World Trade Organization (WTO)

The 153-member World Trade Organization is the multilateral, intergovernmental body which regulates international trade. It incorporates the General Agreement on Tariffs and Trade (GATT), and replaced the Geneva-based GATT secretariat, which operated from 1948 to 1994. When the GATT was originally negotiated in 1947, with 23 signato­ries, it was to be overseen by an independent agency of the United Nations, known as the International Trade Organisation (ITO). However, difficulties arose with the ratification of the ITO Convention, and the latter project had to be abandoned. This left a set of new international trade rules, the General Agreement, which came into effect in January 1948, without a structure to administer it.

The General Agreement, now updated and carried forward as an integral part of the WTO system, defines certain basic terms used in international trade (such as ‘dumping’), enjoins signatory states to reduce tariffs and desist from unilateral action likely to damage trade, and prohibits quantitative restrictions between states. Underwritten by the theory of ‘comparative advantage’, it is based upon the principle of non-discrimination, with trading privileges granted to one contracting party extended to all (under the ‘most favoured nation’ concept). However, this principle does not apply to ‘regional trading arrangements’, such as customs unions, or since 1971, to trading privileges granted to developing countries. Equally, agriculture is exempted, as were textiles until the separate Multifibre Agreement (MFA) expired in 2005. The General Agreement also provides a procedure for the resolution of disputes and permits retaliatory action in certain conditions.

For much of the post-war era, successive ‘rounds’ of GATT negotiations resulted in a general lowering of tariffs:

1947          Geneva                      1960-61      Dillon

1949          Annecy                      1963-67      Kennedy

1950-51     Torquay                    1973-79      Tokyo

1955          Geneva II                  1986-94      Uruguay

The Uruguay Round of negotiations, launched at Punta del Este in 1986, was completed at Marrakesh in April 1994, with remaining tariffs to be reduced by an average of 40 per cent in subsequent years. Following an EU initiative backed by Canada and Japan, ministers decided in Marrakesh to upgrade and widen the GATT system by creating the WTO. A revised version of the General Agreement was drawn up, with new parallel arrangements for trade in services (GATS) and intellectual property rights (TRIPS). The dispute settlement procedure was also strengthened.

The WTO structure, like the GATT before it, is headed by a Ministerial Conference which meets at least once every two years. At ambassadorial level, a General Council oversees the regular operation of the system as a whole (meeting about eight times a year), supported by a dispute settlement body, a trade policy review mechanism, and ‘trade councils’ for goods, services and intellectual property. The WTO is serviced by over 600 staff in Geneva, with work conducted in English, French and Spanish.

After a false start at the Seattle Ministerial Conference in 1999, the contracting parties to the WTO launched a new round of trade talks in Doha (Qatar) two years later, designed to secure agreement on further liberalisation of trade in agriculture and services by 2005. However, the growing assertiveness of certain emerging economies – notably Brazil, China, India and South Africa – made agreement with the European Union and the United States elusive. Unsuccessful Ministerial Conferences in Cancun (2003) and Hong Kong (2005) led to the stalling of the so-called Doha Development Round. A nine-day informal mini-ministerial was held in Geneva in July 2008, but it broke up without agreement. Under the Obama Administration, the United States seems largely to have lost interest in the Doha process, preferring to explore bilateral arrangements.

As a result of globalisation, the number of players seriously involved in the trade negotiating process has widened considerably. The Uruguay Round was ultimately settled by an inner-core ‘Quad’ of the United States, Canada, the European Union and Japan, a group essentially coterminous with the Group of Seven (G7). Then Australia emerged as leader of the Cairns group of middle-sized agricultural exporters. During the 2000s, Brazil and India were also accepted as major protagonists in world trade politics. All of these states (with the exception of Canada) now meet in a range of ad hoc fora, known variously as the ‘new Quad’, the ‘Quint’ or the G6.

The European Union – which exercises exclusive competence in external trade policy under the Common Commercial Policy (CCP) – is a member of the WTO in its own right (in addition to the individual member states). The European Commission represents the EU in all international trade negotiations within the WTO, operating on the basis of a mandate laid down by the Council of Ministers, in practice through the Trade Policy Committee.

Further reading: Bernard Hoekman and Peter Mavroidis, World Trade Organization, 2007; Gráinne de Búrca and Joanne Scott, The EU and the WTO: Legal and Constitutional Aspects, 2000; Paul Blustein, Misadventures of the Most Favoured Nations, 2009.

September 2012

Copyright: Anthony Teasdale, 2012

Citation: The Penguin Companion to European Union (2012), additional website entry

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