Syllabus A. Role Of The Senior Financial Adviser A4. Management of international trade and finance

A4c. The World Trade Organisation (WTO) 2 / 11

Syllabus A4c)

Discuss how the actions of the World Trade Organisation can affect a multinational organisation.

The World Trade Organisation (WTO)

Aims are:

  1. to reduce the barriers to international trade

    It does this by seeking to prevent protectionist measures such as tariffs, quotas and other import restrictions.

  2. resolving trade disputes

    it acts as a forum for negotiation and offering settlement processes to resolve disputes between countries.

The WTO will impose fines, if members are in breach of their rules.

Members of the WTO cannot offer selective free trade deals with another country without offering it to all other members of the WTO (the most favoured nation principle).

The benefits of reducing protectionist measures are:

  1. increased trade and economic growth

  2. allow to specialise and gain competitive advantage in certain products and services, and compete more effectively globally

  3. gain political capital and more influence worldwide

The drawbacks of reducing protectionist measures are:

  1. the need to protect certain industries. 

    It may be that these industries are developing and in time would be competitive on a global scale.

    They may fail too quickly due to international competition, and would create large scale unemployment

  2. dumping’ of goods at a very cheap price, which hurt local producers.