Downloaded from a2zmba.blogspot.

com

World Trade Organisation

The World Trade Organization (WTO) is an international organization

designed to supervise and liberalize international trade. The WTO came into
being on January 1, 1995, and is the successor to the General Agreement on
Tariffs and Trade (GATT), which was created in 1947, and continued to
operate for almost five decades as a de facto international organization.
The World Trade Organization deals with the rules of trade between nations
at a near-global level; it is responsible for negotiating and implementing new
trade agreements, and is in charge of policing member countries' adherence
to all the WTO agreements, signed by the bulk of the world's trading nations
and ratified in their parliaments. Most of the WTO's current work comes
from the 1986-94 negotiations called the Uruguay Round, and earlier
negotiations under the GATT. The organization is currently the host to new
negotiations, under the Doha Development Agenda (DDA) launched in
2001.
The WTO is governed by a Ministerial Conference, which meets in every
two years; a General Council, which implements the conference's policy
decisions and is responsible for day-to-day administration; and a director-
general, who is appointed by the Ministerial Conference. The WTO's
headquarters are in Geneva, Switzerland.

MISSION, FUNCTIONS AND PRINCIPLES

The WTO's stated goal is to improve the welfare of the peoples of its
member countries, specifically by lowering trade barriers and providing a
platform for negotiation of trade.
Its main mission is "to ensure that trade flows as smoothly, predictably and
freely as possible".
This main mission is further specified in certain core functions serving and
safeguarding five fundamental principles, which are the foundation of the
multilateral trading system.

FUNCTIONS
Downloaded from a2zmba.blogspot.com

Among the various functions of the WTO, these are regarded by analysts as
the most important:
• It oversees the implementation, administration and operation of the
covered agreements.
• It provides a forum for negotiations and for settling disputes.
• Additionally, it is the WTO's duty to review the national trade
policies, and to ensure the coherence and transparency of trade
policies through surveillance in global economic policy-making.
• Another priority of the WTO is the assistance of developing, least-
developed and low-income countries in transition to adjust to WTO
rules and disciplines through technical cooperation and training.
• The WTO is also a center of economic research and analysis: regular
assessments of the global trade picture in its annual publications and
research reports on specific topics are produced by the organization.
• Finally, the WTO cooperates closely with the two other components
of the Bretton Woods system, the IMF and the World Bank.

PRINCIPLES OF THE TRADING SYSTEM

The WTO establishes a framework for trade policies; it does not define or
specify outcomes. That is, it is concerned with setting the rules of the trade
policy games. Five principles are of particular importance in understanding
both the pre-1994 GATT and the WTO:

• Nondiscrimination. It has two major components: the most favoured

nation (MFN) rule, and the national treatment policy. Both are
embedded in the main WTO rules on goods, services, and intellectual
property, but their precise scope and nature differ across these areas.
The MFN rule requires that a WTO member must apply the same
conditions on all trade with other WTO members; i.e. a WTO member
has to grant the most favorable conditions under which it allows trade
in a certain product type to all other WTO members. "Grant someone
a special favour and you have to do the same for all other WTO
members." National treatment means that imported and locally-
produced goods should be treated equally (at least after the foreign
goods have entered the market) and was introduced to tackle non-
tariff barriers to trade (e. g. technical standards, security standards et
al. discriminating against imported goods).
• Reciprocity. It reflects both a desire to limit the scope of free-riding
that may arise because of the MFN rule, and a desire to obtain better
Downloaded from a2zmba.blogspot.com

access to foreign markets. A related point is that for a nation to

negotiate, it is necessary that the gain from doing so be greater than
the gain available from unilateral liberalization; reciprocal
concessions intend to ensure that such gains will materialize.

• Binding and enforceable commitments. The tariff commitments

made by WTO members in a multilateral trade negotiation and on
accession are enumerated in a schedule (list) of concessions. These
schedules establish "ceiling bindings": a country can change its
bindings, but only after negotiating with its trading partners, which
could mean compensating them for loss of trade. If satisfaction is not
obtained, the complaining country may invoke the WTO dispute
settlement procedures.

• Transparency. The WTO members are required to publish their trade

regulations, to maintain institutions allowing for the review of
administrative decisions affecting trade, to respond to requests for
information by other members, and to notify changes in trade policies
to the WTO. These internal transparency requirements are
supplemented and facilitated by periodic country-specific reports
(trade policy reviews) through the Trade Policy Review Mechanism
(TPRM). The WTO system tries also to improve predictability and
stability, discouraging the use of quotas and other measures used to
set limits on quantities of imports.

