World Trade Organization

World Trade Organization

THE SUCCESSOR TO THE GATT

INSTITUTIONAL FRAMEWORK AND DISPUTE-RESOLUTION MECHANISMS

THE DOHA ROUND

CONTROVERSY AND 1999 SEATTLE PROTESTS

BIBLIOGRAPHY

The World Trade Organization (WTO) is the international organization that oversees trade among member nations and acts as a forum for governments to negotiate trade agreements and settle trade disputes under a system of rules and procedures. Its aim is to increase world trade by lowering barriers to the international sale of goods and services, including intellectual property. The WTO was formed on January 1, 1995, replacing the postwar multilateral trading order under the General Agreement on Tariffs and Trade (GATT) with a more formal institutional arrangement. Headquartered in Geneva, Switzerland, the WTO as of November 2006 had 150 members, the latest addition being Vietnam. As of this date Russia was the largest state that was not yet a member. The governing principles of the WTO’s global trading system were described by Director General Pascal Lamy in 2006: “Built up stone by stone over the past 50 years, this system is founded on the idea that prosperity depends on efficiency, stability, predictability, and equity in international trade” (Lamy 2006).

THE SUCCESSOR TO THE GATT

In some respects, the WTO is a new organization, growing out of globalization, but the idea of an international trade institution dates at least to the period immediately following World War II (1939–1945). The Bretton Woods Conference of 1944, near the end of World War II, proposed the creation of an International Trade Organization to complement the International Monetary Fund and Bank for Reconstruction and Development (World Bank) in order to stabilize the postwar world economy and promote trade. The member states of the United Nations (UN) agreed to the creation of the International Trade Organization (ITO) at the UN Conference on Trade and Employment in Havana, Cuba, in 1948. The ITO charter covered trade in goods and services and included rules on employment, commodity agreements, restrictive business practices, and investment. The organization failed to materialize, however, when the U.S. Senate rejected the implementing agreement.

GATT, a part of the proposed ITO, survived as a treaty agreement among twenty-three of the fifty signatory states of the ITO to set tariffs (or customs duties) to mutually agreed-upon levels without discrimination among members under a generalized system of preferences. This system called for treating goods from all countries on the same level as that of the most-favored nation (MFN ) and allotted national treatment to both domestic and imported goods once they had entered the market. Certain exceptions to the nondiscrimination principle were allowed—for example, for regional trading arrangements or special access to developing countries—because these types of arrangements expanded regional trade and accorded with the goal of expanding global trade. These principles and exceptions were incorporated into the WTO. Tariff levels were agreed on through an intergovernmental negotiating forum facilitated by the small GATT secretariat, but the system did not provide for any enforcement mechanisms or dispute-settlement procedures, and it dealt almost entirely in trade in goods. Services and intellectual property were later addressed under separate agreements—the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)—that were also incorporated into the WTO. GATT also contained provisions against unfair competitive practices, such as dumping and subsidies, that are also part of WTO fair-trade rules.

Two major industries were given special treatment under the postwar system—agriculture, which was not covered by GATT, and textiles and apparel, which was regulated under a quota system set up by a separate multilateral agreement, the Multifiber Agreement, until 2005. Eight rounds of multiyear trade negotiations were completed under GATT. The WTO was created at the conclusion of the eighth round, known as the Uruguay Round (1986–1995).

INSTITUTIONAL FRAMEWORK AND DISPUTE-RESOLUTION MECHANISMS

Unlike GATT, the WTO has an extensive institutional structure. It comprises the Ministerial Conference, the General Council, and a Secretariat with various bodies, committees, divisions, and working groups on specific issues. The General Council is the WTO’s highest decision-making body and meets on a regular basis. Its members are official government representatives, the ambassadors to the WTO, from all member states. The Ministerial Conference comprises the trade or commerce ministers of the member states and meets approximately every two years; the Sixth WTO Ministerial Conference met in Hong Kong, China, on December 13–18, 2005. The Ministerial Conference issues declarations and decisions outlining the broad mandate of the WTO. A recurrent desire expressed in these declarations has been for greater cooperation and coherence between the IMF, World Bank, and WTO on global economic policy making and development.

The structure of the WTO was created by the legal texts of the Uruguay Round of trade negotiations, which include approximately sixty agreements, annexes, decisions, and understandings incorporating GATT, GATS, and TRIPS and covering trade in goods, services, intellectual property, dispute settlement, and transparency through reviews of governments’ trade policies. The agreements negotiated under GATT and the WTO provide the legal ground rules for international commerce, binding governments much like commercial contracts. Like any contract, disputes between parties are likely to arise, and for this reason a new dispute-settlement process was written into the WTO agreements and have become a central pillar of the global trading system. Within this system, a member country can file a dispute against another country or group of countries that it believes is violating a rule of the agreements or failing to live up to its obligations under the agreements.

