World Trade Organization
2008/9 Schools Wikipedia Selection. Related subjects: Economics
|World Trade Organization (English)
Organisation mondiale du commerce (French)
Organización Mundial del Comercio (Spanish)
|Formation||1 January 1995|
|Membership||152 member states|
|Official languages||English, French, Spanish|
|Budget||182 million Swiss francs (approx. 141 million USD)|
The World Trade Organization (WTO), (OMC - French: Organisation mondiale du commerce, Spanish: Organización Mundial del Comercio), 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 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.
ITO and GATT 1947
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the Bretton Woods institutions now known as the World Bank and the International Monetary Fund. Although an agreement covering trade was not negotiated at Bretton Woods, the Conference did recognize the need for a comparable international institution. In December 1945, the United States invited its war-time allies to enter into negotiations to conclude a multilateral agreement for the reciprocal reduction of tariffs on trade in goods. At the proposal of the United States, the United Nations Economic and Social Committee adopted a resolution, in February 1946, calling for a conference to draft a charter for an International Trade Organization (ITO). A Preparatory Committee was established in February 1946, and worked until November 1947 on the charter of an international organization for trade. By October 1947 an agreement on the GATT was reached in Geneva, and on October 30, 1947 twenty three countries signed the "Protocol of Provisional Application of the General Agreement on Tariffs and Trade".
In March 1948, the negotiations on the ITO Charter were not successfully completed in Havana ( Havana Charter). The Charter provided for the establishment of the ITO, and set out the standard rules for international trade and other international economic matters. The ITO Charter, however, never entered into force; while repeatedly submitted to the US Congress, it was never approved. The most usual argument against the new organization was that it would be involved in internal economic issues. On December 6, 1950 President Truman announced that he would no longer seek Congressional approval of the ITO Charter. In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization.
GATT rounds of negotiations
The GATT was the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. Despite attempts in the mid 1950s and 1960s to create some form of institutional mechanism for international trade, the GATT continued to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.
From Geneva to Tokyo
Seven rounds of negotiations occurred under the GATT. The first GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others broke entirely new ground. Because these plurilateral agreements were not accepted by the full GATT membership, they were often informally called "codes". Several of these codes were amended in the Uruguay Round, and turned into multilateral commitments accepted by all WTO members. Only four remained plurilateral (those on government procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two.
Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy. In response to the problems identified in the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries' policies on world trade GATT could not manage etc.), the eighth GATT round — known as the Uruguay Round — was launched in September 1986, in Punta del Este, Uruguay. It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review.
The round was supposed to end in December 1990, but the US and EU disagreed on how to reform agricultural trade and decided to extend the talks. Finally, In November 1992, the US and EU settled most of their differences in a deal known informally as "the Blair House accord", and on April 15, 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The agreement established the World Trade Organization, which came into being upon its entry into force on January 1, 1995, and replaced GATT as an international organization. It is widely regarded as the most profound institutional reform of the world trading system since the GATT's establishment.
The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations (a distinction is made between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994). The GATT 1994 is not however the only legally binding agreement included in the Final Act; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into a structure with six main parts:
- The Agreement Establishing the WTO
- Goods and investment — the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures
- Services — the General Agreement on Trade in Services
- Intellectual property — the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
- Dispute settlement (DSU)
- Reviews of governments' trade policies (TPRM)
The WTO launched the current round of negotiations, the Doha Development Agenda (DDA) or Doha Round, at the Fourth Ministerial Conference in Doha, Qatar in November 2001. The Doha round was to be an ambitious effort to make globalisation more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.
The talks have been highly contentious and agreement has not been reached, despite the intense negotiations at Fifth Ministerial Conference in Cancún in 2003. A lot of progress was made in the following year, as was reflected by the adoption of the July Package (also called the 'August Pact') on August 2, 2004. This marked the consensus on the issues to the discussed and settled by the WTO Members in the forthcoming Sixth Ministerial Conference in Hong Kong from December 13 – 18, 2005. The Ministerial Conference adopted a Declaration which set deadlines for the negotiations to be concluded. Some of these were adopted forthwith, like the one on the elimination of all forms of export subsidies and disciplines on all export measures by 2013 and the deadline for establishment of modalities for further negotiattions being set on 30 April 2006. However the events took a turn when these deadlines passed by without any conclusive agreements between the Members.
