The World Trade Organisation (WTO): Structure, Functions and Agreements

Let us make an in-depth of the World Trade Organisation (WTO):- 1. Structure of the World Trade Organisation 2. Functions of the World Trade Organisation 3. WTO Agreements 4. Criticisms of the World Trade Organisation.

Structure of the World Trade Organisation:

The WTO secretariat (numbering 625 of many nationalities) is headed by Director General. However, the WTO is headed by the Ministerial Conference who enjoys absolute authority over the institution. It not only carries out functions of the WTO but also takes appropriate measures to administer the new global trade rules. In addition to these, the structure of the WTO consists of a General Council to oversee the WTO agreement and ministerial decisions on a regular basis.

The Council sits in its headquarters Geneva, Switzerland usually once a month. Besides General Council, there is the Council for Trade in Goods, the Council for Trade in Services, the Council for Trade Related Intellectual Property Rights (TRIPS). These Councils and their respective subsidiary bodies perform their respective functions.

Decision-making is made by consensus. If consensus is not reached then majority voting plays the crucial rate. The significant task facing the WTO is that of making the new multilateral trading system truly global. Implementation of WTO agree­ments and ministerial decisions are crucial to credibility of the multilateral trading system and indispensable for expanding global trade, creating additional jobs and improving the standard of living.

Functions of the World Trade Organisation:

At the heart of the Organisation are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO’s overriding objective is to help trade flow smoothly, frets, fairly, and predictably.

With these objectives in mind, we can state the following six specific functions:

i. It shall facilitate the implementation, administration and operation of the WTO trade agreements, such as multilateral trade agreements, plurilateral trade agreements.

ii. It shall provide forum for negotiations among its members concerning their multilateral trade relations.

iii. It shall administer the ‘Understanding on Rules and Procedures’ so as to handle trade disputes.

iv. It shall monitor national trade policies.

v. It shall provide technical assistance and training for members of the developing countries.

vi. It shall cooperate with various international organisations like the IMF and the WB with the aim of achieving greater coherence in global economic policy-making.

The WTO was founded on certain guiding principles—non-discrimination, free trade, open, fair and undistorted competition, etc. In addition, it has special concern for developing countries.

WTO Agreements:

General Agreement on Tariffs and Trade was established in 1947. In 1995, GATT was replaced by the World Trade Organisation (WTO).

As far as the old system or GATT was concerned, there were two GATTS:

(i) GATT the organisation, and

(ii) GATT the agreement.

The second one refers to the agreement between different governments setting out the rules for trade. GATT, the organisation, has been replaced by the establishment of the WTO. GATT, the agreement, however, exists along with the additional WTO new agreements, viz.

(i) General Agreement on Trade in Services (GATS), and

(ii) General Agreements on the Trade Related Aspects of Intellectual Property Rights (TRIPS).

It is, thus, clear that the WTO Agreements cover goods, services and intellectual property.

The three agreements establishing the WTO are:

(i) GATT,

(ii) GATS, and

(iii) TRIPS.

i. GATT:

GATT is related to increasing market access by reducing various trade barriers operating in different countries. Dismantling of trade restrictions was to be achieved by the reduction in tariff rates, reductions in non-tariff support in agriculture, abolition of voluntary export restraints or phasing out the Multi-fibre Arrangement (MFA), cut in subsidies, etc.

To improve market access, industrialised countries will have to reduce tariffs by 36 p.c. over six years and 24 p.c. for developing nations over 10 years. World trade in textiles and clothing’s is governed by the MFA which requires to be phased out within 10 years (1993-2002).

On 1 January 2003, textiles and clothing sector will stand integrated into GATT, with the elimination of MFA restrictions. GATT aims at elimination of farm support and export support in developed countries. The agreement says that all countries will have to reduce aggregate support levies if it is in excess of 5 p.c. of the total value of agricultural produce, but for developing countries it is more than 10 p.c. The value and the volume of direct export subsidies will have to be cut by 36 p.c. and 21 p.c., respectively, over six years for developed countries.

ii. GATS:

Multilaterally agreed and legally enforceable rules and disciplines relating to trade in services are covered by General Agreement on Trade in Services. It envisages free trade in services, like banking, insurance, hotels, construction, etc., so as to promote growth in the developed countries by providing larger markets and in the developing countries through transfer of technologies from the developed countries.

As a result of this agreement, access of service personnel into markets of member countries will henceforth be possible on a non-discriminatory basis under transparent and rule-based system. Under the agreement, service sector would be placed under most favoured nation (MFN) obligations that prevents countries from discriminating among different nations in respect of services.

iii. TRIPS:

The TRIPS Agreement covers seven specific areas, viz. copyrights, trademarks, industrial designs, integrated circuits, geographical indications, trade records and patent. Of these seven areas, the most important as well as debatable aspect is the patents right. The basic principle of the patent system is that an inventor, who makes a full disclosure of what he has invented, is granted a statutory monopoly to exploit his invention.

Patents should be available for any invention, whether products or processes, in all fields of technology provided they are new, involve an inventive step and capable of industrial application. Patents should be available and patent rights enjoyable without discrimination.

TRIPS also say that members must provide for the protection of plant varieties either by patents or by an effective sui generis system. The sui generis system commonly refers to the system of Plant Breeders’ Rights (PBRs)—the exclusive right to produce seed of the protected variety for the seed trade and control of its marketing.

In addition, WTO members have set procedures for settling disputes arising out of the violation of trade rules. Thus, there exists a multilateral system of settlement of disputes. The WTO agreement also allows governments to take appropriate action against dumping.

Criticisms of the World Trade Organisation:

Free trade policy pursued by the WTO over the years has widened the income gap between rich and poor nations, instead of minimising the gap. Secondly, WTO functions in a discriminatory way as it is more biased to the rich countries and MNCs. In fact, this strategy of the WTO has not benefited the developing countries.

One can see that the market access of these countries in industry has not improved, non- tariff barriers like anti-dumping measures have increased and domestic support and export subsidies for agricultural products in the rich countries still remain high. Thirdly, it is criticised that labour relations and environmental issues have been side-lined or ignored by the WTO. Finally, decision-making process in the WTO is rather non-transparent, ineffective and non- inclusive since “the vast majority of developing countries have very little real say in the WTO system.”