WHAT IS THE PURPOSE OF THE WORLD TRADE ORGANIZATION (WTO)?

After the most destructive and deadliest conflict in history World War II the victorious nations established the United Nations (UN) in 1945 to prevent similar future wars. The UN was created as an international organization to preserve global peace and security while fostering economic, social, and cultural cooperation among nations.

This post-war movement extended into many areas, one of which was the creation of international structures aimed at enhancing global economic welfare and liberalizing international trade. To promote cooperation in trade liberalization, 50 countries proposed the establishment of an international organization called the International Trade Organization (ITO). While negotiations for the ITO were ongoing, 23 countries signed the General Agreement on Tariffs and Trade (GATT) in 1947 as an interim arrangement to reduce tariffs on certain goods and apply these reductions while awaiting ITO ratification. Although the ITO was never realized, GATT, lacking institutional identity, served from 1948 to 1994 as the de facto framework governing global trade.

The World Trade Organization (WTO) was founded in 1995 as a result of the Uruguay Round (1986–1995), the last multilateral trade negotiation conducted under GATT. Today, the WTO has 164 member countries, with accession negotiations ongoing for another 24 nations.

WTO PRINCIPLES

1. Most-Favored-Nation (MFN) Principle

No discrimination among member states: Any trade advantage granted to one member must be extended to all other WTO members.

1. National Treatment Principle

Imported and domestically produced goods must be treated equally in terms of laws, regulations, and taxes once they enter the domestic market.

1. Reduction and Binding of Tariffs

Members commit to progressively reduce customs duties and related taxes, aiming for eventual elimination. Reduced rates must be reported to the WTO based on Harmonized System codes (HS codes), and these serve as the maximum permissible rates.

1. Protection through Tariffs Only

Protectionist measures must rely solely on tariffs, not non-tariff barriers. All other trade obstacles must be eliminated.

PROTESTS

At first glance, the goals and principles of the WTO seem ideal. However, almost every WTO meeting is accompanied by protests. Critics raise the following concerns:

• A multilateral trade system has been created, but negotiations lack transparency, undermining democratic decision-making.
• Trade policies are shaped by a global authority, threatening national sovereignty.
• Even in global crises, intellectual property rights take precedence for example, AIDS and COVID-19 medications remained expensive and inaccessible due to patent protections, hindering treatment efforts.

WTO’S IMPACT ON GLOBALIZATION

There is broad consensus that the WTO has successfully reduced tariffs and encouraged countries to follow negotiated trade rules. According to the Center for International Relations, global trade flows have increased since the 1970s, particularly during the peak of globalization between 1990 and 2010.

However, during the Trump administration, economic nationalism, protectionism, and reindustrialization emerged as dominant trends. The additional tariffs imposed by the U.S. to counter its trade deficit with China signaled the decline of globalization. China, which had attempted to join GATT during its founding talks but was blocked by major powers like the U.S., finally joined the WTO in 2001 a milestone that further accelerated its dominance in global trade.

China’s competitive advantage, rooted in cheap labor and extensive outsourcing by Western companies, significantly shifted the trade balance in its favor. As the U.S. increasingly suffered from trade deficits and faced competition from its own outsourced production, it shifted course from globalization to protectionism. The COVID-19 pandemic and resulting supply chain vulnerabilities further fueled this trend.

THE TRUMP TARIFFS

Trump announced on February 4 that a 10% tariff would be imposed on Chinese goods. A month later, this rate was doubled to 20%. In April, a general 10% tariff was declared on all imports to the U.S. In retaliation, China imposed its own tariffs. By April 9, the U.S. imposed a 145% tariff on Chinese imports, and China responded with a 125% tariff on certain U.S. goods. On May 14, both sides agreed to suspend all but the 10% base tariffs for 90 days.

Trump also imposed:

• A 25% tariff on imports from Canada and Mexico, and a 10% tariff on Canadian energy.
• A 25% tariff on some vehicles imported into the U.S. on April 9.
• A 25% import tax on all steel and aluminum (including products made from them) as of March 12.
• A 25% tariff on foreign automobiles starting April 2, later extended to include parts and engines on May 3.
• A general 10% “base” tariff on all imports from most countries, including the UK, announced on April 2 and escalated on April 9 with higher tariffs for 60 countries.
• Exemptions for certain electronics, such as smartphones and computers, were announced on April 12.
• On May 4, Trump proposed a 100% tariff on foreign films to support the U.S. film industry.

This trade war continues with no clear end in sight. One thing is certain: the original goals and principles of the WTO are being ignored. Like many international organizations, the WTO is often disregarded more frequently and blatantly than others.

So really, what is the WTO for?

We may not know for sure, but one thing is clear: in trade wars, it serves no purpose.