Role of The World Trade Organization: General Agreement On Trade in Services

Role of the World Trade Organization
Created in 1994 as a result of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO) is a global international trade organization that develops international commerce rules and mediates trade disputes among its members. The WTO brings together 148 members1 that participate in negotiations and binding commitments concerning the promotion of competition and the liberalization of international trade of goods and services. General Agreement on Trade in Services Concluded in 1997 under the auspices of the WTO, the Fourth Protocol to the General Agreement on Trade in Services (GATS) represents one of the major steps towards liberalization of the global telecommunications marketplace and the establishment of liberalization.2 The purpose of GATS is to facilitate liberalization of trade in services. Two types of obligations exist under GATS: (i) general obligations that apply to all members and all service sectors covered under GATS regardless of whether or not specific commitments have been made; and (ii) sector-specific commitments regarding market access and national treatment for sectors and activities that members agree to open to international trade. Under the general obligations, there are two main principles: (i) WTO member countries must afford each other most favored nation (MFN) treatment (i.e., prohibition on discrimination that requires countries to afford treatment no less favourable than that accorded to like services and service suppliers of any other country);3 and (ii) countries must ensure transparency of local regulations (e.g., countries should publish measures of general application, and allow a period of public comment prior to their issuance). Sector-specific commitments are made regarding market access,4 national treatment5 and other additional commitments.6 WTO members make commitments on market access and national treatment based on one of the following four modes of supply: (i) cross border supply;7 (ii) consumption abroad;8 (iii) commercial presence;9 and (iv) presence of natural persons.10 Studies show that since 1997, countries that made GATS commitments have experienced faster levels of fixedline penetration, mobile subscribership, and telecommunications sector revenues.11 In particular, low-income Sub-Saharan Africa countries that have scheduled commitments out-performed those that did not (see Figure 3-B). 12 Figure 3-B: Development/Economic Impact of WTO
Basic Telecommunications Agreement The series of telecommunications commitments that make up a portion of the GATS are referred to as the WTO Basic Telecommunications Agreement (BTA).13 (See Box 3-1.) The BTA established the basis for structural reform of the telecommunications sector aimed at removing barriers to entry and competition, and the adoption by the majority of members of certain pro-competitive regulatory principles that are set out in the Reference Paper on Regulatory Principles.14 These telecommunications commitments apply to basic telecommunications and certain value-added services, but not to audiovisual services. To date, 105 of the 148 WTO members have made commitments under the BTA. Ninety-eight WTO members have made specific commitments on basic telecommunications and 89 members with respect to value-added telecommunications services.15 Box 3-1: Communications Sector under GATS Definitions/Coverage: Telecommunications services (covered under the BTA):
basic telecommunications services are public and private telecommunications services that involve end-to-end transmission of customer supplier information. These
include voice telephone services, packet-switched data transmission services, circuit-switched data transmission services, telex services, telegraph services, facsimile services, and private leased circuit services.
value added-services are services for which suppliers enhance the form or content of the customers information, thereby adding value to the customers information, and include electronic mail, voice mail, on-line information and data base retrieval, Electronic Data Interchange (EDI), enhanced/value-added facsimile services, including store and forward, and store and retrieve, code and protocol conversion, on-line information and/or data processing (including transaction processing), and other services.
Audiovisual services involve the dissemination of content, including motion picture and video tape production and distribution services, motion picture projection services, radio and television services, radio and television transmission services, and sound recording. Key Documents: a. GATS (general obligations and Fourth Protocol); b. GATS Annex on Telecommunications; c. Schedules of specific commitments and exemptions (country-specific); and d. Reference Paper. The purpose of GATS is not to regulate competition, but to ensure that members that have made commitments do not establish regulations that would hinder the international trade of services. WTO membership does not entail automatic submission to the BTA as countries must expressly make commitments through their respective schedule of commitments. These schedules may contain modifications or derogations from the overall text. Members are free to include in their schedules the sectors and activities that will be covered under the commitments. Commitments are made by identifying a particular subsector in the respective schedule and therefore only the services listed in a schedule are open to international trade, subject to any limitations or conditions set forth in the applicable schedule. As a result, if a sector or activity does not appear listed in a schedule it means that a commitment has not been made regarding that sector or activity, and it is not open to international trade.16
Countries can make BTA commitments as part of their accession to the WTO, as part of a formal round of negotiations (e.g., the Doha round of negotiations launched in November 2001), or unilaterally. As a result of the MFN treatment imposed under GATS, a telecommunications commitment made by a WTO member benefits all members regardless of whether or not such other members have made commitments. GATS rules also apply to the provision of services by monopoly service providers, to the extent the provider has been granted special or exclusive rights to provide the service under monopoly (i.e., the rules do not apply to de facto monopolies).17 Telecommunications services and audiovisual services appear as different subsector classifications under the main Communications sector heading of the GATS Services Sector Classification List.18 While the structure of these schedules is the same, countries were given the flexibility of creating distinctions or sub-divisions within the telecommunications sector heading (i.e., local, long distance and international; wire and radio-based; public or non-public; and resale or facilities-based services), making limitations on market access or national treatment, and in certain cases, adding technological conditions (e.g., for satellite access). As a result, the items and terms included under each classification vary among members, creating potential discrepancies in the manner in which countries classify different types of services.19 These commitments are important documents that establish international obligations undertaken by countries and are a clear reference for potential foreign investors on the countries liberalization strategy. Countries may decide to gradually open their market to competition or to take a more aggressive approach. However, they must clearly specify in their commitments where and for how long they wish to restrict their commitments. Ghana, for example, undertook commitments aimed at phasing in competition over a given period. More specifically, Ghana committed to:20
Duopoly operators for the provision of local, domestic and international long distance services, and private leased circuit services for an exclusive five-year period, ending in 2002. Additional suppliers of local services can be licensed to supply underserved areas where duopoly operators have declined right of first refusal. Full competition in data transmission, Internet and Internet access (excluding voice) and teleconferencing. Mobile services (terrestrial and satellite-based) including mobile data services, fixed satellite services, paging and cellular with the reservation that cross-border voice services can only be supplied through commercial arrangements with the duopoly operators. The Reference Paper on regulatory principles.
However, Ghana stated in its commitments that the government would conduct a review of its policy after the duopoly period so as to determine whether to license additional telecommunications services suppliers.
This is different from Jordans WTO commitment where the Government specified that no restrictions would exist after 1 January 2005. Jordans commitments are based on a WTO Chairmans Note S/GBT/W/2/Rev.1 dated 16 January 1997. This Note foresees that unless otherwise noted in the sector column, any basic telecommunications service listed encompasses local, long distance, and international services for public and nonpublic use; that it may be provided on a facilities-basis or by resale; and that it may be provided through any means or technology (e.g., cable, wireless, or satellites).21 Jordans commitments also indicate that it has removed market access limitations on spectrum availability pursuant to another WTO Chairmans Note S/GBT/W/3 dated 3 February 1997. This Note recognizes the right of all WTO members to exercise spectrum/frequency management that may affect the number of service suppliers provided this is done in accordance with the relevant provisions of GATS. The effects of the BTA extend beyond the countries that have made commitments thereunder, with some countries, such as the United States, adopting parallel commitments under bilateral agreements beyond the scope of the WTO (see Box 3-2). Box 3-2: Beyond the WTO - U.S. Harmonization Efforts Given the slow progress of the Doha Round of negotiations and the uncertainty as to the treatment of certain converged services under the WTO classification framework, the United States has sought to fulfil certain of its trade objectives by means of such bilateral and regional trade agreements. As a result, numerous countries have adopted telecommunications commitments outside the scope of the WTO that are similar to, or which extend beyond, those under the BTA pursuant to these bilateral and regional free trade agreements. In 2002, the U.S. Congress passed the Trade Promotion Authority Act allowing the executive branch to negotiate trade agreements where Congress can only vote to approve or reject the agreements, without making any modifications (this process is referred to as fast-track authority).22 Within this authority is the mandate for the United States Trade Representative (USTR) to ensure that the agreements concluded foresee and prevent trade barriers in digital services, including the trade of digital services and goods (the digital trade agenda).23 Under such fast-track authority and the USTR mandate, to date the United States has concluded eight free trade agreements (and is in the process of negotiating three other agreements, including the U.S.-Andean FTA with Peru, Ecuador and Colombia, and the U.S. SACU FTA, with five member countries of the Southern African Customs Union (SACU) -Botswana, Lesotho, Namibia, South Africa and Swaziland) where countries have generally agreed to an open and competitive telecommunications market, and removing barriers to the trade of
