The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international tradebetween nations. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.^[5]^[6]

The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments^[7]^:fol.9–10 and ratified by their parliaments.^[8] The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.^[9] Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.^[9]

The WTO's current Director-General is Roberto Azevêdo,^[10]^[11] who leads a staff of over 600 people in Geneva, Switzerland.^[12] A trade facilitation agreement, part of the Bali Package of decisions, was agreed by all members on 7 December 2013, the first comprehensive agreement in the organization's history.^[13]^[14] On 23 January 2017, the amendment to the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement marks the first time since the organization opened in 1995 that WTO accords have been amended, and this change should secure for developing countries a legal pathway to access affordable remedies under WTO rules.^[15]

Studies show that the WTO boosted trade,^[16]^[17]^[9] and that barriers to trade would be higher in the absence of the WTO.^[18] The WTO has highly influenced the text of trade agreements, as "nearly all recent [preferential trade agreements (PTAs)] reference the WTO explicitly, often dozens of times across multiple chapters... in many of these same PTAs we find that substantial portions of treaty language—sometime the majority of a chapter—is copied verbatim from a WTO agreement."^[19]

History[edit]

The economists Harry White (left) and John Maynard Keynes at the Bretton Woods Conference.^[20]

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established by a multilateral treaty of 23 countries in 1947 after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation—such as the World Bank (founded 1944) and the International Monetary Fund (founded 1944 or 1945). A comparable international institution for trade, named the International Trade Organization never started as the U.S. and other signatories did not ratify the establishment treaty,^[21]^[22]^[23] and so GATT slowly became a de facto international organization.^[24]

GATT Negotiations before Uruguay[edit]

Seven rounds of negotiations occurred under GATT. The first real GATT trade rounds concentrated on further reducing tariffs. Then the Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement and a section on development. The Tokyo Round during the seventies represented the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others broke entirely new ground. Because not all GATT members accepted these plurilateral agreements, they were often informally called "codes". Several of these codes were amended in the Uruguay Round and turned into multilateral commitments accepted by all WTO members. Only four remained plurilateral (those on government procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two.^[25] Despite attempts in the mid-1950s and 1960s to establish some form of institutional mechanism for international trade, the GATT continued to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.^[26]

Uruguay Round: 1986–1994[edit]

During the Doha Round, the US government blamed Brazil and India for being inflexible and the EU for impeding agricultural imports.^[27]^[28]

Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy.^[29]^[30] In response to the problems identified in the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries' policies on world trade GATT could not manage, etc.), the eighth GATT round—known as the Uruguay Round—was launched in September 1986, in Punta del Este, Uruguay.^[29]

It was the biggest negotiating mandate on trade ever agreed: the talks aimed to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review.^[30] The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed 15 April 1994, during the ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh Agreement.^[31]

The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations (a distinction is made between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994).^[29]GATT 1994 is not, however, the only legally binding agreement included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into six main parts:

the Agreement Establishing the WTO
the Multilateral Agreements on Trade in Goods^[32]
the General Agreement on Trade in Services
the Agreement on Trade-Related Aspects of Intellectual Property Rights
dispute settlement^[33]
reviews of governments' trade policies^[34]

In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the Uruguay Round has been successful in increasing binding commitments by both developed and developing countries, as may be seen in the percentages of tariffs bound before and after the 1986–1994 talks.^[35]

Ministerial conferences[edit]

The World Trade Organization Ministerial Conference of 1998, in the Palace of Nations (Geneva, Switzerland).

The highest decision-making body of the WTO, the Ministerial Conference, usually meets every two years.^[36] It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. Some meetings, such as the inaugural ministerial conference in Singapore and the Cancun conference in 2003^[37] involved arguments between developed and developing economies referred to as the "Singapore issues" such as agricultural subsidies; while others such as the Seattle conference in 1999 provoked large demonstrations. The fourth ministerial conference in Doha in 2001 approved China's entry to the WTO and launched the Doha Development Round which was supplemented by the sixth WTO ministerial conference (in Hong Kong) which agreed to phase out agricultural export subsidies and to adopt the European Union's Everything but Armsinitiative to phase out tariffs for goods from the Least Developed Countries.

