World Trade Organization

World Trade Organization (WTO), international body established to promote and enforce global free trade. The World Trade Organization was founded in 1993 by the Final Act that concluded the Uruguay Round (1986-1994) of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT) of 1947, which it supersedes, and exists to administer and police the 28 free-trade agreements in the Final Act, oversee world trade practices, and adjudicate on trade disputes referred to it by member states.

Based in Geneva, the WTO began operation on January 1, 1995, with its general council comprising 76 member states; by August 2007 it numbered 151 members (a further 31 nations and 8 organizations enjoyed observer status), accounting for over 97 per cent of world trade. Unlike its predecessor, it is a formally constituted entity whose rules are legally binding on its member states, but it is independent of the United Nations. It provides a framework for the rule of law in international trade, expanding the brief of GATT regulations on goods to include trade in services (GATS) and intellectual property rights (TRIPS), as well as certain provisions on trade-related investment measures. Its current work programme, known as the Doha Development Agenda, also calls for negotiations on new issues such as investment, competition policy, government procurement, and trade facilitation (sometimes referred to as the “Singapore” issues). In addition to administering trade agreements and providing a forum for negotiations, the WTO system features an institutionalized mechanism for settling trade disputes that specifies fixed timetables and legal procedures, with the power to authorize retaliation in case of non-compliance.

The WTO is a member-driven organization, with decisions reached by consensus among all member governments. Their trade ministers gather at the ministerial conference at least once every two years to review work in progress and to give political guidance for ongoing trade negotiations. The day-to-day work in between these summits is handled by various councils, subsidiary bodies, and specialist committees at WTO headquarters in Geneva. Of these, the standing general council is the highest decision-making body. Made up of member states’ ambassadors to the WTO, it acts on behalf of the ministerial conference. The WTO Secretariat services the daily operations and negotiations by providing technical and professional support. It is headed by a director-general, who is appointed by the general council. Renato Ruggiero, a former Italian trade minister, became the first full-time director-general of the WTO on May 1, 1995. He was replaced on September 1, 1999 by the former prime minister of New Zealand, Michael Moore. Dr Supachai Panitchpakdi of Thailand took over the position on September 1, 2002, followed by Pascal Lamy, formerly EC Commissioner for Trade, three years later. Trade disputes referred to the WTO dispute settlement body are adjudicated by a panel composed of independent experts; member countries can decide to appeal against panel rulings to a permanent seven-member appellate body whose decision is final. The Secretariat as a whole comprises over 20 divisions with around 550 regular staff. Its budget in 2006 was 170 million Swiss francs (US$141 million).

In February 1997 the WTO concluded a landmark agreement liberalizing telecommunications trade between its members. In March 1999 the United States imposed sanctions on selected European Union (EU) goods following a WTO ruling against EU tariffs on bananas; the dispute broadened later the same month when the WTO ruled against an EU ban on US beef reared with growth hormones. At the Seattle summit in November 1999 the WTO’s failure to reach any kind of agreement on the opening up of previously protected areas of trade was seen as a major blow to the free-trade movement. In the same month China and the United States signed a historic agreement that paved the way for China to join the WTO, although the deal was not formally approved until September 2001, when Taiwan’s application for membership was also accepted. The practicalities of free trade received another blow in August 2002, however, when the WTO awarded the EU the right to impose trade sanctions against the US after that country had introduced tax breaks for its own exports to Europe. Despite this, it is estimated that the settlements administered by the WTO had increased annual world trade by at least US$755 billion by the end of 2002, raising annual world income by some US$235 billion.

Trade negotiations under the auspices of the WTO seemed to be more intractable in 2003, marked by both success and failure. In September, as member governments remained deadlocked over farm subsidies and the so-called “Singapore” issues, the ministerial conference in Cancún, Mexico, ended without a consensus after five days of consultations. However, WTO members achieved a major breakthrough in the run-up to the September summit by reaching an agreement on the issue of patent protection and access to affordable medicines (see Pharmaceutical Industry). This decision makes it easier for poor countries to import cheaper generics if they do not have the capacity to manufacture essential medicines themselves. While trade officials called on member governments to get back to the negotiating table after the failed talks in Cancún, trading nations increasingly pushed for the conclusion of bilateral and regional free-trade agreements. Nonetheless, WTO members widely supported efforts to get the multilateral negotiations back on track, and in August 2004 a deal was agreed to liberalize global trade by lowering farming subsidies for richer countries and opening markets in more impoverished countries for manufactured products. The agreement, reached at a WTO conference in Geneva, was hailed by most country representatives as a significant breakthrough. However, in July 2006 negotiations once again reached an impasse when the United States and EU clashed over agricultural subsidies and tariffs: the collapse of the talks cast some doubt over the future of the deal. The World Bank has calculated that abolishing all trade barriers could increase annual world income by US$2.8 trillion by 2015.