History and Development of the WTO
Here is the timeline of the development of the WTO
Place/Name
Year
Geneva
Annecy
Torquay
Geneva
Dillon Round
Kennedy Round
1947
1949
1951
1956
1960-1961
1964-1967
Tokyo Round
1973-1979
Uruguay Round
1986-1994
Aim
Participating
Countries
Tariffs
23
Tariffs
13
Tariffs
38
Tariffs
26
Tariffs
26
Tariffs, Anti Dumping 62
Measures
Tariffs, Non Tariff
102
Measure, “Framework
Agreements”
Tariffs, Non Tariff
123
Measures, Rules,
Services, Intellectual
Property, Dispute
Settlement, Textiles,
Agriculture
October 1947 – Signing of the General Agreement on Trade and Tariffs (GATT), came into
force on January 1948: This was an indication of attempting to give a boost to trade
liberalization, especially after many countries suffered severe economic damage from the
conclusion of World War 2. This first round of negotiations resulted in a package of trade rules
and 45,000 tariff concessions affecting $10 billion of trade, about one fifth of the world’s total. It
was a multilateral agreement regulating international trade amongst the 23 participating
countries. According to its preamble, its purpose was the "substantial reduction of tariffs and
other trade barriers and the elimination of preferences, on a reciprocal and mutually
advantageous basis."
Though GATT was being formed, most of the participating countries were also in negotiations to
create an International Trade Organisation (ITO) charter, as the vision was for this body to
effectively carry out and implement the rules surrounding trade which was the aim of GATT.
The draft ITO Charter was ambitious. It extended beyond world trade disciplines, to include
rules on employment, commodity agreements, restrictive business practices, international
investment, and services.
Though the initial response of the ITO (signed in 1948 – Havana) was overwhelming supportive,
its actual implementation created a major standing block, as ratification of it proved difficult for
domestic laws to accommodate. Another issue occurred with the US being the driving force was
unable to even implement the charter in its domestic jurisdiction. Therefore, GATT remained the
only multinational organization that dealt with international trade, that it until the establishment
of the WTO in 1995.
Though GATT remained the principal organization that governed the relationship of
international trade amongst said nations, there were rounds that were negotiated to potentially
improve the conditions and strength of GATT. For almost half a century, the GATT’s basic legal
principles remained much as they were in 1948. There were additions in the form of a section on
development added in the 1960s and “plurilateral” agreements (i.e. with voluntary membership)
in the 1970s, and efforts to reduce tariffs further continued. Much of this was achieved through a
series of multilateral negotiations known as “trade rounds” — the biggest leaps forward in
international trade liberalization have come through these rounds which were held under
GATT’s auspices.
In the early years, the GATT trade rounds concentrated on further reducing tariffs. Those rounds
were:
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Annecy (1949): Second GATT round of trade talks held at Annecy, France, where
countries exchanged some 5,000 tariff concessions.
Torquay (1951): Third GATT round held in Torquay, England, where countries
exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%
Geneva (1956): The next trade round completed in May 1956, resulting in $2.5bn in
tariff reductions.
Dillon Round (1960-61): Fifth Gatt round named in honour of US Under Secretary of
State Douglas Dillon who proposed the negotiations. It yielded tariff concessions worth
$4.9bn of world trade and involved negotiations related to the creation of the European
Economic Community.
Such rounds were further negotiations into reducing tariffs states imposed on export and imports.
The idea of trade liberalization was slowly taking place, but cultural, economical and general
social unwillingness stymied its prominence. GATT was useful for now, but its criticisms
emanated from its failure to purely reflect the growth of trade, and what mechanisms should be
enforced to reflect changing attitudes of trade.
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The Kennedy Round (1964-1967) in the mid-sixties brought about negotiations in
reducing tariffs, but was known for its GATT anti-dumping Agreement and a section on
development. The Kennedy Round, named in honour of the late US president, achieves
tariff cuts worth $40bn of world trade. Moreover, the objects of such were to slash tariffs
by half with of course minimum exceptions, breaking down farm trade restrictions,
removal of non-trade barriers and assisting developing countries. The effect of such was a
success for developing nations, as assistance in technology and investment was endorsed
in actuality (Caribbean, Africa). A “Trade and Development” section was added to the
GATT charter; its most significant feature was excepting developing nations from the
rule of reciprocity (states that favours, benefits, or penalties that are granted by
one state to the citizens or legal entities of another, should be returned in kind.