The Twelfth Ministerial Conference (MC12) is set to be held in Nur-Sultan, Kazakhstan, in June 2020.

Doha Round (Doha Agenda): 2001–[edit]

The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming.^[38] The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.^[39]

Progress stalled over differences between developed nations and the major developing countries on issues such as industrial tariffs and non-tariff barriers to trade^[40] particularly against and between the EU and the US over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers. Repeated attempts to revive the talks proved unsuccessful,^[41] though the adoption of the Bali Ministerial Declaration in 2013^[42] addressed bureaucratic barriers to commerce.^[43]

As of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round remains incomplete.^[44] The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sectors (requested by developed countries) and the substantiation^[jargon] of fair trade on agricultural products (requested by developing countries) remain the major obstacles. This impasse has made it impossible to launch new WTO negotiations beyond the Doha Development Round. As a result, there have been an increasing number of bilateral free trade agreements between governments.^[45] As of July 2012 there were various negotiation groups in the WTO system for the current stalemated agricultural trade negotiation.^[46]

Functions[edit]

Among the various functions of the WTO, these are regarded by analysts as the most important:

It oversees the implementation, administration and operation of the covered agreements (with the exception is that it does not enforce any agreements when China came into the WTO in Dec 2001) ^[47]^[48]
It provides a forum for negotiations and for settling disputes.^[49]^[50]

Additionally, it is WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making.^[48]^[50] Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.^[51]

The WTO shall facilitate the implementation, administration and operation and further the objectives of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the multilateral Trade Agreements.
The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreement in the Annexes to this Agreement.
The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes.
The WTO shall administer Trade Policy Review Mechanism.
With a view to achieving greater coherence in global economic policy making, the WTO shall cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies.^[52]

The above five listings are the additional functions of the World Trade Organization. As globalization proceeds in today's society, the necessity of an International Organization to manage the trading systems has been of vital importance. As the trade volume increases, issues such as protectionism, trade barriers, subsidies, violation of intellectual property arise due to the differences in the trading rules of every nation. The World Trade Organization serves as the mediator between the nations when such problems arise. WTO could be referred to as the product of globalization and also as one of the most important organizations in today's globalized society.

The WTO is also a centre of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.^[53] Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.^[49]

Principles of the trading system[edit]

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.^[54] Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:

Non-discrimination. It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favourable conditions under which it allows trade in a certain product type to all other WTO members.^[54] "Grant someone a special favour and you have to do the same for all other WTO members."^[35] National treatment means that imported goods should be treated no less favourably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).^[54]
Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.^[55]
Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.^[35]^[55]
Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM).^[56] The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.^[35]
Safety values. In specific circumstances, governments are able to restrict trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.^[57]

There are three types of provision in this direction:

articles allowing for the use of trade measures to attain non-economic objectives;
articles aimed at ensuring "fair competition"; members must not use environmental protection measures as a means of disguising protectionist policies.^[57]^[58]
provisions permitting intervention in trade for economic reasons.^[56]

Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions.^[7]^:fol.93

Organizational structure[edit]

The General Council has the following subsidiary bodies which oversee committees in different areas:

Council for Trade in Goods: There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles.^[59]

Council for Trade-Related Aspects of Intellectual Property Rights: Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTO's work with other international organizations in the field.^[60]

Council for Trade in Services: The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required.^[61]

Trade Negotiations Committee: The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTO's director-general. As of June 2012 the committee was tasked with the Doha Development Round.^[62]

The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments.^[59] The council has several different committees, working groups, and working parties.^[63] There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on Least-Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer.

