Just Sociology

Examining the Role Limitations and Impact of WTO and Regional Agreements

The World Trade Organisation (WTO) is an international organisation that has become a central player in regulating global trade. Established in 1995, the WTO is responsible for managing the rules that govern international economic relations among its member countries.

The core of the WTO is essentially a rule book, the result of negotiations conducted among the member countries. The organisation is specialised in reducing tariffs and promoting free trade, which is fundamental to the development of the global economy.

However, the WTO faces several limitations and criticisms for its approach to trade liberalisation. This article will examine the role of the WTO in promoting free trade and reducing tariffs, as well as the limitations of its approach to trade liberalisation.

Overview of the World Trade Organisation

The WTO is a global organisation that comprises of 164 member countries. While it began in 1947 as the General Agreement on Tariffs and Trade (GATT), the WTO effectively took its place in 1995 with the signing of the Marrakesh Agreement.

It is headquartered in Geneva, Switzerland, and operates under the mandate to encourage free trade among its members. The organisation is governed by a Ministerial Conference, which meets every two years, and a General Council that administers and manages the WTO’s day-to-day operations.

The WTO’s primary objective is to assist in the growth of global trade by providing a platform for the negotiation of trade agreements between member countries. In addition, it monitors and supervises the implementation of these agreements.

The WTO also provides a system of dispute resolution, where member states can settle trade disputes, with the primary goal of ensuring that global trade runs smoothly, predictably, and transparently.

Role of the WTO in reducing tariffs and promoting free trade

The reduction of tariffs is an essential component of the WTO’s mandate, and one of its core objectives includes the progressive removal of trade barriers, such as taxes, on imports and exports. The WTO does this by negotiating and implementing multilateral trade agreements among member countries, as well as through the establishment of specific sectoral agreements.

The reduction of tariffs has significant benefits, such as increasing competition, which leads to lower prices for consumers, the opening up of markets to producers, and ultimately, economic growth.

The WTO promotes free trade by ensuring that there are no unfair trade practices, such as dumping or subsidies that distort the free trade system.

For instance, dumping involves the sale of goods in foreign markets at prices below their production costs or normal market value, while subsidies provide financial assistance to local producers to outcompete international rivals. As such, the WTO aims to protect the free trade system from these practices and promote fair competition among member countries.

Nevertheless, free trade is not always beneficial in all situations, and critics of the WTO argue that it perpetuates a global economic system that primarily benefits developed nations. Furthermore, some developing countries view the requirement to reduce tariffs and open up their markets as a threat to their infant industries, which may not be able to compete with more established and experienced international rivals.

Reduction in the WTO’s trade liberalisation progress

For decades, the WTO has been pushing for trade liberalisation; that is, the removal of trade barriers and the promotion of free trade. Despite its efforts, progress in trade liberalisation has slowed, and the WTO has been unsuccessful in achieving many of its policies’ targets.

One of the primary reasons for this is that member countries have become more and more devoted to protecting their national interests, which has led to slow-moving negotiations. The stalled progress in trade liberalisation has led to calls for the re-evaluation of the WTO’s approach to the promotion of free trade.

As a result, the WTO has initiated discussions on new agreements that focus on non-tariff barriers, such as regulations and other obstacles to trade.

Economic areas with high tariffs under WTO rules

Although the WTO is committed to reducing tariffs and trade barriers as much as possible, some sectors have been exempted from the organisation’s regular rules of free trade. Agriculture and the automobile industry are two primary areas where tariffs remain high.

In the automobile industry, high tariffs on car parts are used to protect local producers from international competition. Similarly, tariffs on agricultural products, such as beef, poultry, and dairy products, protect local farmers from cheap imports.

In conclusion, despite its limitations, the World Trade Organisation remains fundamental in managing global trade. It has facilitated the removal of tariffs in most sectors of the global economy, allowing trade to flow more freely, and it enforces rules that protect fair competition among countries.

However, the organisation’s approach to trade liberalisation has come under criticism, particularly in sectors where tariffs remain high. While the WTO could do better in promoting free trade, it remains a vital international organisation that promotes global economic growth and development.

Impact of a No-Deal Brexit under WTO Rules

The United Kingdom (UK) is set to leave the European Union (EU) at the end of 2020. However, if the UK fails to secure a deal with the EU, it would trade under World Trade Organisation (WTO) rules, leading to significant consequences for the UK economy.

This subtopic will examine the fallout that would result from a no-deal Brexit and how this would impact the UK’s economy in the short, medium and long term.

Forecasted impact on the UK economy

Simulations by the UK Treasury predict that a no-deal Brexit, which would result in higher tariffs, could leave the UK’s economy 9.3% smaller than it would have been otherwise. The impact on certain sectors like the automobile industry could be even more severe, with the imposition of tariffs wiping out a significant proportion of this sector’s profits.

The Treasury forecast further highlights that the no-deal Brexit scenario would impact the country’s job market as falling investment levels and supply chain disruptions will lead to job cuts. Moreover, the WTO rules require a lower proportion of domestic content in automobiles’ production, which is contrary to the EU’s rules.

This could potentially result in high tariffs impacting the UK’s auto industry, which is heavily reliant on imports from the EU. Additionally, customs checks, essential to ensure sanitary and phytosanitary standards, will cause port delays, leading to a higher cost of transport, which will ultimately be passed on to consumers.

In the short term, the impact on the UK economy will be severe, as many businesses have been relying on trade with the EU for sustained growth. Experts project that the UK’s economic recovery would be delayed by a year, resulting in a 4% fall in GDP during 2021.

