What Is the World Trade Organization?
The World Trade Organization is an international institution that serves as a platform for countries to negotiate trade agreements. Rules govern trade between nations, and the WTO functions as a go-between to settle trade disputes between member countries.
As a multilateral trade organization, the WTO was formed in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), which was created as part of the 1944 Bretton Woods conference.
What Are WTO Agreements?
WTO agreements serve as the legal foundation for international trade, including procedures for settling trade disputes. They cover pacts on goods, services, and intellectual property and also include commitments by members to lower trade barriers and to open their markets. Agreements can be renegotiated when members convene during regular and special meetings.
A Brief History of the World Trade Organization
The WTO was founded on January 1, 1995, following the Uruguay Round (the longest global trade agreement in modern history), which lasted from 1986 to 1994. The WTO held its first Public Forum—a platform to discuss latest developments in trade—in 2006.
In 2012, in what was the longest-running dispute in the WTO at 20 years, an agreement over bananas between the EU and 10 Latin American countries was signed, resulting in the EU lowering import tariffs. In the WTO’s Tenth Ministerial Conference in 2015, the Nairobi Package—a trade agreement in which countries eliminated subsidies on certain farm exports, and tariffs on hundreds of information technology products were abolished—was established.
Why Did the WTO Replace GATT?
The General Agreement on Tariffs and Trade (GATT) lacked an institutional framework since it was established in 1947, and the formation of the WTO sought to resolve that. Plus, while GATT lacked formality in setting trade pacts, the WTO would set agreements that members would need to abide by legally. The WTO would also cover intellectual property and services rather than focus solely on the trade of goods.
Criticism of the WTO
Criticism of the WTO is often aimed at supposedly unfair trade practices in which developed countries tend to benefit over developing nations. Free trade, in particular, could lead to dumping practices and make similar goods made by developing countries uncompetitive.
At the same time, some criticism is aimed at developing countries for receiving preferential treatment. For example, companies in the EU and the U.S. have accused companies in China of stealing intellectual property.
Frequently Asked Questions (FAQ)
The following are answers to some of the most common questions investors ask about the World Trade Organization.
Where Is the Headquarters of the WTO?
The WTO is based in Geneva, Switzerland. Each member appoints a representative to the WTO.
What Is the Ministerial Conference?
The Ministerial Conference is the top decision-making body of the WTO, and it can make decisions on all multilateral trade agreements. All WTO members meet every two years for the conference.
What Is the General Council?
The General Council oversees the day-to-day affairs of the WTO and makes executive decisions. It takes necessary actions in between meetings of the Ministerial Conference.
How Many Member Countries Belong to the WTO?
The WTO currently has 164 members representing 98% of global trade. The last member accepted to the WTO was Afghanistan, in 2016, after first applying for membership in 2004.
Which Countries Are Not Members of the WTO?
About a few dozen countries and territories are not members of the WTO. Among those are Iran, Serbia, and Algeria.
How Does a Country Become a Member of the WTO?
A country seeking to become a member of the WTO must apply, and the years-long process involves agreeing to terms laid out by the WTO. After the applicant’s trade policies and practices have been thoroughly reviewed, two-thirds of WTO members must vote in favor of allowing the applicant to become a part of the organization.
Can a Member Decide to Leave the WTO?
A member can depart from the WTO. However, it loses all the benefits that come with membership, including protection from what it would deem as unfair trade practices with other nations or territories.
How Is the WTO Director-General Appointed?
The appointment of the director-general of the WTO, who oversees its operations and functions, can be a lengthy process. In the appointment of Ngozi Okonjo-Iweala of Nigeria as director-general in 2021, the process took less than a year, and the nomination was a consensus decision by the General Council.