Decision-making[edit]

The WTO describes itself as "a rules-based, member-driven organization—all decisions are made by the member governments, and the rules are the outcome of negotiations among members".^[64] The WTO Agreement foresees votes where consensus cannot be reached, but the practice of consensus dominates the process of decision-making.^[65]

Richard Harold Steinberg (2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the U.S., and may not lead to Pareto improvement.^[66]

Dispute settlement[edit]

The WTO's dispute-settlement system "is the result of the evolution of rules, procedures and practices developed over almost half a century under the GATT 1947".^[67] In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994.^[68]Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy".^[69] WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally.^[70]

The operation of the WTO dispute settlement process involves case-specific panels^[71] appointed by the Dispute Settlement Body (DSB),^[72] the Appellate Body,^[73] The Director-General and the WTO Secretariat,^[74] arbitrators,^[75] and advisory experts.^[76]

The priority is to settle disputes, preferably through a mutually agreed solution, and provision has been made for the process to be conducted in an efficient and timely manner so that "If a case is adjudicated, it should normally take no more than one year for a panel ruling and no more than 16 months if the case is appealed... If the complainant deems the case urgent, consideration of the case should take even less time.^[77] WTO member nations are obliged to accept the process as exclusive and compulsory.^[78]

According to a 2018 study in the Journal of Politics, states are less likely and slower to enforce WTO violations when the violations affect states in a diffuse manner.^[79] This is because states face collective action problems with pursuing litigation: they all expect other states to carry the costs of litigation.^[79] A 2016 study in International Studies Quarterlychallenges that the WTO dispute settlement system leads to greater increases in trade.^[80]

However, the dispute settlement system cannot be used to resolve trade disputes that arise from political disagreements. When Qatar requested the establishment of a dispute panel concerning measures imposed by the UAE, other GCC countries and the US were quick to dismiss its request as a political matter, stating that national security issues were political and not appropriate for the WTO dispute system.^[81]

Accession and membership[edit]

The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and current trade regime.^[82] The process takes about five years, on average, but it can last longer if the country is less than fully committed to the process or if political issues interfere. The shortest accession negotiation was that of the Kyrgyz Republic, while the longest was that of Russia, which, having first applied to join GATT in 1993, was approved for membership in December 2011 and became a WTO member on 22 August 2012.^[83] Kazakhstan also had a long accession negotiation process. The Working Party on the Accession of Kazakhstan was established in 1996 and was approved for membership in 2015.^[84] The second longest was that of Vanuatu, whose Working Party on the Accession of Vanuatu was established on 11 July 1995. After a final meeting of the Working Party in October 2001, Vanuatu requested more time to consider its accession terms. In 2008, it indicated its interest to resume and conclude its WTO accession. The Working Party on the Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss Vanuatu's future WTO membership. The re-convened Working Party completed its mandate on 2 May 2011. The General Council formally approved the Accession Package of Vanuatu on 26 October 2011. On 24 August 2012, the WTO welcomed Vanuatu as its 157th member.^[85] An offer of accession is only given once consensus is reached among interested parties.^[86]

A 2017 study argues that "political ties rather than issue-area functional gains determine who joins" and shows "how geopolitical alignment shapes the demand and supply sides of membership".^[87] The "findings challenge the view that states first liberalize trade to join the GATT/WTO. Instead, democracy and foreign policy similarity encourage states to join."^[87]

Accession process[edit]

WTO accession progress:^[88]

Draft Working Party Report or Factual Summary adopted

Goods or Services offers submitted

Working party meetings

Memorandum on Foreign Trade Regime submitted

Working party established

A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements.^[89] The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members.^[90]

After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant's international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules.^[82]

The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member's commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally.^[89] For instance, as a result of joining the WTO, Armenia offered a 15 per cent ceiling bound tariff rate on accessing its market for goods. Together with the tariff bindings being ad valorem there are no specific or compound rates. Moreover, there are no tariff-rate quotas on both industrial and agricultural products.^[91] Armenia's economic and trade performance growth was noted since its first review in 2010, especially its revival from the 2008 global financial crisis, with an average annual 4% GDP growth rate, despite of some fluctuations. Armenia's economy was marked by low inflation, diminishing poverty and essential progress in enhancing its macroeconomic steadiness in which trade in goods and services, which is the equivalent of 87% of GDP, played a growing role. ^[92]

When the bilateral talks conclude, the working party sends to the general council or ministerial conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be's commitments. Once the general council or ministerial conference approves of the terms of accession, the applicant's parliament must ratify the Protocol of Accession before it can become a member.^[93] Some countries may have faced tougher and a much longer accession process due to challenges during negotiations with other WTO members, such as Vietnam, whose negotiations took more than 11 years before it became official member in January 2007.^[94]

