Understanding the World Trade Organization

Understanding the World Trade Organization

1. Describe how the GATT and WTO have helped to free international trade. Also, what has been the mechanism to accomplish that objective?

Ensures that there is no discrimination in the trade. This has ensured that countries do not discriminate between the trading partners and that no special favors are granted to any of the countries involved. The promotion of fair completion has also helped to free international trade. There exist rules that govern the competition in the goods and services traded by the countries involved

The mechanisms to promote free trade include setting rules, settling disputes, and creating a negotiation forum. GATT and WTO hold forums where they set rules to govern international trade and also settle disputes arising from various countries or sectors in the international trade.

2. Explain how a multilateral trading system can help to create a stable and predictable environment and why this is important.

The multilateral trading system allows the countries to lower or to negotiate on the regulations imposed on the importation and exportation of goods. These may include lowering the taxes and the tariffs required. In these ways, stability and predictability of the economy are ascertained.

The stability and predictability of the economy create many benefits for the members of the involved countries. For instance, there is the creation of job opportunities, and the consumers can experience the advantages that arise from the competition of goods such as high-quality goods at affordable prices.

3. Explain the factors in favor of an open trading system based on multilaterally agreed rules.

Several factors favor the open trading system. For example, open trade creates healthy competition, which in turn leads to the creation of quality goods and services. This is an advantage to the consumer since continued protection of the infant industries may lead to the production of low-quality goods or production of sub-standard goods and services.

An open trading system also leads to innovation and creativeness since different people from different countries can meet and discuss various issues affecting their respective economies. This may lead to improved and creative ways of addressing certain issues.

4. What are the successes and challenges that the General Agreement on Tariffs and Trade (GATT) faced during its existence?

Although after many struggles and challenges, GATT managed to succeed in promoting trade liberalization. This was ensured through a reduction of tariffs and agreeing on favorable terms of trade among the member countries.

Although GATT succeeded, it faced many challenges. For example, there were problems in determining how to handle trade barriers that do not necessarily come in the form of tariffs. Also, some of the members could not agree on the policies decided. Also, the world trade became more complex for the GATT to monitor every aspect of the sectors of economy involved efficiently.

5. What are the temptations or possible reasons to impose protective barriers with the idea of preventing the challenge of competitive imports?

Protection is important in order to prevent dumping. This is where countries dispose of their surplus and sub-standard goods to other countries. These products could be harmful or unfit for consumption.

Protection also protects the infant industries from the stiff competition, which might cause them to close down. Thus it encourages the growth of the country’s economy since most goods are produced from within the country.