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Originally Published: 8/1/2008

THE WORLD TRADE ORGANIZATION

By The Issue Wonk

 

The World Trade Organization (WTO) is an international organization founded in 1995 with the stated aim of promoting free trade and stimulating economic growth among its members. To these ends, it has established rules regarding trade between and among the members. It also settles trade disputes. Its mission is to increase international trade by promoting lower trade barriers and providing a forum for the negotiation of trade. Currently there are 149 members. (For a list of member nations, see the WTO Web site.) The WTO headquarters are in Geneva, Switzerland. There are approximately 30 trade agreements, the most well-known of which is The General Agreement on Tariffs and Trade (GATT).

 

Nominally, the WTO operates on a consensus basis. That is, most decisions, such as adopting agreements and revisions to established agreements, are supposed to be determined by a consensus of the entire membership. In actuality, however, most negotiations are reached by informal talks between small groups, often call “Green Room” negotiations because the color of the Director-General’s Office in Geneva is green. These are the types of agreements that are most frequently criticized by developing country members which are usually excluded from the negotiations. Currently the WTO is engaged in a round a negotiations at the Fourth Ministerial Conference in Doha, Qatar, commonly called “the Doha round.”

 

The WTO hears disputes by a Dispute Settlement Panel com-prised of 3 trade officials. The panel meets in secret and is not required to reveal to national governments that their laws have been challenged by another country. After ruling, either side may appeal the decision. Appeals are heard by another 3 member panel from the permanent Appellate Body of 7 members, each serving 4-year terms. The WTO has significant power to enforce its decisions. It may authorize “retaliatory measures,” such as trade sanctions.

 

The WTO oversees about 60 different agreements. Member countries must sign and ratify all agreements. Here are some of the most important agreements.

 

Agreement on Agriculture (AoA).  This was the first agreement. It has been criticized for reducing tariff protections for small farmers while allowing rich countries to continue to pay their farmers massive subsidies. It has 3 central concepts: domestic support, market access, and export subsidies.

 

Domestic Support:  There are 3 categories of domestic support: fixed payments to producers for environmental programs, domestic subsidies that governments have agreed to reduce but not eliminate, and subsidies which can be increased without limit so long as payments are linked to production-limiting programs.

 

Market Access:  This refers to the reduction of tariff and non-tariff barriers. Least Developed Countries (LDCs) are exempted from tariff reductions but either have to convert non-tariff barriers to tariffs (called  “tariffication”) or create a ceiling which could not be increased in the future.

 

Export Subsidies:  This required developed countries to reduce export subsidies at least 35% by value or 21% by volume by the year 2000.

 

General Agreement on Trade in Services (GATS)

 

Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement

 

Sanitary and Phyto-Sanitary (SPS) Agreement.  Under this agreement, the WTO sets constraints on members’ policies relating to food safety (e.g., bacterial contaminants, pesticides, inspection, and labeling) as well as animal and plant health. This agreement came into play when the U.S. challenged a number of European bans on genetically modified organisms (GMOs), arguing that they were unjustified. The Dispute Resolution Panel issued a ruling that took issue with the regulation of GMOs but dismissed many of the U.S. claims. This agreement has been criticized since quarantine policies, which insure protection of human, animal, and plant health, are viewed as “trade barriers,” and open up speculation on whether science has adequately “proven” that something is a health threat.

 

Agreement on Technical Barriers to Trade (TBT).  This agreement is to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade.

 

According to Wikipedia, additional criticisms of the WTO are:

 

that free trade does not make ordinary people’s lives more prosperous but only results in the rich (both people and countries) becoming richer. WTO treaties have also been accused of a partial and unfair bias toward multinational corporations and wealthy nations.

 

Critics contend that small countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the influential nations in the WTO focus on their own commercial interests.  They also claim that the issues of health, safety and environment are steadfastly ignored.

 

Please see Wikipedia for a vast array of references you can read to get more information.

 

© The Issue Wonk 2006

 

 

 

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