World Trade Organization: An Overview
The WTO was created on 1 January, 1995 to replace the General agreement on tariffs and 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 substantial institutional strueture The WTO is effective the long delayed successor to the anticipated International trade Organization which was originally intended to follow the GATT.
The ITO was initially envisaged, along with the International Monetary fund (IMF) and the world Bank, as one of the key pillars of past world war II reconstruction and economic development. In Havana in 1948, the UN conference on trade and Employment concluded draft charter for the ITO known as the Havana Charter, which would have created extensive rules governing trade, investment, services and business and employment practices. However, the United States failed to ratify the agreement. Meanwhile on agreement to phase out the use of import quotas and to reduce tariffs on merchandise trade negotiated by 23 countries in Geneva in 1947, come into force as the GATT on January 1, 1948.
The world trade organization is an international organization which oversees a large number of agreements defining the “Rules of trade’’ between its member states (WTO, 2004).
International organization established to supervise and liberlize world trade. The WTO is the successor to the General Agreement of Tariff and trade (GATT) which was created in 1947 in the expectation that it world soon be replaced by a specialized agency of the united Nations (UN) to be called the International trade Organization (ITO) although the ITO never materialized, the GATT proved remarkable successful in liberalizing world trade over the next five decades. By the late 1980 there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes. Following the completion at the Uruguay Round (1986-94) of multilateral trade negotiations, the WHO began operations on January 1, 1995. WTO headquarters are located in Geneva, Switzerland.
Benarjee (1994) claims that WTO is designed as a complete institutional structure of international trade. Furthermore. GATT 1994 is not a cntinuation of GATT 1974, rather it is a new document and vastly wider in its reach and compass. GATT 1994 is a new document in that is transcends the boundary of tariffs and trade and enters deep into the individual economy of member nations. It includes four new agreements, absent in GATT 1947, which interlock with individual national economy that would touch many sore points of weak economics. These are the Agreement on Agriculture, the Agreement on Trade-Related Investment Measures (TRIMS), the General Agreement on Trade in Services (GATS) and the agreement on Trade Related Aspects of Intellectual property right (TRIPS).
General Agreement on tariffs and trade functions as the foundation of the WTO trading system and remains in force although the 1995 agreement contains on updated version of it to replace the original 1947 one. It (GATT) was signed in Geneva on October 30, 1947, by 23 countries which accounted for four fifths of world trade. On the some day 10 of these countries including the United States, the United Kingdom, prance, Belgium and the Netherlands, signed a protocol bringing the agreement into force on January, 1948.
General agreement on tariff and trade set of multilateral trade agreements aimed at the abolition of quotas and the reduction of trariff duties among the contacting nations. When GATT was conduced by 23 countries at Geneva, in 1947, it was considered an interim arrangement pending the formation of a United Nation agency to supersede it. When such an agency failed to emerge, GATT was amplified and further enlarged at several succeeding negotiations. It subsequently proved to be the most effective instrument of world trade liberalization playing a major role in the massive expansion of world trade in the second half of the 20th country. By the lime GATT was replaced by the world trade organization (WTO) in 1995, 125 nations were signatories to its agreements which had become a code of conduct governing 90 percent of world trade GATT systematically sought to eliminate the latter. Other general rules included uniform customs regulations and the obligation of each constructing nation to negotiate for tariff cut upon the request of another.
GATT’s normal business involved negotiations on specific, trade problems affecting particular commodities or trading nation, but work out tariff reductions and other issues, Seven such “rounds” were held from 1947 to 1993, starting with those held at Geneva in 1947; and at Geneva in 1996 and again in 1960-62. The most important rounds were the so called kennedy Round (1946-67), the Tokyo Round (1973-73) and the Uruguay Round (1986-94) all held at Geneva These agreements succeeded in reducing average tariffs on the worlds industrial goods from 40 percent of their market value in 1947 to less than 5 percent in 1993.
The WTO’s rules the agreements are the result of negotiations between the members. The current set were, the outcome of the 1986-94 Uruguay Round negatiatious which included a major revision of the original General agreement on tariff and trade (GATT).