Reciprocity has been used in the reduction of tariffs, the grant of copyrights to foreign
authors, the mutual recognition and enforcement of judgments, and the relaxation
of travel restrictions and visa requirements). It also called for the stabilization of raw
material prices. Further, the agricultural grains arrangement provided for higher
minimum trading prices as well as a food aid program to developing countries. The
criticisms of this round surrounded its initiation as a means of political agenda.
Economically liberal critics believed that it did not achieve as liberal of goals as the tariff
cuts suggest and instead, out of political fears, erected non-tariff barriers to protect
domestic industries from the negative effects of trade.
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The Tokyo Round (1973-1979) during the seventies was the first major attempt to tackle
trade barriers that didn’t take the form of tariffs. It aimed at improving the system,
adopting a series of agreements on non-tariff barriers, which in some cases interpreted
existing GATT rules, and in others broke entirely new ground. The Ministerial
declaration setting out the ambit for the negotiations foresaw work aimed at:
(a) Tariff negotiations using the formula method, (b) Reducing or eliminating non-tariff
measures, (c) Examining the possibility of reducing or eliminating all barriers in selected
sectors, (d) Examining the adequacy of the multilateral safeguard system,
(e) Negotiations in agriculture, taking into account the special characteristics and
problems in this sector, and (f) Treating tropical products as a special and priority sector.
GATT had reached an agreement to start reducing not only tariffs but trade barriers as
well, such as subsidies and import licensing. Tariff reductions worth more than $300bn
dollars achieved. Because plurilateral agreements (voluntary membership) were not
accepted by the full GATT membership, they were often informally called "codes".
Several of these codes were amended in the Uruguay Round, and turned into multilateral
commitments accepted by all WTO members.
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The Uruguay Round (1986-1994): GATT trade ministers launch the Uruguay Round in
Punta Del Este, Uruguay, embarking on the most ambitious and far-reaching trade round
so far. The round extended the range of trade negotiations, leading to major reductions in
agricultural subsidies, an agreement to allow full access for textiles and clothing from
developing countries, and an extension of intellectual property rights. In 1994, trade
ministers met for the final time under GATT auspices at Marrakesh, Morocco to establish
the World Trade Organization (WTO) and complete the Uruguay Round. This round is
considered significant because it has reached a positive outcome on the abolition of
quantitative restrictions on imports, not only to regulate trade in goods, but also included
trade in services and intellectual property rights, and produced new mechanisms related
to settling commercial disputes, and has lasted for more than seven years. The objectives
of the Uruguay Round were
to reduce agricultural subsidies
to lift restrictions on foreign investment
to begin the process of opening trade in services like banking and insurance.
They also wanted to draft a code to deal with copyright violation and other forms of intellectual
property rights.
Criticisms of the Uruguay Round
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Groups such as Oxfam have criticized the Uruguay Round for paying insufficient
attention to the special needs of developing countries, especially agricultural concerns
As with the WTO in general, non-governmental organizations(NGOs) such as Health
Gap and Global Trade Watch also criticize what was negotiated in the Round
on intellectual property and industrial tariffs as setting up too many constraints on policymaking and human needs. An article asserts that the developing countries’ lack of
experience in WTO negotiations and lack of knowledge of how the developing
economies would be affected by what the industrial countries wanted in the WTO new
areas; the intensified mercantilist attitude of the GATT/WTO’s major power, the US.; the
structure of the WTO that made the GATT tradition of decision by consensus ineffective,
so that a country would not preserve the status quo, were the reasons for this imbalance.
The most recent “Round” is the Doha Round.
