World Trade Organization

WTO, which is the abbreviation of “World Trade Organization” is an international organization that regulates, supervises trade and integrates member states economically. Its basic need was felt after the great depression of the 1930s and a war (Second World War) which broke out as a consequence of that between Germany (with allies called central or axis powers) and Great Britain ( with allies called allied powers).

This war destroyed Europe both militarily as well as economically resulting in a “European Marshall Plan” from the United States of America with an aim to rebuild Europe, this needed some financial institutions who can finance and regulate American Marshal plan. Some of the main institutions which were built to carry out this Marshall Plan include WTO (Formerly called GATT), IMF (International monetary fund) and IBRD (International Bank for reconstruction and development) commonly called as World Bank.

In 1947, 23 countries signed an agreement which was called GATT (General Agreement on Tariffs and trade) to start negotiations on how to liberalize rules and regulations to promote trade between those countries by agreeing on certain tariffs. Though there was never a complete consensus on the agreement yet it started the all-important negotiations for enhancing trade relations on the world level. After 8 rounds of negotiations from 1947 to 1995, a consensus evolved to replace GATT with a proper organization that will not only regulate tariffs on trade but will also solve disputes between member states.

Thus GATT was replaced with WTO (World trade organization). The new organization was not limited to supervising multi-national trade and solving the trade issues rather its scope was very wide. It had to keep an eye on product quality, labor standards, subsidies offered by different governments, on tariff barriers and legal frameworks to bring them into the conformity with international standards.

The core rules of WTO can be classified as;  Protecting indigenous industry through limited tariff barriers, MFN status (Most favored nation) and National treatment status.

Now discussing how these different rules written down by WTO affect Pakistani economy.  As developing country, it will have both merits and DE-merits for Pakistan but the local industry will only survive when protected with different tariff and non-tariff barriers.As in these rules, it is clearly mentioned that countries should not use non-tariff barriers to putting an embargo on foreign products so this brings a clear danger to the indigenous industry of Pakistan which is producing low-quality products compared to foreign industries. Other risks that involve in implementing these laws for Pakistan include destroying our own successful industries like Textiles, rice industry etc due to the invasion of foreign products in the market.

Another big threat is to already dormant industries like Auto-industry which will be completely wiped out if it was not protected through different barriers. Pakistan has signed Free trade agreements with different countries including China and we have to be careful in pursuing in that because China not only provides high-quality products but also much cheap labor cost compared to Pakistan. MFN is also a status which stops agreed countries from applying different barriers on imports and the worst of them all is NTS which treats both foreign and local products equally causing the destruction of the local industry. Pakistan's economy is based on agriculture and a huge controversy is going regarding this sector of the economy.

However, it also provides some merits. WTO allows some barriers but they should be in a certain limit which will protect local industry. Developing countries are given much more time to bring overall rules to a standard compared to developing countries. Under its rules, Europe and some developing countries provide the special status (like GSP-plus) to developing countries like Pakistan which helps in improving the economy of that country.

Another thing which is obviously in favor of developing countries is their cheap material and low labor cost which can prove destructive for developed economies in terms of their local industries.  China and America are depictions of this in which China is expanding its tentacles in American industry through cheap labor force and low-cost material.