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WTO EXPECTS GLOBAL GOODS TRADE VOLUME TO SLUMP BY AS MUCH AS 32%

Why in news?

The WTO released its outlook for global trade last week – Projecting merchandise trade to plummet by anywhere between 13% and 32% in 2020.

Details

  • Economists at the WTO appear certain that the disruption and resultant blow to trade will in all likelihood be far worse than the slump brought on by the global financial crisis of 2008. .
  • The tight restrictions on movement and social distancing norms across geographies have led to severe curbs on labour supply, transport and travel and the shuttering of whole sectors from hotels and non-essential retail to tourism and significant parts of manufacturing.
  • The WTO expects all regions, save Africa, West Asia and the Commonwealth of Independent States, to suffer double-digit declines in exports and imports this year even under its “optimistic scenario”, which postulates a recovery starting in the second half.
  • The WTO and the IMF chief have pointed to the fact that unlike the recession that accompanied the global financial crisis just over a decade ago, the current downturn is unique.
  • Global supply chains have increased in complexity, especially in industries such as electronics and automotive products, making them particularly vulnerable to the current disruptions, with countries that are a part of these value linkages set to find trade more severely impacted.

Silver Lining

  • A small sliver of silver in this bleak outlook for services trade is the role that the WTO sees for information technology services as companies try to enable employees to work from home and people order essentials and drugs online and socialise remotely.
  • India’s IT exporters have been busy supporting their overseas clients’ business continuity plans in the face of the pandemic and may find this hand-holding at a time of dire need earning them loyalty-linked business when economic activity revives.

Conclusion

  • A rebound in global economic activity will require trade to flow freely across borders as vitally as any fiscal or monetary stimulus.
  • The world will be best served if nations do not turn insular and erect new barriers to the movement of goods, services and people in the aftermath of the pandemic.

WTO

  • The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations.
  • It is the largest international economic organization in the world.
  • The headquarters of the World Trade Organization is in Geneva, Switzerland.
  • The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments.
  • The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
  • Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.

The WTO and the United Nations (UN)

  • Although the WTO is not a UN specialized agency, it has maintained strong relations with the UN and its agencies since its establishment.
  • The WTO-UN relations are governed by the “Arrangements for Effective Cooperation with other Intergovernmental Organizations-Relations between the WTO and the United Nations” signed on 15 November 1995.
  • The WTO Director General participates to the Chief Executive Board which is the organ of coordination within the UN system.

Functions of WTO

  1. Trade negotiations: The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They set procedures for settling disputes.
  2. Implementation and monitoring: WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented.
  3. Dispute settlement: The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly.
  4. Building trade capacity: WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards.
  5. Outreach: The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.
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October 2022
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