On July 24, 2006, at the end of yet another futile gathering of trade ministers in Geneva, Pascal Lamy, the WTO's Director-General, formally suspended the negotiations. Nevertheless, in his report to the WTO General Council on February 7, 2007, Lamy said that "political conditions are now more favorable for the conclusion of the Round than they have been for a long time". He then added that "political leaders around the world clearly want us to get fully back to business, although we in turn need their continuing commitment".
|GATT and WTO trade rounds|
|Geneva||April 1947||7 months||23||Tariffs||Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade|
|Annecy||April 1949||5 months||13||Tariffs||Countries exchanged some 5,000 tariff concessions|
|Torquay||September 1950||8 months||38||Tariffs||Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%|
|Geneva II||January 1956||5 months||26||Tariffs,
admission of Japan
|$2.5 billion in tariff reductions|
|Dillon||September 1960||11 months||26||Tariffs||Tariff concessions worth $4.9 billion of world trade|
|Kennedy||May 1964||37 months||62||Tariffs,
|Tariff concessions worth $40 billion of world trade|
|Tokyo||September 1973||74 months||102||Tariffs, non-tariff measures, "framework" agreements||Tariff reductions worth more than $300 billion dollars achieved|
|Uruguay||September 1986||87 months||123||Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc||The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.|
|Doha||November 2001||?||141||Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, investment, transparency, patents etc||The round is not yet concluded.|
Mission, functions and principles
The WTO's stated goal is to improve the welfare of the people 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.
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 centre 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:
- Non-Discrimination. 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 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 schedules (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 noneconomic objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons….
According to WTO rules, all WTO members may participate in all councils, committees, etc., except the 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 all of the 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. 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, environmentalism, regional trading arrangements and administrative issues.
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, as of 2007- 02-13, 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 is 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.
- Committees on
- Trade and Environment
- Trade and Development (Subcommittee on Least-Developed Countries)
- Regional Trade Agreements
- Balance of Payments Restrictions
- Budget, Finance and Administration
- Working parties on
- Working groups on
- Trade, debt and finance
- Trade and technology transfer
The WTO operates on a one country, one vote system, but actual votes have never been taken. Decisionmaking 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 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.
In reality, WTO negotiations proceed not by consensus of all members, but by a process of informal negotiations between small groups of countries. Such negotiations are often called "Green Room" negotiations (after the colour of the WTO Director-General's Office in Geneva), or "Mini-Ministerials", when they occur in other countries. These processes have been regularly criticized by many of the WTO's developing country members which are often totally excluded from the negotiations.
Richard Steinberg (2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the United States, and may not lead to Pareto improvement.
|“||Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.||”|
— World Trade Organization, Article 21.1 of the DSU
In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994. 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.
|Duration of a Dispute Settlement procedure|
|These approximate periods for each stage of a dispute settlement
procedure are target figures
The agreement is flexible. In addition, the countries can settle
their dispute themselves at any stage.
Totals are also approximate.
|60 days||Consultations, mediation, etc|
|45 days||Panel set up and panellists appointed|
|6 months||Final panel report to parties|
|3 weeks||Final panel report to WTO members|
|60 days||Dispute Settlement Body adopts report (if no appeal)|
|Total = 1 year (without appeal)|
|60-90 days||Appeals report|
|30 days||Dispute Settlement Body adopts appeals report|
|Total = 1 year 3 months (with appeal)|
|Source: Understanding the WTO: Settling Disputes - A unique contribution|
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 parties, unless the DSB decides by consensus within thirty days of its circulation not to adopt the report.
Within thirty days of the adoption of the report, the member concerned is to inform the DSB of its intentions; if the member explains that it is impracticable to comply immediately with the recommendations and rulings, it is to have a "reasonable period of time" in which to comply. If no agreement is reached about the reasonable period for compliance, that issue is to be the subject of binding arbitration. If there is a disagreement as to the satisfactory nature of the measures adopted by the respondent state to comply with the report, that disagreement is to be decided by a panel, if possible the same panel that heard the original dispute, but apparently without the possibility of appeal from its decision.
If all else fails, two more possibilities are set out in the DSU:
- If a member fails within the "reasonable period" to carry out the recommendations and rulings, it may negotiate with the complaining state for a mutually acceptable compensation.
- If no agreement on compensation is reached within twenty days of the expiry of the "reasonable period", the prevailing state may request authorization from the DSB to suspend application to the member concerned of concessions or other obligations under the covered agreements. In contrast to prior GATT practice, authorization to suspend concessions in this context is semi-automatic, in that the DSB "shall grant the authorization [...] within thirty days of the expiry of the reasonable period", unless it decides by consensus to reject the request.
