Discrimination
complicates trade
Trade
allows a division of labour between countries. It allows resources to
be used more appropriately and effectively for production. But the
WTO’s trading system offers more than that. It helps to increase
efficiency and to cut costs even more because of important principles
enshrined in the system.
Imagine
a situation where each country sets different rules and different
customs duty rates for imports coming from different trading partners.
Imagine that a company in one country wants to import raw materials or
components — copper for wiring or printed circuit boards for
electrical goods, for example — for its own production.
It
would not be enough for this company to look at the prices offered by
suppliers around the world. The company would also have to make
separate calculations about the different duty rates it would be
charged on the imports (which would depend on where the imports came
from), and it would have to study each of the regulations that apply
to products from each country. Buying some copper or circuit boards
would become very complicated.
That,
in simple terms, is one of the problems of discrimination.
Imagine
now that the government announces it will charge the same duty rates on
imports from all countries, and it will use the same regulations for all
products, no matter where they come from, whether imported or locally
produced. Life for the company would be much simpler. Sourcing
components would become more efficient and would cost less.
Non-discrimination
is just one of the key principles of the WTO’s
trading system. Others include:
- transparency
(clear information about policies, rules and
regulations);
- increased
certainty about trading conditions
(commitments to lower trade barriers and to
increase other countries’ access to
one’s markets are legally binding);
- simplification
and standardization of customs procedure, removal
of red tape, centralized databases of
information, and other measures designed to
simplify trade that come under the heading “trade
facilitation”.
Together,
they make trading simpler, cutting companies’ costs and increasing
confidence in the future. That in turn also means more jobs and better
goods and services for consumers.
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