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The third principle will result in smoother transactions. The reduction of risk in transactions is directly associated with transparency and lower information costs. By reducing transaction risk, it stands that transactions will increase as will innovation. Thus, international trade is encouraged by the third principle. The fourth principle of promoting fair competition seeks to increase trade by opening markets. The WTO cites the agreement on government procurement, for example, as a means to open competition by removing protections and boundaries. This principle has substantial overlap with other principles.
The fifth principle will encourage international trade. Economic reform means installing market-oriented systems where there were previously none. Developing economies will not only occur through increasing trade but will serve to increase trade as countries develop more comparative and competitive advantages in more sectors.
The WTO's principles seek to promote freer trade through the removal of trade barriers. Trade barriers increase transaction costs, which distort...
These market distortions have the effect of reducing trade. The benefits of trade have been known since Ricardo, so the WTO is operating on the assumption that increasing trade will stimulate global economic growth. In general, these principles guide global trade in the right direction of stimulating trade, creating economic opportunities where none previously existed and providing opportunities for nations that in an environment where nations engage in active protectionism would not have those opportunities.
Works Cited:
Ghosh, M., Perroni, C. & Whalley, J. (2003). Developing country benefits from MFN relative to regional/bilateral trade agreements. Review of International Economics. Vol. 11 (Sept 2003) 712-728.
Moon, D. (2006). Equality and inequality in the WTO dispute settlement system: Analysis of the GATT/WTO dispute data. International Interactions. Vol. 32 (3) 201-228.
WTO. (no date). Princples of the trading system. World Trade Organization. Retrieved May 16, 2010 from http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm
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