The World Trade Organization (WTO) • Explained With Maps

Summary

The World Trade Organization (WTO), with 160 member states, is headquartered in Geneva and aims to liberalize global trade. Established post-WWII based on free trade theories, it evolved from GATT to WTO in 1995. The 'most favoured nation' principle governs trade, with exceptions for free trade zones like NAFTA, Mercosur, EU, and ASEAN. The WTO's budget supports dispute resolution, such as the Boeing-EU case. Agriculture remains a challenge, with the Doha Development Round failing to reach agreements, highlighting north-south disparities in subsidies.

Takeaways

• 🌐 The World Trade Organization (WTO) has 160 member states and is headquartered in Geneva, Switzerland.
• 📈 The WTO's primary goal is to regulate and liberalize world trade, with over 95% of global trade occurring between member states.
• 🏛️ The concept of the WTO emerged post-World War II, inspired by free trade theories and a reaction to economic protectionism seen as a cause of the war.
• 📜 The General Agreement on Tariffs and Trade (GATT) regulated international trade from 1947 until it was replaced by the WTO in 1995.
• 🌉 Membership in the WTO has grown from 23 founding countries to 160 members, with 24 observer governments.
• 🚀 Since 1950, world trade volume has increased twentyfold, with a significant portion of trade happening between industrialized nations and Asia.
• 🌍 The 'most favoured nation' (MFN) principle requires WTO members to extend trade benefits to all members equally, with free trade zones being an exception.
• 🔄 The four major free trade zones are NAFTA, Mercosur, the EU, and ASEAN, promoting regional integration as a step towards global integration.
• 📉 Global tariffs have significantly decreased from an average of 40% to 2.2% since 1945, reflecting the WTO's success in liberalizing trade.
• 💼 The WTO's budget supports the Dispute Settlement Body (DSB), which handles trade disputes, such as the EU's complaint against U.S. subsidies for Boeing.
• 🌾 Agriculture remains a contentious issue within the WTO, with grain prices influenced by demand, speculation, and weather, leading to food riots in 2008.
• 🔄 The Doha Development Round was an attempt by the WTO to establish a new trust basis, addressing the imbalance between northern and southern countries, but it has not yet reached any agreements.

Q & A

How many member states are there in the World Trade Organization (WTO)?

There are 160 member states in the WTO.

Where is the headquarters of the World Trade Organization located?

The headquarters of the WTO is located in Geneva, Switzerland.

What is the primary purpose of the WTO?

The main purpose of the WTO is to regulate and liberalize world trade.

What is the significance of the 'most favoured nation' (MFN) principle in the WTO?

The MFN principle requires that if one member state grants trade benefits to another, it must grant the same benefits to all other member states.

What is the exception to the MFN principle?

The exception to the MFN principle is free trade zones, which are regional agreements that allow for preferential treatment among member countries.

Name the four most important free trade zones mentioned in the script.

The four most important free trade zones are NAFTA, Mercosur, the European Union (EU), and ASEAN.

How has the global duty on goods changed since 1945?

Global duties have decreased significantly since 1945, from an average of 40% of the product value to 2.2% today.

What is the role of the Dispute Settlement Body (DSB) in the WTO?

The DSB handles trade disputes between member countries, such as the dispute between the United States and the European Union over subsidies for Boeing.

What was the impact of increasing grain prices on WTO member states in 2008?

The increase in grain prices led to food riots in several member states, including Mexico, Egypt, and Indonesia.

Why is agriculture still a contentious issue within the WTO?

Agriculture remains contentious because of the differences between northern and southern countries, with the latter suffering from subsidies provided by industrialized nations to their agriculture.

What is the 'Doha Development Round' and why was it initiated?

The 'Doha Development Round' was an attempt by the WTO to establish a new basis of trust and address issues faced by emerging markets, particularly in agriculture, but it has not yet reached any agreements.

Outlines

00:00

🌐 Overview of the World Trade Organization

The script introduces the World Trade Organization (WTO), highlighting its 160 member states and headquarters in Geneva, Switzerland. It emphasizes the WTO's role in regulating and liberalizing global trade, with 95% of trade occurring between member states. The organization's establishment post-World War II was influenced by free trade theories of Adam Smith and David Ricardo, and was a response to economic protectionism that contributed to the war. The General Agreement on Tariffs and Trade (GATT) regulated trade from 1947 until it was replaced by the WTO in 1995. The script also discusses the significant increase in world trade volume since 1950 and the 'most favoured nation' principle that all members must follow, with exceptions for free trade zones like NAFTA, Mercosur, the EU, and ASEAN. It concludes by mentioning the WTO's Dispute Settlement Body and the challenges in agriculture trade, including subsidies and the Doha Development Round.

