The WTO is a rules-based, member-driven organization — all decisions are made by the member governments, and the rules are the outcome of negotiations among members.
It is an organization for trade opening It is a forum for governments to negotiate trade agreements.It is a place for them to settle trade disputes.It operates a system of trade rules.
Essentially, the WTO is a place where member governments try to sort out the trade problems they face with each other.
Created by: Uruguay Round negotiations from 1986-94 — new WTO: goods, services and intellectual property Location: Geneva, Switzerland Established: 1 January 1995
Membership: 160 countries (YEMEN accepted as new member in BALI ministerial meet) Head: Roberto Azevêdo (Director-General)
- Ministerial conferences
The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements
- General Council
Top day-to-day decision-making body. Meets regularly, normally in Geneva.
The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. Many are now being negotiated under the Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.
WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted.
The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgements by specially appointed independent experts are based on interpretations of the agreements and individual countries’ commitments.
WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards.
A country should not discriminate between its trading partners and it should not discriminate between its own and foreign products, services or nationals.
Lowering trade barriers is one of the most obvious ways of encouraging trade; these barriers include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively.
Predictable and transparent
Foreign companies, investors and governments should be confident that trade barriers should not be raised arbitrarily. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition — choice and lower prices.
Discouraging ‘unfair’ practices, such as export subsidies and dumping products at below cost to gain market share; the issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.
More beneficial for less developed countries
Giving them more time to adjust, greater flexibility and special privileges; over three-quarters of WTO members are developing countries and countries in transition to market economies. The WTO agreements give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions.
Protect the environment
The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. However, these measures must be applied in the same way to both national and foreign businesses. In other words, members must not use environmental protection measures as a means of disguising protectionist policies.
The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.
The WTO is different from the World Bank and International Monetary Fund. In the WTO, power is not delegated to a board of directors or the organization’s head.
When WTO rules impose disciplines on countries’ policies , that is the outcome of negotiations among WTO members. The rules are enforced by the members themselves under agreed procedures that they negotiated, including the possibility of trade sanctions. But those sanctions are imposed by member countries, and authorized by the membership as a whole. This is quite different from other agencies whose bureaucracies can, for example, influence a country’s policy by threatening to withhold credit.
Reaching decisions by consensus among some 150 members can be difficult. Its main advantage is that decisions made this way are more acceptable to all members. And despite the difficulty, some remarkable agreements have been reached. Nevertheless, proposals for the creation of a smaller executive body — perhaps like a board of directors each representing different groups of countries — are heard periodically. But for now, the WTO is a member-driven, consensus-based organization.
The Doha Round is the latest round of trade negotiations among the WTO membership. Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules. The work programme covers about 20 areas of trade. The Round is also known semi-officially as the Doha Development Agenda as the fundamental objective is to improve the trading prospects of developing countries.
The Round was officially launched at the WTO’s Fourth Ministerial Conference in Doha, Qatar, in November 2001.
Areas covered under Doha Development Agenda:
The aim: More market access, eliminating export subsidies, reducing distorting domestic support, sorting out a range of developing country issues, and dealing with non-trade concerns such as food security and rural development.
2.Non-agricultural market access (NAMA)
The aim: “To reduce or as appropriate eliminate tariffs, including the reduction or elimination of high tariffs, tariff peaks and tariff escalation (higher tariffs protecting processing, lower tariffs on raw materials) as well as non-tariff barriers, in particular on products of export interest to developing countries”.
The aim: To improve market access and to strengthen the rules. Each government has the right to decide which sectors it wants to open to foreign companies and to what extent, including any restrictions on foreign ownership. Unlike in agriculture and NAMA, the services negotiations are not based on a “modalities” text. They are being conducted essentially on two tracks:
- bilateral and/or plurilateral (involving only some WTO members) negotiations
- multilateral negotiations among all WTO members to establish any necessary rules and disciplines
The aim: To ease customs procedures and to facilitate the movement, release and clearance of goods. This is an important addition to the overall negotiation since it would cut bureaucracy and corruption in customs procedures and would speed up trade and make it cheaper.
