Your continued donations keep Wikipedia running!    

World Trade Organization

From Wikipedia, the free encyclopedia

Jump to: navigation, search
For other uses of the initials WTO, see WTO (disambiguation).
WTO Logo
WTO Logo

The World Trade Organization (WTO) is an international, multilateral organization, which sets the rules for the global trading system and resolves disputes between its member states, all of whom are signatories to its approximately 30 agreements.

WTO headquarters are located in Geneva, Switzerland. Pascal Lamy is the current Director-General, taking over from the previous Director-General Supachai Panitchpakdi on September 1, 2005. As of December 15, 2005, there are 149 members in the organization [1] with the latest to join being Saudi Arabia. All WTO members are required to grant one another most favoured nation status, such that (with some exceptions) trade concessions granted by a WTO member to another country must be granted to all WTO members (WTO, 2004c).

Since its inception in 1995, the WTO has been a major target for protests by the anti-globalization movement. See criticism.

Contents

History

The Bretton Woods Conference of 1944 proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for trade between countries. The ITO charter was agreed at the UN Conference on Trade and Employment in Havana in March 1948, but was blocked by the U.S. Senate (WTO, 2004b). Some historians have argued that the failure may have resulted from fears within the American business community that the International Trade Organization could be used to regulate, rather than liberate, big business (Lisa Wilkins, 1997; Helen Milner 1993).

Only one element of the ITO survived: the General Agreement on Tariffs and Trade (GATT). Seven rounds of negotiations occurred under GATT before the eighth round - the Uruguay Round - concluded in 1995 with the establishment of the WTO. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them, together with approximately 30 other agreements, as well as resolving trade disputes between member countries. Unlike the GATT, the WTO has a substantial institutional structure.

Mission

The WTO aims to increase international trade by promoting lower trade barriers and providing a platform for the negotiation of trade and to their business.

Principles of the trading system

The WTO discussions should follow these fundamental principles of trading.[2]

  1. A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services.
  2. A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers).
  3. A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open.
  4. A trading system should tend toward greater competition.
  5. A trading system should be more accommodating for less developed countries, giving them more time to adjust, greater flexibility, and more privileges.

Structure

All WTO members may participate in all councils, committees, etc., except Appellate Body, Dispute Settlement panels, and plurilateral committees.

Highest level: Ministerial Conference

The topmost decision-making body of the WTO is the Ministerial Conference, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can make decisions on all matters under any of the multilateral trade agreements.

Second level: General Council

The daily work of the ministerial conference is handled by three groups The General Council, The Dispute Settlement Body and The Trade Policy Review Body.

1. The General Council- is the WTO’s highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The council acts on behalf on the Ministerial Council on all of the WTO affairs. The current chairman is Amina Chawahir Mohamed (Kenya).

2. The Dispute Settlement Body - Made up of all member governments, usually represented by ambassadors or equivalent. The current chairperson is H.E. Mr. Muhamad Noor YACOB (Malaysia).

3. The Trade Policy Review Body (TPRB) - the WTO General Council meets as the Trade Policy Review Body to undertake trade policy reviews of Members under the TRPM. The TPRB is thus open to all WTO Members. The current chairperson is Don Stephenson (Canada).

Third level: Councils for Trade

The Councils for Trade work under the General Council. There are three councils - Council for Trade in Goods, Council for Trade-Related Aspects of Intellectual Property Rights, and Council for Trade in Services - each council works in different fields. Apart from these three councils, six other bodies report to the General Council reporting on issues such as trade and development, the environment, regional trading arrangements and administrative issues.

1. Council for Trade in Goods- The workings of the General Agreement on Tariffs and Trade (GATT) which covers international trade in goods, are the responsibility of the Council for Trade in Goods. It is made up of representatives from all WTO member countries. The current chairperson is Vesa Tapani Himanen (Finland).

2. 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.

3. 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’s open to all WTO members, and can create subsidiary bodies as required. The current chairperson is Claudia Uribe (Colombia).

Fourth level: Subsidiary Bodies

There are subsidiary bodies under each of the three councils.

1. The Goods Council- subsidiary under the Council for Trade in Goods. It has 11 committees consisting of all member countries, dealing with specific subjects such as agriculture, market access, subsidies, anti-dumping measures and so on. Committees include the following:

  • Information Technology Agreement (ITA) Committee
  • State Trading Enterprises
  • Textiles Monitoring Body - Consists of a chairman and 10 members acting under it.
  • Groups dealing with notifications - process by which governments inform the WTO about new policies and measures in their countries.

