World Trade Organization

The World Trade Organization (WTO) is an intergovernmental organization that helps countries trade with each other fairly and smoothly. It began on January 1, 1995, after an agreement made in 1994 called the Marrakesh Agreement. The WTO took over from an older group called the General Agreement on Tariffs and Trade, which started in 1948.

Today, the WTO has 166 members, which are countries that do most of the world's trading. It is based in Geneva, Switzerland. The main job of the WTO is to make rules for trading and to help solve problems when countries disagree about trade. These rules cover many things, like goods, services, and intellectual property.

The biggest meeting of the WTO happens every two years, where leaders from all member countries meet to make big decisions together. Every day, representatives from each country meet to handle the organization's work. Since 2021, a leader from Nigeria named Ngozi Okonjo-Iweala has been in charge.

Many experts believe the WTO has helped increase trade and make it easier for countries to trade. However, some people worry that not everyone benefits equally, and that the rules might hurt developing countries or ignore important issues like the environment. The WTO has also been involved in big trade arguments and some difficult discussions about changing its rules.

History

Main article: History of the World Trade Organization

Further information: Bretton Woods system and International Bank for Reconstruction and Development

The World Trade Organization began with an agreement called GATT in 1947. This was after World War II. GATT helped countries lower taxes on things they trade. Another plan for a trade group, called the ITO, didn’t start because some countries didn’t agree to it. So GATT became the main way countries handled trade rules.

GATT had many talks to help countries trade better. In the 1980s, leaders saw that GATT needed to change because the world was changing fast. In 1986, they started a big talk called the Uruguay Round. This talk made new rules for trading services and ideas. It also made the World Trade Organization official in 1994.

The WTO meets every two years with leaders from all its member countries. These meetings help countries talk about fair trade rules. In 2001, they started a new set of talks called the Doha Round to help poorer countries grow by making trade easier. But these talks have been slow because countries don’t always agree on the rules.

Functions

The World Trade Organization (WTO) helps countries work together on trade. It watches over trade rules and offers a place for countries to talk and solve problems. The WTO also helps growing countries follow the rules by offering support and training. It works with groups like the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development to help with global economic policies.

The WTO is different from its predecessor, GATT, because it has more rules and covers more topics, like services and intellectual property. The WTO publishes important reports each year, such as the World Trade Report, the WTO Annual Report, and the World Trade Statistical Review, to explain global trade trends and data.

Principles of the trading system

The World Trade Organization (WTO) sets rules for how countries trade with each other. It doesn’t decide the outcomes, but it creates a framework for trade policies. Five main principles help explain how the WTO works:

1. Non-discrimination: Countries must treat all other WTO members equally in trade. This means if a country gives special benefits to one member, it must give the same benefits to all others. There are some exceptions, like special treatment for developing countries or agreements between groups of countries.
2. Reciprocity: Countries aim to make sure that when they open their markets to others, they also get better access to foreign markets in return. This helps ensure that both sides benefit from trade agreements.
3. Binding and enforceable commitments: Countries make promises about their trade policies, and these promises are written down. If a country wants to change these promises, it must negotiate with its trading partners.
4. Transparency: Countries must share information about their trade rules and policies. This helps all members know what to expect and makes trade more predictable.
5. Safety valves: In certain situations, countries can limit trade to protect the environment, public health, or animal and plant health. However, they must be careful not to use these limits unfairly to protect their own industries.

Exceptions to equal treatment also allow for special help for developing countries and for groups of countries that agree to trade specially with each other.

Organizational structure

The World Trade Organization (WTO) is led by a group of leaders called the Ministerial Conference. They meet at least every two years, and last met in June 2022 in Geneva.

Between these big meetings, three groups help with the work. They are the General Council, the Dispute Settlement Body, and the Trade Policy Review Body.

The General Council has smaller groups that focus on different topics, like trade in goods, services, and ideas about money and rules. There are also groups that look at trade and the environment, trade and helping poorer countries, and many other important areas.