The DSU states that fellow members should give "special attention" to the problems and interest of the developing countries. If one party to a dispute is a developing country, that party is entitled to have at least one panelist who comes from a developing country. Further, if a complaint is brought against a developing country, the time for consultations (before a panel is convened) may be expended, and if the dispute goes to a panel, the deadlines for the developing country to make its submissions may be relaxed. Formal complaints against least developed countries are discouraged, and if consultations fail, the Director-General and the Chairman of the DSB stand ready to offer their good offices before a formal request for a panel is made. As to substance, the DSU provides that "particular attention" is to be paid to the interests of the developing countries, and that the report of panels shall "explicitly indicate" how account has been taken of the "differential and more favorable treatment" provisions of the agreement under which the complaint is brought. In order to assist developing countries overcome their limited expertise in WTO law and assist them in the management of complex trade disputes, an Advisory Centre on WTO Law was established in 2001.
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.
A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members. After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant's international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules. The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member's commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally.
When the bilateral talks conclude, the working party sends to the General Council or Ministerial Conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be's commitments. Once the General Council or Ministerial Conference approves of the terms of accession, the applicant's parliament must ratify the Protocol of Accession before it can become a member.
Members and observers
The WTO has 152 members (almost all of the 123 nations participating in the Uruguay Round signed on at its foundation, and the rest had to get membership). The 27 states of the European Union are represented also as the European Communities. WTO members do not have to be full sovereign nation-members. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT contracting party, and the Republic of China (Taiwan) acceded to the WTO in 2002 under the full extended name of "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu ( Chinese Taipei)". A number of non-members have been observers (30) at the WTO and are currently negotiating their membership. With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. Some international intergovernmental organizations are also granted observer status to WTO bodies. 14 states and 2 territories so far have no official interaction with the WTO.
The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. A list of WTO agreements can be found here A discussion of some of the most important agreements follows.
Agreement on Agriculture (AoA)
The AoA came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or "pillars": domestic support, market access and export subsidies.
The first pillar of the AoA is "domestic support". The AoA structures domestic support ( subsidies) into three categories or "boxes": a Green Box, an Amber Box and a Blue Box. The Green Box contains fixed payments to producers for environmental programmes, so long as the payments are "decoupled" from current production levels. The Amber Box contains domestic subsidies that governments have agreed to reduce but not eliminate. The Blue Box contains subsidies which can be increased without limit, so long as payments are linked to production-limiting programmes.
The AoA's domestic support system currently allows Europe and the USA to spend $380 billion annually on agricultural subsidies alone. "It is often still argued that subsidies are needed to protect small farmers but, according to the World Bank, more than half of EU support goes to 1% of producers while in the US 70% of subsidies go to 10% of producers, mainly agri-businesses". The effect of these subsidies is to flood global markets with below-cost commodities, depressing prices and undercutting producers in poor countries – a practice known as dumping.
"Market access" is the second pillar of the AoA, and refers to the reduction of tariff (or non-tariff) barriers to trade by WTO members. The 1995 AoA required tariff reductions of:
- 36% average reduction by developed countries, with a minimum per tariff line reduction of 15% over five years.
- 24% average reduction by developing countries with a minimum per tariff line reduction of 10% over nine years.
Least Developed Countries (LDCs) were exempted from tariff reductions, but either had to convert non–tariff barriers to tariffs—a process called tariffication—or "bind" their tariffs, creating a "ceiling" which could not be increased in future.
"Export subsidies" is the third pillar of the AoA. The 1995 AoA required developed countries to reduce export subsidies by at least 35% (by value) or by at least 21% (by volume) over the five years to 2000.
The AoA is criticized for reducing tariff protections for small farmers – a key source of income for developing countries – while allowing rich countries to continue to pay their farmers massive subsidies which developing countries cannot afford.
General Agreement on Trade in Services (GATS)
Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement
Sanitary and Phyto-Sanitary (SPS) Agreement
The Agreement on the Application of Sanitary and Phytosanitary Measures - also known as the SPS Agreement was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the beginning of 1995.
Under the SPS agreement, the WTO sets constraints on members' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases).
SPS & Genetically Modified Organisms (GMOs)
In 2003, the United States challenged a number of EU laws restricting the importation of Genetically Modified Organisms (GMOs), arguing they are “unjustifiable” and illegal under SPS agreement. In May 2006, the WTO's dispute resolution panel issued a complex ruling which took issue with some aspects of the EU's regulation of GMOs, but dismissed many of the claims made by the U.S.
Quarantine policies play an important role in ensuring the protection of human, animal and plant health. Yet under the SPS agreement, quarantine barriers can be a ‘technical trade barrier’ used to keep out foreign competitors.
