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World Trade Organization: A Preview Page 1 of 10 pages
World Trade Organization:Brief History
The World Trade Organization came into being in1995 originating from the General Agreement onTariffs and Trade (GATT), a provisional agreementby 23 contracting parties signed on 30 October 1947at the Palais des Nations in Geneva and eventuallybecame an ad hoc international organization createdto support the agreement. From 1948 to 1994, theprovisional GATT provided the rules for much ofworld trade and presided over periods that saw someof the highest growth rates in internationalcommerce. The Agreement contained tariffconcessions agreed to during the first multilateraltrade negotiations and a set of rules designed toprevent these concessions from being frustrated byrestrictive trade measures. Eventually, there were123 participants and the final agreements coveredalmost all trade.Today, the WTO is the only international organizationdealing with the global rules of trade betweennations. WTO agreements, negotiated and signed bythe bulk of the world’s trading nations, bindgovernments to keep their trade policies withinagreed limits. Whereas GATT had mainly dealt withtrade in goods, the WTO and its agreements alsocover trade in services, and in traded inventions,creations and designs (intellectual property).The WTO’s main objective is to help trade flowsmoothly, freely, fairly and predictably byadministering WTO trade agreements, acting as aforum for trade negotiations, settling trade disputes,reviewing national trade policies, assisting developingcountries in trade policy issues, through technicalassistance/training, and cooperating with otherinternational organizations.The WTO has 148 Members, accounting for
90% ofworld trade.
Three-quarters of the Members aredeveloping countries, least developed countries andcustoms territories. A quarter is composed ofdeveloped countries. At the present time, nearly 30applicants are negotiating to become members of theWTO. Notable of these 30 ‘observer-applicants’ arethe Russian Federation, Ukraine, Saudi Arabia, andVietnam. (WTO, 2005)In the intervals between sessions of the MinisterialConference, the next highest-level decision-makingbody is the General Council where Members areusually represented by ambassadors or heads ofdelegation. The General Council acts on behalf of theMinisterial Conference and oversees the work andmanagement of the WTO. The General Council alsomeets as the Trade Policy Review Body and DisputeSettlement Body. At the next level, the Council forTrade in Goods, Council for Trade in Services andTRIPS Council all report to the General Council.
Basic Principles
The WTO agreements are lengthy and complex.There are, however, a number of simple andfundamental principles that run throughout all thedocuments, as follow:
Non-discrimination
- Two WTO key principles are involvedhere:
Most-favored-nation treatment
. Countries cannotnormally discriminate between their trading partners. Grantone country a special favor, and the Member is obliged to dothe same for all other WTO Members.
National Treatment
.Imported and locally-produced goods are treated equally atleast after the foreign goods have entered the market.
Freer trade
- Lowering trade barriers is one of the mostobvious means of encouraging trade. The barriers concernedinclude both tariff barriers and non-tariff barriers.
Predictability
- When countries agree to open their marketsfor goods or services, they bind their commitments.
Promoting fair competition
- Tariffs and, in limitedcircumstances, other forms of protection are allowed butdedicated to open, fair and undistorted competition.
Special Provisions for Developing Countries
- Flexibleimplementation of the various WTO agreements, specialassistance and trade concessions are afforded to developingcountries.
Multilateral Trade Negotiations
Much of the growth was achieved through a series ofeight multilateral trade negotiations known as ’traderounds’. In all trade rounds, the concentration was onreducing tariffs. In the latter rounds, however, otherelements were also addressed or introduced. The
Kennedy Round
in the mid-1960s brought about aGATT Anti-Dumping Agreement and a section ondevelopment; the
Tokyo Round
saw the first major
 
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World Trade Organization: A Preview and Overview Page 2 of 10 pages
attempt to tackle trade barriers that do not take theform of tariffs, and to improve the system. TheUruguay Round in the 1980s led a systemic overhaulunder the GATT.
Entry into Force, 01 January 1948.
