The World Trade Organization, more commonly known as the WTO, is the most powerful legislative and judicial body in the world and is the only global international organization dealing with the rules of trade between nations.  The 1986-1994 Uruguay Round of trade talks resulted in an agreement that led to the creation of the World Trade Organization on January 1st, 1995.  The WTO is a multilateral institution with over 150 member countries that account for over 98% of world trade, and is charged with administering rules for trade among member countries – it is a powerful new global commerce agency, which transformed the General Agreement on Tariffs and Trade (GATT) into an enforceable global commerce code.  Its creation was heralded as an epiphinal event in the legal regulation of the global economy.  At present the World Trade Organization enforces over a dozen separate trade agreements and serves as a forum for ongoing talks to develop new trade agreements. The WTO promotes free trade by opening markets through the elimination of import tariffs. The overriding objective of the World Trade Organization (WTO) is to help trade flow smoothly, freely, fairly and predictably – it does this by acting as a negotiating forum where trade issues are discussed and resolved.

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When unfair trade practices are uncovered, the WTO has the power to arbitrate and bind parties to settlements, which might include monetary awards to those member countries that have been disenfranchised.  Case law of the World Trade Organization is now very extensive, running into hundreds of cases and resolutions, along with thousands of pages of testimony and findings.

As an organization the WTO has the opportunity to make significant contributions to the world ecological balance in a number of areas – For example, the WTO has made inroads into reducing global overfishing by reducing worldwide subsidies in the fishing sector.   It is also seeing increasing pressure to involve itself in dealing with contentious and moral issues in realms such as genetically modified food crops.

The term “trade balance” is defined as the sum of a country’s exports less its imports, in aggregate dollar terms.  A negative trade balance is known as a “trade deficit” – i.e. where the value of imports exceeds the value of exports.  Increases in the U.S. trade deficit since the 1970’s can be traced to three primary sources – a long decline in savings as a share of gross domestic product (GDP) that accelerated in the 1980s, fluctuations in the business cycle, and relatively attractive investment opportunities in the United States in the 1990s. At its current pace, America’s trade deficit is expected to top 1 trillion dollars in 2008, with U.S. to China trade expected to balloon to a whopping 275 billion dollar deficit.   On the flip-side, it’s estimated that 50% of China’s trade surplus is due to exports to the United States.  Imports of high-tech goods from China now account for over 95% of that deficit.

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Politicians and industry pundits are watching countries such as China closely, and have made arguments to the World Trade Organization (the “WTO”) alleging that China subsidizes its own industries and penalizes foreign companies by incenting the purchase of locally produced goods and services.  Arguments are ongoing in front of WTO panels, with China relenting on several of its policies in recent months.  Washington continues to argue that a range of domestically produced goods in the United States, from steel, to paper, to computer products, are denied an opportunity to compete in the Chinese market and in third country markets where they are forced to vie with highly subsidized Chinese comparables.  Policymakers could, of course, design broad and severe trade restrictions to close the deficit by choking off imports, but this form of artificial protectionism would likely be seen as “tit-for-tat” retaliation which would only serve to escalate tensions and encourage further imbalance in trade relations.

Regardless of Washington’s view, America’s appetite for products based on “the lowest price” is a huge contributor to recent acceleration in America’s trade deficits – many experts see this as a culmination of both the unbalanced nature of global trade and one of the “costs” of globalization and free trade.

International trade is the exchange of goods and services across international boundaries or territories.  It is also a branch of economics, which, together with international finance, forms the larger branch of international economics.  International trade is a critical component of economic growth and the creation of jobs and wealth and can be considered a prime driver of how well a country develops, and affects how well the economies of different countries are doing.  It is regulated through a set of rules that the world’s governments have created over the years and is the backbone of our modern, commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders.  One view holds that nothing needs to be done to protect or promote trade and growth because market forces will tend to do this automatically.  In contrast, protectionism holds that regulation of international trade is important to ensure that markets function properly. 

Free Trade is a concept wherein a customer can buy products from anywhere in the world and no extra duty is levied on him or her for importing these goods.  Free trade offers benefits by allowing countries to specialize in production and leverage that which they can do most efficiently.  Most economists from the time of Adam Smith have favored free international trade and have opposed tariffs and quotas which can impose artificial boundaries on those countries.  A recent poll showed that 51% of people surveyed agreed that free trade is a good idea because it can lead to lower prices and the long-term growth of the economy.  However 44% of respondents argued that free trade is a bad idea because it can lead to lower wages and higher unemployment when local sectors cannot compete with cheaper imports.  Please see Trade leads from the Bags, Cases and Luggage section of the Business to Business Marketplace.
Many argue that poverty is the real enemy of the world, and that increasing or opening trade channels opens up markets for the products of the poor, which in turn diminishes poverty and provides the means, incentives and technical know-how to propel such societies from their impoverished economies.  Others believe that a growth in international trade is already undermining poor economies by increasing penetration by foreign companies and allowing exploitation.  Suffice to say that there is merit to both arguments.

In summary, there are various views relating to expansion through increased activity in terms of trade – each has merit and should be weighed into final policies of concerned governments.