Principles of the Trading System

The WTO agreements are lengthy and complex because they are legal text covering a wide range of activities. They deal with: agriculture, textile and clothing, banking, telecommunication, government purchase, industrial and much more. But a number of simple, fundamental principles run throughout all of these documents these principles are the foundation of the multilateral trading system.

·         Trade without discrimination

o   Most favored nation(MFN): trading other people equally

o   National treatment: treating foreigners and local equally

·         Freer trade: gradually, through negotiation

Lowering trade barriers is considered as most obvious means of encouraging trade. The barriers concerned include customs duties and measure such as import bans or quotas that restrict quantities selectively, from time to time other issues such as red tape and exchange rate policies have also been discussed.

·         Predictability: through binding and transparency

Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities.

·         Promoting fair competition

The WTO is sometimes described as a ‘free trade’ institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstance, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.

·         Encouraging development and economic reform

As we know that WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system’s agreements. And the agreements themselves inherit the earlier provision of GATT that allow for special assistance and trade concessions for developing counties.

·         The case for open trade

Under this, Nepal can be in the position of profit through the liberal trade policies- policies that allow the unrestricted flow of goods and service–sharpen competition, motivate innovation and breed success.

·         Comparative advantage

Normally, suppose country Nepal is better than India for raw material and India is better than Nepal to make effective product. Through the collaborative way, both can be in benefit position.