WORLD TRADE ORGANIZATION (WTO)
Centre William Rappard Telephone: (22)739-5111 154 rue de Lausanne (22)739-5007 CH-1211 Geneva 21 (Info. & Media Relations) Switzerland Facsimile: (22)731-4206 (22)739-5458 (Info. & Media Relations) Telex: 412324 GATT CH Cable: GATT GENEVE E-Mail: email@example.com Internet: www.wto.org Director-General: ... Supachai PANITCHPAKDI
LANGUAGES: English, French, Spanish
ESTABLISHMENT AND FUNCTIONS
The World Trade Organization (WTO) is the legal and institutional foundation of the multilateral trading system. It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations. It is the platform on which trade relations among countries evolve through collective debate, negotiation and adjudication.
The WTO was established on January 1, 1995. Governments concluded the Uruguay Round negotiations on December 15, 1993 and Ministers gave their political backing to the results by signing the Final Act at a meeting in Marrakesh, Morocco in April 1994. The "Marrakesh Declaration" of April 15, 1994, affirmed that the results of the Uruguay Round, the eighth trade round held under the auspices of the General Agreement on Tariffs and Trade (GATT), would "strengthen the world economy and lead to more trade, investment, employment and income growth throughout the world". The WTO is the embodiment of the Uruguay Round results and the successor to the GATT.
Not only does the WTO have a larger membership than GATT (144 countries by February 2002 versus 128 for GATT), it also has a much broader scope in terms of the commercial activity and trade policies it applies. The GATT applied only to trade in merchandise goods; the WTO covers trade in goods, services and "trade in ideas" or intellectual property.
The essential functions of the WTO are to: administer and implement the multilateral and plurilateral trade agreements which together make up the WTO; act as a forum for multilateral trade negotiations; seek to resolve trade disputes; oversee national trade policies; and cooperate with other international institutions involved in global economic policy-making.
The WTO agreement contains some 29 individual legal texts - covering everything from agriculture to textiles and clothing, and from services to government procurement, rules of origin and intellectual property. Added to these are more than 25 additional Ministerial declarations, decisions and understandings which spell out further obligations and commitments to WTO members.
WTO rules now extend to such traditionally sensitive sectors as trade in agricultural products and textiles and clothing. For agriculture, the rules cover market access conditions, domestic support measures, export subsidy restrictions and food safety, plant and animal health regulations. For trade in textiles and clothing, new rules call for a 10-year phase out of the Multi-fibre Arrangement and a complete integration of this sector into WTO rules.
The first multilateral agreement for trade in services spells out obligations for members such as coverage, national treatment, market access and a framework for the progressive liberalization of trade in services. Agreements on market access commitments for basic telecommunications and financial services were reached in 1997. Another first is the agreement on the trade-related aspects of intellectual property rights (TRIPS). This agreement not only addresses different kinds of intellectual property rights such as copyrights, patents and performers' rights but also protects geographic indications, industrial designs, trademarks and trade-secrets and know-how. For trade in goods, WTO rules cover areas such as anti-dumping practices, subsidies and countervailing measures, customs valuation and import licensing. The rules seek to clarify when such measures can be used, to what extent and how. They are accompanied by various mechanisms to ensure transparency, such as notification procedures.
A number of simple and fundamental principles run throughout all of the above-mentioned agreements which, together, make up the new multilateral trading system. Key provisions of the WTO rules outlaw discrimination among members and between imported and domestically-produced merchandise. For example, according to Article I, the "most-favored-nation" (MFN) clause, members are bound to grant to the products of other members treatment no less favorable than that accorded to the products of any other country. A second form on non-discrimination known as "national treatment", requires that once goods have entered a market, they must be treated no less favorably than the equivalent domestically-produced goods.
Following the establishment of the GATT in 1948, average tariff levels fell progressively through a series of seven trade rounds. The Uruguay Round added to that success, cutting tariffs substantially, sometimes to zero, while raising the overall level of bound tariffs significantly. The tariff reductions commitments made by more than 120 countries in the Uruguay Round are contained in some 22,500 pages of national tariff schedules.
