The World Trade Organisation
The WTO's roots are linked to the post war period (around the Bretton woods agreement) aiming to boost economies worldwide as the recession post WWII was kicking in
Bretton Woods - the turning point for global economic integration
Post WWII representative of mostly western nations met to reorganise the global economy
One of the big changes was in how exchange rates are calculated
The IMF and world bank were set up as well as GATT (General Agreements on Tariffs and Trade) becoming the WTO
The Bretton Woods Agreement established a system through which a fixed currency exchange rate could be created using gold as the universal standard
The agreement involved representatives from 44 nations and brought about the creation of the International Monetary Fund (IMF) and the World Bank
The World Trade Organisation (WTO) is the global international organisation dealing with the rules of trade between nations
The primary goal is to ensure that trade flows as smoothly and freely as possible
The WTO act to reduce tariffs/barriers by acting as mediators between governments
WTO Rules
Countries should promote free trade
i.e. remove barriers to trade
Countries have to treat other countries fairly, and cannot give another country special trading terms (e.g. lower tariffs) - unless they are in the same trading bloc
There should be fair competition across traded goods
It is important to recognise that the trading relationship between LDE, EME and HDE countries makes it difficult for LDE countries to achieve significant economic growth due to a lack of access to markets and restrictions that prevent them from producing more high-value secondary commodities
e.g. EU places higher tariffs on imports of roasted nuts compared to imports of raw nuts which can make it difficult for LDE countries to access the market for processed goods (meaning there is no point in the LDC converting their raw material into roasted nuts as tariffs placed on their product would make it expensive for the consumer; they will favour domestic roasted nuts.)
Types of trade agreement
Bilateral Trade Agreement
Trade agreement between 2 countries
Multilateral Trade Agreement
Trade agreement between 3 or more countries
Free Trade Areas
Countries agree to abolish tariffs and quotas on trade between themselves but maintain restrictions on goods coming from outside the area
NAFTA
Customs Unions
Member countries operate a tariff on imports from outside the group
Economic Unions
Customs union and common policies in such areas as agriculture, transport, pollution, industry, and energy
e.g. the EU (which also has a 'monetary fund')
Common Markets
Customs unions which in addition to free trade in goods and services also allow the free movement of labour and capital
Trading Blocs
Free Trade Areas
Customs Unions
Economic Unions
Advantages of Trade Agreement Blocs
On a Global Scale
Improved peace and security/reduced conflict
Increased global trade and co-operation on trade issues
On a Regional Scale
Helps members to develop their economies and standard of living
Helps the region to compete effectively with other trading blocs
More negotiating power
To gain a bigger representation in world affairs
To allow free movement of workers around the bloc
Helps to support particular sectors
To share ideas, democracy and human rights
Disadvantages of Trade Agreement Blocs
On a Regional Scale
Some loss of sovereignty
Some loss of financial control
e.g. the European Central Bank for the EU
Pressure to adopt central legislation
e.g. food standards
Certain sectors may be damaged
e.g. UK fishing - having to share resources with Spain and France
Cannot 'tailor' a trade agreement to a specific country's needs