Doha Round
This is the current Round. The Round was officially launched at the WTO’s Fourth Ministerial
Conference in Doha, Qatar, in November 2001. The Doha Ministerial Declaration provided the
mandate for the negotiations, including on agriculture, services and an intellectual property topic,
which began earlier. The Round is also known semi-officially as the Doha Development
Agenda as a fundamental objective is to improve the trading prospects of developing countries.
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.
In Doha, ministers also approved a decision on how to address the problems developing
countries face implementing the current WTO agreements.
The aims of the Doha Round are:
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Agriculture: More market access, eliminating export subsidies, reducing distorting
domestic support, sorting out a range of developing country issues, and dealing with nontrade concerns such as food security and rural development.
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Balance between agriculture and non-agricultural market access (NAMA): 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”.
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Services: 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: (1) bilateral and/or plurilateral (involving only some WTO
members) negotiations and (2) multilateral negotiations among all WTO members to
establish any necessary rules and disciplines.
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Trade facilitation: 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.
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Rules: These cover anti-dumping, subsidies and countervailing measures, fisheries
subsidies, and regional trade agreements. The aim is “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.
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The Environment: These are the first significant negotiations on trade and the
environment in the GATT/ WTO. They have two key components:
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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.
o
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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.
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Other intellectual property issues (TRIPPS): 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 DirectorGeneral (sometimes a deputy): GI “extension”.(1) Extending the higher level of
protection for geographical indications beyond wines and spirits. (2) Biopiracy, benefit
sharing and traditional knowledge
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Dispute settlement: 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.
General Observation of GATT
GATT has made over 47 years a great success in promoting and ensuring a large part of the
liberalization of world trade, and helped reductions in customs duties and ensured the growth of
trade and production, it has made a lot of achievements and contributions in the field of
liberation of some sectors of the international trade and growth. Though it had success in terms
of liberalization of international trade, enhancement of the world productivity and reduce tariffs,
it was unable to achieve the interests of developing countries and to cope with international
changes. Nonetheless, GATT has had its fair share of criticisms and has such opened avenues
where economists and scholars alike had discovered its weakness
Weakness of GATT
- GATT by itself was only the set of rules and multilateral agreements and has no
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constituent bases, it was only interested in trade in goods without paying attention to
services and intellectual property rights, the role of the commission of disputes of the
GATT was slow in resolving disputes and it was being subjected to a degree of
disruption.
One of the main reasons behind the collapse of the GATT was that the organization was
in favor of the industrial countries, and lost confidence among the developing countries
the existence of legal problems, particularly in the areas of agriculture and textiles. For
example, it can be noted that the United States was not able to convince Japan and China
within the framework of the GATT to open its markets to U.S. goods. The absence of an
international mechanism to resolve disputes in international trade only made matters
worse, as states didn’t have any remedy per se, if they felt aggrieved.
The World Trade Organisation Functions
What does the WTO do?
The World Trade Organisation provides forums whereby states can negotiate agreements
centered around reducing trading obstacles that hamper international trade, so that there can be
somewhat of a level playing field for trade between member states, which will encourage
economic growth and development. Moreover, the WTO has instilled mechanisms, both
institutional and legal parameters to monitor and enforce such agreements, and sanctions or
methods or settling disputes that will arise from its interpretation and application. Such
agreements are both multilateral (16 in all), that is between member states and they are atleast 2
plurilateral agreements, which include some of the member states.
Functions of the WTO
- negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers
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to trade) and agreeing on rules governing the conduct of international trade (antidumping, subsidies, product standards)
administering and monitoring the application of the WTO’s agreed rules for trade in
goods, trade in services, and trade-related intellectual property rights
administering and monitoring the application of WTO’s rules agreed upon that concerns
trading of goods and services, and general trade related to intellectual property rights
monitoring and reviewing the trade policies of our members, as well as ensuring
transparency of regional and bilateral trade agreements
settling disputes through the interpretation and application of the agreements
building capacity of developing country government officials in international trade
matters
assisting the process of accession of some 30 countries who aren’t members of the
organization
conducting economic research, collecting and disseminating trade data in support of the
WTO’s main activities
explaining and educating the public about the WTO
The WTO was established in 1995, but recognition must be given to GATT for instituting a
robust and prosperous international solid trading system, designed to engineer international
economical growth. Given GATT’s membership began to increase as more states began to
familiarize themselves with its goals, the WTO has presently 153 members, with the majority
being developing countries. The Secretariat, located in Geneva comprises of closely to 700
members heads all of its activities. Decisions are instituted by the agreement of all member states
The two major bodies that run the administrations of the WTO are:
- the Ministerial conference: The topmost decision-making body of the WTO is the
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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: is the WTO’s highest-level decision-making body in Geneva, meeting
regularly to carry out the functions of the WTO. It has representatives (usually
ambassadors or equivalent) from all member governments and has the authority to act on
behalf of the ministerial conference which only meets about every two years.
