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The Purpose of the Establishment of the WTO, the World Trade Organization

Timesofummah.com – It is undeniable that the prosperity or welfare of a country is highly dependent on international trade activities carried out by that country. If a country can carry out trade activities in the form of exports more than imports, then that country can be said to be a prosperous country. However, if a country imports more activities than its exports, it can be said that the country is not close to prosperity.

The development of the economy in each country is very different, especially in the trade sector. Trade growth in developed countries will be different from that of developing countries. This difference will affect the prosperity or welfare of a country. If this export disparity continues, it is possible that international trade in developing countries will find it difficult to progress. In fact, it is possible that the poverty rate throughout the world has increased.

With this background, several world economists and global economic policy makers have begun to realize that conducting international trade requires a special policy that regulates international trade. This is done because it is to encourage the progress of the world’s economic development and its countries as well as to reduce poverty all over the world.

If international trade policies are not regulated and managed properly, it will most likely lead to economic imbalances, social inequality, the fading of culture in a country, and can even cause environmental damage. So that a policy or regulation on international trade can be realized and no one is harmed by each country, it must be managed and regulated properly.

With policies that are managed and regulated properly, it will produce security and certainty for international traders, prevent and eliminate things that can hinder international trade, and maintain social values ​​that already exist.

Therefore, an international trade organization was formed in order to regulate and manage international trade policies. The organization is known as the World Trade Organization or shortened to WTO. Well, can read this article to find out more about the international trade organization, the WTO.

WTO Definition

The Purpose of the Establishment of the WTO, the World Trade Organization

The World Trade Organization or abbreviated as WTO is an international trade organization. Until now, the WTO organization has experienced significant development and growth, and has even become an international organization that has influence for many countries, especially in the fields of trade, economic relations, and development between nations.

Members of the organization that regulates international trade policies are mostly made up of countries that have an important role in international trade. The number of countries that have a role in international trade that joins the WTO organization is aimed at increasing economic growth and living standards for countries that have become members.

Within the legal framework of the WTO organization, an international trading system or what can be called multilateral trade covers fields and activities that are quite broad and complete. In other words, the WTO organization not only regulates and manages international trade policies, but also plays a role in trade in services, intellectual property rights, and trade issues related to development issues.

Not only that, this organization helps developing countries to integrate with this organization and address issues such as societal values. Thus, growth in developing countries can run properly. Moreover, growth and trade problems are currently growing and can be seen in several sectors, such as agriculture, sanitary and phytosanitary, technical barriers to trade, and others, so that both developing countries and developed countries need a regulation that can solve various kinds of international trade problems.

So that the WTO organization can run effectively, the WTO creates an international trade system that is stated in a rule, namely a ruled based system. The rules are in the form of agreements that have been agreed upon by the members of the WTO organization. As for the nature of the agreements, they have been integrated and have been single undertakings.

The agreements that have been agreed upon by WTO members consist of rules or policies that are very disciplined and must be adhered to by members. Therefore, when reading these covenants, a correct point of view and understanding is needed. This needs to be done so that members gain additional insight into international trade and have more mature readiness to deal with problems that arise in international trade.

The agreements that exist in the WTO organization are agreements that are full of justice or fair and balanced. With balanced agreements, trade relations between members of the WTO organization become more harmonious, so that economic growth in the trade sector can run optimally.

A Brief History of the WTO

The World Trade Organization (WTO) was formed from an agreement signed on April 15, 1994 in Marrakech, Morocco. Those who signed the agreement were countries or regions that had participated in the Uruguay Round or the “Uruguay Round”. Countries that have participated in the “Uruguay Round” conducted international trade from 1986 to 1994.

Not only from the “Uruguay Round”, this world trade organization was also formed from the negotiations that had taken place under the General Agreement on Tariffs and Trade (GATT). The General Agreement on Tariffs and Trade (GATT) has de facto been running as an international trade organization between countries. In 1995, the General Agreement on Tariffs and Trade (GATT) organization has been around for almost 50 years.

However, in the same year or on January 1, 1995, the World Trade Organization (WTO) replaced the old international trade organization, namely the General Agreement on Tariffs and Trade (GATT). The WTO organization began to carry out its role to maintain the stability of international trade.

The use of the international trade organization General Agreement on Tariffs and Trade (GATT) is not without reason, GATT is only considered a multilateral agreement for reducing international trade tariffs, not considered as an organization. Until finally, when the Uruguay Round was running, several countries began to want to form an international trade organization that could regulate and manage trade between countries.

Initially, the world trade organization WTO was not wanted by the United States and many developing countries. However, until finally this organization was formed and has been followed by many countries. In 2014 alone, around 154 countries have become members of the WTO organization. Of the 154 member countries, 117 of them are developing countries or separate customs territories.

The establishment of the WTO is based on a principle, namely to provide openness to regional boundaries, provide guarantees for the Most-Favored-Nation Principle (MFN), prohibit discriminatory treatment against member countries, and act transparently in all activities. The establishment of the WTO which is built on these principles can have a positive impact on international trade, so that the economic development of each member country will increase.

Until 2014, the WTO organization has become the venue for negotiating a number of new agreements under the Doha Development Agenda (DDA). The Doha Development Agenda (DDA) only started in 2001.