Members and observers[edit]

The WTO has 164 members and 23 observer governments.^[95] Liberia became the 163rd member on 14 July 2016, and Afghanistan became the 164th member on 29 July 2016.^[96]^[97] In addition to states, the European Union, and each EU country in its own right,^[98] is a member. WTO members do not have to be fully independent states; they need only be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong has been a member since 1995 (as "Hong Kong, China" since 1997) predating the People's Republic of China, which joined in 2001 after 15 years of negotiations. The Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei) despite its disputed status.^[99] The WTO Secretariat omits the official titles (such as Counsellor, First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the Permanent Representative and the Deputy Permanent Representative.^[100]

As of 2007, WTO member states represented 96.4% of global trade and 96.7% of global GDP.^[101] Iran, followed by Algeria, are the economies with the largest GDP and trade outside the WTO, using 2005 data.^[102]^[103] With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. A number of international intergovernmental organizations have also been granted observer status to WTO bodies.^[104] 12 UN member states have no official affiliation with the WTO^{[citation needed]}.

Agreements[edit]

The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession.^[105] A discussion of some of the most important agreements follows.

The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or "pillars": domestic support, market access and export subsidies.

The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade. The agreement entered into force in January 1995.

The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.^[106]

The Agreement on the Application of Sanitary and Phytosanitary Measures—also known as the SPS Agreement—was negotiated during the Uruguay Round of GATT, and entered into force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement, the WTO sets constraints on members' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases).

The Agreement on Technical Barriers to Trade is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994. The object ensures that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade".^[107]

The Agreement on Customs Valuation, formally known as the Agreement on Implementation of Article VII of GATT, prescribes methods of customs valuation that Members are to follow. Chiefly, it adopts the "transaction value" approach.

In December 2013, the biggest agreement within the WTO was signed and known as the Bali Package.^[108]

Office of director-general[edit]

The headquarters of the World Trade Organization in Geneva, Switzerland.

The procedures for the appointment of the WTO director-general were published in January 2003.^[109] Additionally, there are four deputy directors-general. As of 13 June 2018, under director-general Roberto Azevêdo, the four deputy directors-general are

Yi Xiaozhun of China (since 1 October 2017),
Karl Brauner of Germany (since 1 October 2013),
Yonov Frederick Agah of Nigeria (since 1 October 2013) and
Alan W. Wolff of the United States (since 1 October 2017).^[110]

List of directors-general[edit]

Source: Official website^[111]

Roberto Azevêdo, 2013–present
Pascal Lamy, 2005–2013
Supachai Panitchpakdi, 2002–2005
Mike Moore, 1999–2002
Renato Ruggiero, 1995–1999
Peter Sutherland, 1995

(Heads of the precursor organization, GATT):

Peter Sutherland, 1993–1995
Arthur Dunkel, 1980–1993
Olivier Long, 1968–1980
Eric Wyndham White, 1948–1968

Impact[edit]

Studies show that the WTO boosted trade.^[16]^[17] Research shows that in the absence of the WTO, the average country would face an increase in tariffs on their exports by 32 percentage points.^[18]^[112]

According to a 2017 study in the Journal of International Economic Law, "nearly all recent [preferential trade agreements (PTAs) reference the WTO explicitly, often dozens of times across multiple chapters. Likewise, in many of these same PTAs we find that substantial portions of treaty language—sometime the majority of a chapter—is copied verbatim from a WTO agreement... the presence of the WTO in PTAs has increased over time."^[19]

World Trade Organization

World Trade Organization
	Organisation mondiale du commerce (in French); Organización Mundial del Comercio (in Spanish)
	Members Members, dually represented by the EU Observers Non-participant states
Formation	1 January 1995; 24 years ago
Type	International trade organization
Purpose	Reduction of tariffs and other barriers to trade
Headquarters	Centre William Rappard, Geneva, Switzerland
Coordinates	46°13′27″N 06°08′58″ECoordinates: 46°13′27″N 06°08′58″E
Region served	Worldwide
Membership	164 member states
Official language	English, French, Spanish
Director-General	Roberto Azevêdo
Budget	197.2 million Swiss francs(approx. 209 million US$) in 2018.
Staff	640
Website	www.wto.org

