The World Trade Organization

General Agreement on Tariffs and Trade


“The WTO, a world economic saviour or, a path to world domination by multinational companies?”

• A look at the myths and realities: • How and why were they created? • What are their principles and key functions? • How do they operate? • What is their future?


A History
• 1930’s - Great Depression, protectionism and collapse of world trade • 1940’s - WW2, advance of Communism • 1944 - Bretton Woods Conference - to promote trade liberalization and multilateral economic cooperation • - to create “three pillars” ITO, IMF, World Bank


More History
1945 - International Monetary Fund - to monitor world currencies, - maintain orderly system of international payments, - lend to countries with balance of payments problems - World Bank - IBRD, IDA,IFC,MIGA,ICSID - lends to poor countries for major infrastructure projects - investment guarantees and dispute settlement

And yet more History
1947 - US Congress rejects ITO - GATT created - weak trade agreement with small secretariat in Geneva - major principles: 1/ No trade discrimination Most Favoured Nation National Treatment 2/ Trade barriers limited to tariffs (exception) 3/ Transparency 4/ Regional trade agreements OK 5/ Limited fees on imports e.g. antidumping , countervail 1947 - 1986 - 7 rounds of negotiations to reduce tariffs and other trade barriers

Crisis Looms
• 1986 - Uruguay Round - to resolve growing trade problems - system near collapse


1995 - World Trade Organization
- permanent world trade body, legal status - establishes common institutional framework for international trade relations - 145 + members, 97% of world trade - NOT a world government, sets rules that members must implement and obey. - much stronger than GATT with good dispute settlement - all members bound - no selective acceptance as under GATT

WTO/GATT Basic Principles
1/ No discrimination “Most Favoured Nation” “National Treatment” 2/ Trade liberalization tariff and non-tariff reductions 3/ Predictability tariff and NTB’s to be “bound” transparency 4/ More competitive discourage export subsidies and dumping 5/ More benefits for developing countries special tariff rates, subsidies, investment restrictions


WTO Key Functions
1/ administering trade agreements 2/ acting as a forum for trade negotiations 3/ settling trade disputes 4/ reviewing national trade policies 5/ assisting developing countries in trade policy 6/ cooperating with other international trade orgs.

WTO Organization
1/ Ministerial Council 2/ General Council - Trade Policy Review - Dispute Settlement Body 3/ Councils - Goods - Services - Intellectual Property 4/ Committees, Working Parties and Groups


Agreements Administered by WTO
1/ Goods GATT 1994 -agriculture -textile/clothing -subsidies/countervail -safeguards -product standards -anti-dumping -rules of origin -movement of persons -air transport -financial services -shipping -telecommunications

2/ Services


3/ Intellectual Property 4/ Investment 5/ Disputes

TRIPS TRIMS Settlement of Disputes

How does it operate?
• Ministerial Conference - meets every two years • General Council - meets regularly • Secretariat - 550 staff


How are decisions made?
- generally by member consensus - if no consensus by vote (1 member, 1 vote) with 2/3 or ¾ required - amendments to agreements only take effect if members accept them


How are rules imposed?
- member countries adopt rules in own domestic legislation - WTO does not impose rules, decisions directly, rather gives member right to impose penalties (trade sanctions)


Dispute Settlement
key to WTO success, covers all WTO agreements - since 1995, 300 disputes submitted The Process: - 1st stage - Consultations - parties have 60 days to try to negotiate “out of court” settlement - 2nd stage - if no agreement, dispute settlement panel established, in consultation with parties - panel has 6-9 months to examine issues, issue interim report, get input from parties, and issue final report. - losing defendant can appeal, appeal report in 3 months - Dispute Settlement Body accepts report or rejects (with consensus) 3rd stage - implementation - loser negotiates reasonable time to implement. - if doesn’t implement within 30 days, WTO gives winner OK to retaliate and parties negotiate mutually acceptable compensation

Current Trends
- increasing freer trade - increasing fairer trade - Doha Conference 2001 goal to provide developing countries easier rules on import and investment restrictions, subsidies, assistance to meet technical, product standards - developing countries more power in system - regional trade agreements (EU) expanding

The Future of WTO?
- will WTO create one global free trade system, or will global trade be dominated by regional trade agreements? - will conflict between developed and developing countries cause serious problems? - will EU agricultural policy or U.S. noncompliance lead to weakening? - will dispute settlement be truly effective?

Many Myths: - WTO controlled by multinationals - WTO dictates to countries - WTO for free trade not fair trade - WTO against small and poor countries - WTO anti-environment and labour WTO Benefits: - creates orderly world trade and economic system - handles disputes fairly - creates integrated world economy which reduces political conflict - reduces inequalities between rich and poor, big and small - freer trade reduces cost of living and creates jobs worldwide