Wto Multilateral Trade Agreements

Trade and foreign policy have been linked throughout history, with foreign policy often designed to promote trade interests. In the 3rd century BC, during the Han Dynasty, China used its military power to preserve the Silk Road for its trade value. In 30 BC, Rome conquered much of Egypt to have a better supply of grain. The result is a more prosperous, peaceful and responsible economic world. Decisions taken in the WTO are generally taken by consensus among all members and ratified by members` parliaments. Trade disputes are integrated into the WTO dispute settlement process, which focuses on interpreting agreements and commitments and how to ensure consistency in members` trade policy. This reduces the risk of disputes spreading to political or military conflicts. While the WTO is relatively young, the multilateral trading system, originally established under the GATT, is more than 70 years old. The third advantage is that it normalizes trade rules for all trading partners.

Businesses save court costs because they follow the same rules for each country. This principle is called treatment of the most favoured nation (MFN) (see box). It is so important that this is the first article of the General Agreement on Tariffs and Trade (GATT) that governs trade in goods. The MFN is also a priority of the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-Related Intellectual Property Rights (TRIPS) (Article 4), although the principle is treated somewhat differently in each agreement. Together, these three agreements cover the three main areas of trade implemented by the WTO. The WTO is sometimes referred to as a free trade institution, but that is not entirely accurate. The system allows tariffs and, in limited circumstances, other forms of protection. Specifically, it is a set of rules dedicated to open, fair and undistorted competition. The General Agreement on Trade in Services was created to extend the multilateral trading system to the services sector, just as the General Agreement on Tariffs and Trade (GATT) provided for such a system for trade in goods.