The 10 Benefits of the Wto

The 10 Benefits of the Wto

1. The system helps to keep the peace

Most fundamental principles of the trading system are helping trade to flow smoothly and dealing with disputes over trade issues. If trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely. Smoothly-slowing trade also helps people all over the world become better off because they are less likely to fight. The system is important as a confidence-builder as well. Governments are confident that others will not raise their trade barriers so they will also be in a better frame of mind to cooperate with each other.

2. The system allows disputes to be handled constructively

More trade means more possibilities for disputes to arise. But in reality, a lot of international trade tension is reduced because countries can turn to organizations to settle their trade disputes. When they bring disputes to the WTO, the WTO’s procedure focuses their attention on the rules then countries concentrate on trying to comply with the rules. There is a clear basis for judging who is right or wrong. The increasing number of disputes reflects the closer economic ties throughout the world and the fact that countries have faith in the system to solve their differences.

3. A system based on rules rather than power makes life easier for all

The agreements apply to everyone. Rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures. Smaller countries can enjoy some increased bargaining power and perform more effectively if they make use of the opportunities to form alliances and to pool resources. The major economic powers can use the single forum of the WTO to negotiate with all or most of their trading partners at the same time. This makes life much simpler for the bigger trading countries. The principle of non-discrimination in agreements avoids that complexity and the fact that there is a single set of rules applying to all members simplifies the entire trade regime.

4. Freer trade cuts the cost of living

Protectionism raises prices. The WTO’s global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production and reduced prices of finished goods and services, and ultimately a lower cost of living. For example, food is cheaper because when you protect your agriculture, the cost of your food goes up but WTO members are now reducing the subsidies and the trade barriers that are the worst offenders. Clothes are cheaper because the textiles and clothing trade is going through a major reform. The same goes for other goods, trade barriers around the world are lower than they have ever been in modern trading history. They continue to fall, and we are all benefiting.

5. It gives consumers more choice, and a broader range of qualities to choose from

Imports allow us more choice, both more goods and services to choose from, and a wider range of qualities. Even the quality of locally-produced goods can improve because of the competition from imports. This expands the range of final products and services that are made by domestic producers, and it increases the range of technologies they can use. Import can also encourage new local producers to compete, increasing the choice of brands available to consumers as well as increasing the range of goods and services produced locally.

6. Trade raises incomes

Trade clearly boosts incomes. Trade also poses challenges as domestic producers face competition from imports. But the fact that there is additional income means that resources are available for governments to redistribute the benefits from those who gain the most. For example, to help companies and workers adapt by becoming more productive and competitive in what they were already doing, or by switching to new activities.

7. Trade stimulates economic growth, and