c




 


 
 January 1, 1995

Centre William Rappard, Geneva,




Switzerland


 153 member states


  English, French, Spanish[1]





 Pascal Lamy


189 million Swiss francs (approx. 182

  
million USD) in 2009.[2]

  625[3]

c  www.wto.int

The c



 
(c) is an organization that intends to supervise and
liberalize international trade. The organization officially commenced on January 1, 1995 under
the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT),
which commenced in 1948. The organization deals with regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade agreements, and a
dispute resolution process aimed at enforcing participants' adherence to WTO agreements which
are signed by representatives of member governments and ratified by their parliaments.[4][5] Most
of the issues that the WTO focuses on derive from previous trade negotiations, especially from
the Uruguay Round (1986-1994).

The organization is currently endeavoring to persist with a trade negotiation called the Doha
Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable
participation of poorer countries which represent a majority of the world's population. However,
the negotiation has been dogged by "disagreement between exporters of agricultural bulk
commodities and countries with large numbers of subsistence farmers on the precise terms of a
'special safeguard measure' to protect farmers from surges in imports. At this time, the future of
the Doha Round is uncertain."[6]

The WTO has 153 members,[7] representing more than 97% of total world trade[8] and 30
observers, most seeking membership. The WTO is governed by a ministerial conference,
meeting 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 at the Centre William Rappard, Geneva,
Switzerland.
Harry Dexter White (l) and John Maynard Keynes at the Bretton Woods Conference ² Both
economists had been strong advocates of a liberal international trade environment, and
recommended the establishment of three institutions: the IMF (fiscal and monetary issues), the
World Bank (financial and structural issues), and the ITO (international economic
cooperation).[9]

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 ² 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 U.S. and a few other
signatories and never went into effect.[10][11][12]

In the absence of an international organization for trade, the GATT would over the years
"transform itself" into a de facto international organization.[13]

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See also: General Agreement on Tariffs and Trade

The GATT was the only multilateral instrument governing international trade from 1948 until
the WTO was established in 1995.[14] 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.[15]

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!"  #$ 

Seven rounds of negotiations occurred under the 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 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.[14]

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During the Doha Round, the US government blamed Brazil and India for being inflexible, and
the EU for impeding agricultural imports.[16] The President of Brazil, Luiz Inácio Lula da Silva,
responded to the criticisms by arguing that progress would only be achieved if the richest
countries (especially the US and countries in the EU) make deeper cuts in their agricultural
subsidies, and further open their markets for agricultural goods.[17]
Main article: Uruguay Round

Well before GATT's 40th anniversary, its members concluded that the GATT system was
straining to adapt to a new globalizing world economy.[18][19] 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
² known as the Uruguay Round ² was launched in September 1986, in Punta del Este,
Uruguay.[18]

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.[19] The Final Act concluding the Uruguay Round and officially establishing
the WTO regime was signed during the April 1994 ministerial meeting at Marrakesh, Morocco,
and hence is known as the Marrakesh Agreement.[20]

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 j

1994, the updated parts of
GATT, and j

1947, the original agreement which is still the heart of GATT 1994).[18] 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 a structure with six main parts:

O| The Agreement Establishing the WTO

O| Goods and investment ² the Multilateral Agreements on Trade in Goods including the
GATT 1994 and the Trade Related Investment Measures
O| Services ² the General Agreement on Trade in Services
O| Intellectual property ² the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
O| Dispute settlement (DSU)
O| Reviews of governments' trade policies (TPRM)[21]
¢ 
 