The procedure resembles a court or tribunal, with formal consultations, mediation, and a panel set up to hear the arguments, examine the legal obligations of the parties, and prepare a report for the Dispute Settlement Body (consisting of all WTO members) to adopt or reject. It also includes an appeals process based on legal interpretation heard by a permanent Appellate Body composed of seven individuals of high legal standing without governmental affiliations. Members of the Appellate Body have four-year terms and can uphold, modify, or reverse the panel’s legal findings or conclusions. Rulings are adopted by the Dispute Settlement Body automatically unless there is a consensus against the panel or appeals report (not a consensus in favor of the report) and are binding; if a state loses a dispute, it must comply with the report recommendations and state its intention to do so within thirty days. In cases of nonimplementation, the parties negotiate compensation pending full implementation. The Dispute Settlement Body monitors implementation of the report rulings and recommendations (if adopted) and has the power to authorize retaliatory action by the harmed country against the country violating its treaty obligations. By July 2005 a total of 332 cases had been brought before the WTO. A typical dispute may take up to sixty days for consultations, up to a year for panel review without an appeal, or a year and three months with an appeal. For any given dispute, the panel’s report is normally presented to the parties within six months (or three months when the issue involves perishable goods).

THE DOHA ROUND

Trade negotiations among member states continue under the WTO, as under GATT, on a multiyear, multilateral basis. As of May 2007 the ninth round of global trade negotiations, the Doha Round, was still ongoing. Doha Round negotiations began in 2001 and are considered by many as much more difficult than earlier rounds. Several reasons are commonly used to explain this difficulty: (1) It goes deeper and farther than other rounds in addressing for the first time such issues as agricultural subsidies and bureaucratic border requirements and documentation, making for political complexity. (2) It makes greater attempts at fair trade by making economic development more central to the international trading system. (3) The membership has grown so much in size and socioeconomic diversity that negotiating outcomes based on the practice of consensus has become much more difficult. (4) It faces strong opposition to globalization by various nonprofit associations representing labor, the environment, and other constituencies. The WTO has been a focus of globalization debates among intellectuals and policy makers and a target of antiglobalization protests by civil society groups.

CONTROVERSY AND 1999 SEATTLE PROTESTS

The WTO has come to represent the institutionalization of globalization, with its positive trade expansion effects as well as its negative effects on communities, local industry, and human rights. The adverse effects of globalization have given rise to a global social movement with active published criticism and consistent protests by activists at WTO Ministerial meetings as well as the annual World Bank–IMF conferences. The first protest of significant size and impact took place at the WTO Ministerial meeting in Seattle from November 29, 1999, to December 3, 1999. An estimated 50,000 protesters from around the world included human rights groups, students, environmental groups, religious leaders, labor-rights activists, others demanding fair trade with less exploitation, and various protectionist groups demanding a nationalist response to maintain domestic industries and preserve communities without foreign influence. While the majority were nonviolent protestors, a small group clashed violently with police, leading the Seattle police and the National Guard to declare a state of emergency that included curfews, arrests, teargas, pepper spray, and rubber bullets fired at nonviolent protestors. Many found the violation of the right of free speech for the purpose of free trade and the ensuing police actions unacceptable. Enormous public protests ensued, ultimately causing the resignation of the Seattle police chief and succeeding in disrupting the meeting, which collapsed. Over 500 related events took place between February 18, 1999, the day the Ministerial location in Seattle was announced, and mid-December 1999, after the WTO had departed. Over 1,400 organizations signed a letter stating their opposition to the WTO. According to the text of the letter, protesting organizations accused the WTO of

principally to pry open markets for the benefit of transnational corporations at the expense of national and local economies; workers, farmers, indigenous peoples, women and other social groups; health and safety; the environment; and animal welfare. In addition, the WTO system, rules and procedures are undemocratic, un-transparent and non-accountable and have operated to marginalize the majority of the world’s people. (WTO History Project)

At the root of the protests are many fundamental differences in the perspectives of developing and industrialized nations, as well as labor unions and some domestic industry in developed countries, on the current reality of free trade and how it affects them. The protests have drawn attention to the democratic deficit within the WTO and to the social issues globalization can adversely impact. However, long-term legislative impact on the WTO itself remains unclear.

SEE ALSO Diplomacy; Free Trade; General Agreement on Tariffs and Trade; Globalization, Social and Economic Aspects of; International Monetary Fund; Protest; Social Movements; Trade; Uruguay Round; World Bank, The

BIBLIOGRAPHY

Bhagwati, Jagdish. 2005. In Defense of Globalization. Oxford: Oxford University Press.

Jackson, John H. 1998. The World Trade Organization: Constitution and Jurisprudence. London: Royal Institute of International Affairs.

Lamy, Pascal. 2006. Partnership and Global Prosperity. Speech made on June 5, 2006, in Montreal, Canada, for the International Economic Forum of the Americas. http://www.wto.org

Scott, Jeffrey J., ed. 2000. WTO after Seattle. Washington, DC: Institute for International Peace.

Stiglitz, Joseph E. 2003. Globalization and Its Discontents. New York: Norton.

Stiglitz, Joseph E. 2006. Making Globalization Work. New York: Norton.

Thomas, Janet. 2000. The Battle in Seattle: The Story behind and beyond the WTO Demonstrations. Golden, CO: Fulcrum.

Wallach, Lori, and Michell Sforza. 1999. Whose Trade Organization? Corporate Globalization and the Erosion of Democracy: An Assessment of the World Trade Organization. Washington, DC: Public Citizen.

WTO History Project, University of Washington. http://depts.washington.edu/wtohist/index.htm

Anastasia Xenias