These cover anti-dumping, subsidies and countervailing measures, fisheries subsidies, and regional trade agreements.
The aim: “Clarifying and improving disciplines” under the Anti-Dumping and Subsidies agreements; and to “clarify and improve WTO disciplines on ﬁsheries subsidies, taking into account the importance of this sector to developing countries.
These are the first signiﬁcant negotiations on trade and the environment in the GATT/ WTO. They have two key components:
- Freer trade in environmental goods. Products that WTO members have proposed include: wind turbines, carbon capture and storage technologies, solar panels.
- Environmental agreements. Improving collaboration with the secretariats of multilateral environmental agreements and establishing more coherence between trade and environmental rules.
7.Geographical indications: multilateral register for wines and spirits
This is the only intellectual property issue that is deﬁnitely part of the Doha negotiations. The objective is to “facilitate” the protection of wines and spirits in participating countries. The talks began in 1997 and were built into the Doha Round in 2001.
8.Other intellectual property issues
Some members want negotiations on two other subjects and to link these to the register for wines and spirits. Other members disagree. These two topics are discussed in consultations chaired by the WTO Director-General (sometimes a deputy):
- GI “extension”. Extending the higher level of protection for geographical indications beyond wines and spirits
- Biopiracy, benefit sharing and traditional knowledge
Aim: To improve and clarify the Dispute Settlement Understanding, the WTO agreement dealing with legal disputes. These negotiations take place in special sessions of the Dispute Settlement Body (DSB). Exceptionally, they are not part of the “single undertaking” of the Doha Round.
At the Ninth Ministerial Conference, held in Bali, Indonesia, from 3 to 7 December 2013, ministers adopted the “Bali Package”.
What are the components of BALI PACKAGE?
The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. It will be a legally binding agreement
The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.
Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement.
The benefits to the world economy are calculated to be between $ 400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.
2.Agriculture and cotton
Agreement on the agriculture part of the Bali Package required sorting out two issues. Much of the focus was on shielding public stockholding programmes for food security in developing countries, so that they would not be challenged legally even if a country’s agreed limits for trade-distorting domestic support were breached.
(The proposed solution will be interim and a permanent solution is to be arrived in four years.
The other issue was about “tariff quota administration“, how a specific type of import quota (a “tariff quota” where volumes inside the quota have a lower duty) is to be handled when the quota is persistently under-filled. Members have agreed on a combination of consultation and providing information when quotas are under-filled.
A third deals with improving market access for cotton products from least developed countries, and with development assistance for production in those countries.
Four documents remained unchanged from their Geneva versions.
- Duty-free, quota-free access for least developed countries to export to richer countries’ markets. Many countries have already implemented this, and the decision says countries that have not done so for at least 97% of products “shall seek to” improve the number of products covered.
- Simplified preferential rules of origin for least developed countries, making it easier for these countries to identify products as their own goods, and qualify for preferential treatment in importing countries.
- A “services waiver”, allowing least developed countries preferential access to richer countries’ services markets.
- A “monitoring mechanism” consisting of meetings and other methods for monitoring special treatment given to developing countries.
In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down — i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production.
AMBER BOX: The amber box contains aid to be avoided and reduced. All domestic support measures “considered to distort production and trade” fall into this box. These could take the form of “support for market prices” via the setting of a minimum “intervention” price, or of subsidies tied to production levels or prices for the current year. For example, when the India buys up rice and wheat at guaranteed prices, it is amber-box aid. Likewise its rebates on interest rates in the farming sector(Interest subvention scheme)
BLUE BOX: The blue box contains tolerated aid. It includes subsidies that are linked to one product, but that do not increase according to production levels. This includes aid that is linked to production limitation programmes and calculated according to fixed production data from an earlier period. For example, the blue box contains aid to livestock or land not linked to prices but to fixed figures for surface and yield.
Green box: The green box contains fully authorized aid. It takes in subsidies that do not distort trade, or only minimally. Research and training services provided to farmers by the state are one example of such aid. Aid designed to help protect the environment or to resist natural disasters is another.