TABLE OF CONTENTS

Introduction
Origins
Objectives and operation
Assessment

World Trade Organization (WTO), international organization established to supervise and liberalize world trade. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 in the expectation that it would soon be replaced by a specialized agency of the United Nations (UN) to be called the International Trade Organization (ITO). Although the ITO never materialized, the GATT proved remarkably successful in liberalizing world trade over the next five decades. By the late 1980s there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes. Following the completion of the Uruguay Round (1986–94) of multilateral trade negotiations, the WTO began operations on January 1, 1995.

Origins

The ITO was initially envisaged, along with the International Monetary Fund (IMF) and the World Bank, as one of the key pillars of post-World War II reconstruction and economic development. In Havana in 1948, the UN Conference on Trade and Employment concluded a draft charter for the ITO, known as the Havana Charter, which would have created extensive rules governing trade, investment, services, and business and employment practices. However, the United States failed to ratify the agreement. Meanwhile, an agreement to phase out the use of import quotas and to reduce tariffs on merchandise trade, negotiated by 23 countries in Geneva in 1947, came into force as the GATT on January 1, 1948.

Although the GATT was expected to be provisional, it was the only major agreement governing international trade until the creation of the WTO. The GATT system evolved over 47 years to become a de facto global trade organization that eventually involved approximately 130 countries. Through various negotiating rounds, the GATT was extended or modified by numerous supplementary codes and arrangements, interpretations, waivers, reports by dispute-settlement panels, and decisions of its council.

During negotiations ending in 1994, the original GATT and all changes to it introduced prior to the Uruguay Round were renamed GATT 1947. This set of agreements was distinguished from GATT 1994, which comprises the modifications and clarifications negotiated during the Uruguay Round (referred to as “Understandings”) plus a dozen other multilateral agreements on merchandise trade. GATT 1994 became an integral part of the agreement that established the WTO. Other core components include the General Agreement on Trade in Services (GATS), which attempted to supervise and liberalize trade; the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which sought to improve protection of intellectual property across borders; the Understanding on Rules and Procedures Governing the Settlement of Disputes, which established rules for resolving conflicts between members; the Trade Policy Review Mechanism, which documented national trade policies and assessed their conformity with WTO rules; and four plurilateral agreements, signed by only a subset of the WTO membership, on civil aircraft, government procurement, dairy products, and bovine meat (though the latter two were terminated at the end of 1997 with the creation of related WTO committees). These agreements were signed in Marrakech, Morocco, in April 1994, and, following their ratification, the contracting parties to the GATT treaty became charter members of the WTO. By the 2010s the WTO had more than 160 members.

Objectives and operation

The WTO has six key objectives: (1) to set and enforce rules for international trade, (2) to provide a forum for negotiating and monitoring further trade liberalization, (3) to resolve trade disputes, (4) to increase the transparency of decision-making processes, (5) to cooperate with other major international economic institutions involved in global economic management, and (6) to help developing countries benefit fully from the global trading system. Although shared by the GATT, in practice these goals have been pursued more comprehensively by the WTO. For example, whereas the GATT focused almost exclusively on goods—though much of agriculture and textiles were excluded—the WTO encompasses all goods, services, and intellectual property, as well as some investment policies. In addition, the permanent WTO Secretariat, which replaced the interim GATT Secretariat, has strengthened and formalized mechanisms for reviewing trade policies and settling disputes. Because many more products are covered under the WTO than under the GATT and because the number of member countries and the extent of their participation has grown steadily—the combined share of international trade of WTO members now exceeds 90 percent of the global total—open access to markets has increased substantially.

