Failures and benefits of free trade and the role of World Trade Organization (WTO)

The free flow of international trade gained significance after the Second World War when the General Agreement on Tariffs and Trade (GATT) was tabled. The GATT was followed by the formation of the World Trade Organization (WTO) in 1995. The WTO was formed to establish rules for international trade and to have a free trade policy for international trade. The WTO allows all countries to negotiate their rights, to reduce tariffs and trade barriers, and to avoid conflicts among nations. Vietnam became the 150th member of WTO in January 2007 (Hayton, 2007). At present, there are 153 members in the World Trade Organization.

Free trade is a movement of capital and labour between countries, regions, and firms that allows having free access to international markets or to information. Free trade allows also not only trade of products or services without taxes or trade barriers such as tariffs or quotas but also applies the same rights or rules for all, without conferring advantages for some countries or the creation of a monopolistic power. With regard to the effects on the economy as a result of following free trade agreements, it can be said that free trade agreements allow for accelerating the economic growth, thanks to a greater level of competitiveness. It also enables liberalization of industries and in encouraging international partnerships. The agreements allow controlling social or environmental rights in both countries. However, the free trade is not still a reality for all countries or all industries, as each government tries to implement the best choice for its economy. The WTO tries to help the countries in this task but the complexity of the system sometimes lead to failure. As a result, there are more bilateral agreements or protectionism from government. We need to examine if this move is a good solution and the economic benefits or costs of the WTO failures. In the first part of this document, we will explain the role of the WTO, its mission, its problems and its future. Then we will explain several economic trade theories which had allowed the development of free trade. Finally, we will try to explain the benefits and the costs of WTO failures the economy.

[...] But we can also have lower prices or/and an efficient use of resources Other trade theories Later, the international trade increased in terms of quantity and new international trade theories appeared. International trade often depends on supply, demand, imperfect markets and development. One theory is the Demand Led theory, which talks about consumers’ goods. This theory explains intra- industry trade; which means trade between countries with regard to the products using same or similar factors. In addition, this theory of economist Linder shows the role of domestic demand as well as the structure of demand or income in different countries. [...]

[...] if it has to forgo less of other goods in order to produce Ricardo was a classical economist who explained, in his book On the Principles of Political Economy and Taxation in 1817, that the base for trade is comparative contrary to Smith’s absolute advantage theory which identified the base for trade as differences in absolute costs (Grimwade, N. 2000). In fact, he explained that as long as the countries and the regions produce goods with different opportunity production costs, the trade is good for them. [...]

[...] Finally, we will try to explain the benefits and the costs of WTO failures the economy The World Trade Organisation The World Trade Organisation was formed on January Today the organisation accounts for 153 members. The members of the WTO include member states, states in progress of adhesion, and the World Bank or the International Monetary Fund. According to the website of the World Trade Organisation World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level.” 1. [...]