World Trade Organization

World Trade Organization

The World Trade Organization (WTO) is an international organization designed to supervise and liberalize international trade. The WTO came into being on 1 January 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947, and continued to operate for almost five decades as a de facto international organization.

The World Trade Organization deals with the rules of trade between nations at a near-global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the majority of the world's trading nations and ratified in their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round. The organization is currently working with its members on a new trade negotiation called the Doha Development Agenda (Doha round), launched in 2001.

The WTO has 153 members, which represents more than 95% of total world trade. The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference. The WTO's headquarters is in Geneva, Switzerland.

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the United States and a few other signatories and never went into effect.

In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization.

The GATT was the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. Despite attempts in the mid 1950s and 1960s to create 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.

Seven rounds of negotiations occurred under the GATT. The first 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 was 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 these plurilateral agreements were not accepted by the full GATT membership, 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.

Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy. 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. It was the biggest negotiating mandate on trade ever agreed: the talks were going 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. The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed during the April 1994 ministerial meeting at Marrakesh, Morroco, and hence is known as the Marrakesh Agreement.

The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the "Singapore issues".

Was held in Geneva in Switzerland.

The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing worldwide attention.

Was held in Doha In Persian Gulf nation of Qatar. The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join.

The ministerial conference was held in Cancún, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20 developing nations (led by India, China and Brazil), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress.

The WTO launched the current round of negotiations, the Doha Development Agenda (DDA) or Doha Round, at the Fourth Ministerial Conference in Doha, Qatar in November 2001. The Doha round 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. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.

The negotiations have been highly contentious and agreement has not been reached, despite the intense negotiations at several Ministerial Conferences and at other sessions. Disagreements still continue over several key areas including agriculture subsidies.

Additionally, it is the WTO's duty to review the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. 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. The WTO is also a center 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. Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.

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 ten members. The body also has several groups relating to textiles.

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.

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.

The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments.

The General council has several different committees, working groups, and working parties.

The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTO’s director-general. The committee is currently tasked with the Doha Development Round.

The WTO operates on a one country, one vote system, but actual votes have never been taken. Decisionmaking is generally by consensus, and relative market size is the primary source of bargaining power. The advantage of consensus decision-making is that it encourages efforts to find the most widely acceptable decision. Main disadvantages include large time requirements and many rounds of negotiation to develop a consensus decision, and the tendency for final agreements to use ambiguous language on contentious points that makes future interpretation of treaties difficult.

In reality, WTO negotiations proceed not by consensus of all members, but by a process of informal negotiations between small groups of countries. Such negotiations are often called "Green Room" negotiations (after the colour of the WTO Director-General's Office in Geneva), or "Mini-Ministerials", when they occur in other countries. These processes have been regularly criticised by many of the WTO's developing country members which are often totally excluded from the negotiations.

Richard 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 United States, and may not lead to Pareto improvement.

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. 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". 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.

The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions.

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. The process takes about five years, on average, but it can last more if the country is less than fully committed to the process or if political issues interfere. As is typical of WTO procedures, an offer of accession is only given once consensus is reached among interested parties.

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. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members. 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. 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.

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.

The WTO has 153 members (almost all of the 123 nations participating in the Uruguay Round signed on at its foundation, and the rest had to get membership). The 27 states of the European Union are represented also as the European Communities. WTO members do not have to be full sovereign nation-members. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT contracting party, and the Republic of China (ROC) (commonly known as Taiwan, whose sovereignty has been disputed by the People's Republic of China) acceded to the WTO in 2002 under the name of "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei). A number of non-members have been observers (28) at the WTO and are currently negotiating their membership. While an observer, Russia is not a member. With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. Some international intergovernmental organizations are also granted observer status to WTO bodies. 14 states and 2 territories so far have no official interaction with the WTO.

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. A list of WTO agreements can be found here 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 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.

The Agreement on the Application of Sanitary and Phytosanitary Measures - also known as the SPS Agreement 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 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 of the TBT Agreement is to "to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade".

The stated aim of the WTO is to promote free trade and stimulate economic growth. Critics argue that free trade leads to a divergence instead of convergence of income levels within rich and poor countries (the rich get richer and the poor get poorer). Martin Khor, Director of the Third World Network, argues that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. He argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, because (among other reasons): market access in industry has not improved; these countries have had no gains yet from the phasing out of textiles quotas; non-tariff barriers such as anti-dumping measures have increased; and domestic support and export subsidies for agricultural products in the rich countries remain high. Jagdish Bhagwati asserts however that there is greater tariff protection on manufacturers in the poor countries, which are also overtaking the rich nations in the number of anti-dumping filings.

Other critics claim that the issues of labor relations and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer. On the other side, Khor responds that "if environment and labor were to enter the WTO system it would be conceptually difficult to argue why other social and cultural issues should also not enter." Bhagwati is also critical towards "rich-country lobbies seeking on imposing their unrelated agendas on trade agreements." Therefore, both Bhagwati and Arvind Panagariya. Professor at Columbia University, have criticized the introduction of TRIPs into the WTO framework, fearing that such non-trade agendas might overwhelm the organization's function.

Other critics have characterized the decision making in the WTO as complicated, ineffective, unrepresentative and non-inclusive, and they have proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries. The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system"; the Network stresses that "civil society groups and institutions must be given genuine opportunities to express their views and to influence the outcome of policies and decisions." Certain non-governmental organizations, such as the World Federalist Movement, argue that democratic participation in the WTO could be enhanced through the creation of a parliamentary assembly, although other analysts have characterized this proposal as ineffective.

