World Trade Organization

Table of Contents

From GATT to WTO…………………………………………………………………………….…..3

GATT trade rounds…………………………………………………………………………………..4

Creation of the World Trade Organization (WTO) ……………………………………………...….5

WTO structure………………………………………………………………………………………..6

Members, observers, and the case of Mexico as member of the WTO………………………………7

10 benefits of the WTO trading system ……………………………………………………………...9

10 common misunderstandings about the WTO …………………………………………………...11

Conclusion…………………………………………………………………………………………..14

References…………………………………………………………………………………………..15 

As of January the 1st of 1995, the World Trade Organization (WTO) entered into force by replacing the General Agreement on Tariffs and Trade (GATT), which used to regulate world trade since 1948. According to the WTO’s official website, its objective is to help producers of goods and services, exporters, and importers, conduct their business through the design of rules governing trade between countries while monitoring compliance. The role of the WTO is vital, since it is the only organization that deals with the rules governing trade between countries.

From GATT to WTO

In his book “Derecho del comercio exterior” (“Foreign Trade Law” in English), Jorge Witker explains that the GATT, WTO’s predecessor, was established after World War II in order to avoid the risk of aggrieving the economic situation through strategic efforts in order to restore as soon as possible the multilateral trading system that linked the various nations before the economic depression. Among the basic principles of GATT were the following:

A. Nondiscrimation

It refers to the fact od not dividing countries among friends and/or enemies, and which all of them are governed by the same trading parameter, not taking into account the country’s economic or political system. It also prohibits the use of retaliation or punishment between countries due to racial, political, or religious concerns.

B. Reciprocity

Reciprocity is a fundamental element of the negotiating process. It reflects both a desire to limit the scope for free-riding that may arise because of the MFN (Most Favored Nation) rule and a desire to obtain “payment” for trade liberalization in the form of better access to foreign markets (Hoekman). In short, nothing is free or unilateral, but the opposite, where everything is distributed so that there are no winners or losers.

C. Equality of States

It means that all GATT members are subject to the same rights and obligations, as others, assuming they have the same status regardless of its economic and commercial power.

D. Reduction and eliminations of tariffs

After the establishment of GATT, tariffs were the main form of trade protection, and in the early negotiations were mainly focused on the consolidation and reduction of customs duties. Once a country becomes member of GATT, tariffs and taxes should be negotiated and reduced gradually, declining any government intervention through quantitative restrictions on market exchanges (Witker).

GATT trade rounds

There were several rounds in different countries and years in which specific GATT-related topics were discussed, depending on their importance and priority. Furthermore, it was during one of these rounds where the WTO was created. Below is a table showing the different rounds, the length, the subject or subjects covered, and the results.

GATT & WTO trade rounds

Name Start Duration Countries Subjects covered Achievements

Geneva April 1946 7 months 23 Tariffs Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade

Annecy April 1949 5 months 13 Tariffs Countries exchanged some 5,000 tariff concessions

Torquay September 1950 8 months 38 Tariffs Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%

Geneva II January 1956 5 months 26 Tariffs, admission of Japan $2.5 billion in tariff reductions

Dillon September 1960 11 months 26 Tariffs Tariff concessions worth $4.9 billion of world trade

Kennedy May 1964 37 months 62 Tariffs, Anti-dumping Tariff concessions worth $40 billion of world trade

Tokyo September 1973 74 months 102 Tariffs, non-tariff measures, "framework" agreements Tariff reductions worth more than $300 billion dollars achieved

Uruguay September 1986 87 months 123 Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc. The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

Doha November 2001 ? 141 Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, investment, transparency, patents etc. The round is not yet concluded.

Source: Wikipedia.org

Creation of the World Trade Organization (WTO)

The negotiations of the Uruguay Round formally concluded with the ministerial meeting in Marrakesh on April 15, 1994, where 125 countries signed the Final Act comprising sixteen articles, from which Article 1 recognizes the establishment of the World Trade Organization (WTO) and its legal status, respectively, this according to Adrian Markesz, author of "What is the WTO?". The WTO’s current location is Geneva, Switzerland, with a total of 154 members as of April 29 2012. It had a budget of 196 million Swiss Francs in 2011, and the Director-General is Pascal Lamy.

Just like GATT, the WTO principles are essentially the same, which are similar in each of the agreements that make up this organization. However, WTO’s objectives differ from GATT’s objectives. These are (Witker):

1. Raising the living standards and full employment levels.

2. Rise real income and effective demand.

3. Expand production and trade in goods and services

4. Optimal use of resources in accordance with the objective of sustainable development

5. Protect and preserve the environment

6. Increase the means to do all of the above

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