The World Trade Organisation
(General Agreement on Trade and Tariffs)

The World Trade Organisation (WTO) the legal and institutional foundation of the international trading system and the only organisation dealing with the global rules of trade between nations. It is a rules-based membership organisation, based in Geneva, which operates by consensus. Its membership is currently 144 countries (1 January 2002).

The WTO's predecessor was the General Agreement on Trade and Tariffs (GATT), which governed the international trade system since the end of the Second World War. GATT itself was formed in 1948 when 23 countries collaborated to reduce customs tariffs. Since 1948 there have been eight rounds of trade negotiations under GATT's auspices. The Uruguay Round (1986-93) established the WTO.

While GATT represented an ad hoc and provisional treaty, the WTO and its agreements are permanent. GATT was concerned solely with trade in goods, WTO agreements now cover trade in services and intellectual property. Therefore the WTO brings GATT, GATS (General Agreement on Trade in Services) and TRIPS (Trade- Related Intellectual Property Agreement) together within one organisation, one set of rules and one system for resolving disputes.

The WTO's stated mission is to make trade flow as smoothly and freely as possible and to make the rules governing trade as transparent, fair and predictable as possible. The WTO identifies its functions as: administering and implementing trade agreements, acting as a forum for trade negotiations, handling trade disputes, monitoring national trade policies, providing technical assistance and training for developing countries, co-operation with other international agencies in trade-related matters. Its highest authority is the Ministerial Council which aims to sit every two years and is composed of a representative from each member state.

A central feature of its mission is to remove barriers to free trade. Direct barriers to trade include import bans or quotas, customs duties, and government policies of buying from domestic producers. Indirect barriers include any government measure such as the regulation of products on environmental or health and safety grounds, or government support for domestic industries.

Much of the WTO's power lies in its other main function, its dispute settlement process and resolving conflicting trade interests. The WTOs role lies in interpreting complex agreements on trade, and in settling differences through procedures based on an agreed legal foundation. It is argued that this reduces the risk of disputes spilling into political or military conflict between nations. Disputes panels have the authority to make binding judgements in cases where trade rules are broken or disputed. It has the power to impose retaliatory measures on the offending country.

A growing international movement is forming in protest against the WTO and its expanding free trade agenda. Some of the major criticisms are outlined here:

• The WTO dictates policy and promotes trade liberalisation at any cost, this represents forced not free trade. The WTO claims its rules-based system is a means of protecting smaller nations from larger trading powers, although many developing countries have complained of being pressured into accepting rules.

• Trade liberalisation has taken place on an unequal basis. While Northern industrialised nations and transnational corporations are being given improved access to markets in developing countries, less developed nations face growing levels of tariffs and protectionism

• Under WTO rules, commercial interests and the interests of global corporations take precedence over development, environmental and social concerns. Any attempts by governments to protect domestic industries, workers or consumers or put forward environmental regulations can be challenged as barriers to free trade. Currently, organisations are campaigning against the extension of the GATS (General Agreement on Trade in Services), and its potential effects, for example in the privatisation of services such as water supplies in developing countries.

• As developing countries now represent three-quarters of the membership of the WTO, it is argued that any further comprehensive trade round should take development targets into account. Organisations have argued that the issue of market access for developing countries should be addressed, particularly in the textile and agricultural sectors.

• The WTO is undemocratic and negotiations take place behind closed doors. Many argue that multilateral trade decisions and rules should be made more transparent and accountable, and that national parliaments and wider civil society should play a greater role.

The WTO is at a turning point in its history. The organisation is still coming to terms with the breakdown of the WTO's third Ministerial Conference in Seattle in1999. This was widely considered a serious challenge to the legitimacy of the WTO as negotiators failed to reach agreement on issues that were considered fundamental and would have set the agenda for a new round of trade negotiations for the next century. Media coverage raised the WTO's profile massively at this difficult point by focusing on the 'Battle of Seattle' – the large demonstration which flared into a major clash with police outside the negotiating chamber.

The organisation is also having to manage the historic step of accepting China into the WTO since 11December 2001. China's fast growing economy, population and potential to rival the USA, combined with the opening up of new markets for trade, mean its entry will be highly significant in defining the changing agenda of world trade. Negotiations for Russian entry are also underway.

Most notably, the WTO has found itself on course for a clash with the USA after George W. Bush has struck a more protectionist note by raising steel tariffs and farming subsidies. If this conflict is not resolved, it may have the potential to spark a rise on protectionism across the world and hence undermine all that the WTO stands for.

Books

Held, D., McGrew, A., Goldblatt, D., Perraton, J. (1999), Global Transformations: Politics, Economics and Culture

Dicken, P (1998) Global Shift (3rd edition)

Hirst, P. and Thompson, G. (1999), Globalization in Question: The International Economy and the Possibilities of Governance (2nd edition)

Qureshi, A., (1996) The World Trade Organisation: Implementing International Trade Norms

Hoekman, E. and Kostecki, M. (1995) The Political Economy of the World Trading System: From GATT to WTO

Krueger, A. ed., (2000), The WTO as an International Organization

Jackson, J. (1997), The World Trading System (2nd edition)

Howse, R. and Trebilock, M. (1999), The Regulation of International Trade (2nd edition)

Gallagher, P. (2000), Guide to the WTO and Developing Countries

Michalopoulos, C. (2002), Developing Countries in the WTO

Danaher, K. and Burbach, R. eds. (2000), Globalize This! : The Battle Against The World Trade Organisation

Websites

www.wto.org The WTOs own website
www.freetrade.org The Cato Institute's Center for Trade Policy Studies (pro-free trade site)
www.oecd.org
www.cid.harvard.edu/cidtrade/ Global Trade Negotiations site, founded by Dani Rodrik, for academic papers on WTO and the position of business/NGOs
www.tradeobservatory.org
www.gatswatch.org
www.tradewatch.org Organisation headed by Lori Wallach
www.oxfam.org.uk
and www.maketradefair.org Oxfam's report on trade, globalisation and the fight against poverty
www.wdm.org.uk Trade reform campaign and challenging GATS
www.focusweb.org Focus on the Global South

Anna Evans

Placed on Fabian Global Forum, May 2002