role of WTO in international business?

© International Trade Centre, International Trade Forum - Issue 3/2002

WTO rules are increasingly being adapted as national trade laws. Businesses can help shape the rules as they develop ? if they are committed to dialogue. Below, ITC answers some frequent questions it receives on the subject.

Q Why is it important for business in the developing world to know about the WTO rules?

A There are two main reasons. First, in a globalizing economy, the WTO agreements determine more and more national trade rules. For business, it is vital to be familiar with the present and future trade rules in their markets. Just one example: the WTO Agreement on Textiles and Clothing sends a clear message that from 1 January 2005 such trade will be free of quotas. The new trading environment will provide definite advantages to more efficient producers, who will increase their market share at the expense of less efficient ones. Knowing what is in the Agreement will facilitate business decisions regarding investments, structural adjustments and export strategy. I could also have mentioned the examples of the WTO Agreement on Agriculture or the General Agreement on Trade in Services.

Q And what is the other reason?

A The other reason is more general but equally important. The history of trade negotiations shows that only a well-informed business community can provide a partnership for governments in international rule-making. In developed countries, business is routinely very active in influencing government positions in multilateral or bilateral trade negotiations. If a government of a developed country neglects substantial business interests, it may face serious difficulties in its parliament or elsewhere.

In many developing countries and transition economies, there is no systematic dialogue between business and government in trade matters. This is partly due to historical reasons, such as weak economic structures and legal and institutional underdevelopment. But a contributing factor is that businesses in that part of the world do not know the rules of the game and therefore are not in a position to participate in a meaningful dialogue with the government. As a result, multilateral trading system rules are alien to them; businesses do not feel that they can have an impact on them, however small it may be. This strengthens the already widespread anti-globalization feelings.

Q What are the main concerns of business in developing countries right now about the world trading system and the WTO negotiations?

A As we have seen, it was not easy to agree on the Doha Development Agenda. Businesses in many developing countries were not satisfied with the results of the Uruguay Round. They felt that their governments went too far in liberalizing their domestic market. At the same time, their access to foreign markets in traditional export items ? agricultural products, textile and clothing, not to mention labour ? remained subject to serious restrictions. Greater liberalization led to strong competition in the domestic market which, in many cases, put domestic industries? existence in danger.

In addition, implementation of the Uruguay Round agreements was far from satisfactory. Developed countries have been slow in eliminating restrictions in textile and clothing, for example, while developing countries had difficulties in implementing obligations due to institutional problems and lack of a substantive dialogue between business and government during the Uruguay Round. Because some developing country governments failed to hold meaningful dialogue with the business community, they have accepted some obligations that are difficult to meet in the specified time frames.

See the problems, for example, with regard to the Agreement on Trade-Related Investment Measures or the Agreement on Subsidies and Countervailing Measures. This explains why developing countries insisted on including so many development and technical assistance elements in the Doha Development Agenda.

Q How can ITC help?

A ITC has developed programmes to provide technical assistance to the business community in developing countries and transition economies in multilateral trading system-related matters. The World Tr@de Net programme is the largest one in this category. Business interests drive the programme, which operates only in countries where both the business community and the government are interested in participating. The World Tr@de Net is an informal network of major players in trade matters. Members include businesses, government, trade specialists, training institutions and universities. The main emphasis is on explaining to businesses the implications of the WTO agreements and promoting meaningful dialogue between business and government in trade matters. This is of special importance now.

World Tr@de Net members adopt country action plans after they assess their needs. ITC provides support such as training materials, case stu

role of WTO in international business?