To the top

World Trade Organization accession and membership

All World Trade Organization members have joined the organization as a result of negotiation, and membership consists of a balance of rights and obligations. The process of becoming a World Trade Organization] (WTO) member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and the current trade regime. The process takes about five years, on average, but it can take some countries almost a decade if the country is less than fully committed to the process, or if political issues interfere. The shortest accession negotiation was that of Kyrgyzstan, lasting 2 years and 10 months. The longest was that of China, lasting 15 years and 5 months. Russia, having first applied to join the General Agreement on Tariffs and Trade (GATT) in 1993, is still in negotiations for membership. Recently, it has made much bigger strides by securing a bilateral trade agreement with the European Union (2004) and the United States (2006). Moldova and Georgia are the remaining two nations with which Russia must make agreements to enter the WTO. As is typical of WTO procedures, an offer of accession is only given once consensus is reached among interested parties.

The process of accession can be broken down into four major stages: a country wishing to accede to the WTO submits an application to the General Council. The government applying for membership has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members, and dealing with the country's application. For large countries such as Russia, numerous countries participate in this process. For smaller countries, the Quadrilateral group of countries – consisting of the EU, the United States, Canada, and Japan – and an applicant's neighboring countries are typically most involved. The applicant then presents a detailed memorandum to the Working Party on its foreign trade regime, describing, among other things, its economy, economic policies, domestic and international trade regulations, and intellectual property policies. The Working Party Members submit written questions to the applicant to clarify aspects of its foreign trade regime with particular attention being paid to the degree of privatization in the economy and the extent to which government regulation is transparent. After all necessary background information has been acquired, the Working Party will begin meeting to focus on issues of discrepancy between the WTO rules and the Applicant's international and domestic trade policies and laws. The WP 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.

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. These talks cover tariff rates and specific market access commitments, and other policies in 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. In other words, the talks determine the benefits (in the form of export opportunities and guarantees) other WTO members can expect when the new member joins. The talks can be highly complicated; it has been said that in some cases the negotiations are almost as large as an entire round of multilateral trade negotiations.

When the bilateral talks conclude, the working party finalizes the terms of accession. sends an accession package, which includes a summary of all the WP meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be’s commitments to the General Council or Ministerial Conference. 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. The documents used in the accession process which were embargoed during the accession process are released once the nation becomes a member.

The WTO has 153 members (almost all of the 123 nations participating in the Uruguay Round signed on at its foundation, and the rest had to get membership). The 27 states of the European Union are represented also as the European Communities. Some non-sovereign autonomous entities of member states are included as separate members, since WTO members do not have to be full sovereign nation-members. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong became a GATT contracting party by the now terminated "sponsorship" procedure of the United Kingdom (Hong Kong uses the name "Hong Kong, China" since 1997). A new member of this type is the Republic of China (Taiwan), which acceded to the WTO in 2002, and carefully crafted its application by joining under the name "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)".

Tonga was admitted on 15 December, 2005 during the ministerial conference. On January 11, 2007, Vietnam became the 150th WTO member state. Tonga finalized ratification of the admittance in July 2007, and thus became the 151st member state. Ukraine became the 152nd member state on 16 May 2008. Cape Verde joined on 23 July 2008 as the 153rd member state.

A number of non-members have been observers (28) at the WTO and are currently negotiating their membership: Afghanistan, Algeria, Andorra, Azerbaijan, Bahamas (process frozen in 2001), Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Equatorial Guinea (expected to start membership negotiations until 4 April 2007), Ethiopia, Holy See (Vatican; special exception from the rules allows it to remain observer without starting negotiations), Iran, Iraq, Kazakhstan, Laos, Lebanon, Libya, Montenegro, Russia, Samoa, Sao Tome and Principe, Serbia, Seychelles (negotiations frozen since 1998), Sudan, Tajikistan, Uzbekistan, Vanuatu (accession agreed in 2001, but not ratified by Vanuatu itself), and Yemen. With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. Some international intergovernmental organizations are also granted observer status to WTO bodies.

Syria first applied to join the WTO in October 2001, then again in January 2004 and September 2005. Its application for membership is currently pending, awaiting WTO General Council approval to start negotiations.

The following states (14) and territories (2) so far have no official interaction with the WTO: the states of Eritrea, Somalia, Turkmenistan, North Korea, Monaco, San Marino, East Timor, Nauru, Tuvalu, Palau, Kiribati, Micronesia, Marshall Islands and the territories of Western Sahara and Palestine.

The following table lists all current members and their accession date.

To the top

Criticism of the World Trade Organization

The stated aim of the World Trade Organization (WTO) is to promote free trade and stimulate economic growth. Some people argue that free trade leads to a divergence instead of convergence of income levels within rich and poor countries (the rich get richer and the poor get poorer).

Khor argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, and, therefore, the credibility of the WTO trade system could be eroded. According to Khor, "one of the major categories of 'problems of implementation of the Uruguay Round' is the way the Northern countries have not lived up to the spirit of their commitments in implementing (or not implementing) their obligations agreed to in the various Agreements." Khor also believes that the Doha Round negotiations "have veered from their proclaimed direction oriented to a development-friendly outcome, towards a 'market access' direction in which developing countries are pressurised to open up their agricultural, industrial and services sectors." Jagdish Bhagwati asserts however that there is greater tariff protection on manufacturers in the poor countries, which are also overtaking the rich nations in the number of anti-dumping filings.

Other critics have characterized the decision making in the WTO as complicated, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensus-building" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries. The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system".

The lack of transparency is often seen as a problem for democracy. Politicians can negotiate for regulations that would not be possible accepted in a democratic process in their own nations. "Some countries push for certain regulatory standards in international bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism." This is often referred to as Policy Laundering.

To the top