2. The Services Council- subsidiary under the Council for Trade in Services which deals with financial services, domestic regulations and other specific commitments.

3. Dispute Settlement panels and Appellate Body- subsidiary under the Dispute Settlement Body to resolve disputes and the Appellate Body to deal with appeals.

Other committees

  • Committees on
    • Trade and Environment
    • Trade and Development (Subcommittee on Least-Developed Countries)
    • Regional Trade Agreements
    • Balance of Payments Restrictions
    • Budget, Finance and Administration
  • Working parties on
    • Accession
  • Working groups on
    • Trade, debt and finance
    • Trade and technology transfer

Trade negotiations

While most international organisations operate on a one country, one vote or even a weighted voting basis, many WTO decisions, such as adopting agreements (and revisions to them) are officially determined by consensus of all member states. 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. [3]

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. The most notable recent failures of consensus, at the Ministerial meetings at Seattle (1999) and Cancún (2003), were due to the refusal of some developing countries to accept proposals.

The WTO began the current round of negotiations, the Doha round, at the Fourth Ministerial Conference in Doha, Qatar in November 2001. The talks have been highly contentious and agreement has not been reached, despite continuing talks at Fifth Ministerial Conference in Cancún in 2003 and at the Sixth Ministerial Conference in Hong Kong on December 13 - December 18, 2005.

Dispute resolution

Apart from hosting negotiations on trade rules, the WTO also acts as an arbiter of disputes between member states over its rules. And unlike most other international organizations, the WTO has significant power to enforce its decisions through the authorisation of trade sanctions against members which fail to comply with its decisions. Member states can bring disputes to the WTO's Dispute Settlement Body if they believe another member has breached WTO rules. [4]

Disputes are heard by a Dispute Settlement Panel, usually made up of three trade officials. The panels meet in secret and are not required to alert national parliaments that their laws have been challenged by another country.

If decisions of the Dispute Settlement Body are not complied with, it may authorise "retaliatory measures" - trade sanctions - in favour of the member(s) which brought the dispute. While such measures are a strong mechanism when applied by economically powerful states like the United States or the European Union, when applied by economically weak states against stronger ones, they can often be ignored. This has been the case, for example, with the March 2005 Appellate Body ruling in case DS 267, which declared US cotton subsidies illegal.

Membership

A world map of WTO participation. Green indicates members, yellow/orange for observers, and grey indicates countries that are neither. The countries of the European Communities (i.e., the EU) are dually represented collectively and individually.
Enlarge
A world map of WTO participation. Green indicates members, yellow/orange for observers, and grey indicates countries that are neither. The countries of the European Communities (i.e., the EU) are dually represented collectively and individually.

The WTO has 149 members (76 members at its foundation and a further 73 members joined over the following ten years). The 25 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.

The latest (as of 15 December 2005) member admitted being the Kingdom of Tonga on 15 December 2005 during the ministerial conference (ratification process is expected to end in June 2006). A current list of members can be found here.

The shortest accession negotiation was that of the Kyrgyz Republic, lasting 2 years and 10 months. The longest was that of China, lasting 15 years and 5 months. Russia, having first applied to join GATT in 1993, is still in negotiations for membership.

A number of non-members have been observers (31) at the WTO and are currently negotiating their membership: Algeria, Andorra, Azerbaijan, Bahamas (process frozen in 2001), Belarus, Bhutan, Bosnia and Herzegovina, Cape Verde, Equatorial Guinea (expected to start membership negotiations in 2007 or earlier), Ethiopia, Holy See (Vatican; special exception from the rules allows it to remain observer without starting negotiations), Iran 1, Iraq, Kazakhstan, Lao People's Democratic Republic, Lebanon, Libya, Russian Federation, Samoa, Sao Tome and Principe, Serbia and Montenegro (each republic is applying for separate membership), Seychelles (negotiations frozen since 1998), Sudan, Tajikistan, Ukraine, Uzbekistan, Vanuatu (accession agreed in 2001, but not ratified by Vanuatu itself), Vietnam and Yemen.
1 Iran first applied to join the WTO in 1996, but the United States, accusing Tehran of supporting international terrorism, blocked its application 22 times. The U.S. said in March it would drop its veto on a start to Iran's accession negotiations. The U.S. has chosen not to block Iran's latest application for membership as part of a nuclear related deal.