05:05

🌱 Challenges in Global Agriculture Trade

Paragraph 2 delves into the challenges faced by emerging markets within the WTO, particularly regarding agricultural subsidies provided by industrialized nations. It mentions the 'Doha Development Round' as an attempt to establish a new trust basis but notes the lack of agreements to date. The paragraph invites viewers to reflect on the information presented about the WTO and consider their thoughts on the matter.

Keywords

💡World Trade Organization (WTO)

The World Trade Organization is a global international organization that deals with the rules of trade between nations. Its main purpose is to ensure that trade flows as smoothly, predictably, and freely as possible. In the script, it is mentioned that the WTO has 160 member states and its headquarters is in Geneva, Switzerland. The WTO plays a crucial role in regulating and liberalizing world trade, which is vital for economic cooperation and development among countries.

💡Member States

Member states are the countries that have joined the WTO and agreed to its rules. The script mentions that there are 160 member states of the WTO, which indicates the broad international consensus on the need for a body to regulate trade. These member states commit to the principles of non-discrimination and most-favored-nation treatment, aiming to reduce trade barriers and promote economic growth.

💡Geneva, Switzerland

Geneva is the location of the WTO's headquarters. This city in Switzerland is known for its neutrality and serves as a hub for international diplomacy and organizations. The WTO's location in Geneva underscores its role as a neutral arbiter in global trade disputes and negotiations.

💡Liberalize World Trade

Liberalizing world trade means reducing or eliminating restrictions on the international exchange of goods and services. The script highlights that the WTO's main purpose is to regulate and liberalize world trade, which helps to foster economic growth by promoting free and fair competition among nations.

💡Most Favored Nation (MFN) Principle

The most favored nation principle requires WTO members to treat each other's trade equally, meaning that any advantage granted to one member must be extended to all other members. This principle is crucial for ensuring non-discrimination in trade and is mentioned in the script as a fundamental rule that every member of the WTO has to comply with.

💡Free Trade Zones

Free trade zones are areas where member countries have agreed to reduce or eliminate trade barriers among themselves. The script identifies four major free trade zones: NAFTA, Mercosur, the European Union, and ASEAN. These zones are exceptions to the MFN principle and are seen as steps towards greater global economic integration.

💡North American Free Trade Agreement (NAFTA)

NAFTA is a trade agreement between Mexico, Canada, and the United States, aimed at eliminating trade barriers and fostering economic growth. The script mentions NAFTA as one of the most important free trade zones, illustrating how regional trade agreements can lead to increased economic cooperation and trade liberalization.

💡Dispute Settlement Body (DSB)

The DSB is a part of the WTO responsible for resolving trade disputes between member countries. The script refers to the DSB in the context of a dispute between the United States and the European Union over subsidies to the aircraft company Boeing. The DSB's role is to ensure that trade disputes are resolved in a fair and transparent manner.

💡Agriculture

Agriculture is a significant topic within the WTO because it is one of the last sectors that is not fully liberalized. The script discusses how grain prices have been affected by various factors, leading to food riots in 2008. The WTO's efforts to address agricultural trade issues are complicated by the differences between developed and developing countries, particularly regarding subsidies.

💡Doha Development Round

The Doha Development Round is a series of WTO negotiations aimed at lowering trade barriers and promoting development, particularly for developing countries. The script mentions that the WTO has been unable to reach agreements in this round, indicating the challenges in achieving global trade liberalization, especially in areas like agriculture.

💡Economic Protectionism

Economic protectionism refers to government policies that protect domestic industries from foreign competition by restricting international trade. The script suggests that a return to economic protectionism was considered a cause of the Second World War, highlighting the historical context for the establishment of the WTO and the importance of promoting free trade to prevent conflicts.

Highlights

The World Trade Organization (WTO) has 160 member states.

WTO's headquarters is located in Geneva, Switzerland.

The main purpose of the WTO is to regulate and liberalize world trade.

Over 95% of global trade occurs between WTO member states.

The idea for the WTO emerged post-World War II, similar to the UN, IMF, and World Bank.

WTO is based on free trade theories of Adam Smith and David Ricardo.

The Great Depression influenced the establishment of the WTO to prevent economic protectionism.