digital goods and services.24 In broad terms, all trade commitments under the FTAs (except for few carve-outs e.g., Costa Rica, under the CAFTA), provide for: (i) reasonable and non-discriminatory access to the networks of the signatory parties; (ii) the right of telecommunications companies to interconnect with networks in the signatory countries at nondiscriminatory, cost-based rates; (iii) nondiscriminatory access to facilities, such as telephone switches and submarine cable landing stations; (iv) the ability to lease elements of telecommunications networks on non-discriminatory terms and to resell such telecommunications services; (v) the recognition by each signatory of the importance of supplying services by electronic means as a vehicle to establish a vibrant e-commerce environment; (vi) non-discriminatory treatment of digital products; and (vii) the protection of intellectual property rights. To a large extent, these principles parallel those under the WTOs Reference Paper, but extend these obligations to digital services and goods that may not be covered under certain countries WTO commitments. The United States has also used the FTA as a means to further expand the scope of WTO commitments of certain countries or to achieve some of the same objectives sought under the WTO. For example, the recently approved U.S.-Central American Free Trade Agreement (CAFTA) is directed to promote trade liberalization between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. Although some of the CAFTA countries are WTO members, they had not fully adopted the BTA or the WTO Information Technology Agreement. However, in signing CAFTA these countries committed to a chapter on telecommunications services that incorporates many elements of the BTA and the Reference Paper. In addition, CAFTA, which was substantially modeled after the ten-year old North American Free Trade Agreement (NAFTA), also contains a relevant section directed to the liberalization of telecommunications among the signing parties. Thus, through CAFTA, Costa Rica, for the first time made a commitment to open its market to foreign competition in Internet services, private data networks, and wireless services. CAFTA also requires the Dominican Republic, Guatemala, Honduras and Nicaragua to join the WTO ITA so that U.S. hightech exports enter their markets duty-free.25 WTO Reference Paper The Reference Paper, which consists of six principles that serve as a checklist of success of telecommunications reform in many countries,26 was conceived as a necessary instrument for the removal of regulatory barriers to market access, and its
implementation is aimed at preventing anticompetitive practices by major suppliers.27 Members may adopt the Reference Paper in whole or in part, and by doing so, they commit to maintain appropriate regulatory measures to ensure a competitive marketplace, as well as transparent and fair regulatory procedures. The six Reference Paper principles are: 1. Competitive safeguards: Members are required to establish competitive safeguards preventing major suppliers from engaging in anticompetitive conduct. The Reference Paper does not define competitive safeguards or anticompetitive practices; this is left for each member to determine in its national legislation. However, the Reference Paper lists certain examples of anticompetitive practices including: anticompetitive cross-subsidization; use of information obtained from competitors with anticompetitive results; and withholding technical data. 2. Interconnection: Major suppliers (i.e., those with the ability to materially affect the terms of price and supply in the market by exploiting their control over essential facilities or their position in the market) of members are required to provide interconnection upon request, under non-discriminatory terms and conditions, and at cost-orientated rates that are transparent and feasible. 3. Universal service: Members have the right to define the kind of universal service obligation they wish to maintain, provided such obligations are not anticompetitive per se, and are administered in a transparent, non-discriminatory and competitively neutral manner. Universal service obligations may not create unnecessary burdens on service suppliers. 4. Public availability of licensing criteria: To the extent a licence is required, members should make publicly available: (i) the licensing criteria and the time it will take to decide on a licence application; and (ii) the terms and conditions of individual licences. 5. Independent regulators: Members should ensure that the regulatory authority is separate from, and not accountable to, any supplier of basic telecommunications services, and that their decisions are impartial with respect to market participants. This requirement seeks equal, transparent and objective treatment of all operators in the market. 6. Allocation and use of scarce resources: Allocation and use of scarce resources (i.e., frequencies, numbers, and rights of way) should be carried out in an objective, timely, transparent and non-discriminatory manner, and the allocation of frequency bands should be made publicly available. Details of government-use frequencies do not have to be made publicly available. To date, close to 90 countries have committed to adopting the Reference Paper.28 The Reference Paper has been criticized for its general nature and the fact that it does not prescribe the manner in which these principles should be applied. However, it has provided countries with a baseline approach of what are considered the minimum standards of international good practice.29 Moreover, it can be, and has already been, used as a vehicle to evaluate the appropriateness of existing measures or the lack thereof under the WTOs dispute settlement mechanism (the decisions of which are binding upon
WTO members). (See Section on WTO Dispute Settlement Mechanism below for a discussion on the U.S.-Mexico Panel Report.) Annex on Telecommunications Concluded at the Uruguay Round, the GATS Annex on Telecommunications recognizes that access to and use of public telecommunications networks are essential to the effective provision of services covered under GATS and requires WTO members to allow suppliers of scheduled services to use the public telecommunications transport network and services on reasonable and non-discriminatory terms.30 This obligation extends to any kind of service sector for which a schedule has been made accepting specific market access and national treatment (e.g., value-added services, banking services, legal services, and computer services) regardless of whether the particular country has liberalized its basic telecommunications sector. As a result, the Annex on Telecommunications does not deal with market access to basic telecommunications (as this is dealt with in each members schedule) and does not specifically require liberalization of telecommunications services; rather it deals with the ability of service suppliers to access such services.31 Such ability is limited by the right of the network owner to establish access and use conditions that address public service responsibilities, the protection of the technical integrity of the network or to deny use of the network for services not covered under any schedule of commitments. Audiovisual Services Also under the Communications sector list are audiovisual services (i.e., motion picture and videotape production services, motion picture projection services, radio and television services, sound recording, and others). These services are not covered under the BTA, and the national laws of each country are used to interpret the services that fall under the audiovisual subsector (e.g., for most WTO member countries, satellite services fall under broadcasting/audiovisual activities, but under U.S. legislation these are considered telecommunications services).32 Audiovisual services are not as liberalized as telecommunications services and many countries maintain rules prohibiting foreign ownership of broadcasters and reception of foreign satellite television programming. Some countries expect to achieve greater liberalization of these services through the Doha Round of negotiations; however, there have been challenges in achieving a unified approach since a division exists between those countries with a strong interest to export audiovisual services and those whose cultural and/or economic objectives direct them to protect their domestic industries. New Round of Services Negotiations WTO members commit to progressively liberalize trade in services through periodical rounds of negotiations.33 The Doha Round of negotiations launched in 2001 includes negotiation of telecommunications services and audiovisual services, and there have been proposals to: (i) update the listing of services; (ii) negotiate an e-commerce classification;
(ii) enhance provisions on regulatory independence; and (iii) limit licensing and universal services fees. Negotiations (expected to conclude in 2005) are still underway and WTO members are expected to address the following issues:34
(i) reduction of national treatment exemptions and increase of market access on basic telecommunications and value-added services, and negotiation on the coverage of new convergence services and technologies (i.e., VoIP and broadband); (ii) increasing the number of countries that adhere to the Reference Paper; (iii) reclassification of basic telecommunications and value-added services; and (iv) recognizing the maturation of e-commerce related to market access fortelecommunications-related services that also form the basis for e-businesses, as well as those that use networks for this purpose.
Regulatory Impact of WTO commitments WTO commitments constitute legally binding obligations on members, enforceable through the WTOs binding dispute settlement process. As a result, the impact of WTO commitments on a countrys regulatory framework can be seen through voluntary compliance of a members commitments or as a result of enforcement through the WTOs dispute settlement mechanism. Voluntary Compliance WTO commitments may have a greater impact on developing countries than on developed countries. For many developed countries, adoption of the GATS principles was a reinstatement of pro-competitive liberalization policies that were already in place and compliance with GATS did not require substantial legislative reform. However, for many developing countries, liberalization of their telecommunications market required certain reforms to their telecommunications legislation and structure. GATS seeks the establishment and enforcement of a framework without creating unnecessary barriers to trade.35 It explicitly recognizes members right to regulate the supply of services in order to meet national policy objectives, and therefore liberalization does not imply deregulation. One of the main objectives of GATS with respect to developing countries is to increase their participation through progressive liberalization, taking into account their development levels.36 To achieve such liberalization and comply with GATS telecommunications commitments, many WTO members were required to modify their laws to reflect compliance with their international commitments (e.g., implementing transparent regulatory structures and procedures,establishing an independent regulator; and removing market access barriers). While GATS does not require members to privatize the incumbent operators, many countries did engage in privatization and liberalization efforts as a means to introduce competition in the market. However, even when countries have adopted the legal and structural reforms necessary to comply with their WTO commitments, effective competition and adequate enforcement
of a regulatory framework may sometimes be hindered by the size of the market and the countrys lack of technical, financial, and human resources. For example, Bangladesh has been WTO a member since its inception in 1995. Bangladesh did not expressly agree to adopt the Reference Paper, 37 but rather to review the creation of regulatory disciplines, including specific commitments to:38