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

The following states (15) and territories (2) so far have no official interaction with the WTO: the states of Eritrea, Somalia, Liberia, Turkmenistan, North Korea, Monaco, San Marino, East Timor, Comoros, Nauru, Tuvalu, Palau, Kiribati, Micronesia, Marshall Islands and the territories of Western Sahara, Palestine.

Agreements

The WTO oversees about 30 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.

Agreement on Agriculture (AoA)

Main article: Agreement on Agriculture

The AoA 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.

Domestic support

The first pillar of the AoA is "domestic support". The AoA structures domestic support (subsidies) into three categories or "boxes": a Green Box, an Amber Box and a Blue Box. The Green Box contains fixed payments to producers for environmental programs, so long as the payments are "decoupled" from current production levels. The Amber Box contains domestic subsidies that governments have agreed to reduce but not eliminate. The Blue Box contains subsidies which can be increased without limit, so long as payments are linked to production-limiting programs. [5]

The AoA's domestic support system currently allows Europe and the USA to spend $380 billion annually on agricultural subsidies alone. "It is often still argued that subsidies are needed to protect small farmers but, according to the World Bank, more than half of EU support goes to 1% of producers while in the US 70% of subsidies go to 10% of producers, mainly agri-businesses." [6]. The effect of these subsidies is to flood global markets with below-cost commodities, depressing prices and undercutting producers in poor countries – a practice known as dumping.

Market Access

"Market access" is the second pillar of the AoA, and refers to the reduction of tariff (or non-tariff) barriers to trade by WTO member-states. The 1995 AoA required tariff reductions of:

  • 36% average reduction by developed countries, with a minimum per tariff line reduction of 15% over five years.
  • 24% average reduction by developing countries with a minimum per tariff line reduction of 10% over nine years.

Least Developed Countries (LDCs) were exempted from tariff reductions, but either had to convert non–tariff barriers to tariffs—a process called tariffication—or "bind" their tariffs, creating a "ceiling" which could not be increased in future.

Export subsidies

"Export subsidies" is the third pillar of the AoA. The 1995 AoA required developed countries to reduce export subsidies by at least 35% (by value) or by at least 21% (by volume) over the five years to 2000.

Criticism

The AoA is criticised for reducing tariff protections for small farmers – a key source of income for developing countries – while allowing rich countries to continue to pay their farmers massive subsidies which developing countries cannot afford.

General Agreement on Trade in Services (GATS)

Main article: General Agreement on Trade in Services

Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement

Main article: Agreement on Trade-Related Aspects of Intellectual Property Rights

Sanitary and Phyto-Sanitary (SPS) Agreement

Main article: Agreement on the Application of Sanitary and Phytosanitary Measures

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 member-states' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases).

SPS & Genetically Modified Organisms (GMOs)

In 2003, the USA challenged a number of EU laws restricting the importation of Genetically Modified Organisms (GMOs), arguing they are “unjustifiable” and illegal under SPS agreement. In May 2006, the WTO's dispite resolution panel issued a complex ruling which took issue with some aspect's of the EU's regulation of GMOs, but dismissed many of the claims made by the USA. A summary of the decision can be found here

Criticism

Quarantine policies plays an important role in ensuring the protection of human, animal and plant health. Yet under the SPS agreement, quarantine barriers can be a ‘technical trade barrier’ used to keep out foreign competitors.

The SPS agreement gives the WTO the power to override a country's use of the precautionary principle – a principle which allows them to act on the side of caution if there is no scientific certainty about potential threats to human health and the environment. Under SPS rules, the burden of proof is on countries to demonstrate scientifically that something is dangerous before it can be regulated, even though scientists agree that it is impossible to predict all forms of damage posed by insects or pest plants.

Agreement on Technical Barriers to Trade (TBT)

Main article: Agreement on Technical Barriers to Trade

The Agreement on Technical Barriers to Trade - also known as the TBT Agreement 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 beginning of 1995.

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" [7]

Chronology

Criticism

The stated aim of the WTO is to promote free trade and stimulate economic growth. Many people argue that free trade does not make ordinary people's lives more prosperous but only results in the rich (both people and countries) becoming richer. WTO treaties have also been accused of a partial and unfair bias toward multinational corporations and wealthy nations.

