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The World Trade Organization (WTO) is a multinational rules-based and member driven organization which oversees a large number of agreements defining the "rules of trade" between its member states (WTO, 2004a). The WTO is the heir to the never-created International Trade Organization that was originally charged with a mission encompassing not only trade issues but also issues of environment and development. The WTO, as opposed to the ITO, focuses only on trade issues and largely overlooks other concerns in closed proceedings. However since the Doha Development Agenda was agreed in November 2001 there has been a partial attempt to incorporate development issues in its discussions.
WTO headquarters are located in Geneva, Switzerland. On May 13, 2005, Pascal Lamy was elected the Director-General. He took over from Supachai Panitchpakdi on September 1, 2005. As of December 15, 2005, there are 150 members in the organization, with the Kingdom of Tonga becoming the 150th member. Most of the countries are developing countries. 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).
In the late 1990s, the WTO became a major target of protests by the anti-globalization movement. See critique.
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The WTO was established on January 1, 1995 to replace the General Agreement on Tariffs and Trade (GATT), a series of post-war trade treaties intended to facilitate free trade. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them. Unlike the GATT, the WTO has a substantial institutional structure.
The WTO is effectively the long-delayed successor to the expected International Trade Organization, which was originally intended to follow the GATT. The International Trade Organization 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).
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 take 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 Eirik Glenne (Norway).
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
Under each of the three councils, there are subsidiary bodies under each one.
1. The Goods Council- subsidiary under the Council for Trade in Goods. It has 11 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so on), which include the following. Again, these committees consist of all member 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
The WTO aims to encourage smooth and free trade by promoting lower trade barriers and providing a platform for the negotiation of trade and to resolve disputes between member nations, when they arise. The goal is to help producers of goods and services, exporters, and importers conduct their business.
Principles of the trading system
The WTO discussions should follow these fundamental principles of trading.
The WTO has two basic functions: as a negotiating forum for discussions of new and existing trade rules, and as a trade dispute settlement body.
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 determined by consensus. This does not necessarily mean that unanimity is found: only that no Member finds a decision so unacceptable that they must insist on their objection. Voting is only employed as a fall-back mechanism or in special cases.
The advantage of consensus 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. 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 (WTO, 2004d). The talks have been highly contentious and agreement has not been reached, despite continuing talks in Cancún, Geneva, and Paris. The Sixth Ministerial Conference was held in Hong Kong on December 13 - December 18, 2005.
Like most other international organizations, the WTO has no significant power to enforce the decisions it makes when a member brings a complaint against another. If decisions of its Dispute Settlement Body are not complied with, it may authorise "retaliatory measures" on the part of the complaining member, but no other enforcement action is available. This means that economically powerful states like the United States can essentially ignore rulings against them from complaints brought by the economically weak, as the latter states simply do not have the power to hurt US trade enough to force the US to change its position. This has been the case, for example, with the March 2005 Appellate Body ruling in case DS 267 declaring US cotton subsidies illegal.
The WTO has 150 members (76 members at its foundation and a further 74 members joined over the following ten years). The 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. A current list of members can be found here.
A number of non-members have been observers (31) at the WTO and are currently negotiating their membership: Algeria, Andorra, Azerbaijan, Bahamas (process freezed 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, Iraq, Kazakhstan, Lao People's Democratic Republic, Lebanese Republic, Libya, Russian Federation, Samoa, Sao Tome and Principe, Serbia and Montenegro (each republic is applying for separate membership), Seychelles (negotiations freezed since 1998), Sudan, Tajikistan, Ukraine, Uzbekistan, Vanuatu (accession agreed in 2001, but not ratified by Vanuatu itself), Vietnam and Yemen.
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.
Russia, having first applied to join GATT in 1993, is not yet a member either.
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.
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.
The WTO includes more than 20 agreements which have the status of international legal texts. Member countries must sign and ratify all agreements. A list of WTO agreements can be found here A discussion of some of the most important agreements follows.
