minister, who said the agricultural summit was a leap from the old days when the WTO was divided between developed and emerging markets.
The WTO has existed for over 20 years, and its list of accomplishments is not extensive according to critics of globalization. However, examination of the information technology and farming subsidy agreements reveals an organization that is beginning to hit the right notes, finding where to reform trade practices to benefit nations, corporations and consumers.