Tariff reductions, for the most part phased in over five years, will result in a 40 percent cut in developed countries' tariffs on industrial products, from an average of 6.3 percent to 3.8 percent, and a jump from 20 to 44 percent in the value of imported industrial products that receive duty-free treatment in developed countries. At a higher end of the tariff structure, the proportion of imports into developed countries from all sources that encounter tariffs above 15 percent will decline from 7 to 5 percent and from 9 to 5 percent for imports from developing countries.
The Uruguay Round increased the percentage of bound product lines from 78 to 99 percent for developed countries, 21 to 73 percent for developing economies and from 73 to 98 percent for economies in transition - results which provide a substantially higher degree of market security for traders and investors.
The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following: (a) The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat; (b) the GATT was applied on a "provisional basis" even if, after more than forty years, governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent; (c) the GATT rules applied to trade in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property; (d) while GATT was a multilateral instrument, by the 1980s many new agreements had been added of a plurilateral, and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership; and (e) the WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.
The "GATT 1947" continued to exist until the end of 1995. However, the GATT continues as "GATT 1994", the amended and up-dated version of GATT 1947, which is an integral part of the WTO Agreement and which continues to provide the key disciplines affecting international trade in goods.
The WTO continues GATT's tradition of seeking to make decisions not by voting but by consensus. This procedure allows members to ensure their interests are properly considered even though, on occasion, they may decide to join a consensus in the overall interests of the multilateral trading system. Where consensus is not possible, the WTO agreement allows for voting. In such circumstances, decisions are taken by a majority of the votes cast and on the basis of "one country, one vote".
There are four specific voting situations envisaged in the WTO Agreement. First, a majority of three-quarters of WTO members can vote to adopt an interpretation of any of the multilateral trade agreements. Second, and by the same majority, the Ministerial Conference, may decide to waive an obligation imposed on a particular member by a multilateral agreement. Third, decisions to amend provisions of the multilateral agreements can be adopted through approval either by all members or by a two-thirds majority depending on the nature of the provision concerned. However, such amendments only take effect for those WTO members which accept them. Finally, a decision to admit a new member is taken by a two-thirds majority in the Ministerial Conference.
The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system and WTO members commit themselves not to take unilateral action against perceived violations of the trade rules but to seek recourse in the multilateral dispute settlement system and to abide by its rules and findings.
At a Dispute Settlement Body (DSB) meeting held within 30 days of the adoption of the panel or appellate report, the party concerned must state its intentions in respect of the implementation of the recommendations. If it is impractical to comply immediately, the member will be given a "reasonable period of time" - to be set by the DSB - to do so. If it fails to act within this period, it is obliged to enter into negotiations with the complainant in order to determine a mutually-acceptable compensation - for instance, tariff reductions in areas of particular interest to the complainant.
If, after 20 days, no satisfactory compensation is agreed, the complainant may request authorization from the DSB to suspend concessions or obligations against the other party. The DSB should grant this authorization within 30 days of the expiry of the "reasonable period of time" unless there is a consensus against the request.
In principle, concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement. In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions may be made under another agreement.
In any case, the DSB will keep under surveillance the implementation of adopted recommendations or rulings, and any outstanding case will remain on its agenda until the issue is resolved.
At the end of 1994, developing countries accounted for 97 of the total GATT membership of 128 and, together with countries currently in the process of "transition" to market-based economies, they are expected to play an increasingly important role in the WTO as the Organization's membership expands. As a consequence, much attention is paid to the special needs and problems of developing and transition economies. For instance, the WTO Secretariat, alone or in cooperation with other international organizations, conducts missions and seminars and provides specific, practical technical cooperation for governments and their officials dealing with accession negotiations, implementing WTO commitments or seeking to participate effectively in multilateral negotiations. Courses and individual assistance is given on particular WTO activities including dispute settlement and trade policy reviews. Moreover, developing countries, especially the least-developed among them, are helped with trade and tariff data relating to their own export interests and to their participation in WTO bodies. In October 1997, the WTO members organized a high-level meeting for least-developed countries during which these countries expressed their needs and worked out, in cooperation with six international agencies (IMF, ITC, UNCTAD, UNDP, World Bank and WTO), integrated assistance programs.
