AP World History: Modern

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World Trade Organization (WTO)

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AP World History: Modern

Definition

The World Trade Organization (WTO) is an international organization established in 1995 to regulate and facilitate international trade between nations by providing a framework for negotiating trade agreements and resolving disputes. The WTO aims to ensure that trade flows as smoothly, predictably, and freely as possible, which is crucial in a globalized economy where interdependence among countries is increasing.

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5 Must Know Facts For Your Next Test

  1. The WTO replaced the General Agreement on Tariffs and Trade (GATT), which was established in 1947, aiming to promote international trade by reducing tariffs and other trade barriers.
  2. One of the key functions of the WTO is to provide a platform for member countries to negotiate trade agreements, which can cover various sectors including agriculture, services, and intellectual property.
  3. The WTO has a dispute resolution mechanism that allows member countries to resolve trade disputes through a formal process rather than through unilateral measures.
  4. The organization currently has 164 member countries, accounting for over 98% of global trade, making it a central player in shaping the rules of international trade.
  5. Critics argue that the WTO favors developed nations over developing countries, leading to imbalances in global trade practices and economic opportunities.

Review Questions

  • How does the World Trade Organization contribute to the functioning of a globalized economy?
    • The World Trade Organization plays a vital role in a globalized economy by creating a structured environment where countries can negotiate trade agreements and resolve disputes effectively. By promoting free trade through the reduction of tariffs and barriers, the WTO helps facilitate smoother transactions between nations. This contributes to economic growth and stability as countries become more interdependent on one another for goods and services.
  • Evaluate the impact of the WTO on developing countries' economies in the context of globalization.
    • The impact of the WTO on developing countries has been mixed. While the organization aims to foster free trade and economic growth globally, critics argue that its policies often favor developed nations, leaving developing countries at a disadvantage. Many argue that developing nations struggle to compete on equal footing due to their limited resources and negotiating power within the WTO framework. This raises important questions about fairness and equity in global trade systems.
  • Discuss how the establishment of the WTO reflects broader trends in global economics after 1900.
    • The establishment of the WTO in 1995 reflects broader trends in global economics that include increasing interdependence among nations, the rise of globalization, and efforts to create systematic frameworks for international cooperation. The transition from GATT to the WTO signifies a shift towards more structured and enforceable rules governing international trade. This move aligns with post-1900 trends emphasizing economic integration, liberalization policies, and a greater emphasis on multilateralism in addressing global economic challenges.
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