GATT is now the WTO’s principal rule book for trade in books. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual properly dispute settlement and trade policy reviews. The complete set runs to some 30,000 pages consisting about 60 agreements and separate commitments (called schedules) made by individual members in specific areas such as tower customs duty rates and services market opening.
Through these agreements, WTO members operate a non- discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing tries commitments.
The most favored nation (MFN) clause, one of the principal pillars of the GATT requires with few exceptions, that all imported items should face identical barriers irrespective of the source However, some of the exceptions that GATT allowed, as departures from MFN rules, are regionalism and special and differential (S & O) treatment that developing countries receive from the developed ones in terms of pre frontal lopper tariffs. These exceptions are made if certain conditions are fulfilled.
Over three quarters of WTO members are developing or least developed countries. All WTO agreements contain special provision for them, including longer time periods to implement agreements and commitments, measures to increases their trading opportunities, provisions requiring all WTO members to safeguard their trade interests and support to help them build the infrastructure for WTO work, handle disputes and implement technical standards.
The 2001 Ministerial conference in Doha set out tasks, including negotiations, for a wide range of issues concerning developing countries. Some people call the new negotiations the Doha development Round.
A WTO committee on trade and development assisted by a sub-committee on least developed countries, looks at developing countries special needs. Its responsibility includes implementation of the agreements, technical cooperation, and the increased participation of developing countries in the global trading system.
Besides, The LDCs (Less development countries) agrue that they are special and different from the developed ones in terms of their incomes balance of trade, and balance of payments. The balance of payments problem makes trade liberalization difficult and the import substituition strategies suggest than trade liberlization in undesirable. There fore their poor export potentiality requires them to receive S & D treatment from developed countries in terms of lower trade barriers (Whalley, 1990) Such treatments make a different trade relation between a poor country and a reach one as opposed to that between a pair of LDCs or affluent ones which in country to the multilateral based liberalization effort.
The WTO organize around 100 technical cooperation missions to developing countries annually. It holds on average three trade policy course each year in Geneva for government officials. Regional seminars are held regularly in all regions of the world with a special emphasis on African countries. Training courses are also organized in Geneva for official from countries in transition from central planning to market economies.
The WTO set up reference country in over 100 trade ministries and regional originations in capitals of developing and least developed countries, providing computers and internet access to the WTO’s immense databases of official document and other material.
The Organization OF World Trade Organization
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. And another activities of WTO are:
i) Facilitate the management of the multilateral trade Agreement and the plurilateral trade agreements for the fulfillment of their obligations.
ii) All Multilateral Trade Relations concerning the above Agreements will be negotiated by the members in this forum.
iii) WTO will also facilitate implementation of the results of the negotiations as deeded by the Ministerial conference.
iv) The WTO shall administer the understanding on Rules and procedures Governing the settlement of Disputes, forming part of the Agreements (MTAs and PTAs)
v) The WTO is responsible for administration of the Trade Policy Review Mechanism (TPRM) forming part of the Agreement.
vi) WTO is also the organ for establishing co-ordination with other wings of the UNO such as the International Monetary Fund and the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies.
Structure: The WTO had 76 members it its creation A further 72 members joined here Now the WTO has 148 Members, Accounting for over 97% of world trade. Around 30 other are negotiating membership Decisions are made by the cattier membership. This is typically consenus. A majority is also possible but it has never been used in the WTO and was extremely rare under the WTO’s Predecessor, GATT. The WTO’s agreements have been ratified in all member’s parliaments.
The decision making by the WTO shall be by consensus. Where consensus is not availiable the issue shall be decided by voting decision of the Ministerial Conference and the General council shall be taken by a majority of the votes cost unless otherwise provided in the Multilateral Trade Agreement (MTA)
Each Member shall has one vote, when the European communities exereise their right to vote, they shall have a number of votes equal to the number of their Member states who members of the WTO.