The WTO also examines the links between trade and the environment. A committee on this subject was established in early 1995 to explore issues such as: multilateral environmental agreements; the sustainable development, environment and trade interface; improved market access, in particular to exports of developing countries; trade in domestically prohibited goods; packaging, labelling and re-cycling requirements and the transparency of trade-related environmental measures. The Committee reported its recommendations to the first biennial meeting of the WTO Ministerial Conference which took place in December 1996 in Singapore. At that time, its work and terms of reference were reviewed; the Ministers decided that the Committee should continue its work on the same issues and under the same terms of reference.
At the Fourth Ministerial Conference of the WTO in Doha, Qatar, Trade Ministers of the WTO Members agreed to launch new negotiations. The Doha Ministerial declaration provides the mandate for negotiations on a range of subjects and other work, including issues concerning the implementation of the present agreements. The negotiations include those on agriculture and services, which began in early 2000. A number of other issues have now been added. The declaration sets January 1, 2005 as the date for completing all but two of the negotiations. Negotiations on the Dispute Settlement Understanding are to end in May 2003; those on a multilateral register of geographical indications for wines and spirits, by the next Ministerial Conference in 2003. Progress is to be reviewed at the Fifth Ministerial Conference in 2003 to be held in Mexico - the exact date still to be set. The negotiations take place in the Trade Negotiations Committee and its subsidiaries. Other work under the work programme takes place in other WTO councils and committees.
144 members: Albania, Angola, Antigua and Barbuda, Argentina, Australia, Austria, Bahrain, Bangladesh, Barbados, Belgium, Belize, Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Burundi, Cameroon, Canada, Central African Republic, Chad, Chile, China, Democratic Republic of the Congo, People's Democratic Republic of the Congo, Colombia, Costa Rica, Côte d'Ivoire, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, European Communities, Fiji, Finland, France, Gabon, The Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong, China, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kenya, Korea, Kuwait, Kyrgyz Republic, Latvia, Lesotho, Liechtenstein, Lithuania, Luxembourg, Macau, China, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Namibia, Netherlands (for the Kingdom in Europe and for the Netherlands Antilles), New Zealand, Nicaragua, Niger, Nigeria, Norway, Sultanate of Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Rwanda, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Senegal, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Suriname, Swaziland, Sweden, Switzerland, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Zambia, Zimbabwe
The structure of the WTO is dominated by its highest authority, the Ministerial Conference, composed of representatives of all WTO members, which is required to meet at least every two years and which can take decisions on all matters under any of the multilateral trade agreements.
The day-to-day work of the WTO, however, falls to a number of subsidiary bodies; principally the General Council, also composed of all WTO members, which is required to report to the Ministerial Conference. As well as conducting its regular work on behalf of the Ministerial Conference, the General Council convenes in two particular forms - as the Dispute Settlement Body, to oversee the dispute settlement procedures, and as the Trade Policy Review Body to conduct regular reviews of the trade policies of individual WTO members.
The WTO General Council convenes as the Dispute Settlement Body (DSB) to deal with disputes arising from any agreement contained in the Final Act of the Uruguay Round. Thus, the DSB has the sole authority to establish panels, adopt panel and appellate reports, maintain surveillance of implementation of rulings and recommendations, and authorize retaliatory measures in cases of non-implementation of recommendations.
The WTO dispute settlement mechanism gives the possibility of appeal to either party in a panel proceeding. Appeals are heard by a standing Appellate Body established by the DSB. This Appellate Body is composed of seven persons - broadly representative of WTO membership - who will serve four-year terms. They are required to be persons of recognized standing in the field of law and international trade, and not affiliated with any government.
The WTO Secretariat, located in Geneva, has about 500 staff and is headed by a Director-General and four Deputy Directors-General. Its responsibilities include the servicing of WTO delegate bodies with respect to negotiations and the implementation of agreements. It has a particular responsibility to provide technical support to developing countries, and especially the least-developed countries. WTO economists and statisticians provide trade performance and trade policy analysis while its legal staff assist in the resolution of trade disputes involving the interpretation of WTO rules and precedents. The Secretariat's work is also concerned with accession negotiations for new members and providing advice to governments considering membership.
The WTO budget is about US$79 million with individual contributions calculated on the basis of shares in the total trade conducted by WTO members. Part of the WTO budget also goes to the International Trade Centre.
WTO Focus (published 12 times a year); WTO Annual Report (released in April); Trade Policy Reviews (by country); Studies (Financial Services; Electronic Commerce)
UPDATED: September 4, 2002