The World Trade Organization (WTO) came into being on January 1st 1995. It was the outcome of the lengthy (1986-1994) Uruguay round of GATT negotiations. The WTO was essentially an extension of GATT. It extended GATT in two major ways. First GATT became only one of the three major trade agreements that went into the WTO (the other two being the General Agreement on Trade in Services (GATS) and the agreements on Trade Related Aspects of Intellectual Property Rights (TRIPS)). Second the WTO was put on a much sounder institutional footing than GATT. With GATT the support services that helped maintain the agreement had come into being in an ad hoc manner as the need arose. The WTO by contrast is a fully fledged institution (GATT also was, at least formally, only an agreement between contracting parties and had no independent existence of its own while the WTO is a corporate body recognized under international law).
Principles of the WTO
The basic principles of the WTO (according to the WTO):
- Trade Without Discrimination
- No Most Favoured Nation (MFN) Treatment – no special deals to trading partners, all members of WTO must be treated the same
- No National Special Treatement – locals and foreigners are treated equally
- Freer Trade
- Predictability through Binding – promising not to raise tariffs is called binding a tariff and binding leads to greater certainty for businesses
- Promoting Fair Competition
- Encouraging Development and Economic Reform Elaboration of all these points can be found on the WTO website here.
What the WTO Does
Perhaps the most important question to ask about the WTO, especially in light of recent controversies is: What does the WTO do? The basic functions of the WTO are:
Administering WTO trade agreements
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 Plurilateral Trade Agreements.
Forum for trade negotiations
The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.
Handling trade disputes
The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter referred to as the “Dispute Settlement Understanding” or “DSU”) in Annex 2 to this Agreement.
Monitoring national trade policies
The WTO shall administer the Trade Policy Review Mechanism (hereinafter referred to as the “TPRM”) provided for in Annex 3 to this Agreement.
Technical assistance and training for developing countries
Cooperation with other international organizations
With a view to achieving greater coherence in global economic policy-making, the WTO shall cooperate, as appropriate, with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies.
NB. The descriptions are taken verbatim from: Article III: Functions of the WTO, p. 10 of Agreement Establishing the WTO, part of Uruguay Round Final Act. To see original document go to WTO documents page. It is interesting to note that in this document point 5 is not mentioned. Point 5 is taken from the WTO website page: What is the WTO?
The WTO has (at the point of writing) 140 members who account for approx 90% of world trade. Most agreements in the WTO are arrived at by consensus (i.e. everybody agrees – not one member dissents). Majority votes are possible but
none so far have occurred. It is also worth noting that all the WTO’s agreements have been ratified by the members states’ parliaments (where such exist) in contrast to the case for GATT. [Source: WTO website].
Here can be found an organization diagram that summarizes all the information. Below I list the main elements.
There shall be a Ministerial Conference composed of representatives of all the Members, which shall meet at least once every two years. The Ministerial Conference shall carry out the functions of the WTO and take actions necessary to this effect. The Ministerial Conference shall have the authority to take decisions on all matters under any of the Multilateral Trade Agreements, if so requested by a Member, in accordance with the specific requirements for decision-making in this Agreement and in the relevant Multilateral Trade Agreement.
There shall be a General Council composed of representatives of all the Members, which shall meet as appropriate. In the intervals between meetings of the Ministerial Conference, its functions shall be conducted by the General Council. The General Council shall also carry out the functions assigned to it by this Agreement. The General Council shall establish its rules of procedure and approve the rules of procedure for the Committees provided for in paragraph 7.
Multitude of Committees, Bodies and Councils
For example: Dispute Settlement Body (DSU), Councils for Trade in Goods, Trade in Services and for TRIPS etc.
NB Description in 1. and 2. taken from Agreement Establishing WTO pps. 10-11. See WTO documents page.
Last Updated: 03/12/2001