The WTO system helps to keep the peace.
Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues bearing in mind how history is littered with examples of trade disputes turning into war. However, the GATT/WTO system is an important confidence builder (Thirkell White, Ben 2005).
The WTO system allows disputes to be handled constructively.
The trade wars in the 1930s are proof of how protectionism can easily plunge countries into a situation where no one wins and everyone loses. There could be a down side to trade liberalization and expansion. More trade means more opportunities for disputes to arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes.
Decisions in the WTO are made by consensus, were ratified in all members parliaments. The agreements apply to everyone, rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures (Thirkell White, Ben 2005).
Freer trade cuts the cost of living.
Protectionism is expensive: it raises prices. The WTO’s global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production because imports used in production are cheaper and reduced prices of finished goods and services, and ultimately a lower cost of living in the sense of core and periphery countries (Matthew Watson 2005).
Lowering trade barriers allows trade to increase, which adds to incomes national incomes and personal incomes. But some adjustment is necessary.
Trade stimulates economic growth, and that can be good news for employment.
Trade clearly has the potential to create jobs. In practice there is often factual evidence that lower trade barriers have been good for employment. But the picture is complicated by a number of factors. Nevertheless, the alternative protectionism is not the way to tackle employment problems (Albritton, R. 2007).
The basic principles make the system economically more efficient, and they cut costs. Many of the benefits of the trading system are more difficult to summarize in numbers, but they are still important. They are the result of essential principles at the heart of the system, and they make life simpler for the enterprises directly involved in trade and for the producers of goods and services (David Harvey 2005).
Trade allows a division of labour between countries. It allows resources to be used more appropriately and effectively for production. But the WTO’s trading system offers more than that. It helps to increase efficiency and to cut costs even more because of important principles enshrined in the system (Matthew Watson 2005).
Albritton, R. (2007) Political economy and global capitalism: the 21st century, present and future; London: Anthem Press, 2007
David Harvey (2005) A brief history of neoliberalism; Oxford: Oxford University Press.
Matthew Watson (2005) Foundations of international political economy; Basingstoke: Palgrave Macmillan.
Thirkell White, Ben (2005) The IMF, Middle-Income Countries and the Asian Financial Crisis; David Hudson and Richard Woodward Governing Financial Globalization; International Political Economy and Multi-Level Governance; Multi-Level Governance as Adaptation, in Andrew Baker; London: Routledge.
By Alex NT374@live.mdx.ac.uk