The World Trade Organization (WTO), established on 1 January 1995, is the legal and institutional foundation of the multilateral trading system. It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations. And it is the platform on which trade relations among countries evolve through collective debate, negotiation and adjudication.
The WTO is the embodiment of the results of the Uruguay Round trade negotiations and the successor to the General Agreement on Tariffs and Trade (GATT).
The Preamble of the Agreement Establishing the WTO states that members should conduct their trade and economic relations with a view to "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of development."
Furthermore, members recognize the "need for positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in international trade commensurate with the needs of their economic development."
To contribute to the achievement of these objectives, WTO Members have agreed to enter into "reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations."
The fundamental principles of the multilateral trading system are:
- Trade without discrimination. Under the "most-favoured nation" (MFN) clause, members are bound to grant to the products of other members no less favourable treatment than that accorded to the products of any other country. The provision on "national treatment" requires that once goods have entered a market, they must be treated no less favourably than the equivalent domestically-produced good.
- Predictable and growing access to markets. While quotas are generally outlawed, tariffs or customs duties are legal in the WTO. Tariff reductions made by over 120 countries in the Uruguay Round are contained in some 22,500 pages of national tariff schedules which are considered an integral part of the WTO. Tariff reductions, for the most part phased in over five years, will result in a 40 per cent cut in industrial countries' tariffs in industrial products from an average of 6.3 per cent to 3.8 per cent. The Round also increased the percentage of bound product lines to nearly 100 per cent for developed nations and countries in transition and to 73 per cent for developing countries. Members have also undertaken an initial set of commitments covering national regulations affecting various services activities. These commitments are, like those for tariffs, contained in binding national schedules.
- Promoting fair competition. The WTO extends and clarifies previous GATT rules that laid down the basis on which governments could impose compensating duties on two forms of "unfair" competition: dumping and subsidies. The WTO Agreement on agriculture is designed to provide increased fairness in farm trade. That on intellectual property will improve conditions of competition where ideas and inventions are involved, and another will do the same thing for trade in services.
- Encouraging development and economic reform. GATT provisions intended to favour developing countries are maintained in the WTO, in particular those encouraging industrial countries to assist trade of developing nations. Developing countries are given transition periods to adjust to the more difficult WTO provisions. Least-developed countries are given even more flexibility and benefit from accelerated implementation of market access concessions for their goods.
The essential functions of the WTO are:
- administering and implementing the multilateral and plurilateral trade agreements which together make up the WTO;
- acting as a forum for multilateral trade negotiations;
- seeking to resolve trade disputes;
- overseeing national trade policies; and
- cooperating with other international institutions involved in global economic policy-making.
The highest WTO authority is the Ministerial Conference which meets every two years. The day-to-day work of the WTO, however, falls to a number of subsidiary bodies, principally the General Council, which also convenes as the Dispute Settlement Body and as the Trade Policy Review Body. The General Council delegates responsibility to three other major bodies - namely the Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of Intellectual Property Rights.
Three other bodies are established by the Ministerial Conference and report to the General Council: the Committee on Trade and Development, the Committee on Balance of Payments and the Committee on Budget, Finance and Administration. The General Council formally established, in early 1995, a Committee on Trade and Environment, which will present a report on its work to the first meeting of the WTO Ministerial Conference, scheduled for December 1996 in Singapore.
Each of the plurilateral agreements of the WTO - those on civil aircraft, government procurement, dairy products and bovine meat - have their own management bodies which report to the General Council.
Secretariat and budget
The WTO Secretariat is located in Geneva. It has around 450 staff and is headed by its Director-General, Renato Ruggiero, and four Deputy Directors-General. Its responsibilities include the servicing of WTO delegate bodies with respect to negotiations and the implementation of agreements. It has a particular responsibility to provide technical support to developing countries, and especially the least-developed countries. WTO economists and statisticians provide trade performance and trade policy analyses while its legal staff assist in the resolution of trade disputes involving the interpretation of WTO rules and precedents. Other Secretariat work is concerned with accession negotiations for new members and providing advice to governments considering membership.
The WTO budget is around US$83 million with individual contributions calculated on the basis of shares in the total trade conducted by members. Part of the budget also goes to the International Trade Centre.
Mr. Renato Ruggiero
Contact informationWorld Trade Organization