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 started with an agreement called GATT, made by 23 countries in 1947 after World War II. GATT helped countries lower taxes on things they trade with each other. But another plan for a trade group, called the ITO, didn’t get started 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 things like services and ideas, and 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 sometimes get big and noisy, but they 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 and hard to finish 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, offers a place for countries to talk and solve problems, and keeps track of each country’s trade policies. The WTO also helps countries that are still growing to 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. While GATT allowed many exceptions, the WTO has clearer rules and can take action if countries don’t follow them. This has sometimes made it hard for countries to agree on changes.

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 says it is an organization where members make rules together, and all decisions are made by the member governments. The rules come from talks among the members. Even though the WTO Agreement allows voting when agreement cannot be reached, most decisions are made by agreement.

One writer in 2002 said that while the WTO starts with rules for talks, the final decisions in big trade talks often depend on the power of certain countries like Europe and the U.S., and this might not always make things better for everyone.

Dispute settlement

Main article: Dispute settlement in the WTO

The WTO has a special way to help countries solve problems with each other about trade rules. Countries agree to use this system instead of taking matters into their own hands. When 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

Becoming a member of the World Trade Organization (WTO) is different for each country. It usually takes about five years, but some countries take much longer. For example, Russia first tried to join in 1993 and finally became a member in 2012. Kazakhstan and Vanuatu also had long processes before joining.

When a country wants to join, it must explain its trade rules and policies. Then, it talks with current WTO members about things like prices and access to markets. Once these talks are done, the country’s leaders must agree to the rules before it can become a member. Some countries, like Vietnam, took over 11 years to finish this process.

The WTO has 166 members and 23 observer governments. Recently, Comoros and Timor Leste 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 around 60 important agreements that guide how countries trade with each other. Every member country must agree to these rules when they join.

One key agreement is the Agreement on Agriculture, which started in 1995. It focuses on three main ideas: helping farmers, letting goods move freely between countries, and controlling costs on exports.

Another important agreement is the General Agreement on Trade in Services. It began in 1995 and makes sure that services, like banking and travel, are traded fairly between nations, just like goods are.

There is also the Agreement on Trade-Related Aspects of Intellectual Property Rights. This agreement, made in 1994, sets basic rules for protecting ideas and creations like 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 for each year from its members. The amount each member pays is worked out using a special formula that looks at how much trade they do around the world.

Impact

Studies show that the WTO has helped boost trade around the world. Without the WTO, countries would likely have higher taxes on goods they import, making them more expensive. The WTO helps settle disagreements between countries to keep trade flowing.

Research also shows that being part of the WTO can change how a country’s economy works, making it more organized and less likely to have hidden or unofficial business activities. Many trade deals between countries mention the WTO and often use words from WTO agreements.

Criticism

Main article: Criticism of the World Trade Organization

See also: 1999 Seattle WTO protests

People sometimes talk about hard topics at meetings or public events, which can help everyone understand issues better and find ways to solve problems.

Some people wonder if letting countries trade freely really helps everyone. They point out that many poorer countries grew faster in the past before they opened up their trade too much. For example, El Salvador opened up its trade in the 1990s but didn’t see strong growth. Meanwhile, Vietnam grew quickly by opening up slowly and protecting its own businesses at first.

Others say that the benefits of free trade aren’t shared fairly. They note that in places like China and India, the gap between rich and poor keeps getting bigger even as the economy grows. Some worry that opening up trade too soon can hurt smaller countries, making it hard for them to build strong industries and compete with bigger nations.