Question

What is the basic function of the World Trade Organisation (WTO)? What benefits do nations get by forming trading blocs?

Answer 1

World Trade Organisation

• In 1948, to liberalise the world from high customs tariffs and various other types of restrictions, General Agreement for Tariffs and Trade (GATT) was formed by some countries.
• In 1994, it was decided by the member countries to set up a permanent institution for looking after the promotion of free and fair trade amongst nation and the GATT was transformed into the World Trade Organisation from 1st January 1995.
• WTO is the only international organisation dealing with the global rules of trade between nations.
• It sets the rules for the global trading system and resolves disputes between its member nations.
• WTO also covers trade in services, such as telecommunication and banking, and others issues such as intellectual rights.

Benefits of forming trading blocs

• Regional Trade Blocs have come up in order to encourage trade between countries with geographical proximity, similarity and complementarities in trading items and to curb restrictions on trade of the developing world.
• Today, 120 regional trade blocs generate 52 per cent of the world trade. These trading blocs developed as a response to the *** of the global organisations to speed up intra-regional trade.