Critics contend that small countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the influential nations in the WTO focus on their own commercial interests. They also claim that the issues of health, safety and environment are steadfastly ignored.

Martin Khor 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 states which have less negotiation power. Some examples of this bias are: (1) rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing); (2) the increase in non-tariff barriers such as anti-dumping measures allowed against developing countries; (3) the maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets; (4) many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and (5) the Intellectual Property Rights that bans developing countries to incorporate technology that originates from abroad in their local systems (including medicines and agricultural products).

Jagdish Bhagwati, although pro-free trade and pro-globalization, has strongly criticized the introduction of TRIPs (forum shifting) into the WTO/GATT framework. His fear is that other non-trade agendas might overwhelm the organization's function.

Many non-governmental organizations, such as the World Federalist Movement, are calling for the creation of a WTO parliamentary assembly to allow for more democratic participation in WTO decision making [8]. Dr. Caroline Lucas recommended that such an assembly "have a more prominent role to play in the form of parliamentary scrutiny, and also in the wider efforts to reform the WTO processes, and its rules" [9]. However, Dr. Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasons [10]:

  • It does not resolve the problem of “informal meetings” whereby industrialized countries negotiate the most important decisions;
  • It does not reduce the de facto inequality which exists between countries with regards to an effective and efficient participation to all activities within all WTO bodies;
  • It does not rectify the multiple violations of the general principles of law which affect the dispute settlement mechanism.

Ministerial conferences

First ministerial conference

Main article: WTO Ministerial Conference of 1996

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".

Second ministerial conference

Main article: WTO Ministerial Conference of 1998

Was held in Geneva.

Third ministerial conference

Main article: WTO Ministerial Conference of 1999

The third conference in Seattle, Washington ended in failure, with massive demonstrations and riots drawing worldwide attention.

Fourth ministerial conference

Main article: WTO Ministerial Conference of 2001

Was held in Doha.

Fifth ministerial conference

Main article: WTO Ministerial Conference of 2003

The ministerial conference was held in Cancún, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20 (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.

Sixth ministerial conference

Main article: WTO Ministerial Conference of 2005

The sixth WTO Conference Ministerial was held in Hong Kong from December 13 - December 18, 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 - but with up 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2006.

See also

References and further readings

Books and reports on the WTO

Articles on the WTO

Articles by the WTO

External links

Wikiquote has a collection of quotations related to:

Official WTO Pages

Government Pages on the WTO

Media Pages on the WTO

Non-Governmental Organization Pages on the WTO (Alphabetical List)


World Trade Organization (WTO)
AlbaniaAngolaAntigua and BarbudaArgentinaArmeniaAustraliaBahrainBangladeshBarbadosBelizeBeninBoliviaBotswanaBrazilBruneiBulgariaBurkina FasoBurundiCambodiaCameroonCanadaCentral African RepublicChadChilePeople's Republic of China (PRC)ColombiaCongoCosta RicaCôte d'IvoireCroatiaCubaDemocratic Republic of the CongoDjiboutiDominicaDominican RepublicEcuadorEgyptEl SalvadorEuropean CommunitiesFijiFYR MacedoniaGabonThe GambiaGeorgiaGhanaGrenadaGuatemalaGuineaGuinea BissauGuyanaHaitiHondurasHong Kong (PRC)IcelandIndiaIndonesiaIsraelJamaicaJapanJordanKenyaKuwaitKyrgyzstanLesothoLiechtensteinMacau (PRC)MadagascarMalawiMalaysiaMaldivesMaliMaltaMauritaniaMauritiusMexicoMoldovaMongoliaMoroccoMozambiqueMyanmarNamibiaNepalNew ZealandNicaraguaNigerNigeriaNorwayOmanPakistanPanamaPapua New GuineaParaguayPeruPhilippinesQatarRomaniaRwandaSaint Kitts and NevisSaint LuciaSaint Vincent & the GrenadinesSaudi ArabiaSenegalSierra LeoneSingaporeSolomon IslandsSouth AfricaSouth KoreaSri LankaSurinameSwazilandSwitzerlandSeparate Customs Territory of Taiwan, Penghu, Kinmen, and MatsuTanzaniaThailandTogoTrinidad and TobagoTunisiaTurkeyUgandaUnited Arab EmiratesUnited StatesUruguayVenezuelaZambiaZimbabwe
Personal tools