issue licences to two additional fixed-line operators; introduce full competition in voice and data transmission over closed user groups and Internet access services; grant licences to four mobile telephone service suppliers; and make no limitations on national treatment (subject to certain subsidies and tax benefits that may only be extended to national operators).
In 2001, Bangladesh approved the Telecommunications Act, establishing an independent regulator and setting the stage for telecommunications reform. Mobile licences were also issued to four companies, which has permitted growth and competition in the sector. Licences were also granted to fixed-line operators, but competition and growth in this market has been slower as a result of interconnection issues with the fixed incumbent telecommunications operator.39 Bangladesh is expected to privatize the incumbent operator and remove additional barriers that still exist in the mobile services market (i.e., restrictions on interconnection with the incumbent operator).40 Also illustrative of the impact of the WTO is Uganda. Although a founding WTO member, Uganda made GATS commitments on basic telecommunications unilaterally (i.e., not as a part of formal negotiating rounds) and revised these commitments in 1999 as a result of the introduction of competition and privatization of the incumbent operator. In its schedule of specific commitments Uganda:

agreed to adopt the Reference Paper; maintained the right of duopoly major licence holders and other pre-existing licence holders over international gateway services (including international roaming for mobile services) according to the terms of those licences; and agreed to grant licences to three mobile carriers.
Uganda began its telecommunications liberalization process in 1994 with the introduction of competition in the mobile sector where three operators currently compete. Liberalization of the fixed-line market began in 1997 when it awarded a second licence to a fixed-line operator, granting it shared-exclusivity with the incumbent telecommunications operator until 2005. In 1997, Uganda issued the Telecommunications Act establishing an independent regulatory body, as well as a neutral supervisory body for the settlement of telecommunications disputes. Other countries that were not WTO founding members, but have acceded to the WTO post BTA, have been required to undertake significant market restructuring as part of their accession, including dismantling of their monopoly telecommunications operators.
For example, Croatia and Georgia, which entered telecommunications commitments in 2000, were required to open their telecommunications market to competition by removing existing monopolies by 2003 and 2004, respectively.41 In 2001, Moldova also agreed to lift the existing monopoly by 2003.42 WTO Dispute Settlement Mechanism - Effects of the DSB decision within Mexico The impact of WTO commitments in the shaping of national legislation also can be seen in the context of the dispute settlement mechanism provided in GATS.43 WTO Dispute Settlement Body (DSB) rulings are binding for the members upon which judgment has been passed, and are automatically adopted unless there is a consensus to the contrary.44 In this sense, dispute settlement constitutes a coercive mechanism for enforcing members WTO commitments in such cases where voluntary compliance is not forthcoming. Hence, such disputes may arise, for example, when one member takes, or omits to take, certain actions that another member state deems a breach of pre-existing WTO commitments. WTO rules exclude individual service providers from directly seeking relief, but the service provider may seek its country of origin government to put pressure on another countrys government to comply with its GATS obligations, and ultimately activate the dispute settlement procedure. To date, only one telecommunications case has been submitted to the DSB: a case involving trade of services between the United States and Mexico, which resulted in the Report of the Panel on Mexicos Measures Affecting Telecommunications Services (the Panel Report).45 In 2000, after failed bilateral talks, the United States initiated a WTO consultation proceeding claiming Mexicos failure to comply with its commitments under the GATS Annex on Telecommunications and the Reference Paper with respect to basic and value-added services. Mexicos schedule of commitments (adherence to the Reference Paper, market access, and national treatment) required it to:

ensure cost-orientated interconnection; prevent anticompetitive practices; and ensure that foreign service suppliers have access to Mexican public telecommunications networks.
The United States claimed that Mexico: 1. Failed to ensure that local operator, Telmex, provide interconnection to U.S. suppliers on cost-orientated, reasonable rates, terms and conditions (i.e., inconsistency with interconnection principles under the Reference Paper). 2. Maintained legislation that failed to prevent anticompetitive practices by Telmex, allowing it to establish international interconnection rates on behalf of all of the suppliers in the market (i.e., inconsistency with the competitive safeguards principles under the Reference Paper). 3. Failed to comply with the Annex on Telecommunications, as U.S. suppliers were unable to access Mexicos public telecommunications network for the provision of certain international services (i.e., non-facilities based services through
Mexican commercial agencies, comercializadoras, and international simple resale through cross-border leased circuits). As a result of the failed consultation proceedings, in 2002, a Panel was constituted, concluding with the DSB Panel Report in June 2004 which found that Mexico had breached several of its WTO telecommunications obligations. As a result, the United States and Mexico agreed on an implementation timetable addressing the compliance issues laid out in the Panel Report. According to such compliance agreement, Mexico was required to: 1. Revise its International Long Distance Rules (the ILD Rules), eliminating those aspects of the existing ILD Rules that implemented the uniform settlement rate system, the proportional return system, and the requirement that the carrier with the greatest proportion of outgoing traffic to a country negotiate the settlement rate on behalf of all Mexican carriers for that country. All such practices were deemed by the Panel Report to be a breach of Section 1.1 of the Reference Paper.46 Thus, the new ILD Rules had to allow the competitive commercial negotiation of international settlement rates. 2. Maintain regulations authorizing the issuance of permits for the resale of international long distance public switched telecommunications services. Such regulations would have to regulate commercial agencies (comercializadoras) established in Mexico and permit them to purchase and resell these telecommunications services through the use of capacity of concessionaires. The absence of such regulations was deemed by the Panel Report to be a breach of Article 5 (a) and (b) of the Annex on Telecommunications. In light of this compliance schedule, Mexico has undertaken the following reforms: 1. New international long distance telecommunications rules47 were approved providing for the competitive negotiation of settlement accounting rates or international interconnection rates, including prices for incoming and outgoing traffic.48 In addition, foreign operators now are free to decide which Mexican operator they wish to use to terminate their traffic in Mexico.49 2. With regards to the rules for licensing of comercializadoras, Mexico issued Regulations for the Resale of Long distance and International Long distance Telecommunications Services, allowing the commercial resale of long distance and international long distance services originating in Mexico. This regulation authorizes the issuance of licences for the resale of international long distance public switched telecommunications services. Converged Services in the WTO Framework Regulatory frameworks that are vertically structured around industries and more serviceorientated, face greater challenges in adapting to and enabling convergence. While the WTO framework was an important step towards removing traditional barriers to trade and competition in the telecommunications market, its vertically segmented structure
may lead to an un-harmonized approach towards convergence. As shown above, communications subsectors are technology oriented, and may not provide the flexibility necessary to accommodate new converged services. A 1998 note by the WTO Secretariat highlighted that the GATS classification of services [may be] inadequate [] to meet the rapid changes of the sector [] and any other list that might be devised could become quickly out of date. Moreover, the lack of specificity regarding the scope and services under each commitment creates a degree of uncertainty about members commitments in connection with converged services. Moreover, WTO members have the flexibility to use their national legislation to interpret or define the category of services for which commitments have been made and therefore the treatment and liberalization of the same service may vary by country. The evolution of convergence has caused the vertical separation of services and industries to disappear, making the WTOs service-based classification obsolete. This also leads to uncertainty regarding the commitments applicable to newly developed services, as such services may potentially fall outside of the scope of existing classification headings and therefore not be subject to any commitment. World Trade Organization (English) Organisation mondiale du commerce (French) Organizacin Mundial del Comercio (Spanish)
WTO founder members (January 1, 1995) WTO subsequent members Formation January 1, 1995 Headquarters Centre William Rappard, Geneva, Switzerland Membership 153 member states Official languages English, French, Spanish[1] Director-General Pascal Lamy Budget 189 million Swiss francs (approx. 182 million USD) in 2009.[2] Staff 625[3] Website wto.org
The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments.[4][5] Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (19861994). The organization is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. However, the negotiation has been dogged by "disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain."[6] The WTO has 153 members,[7] representing more than 97% of the world's population,[8] and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.
Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.[34] Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO: 1. Non-Discrimination. It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members.[34] "Grant someone a special favour and you have to do the same for all other WTO members."[35] National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered
2.
3.
4.
5.
the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).[34] Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.[36] Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.[35][36] Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic countryspecific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM).[37] The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.[35] Safety valves. In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons.[37] Exceptions to the MFN principle also allow for preferential treatment of developed countries, regional free trade areas and customs unions.[citation needed]
[edit] Organizational structure

The General Council has multiple bodies which oversee committees in different areas, re the following: Council for Trade in Goods There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles.[38] Council for Trade-Related Aspects of Intellectual Property Rights Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTOs work with other international organizations in the field.[39]
Council for Trade in Services The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required.[40] Trade Negotiations Committee The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTOs director-general. The committee is currently tasked with the Doha Development Round.[41] The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments.[38] The General council has several different committees, working groups, and working parties.[42] There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on LeastDeveloped Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer.
[edit] Voting system