The SPS agreement gives the WTO the power to override a country's use of the precautionary principle – a principle which allows them to act on the side of caution if there is no scientific certainty about potential threats to human health and the environment. In EC measures Concerning Meat and Meat Products (Hormones) WT/DS/26/AB/R the Appellate Body of the WTO held that it was “less than clear” whether the precautionary principle had crystallized into a principle of customary international law, (EC-Hormones paragraph 123) and even if it had, it could not override the provisions of Articles 5.1 and 5.2 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) that require members to base their measures on a risk assessment. (EC-Hormones paragraphs 123, 124 and 125.See discussion K Kennedy “Resolving International Sanitary and Phytosanitary Disputes in the WTO:Lessons and Future Directions” (2000) Volume 55 Food and Drug Law Journal 81 at 95) The Appellate Body also pointed out that the principle had not been written into the SPS Agreement, although the Appellate Body conceded that the principle was reflected in the sixth paragraph of the preamble of the SPSA, as well as articles 3.3 and 5.7.(EC-Hormones paragraph 124) Article 3.3 allows members to implement quarantine measures higher than those found in international standards, as long as the measures otherwise comply with the SPS Agreement; while Article 5.7 allows provisional measures where there is insufficient scientific evidence. Additionally, the Appellate Body acknowledged that article 5.7 does not necessarily exhaust the relevance of the precautionary principle and that, where there are risks of irreversible damage, governments often act from the point of view of prudence. (EC-Hormones paragraph 124)
Under SPS rules, the burden of proof is on countries to demonstrate scientifically that something is dangerous before it can be regulated, even though scientists agree that it is impossible to predict all forms of damage posed by insects or pest plants.
Agreement on Technical Barriers to Trade (TBT)
The Agreement on Technical Barriers to Trade - also known as the TBT Agreement is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994.
The object of the TBT Agreement is to "to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade".
Although the stated aim of the WTO is to promote free trade and stimulate economic growth, some believe that globally free trade results in the rich (both people and countries) becoming richer, while the poor are getting poorer. Martin Khor, Director of the Third World Network, argues that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. He argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, because (among other reasons): market access in industry has not improved; these countries have had no gains yet from the phasing out of textiles quotas; non-tariff barriers such as anti-dumping measures have increased; and domestic support and export subsidies for agricultural products in the rich countries remain high. Jagdish Bhagwati asserts however that there is greater tariff protection on manufacturers in the poor countries, which are also overtaking the rich nations in the number of anti-dumping filings.
Other critics claim that the issues of labor relations and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer. On the other side, Khor responds that "if environment and labor were to enter the WTO system [...] it would be conceptually difficult to argue why other social and cultural issues should also not enter." Bhagwati is also critical towards "rich-country lobbies seeking on imposing their unrelated agendas on trade agreements." Therefore, both Bhagwati and Arvind Panagariya have criticized the introduction of TRIPs into the WTO framework, fearing that such non-trade agendas might overwhelm the organization's function.
Some libertarians and small-government conservatives, e.g. Ron Paul as well as think tanks such as the Ludwig von Mises Institute oppose the World Trade Organization. The WTO is seen as a bureaucratic and anti-capitalistic organization not promotimg free trade, but political interventionism. For example, Ron Paul says free trade agreements don't have to be 20,000 pages. In the February 1994 issue of Free Market, the Mises institute argued that "The WTO will convert peaceful trade into policy imperialism. It will allow economic exchange with some countries under approved conditions, and impose a variety of sanctions on others. The conditions will include all the legislation beloved of U.S. left-liberals, such as preferences for labor unions, artificially high labor costs, controls on the organization of industry, high taxes on capital and income, central-bank inflation, invasive tax collection, and the abolition of financial privacy. The goal, as with Nafta, is to transform every country, developed or developing, into a carbon copy of Clintonian social democracy."
Other critics have characterized the decision making in the WTO as complicated, ineffective, unrepresentative and non-inclusive, and they have proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries. The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system"; the Network stresses that "civil society groups and institutions must be given genuine opportunities to express their views and to influence the outcome of policies and decisions." Certain non-governmental organizations, such as the World Federalist Movement, argue that democratic participation in the WTO could be enhanced through the creation of a parliamentary assembly, although other analysts have characterized this proposal as ineffective.
First ministerial conference
The inaugural ministerial conference was held in Singapore in 1996. 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".
Second ministerial conference
Third ministerial conference
The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing worldwide attention.
Fourth ministerial conference
Fifth ministerial conference
The ministerial conference was held in Cancún, Mexico, aiming 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-called " Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress.
Sixth ministerial conference
The sixth WTO Conference Ministerial was held in Hong Kong from December 13 – December 18, 2005. It was considered vital if the four-year-old Doha Development Agenda negotiations were to move forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries, following the Everything But Arms initiative of the European Union — but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2006.