UK exporters will experience difficulties in accessing the EU’s markets because of non-tariff barriers, such as regulations and other obstacles, leading to reduced export volumes. However, in the long run, a no-deal scenario might cause the UK’s economy to adapt to new trade arrangements.

This, coupled with an effective implementation of the just-in-time modalities in all sectors, could reduce any long-term impact on the UK economy.

Possibility of forging new trade agreements post-Brexit

One of the main ideas, Brexiteers, supported during and after the Brexit campaign, was the possibility of forging new trade agreements after leaving the EU. Brexiteers believe that the United Kingdom could secure new trade agreements with various countries and potentially increase trade volumes.

The WTO fall-back scenario, in this context, is viewed as the UK’s opportunity to take control of its trade policy and make its own trade deals. However, the reality is that the UK needs first to demonstrate credibility and identity to negotiate favourable deals globally.

Establishing new trade agreements elsewhere is not a simple task, and many trade relationships with other countries take years, if not decades, to negotiate. Furthermore, as a member of the EU, the UK had preferential access to the EU bloc, constituting approximately half of its exports.

Outside the EU, the UK has to compete with other countries such as the United States and China, who are already actively involved in global trade agreements. The UK government has already made significant progress in establishing trade agreements with some countries.

For example, the government ratified the UK-Japan Comprehensive Economic Partnership. This new agreement removes tariffs on 99% of UK exports to Japan and opens up opportunities for UK businesses in Japan.

However, the reality is that the largest trading block for the UK is the EU, and negotiating free trade agreements with other countries is unlikely to outweigh the benefits of being part of a massive trading block like the EU.

Regional Agreements vs Globalisation

Importance of regional agreements for economic growth

Regional agreements are pivotal to trade liberalisation, promoting globalisation and economic growth worldwide. The commitments made between regional countries allow for the easy movement of goods, services, and people, ultimately enhancing growth opportunities.

The comprehensive regional agreements also provide the legal and regulatory context necessary for expanding sectoral trade, attracting foreign direct investment, and creating opportunities to raise living standards. For instance, the EU, which is a customs union and has a single market, is an example of a successful regional agreement.

Its members have free movement of goods, as well as common regulations and standards, making business transactions smoother and less costly. In turn, the EU is now the world’s largest trading bloc, with some of the most competitive economies worldwide.

Unlikelihood of negotiating multiple deals outweighing benefits of a massive trading block

While regional agreements have been successful, smaller ones between several countries still constitute regulatory fragmentation, varying from one agreement to another. Negotiating with single countries, therefore, may pose a challenge, mainly because the negotiating power of single countries is minimal in comparison to the negotiating power of a massive trading bloc such as the EU.

The EU operates with a ‘one-size-fits-all’ rule, reducing regulatory fragmentation and improving predictability. However, the governance of the massive trading bloc depends on political consensus, requiring a significant amount of time to make decisions.

Furthermore, negotiating multiple deals with individual countries to replace the benefits of a regional agreement is unlikely to be feasible. The agreements, like NAFTA, the NAFTA replacement (USMCA), ASEAN or Mercosur, took several years to negotiate and implement fully.

While regional agreements have proven crucial to trade liberalisation, a massive trading bloc like the EU can provide the necessary legal, regulatory, and economic context that smaller agreements could take years to establish. In conclusion, no-deal Brexit scenarios create an uncertain future for the UK because the country will have to trade under WTO rules, which could potentially affect long-term trade volumes.

However, if the UK can demonstrate credibility and confidence in dictating its trade policy, it might be possible to negotiate new agreements with other countries. Nevertheless, the benefits of a massive trading bloc like the EU remain critical to economic growth and regional agreements such as the EU save the time and cost of negotiating multiple deals, making them critical to trade liberalisation.

Regional agreements cement the foundation for a global trading system, setting precedents for establishing larger trading blocs, promoting globalisation and boosting economic growth worldwide. In conclusion, this article explored the essential role of the World Trade Organisation (WTO) in regulating global trade and its limitations in promoting free trade, as well as the impact of a no-deal Brexit under WTO rules and the importance of regional agreements in promoting economic growth.

Despite some limitations, the WTO remains a critical international organisation that promotes global economic growth and development. Similarly, regional agreements provide the necessary legal, regulatory, and economic context that smaller agreements could take years to establish, making them critical to trade liberalisation.

These topics service essential considerations in promoting globalisation and boosting economic growth worldwide. FAQs:


What is the WTO, and what is its role in global trade?

The World Trade Organisation (WTO) is an international organisation that manages the rules that govern international economic relations among its member countries, facilitating trade liberalisation and promoting free trade.

2. How does the WTO reduce tariffs and promote free trade?

The WTO negotiates, implements and monitors multilateral trade agreements and sectoral agreements among member countries, allowing for the reduction of trade barriers, such as taxes, on imports and exports. 3.

What is a no-deal Brexit under WTO rules?

A no-deal Brexit involves the UK leaving the EU without an agreement in place to establish a new relationship between the UK and the EU.

Instead, the UK would trade with the EU under World Trade Organisation (WTO) rules, resulting in higher tariffs and non-tariff barriers to trade. 4.

How would a no-deal Brexit impact the UK economy?

A no-deal Brexit could reduce the UK’s economy by 9.3%, as projected by the Treasury.

This could impact job markets, lead to supply chain disruptions in industries such as the automobile sector, and delay the UK’s economic recovery by a year. 5.

Are there benefits to regional agreements over multiple bilateral agreements?


Regional agreements provide the necessary legal, regulatory, and economic context that smaller agreements take years to establish which promotes economic growth, setting the course for larger trading blocs, promoting globalisation and economic growth.

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