The WTO operates on a one country, one vote system, but actual votes have never been taken. Decision making is generally by consensus, and relative market size is the primary source of bargaining power. The advantage of consensus decision-making is that it encourages efforts to find the most widely acceptable decision. Main disadvantages include large time requirements and many rounds of negotiation to develop a consensus decision, and the tendency for final agreements to use ambiguous language on contentious points that makes future interpretation of treaties difficult.[citation needed] In reality, WTO negotiations proceed not by consensus of all members, but by a process of informal negotiations between small groups of countries. Such negotiations are often called "Green Room" negotiations (after the colour of the WTO Director-General's Office in Geneva), or "Mini-Ministerials", when they occur in other countries. These processes have been regularly criticised by many of the WTO's developing country members which are often totally excluded from the negotiations.[citation needed] Richard Harold Steinberg (2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the U.S., and may not lead to Pareto improvement.[43]
[edit] Dispute settlement

Main article: Dispute settlement in the WTO In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994.[44] Dispute settlement is regarded by the WTO as the central pillar of
the multilateral trading system, and as a "unique contribution to the stability of the global economy".[45] WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally.[46] The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions.[47] Bodies involved in the dispute settlement process, World Trade Organization.
[edit] Accession and membership

Main article: World Trade Organization accession and membership The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and current trade regime.[48] The process takes about five years, on average, but it can last more if the country is less than fully committed to the process or if political issues interfere.[49] As is typical of WTO procedures, an offer of accession is only given once consensus is reached among interested parties.[50]
[edit] Accession process
Effectiveness
Developing countries
Critics contend that smaller countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the politicians representing the most influential nations in the WTO (and within those countries or between them, influential private business interests) focus on the commercial interests of profit-making companies rather than the interests of all.[citation needed] Martin Khor argues that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. Some examples of this bias are: Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing); The increase in non-tariff barriers such as antidumping measures allowed against developing countries; The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets; Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products). Khor argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, and, therefore, the credibility of the WTO trade system could be eroded. According to Khor, "one of the major categories of 'problems of implementation of the Uruguay Round' is the way the Northern countries have not lived up to the spirit of their
commitments in implementing (or not implementing) their obligations agreed to in the various Agreements."[2] Khor also believes that the Doha Round negotiations "have veered from their proclaimed direction oriented to a development-friendly outcome, towards a 'market access' direction in which developing countries are pressurised to open up their agricultural, industrial and services sectors."[3] Jagdish Bhagwati asserts however that there is greater tariff protection on manufacturers in the poor countries, which are also overtaking the rich nations in the number of anti-dumping filings.[4] [edit]
[edit] Labour and environment

Other critics claim that the issues of labor and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." He also argues that "in the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs."[5] Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer.[6] On the other side, Khor responds that "if environment and labor were to enter the WTO system [...] it would be conceptually difficult to argue why other social and cultural issues should also not enter." He also argues that "trade measures have become a vehicle for big corporations and social organizations in promoting their interests."[7] Bhagwati is also critical towards "richcountry lobbies seeking on imposing their unrelated agendas on trade agreements." According to Bhagwati, these lobbies and especially the "rich charities have now turned to agitating about trade issues with much energy understanding."[8] Therefore, both Bhagwati and Arvind Panagariya have criticized the introduction of TRIPs into the WTO framework, fearing that such non-trade agendas might overwhelm the organization's function. According to Panagariya, "taken in isolation, TRIPs resulted in reduced welfare for developing countries and the world as a whole."[9] Bhagwati asserts that "intellectual property does not belong in the WTO, since protecting it is simply a matter of royalty collection [...] The matter was forced onto the WTO's agenda during the Uruguay Round by the pharmaceutical and software industries, even though this risked turning the WTO into a glorified collection agency."[10] For a discussion on the incorporation of labor rights into the WTO, see The Recognition of Labour Standards within the World Trade Organization. [edit]
[edit] Decision making

Other critics have characterized the decision making in the WTO as over-simplified, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensus-building" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be
delegated responsibility for developing consensus on trade issues among the member countries.[11] The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system".[12] Many non-governmental organizations, such as the World Federalist Movement, are calling for the creation of a WTO parliamentary assembly to allow for more democratic participation in WTO decision making.[13] Dr Caroline Lucas recommended that such an assembly "have a more prominent role to play in the form of parliamentary scrutiny, and also in the wider efforts to reform the WTO processes, and its rules".[14] However, Dr Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasons: It does not resolve the problem of "informal meetings" whereby industrialized countries negotiate the most important decisions; It does not reduce the de facto inequality which exists between countries with regards to an effective and efficient participation to all activities within all WTO bodies; It does not rectify the multiple violations of the general principles of law which affect the dispute settlement mechanism.[15] The lack of transparency is often seen as a problem for communism. Politicians can negotiate for regulations that would not be possible accepted in a democratic process in their own nations. "Some countries push for certain regulatory standards in international bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism."[16] This is often referred to as Policy Laundering.
10 benefits of the WTO trading system

From the money in our pockets and the goods and services that we use, to a more peaceful world the WTO and the trading system offer a range of benefits, some well-known, others not so obvious.
The world is complex. This booklet is brief, but it tries to reflect the complex and dynamic nature of trade. It highlights some of the benefits of the WTOs trading system, but it doesnt
claim that everything is perfectotherwise there would be no need for further negotiations and for the system to evolve and reform continually. Nor does it claim that everyone agrees with everything in the WTO. Thats one of the most important reasons for having the system: its a forum for countries to thrash out their differences on trade issues. That said, there are many over-riding reasons why were better off with the system than without it. Here are 10 of them.
The ten benefits

1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government
1. The system helps to keep the peace

This sounds like an exaggerated claim, and it would be wrong to make too much of it. Nevertheless, the system does contribute to international peace, and if we understand why, we have a clearer picture of what the system actually
does.
THE 10 BENEFITS 1. Peace 2. Disputes 3. Rules 4. Cost of living 5. Choice 6. Incomes 7. Growth and jobs 8. Efficiency 9. Lobbying 10. Good government
Sales people are usually reluctant to fight their customers
Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces. History is littered with examples of trade disputes turning into war. One of the most vivid is the trade war of the 1930s when countries competed to raise trade barriers in order to protect domestic
producers and retaliate against each others barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2. Two developments immediately after the Second World War helped to avoid a repeat of the pre-war trade tensions. In Europe, international cooperation developed in coal, and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was created. Both have proved successful, so much so that they are now considerably expanded one has become the European Union, the other the World Trade Organization (WTO).
How does this work?

