The WTO role in the Australia and US free trade agreement

Essay by ajf003University, Bachelor'sA, January 2005

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Since its inception The World Trade Organisation (WTO) has played a pivotal role in ensuring that trade flows as smoothly, predictably and freely as possible across all nations. The purpose of this paper is to consider the role that the WTO plays in creating multilateral agreements and to contrast these with those roles played by other nations when negotiating bilateral trade agreements. A review of trade creation and trade diversion is put forward followed by discussion of the proposed free trade agreement between Australian and the United States of America.

The World Trade Organisation (WTO) came of age in 1995 and was successor to the General Agreement on Tariffs and Trade (GATT) that was established in the wake of the Second World War. The WTO was founded on the principle of decreasing trade barriers and providing all nations equal footing in trading relationships (WTO 2004). The WTO is the only international organisation dealing with the global rules of trade between nations, with its main objective being to ensure that trade flows as smoothly, predictably and freely as possible (WTO 2004; Carbaugh 2004).

The WTO achieves this objective by administering trade agreements, acting as a forum for trade negotiations, settling trade disputes, reviewing national trade policies, and by assisting developing countries in trade negotiations (WTO 2004). With 148 members as of 13 October 2004, each representing diverse economic and cultural background, the desire is not enforcing a trading system, rather the WTO is a rules-based, member-driven organisation where all decisions are made by the member governments, and the rules are the outcome of negotiations among members (WTO 2004). Through these agreements, the WTO helps decrease trade barriers.

At the heart of the WTO is the multilateral trading system. The system was developed through a series of trade negotiations, or rounds, held...