World Trade Organisation (WTO): Definition, Structure and Other Details

Let us make in-depth study of the definition, administrative structure, bodies for administration, functions, features and object of World Trade Organisation (WTO).

Definition of WTO:

WTO is officially defined as the legal and institutional foundation of the multilateral trade system.

Unlike GATT, the WTO is a permanent organisation created by international treaty ratified by the governments and legislatures of member states. As the principal international body concerned with solving trade problems between countries and providing a forum for multilateral trade negotiations, it has global status similar to that of the International Monetary Fund and the World Bank.

Administrative Structure of WTO:

WTO is headed by a director-general (currently Mr. Renato Ruggiero, former Italian trade minister) who has four deputies from different member states. The WTO’s ruling body is the General Council, comprising each member country’s permanent envoys. It sits in Geneva on an average once a month. Its supreme authority is the ministerial conference, to be held every two years. The General Council appoints the director- general to a four-year term after consultations among member countries.

WTO started with 125 countries. But seven more states including China, Russia were admitted later on as members. Members range from the top four world trade powers—the United States, the European Union, Japan and Canada—to the increasingly influential emerging developing economies of Asia to some of the world’s poorest countries, like Bangladesh, Guinea.

WTO Bodies for Administration:

The two important bodies in WTO have been set up to perform its various functions:

1. Dispute Settlement Body (DSB):

The DSB, on which all member countries can sit, usually meets twice a month to hear complaints of violations of WTO rules and agreements. It sets up expert panels to study disputes and decide if the rules are being broken. The DSB’s final decisions, unlike those of a similar but less powerful body in the old GATT, cannot be challenged.

2. Trade Policy Review Body (TPRB):

The TPRB is a forum for the entire membership to review the trade policies of all WTO member countries. Major trading policies are reviewed every two years, others every four years.

Other major bodies are the Council for Trade in Goods, the Council for Trade in Services and the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Functions of WTO:

WTO has the following five functions to perform:

(1) The WTO provides the framework for implementation, administration and operation of multilateral trade agreements reached at Uruguay Round.

(2) The WTO provides the forum for further negotiations among its member states concerning their multilateral trade relations with regard to the matters included in the agreements reached at Uruguay Round.

(3) The WTO undertakes the task of settlement of disputes among the member states, which arise from their different understandings of the rules and procedure agreed upon.

(4) The WTO administers the ‘ Trade Review Mechanism.’

(5) In order to evolve a coherent global economic policy to promote free and fair trade among the different countries, WTO cooperates in an appropriate manner with the IMF; World Bank and its affiliated agencies.

The Guiding Fundamental Principles and Features of WTO:

The following fundamental principles have been provided for the functioning of WTO as a multiple trading system:

These principles represent the salient features of WTO.

(a) Non-Discrimination:

This is the most important principle on which WTO has been founded.

The principle of non-discrimination means two things:

(1) All trading partners will be granted the most favoured nation (MFN) status, that is, each member state of WTO will treat every other member state equally as the most favoured nation doing trade. No discrimination will be done by a member of state between different trading states who are also members of WTO. However, some exceptions have been provided in this regard, for example, in case regional trade agreements exist.

(2) Foreign goods, services, trade marks, patents and copyrights shall be given the same treatment as is given to nationals of a country.

(b) Free Trade:

The objective of WTO, as in case of GATT, is to promote free trade among nations through negotiations. For this purpose WTO has to work for progressive liberalisation of trade through reduction in tariffs and removal of quantitative restrictions on imports by member countries.

(c) Stability in the Trading System:

Under WTO agreements member states are committed not to raise tariff and non-tariff trade barriers arbitrarily. This provides stability and predictability to the trading system.

(d) Promotion of Fair Competition:

WTO system of multilateral trading system provides for transparent, fair and undistorted competition among the various countries. Rules such as Most Favoured Nation (MFN) treatment to all trading parties, equal treatment to foreign goods, patents and copyrights as with nationals ensure fair competition among trading countries. Besides, WTO agreement provides for discouraging unfair competitive practices such as export subsidies and dumping (that is, selling products abroad below domestic prices to gain market access).

(e) Special Concern for Developing Countries:

WTO has shown special concern for the developing countries as it has given them more time to adjust to agreements under it and also some special privileges. An important feature of WTO is that it would deal with not only the disputes in the area of trade in goods but a whole range of issues such services and intellectual property rights.

(f) Market Access Commitment:

WTO agreements which seek to establish multilateral trading system require the member countries to undertake market access commitment on reciprocity basis. In fact, market access is ensured by abolishing non-tariff barriers as well as by reducing tariffs.

The understanding on market access requires that member countries will cut tariffs on industrial goods and agricultural products by about 37 per cent. In order to provide market access for the products of developing countries to the USA, USA agreed to cut down farm subsidies. The developing countries are also required to reduce agricultural subsidies to the level of 10 per cent of the value of agricultural produce. In the area of trade in services, market access has been ensured by giving Foreign Service suppliers the same treatment as domestic service suppliers.

(g) Decision at the Ministerial Level Meeting:

Another feature of WTO agreement is that it has upgraded decision-making at the ministerial level. Important decisions regarding trade related matters are to be taken at the Ministerial level meetings. Ministerial level meetings have now been incorporated in the legal structure of WTO.

(h) Wider Range of Issues:

Another important feature of WTO is that it will deal with not only issues and disputes relating to trade in goods but also the whole range of issues concerning trade in services and intellectual property rights.

(i) Multilateral Trading System:

The most important features of WTO is that it seeks to establish just and fair multilateral system of international trade wherein the developed countries, the developing countries, and the least developing countries all have equal opportunities for market access for their products in foreign countries and wherein discriminatory trade barriers and unjust Government support to exports by different countries have been eliminated.

Object of WTO:

The objective of WTO agreements is to establish a multilateral trading system in order to promote free and fair trade among nations. Thus, Dunkel Act on which WTO has been founded is wedded to liberalisation of trade based on comparative costs. For the purpose of trade liberalisation, it provides for a multilateral trading system.

Accordingly, this provides for a multilateral framework for trade not only in industrial and agricultural goods but also in services and also to protect trade related intellectual property rights (TRIPS. By committing the member countries to give Most Favoured Nation (MFN) treatment to all trading partners, it has sought to discourage bilateral trading so as to encourage multilateral trading system.