Crudely put, sales people are usually reluctant to fight their customers. In other words, if trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely. Whats more, smoothly-flowing trade also helps people all over the world become better off. People who are more prosperous and contented are also less likely to fight. But that is not all. The GATT/WTO system is an important confidence-builder. The trade wars in the 1930s are proof of how protectionism can easily plunge countries into a situation where no one wins and everyone loses. The short-sighted protectionist view is that defending particular sectors against imports is beneficial. But that view ignores how other countries are going to respond. The longer term reality is that one protectionist step by one country can easily lead to retaliation from other countries, a loss of confidence in freer trade, and a slide into serious economic trouble for all including the sectors that were originally protected. Everyone loses. Confidence is the key to avoiding that kind of no-win scenario. When governments are confident that others will not raise their trade barriers, they will not be tempted to do the same. They will also be in a much better frame of mind to cooperate with each other. The WTO trading system plays a vital role in creating and reinforcing that confidence. Particularly important are negotiations that lead to agreement by consensus, and a focus on abiding by the rules.
2. The system allows disputes to be handled

constructively
As trade expands in volume, in the number of products traded, and in the numbers of countries and companies trading, there is a greater chance that disputes will arise. The WTO system helps resolve these disputes peacefully and constructively.
See also: > The WTO in Brief > 10 misunderstandings > Understanding the WTO
Countries in dispute always aim to conform with the agreements
There could be a down side to trade liberalization and expansion. More trade means more possibilities for disputes to arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of international trade tension is
reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes. Before World War 2 that option was not available. After the war, the worlds community of trading nations negotiated trade rules which are now entrusted to the WTO. Those rules include an obligation for members to bring their disputes to the WTO and not to act unilaterally. When they bring disputes to the WTO, the WTOs procedure focuses their attention on the rules. Once a ruling has been made, countries concentrate on trying to comply with the rules, and perhaps later renegotiating the rules not on declaring war on each other. Around 300 disputes have been brought to the WTO since it was set up in 1995. Without a means of tackling these constructively and harmoniously, some could have led to more serious political conflict. The fact that the disputes are based on WTO agreements means that there is a clear basis for judging who is right or wrong. Once the judgement has been made, the agreements provide the focus for any further actions that need to be taken. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout the world, the GATT/WTOs expanding membership and the fact that countries have faith in the system to solve their differences. Sometimes the exchanges between the countries in conflict can be acrimonious, but they always aim to conform with the agreements and commitments that they themselves negotiated.
3. A system based on rules rather than power

makes life easier for all
The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.
Smaller countries enjoy more bargaining power, and life is simpler for bigger countries
Decisions in the WTO are made by consensus. The WTO agreements were negotiated by all members, were approved by consensus and were ratified in all members parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal right to challenge each other in the WTOs dispute settlement procedures. This makes life easier for all, in several different ways. Smaller countries can enjoy some increased bargaining power. Without a multilateral regime such as the WTOs system, the more powerful countries would be freer to impose their will unilaterally on their smaller trading partners. Smaller countries would have to deal with each of the major economic powers individually, and would be much less able to resist unwanted pressure. In addition, smaller countries can perform more effectively if they make use of the opportunities to form alliances and to pool resources. Several are already doing this. There are matching benefits for larger countries. The major economic powers can use the single forum of the WTO to negotiate with all or most of their trading partners at the same time. This makes life much simpler for the bigger trading countries. The alternative would be continuous and
complicated bilateral negotiations with dozens of countries simultaneously. And each country could end up with different conditions for trading with each of its trading partners, making life extremely complicated for its importers and exporters. The principle of non-discrimination built into the WTO agreements avoids that complexity. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. And these agreed rules give governments a clearer view of which trade policies are acceptable.
4. Freer trade cuts the cost of living

We are all consumers. The prices we pay for our food and clothing, our necessities and luxuries, and everything else in between, are affected by trade policies.
According to one calculation, consumers and governments in rich countries pay $350 billion per year supporting agriculture enough to fly their 41 million dairy cows first class around the world one and a half times
Protectionism is expensive: it raises prices. The WTOs global
system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living. There are plenty of studies showing just what the impacts of protectionism and of freer trade are. These are just a few figures: Food is cheaper When you protect your agriculture, the cost of your food goes up by an estimated $1,500 per year for a family of four in the European Union (1997); by the equivalent of a 51% tax on food in Japan (1995); by $3 billion per year added to US consumers grocery bills just to support sugar in one year (1988). Negotiating agricultural trade reform is a complex undertaking. Governments are still debating the roles agricultural policies play in a range of issues from food security to environmental protection. But WTO members are now reducing the subsidies and the trade barriers that are the worst offenders. And in 2000, new talks started on continuing the reform in agriculture. These have now been incorporated into a broader work programme, the Doha Development Agenda, launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. Clothes are cheaper Import restrictions and high customs duties combined to raise US textiles and clothing prices by 58% in the late 1980s. UK consumers pay an estimated 500 million more per year for their clothing because of these restrictions. For Canadians the bill is around C$780 million. For Australians it would be A$300 annually per average family if Australian customs duties had not been reduced in the late 1980s and early 1990s. The textiles and clothing trade is going through a major reform under the WTO that will be completed in 2005. The programme includes eliminating restrictions on quantities of imports. If customs duties were also to be eliminated, economists calculate the result could be a gain to the world of around $23 billion, including $12.3 billion for the US, $0.8 billion for Canada, $2.2 billion for the EU and around $8 billion for developing countries.
The same goes for other goods When the US limited Japanese car imports in the early 1980s, car prices rose by 41% between 1981 and 1984 nearly double the average for all consumer products. The objective was to save American jobs, but the higher prices were an important reason why one million fewer new cars were sold, leading to more job losses. If Australia had kept its tariffs at 1998 levels, Australian customers would pay on average A$2,900 more per car today. In 1995, aluminium users in the EU paid an extra $472 million due to tariff barriers. One of the objectives of the Doha Development Agenda (DDA) is another round of cuts in tariffs on industrial products, i.e. manufactured and mining products. Some economists, Robert Stern, Alan Deardorff and Drusilla Brown, predict that cutting these by one third would raise developing countries income by around $52 billion. and services Liberalization in telephone services is making phone calls cheaper in the 1990s by 4% per year in developing countries and 2% per year in industrial countries, taking inflation into account. In China, competition from a second mobile phone company was at least part of the reason for a 30% cut in the price of a call. In Ghana the cut was 50%. The group of economists led by Robert Stern estimates that lowering services barriers by one third under the Doha Development Agenda would raise developing countries incomes by around $60 billion. And so it goes on. The system now entrusted to the WTO has been in place for over 50 years. In that time there have been eight major rounds of trade negotiations. Trade barriers around the world are lower than they have ever been in modern trading history. They continue to fall, and we are all benefiting.
5. It gives consumers more choice, and a broader

range of qualities to choose from
Think of all the things we can now have because we can import them: fruits and vegetables out of season, foods, clothing and other products that used to be considered exotic, cut flowers from any part of the world, all sorts of
household goods, books, music, movies, and so on.