The rules embodied in both the GATT and the WTO serve at least three purposes. First, they attempt to protect the interests of small and weak countries against discriminatory trade practices of large and powerful countries. The WTO’s most-favoured-nation and national-treatment articles stipulate that each WTO member must grant equal market access to all other members and that both domestic and foreign suppliers must be treated equally. Second, the rules require members to limit trade only through tariffs and to provide market access not less favourable than that specified in their schedules (i.e., the commitments that they agreed to when they were granted WTO membership or subsequently). Third, the rules are designed to help governments resist lobbying efforts by domestic interest groups seeking special favours. Although some exceptions to the rules have been made, their presence and replication in the core WTO agreements were intended to ensure that the worst excesses would be avoided. By thus bringing greater certainty and predictability to international markets, it was thought, the WTO would enhance economic welfare and reduce political tensions.

Resolution of trade disputes

The GATT provided an avenue for resolving trade disputes, a role that was strengthened substantially under the WTO. Members are committed not to take unilateral action against other members. Instead, they are expected to seek recourse through the WTO’s dispute-settlement system and to abide by its rules and findings. The procedures for dispute resolution under the GATT have been automated and greatly streamlined, and the timetable has been tightened.

Dispute resolution begins with bilateral consultations through the mediation, or “good offices,” of the director-general. If this fails, an independent panel is created to hear the dispute. The panel submits a private draft report to the parties for comment, after which it may revise the report before releasing it to the full WTO membership. Unlike the IMF and the World Bank, both of which use weighted voting, each WTO member has only one vote. As in the earlier GATT system, however, most decisions are made by consensus. Unless one or both of the parties files a notice of appeal or the WTO members reject the report, it is automatically adopted and legally binding after 60 days. The process is supposed to be completed within nine months, and, if an appeal is lodged, the WTO Appellate Body hears and rules on any claim of legal error within 60 days. Appellate rulings are automatically adopted unless a consensus exists among members against doing so.

Trade-policy reviews

The WTO also seeks to increase awareness of the extent and effects of trade-distorting policies, a goal that it accomplishes through annual notification requirements and through a policy-review mechanism. Notices of all changes in members’ trade and trade-related policies must be published and made accessible to their trading partners. For many developing countries and countries whose economies were formerly centrally planned, this requirement was a major step toward more transparent governance. The WTO reviews the trade policies of the world’s four largest traders (the European Union, the United States, Japan, and China) once every two years, the policies of the 16 next largest traders once every four years, and the policies of all other traders once every six or more years. After extensive consultations with the member country under review, the WTO Secretariat publishes its review together with a companion report by the country’s government. The process thus monitors the extent to which members are meeting their commitments and provides information on newly opened markets. It also provides a firmer basis for subsequent trade negotiations and the resolution of trade disputes.

Assessment

The pace of international economic integration via the GATT and WTO rounds of multilateral trade negotiations has been slower and less comprehensive than some members would prefer. Some have suggested that there should be additional integration among subgroups of (often neighbouring) member economies—e.g., those party to the European Union, the North American Free Trade Agreement, and the Asia-Pacific Economic Cooperation—for political, military, or other reasons. Notwithstanding the most-favoured-nation clauses in the agreements establishing the WTO, the organization does allow such preferential integration under certain conditions. Even though many such integration agreements arguably do not involve “substantially all trade”—the WTO’s main condition—there has been little conflict over the formation of free-trade areas and customs unions. The most common omissions from such agreements are politically sensitive sectors such as agriculture.

Beginning in the late 1990s, the WTO was the target of fierce criticism. Opponents of globalization, and in particular those opposed to the growing power of multinational corporations, argued that the WTO infringes upon national sovereignty and promotes the interests of large corporations at the expense of smaller local firms struggling to cope with import competition. Environmental and labour groups (especially those from wealthier countries) have claimed that trade liberalization leads to environmental damage and harms the interests of low-skilled unionized workers. Protests by these and other groups at WTO ministerial meetings—such as the 1999 demonstrations in Seattle, Washington, U.S., which involved approximately 50,000 people—became larger and more frequent, in part because the development of the Internet and social media made large-scale organizing and collective action easier. In response to such criticism, supporters of the WTO claimed that regulating trade is not an efficient way to protect the environment and labour rights. Meanwhile, some WTO members, especially developing countries, resisted attempts to adopt rules that would allow for sanctions against countries that failed to meet strict environmental and labour standards, arguing that they would amount to veiled protectionism.

