The World Trade Organization an Overview

The World Trade Organization (WTO) was established in 1995 to replace the General Agreement on Tariffs and Trade, or the GATT agreement. The WTO is headquartered in Geneva, Switzerland and is set up to make it easier for businesses to export or import and to conduct their business across international boundaries.

As such, it is self described as the only international organization that works on the rules of trade between the nations. The mechanism for enhancing trade lies in agreements that are negotiated and signed by the majority of participating nations and that are ratified in their governments or parliaments.

Additionally, the WTO provides technical assistance, helps with the settling of trade disputes, monitors international trade policies and provides an organized forum for trade negotiations.

The WTO agreements are legally worded ground rules for international commerce that have the form of contracts. These contracts  require the signatories to honor the rules of trade and commerce or to keep trade policies within agreed upon limits. This allows a smoother environment of fairness and application of trade rights. The expectation is that the agreements will allow more choice of products and services and better supply availability for consumers. Companies can enjoy smoother supply chains, markets access, and   the movement of supplies and services on a global basis is enhanced.

The famous “Most favored nation” principle dates back to GATT. It means that if one nation is given permission to trade, then all member nations must be given the same and equal perks.

Another principle, “National treatment”, applies to giving foreign goods and services the same treatment as domestic goods and services.

One philosophy is that the negotiation of trade disputes can prevent escalations in hostility that can lead to war. In other ways, the fewer the trade barriers, the more able people are to interact with each other.

The WTO, however, has been expanding its power and role in international trade, while remaining a little known and controversial institution. The original charter was to manage to limited functions of the GATT, which were to reduce tariffs on goods. Now, there are moves to interfere with social goals, such as health, environmental and other programs that are best for the nation, but which limit international trade. There have been moves to expand power and authority.

As a result, the WTO has been increasingly viewed as an organization of unelected bureaucrats who seek to transfer authority from people and nations to a global authority. Opposing views favor a single, more beefed up regulator of trade issues.

The WTO functions in the form of “rounds”, which are multiyear conferences. The most recent round was the Uruguay Round, which was ratified in 1994 in the US Congress. The controversy of the Uruguay Round involved the WTO giving itself more enforcement authority. The most powerful enforcement tool is the ability to allow a nation to impose trade sanctions if another country violates the agreement.

The other controversial initiative of the Uruguay Round was the concept of liberalized investment, which required nations to treat foreigh investors as if they were domestic investors. This allowed a flood of foreign investors which had the freedoms of domestic investors of a nation.

In other words, foreign entities were increasingly allowed to challenge the internal and sovereign laws of countries, as if they were the people, which led to great outrage over what is considered undue foreign influence, interference and attention toward foreign corporations at the expense of the citizens and people.

Another controversy about the now greatly empowered WTO lies in its closed door meetings as well as the  lack of accountability in its unelected leadership.  The fact of no public accountability, yet having the ability to bind nations to agreements that may be compromised by corporate and lobbying influence is a dangerous concept to many.

The Uruguay Round was insulting to labor by not even covering workers rights and abuses. Also, the WTO insists that such issues as child labor and environmental violations cannot be used to block imports by a participating nation. The most violent protests against the WTO are based in the complete dismissal of labor, human rights, endangered species and environmental issues as nations were forced to accept goods, no matter how they were produced.

Worse was the “least trade restrictive” test, which actually limits a country’s ability to establish it’s own environmental or health related policies if they interfere with trade.  As a result, countries like the US, which sets higher standards for such areas as health, the environment, and inhumane labor conditions, were forced to lower them to an international standard that applied to all.

The WTO agreements from the Uruguay round, in essence, gave the WTO greater enforcement authority while causing governments to give up some of their authority as sovereign nations in favor of enhanced international trade and foreign investment. International trade and foreign investment were then viewed as intrusive and inappropriate influences on the government of nations who were inclined to put the will and needs of the people in second place.

The adamant and non negotiable behavior of the WTO created hostility toward the organization that persists and is demonstrated by massive protests, often leading to violence whenever and wherever the WTO is meeting or where WTO agreements cause great and localized dissatisfaction, as in the Seattle anti WTO riots.

This gives the WTO the image and effect of an autocratic global power with great secrecy in its operations and functions. There are some calls for the WTO to be dismantled and replaced with a more democratic and publicly accountable organization.

Sarah Anderson and John Cavanaugh, “World Trade Organization”, Foreign Policy In Focus, January 1997

The World Trade Organization