Principles of the WTO
- Pursuit of Open Borders
- Non discriminatory treatment by and among members
- Commitment to transparence in the conduct of activities
- Opening of national markets to international trade
- The guarantee of most favoured nation principle
Key
Reporting to General Council (or a subsidiary)
Reporting to Dispute Settlement Body
Plurilateral committees inform the General Council or Goods Council of their activities,
although these agreements are not signed by all WTO members
Trade Negotiations Committee reports to General Council
Criticisms of the WTO – Consensus Voting
An article written by the CIDSE (International Co-operation for Development and Solidarity)
titled “A hearing in the WTO for all Members – Guidelines for improving the WTO negotiating
process” in May, 2005 was written to emphasize on the unfortunate bleak representation
developing nations are subjected to whenever the conference meets to make decisions. Since the
WTO’s membership grew, the consensus system which is still utilized has resulted in stymie yet
pain staking decision making processes. The consensus voting system is a group decisionmaking process that seeks the consent of all participants. It aims for a “voice” for all member
states to have during the decision making process, as such promotes democracy. How so?
democracy is promoted as states are given equal representation and the purpose of the WTO is
given effect, as it promotes trade development in both developed and developing countries.
Though, this consensus system reinforces the WTO being one of the most democratic
international institutions, the Seattle Ministerial (1999) prove that even a democratic system can
be vulnerable to manipulation by elite nations. The article further went to evaluate the validity of
the consensus system in 3 main brackets:
- inclusive consensus – will look at how exclusionary processes undermine consensus
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decision making
vested interests among officeholders and guidelines for democratizing the negotiating
process – will identify how various office holders, particularly the Secretariat and
Ministerial functionaries are perceived as being subservient to vested interests
guidelines for democratizing the negotiating process – CIDSE’s ideas that can be
implemented to encourage more representation and general inclusiveness of developing
nations in the ministerials
Inclusive Consensus
Balancing organizational efficiency with inclusiveness remains the most prominent challenge the
WTO is confronted with.
Inclusive consensus symbolizes the idea of having an agreement based on the collectivity of
approval by all member states. Informals, “Green rooms,” small group meetings, consultations
all characterize the process behind WTO negotiations but remain the most criticized aspect of the
WTO negotiation process. Non-inclusive meetings which involve some member states
discussing negotiations to reach a common position, suffers from not having those established
mechanisms needed for decision making, as it is seemingly avoided and as such is consequently,
labeled as a parallel decision making authority (meaning)
Many of these meetings have caused severe discontent amongst developing nations, as it is
labeled as undemocratic, non-transparent and a violation of the consensus principle, the WTO
surrounds itself with. E.g. the Seattle Ministerial had so many disagreements that it collapsed
owing to the non-transparency of ideas shared in the decision making process. Moreover, there
was the criticism that by sacrificing inclusiveness for expediency (the quality of being
convenient and practical despite possibly being improper or immoral; convenience) it would
caused suspicion and general complaints amongst those excluding leading to questions
surrounding the foundation of how the WTO would be governed.
