Importance of GATT, WTO, and arrangements such as the NAFTA

Importance of GATT, WTO, and arrangements such as the NAFTA

Multilateral free trade has gained global significance with the application of trade agreements such as NAFTA, the GATT and the transformation that has happened recently in WTO. The main agenda in all of these trade agreements is the liberalization in all the fields of economic activities. The liberalization is also included in areas that are prone to protection such as financial services, agriculture, and foreign direct investment. To promoting progressive trade liberalization the WTO, GATT, and NAFTA have rules that are designed to prevent wrongful practices that may take place in international trade (Michalopoulos, 2014) Such unlawful practices are things like exporters dumping cheap products in the foreign markets. The principles in the trade agreements play a fundament role in international trade.

To begin with, they ensure that there is trade without discrimination among the member countries. The principle of most-favored-nations provides that all the members are treated equally as stated in the WTO agreements.  It ensures that countries cannot discriminate any member by offering special favors to some partners such as lowering customs duty for some of the partners. All regulations and rules of trade must apply to all the members. The principle of most-favored-nations is such an important rule such that it is the first article in the GATT and governs the trade in goods between partners. Next, the rules in the trade agreement ensure that the foreign and local trade partners are treated equally (Remy, 2018). Both the imported and locally produced products should be treated equally after the foreign goods have entered the country. The same rules in GATT and WTO also apply to domestic and international patents, copyrights, services, and trademarks. This is outlined in the principle of national treatment is significant as it allows the domestic country to treat others. Next is facilitating free trade through engaging in negotiations to come up with the right terms to trade (Remy, 2018). One of the essential methods of ensuring and encouraging free trade is lowering the trade barriers such as the tariffs and customs duties.

To some extent, other issues such as the exchange rate policies and red tape are discussed to enhance free trade. Bot WTO and GATT allow for gradual changes in the trade agreements through negotiations to bring about liberalization. Next, the rules stipulated in the trade agreement enable the business to predict future opportunities because of the eliminated trade barriers. Predictability and stability bring about more investments and create more job opportunities and thus the consumers can enjoy the benefits of completion. The multilateral trade system is aimed at ensuring that governments make the business environment predictable and stable. In WTO countries agree to open a market for goods and services in this sense they bind their commitments. Therefore if one of the partners decide to deviate from the binding, then there must be a negotiation with other partners and compensate for the lost trade (Remy, 2018).

Next, the trade agreement systems promote fair completions between the participants. The rules in the trade systems such as the most-favored-nation and the national treatment are set to enable a fair condition to trade. The WTO agreements aim at promoting fair completion in all the economic sectors. Lastly, the systems of trade encourage economic reforms and development. The WTO system fosters development. The developing countries need flexibility in their time of implementing the systems. The agreements inherit the provisions of GATT that encourage trade concessions and special assistance for the developing countries. This is vital because over a quarter of the WTO members are countries in transition to market economies and the developing countries (Michalopoulos, 2014).

Trade agreements have a significant impact on investment and trade in the world. Across the globe, the trade agreements are responsible for shaping the relationship among organizations, for small business exporters to thrive in business, they have to have an understanding of the influence the trade agreements have on their business. The lenders for them to understand the needs of their customers they must follow the trade agreement policies. Most countries have established free trade agreements and are expanding them; others have established common markets and customs unions. This is one of the reasons that is making trade agreements like WTO, NAFTA, AND GATT to flourish (Gálvez, 2018). In this discussion, I choose to explain how trade agreements have impacted the textile industry.

In Northern America, the textile industry has improved dramatically in the past ten years. The Northern American Free Trade Agreement (NAFTA) has promoted the formation of an apparel supply network throughout the Western Hemisphere incorporating the textile industry in the United States with the retailers with apparel industries in Mexico to enable them to compete against the Asian companies. However, on the contrary, the growth of the apparel industry in Mexico has not led to the growth of the United States’ textile industry. Instead, the United States textile industry has been deteriorating thus losing stand in the global competition making it give up on a substantial portion of its manufacturing.  For now, the United States textile industry is undergoing lay-offs, many plant closure, negative profits, and bankruptcy.  This manifest shows the impact of NAFTA on the textile industry in the United States.  Therefore there should be a corporate strategy to check on the performance of the textile industry to put in place the pending plan to maintain the competitiveness of the sector in the global market.






Gálvez, A. (2018). Laying the Groundwork for NAFTA. Eating NAFTA,63-88. doi:10.1525/california/9780520291805.003.0003

Michalopoulos, C. (2014). Trade and Development in GATT and the WTO. Emerging Powers in the WTO. doi:10.1057/9781137297082.0007

Remy, J. (2018). The WTO Dispute Settlement System: An Overview. Handbook of WTO/GATT Dispute Settlement. doi:10.1163/2211-4386_rwwtogatt_wtogatt_p1_4