World Trade Organization (WTO)

At the signing of the Uruguay Round trade agreement in Marrakech, Morocco, in April 1994, US representatives pushed for an normous expansion of the definition of trade issues. The result was the creation of the WTO, which encompasses the current GATT structure and extends it to new areas not adequately covered in the past. The WTO is an institution, not an agreement as was GATT. It sets many rules governing trade between its 148 members, provides a panel of experts to hear and rule on trade disputes between members, and unlike GATT, issues binding decisions. It will require, for the first time, the full participation of all members in all aspects of the current GATT and the Uruguay Round agreements, and through its enhanced stature and scope, provide a permanent, comprehensive forum to address the trade issues of the 21st century global market.

All member countries will have equal representatives in the WTO’s ministerial conference, which will meet at least every two years to vote for a Director General, who will appoint other officials. Trade disputes such as that swirling around genetically modified foods are heard by a panel of experts selected by the WTO from a list of trade experts provided by member countries. The panel hears both sides and issues a decisions; the wining side will be authorized to retaliate with trade sanctions if the losing country does not change its practices. Although the WTO has no means of enforcement, international pressure to comply with WTO decisions from other member countries is expected to force compliance. The WTO ensures that member countries agree to the obligations of all the agreements, not just those they like. For the first time, member countries, including developing countries (the fastest growing markets of the world) will undertake obligations to open their markets and to be bound by the rules of the multilateral trading system.

The WTO provision of the Uruguay Round encountered some resistance before it was finally ratified by the three super powers: Japan, the European Union (EU), and the United States. A legal wrangle European Union countries centered on whether the EU’s founding treaty gives the European Commission the sole right to negotiate for its members in all areas covered by the WTO.

In the US, ratification was challenged because of concern for the possible loss of sovereignty over its trade laws to WTO, the lack of veto power (the US could have a decision imposed on it by a majority of the WTO’s members) and the role the US would assume when a conflict arises over an individual state’s laws that might be challenged by a WTO member. The GATT agreement was ratified by the US Congress and soon after, the EU, Japan and more than 60 other countries followed. All 117 members of the former GATT supported the Uruguay agreement. Since almost immediately after its inception on January 1, 1995 WTO’s agenda has been full with issues raging from threats of boycotts and sanctions and the membership of Iran and Russia. Indeed a major event in international trade during recent years is China’s 2001 entry into the WTO. Instead of waiting for various rounds to iron out problems, the WTO offers a framework for a continuous discussion and resolution of issues that retard trade.

WTO has its detractors but from most indications it is gaining acceptance by the trading community. The number of countries that have joined and those that want to become members is a good measure of its importance. Another one is the accomplishments since its inception: it was been the forum for successful negotiations to opening markets in telecommunications and in information technology equipment, something the US had sought for the last two rounds of GATT. It also has been active in settling trade disputes and it continues to oversee the implementation of the agreements reached in the Uruguay Round. But with its successes come other problems, namely, how to counter those countries that want all the benefits of belonging to WTO but also want to protect their markets.