Abstract
The free flow of international trade gained significance after the Second World War when the General Agreement on Tariffs and Trade (GATT) was tabled. The GATT was followed by the formation of the World Trade Organization (WTO) in 1995. The WTO was formed to establish rules for international trade and to have a free trade policy for international trade. The WTO allows all countries to negotiate their rights, to reduce tariffs and trade barriers, and to avoid conflicts among nations. Vietnam became the 150th member of WTO in January 2007 (Hayton, 2007). At present, there are 153 members in the World Trade Organization.
Free trade is a movement of capital and labor between countries, regions, and firms that allows having free access to international markets or to information. Free trade allows also not only trade of products or services without taxes or trade barriers such as tariffs or quotas but also applies the same rights or rules for all, without conferring advantages for some countries or the creation of a monopolistic power. With regard to the effects on the economy as a result of following free trade agreements, it can be said that free trade agreements allow for accelerating the economic growth, thanks to a greater level of competitiveness. It also enables liberalization of industries and in encouraging international partnerships. The agreements allow controlling social or environmental rights in both countries. However, the free trade is not still a reality for all countries or all industries, as each government tries to implement the best choice for its economy. The WTO tries to help the countries in this task but the complexity of the system sometimes lead to failure. As a result, there are more bilateral agreements or protectionism from government. We need to examine if this move is a good solution and the economic benefits or costs of the WTO failures. In the first part of this document, we will explain the role of the WTO, its mission, its problems and its future. Then we will explain several economic trade theories which had allowed the development of free trade. Finally, we will try to explain the benefits and the costs of WTO failures the economy.