Decision Making at the WTO

In the WTO organization, every decision made is based on the consensus of all member countries. This organization also has the highest body, namely the Ministerial Conference or abbreviated as KTM. The Ministerial Conference (KTM) is held every two years. In addition, decision making at the WTO international trade organization is not only through KTM activities, but is sometimes carried out by the General Council.

Under the General Council there are still several bodies including, councils, committees, and sub-committees. All of these agencies almost have the same task, namely to carry out and provide supervision over the implementation of agreements in the WTO organization that have been agreed upon by member countries.

The WTO held the Doha KTM in 2001. Negotiations were carried out with the aim of creating an international trade system aimed at development. With this international trade system, it opens up opportunities for developing countries to carry out national economic development. The issues discussed, such as agricultural issues, non-agricultural market access (NAMA), trade in services, and rules.

However, the negotiations held in Doha did not go smoothly because of many differences. For example, in developing countries, this agricultural issue becomes a socio-economic problem, such as food security, rural development, and livelihood security. Meanwhile, developed countries assume that the existence of subsidies in international trade is a political element in agricultural policy.

Until finally full negotiations were resumed in early February 2007. Until in July 2008, the WTO held the KTM again, this time with the hope of finding a middle way from the problem of modalities and NAMAs. However, in 2008 the KTM negotiations did not find a middle ground.

Until December 2011, the WTO Ministerial Conference (KTM) was held in Geneva, Switzerland. From the implementation of the KTM, the elements of political guidance have been agreed upon by member countries. The agreed political elements will determine the work program of the WTO and hold the “Doha Round” (Doha Development Agenda) two years later.

As for several political directions that have been agreed upon, namely strengthening the multilateral trading system and the WTO; strengthening WTO activities on trade and development issues; and the next step towards completing the “Doha Round” negotiations.

Indonesia’s Achievements in the WTO

Indonesia has long been a member of the world trade organization, the WTO, so Indonesia also has a role for international trade. One of Indonesia’s achievements in the WTO that has taken many people by surprise is that there is a bright spot or a middle ground for policy-making problems at the WTO. This happened on 3-7 December 2013 (two years after the last Doha Round) when the KTM was held in Bali.

In fact, this is the first time in the history of the WTO that this world trade organization has been considered fully delivered. With the status of fully delivered, all members of the WTO have approved the “Bali Package” as an outcome or decision of the 9th WTO KTM. The “Bali package” consists of issues of trade facilitation, development and LDCs, and agriculture (part of the issue of DDA negotiations).

The “Bali Package” which has been approved by all WTO members is arguably a historic achievement, be it for Indonesia or the WTO. Not only that, since it was first established and operated in 1995, there has only been a trade facilitation agreement and the agreement appeared at KTM Bali, Indonesia.

The birth of the trade facilitation agreement aims to provide a smooth flow of goods in and out of between countries that occur at the port by creating a reform of the existing system of expenditure and entry of goods. In short, the entry and exit of goods provided by this facility will improve the economy, and the most important thing is that the Indonesian government can build economic growth so that economic competitiveness is higher and can expand market channels, especially export products.

The “Bali Package” also includes the approval of flexibility in the issue of public stockholding for food security. With this approval, developing countries, including Indonesia, are free to provide subsidies for the availability of affordable food, especially for the poor, without having to worry about being sued at the WTO’s Dispute Settlement Body forum.

Not only that, the “Bali Package” also gives the WTO credibility and has increased as the only multilateral forum that functions to overcome international trade problems as well as to restore political confidence from all WTO member countries and can complete DDA negotiations.

WTO Goals

After discussing the meaning of the WTO, a brief history of the WTO, to Indonesia’s achievement of the WTO, now is the time to discuss the purpose of the establishment of the world trade organization, the WTO. Based on the opening of the WTO agreement, there are main objectives of the WTO, namely:

  1. Make improvements to the standard of living.
  2. Create more job opportunities.
  3. More realistic income growth and effective demand for goods and services.
  4. Increase production and trade in goods and services.

However, in the opening of the WTO agreement it is stated clearly that in order to achieve all of these goals, the WTO is obliged to take into account the form of sustainable economic development so that it continues to develop and pays attention to every need of developing countries that are members of the WTO.

WTO Functions

Not only the purpose, the establishment of the WTO also has a main function is to create the same institutional framework for international trade activities or trade of member countries. The functions of the WTO that need to be implemented include:

  1. Provide assistance to developing countries.
  2. Cooperating with international organizations and private organizations around the world.
  3. Conduct a consensus to conclude a new multilateral agreement.
  4. Provide facilities that can support activities derived from the WTO agreement.
  5. Supervise international trade between member countries.
  6. To settle trade disputes that occur between member countries.

Conclusion

Globalization that is growing rapidly makes international trade also experience development, so that the national market in each country must be ready to accept this challenge. Many countries participate in international trade, so a policy that can regulate and manage international trade is needed so that there is no fraud.

Therefore, both developing and developed countries want an organization that can regulate and manage all international trade activities. On the basis of this desire and the agreements that have been agreed upon, the World Trade Organization or an international trade organization was formed.

About robert fernandez

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