Life with ... ... and without imports
Think also of the things people in other countries can have because they buy exports from us and elsewhere. Look around and consider all the things that would disappear if all our imports were taken away from us. Imports allow us more choice both more goods and services to choose from, and a wider range of qualities. Even the quality of locally-produced goods can improve because of the competition from imports. The wider choice isnt simply a question of consumers buying foreign finished products. Imports are used as materials, components and equipment for local production. This expands the range of final products and services that are made by domestic producers, and it increases the range of technologies they can use. When mobile telephone equipment became available, services sprang up even in the countries that did not make the equipment, for example. Sometimes, the success of an imported product or service on the domestic market can also encourage new local producers to compete, increasing the choice of brands available to consumers as well as increasing the range of goods and services produced locally. If trade allows us to import more, it also allows others to buy more of our exports. It increases our incomes, providing us with the means of enjoying the increased choice.
6. Trade raises incomes

Lowering trade barriers allows trade to increase, which adds to incomes national incomes and personal incomes. But some adjustment is necessary.
The fact that there is additional income means that resources are available for governments to redistribute
The WTOs own estimates for the impact of the 1994 Uruguay Round trade deal were between $109 billion and $510 billion added to world income (depending on the assumptions of the calculations and allowing for margins of error). More recent research has produced similar figures. Economists estimate that cutting trade barriers in agriculture, manufacturing and services by one third would boost the world economy by $613 billion equivalent to adding an economy the size of Canada to the world economy. In Europe, the EU Commission calculates that over 198993 EU incomes increased by 1.11.5% more than they would have done without the Single Market. So trade clearly boosts incomes. Trade also poses challenges as domestic producers face
competition from imports. But the fact that there is additional income means that resources are available for governments to redistribute the benefits from those who gain the most for example to help companies and workers adapt by becoming more productive and competitive in what they were already doing, or by switching to new activities.
7. Trade stimulates economic growth, and that

can be good news for employment
Trade clearly has the potential to create jobs. In practice there is often factual evidence that lower trade barriers have been good for employment. But the picture is complicated by a number of factors. Nevertheless, the alternative protectionism is not the way to tackle employment problems.
Careful policy-making harnesses the job-creation powers of freer trade
This is a difficult subject to tackle in simple terms. There is strong evidence that trade boosts economic growth, and that economic growth means more jobs. It is also true that some jobs are lost even when trade is expanding. But a reliable analysis of this poses at least two problems. First, there are other factors at play. For example, technological advance has also had a strong impact on
employment and productivity, benefiting some jobs, hurting others. Second, while trade clearly boosts national income (and prosperity), this is not always translated into new employment for workers who lost their jobs as a result of competition from imports. The picture is not the same all over the world. The average length of time a worker takes to find a new job can be much longer in one country than for a similar worker in another country experiencing similar conditions. In other words, some countries are better at making the adjustment than others. This is partly because some countries have more effective adjustment policies. Those without effective policies are missing an opportunity. There are many instances where the facts show that the opportunity has been grasped where freer trade has been healthy for employment. The EU Commission calculates that the creation of its Single Market means that there are somewhere in the range of 300,000900,000 more jobs than there would be without the Single Market. Often, job prospects are better in companies involved in trade. In the United States, 12 million people owe their jobs to exports; 1.3 million of those jobs were created between 1994 and 1998. And those jobs tend to be better-paid with better security. In Mexico, the best jobs are those related to export activities: sectors which export 60 per cent or more of their production, pay wages 39% higher than the rest of the economy and maquiladora (in-bond assembly) plants pay 3.5 times the Mexican minimum wage. The facts also show how protectionism hurts employment. The example of the US car industry has already been mentioned: trade barriers designed to protect US jobs by restricting imports from Japan ended up making cars more expensive in the US, so fewer cars were sold and jobs were lost. In other words, an attempt to tackle a problem in the short
term by restricting trade turned into a bigger problem in the longer term. Even when a country has difficulty making adjustments, the alternative of protectionism would simply make matters worse.
8. The basic principles make the system

economically more efficient, and they cut costs
Many of the benefits of the trading system are more difficult to summarize in numbers, but they are still important. They are the result of essential principles at the heart of the system, and they make life simpler for the enterprises directly involved in trade and for the producers of goods and services.
Discrimination complicates trade
Trade allows a division of labour between countries. It allows resources to be used more appropriately and effectively for production. But the WTOs trading system offers more than that. It helps to increase efficiency and to cut costs even more because of important principles enshrined in the system. Imagine a situation where each country sets different rules and
different customs duty rates for imports coming from different trading partners. Imagine that a company in one country wants to import raw materials or components copper for wiring or printed circuit boards for electrical goods, for example for its own production. It would not be enough for this company to look at the prices offered by suppliers around the world. The company would also have to make separate calculations about the different duty rates it would be charged on the imports (which would depend on where the imports came from), and it would have to study each of the regulations that apply to products from each country. Buying some copper or circuit boards would become very complicated. That, in simple terms, is one of the problems of discrimination. Imagine now that the government announces it will charge the same duty rates on imports from all countries, and it will use the same regulations for all products, no matter where they come from, whether imported or locally produced. Life for the company would be much simpler. Sourcing components would become more efficient and would cost less. Non-discrimination is just one of the key principles of the WTOs trading system. Others include: transparency (clear information about policies, rules and regulations); increased certainty about trading conditions (commitments to lower trade barriers and to increase other countries access to ones markets are legally binding); simplification and standardization of customs procedure, removal of red tape, centralized databases of information, and other measures designed to simplify trade that come under the heading trade facilitation.
Together, they make trading simpler, cutting companies costs and increasing confidence in the future. That in turn also means more jobs and better goods and services for consumers.
9. The system shields governments from narrow

interests
The GATT-WTO system which evolved in the second half of the 20th Century
helps governments take a more balanced view of trade policy. Governments are better-placed to defend themselves against lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone in the economy.
Governments are better placed to ward off powerful lobbies
One of the lessons of the protectionism that dominated the early decades of the 20th Century was the damage that can be caused if narrow sectoral interests gain an unbalanced share of political influence. The result was increasingly restrictive policy which turned into a trade war that no one won and everyone lost. Superficially, restricting imports looks like an effective way of supporting an economic sector. But it biases the economy against other sectors which shouldnt be penalized if you protect your clothing industry, everyone else has to pay for more expensive clothes, which puts pressure on wages in all sectors, for example. Protectionism can also escalate as other countries retaliate by raising their own trade barriers. Thats exactly what happened
in the 1920s and 30s with disastrous effects. Even the sectors demanding protection ended up losing. Governments need to be armed against pressure from narrow interest groups, and the WTO system can help. The GATT-WTO system covers a wide range of sectors. So, if during a GATT-WTO trade negotiation one pressure group lobbies its government to be considered as a special case in need of protection, the government can reject the protectionist pressure by arguing that it needs a broad-ranging agreement that will benefit all sectors of the economy. Governments do just that, regularly.
10. The system encourages good government

Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to reverse. The rules also discourage a range of unwise policies. For businesses, that means greater certainty and clarity about trading conditions. For governments it can often mean good discipline.
The rules reduce opportunities for corruption
The rules include commitments not to backslide into unwise policies. Protectionism in general is unwise because of the damage it causes domestically and internationally, as we have already seen. Particular types of trade barriers cause additional damage because they provide opportunities for corruption and other forms of bad government. One kind of trade barrier that the WTOs rules try to tackle is the quota, for example restricting imports or exports to no more than a specific amount each year. Because quotas limit supply, they artificially raise prices, creating abnormally large profits (economists talk about quota rent). That profit can be used to influence policies because more money is available for lobbying. It can also provide opportunities for corruption, for example in the allocation of quotas among traders. There are plenty of cases where that has happened around the world. In other words, quotas are a particularly bad way of restricting trade. Governments have agreed through the WTOs rules that their use should be discouraged. Nevertheless, quotas of various types remain in use in most countries, and governments argue strongly that they are needed. But they are controlled by WTO agreements and there are commitments to reduce or eliminate many of them, particularly in textiles. Many other areas of the WTOs agreements can also help reduce corruption and bad government. Transparency (such as making available to the public all information on trade regulations), other aspects of trade facilitation, clearer criteria for regulations dealing with the safety and standards of products, and non-discrimination also help by
reducing the scope for arbitrary decision-making and cheating. Quite often, governments use the WTO as a welcome external constraint on their policies: we cant do this because it would violate the WTO agreements.
What is the role of the World Trade Organisation (WTO) and has it been successful in achieving its goals? Why? Whats the future of the WTO?
By ringlet86
What is the role of the World Trade Organisation (WTO) and has it been successful in achieving its goals? Why? Whats the future of the WTO? Globalisation is the move towards interdependence between nations, organizations and people. There are many global institutions that facilitate globalisation and their roles are to regulate and monitor international exchange to ensure that there is co-operation in areas like finance, aid, peace keeping and politics on a global scale.
It was believed that a certain structure and framework was needed to prevent the economic policies that contributed to the 1930 Great Depression. However, I will focus only on the World Trade Organisation (WTO) for this entry.
The WTO deals with the rules of trade between nations. It was created to supervise and liberalise international trade. Its role in the global market is to negotiate and implement new trade agreements. It functions as an international court to resolve trade disputes. Currently, the WTO has 153 members, which represents more than 95% of world trade.
In light of all these, I would like to examine how the WTO has been effective. Countries join the WTO for many reasons such as to increase trade and exports. Through the WTO, two countries, for example, can experience improved trade. If Country A is a producer of rice, and country B is a producer of coffee, both countries can trade and exchange their goods, and citizens benefit.
The presence of trade agreements, which usually involve reciprocal benefits, for example, exchanges or tax cuts on the exchange of goods is a reason why countries are encouraged to negotiate these agreements. Countries that have negotiated trade agreements get access to foreign markets, and this facilitates growth and benefits the economy. Countries also get to save on resources when they pay lower prices for goods exchanged.
Despite the benefits of being a member of the WTO, some critics say that the smaller countries in WTO have little influence in decision making the most influential nations in the WTO focus on commercial interests of profit making companies.
About 80 countries have in the WTO have per capita incomes lower than they were in a decade ago, and the numbers of people living in poverty especially in sub Saharan Africa has continued to grow.
For example, the United States attempt to ban shrimp caught using equipment that were harmful to endangered sea turtles has been ruled as an illegal act by the WTO, thus causing the US to change its decision. National laws like these are considered as detrimental to trade, and countries are forced to abolish laws like these.
The question remains: why do governments still want to be members of the WTO then? Despite the controversy, WTO membership has grown steadily, and currently, 30 countries are holding observer status and are waiting to be members. Perhaps countries still benefit from joining the WTO. WTO aims to be non discriminating and transparent. A small country can enjoy the benefits that WTO grants to its members. Smaller countries can also join alliances with larger countries to increase their bargaining power.
I believe to make the WTO more relevant to the citizens of the world, there should be a complete change of the WTOs policies. There should be a moving away from serving the interests of large corporations, and
promote environmental pollution. This is sustainable growth, and is a remedy for poverty. It must also attempt to change peoples perceptions of the WTO, and redefine itself as a development institution. Many people believe that it is simply an institution used by the rich to make decisions favourable for them.
The WTO should focus on maintaining its original agreements that aim to provide a level playing field for the global economy and to provide transparency in settling conflicts.

Role of The World Trade Organization: General Agreement On Trade in Services

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Role of The World Trade Organization: General Agreement On Trade in Services

Hochgeladen von

Copyright:

Verfügbare Formate

Role of the World Trade Organization

Principles of the trading system

[edit] Organizational structure

[edit] Voting system

[edit] Dispute settlement

[edit] Accession and membership

[edit] Accession process

[edit] Labour and environment

[edit] Decision making

10 benefits of the WTO trading system

The ten benefits

1. The system helps to keep the peace

Sales people are usually reluctant to fight their customers

How does this work?

2. The system allows disputes to be handled

Countries in dispute always aim to conform with the agreements

3. A system based on rules rather than power

4. Freer trade cuts the cost of living

Protectionism is expensive: it raises prices. The WTOs global

5. It gives consumers more choice, and a broader

household goods, books, music, movies, and so on.

Life with ... ... and without imports

6. Trade raises incomes

7. Trade stimulates economic growth, and that

Careful policy-making harnesses the job-creation powers of freer trade

8. The basic principles make the system

Discrimination complicates trade

9. The system shields governments from narrow

Governments are better placed to ward off powerful lobbies

10. The system encourages good government

The rules reduce opportunities for corruption

Das könnte Ihnen auch gefallen