The topmost decision-making body of the WTO is the Ministerial Conference, which usually
meets every two years. 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. 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". The second ministerial conference 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. The fourth ministerial conference 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 fifth 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[22], Brazil, ASEAN led by the
Philippines), 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 sixth WTO ministerial conference was held in Hong Kong from 13-18 December 2005. It
was considered vital if the four-year-old Doha Development Agenda negotiations were to move
forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out
all their agricultural export subsidies by the end of 2013, and terminate any cotton export
subsidies by the end of 2006. Further concessions to developing countries included an agreement
to introduce duty free, tariff free access for goods from the Least Developed Countries, following
the Everything but Arms initiative of the European Union ² but with up to 3% of tariff lines
exempted. Other major issues were left for further negotiation to be completed by the end of
2010. The WTO General Council, on 26 May 2009, agreed to hold a seventh WTO ministerial
conference session in Geneva from 30 November-3 December 2009. A statement by chairman
Amb. Mario Matus acknowledged that the prime purpose was to remedy a breach of protocol
requiring two-yearly "regular" meetings, which had lapsed with the Doha Round failure in 2005,
and that the "scaled-down" meeting would not be a negotiating session, but "emphasis will be on
transparency and open discussion rather than on small group processes and informal negotiating
structures". The general theme for discussion is "The WTO, the Multilateral Trading System and
the Current Global Economic Environment"[23]

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Main article: Doha Round

The Doha Development Round started in 2001 and continues today.

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.[24] The initial agenda comprised
both further trade liberalization and new rule-making, underpinned by commitments to
strengthen substantial assistance to developing countries.[25]

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.[26]

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

O| It oversees the implementation, administration and operation of the covered

agreements.[28][29]
[30][31]
O| It provides a forum for negotiations and for settling disputes.

Additionally, it is the 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.[29][31] 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.[32]

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.[33] Finally, the WTO cooperates closely with the two other components of the
Bretton Woods system, the IMF and the World Bank.[30]
¢ (

  

$ 
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.[34] Five principles are of
particular importance in understanding both the pre-1994 GATT and the WTO:

1.| 


 
. 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
favorable conditions under which it allows trade in a certain product type to all other
WTO members.[34] "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 favorably 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).[34]
2.| &
 $. 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.[36]
3.| 




  
. 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][36]
4.| 



$. 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).[37] 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]
5.|  $"". In specific circumstances, governments are able to restrict trade. There are
three types of provisions in this direction: articles allowing for the use of trade measures
to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and
provisions permitting intervention in trade for economic reasons.[37] Exceptions to the
MFN principle also allow for preferential treatment of developing countries, regional free
trade areas and customs unions.[citation needed]

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The General Council has multiple bodies which oversee committees in different areas, and they
are the following:

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.[38]
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.[39]
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.[40]
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. The committee is currently tasked
with the Doha Development Round.[41]

The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS
rules and specific commitments.[38] The General council has several different committees,
working groups, and working parties.[42] 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.

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The WTO operates on a one country, one vote system, but actual votes have never been taken.
Decision making 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.[citation needed]

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..[citation needed]

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.[43] 123

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Main article: Dispute settlement in the WTO

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.[44]
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".[45] 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.[46]

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.[47]. Several commentators have pointed out the practical difficulty in establishing
legal elements required to bring trade remedy claim under WTO law.[48]

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Main article: WTO accession and membership

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.[49] 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.[50] As is typical of WTO
procedures, an offer of accession is only given once consensus is reached among interested
parties.[51]

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Status of WTO negotiations: members (including dual-representation with the European Union)
Draft Working Party Report or Factual Summary adopted Goods and/or Services offers submitted
Memorandum on Foreign Trade Regime submitted observer, negotiations to start later or no
Memorandum on FTR submitted frozen procedures or no negotiations in the last 3 years no
official interaction with the WTO

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.[52] The application is submitted to the WTO in a memorandum which is examined
by a working party open to all interested WTO Members.[51]

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.[49]

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.[52]

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.[53]

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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).[54] 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 or 4
)
acceded to the WTO in 2002 under the name of "Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu" (Chinese Taipei).[55]

A number of non-members (30) are observers at WTO proceedings and are currently negotiating
their membership. As observers, Iran, Iraq and Russia are not yet members. Russia is the biggest
economy outside WTO and after the completion of Russia's accession, Iran would be the biggest
economy outside the WTO.[56] 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.[57] 14 states and
2 territories so far have no official interaction with the WTO.

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Main article: Uruguay Round

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.[58] 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 the General Agreement on Tariffs and Trade (GATT) provides 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.

The Agreement on the Application of Sanitary and Phytosanitary Measures ² 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 ensures that technical negotiations and standards, as well as
testing and certification procedures, do not create unnecessary obstacles to trade".[59] 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.