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The World Trade Organization (WTO)

Organizing World Trade


The World Trade Organization (WTO) is the only organisation in the world that supervises trading, and its rules, between nation states. WTO agreements are ones that are signed by the majority of the world’s trading nations and find ratification in those nations’ parliaments. The overarching aim is for the WTO to help any legitimate body that produces merchandise and services, and exporters and importers, to conduct their operations.


The Who and the What


According to the World Trade Organization’s (WTO) website, there are several – apparent ways – in which to view it as an entity. It is an organization for the opening of trade, it provides a forum by which nation’s governments can negotiate their trade deals and agreements, it is a place where trade disputes can be addressed and resolved, and it provides a system of rules and guidelines to which trading can adhere. Initiatives are brokered, problems aired, and solutions devised, all by those nations that have acceded to work with one another.


The WTO in and of itself is managed by the governments of the nations who are signatories. Decisions are agreed upon by the governments of the member countries where appointed ministers, delegates, or ambassadors come together at various times (meeting at least once every two years) usually in Geneva, Switzerland. The agreements themselves tend to be long and complicated since they take into account issues of legality that often cover a broad range of activities. However, the WTO tries to maintain a set of simple principles that thread their way through the negotiations they broker and the documentation they produce. The principles form the essence of the multilateral trading system. The WTO purports to be able to achieve 10 objectives: ‘cut living costs and raise living standards, settle disputes and reduce trade tensions,’ stimulate economic growth and employment,’ ‘cut the cost of doing business internationally,’ ‘encourage good governance, ‘help countries develop,’ ‘give the weak a stronger voice,’ ‘support the environment and health,’ ‘contribute to peace and stability,’ and ‘be effective without hitting the headlines.’ Figure one provides an outline of the structure and the people that compose the WTO.





The Road to Now


The WTO as a regime, it is more apt to say, evolved over time rather than came into being. According to Wikipedia, it officially emerged with the signing of the Final Act (or the Uruguay Round) of the General Agreement on Tariffs and Trade (GATT) on 15th April 1994 and became known as the Marrakesh Agreement. In contrast, the WTO website states that the organization was established on 1st January 1995. It is now composed of 164 members who represent 98% of the world’s trade and as of 2020 has a budget of 197 million Swiss francs. According to the 2019 consolidated budget of the WTO, the top 10 contributors to the WTO are Italy, the US, Hong Kong, China, the Netherlands, Germany, South Korea, Japan, France, and the UK. Of these, the biggest contributor is the US, followed by China and then Germany.


The GATT is considered to be the precursor to the WTO. It was established in the wake of the Second World War and the social and economic chaos of that era. It was around that time that other international financial institutions sprang up such as the World Bank and the International Monetary Fund (IMF). The GATT was set in place with a view to it being replaced in short order by the International Trade Organization (ITO). The US – among other signatories – did not ratify it and so the GATT stayed in place for decades thereafter. Seven rounds of negotiations have occurred under the GATT which remained in existence for over 40 years. These negotiations came to be known as the Annecy, the Torquay, the Geneva, the Dillon, the Kennedy, the Tokyo, and the Uruguay rounds.


Trump & Co


As is perhaps fairly evident, the WTO is able to have a profound influence over trading rules that affect large geographical swathes of the globe, and, therefore, can have a huge impact on the economy of a given country. It can be no surprise that critical eyes have been focused on the organization over the years. In particular, ex-US President Donald Trump was vocal about his WTO concerns. He called the organization the ‘single worst trade deal ever made’ (the Atlantic Council). He made the threat that ‘if they don’t shape up, I would withdraw from the WTO.


America has not been alone in its criticisms. The EU and Japan have also cast their own stones. Essentially, the issues fall into three categories: the internal judgment of WTO members to identify developing countries eligible for special treatment, the failure of WTO members to communicate to the WTO body and its other members of government subsidies in accordance with specific rules, and the alleged overreaching of the WTO Appellate Body.


Turmoil


The Financial Times recently discussed how criticisms are being leveled at the WTO due to its inability to resolve tariff negotiations where India, South Africa, and Indonesia are pushing to be able to impose charges on aspects of international communication that have become essential to daily life (such as on messaging apps, video calls, and the flow of data). Should the WTO allow a new ‘protectionist measure’ to be created, it would be a stain on their position as a force for global trade negotiations.


The world is perceived to be immersed in a surfeit of chaos and uncertainty at the moment (with the partitioning of international alliances and the emergence of isolationist geopolitics), and it is poor timing for the WTO to exhibit any signs of weakness in the global stage. This has followed in the wake of major international financial issues such as the trade war between the US and China, the calving of the UK from the EU, and then, of course, the onset of the first global pandemic of its kind in a century.


The WTO had a chance to try and meet the aforementioned challenges in its 12th ministerial conference that began its lengthy process on 12th June 2022. At it, such things were addressed as WTO reform, response to the coronavirus pandemic, e-commerce, food security, and agriculture, and subsidies for fisheries. The outcomes of this conference are too lengthy to address here but Ngozi Okonjo-Iweala – the now director-general of the WTO who took up the role in March 2021 – has staked her reputation on finding a solution. In the build-up to the conference, Ngozi was a hive of action, moving between groups where negotiations were occurring in order to push their progress along. In May, she asked members to consider what is now at stake: “Let us all remember that the WTO is about people – about using trade as a tool to raise living standards, create jobs, and promote sustainable development. So, let’s redouble our efforts, let’s deliver results, and lets reinvigorate the WTO.


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