The World Trade Organization was transformed from the General Agreement on Tariffs and Trade (GATT), which was established in 1947.
A series of trade negotiations, GATT rounds began at the end of World War II and were aimed at reducing tariffs for the facilitation of global trade on goods.
The purpose of the WTO is to ensure that global trade functions smoothly, freely and predictably. According to documents from the WTO, the Organization strives to create the legal ground rules for global trade among member states to foster international trade. The WTO’s founding and guiding principles remain the pursuit of open borders, the guarantee of most-favored-nation principle and non-discriminatory treatment by and among members, and a commitment to transparency in the conduct of its activities. The opening of national markets to international trade, with justifiable exceptions or with adequate flexibilities, will encourage and contribute to sustainable development, raise people’s welfare, reduce poverty, and foster peace and stability, it says.
The WTO rules apply to local companies and nationals in the conduct of business in the international arena. If a company decides to invest in a foreign country, by, for example, setting up an office in that country, the rules of the WTO will govern its activities. Theoretically, if a country is a member to the WTO, its local laws cannot contradict WTO rules and regulations, which currently govern approximately 97% of all world trade.
Ethiopia’s first bid to join the WTO was made ten years ago, but the process has taken longer than expected. Those who support Ethiopia’s membership to the WTO argue that liberalization of the trade regime, laws and procedures in Ethiopia will result in increased access to foreign markets and on the back of this increased foreign and domestic investment. There has been much concern about the impact of Ethiopia’s prospective accession to the WTO. The issue is whether Ethiopia’s accession to the WTO multilateral trade agreements would facilitate economic development.
Some argue that liberalization of the service sector, in line with the General Agreement on Trade in Services –GATS, might be disadvantageous to Ethiopia under current realities, particularly in areas such as banking, telecommunications and others. In addition to that the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) can adversely affect technology transfer to Ethiopia, an opportunity which nearly all developed economies had during the infancy of their industrial development. Lidet Abebe, who is an expert on intellectual property rights, suggests that negotiators should be smart in dealing with the TRIPS and use the minimum standard while revising laws and procedures that are related to the intellectual property such as trade mark, patent and industrial designs.
Pro accession to WTO intellectuals, on the other hand, forward long-term benefit though there is a challenge in services and intellectual property rights in the short-run. Ethiopia’s integration with the international trading system, enhancement of credibility and guarantee against perceptions of high risk of policy reversals, review of various policies to make them conducive to foreign investment, guarantee to market access in contrast to the non-binding opportunities like African Growth and Opportunity Act (AGOA) are among the benefits forwarded in support of Ethiopia’s trade liberalization under the WTO. Geremew Ayalew, who is a Foreign Trade Relations and Negotiation Director at the Ministry of Trade, asserts that Ethiopia’s accession to the WTO would help increase its export trade. Ethiopia’s membership will also open market opportunities in other countries and benefit from of job creation, market and foreign direct investment flow. If so, it is inevitable that the country revises its laws and procedures that are currently not in tandem within the laws and procedures of the WTO and its members states.
According to the WTO, 98% of world trade is carried out among members of WTO. Two-third of the member states are listed among developing countries. As a developing country, Ethiopia should benefit from the expanding world trade. Isolation from the WTO will have a negative impact on trade and investment sector of the country in the long run.
Although accession may have its own short-term difficulties, its membership can lead to gradual benefits from multilateral trade liberalization. The accession process might also take longer than predicted in Ethiopia’s accession plan. Processing Ethiopia’s accession can therefore be used as a preparation time in order to fulfill and revise the laws and trade practices in conformity with the WTO standards, which will help the country achieve full membership in due time.