The General Agreement on Tariffs and Trade (GATT) regulated international trade from 1947.

GATT was signed by 23 countries in 1948, with Lebanon, Syria, and China not ratifying it.

GATT was replaced by the WTO in 1995, after having 128 member countries.

World trade volume has increased twentyfold since 1950.

Trade routes include sea, internet, and air, with a focus on trade with Asia.

WTO members must comply with the 'most favoured nation' (MFN) principle.

Free trade zones are an exception to the MFN principle.

Four major free trade zones include NAFTA, Mercosur, EU, and ASEAN.

Global duties have decreased significantly since 1945, from 40% to 2.2%.

WTO's budget funds the Dispute Settlement Body (DSB) which handles trade disputes.

The EU and US had a dispute over Boeing subsidies, which WTO ruled illegal in 2011.

Agriculture remains one of the least liberalized sectors in global trade.

Grain prices have been influenced by demand, speculation, conflicts, and weather changes.

Food riots occurred in 2008 in several WTO member states due to rising grain prices.

The Doha Development Round was an attempt by the WTO to establish a new trust basis, but no agreements were made.

Transcripts

Today we have a look at the World Trade Organization (WTO).

Firstly we mark the member states of the World Trade Organization, altogether are there 160 member states.

Its headquarters is in Geneva (Switzerland).

The main purpose of the World Trade Organization is to regulate and liberalize world trade.

Since more than 95% of the trade is processed between member states, is the WTO very important.

The idea to establish an organization, which regulates the international trade, arose after the Second World War,

just like the idea to found the United Nations (UN), the International Monetary Fund (IMF),

and the World Bank. The idea based on the free trade theories of Adam Smith and David Ricardo,

but was also boosted by the Great Depression in the 1930s,

because the return to economic protectionism was considered as a reason for the Second World War.

Therefore thought one, that economic agreements could protect peace between the countries.

In the year 1947 were the international trade relations regulated by the General Agreementon Tariffs and Trade (GATT).

23 countries signed this agreement in 1948, but three of them didn't ratify it. (Lebanon, Syria and China)

To the GATT belonged 128 countries in 1994

and it was replaced at the beginning of 1995 by the World Trade Organization.

Today are 160 countries member states of the WTO and 24 governments have observer status.

Since 1950 increased the world trade volume twentyfold.

Here can you see all trade routes, inclusive sea, internet and air.

Most of them are between the industry nations, but the trade with countries in Asia increases fast, many products

because they export many productsto North America and Europe.

How does the World Trade Organization work?

Every member of the WTO has to comply with the "most favoured nation" (MFN) principle. That means when one member state grants for example

trade benefits to another member state, it has to grant the same trade benefits to every other nation in the organization.

But there is an exception to the "most favoured nation" principle: free trade zones.

Here can you see the four most important free trade zones:

To the North American Free Trade Agreement(NAFTA) belongs Mexico, Canada and the United States.

To the Mercado Común del Sur (Mercosur) belong five South American countries, plus five additional associated nations.

The European Union (EU), which has nearly no customs barriers.

And the Association of Southeast Asian Nations (ASEAN), which has ten member states.

Reason for this exception is the idea, that regional integration is the first step to global integration.

Global duties decreased on average almost completely since 1945.

So decreased duties on average from 40% of the product value to 2.2% today.

The Budget of the World Trade Organization is also used for the so called Dispute Settlement Body (DSB),

which handles trade disputes. Such a dispute existed for example between the Unites States and the European Union.

The European Union complained about the U.S. subsidies for the aircraft company Boeing.

In January 2011 declared the World Trade Organization those subsidies illegal and allowed the EU to react with reasonable trade sanctions.

Another problem area in the WTO is agriculture, one of the last economic sectors which isn't completely liberalized.

Here can you see the development of the grain prices. They are related to

the increasing demand for animal food, to price speculations, but also to conflicts and changes in weather.

Because of those factors increased the grain prices and that resulted in food riots in many member states of the World Trade Organization in the year 2008.

Within them: Mexico, Egypt and Indonesia. Agriculture is still an important topic in the WTO,

especially because of the differences between the north and south countries.

The emerging markets in the south make the majority in the World Trade Organization,

but they suffer under the industry nations, which support their agriculture with subsidies.

Because of this tried the WTO to establish a new basis of trust with the so called

"Doha Development Round", but unfortunately couldn't they make any agreements until today.

I hope you enjoyed our trip to the World Trade Organization, but there's still a question left:

What do you think?