Other criticisms drawn by CIDSE on the decision making process of the WTO were:
- the representation of developing nations in small group meetings is subject to review, as
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they hardly are entertained in discussions. Moreover, these meetings exert pressure on
developing nations to agree to some policy, even if the policy is non-transparent and
adverse to them
a lack of transparency in the decision making process surrounds such meetings as their
status is often unclear
NB: Many non-governmental organizations, such as the World Federalist Movement, are calling
for the creation of a WTO parliamentary assembly to allow for more democratic participation in
WTO decision making. Dr Caroline Lucas recommended that such an assembly "have a more
prominent role to play in the form of parliamentary scrutiny, and also in the wider efforts to
reform the WTO processes, and its rules". However, Dr Raoul Marc Jennar argues that a
consultative parliamentary assembly would be ineffective for the following reasons:
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It does not resolve the problem of "informal meetings" whereby industrialized countries
negotiate the most important decisions;
It does not reduce the de facto inequality which exists between countries with regards to an
effective and efficient participation to all activities within all WTO bodies;
It does not rectify the multiple violations of the general principles of law which affect the
dispute settlement mechanism.
Recommendations:
- The article stated that many member states had considered that the WTO should
implement an Advisory Group or some sort of Consultative body. Here, this body can
assist in narrowing out differences in the preparation of negotiations. Moreover, it can
encourage developing nations to give their opinions on a particular matter. Instead of
developing nations being forced to organize cohesive groups, they can submit responses
to such body
Vested Interest Among Officeholders
Since the WTO is a membership organization, there are officeholders and most importantly, the
Secretariat responsible for delivering assistance and facilitate negotiations amongst member
states. The secretariat which comprises of about 600 members is described as relatively small in
comparison to other international institutions. Moreover, the report from the Consultative Board
noted that the relationship between delegates and staff was tumultuous. The report places
emphasis on the relationships of workers but doesn’t provide study evidence of how the
Secretariat may be utilized to do the bidding of specific members rather than fulfilling its duty in
ensuring the WTO functions as to deliver its mandates.
The most senior office in the Secretariat is the Director General yet its role isn’t defined in the
Marrakesh Agreement (mark the culmination of the Rounds and established the WTO).
Establishing its powers, role, functions, duties, conditions of service and terms of office has
never been fully developed. The Consultative Report also found that the Conference’s
Chairperson executive decision to appoint friends of the chair to expedite progress within
negotiations. The issues and interest of members that are in need of addressing internal
institutional reform measures had dissipated since the Cancum post mortems. These issues
remain unresolved as such there is a threat that negotiation the decision will remain complicate.
The DG was also criticized especially when the Cancum Ministerial concluded. The problems in
this Ministerial conference were:
- One pressing issue that angered the larger Developed Nations was the unwillingness of
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many developing countries to completely open their markets for free trade
Too much on the agenda for the amount of time they had, a lack of clear organization for
the debates and lectures, and too many countries trying to participate while constantly
realigning themselves solely to seek a better outcome for their countries. No one had the
intentions to try and strike deals with each other as a whole, rather there were many back
door deals throughout the conference as countries tried to swindle around everyone.
NB: Since 1986, the membership of this conference has risen by 90 participants to a total of 146
members. This has caused a large dilemma of satisfying all countries’ needs. As many of the
earlier participants have already satisfied many of the open trade requirements in their countries,
many of the newer countries are reluctant from abiding to the tariff abolition and free trade
encouragement.
Guidelines for Democratising the Negotiating Process
In the article by CIDSE, it concluded by suggesting guidelines to probably be taken into
consideration to improve the WTO’s negotiating process.
- Members who are excluded from these mini-ministerials should have the benefit of
knowing what is going on, as such they should have some status and clarity regarding
country participation.
- WTO needs to portray democracy, and this can be done by implementing a working
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group that invites members to submit various responses from the Advisory Group, as
such can offer an impartial report that isn’t motivated by bias (issue of bribery still
loams)
Green rooms are not decision making forums, so the General Committee doesn’t have to
present by should for the conferences
The Director General’s powers, roles, functions, appointment should be clearly defined
The issue of the Executive Board inviting its friends to sit on the Conference should be
addressed also. Member states should have a say in such appointments
Decision making must be more transparent as such the system itself should involve from
participation from civil society. Can mirror the involvement of the ECOSOC in the UN