The 23 members ofthe PreparatoryCommittee establishedby the United NationsEconomic and SocialCouncil in 1946drafted the charter ofthe
InternationalTrade Organization
 (ITO). The
ITO
wasenvisaged as the final leg of a triad of post-Wareconomic agencies (the other two were theInternational Monetary Fund and the InternationalBank for Reconstruction - later the World Bank).From April to October 1947, Members completedsome 123 negotiations and established 20 schedulescontaining the tariff reductions and bindings whichbecame an integral part of GATT. The first Roundcovered some 45,000 tariff concessions and about$10B in trade. On 1 January 1948, GATT enteredinto force. The first Session was held from Februaryto March in Havana, Cuba. After long and difficultnegotiations, some 53 countries signed the Final Actauthenticating the Havana Charter in March1948.The Contracting Parties held their secondsession in Geneva from August to September.
Second RoundAnnecy, France April – August 1949
The contracting parties exchanged some 5,000tariffconcessions. At their third Session, they also dealtwith the accession of ten more countries.
Third RoundTorquay, England September 1950 – April 1951
The contracting parties exchanged some 8,700tariffconcessions in the English town,
yielding tariffreductions of about 25% in relation to the 1948level
. Four more countries acceded to GATT. Duringthe fifth Session of the Contracting Parties, theUnited States indicated that the ITO Charter wouldnot be re-submitted to the US Congress; this, ineffect, meant that ITO would not come into operation.
The Haberler Report
: In honor of Professor GottfriedHaberler, the chairman of the panel of eminent economists,GATT published in October 1958 the
Trends in InternationalTrade
, which provided initial guidelines for the work of GATT.The Contracting Parties at their 13th Sessions, attended byMinisters, subsequently established three committees inGATT: Committee I to convene a further tariff negotiatingconference; Committee II to review the agricultural policies ofmember governments and Committee III to tackle theproblems facing developing countries in their trade.
Fourth RoundGeneva, Switzerland May 1956.
This Round produced some $2.5Bn worth of tariffreductions. At the beginning of the year, the GATTcommercial policy course for officials of developingcountries was inaugurated.
The
Short-Term Arrangement
covering cotton textiles wasagreed in 1961 as an exception to the GATT rules. It permittedthe negotiation of quota restrictions affecting the exports ofcotton-producing countries. In 1962 the "Short-term"Arrangement became the "Long-term" Arrangement, lastinguntil 1974 when the Multifibre Arrangement entered into force.
Fifth Round: The Dillon RoundSeptember 1960 – July 1962
In honor of US Undersecretary of State DouglasDillon who proposed the negotiations, this Roundresulted in about 4,400 tariff concessions covering$4.9B of trade. The Round was divided into twophases: the first was concerned with negotiationswith EEC member states for the creation of a singleschedule of concessions for the Community based onits Common External Tariff; and the second was afurther general round of tariff negotiations.
Sixth Round: The Kennedy RoundMay 1964 – June 1967.
In June 1967, the Round's Final Act was signed bysome 50 participating countries which togetheraccounted for 75% of world trade. For the first time,negotiations departed from the product-by-productto an across-the-board or linear method of cuttingtariffs for industrial goods. The working hypothesis ofa 50% target cut in tariff levels was achieved in manyareas. Concessions covered an estimated total valueof trade of about $40B. Separate agreements werereached on grains, chemical products and a
Code onAnti-Dumping
.
The early 1960s marked the accession to the GeneralAgreement of many newly-independent developing countries.In February, the Contracting Parties adopted the text of
Part IVon Trade and Development
. The additional chapter to theGATT required developed countries to accord high priority tothe reduction of trade barriers to products of developingcountries. A
Committee on Trade and Development
wasestablished to oversee the functioning of the new GATTprovisions. In 1968, GATT had established the InternationalTrade Centre (ITC) to help developing countries in tradepromotion and identification of potential markets.
Seventh Round: The Tokyo RoundTokyo, Japan, September 1973 – November 1979
Some 99 countries exchanged tariff reductions andbindings which covered more than $300B of trade. Asa result of these cuts, the weighted average tariff on
manufactured goods in the world's nine majorindustrial markets declined from 7.0 to 4.7%
.Agreements were reached in the following areas:subsidies and countervailing measures, technical
 
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World Trade Organization: A Preview and Overview Page 3 of 10 pages
barriers to trade, import licensing procedures,government procurement, customs valuation, arevised anti-dumping code, trade in bovine meat,trade in dairy products and trade in civil aircraft. Thisround reduced import duties and other trade barriersby industrial countries on tropical products exportedby developing countries.