Despite these criticisms, however, WTO admission remained attractive for nonmembers, as evidenced by the increase in the number of members after 1995. Most significantly, China entered the WTO in 2001 after years of accession negotiations. The conditions for Chinese membership were in some ways more restrictive than those for developing countries, reflecting the concerns of some WTO members that the admission of such a large and still somewhat planned economy might have an overall negative effect on free trade.

Kym Anderson

CITATION INFORMATION

ARTICLE TITLE: World Trade Organization

WEBSITE NAME: Encyclopaedia Britannica

PUBLISHER: Encyclopaedia Britannica, Inc.

DATE PUBLISHED: 20 November 2019

URL: https://www.britannica.com/topic/World-Trade-Organization

ACCESS DATE: December 23, 2019

Advantages and disadvantages of WTO

Readers Question: What are the advantages and disadvantages of the WTO formally the GATT?

The WTO is a body designed to promote free trade through organizing trade negotiations and act as an independent arbiter in settling trade disputes. To some extent the WTO has been successful in promoting greater free trade. The principles of the WTO are

Promote free trade through gradual reduction of tariffs
Provide legal framework for negotiation of trade disputes. This aims to provide greater stability and predictability in trade.
Trade without discrimination - avoiding preferential trade agreements.
WTO is not a completely free trade body. It allows tariffs and trade restrictions under certain conditions, e.g. protection against 'dumping' of cheap surplus goods.
WTO is committed to protecting fair competition. There are rules on subsidies, dumping
WTO is committed to economic development. For example, recent rounds have put pressure on developed countries to accelerate restrictions on imports from the least-developing countries.

Advantages of promoting free trade

Lower prices for consumers. Removing tariffs enables us to buy cheaper imports
Free trade encourages greater competitiveness. Through free trade, firms face a higher incentive to cut costs. For example, a domestic monopoly may now face competition from foreign firms.
The law of comparative advantage states that free trade will enable an increase in economic welfare. This is because countries can specialise in producing goods where they have a lower opportunity cost.
Economies of scale. By encouraging free trade, firms can specialise and produce a higher quantity. This enables more economies of scale, this is important for industries with high fixed costs, such as car and aeroplane manufacture. In new trade theory, it is this specialisation and exploitation of economies of scale that is most important factor in improving economic welfare. See also: Advantages of Free Trade

Successes of WTO

To what extent has the WTO being able to promote free trade?

The WTO has over 160 members representing 98 per cent of world trade. Over 20 countries are seeking to join the WTO.
An increased number of trade disputes have been brought to the WTO, showing the WTO is a forum for helping to solve disputes.
WTO regulations and co-operation helped avoid a major trade war; this was significant during 2008/09 global recession. We could compare this to 1930s, where trade wars broke out causing a fall in global trade. According to (Bagwell and Staiger 2002) the average tariff in 1930s was 50%. In 2000s, average tariff is 9% (VOX)
According to Ralph Ossa, "WTO success: No trade agreement but no trade war"
VOX.eu 11 June 2015. the value of WTO in preventing trade wars could be estimated at up to $340 billion per year.

World exports as a % of GDP have increased from 22% of GDP in 1995 (when WTO formed to just under 30% in 2015. Indicating importance of trade to global economy.

Disadvantages of WTO

However, the WTO has often been criticised for trade rules which are still unfavourable towards developing countries. Many developed countries went through a period of tariff protection; this enabled them to protect new, emerging domestic industries. Ha Joon Chang argues WTO trade rules are like 'pulling away the ladder they used themselves to climb up' (Kicking away the ladder at Amazon)
Free trade may prevent developing economies develop their infant industries. For example, if a developing economy was trying to diversify their economy to develop a new manufacturing industry, they may be unable to do it without some tariff protection.
WTO is being overshadowed by new TIPP trade deals. These deals are negotiated away from WTO and focuses mainly on US and EU. It excludes China, Russia, India, Brazil and South Africa. It threatens to diminish the global importance of WTO
Difficulty of making progress. WTO trade deals have been quite difficult to form consensus. Various rounds have taken many years to slowly progress. It results in countries seeking alternatives such as TIPP or local bilateral deals.
WTO trade deals still encompass a lot of protectionism in areas like agriculture. Protectionist tariffs which primarily benefit richer nations, such as the EU and US.
WTO has implemented strong defense of TRIPs ‘Trade Related Intellectual Property’ rights These allow firms to implement patents and copyrights. In areas, such as life-saving drugs, it has raised the price and made it less affordable for developing countries.
WTO has rules which favour multinationals. For example, 'most favoured nation' principle means countries should trade without discrimination. This has advantages but can mean developing countires cannot give preference to local contractors, but may have to choose foreign multinationals - whatever their history in repatriation of profit, investment in area.

