The Objectives of the World Trade Organization

1 1. What is the objective of the WTO? To what degree has it achieved that objective? What has been the growth rate of global trade since the WTO was created? How does the World Bank compare with the Chinese Development Bank?

The World Trade Organization is an international organization that deals with the global rules of trade. Its primary purpose is to ensure a smooth, predictable, and free trade flow. The organization works towards achieving this objective by setting and enforcing international trade rules, providing a negotiation forum, and keeping an eye on further trade liberalization, resolving trade disputes among its member states, and helping developing countries reap much from the global trading system. More specifically, WTO is an international organization that succeeded the General Agreement on Tariffs and Trade (GATT) to supervise and liberalize world trade.

Since the creation of the WTO, volumes of trade across the globe today has increased by approximately 4116% from the level recorded in 1950 in the early GATT days. The values of world trade have also increased by roughly 300 times from the 1950 levels (World Trade Organization, 2020). The world's applied tariffs are currently at 9% average, which is 2.1% lower than the 11.1% registered in 1996 just twelve months after the WTO’s establishment.

Further, world merchandise trade volume and value have also increased from 4.2 percent in 1995 to 5.5 percent in 2019 since the establishment of the organization (World Trade Organization, 2019).

The World Bank offers loans and grants to low and middle-income countries to help them in their capital project developments. The China Development Bank has also grown to become a significant player in international development finance as it also provides loans to help finance projects in developing countries. In regards to lending terms, the China Development Bank has some degree of concessionality hence more attractive than World Bank (Morris, Parks, &

2 Gardner, 2020). However, it has been accused of lacking the environmental and social standards expected of a world-class financial institution. Unlike the World Bank, it finances activities harmful to the environment and communities internationally.

2. Some groups of nations are forming trade blocs, like North America or Europe. Are regional trade blocs good for global trade or not? Do bilateral trade agreements such as USMCA, EU, and Mercosur undercut the WTO? Support your argument.

Regional trade blocs hugely contribute to global trade in various ways. They act as building blocks to the liberalization of international trade. Regional trade blocs are characterized by greater harmony of interests and less negotiation procedures, which enhances global market openings. Similarly, such blocs are also formed on the basis of the principles of honesty and political support, which promote international trade from the bottom up. According to Nguyen (2019), trade blocs are instrumental in locking in and mobilizing regional solidarity, enhancing the efficiency of negotiation with larger units, increasing competitive liberalization, and developing export constituencies to establish domestic political momentum. Moreover, regional trade blocs are ever-expanding, thus increasing their impact on international trade.

Such trade agreements as EU, Mercosur, and USMCA appear to undermine WTO. However, such agreements actually support the organization’s multilateral trading system. Trade agreements have enabled countries to negotiate commitments and rules that were never possible multilaterally. Conversely, some of these rules have, in turn, laid the foundation for agreement in the WTO. The agreements of the World Trade Organization recognize that such bilateral trade agreements can be of significant benefit to member states as long as their objective is to facilitate trade among the concerned parties (World Trade Organization, 2019).

3 References Morris, S., Parks, B., & Gardner, A. (2020). Chinese and World Bank Lending Terms: A Systematic Comparison Across 157 Countries and 15 Years. Center for Global Development.

Nguyen, D. B. (2019). A new examination of the impacts of regional trade agreements on international trade patterns. Journal of Economic Integration, 34(2), 236-279.

World Trade Organization (2019). Regionalism: friends or rivals? https://www.wto.org/english/thewto_e/whatis_e/tif_e/bey1_e.htm World Trade Organization (2020). Evaluation of trade under the WTO: handy statistics. https://www.wto.org/english/res_e/statis_e/trade_evolution_e/evolution_trade_wto_e.htm