The AoA came into effect with the establishment of the WTO at the beginning of 1995. Its effect has been to reduce tariff protections for small farmers – a key source of income for developing countries – while allowing rich countries to pay their farmers massive subsidies which developing countries could never afford. The AoA has three central concepts, or "pillars": domestic support, market access and export subsidies.
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. [1]
The AoA's domestic support system currently allows Europe and the US to spend $380 billion every year 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." [2]. 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”.
(See General Agreement on Trade in Services)
(See Agreement on Trade-Related Aspects of Intellectual Property Rights)
The WTO’s agreement on “sanitary and phytosanitary standards” (SPS) came into effect in 1995, and aims to restrict the use of quarantine measures to allow a “free” flow of international trade. Under the SPS agreement the WTO sets constraints on government policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases). Quarantine policies plays a vitally important role in ensuring the protection of human, animal and plant health. But in the eyes of the WTO's 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.
SPS & Genetically-Modified Organisms (GMOs)
The US – which grows as much as 80% of the world’s GM crops – has used the SPS agreement to challenge the EU’s laws restricting the import of Genetically-Modified Organisms (GMOs), arguing they are “unjustifiable” and illegal under WTO rules. The WTO is due to decide the case in 2006. If it decides that the EU laws are illegal, the decision will also put in jeopardy the Cartagena Biosafety Protocol – the first legally binding global agreement giving countries the right to reject GM organisms on the basis of the precautionary principle.
The stated aim of the WTO is to promote free trade, stimulate economic growth and hence make people's lives more prosperous.
The WTO also promotes economic globalization, which anti-globalization activists consider problematic. WTO treaties have been accused of a partial and unfair bias toward multinational corporations and wealthy nations.
The WTO is criticized as being the tool of powerful lobbies.
Small countries in the WTO wield little influence. Despite the WTO aim of helping the developing countries, the influential states in the WTO focus on their own commercial interests. The needs of the developing countries are often perceived to be ignored. In addition, the issues of health, safety and environment are steadfastly ignored.
Jagdish Bhagwati, although pro-free trade and pro-globalization, has strongly criticised 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 nongovernmental 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 decisionmaking [3]. 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" [4]. However, Dr. Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasons [5]:
The computer game Deus Ex: Invisible War features a fictional WTO with seemingly more of a military function, providing technology and military support to cities caught in the "Collapse".
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 third conference ended in failure, with massive demonstrations and riots drawing worldwide attention.
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.
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 of2006.
The conference was notable for continual verbal sparring between the EU Trade Representative Peter Mandelson and the US Trade Representative Rob Portman over the issue of farm subsidies, and the key role played by the G20 group of middle income developing countries led by Brazil and India. They announced an alliance with other developing countries and worked closely with them on some issues. Nevertheless the talks were crticised by many development groups for not putting fair trade at the centre of the agenda. Even the UK trade minister Alan Johnson characterised the meeting as "one step up from failure."
The protests at this conference turned out to be the closest to the venue of a conference in WTO history; the police were forced to use tear gas to prevent the protesters forcing their way into the venue, the Hong Kong Convention and Exhibition Centre. An estimated 10,000 protesters were present in Hong Kong during the meeting, and the areas around the convention center where the meetings took place were barricaded from 6pm on December 12, 2005.
Very prominent amongst the protesters were South Korean farmers who have a history of militant and desperate actions, with one having committed suicide at the last conference to bring international attention to their plight.
The protesters' main agenda was to stop the WTO talks by staging roadblocks to prevent delegates from getting to the conference. The government had already started to glue down bricks used to pave the pavement, so as to prevent the use of bricks as weapons. Businesses around the Wan Chai area, where the conferences were taking place had been informed to tighten up their security, such as metal gates and boarded-up windows.
Gendered impact of China's entry into WTO: A conceptual scheme to understand vulnerability
More references at the WorldTradeLawnet Bibliography.