On 1 January 1974, the Arrangement Regarding InternationalTrade in Textiles, known as the
Multifibre Arrangement
 (
MFA
), entered into force. It superseded the arrangements thathad been governing trade in cotton textiles since 1961. TheMFA was extended in 1978, 1982, 1986, 1991 and 1992.GATT (Article 6) allows countries to take action againstdumping. The
Anti-Dumping Agreement
clarifies andexpands Article 6, allowing countries to act in a way that wouldnormally break the GATT principles of binding a tariff and notdiscriminating between trading partners. The agreement is thesuccessor to the Tokyo Round Anti-dumping Code which,itself, was the successor to the original Anti-dumping Codeconcluded during the Kennedy Round.
Eighth Round: The Uruguay RoundPunta del Este, 20 Sep 1986–15 Dec 1993
The Punta del Este Declaration was divided into twosections: the first covered negotiations on trade ingoods, and the second initiated negotiations on tradein services. The Round was quite simply the largesttrade negotiation ever, and most probably the largestnegotiation of any kind in history.
It brought aboutthe biggest reform of the world’s trading systemand led to the creation of the WTO.
GATT 1994
is the updated version of GATT 1947 and takesinto account the substantive changes negotiated in theUruguay Round. GATT 1994 is an integral part of the WorldTrade Organization established on 1 January 1995. It wasagreed that there be a one-year transition period during whichcertain GATT 1947 bodies and commitments would co-existwith those of the World Trade Organization. (WTO, 1994)
Most of the WTO agreements are the result thisRound, signed as the “Final Act” at the Marrakeshministerial meeting in April 1994. There are about 60agreements. Foremost is the Agreement Establishingthe WTO, which serves as an umbrella agreement.Annexed are the agreements on goods (GATT 1994,Annex 1A), services (GATS, Annex 1B) andintellectual property (TRIPS, Annex 1C), disputesettlement (Annex 2), trade policy review mechanism(Annex 3) and the plurilateral agreements (Annex 4).
The
Services Agreement
(
GATS
) which forms part of theFinal Act rests on three pillars. The first is a FrameworkAgreement containing basic obligations which apply to allmember countries. The second concerns national schedules ofcommitments containing specific further national commitmentswhich will be the subject of a continuing process ofliberalization. The third is a number of annexes addressing thespecial situations of individual services sectors.
Agreement on Trade Related Aspects of IntellectualProperty Rights, Including Trade in Counterfeit Goods
 (
TRIPS
) addresses the applicability of basic GATT principlesand those of relevant international intellectual propertyagreements; the provision of adequate intellectual propertyrights; the provision of effective enforcement measures forthose rights; multilateral dispute settlement; and transitionalarrangements.
The schedules of commitments also form part of theUruguay Round agreements.
WTO Ministerial Conferences
The WTO is a member-driven organization anddecisions are taken by the entire membership,typically by consensus.
The WTO’s top leveldecision-making body is the MinisterialConference
which meets at least once every twoyears. WTO Ministerial Conferences have been heldin Singapore in 1996, Geneva in 1998, Seattle in1999, Doha in 2001, and Cancún in 2003.
First WTO ConferenceSingapore, 9 - 13 December 1996
The first regular biennial meeting ofthe WTO at Ministerial level aimed tofurther strengthen the WTO as aforum for negotiation, the continuingliberalization of trade within a rule-based system, and the multilateralreview and assessment of trade policies. Thefollowing were tackled during this meeting: assessthe implementation of commitments under the WTOAgreements and decisions; review the ongoingnegotiations and Work Programme; examinedevelopments in world trade; and address thechallenges of an evolving world economy.
Agreement on
Trade-related Aspects of IntellectualProperty Rights
(TRIPS) entered into force for developedcountries on 01 January 1996.
Basic Telecommunications
negotiations are suspended inMay 1996 until 1997 in spite of substantial offers.
Second WTO ConferenceGeneva, Switzerland, 18 – 20 May 1998
The Conference coincided with the 50
th
 Anniversary Commemoration, thus it paidtribute to the system's importantcontribution over the past half-century togrowth, employment and stability by promoting theliberalization and expansion of trade and providing aframework for the conduct of international traderelations. New WTO Members who have joined sincethe Singapore meeting: Congo, Democratic Republicof Congo, Mongolia, Niger and Panama.
Adopted the
Declaration on Global Electronic Commerce
 on 20 May 1998. It urged Members to continue their currentpractice of not imposing customs duties on electronictransmissions.
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