The World Trade Organization

The world trade organization (WHO) is a global organization that regulates international trade. The world trade organization was established on January 1st 1995 under the Marrakesh Agreement, signed by 123 nations on April 15th1994, to replace the General Agreement on Tariffs and Trade (GATT), which was initiated in 1947 after the end of Second World War with the aim of reducing tariffs so as to facilitate global trade. The rationale for Agreement on Tariffs and Trade was rooted on the Most Favored Nation (MFN) clause that was assigned to one country by another, which gave the country privilege of trading rights. By itself, Agreement on Tariffs and Trade purposed to assist all nations to obtain MFN-like status so that no single nation would be having more trading privileges than others.

Functions of World Trade Organizations

The World trade organization deals with regulation of international trade (between participating countries) by developing a framework for negotiating trade agreements and a dispute resolution procedure aimed at enforcing adherence of the participants to world trade organization agreements that are signed by government representative members and approved by their parliaments. Most of the issues that the world trade organization focuses on are derived from preceding trade negotiations, particularly from the Uruguay Round between 1986 and 1994. The Uruguay Round also provides the basics for regulating trade in services. World trade organization functions as a global authority on international trade and also reserves the right to review domestic trade policies of a country, although this sometimes may compromise the national sovereignty of the country. Theoretically, if a state is a member to the world trade organization, its local laws cannot oppose rules and regulations of WTO, which currently govern approximately 97% of all the global trade.

Importance of the World Trade Organization

The main importance of the world trade organization is to make sure that global trade starts smoothly, freely and predictably. The world trade organization develops and embodies the legal ground rules for international trade among member countries and thus offers a system for international commerce. The world trade organization intends to develop economic peace and stability around the globe through a multilateral system based on consenting member countries (at present there are over one hundred and forty member states) that have ratified the rules of the world trade organization in their individual nations as well. This implies that world trade organization rules has become part of a domestic legal system of some nations. The rules, therefore, apply to local companies in the conduct of business in the international arena.

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