Evaluation

In response to this the WTO may say that free trade has been an important engine of growth for developing countries in Asia. Although there may be some short term pain, it is worth it in the long run.
Also the WTO has sought to give exemptions for developing countries; enabling in principle the idea developing countries should be allowed to limit imports more than developed countries.

Members of the WTO enjoy the benefits conferred by any trade agreement. Since the WTO has so many members, its benefits are global. The WTO helps trade throughout the world to flow smoothly through its trade agreements. It provides its members with a fair method to resolve trade disputes. They don't have to resort to violence or war.

Membership in the WTO also has responsibilities. Members agree to avoid trade barriers and abide by the WTO's resolution of the dispute. That prevents retaliatory trade warfare . These escalating trade restrictions help the individual countries in the short term. They hurt world trade in the long term. In fact, it was just this type of trade protectionsim that worsened the Great Depression of 1929. As global trade slowed, countries sought to protect domestic industries. They erected trade barriers, creating a downward spiral. As a result, world trade shrank by 25%.

The WTO is a body designed to promote free trade through organizing trade negotiations and act as an independent arbiter in settling trade disputes. To some extent the WTO has been successful in promoting greater free trade.

Free trade has many advantages, such as:

Lower prices for consumers. Removing tariffs enables us to buy cheaper imports
Free trade encourages greater competitiveness. Firms face a higher incentive to cut costs. For example, a domestic monopoly may now face competition from foreign firms.
Law of comparative advantage states that free trade will enable an increase in economic welfare. This is because countries can specialise in producing goods where they have a lower opportunity cost.
Economies of scale. By encouraging free trade, firms can specialise and produce a higher quantity. This enables more economies of scale, this is important for industries with high fixed costs, such as car and aeroplane manufacture.
Free trade can help increase global economic growth.

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World Trade Organization (WTO)

Salient Features of World Trade Organisation (9 Features)

(a) Non-Discrimination:

(b) Free Trade:

(c) Stability in the Trading System:

(d) Promotion of Fair Competition:

(e) Special Concern for Developing Countries:

(f) Market Access Commitment:

(g) Decision at the Ministerial Level Meeting:

(h) Wider Range of Issues:

(i) Multilateral Trading System:

WTO: The World Trade Organisation: Origin and Role of WTO

History:

Status:

Basic Principle:

Leadership Structure:

Membership:

WTO Bodies:

Successes so far:

Failures so far:

Dangers Ahead:

WTO: The World Trade Organisation: Features, Structures, Objective and Function of the WTO

Introduction:

Features of the WTO:

Structure of the WTO:

Objectives of the WTO:

Functions of the WTO:

World Trade Organization

Contents

History[edit]

GATT Negotiations before Uruguay[edit]

Uruguay Round: 1986–1994[edit]

Ministerial conferences[edit]

Doha Round (Doha Agenda): 2001–[edit]

Functions[edit]

Principles of the trading system[edit]

Organizational structure[edit]

Decision-making[edit]

Dispute settlement[edit]

Accession and membership[edit]

Accession process[edit]

Members and observers[edit]

Agreements[edit]

Office of director-general[edit]

List of directors-general[edit]

Impact[edit]

World Trade Organization

Origins

Objectives and operation

Resolution of trade disputes

Trade-policy reviews

Assessment

Advantages and disadvantages of WTO

Advantages of promoting free trade

Successes of WTO

Disadvantages of WTO

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