Introduction

This article provides an overview of the World Trade Organisation (WTO).(1) In particular, it examines the WTO's:

  • origins;
  • membership;
  • structure;
  • mandate; and
  • decision-making processes.

Origins

Following World War II, the architects of the Bretton Woods Agreement proposed the formation of an international trade organisation to oversee a new multilateral system of international trade. The international trade organisation was intended to sit alongside the International Monetary Fund (IMF); however, it never came into existence due to opposition in the US Congress, which was concerned that such organisation would encroach excessively on domestic sovereignty. This led to the negotiation of a provisional agreement: the General Agreement on Tariffs and Trade (the GATT).

The GATT was intended to preserve parties' tariff reduction commitments until the international trade organisation was established. However, the GATT ended up becoming a permanent framework for the multilateral trading system and was considered to be the default basis. Various negotiations have been held under the GATT, initially relating to tariff reductions but evolving to include other areas such as anti-dumping and non-tariff measures. Over time, the GATT therefore evolved into the creation of the WTO in 1995, which was considered to be the biggest reform of international trade since World War II.

Membership

The WTO is an umbrella organisation providing the forum for negotiation, treaty revision and dispute settlement. As of 5 February 2021, the WTO had 164 members, accounting for 98% of world trade. Countries which are in the process of negotiating their membership include Iran, Iraq, Serbia and Algeria. The regime of negotiating members broadly follows the WTO regime. Other countries, such as North Korea, have not yet applied or have decided not to apply to become a member of the WTO.(2)

Structure

A key facet of the WTO is that it is run by its members, which differentiates it from other international organisations.

Figure 1

At the top of the structure is the Ministerial Conference, which meets every two years.

The day-to-day work in between ministerial conferences is handled by the following bodies:

  • the General Council, which comprises delegates from all member countries, and its various subcouncils and committees;
  • the Secretariat, which is located in Geneva and headed up by the director general, who is appointed by various members. Due to decisions being taken by members themselves, the Secretariat has no decision-making role; and
  • the dispute settlement body, which consists of panels and the appellate body.

The third level of the WTO comprises councils for each broad area of trade – for example:

  • the Council for Trading Goods;
  • the Council for Trade and Services; and
  • the Council for Trade-Related Aspects of Intellectual Property Rights.

Six other bodies report to the General Council and are deemed to be committees due to their smaller scope of coverage. However, such bodies still consist of WTO members.

Finally, each high-level council has subsidiary bodies which all consist of member countries. These deal with specialist subjects such as:

  • market access;
  • agriculture;
  • safeguard; and
  • rules of origin.

Mandate

The WTO has various key functions, including:

  • administering WTO agreements;
  • providing a forum for trade negotiations;
  • undertaking dispute settlement;
  • undertaking trade monitoring;
  • providing technical assistance and training for developing economies; and
  • cooperating with other international organisations.

The current set of WTO agreements is largely the outcome of the 1986 to 1994 Uruguay round of negotiations, which included a major revision of the GATT. These agreements allow WTO members to operate a non-discriminatory trading system and set out various rights and obligations for members. They also provide a forum for trade negotiations and a dispute settlement procedure mechanism – the dispute settlement understanding. This allows governments to bring disputes to the WTO's attention if they believe that their rights under the WTO agreements are being infringed. Initially, the procedure encourages members to resolve disputes through consultations with each other. However, if this proves unsuccessful, disputes can be brought at the WTO level. The dispute settlement procedure contains various stages, including obtaining a ruling from a panel of experts and the opportunity to appeal a ruling on legal grounds through the appellate body.

All members must undergo periodic scrutiny and the WTO undertakes regular monitoring of global trade measures. Following the 2008 financial crisis in particular, this monitoring role has become a regular function of the WTO.

The WTO also provides technical assistance and training for developing economies. All WTO agreements contain specific provisions to assist members with developing economies – for example, by giving longer timeframes to implement commitments and additional support to build the infrastructure needed for these countries to participate in the WTO. The WTO Committee on Trade and Development also looks at, in particular, developing economies' special needs.

Finally, the WTO cooperates with other international organisations, such as the World Health Organisation and the IMF. This international cooperation is likely to become increasingly key, as a raft of regulations and new licensing provisions have already emerged with respect to the global movement of equipment and medicines needed to help countries treat and develop a vaccine for COVID-19.

WTO agreements The key WTO agreements are:

  • the WTO Agreement – this is the umbrella agreement which deals with the functioning of the WTO;
  • the GATT – this is the principal agreement dealing with goods. Although it has historically tended to focus on goods, recent multilateral negotiations have focused on non-tariff barriers to trade, as discussed above;
  • the General Agreement on Trade and Services (GATS) – this is the principal agreement for services, in which each member has a schedule of commitments relating to services in particular. The GATS was created to harmonise regulations regarding cross-border services and remove the impediments to cross-border trade which domestic regulatory policies are often said to have created;
  • the Trade-Related Intellectual Property Rights Agreement; and
  • the Agreement on Government Procurement, which aims to minimise discrimination in the treatment of foreign direct investment and government procurement.

Decision making

Taking decisions by a consensus is how the WTO differs from other international organisations, such as the IMF. As the WTO is run by member governments, the power of decision making is not delegated to a board of directors or an individual. The original Article 25 of the GATT provided for joint action by a majority vote. However, over time, this has led to the development of a practice requiring a consensus for all decision making. In particular, the WTO Agreement, as well as any amendments to said agreement, binds only those members which have signed and ratified it. Thus, any proposals to amend the WTO Agreement must be tabled for a minimum of 90 days.

There are also specific provisions (as set out in Article 10(2) of the agreement) which can be amended only by a unanimous agreement of all members. All other provisions can be amended by a two-thirds majority of the Ministerial Conference. Such amendments are binding only on the members which vote in favour thereof. However, this is subject to an exception in Article 10(5), whereby the Ministerial Conference can decide by a three-quarters majority that an amendment is of such a nature that any member which has not accepted it within a period specified by the Ministerial Conference can withdraw from the WTO or remain a member with the consent of the Ministerial Conference.

For further information on this topic please contact Ursula Johnston, Savannah Would, Bernardine Adkins or Sean Giles at Gowling WLG by telephone (+44 207 379 0000) or email ([email protected], [email protected], [email protected] or [email protected]). The Gowling WLG website can be accessed at www.gowlingwlg.com.

Endnotes

(1) This article is based on a webinar, which can be viewed here.

(2) A map showing WTO members and the countries negotiating accession is available here.