The WTO’s creation was agreed to at the end of the 1986-93 Uruguay Round of international trade negotiations. The agreement was formalised in the Final Act of the Round. Which was signed by trade ministers in Marrakesh, Morocco, in April 1994.
Launched on January 1, 1995, it replaced the old General Agreement on Tariffs and Trade (GATT), which had acted as an “interim” world trade watchdog since 1948.
Status: It is officially defined as “the legal and institutional foundation of the multila-teral trading system.” Unlike GATT, the WTO is a permanent organisation created by international treaty ratified by the governments and legislatures of member states.
As the principle international body concerned with solving trade problems between countries and providing a forum for multilateral trade negotiations, it has global status similar to that of the International Monetary Fund and the World Bank. But unlike them, it is not a United Nations agency although, it has a “co-operative relationship” with the United Nations.
Its underlying documents are the General Agreement a 38-article code aimed at ensuring open and fair trade in goods, services, agricultural produce and textiles and 500 pages of specific accords reached in the Uruguay Round.
Most-favoured-nation (MFN) – Article 1 of the General Agreement – which binds all members to give equal treatment to the products and services of all other WTO states. But there are let-outs.
The WTO is headed by a director-general (currently Renato Ruggiera, former Italian Trade Minister) who has four deputies from different member states. The WTO’s ruling body is the General Council, comprising each member country’s permanent envoys. It sits in Geneva an average of once a month. Its supreme authority is the Ministerial Conference, to be held every two years.
The General Council appoints the director-general to a four-year term after consultations among member countries.
Currently, 125 countries. But three more are expected to join during the Singapore Ministerial Conference. Members range from the “Quad Group” of top four world trade powers – the United States, the European Union, Japan and Canada to the increasingly influential emerging economies of Asia to some of the world’s poorest countries, like Bangladesh, Guinea and Solomon Islands.
The membership applications of 28 others are being examined by working parties of present members to see if applicants’ domestic trade laws and practices conform to WTO rules.
Notable among these are China, Russia, Taiwan, Saudi Arabia and Ukraine. The entry of all pending applicants will bring in practically every state that engages in foreign trade.
The possible memberships of Iran, Iraq, Libya, Syria and North Korea have been cast in doubt, mainly due to pressure from the United States, which sees them as “rogue states.”
Two key units are the Dispute Settlement Body (DSB) and the Trade Policy Review Body (TPRB). The DSB, on which all member countries can sit, usually meets twice a month to hear complaints of violations of WTO rules and agreements. It sets up expert panels to study disputes and decide if the rules are being broken. The DSB’s final decisions, unlike those of a similar but less powerful body in the old GATT, cannot be blocked.
The TPRB is a forum for the entire membership to review the trade policies of all WTO states. Major trading powers are reviewed the trade policies of all WTO states. Major trading powers are reviewed every two yeas, others every four years.
Other major bodies are the Council for Trade in Goods, the Council for Trade in Services and the Council for Trade in Services and the Council for Trade-Related Aspects of Intellectual Property Rights.
Successes so far:
The DSB, which in the two years of its existence has already had over 60 disputes brought to it – as many as would go to GATT in a decade. WTO members see the DSB as producing fair and more-or-less enforceable rulings.
Developing countries regard it as a strong line of defence against more powerful economies – its first ruling was against a U.S. gasoline tax and Washington agreed to amend its law as a result. The United States has taken Japan to the DSB rather than declare unilateral sanctions – as it might have done in the past – in a dispute over the Japanese photographic-film market.
Failures so far:
Negotiations on liberalising world markets in financial services, maritime services and basic telecommunications – which should have been completed in the Uruguay Round but were set aside for later – all ended without global accords. In all three, the United States argued that market-opening offers from other countries, especially in the developing world, were insufficient. But telecom talks have resumed and the hope is that the ministers will push in Singapore for an accord to be reached by a February 15, 1997, deadline.
The proliferation of regional trade agreements like the Asia-Pacific Economic Co-operation (APEC) forum and the North American Free Trade Agreement (NAFTA), for which there is a let-out from MFN under the General Agreement. Some analysts fear regional trade groupings could turn into hostile economic an political blocs battling for markets and access to resources.
The WTO also faces growing pressures for protectionism among legislators and workers in the major industrial powers, and especially the United States, who say free trade and “globalisation” of the world economy mean jobs will be stolen by developing countries with cheaper labour.