WORLD TRADE ORGANIZATION (WTO) (Encyclopedia)
International organisation established by the Marrakesh agreement on January 1, 1995 in order to regulate commercial relations between member countries, specifically in terms of questions pertaining to legal agreements and instruments. The World Trade Organization’s activity is founded on the same principles at the heart of the GATT (General Agreement on Tariffs and Trade), whose role the WTO assumed by acknowledging the various agreements and conventions adopted. The passage from the GATT system to that of the World Trade Organization (WTO) took place at the end of a complex transition that finally concluded on January 1, 2006, the date in which the old system ceased to exist after having provided important support towards the creation of a stable commercial system contributing to unprecedented economic growth. Table 1 displays the WTO’s 153 current member states1:
Table 1 … Member Countries and Observing Countries
Source: WTO (2008)
Of these countries, 112 are original members, parties to the GATT, that accepted the WTO and other multilateral agreements without reserve; other countries joined later on, acquiring member status only after negotiations with the already member countries. Countries that are not yet members of the WTO or other international organisations are allowed to be considered "Observing Members". This condition, connected to procedural agreements of the Organisation, allows countries to follow the discussions about themes for which they may have a particular interest, without, however, any decision power. In addition, organisations that cooperate closely with the WTO are also observers, including the International Monetary Fund (IMF) and the World Bank, as well as institutions like the Organization for Economic Cooperation and Development (OECD), the United Nations (UN), the Food and Agricultural Organization (FAO), the European Bank for Reconstruction and Development (EBRD), the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Industrial Development Organization.
1. WTO’s basic principles
The WTO’s basic principles are the foundation of the multilateral trading system. In particular, the trading system should be:
- without discrimination … it means that a country should not discriminate between its trading partners, giving them equally "most-favoured-nation" or MFN status; furthermore, it should not discriminate between its own and foreign products, services or nationals, giving them "national treatment";
- freer … lowering trade barriers through negotiation; barriers include customs duties or tariffs and measures such as import bans or quotas that restrict quantities selectively;
- predictable … foreign companies, investors and governments should be confident that trade barriers, including tariffs and non-tariff barriers, should not be raised arbitrarily; tariff rates and market-opening commitments are "bound" in the WTO;
- more competitive … discouraging "unfair" practices such as export subsidies and dumping products at below cost to gain market share;
- more beneficial for less developed countries … giving them more time to adjust, greater flexibility, and special privileges.
In particular, by analysing the first principle well known as most-favoured-nation (MFN) treatment, we can observe that it is the priority of the General Agreement on Tariff and Trade (GATT). It is also included in the General Agreement on Trade in Services (GATS) and in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Although those three agreements cover all the three main areas of trade handled by the WTO, the principle is handled slightly differently in each of them. The MFN provides that each country treats all the other members equally as "most-favoured" trading partners. If a country applies some conditions to one trading partner, it has to give the same "best" treatment to all the other WTO members, so that they all remain "most-favoured". Some exceptions are allowed, but in any case, the principle ensures that each country treats its over 153 fellow-members equally.
As the former one, the principle of "national treatment" is found in all the three main WTO agreements, GATT, GATS and TRIPS, and it is handled slightly differently in each of these. It provides that imported goods receive the same treatment of national products, services or item of intellectual properties only once they have entered the market.
2. WTO’s organisational structure
The WTO shows an articulated organisational structure, constituted by principal governing bodies entrusted with general responsibilities, permanent subsidiary bodies, and subsidiary bodies responsible for specific matters. The Ministerial Conference, one of the principal bodies, meets collectively once every two years, but it can be convoked for an extraordinary meeting by the President’s initiative, or by request of the General Council or a majority of members. The Conference carries out the organisation’s typical functions, by taking the necessary action to that end. It also has the ability to make decisions on any situation regarding the underlying multilateral commercial agreements. The General Council, an executive body, exercises the functions of the Conference during the interval between meetings, gathering about 12 times a year to ensure the smooth and constant functioning of the organisation. The Council is also entrusted with monitoring the organisation’s functioning, as well as with ministerial decisions. The General Council also functions as a Dispute Settlement Body and a Trade Policy Review Body.
The following are permanent subsidiary bodies of the General Council:
- The Council for Trade in Goods
- The Council for Trade in Services
- The Council for Trade-Related Aspects of Intellectual Property Rights.
These bodies operate under the direction of the General Council and are responsible for the workings of the WTO agreements dealing with their respective areas of trade. In addition to these bodies, there is a series of specific committees.
The specific committees are:
- Committee on Trade and Development
- Committee on Balance of Payments Restrictions
- Committee on Budget, Finance and Administration
- Committee on Trade and Environment
- Committee on Regional Trade Agreements.
The WTO’s General Director2is appointed by the Ministerial Conference, and the director, in turn, appoints the officials of the Secretariat. The Director is responsible for the administration and management of the organisation and, as established in the institutional agreement, for presenting the annual budget forecast and finance report to the Committee on Budget and, once approved, to the General Council. It is also the responsibility of the Director to represent the WTO in all legal matters, and to act as a depository for all contracts.
3. WTO’s decision making process
The decision making process begins with informal consultation and council and committees meetings; decisions are normally taken by consensus; this process does not require the unanimous agreement between member countries, but rather consensus is achieved if no member present disagrees with a decision. In that case, issues are taken to a vote on a one-country, one-vote basis, regardless of each country’s economic and demographic weight. Each vote requires a given majority depending on the argument, the proposal and the effects of the discussion. The basic principles such as the most-favoured-nation (MFN) treatment and the principle of national treatment require unanimity to be modified; other kinds of contents can be modified by two-thirds of the members and repealed in part by three-fourths. No specified cases require simple majority.
4. WTO’s special policies
The WTO’s main functions have to do with trade negotiations and the enforcement of negotiated multilateral trade rules. The organisation implements four particular policies supporting four different functions:
- Assisting developing and transition economies: much attention is paid to needs and problems of developing and transition economies. Several programmes are organised jointly with other international organisations. Furthermore, the least-developed countries are helped with trade and tariff data relating to their own export interests and to their participation in WTO bodies;
- Specialised help for export promotion: the International Trade Center assists developing countries in formulating and implementing export promotion programmes as well as import operations and techniques. It was established by the GATT in 1964 and it is jointly operated by the WTO and the UN Conference on Trade and Development (UNCTAD). The centre’s help is freely available to the least-developed countries;
- Co-operation in global economic policy-making: the WTO cooperates with the International Monetary Fund, the World Bank and other multilateral institutions to achieve greater coherence in global economic policy-making;
- Routine notification when members introduce new trade measures or alter old ones: the WTO requires that countries notify the organisation when they take relevant actions in order to monitor whether commitments are being implemented. On the other side, the WTO’s website (www.wto.org) is the only manner to keep the public informed; the organisation’s objective is to make more information available to the public.
1As of July 3, 2008
2The position of General Director of the WTO has been held by Pascal Lenny since January 1, 2005.
Esposito, C., Istituzioni Economiche Internazionali e Governance Globale, Giappichelli Ed., 2009
Jackson J., The Uruguay Round and the WTO: New Opportunities for the Bretton Woods System, in Bretton Woods Commission, Bretton Woods: Looking to the Future, 1994.
WTO Segretariat, From GATT to the WTO: the Multilateral Trading System in the New Millennium, Kluver Law International, 2000.
WTO, Annual reports.
Editor: Federica ALFANI
© 2009 ASSONEBB