Question

Describe the role of GATT and the WTO in reducing barriers to trade and investment worldwide, and explain how this reduction has led to the integration and interdependence of national economies.

Answer 1

Answer. GATT reduced tariffs for mutual trade under mutual benefits to promote integrity at international level. GATT was replaced by WTO in 1995 because of its ineffective functioning and lack of provisional arrangements. WTO was built with the aim to promote international trade and develop peace. The main role was to ensure global trade that can integrate the world and work smoothly through standard legal rules. WTO promotes liberalization and economic globalization. Through the establishment of WTO, 40% average decline in tariffs was observed which help the global markets to integrate and meet promote exports and imports. Through promoting openness of economies, counties realized the decreased cost of living. Because of the easy and cheap availability of goods and inputs (including labor) economies became interdependent on each other. Lower trade barriers and increasing opportunities for economies through reduced cost of living helps in integration of the countries, and further in their development process. Also, by providing preferential treatment to developing counties, WTO help in the growth process of low-developing countries by providing opportunity at international markets. The example can be seen through developing counties being given extra time in implementation of TRIPS obligation. Hence, it can be said that GATT and WTO by reducing trade barriers and maintaining peace have been able to integrate the world, and making economies interdependent on each other.