1. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side effects — because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be ‘transparent’ and predictable. 2. Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to open markets for trade. But the WTO is not just about opening markets, and in some circumstances its rules support maintaining trade barriers — for example, to protect consumers or prevent the spread of disease. 3. Lowering trade barriers is one of the most obvious ways of encouraging trade; these barriers include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. Positive consequences: more competitiveness in the world market and more benefits for less developed countries. Source: WTO (http://www.wto.org/english/thewto_e/whatis_e/what_stand_for_e.htm)
Theorists tend to view tariffs as distortions to the free market; Typical analyses find that tariffs tend to benefit domestic producers and government at the expense of consumers; net welfare effects of a tariff on the importing country are negative; Normative judgments often follow from these findings, namely that it may be disadvantageous for a country to artificially shield an industry from world markets, and that it might be better to allow a collapse to take place.
Open Markets Matters An open trading system is vital for global prosperity and smart economic policies: more open economies grow much faster than closed ones and trade can be a powerful tool in the fight against poverty. Over the last 50 years the trade to GDP ratio for the world has grown from less than 15% to 27% today, reflecting the dismantling of import and export
barriers through unilateral domestic reforms, regional integration arrangements and multilateral co‑operation through the WTO. The OECD Trade Committee (TC) has contributed much to these reform efforts, supporting the WTO rules-based trading system, promoting freer trade in goods and services and helping governments address the related challenges. Source: Ash, Ken (2011), “Open markets matter”, in OECD, Smart Rules for Fair Trade: 50 years of Export Credits, OECD Publishing (http://dx.doi.org/10.1787/9789264111745-2-en). Making open markets work for development Studies carried out at the OECD suggest the likely gains are well worth the effort for developing countries. One such study considered a variety of tariff liberalization scenarios and found overall potential welfare gains for developing countries of up to USD 68 billion (or the equivalent of up to 2% per capita, depending on the region). How will lower tariffs affect government revenue? Some developing countries that rely on import tariffs for much of their government revenue are also concerned about the effect that lower tariffs will have on their public finances. Indeed, the Doha Work Programme that sets the framework for the current WTO negotiations includes instructions for negotiators to take into account the particular needs of countries dependent on revenues from import tariffs. A recent OECD study looked at this issue in detail and assessed the likely impact on a sample of developing countries while suggesting how efficient tax policies could help replace lost tariff revenue. The study found that revenue losses from tariff reductions for many countries would be less severe than might be expected. For one thing, many developing countries already apply import tariffs that are significantly lower than the maximum or...