The Ministerial conference and the General Council shall have the exclusive authority of interpretation of this Agreement and the Multilateral trade Agreements.
In the case of the interpretation of Multilateral Agreements where there is a specific Council the Ministerial conference and the General council their authority on the basis of recommendation by the respective overseeing the functioning of the Agreement.
An interpretation shall be adopted by consensus : shall be adopted by three fourths majority of the members.
The Ministerial Conference may decide to wave an imposed on a member by this Agreement or any of the multilateral trade Agreement Provided that such decision shall have approval of three fourths of the Members.
Any waiver of obligations of a member, granted under these provisions, shall be reviewed as per terms of this agreement.
The decisions under a plurilateral trade agreement inducing any decision on interpretations and waivers, shall be governed by the provision of the agreement.
The WTO secretariat based in Geneva, has around 560 staff and is headed by a director general. It does not have branch offices outside themselves, the Secretariat does not have the decision making rote that other international bureaucracies are given.
The Secretarial also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. The annual budget is roughly 155 million Swiss Francs.
Pre an Post Uruguay Tariff Rates for Selected Goods (in percentages)
|Country||Texbles & Clothing||Leather goods||Fishing|
|Pre- Post %
Uruguay Uruguay Reduction
1 2 3
|Pre- Post %
Uruguay Uruguay Reduction
1 2 3
|Pre- Post %
Uruguay Uruguay Reduction
1 2 3
|USA||19.58 17.45 10.8||9.99 9.25 7.4||1.37 1.16 15.3|
|EEC||9.94 8.30 16.5||7.21 5.91 18.0||6.79 6.22 8.4|
|Japan||10.39 6.83 34.2||10.53 8.54 18.9||5.54 4.18 24.5|
|Third World||12.10 8.78 27.5||11.04 7.12 35.5||6.63 4.99 24.7|
Post-Uruguay Tariff-cut Commitments by Various Countries (in percentage)
Cuts offered by Hong Kong are zero, for, being a free port, it has nothing to out Source: Indian Express, Kochi, June 27, 1994.
· 1986-1994-Uruguay Round of GATT negotiations culminating in the Marrakech Agreement that established the WTO.
· January 1, 1995-The WTO came into existence.
· May 1, 1995-Renato Ruggiero became director-general for a 4-year term.
· December 9- December 13, 1996-The inaugura ministerial conference in Singapore. 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”.
· May 18- May 20, 1998-2nd ministerial conference in Geneva, Switzerland.
· September 1, 1999-Mike Moore became director-general. The post had been fiercely contested; eventually a compromise was reached with Mike Moore and Supachai Panitchpakdi taking half each of a six-year term.
· November 30- December 3, 1999-3rd ministerial conference in Seattle, Washington, USA. The conference itself ended in failure, with massive demonstrations and riots drawing worldwide attention.
· November 9- November 13, 2001-4th ministerial conference in Doha, Qatar begins the Doha round. Issuance of the Doha Declaration.
· December 11, 2001-The People’s Republic of China joined the WTO after 15 years of negotiations (the longest in GATT history). The Republic of China (Taiwan) would follow shortly thereafter as Chinese Taipei.
· September 1, 2002-Supachai Panitchpakdi became director-general.
· September 10- September 14, 2003-5th ministerial conference in Cancun. Mexico aims 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-calied “Singapore issues” and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress.
· August 2004-Geneva talks achieve a framework agreement on the Doha round. Developed countries will lower agricultural subsdies, and in exchange the developing countries will lower tariff barriers to manufactured goods.
· October 2004-Cambodia becomes last nation so far to join the WTO
· May 2005-Paris talks aimed at finalizing issues for agreement before the December 2005 ministerial conference in Hong Kong are hung over technical issue. The group of five (U.S., Australia, the EU. Brazil and India) fail to agree over chicken, beef and rice. France continues to protest restrictions on subsidies to farmers. Oxfam accuses the EU of delaying tactics which threaten to scupper the Doha round.
· December 13-December 18, 2005-6th ministerial conference will be held in Hong Kong.