Decision-making

The WTO is a group where countries work together to make rules. All choices are made by the countries that are members. The rules are made through discussions among the members. Though the WTO Agreement says voting can be used if they cannot agree, most choices are made by agreement.

One writer in 2002 said that even though the WTO starts with rules for discussions, the final choices in big trade talks often depend on the power of some countries like Europe and the U.S., and this might not always be good for everyone.

Dispute settlement

Main article: Dispute settlement in the WTO

The WTO has a special way to help countries solve trade problems. Countries agree to use this system instead of solving problems by themselves. If a country thinks another is breaking trade rules, they can ask for help from special groups called panels. These panels look at the problem and make a decision. If needed, there is also a group called the Appellate Body that can review the decision.

The goal is to solve problems quickly and fairly. Usually, a decision can be made in about a year, and if there is an appeal, it may take up to 16 months. If a problem is very urgent, it should be solved even faster. However, this system cannot handle trade problems that come from political disagreements between countries.

Since 2019, the Appellate Body has had trouble working because new members could not be added. Because of this, some countries created a new way to review decisions while they wait for the Appellate Body to start working again.

Accession and membership

Joining the World Trade Organization (WTO) is different for each country. It can take about five years, but some countries take longer. For example, Russia tried to join in 1993 and became a member in 2012. Kazakhstan and Vanuatu also took a long time to join.

When a country wants to join, it must explain its trade rules. Then, it talks with current WTO members about trade. After these talks, the country’s leaders must agree to the rules before it can join. Some countries, like Vietnam, took more than 11 years to finish this.

The WTO has 166 members and 23 observer governments. Comoros and Timor Leste recently joined as the 165th and 166th members. Not all members are fully independent countries; some are areas with control over their own trade, like Hong Kong and Taiwan.

Further information: Member states of the World Trade Organization

Agreements

The WTO manages about 60 agreements that help countries trade with each other. Every country must agree to these rules when they join.

One key agreement is the Agreement on Agriculture. It began in 1995 and helps farmers, allows goods to move freely between countries, and controls export costs.

Another important agreement is the General Agreement on Trade in Services. It started in 1995 and ensures that services like banking and travel are traded fairly between nations.

There is also the Agreement on Trade-Related Aspects of Intellectual Property Rights. This agreement, made in 1994, sets rules for protecting ideas and creations such as music, movies, and inventions.

In 2013, members signed a major agreement called the Bali Package.

Office of director-general

Main article: Director-General of the World Trade Organization

The rules for choosing the leader of the WTO were updated in January 2003. The leader serves for four years at a time, and there are four helpers called deputy directors-general.

In May 2020, the old leader said he would leave on August 31, 2020. Countries started picking a new leader, and many wanted Ngozi Okonjo-Iweala to be chosen. After some discussion, members of the WTO agreed on February 15, 2021, to choose Ngozi Okonjo-Iweala from Nigeria as the new leader. She was the first woman and the first person from Africa to hold this job.

Budget

The World Trade Organization gets most of its money each year from its members. Each member pays an amount worked out using a special formula. The formula looks at how much trade they do around the world.

Impact

The WTO has helped increase trade around the world. Without the WTO, countries might have higher taxes on goods they import, making them cost more. The WTO helps countries solve problems so trade can continue.

Being part of the WTO can also change how a country’s economy works. It helps make things more organized and less confusing. Many trade deals between countries talk about the WTO and use words from its agreements.

Criticism

Main article: Criticism of the World Trade Organization

See also: 1999 Seattle WTO protests

Sometimes people talk about tough subjects at meetings or events. This can help everyone understand problems better and think of solutions.

Some people ask if free trade really helps everyone. They note that many poorer countries grew faster before they opened up their trade too much. For example, El Salvador opened up trade in the 1990s but did not grow strongly. Meanwhile, Vietnam grew quickly by opening up slowly and protecting its own businesses at first.

Others feel that the good parts of free trade are not shared fairly. They point out that in places like China and India, the difference between rich and poor keeps getting larger even as the economy improves. Some worry that opening up trade too soon can hurt smaller countries, making it hard for them to build strong industries and compete with larger nations.