• Safety valves. In specific circumstances, governments are able to

restrict trade. There are three types of provisions in this direction:
articles allowing for the use of trade measures to attain noneconomical
objectives; articles aimed at ensuring "fair competition"; and
provisions permitting intervention in trade for economic reasons.[37]
Downloaded from a2zmba.blogspot.com
Downloaded from a2zmba.blogspot.com

FORMAL STRUCTURE
According to WTO rules, 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 separate customs
territories. The Ministerial Conference can make 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. All three consist of the same membership - representatives of all
WTO members - but each meets under different rules.
1. The General Council, the WTO’s highest-level decision-making body in
Geneva, meets 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 the entire WTO affairs. The current
chairman is Amb. Muhamad Noor Yacob (Malaysia).
2. The Dispute Settlement Body is made up of all member governments,
usually represented by ambassadors or equivalent. The current chairperson is
H.E. Mr. Mr. Bruce Gosper (Australia).
3. The WTO General Council meets as the Trade Policy Review Body
(TPRB) to undertake trade policy reviews of Members under the TRPM.
The TPRB is thus open to all WTO Members. The current chairperson is
H.E. Ms. Claudia Uribe (Colombia).

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.
Downloaded from a2zmba.blogspot.com

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
Amb. Yonov Frederick Agah (Nigeria).
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.

Fourth level: Subsidiary Bodies

There are subsidiary bodies under each of the three councils.
1. The Goods Council- subsidiary under the Council for Trade in Goods. It
has 11 committees consisting of all member countries, dealing with specific
subjects such as agriculture, market access, subsidies, anti-dumping
measures and so on. Committees include the following:
• Information Technology Agreement (ITA) Committee
• State Trading Enterprises
• Textiles Monitoring Body - Consists of a chairman and 10 members
acting under it.
• Groups dealing with notifications - process by which governments
inform the WTO about new policies and measures in their 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.

The WTO operates on a one country, one vote system, but actual votes have
never been taken. Decision making is generally by consensus, and relative
market size is the primary source of bargaining power. The advantage of
consensus decision-making is that it encourages efforts to find the most
Downloaded from a2zmba.blogspot.com

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.

DISPUTE SETTLEMENT BODY

Dispute settlement is regarded by the WTO as the central pillar of the
multilateral trading system, and as a "unique contribution to the stability of
the global economy". WTO members have agreed that, if they believe
fellow-members are violating trade rules, they will use the multilateral
system of settling disputes instead of taking action unilaterally.
The operation of the WTO dispute settlement process involves
The DSB panels, the Appellate Body, the WTO Secretariat, arbitrators,
independent experts and several specialized institutions.
The General Council discharges its responsibilities under the DSU through
the Dispute Settlement Body (DSB). Like the General Council, the DSB is
composed of representatives of all WTO Members. The DSB is responsible
for administering the DSU, i.e. for overseeing the entire dispute settlement
process. If a member state considers that a measure adopted by another
member state has deprived it of a benefit accruing to it under one of the
covered agreements, it may call for consultations with the other member
state. If consultations fail to resolve the dispute within 60 days after receipt
of the request for consultations, the complainant state may request the
establishment of a panel. It is not possible for the respondent state to prevent
or delay the establishment of a panel, unless the DSB by consensus decides
otherwise. The panel, normally consisting of three members appointed ad
hoc by the Secretariat, sits to receive written and oral submissions of the
parties, on the basis of which it is expected to make findings and conclusions
for presentation to the DSB. The proceedings are confidential, and even
when private parties are directly concerned, they are not permitted to attend
or make submissions separate from those of the state in question.
The final version of the panel's report is distributed first to the parties, and
two weeks later it is circulated to all the members of the WTO. The report
must be adopted at a meeting of the DSB within 60 days of its circulation,
unless the DSB by consensus decides not to adopt the report or a party to the
dispute gives notice of its intention to appeal. A party may appeal a panel
report to a standing Apellate Body, but only on issues of law, and legal
interpretations developed by the panel. Members may express their views on
the report of the Appellate Body, but they cannot derail it: an Apellate Body
report shall be adopted by the DSB and unconditionally accepted by the
Downloaded from a2zmba.blogspot.com

parties, unless the DSB decides by consensus within thirty days of its
circulation not to adopt the report.
ACCESSION AND MEMBERSHIP
The process of becoming a WTO member is unique to each applicant
country, and the terms of accession are dependent upon the country's stage
of economic development and current trade regime. The process takes about
five years, on average, but it can last more if the country is less than fully
committed to the process or if political issues interfere. As is typical of
WTO procedures, an offer of accession is only given once consensus is
reached among interested parties.

Members and Observers

The WTO has 151 members (almost all of the 123 nations participating in
the Uruguay Round signed on at its foundation, and the rest had to get
membership).