Antiglobalization activists protest at the World Trade Organization conference in Seattle, Washington, in December 1999. (© Steve Rubin/The Image Works)
A multilateral trade organization designed to promote trade liberalization through periodic rounds of trade negotiations and procedures to resolve trade disputes among members.
The World Trade Organization (WTO) was launched at the end of the Uruguay Round (1986–1994) of trade negotiations. Before 1994, nations pursued trade liberalization through the General Agreement on Tariffs and Trade (GATT), which was established in 1947 by twenty-three industrialized countries. GATT was never intended to serve as the primary vehicle for promoting liberal trade, as the International Trade Organization (ITO) was supposed to fulfill that function. But the U.S. Congress blocked the ITO, which was established at the Havana Conference in 1948, because it feared a loss of U.S. sovereignty over trade issues. In 1995, GATT was incorporated into the WTO following ratification of the new structure by the member governments. In addition, the WTO includes agreements on trade in services, agricultural trade, trade-related intellectual property, trade-related investment measures, and many other special conventions. As of February 2005, the WTO included 148 members.
In joining the WTO, national governments agree to abide by rules pertaining to international trade negotiated and adopted by the members of the WTO. Because the main objective of the WTO is to encourage trade liberalization, many of the rules concern tariff levels or the use of other types of trade barriers. Eight rounds of trade negotiations have been completed and a ninth, the Doha Round, was launched in 2002. These negotiations have led to substantial reductions in industrial tariffs, and WTO members have also agreed to restrict the use of nontariff trade barriers, such as import quotas or voluntary export restraints, export subsidies, technical standards, and many other national regulations that might distort international trade. WTO members must treat all other members in the same manner through the principle of normal trade relations (NTR; formerly known as most-favored-nation status). It is this principle that ensures that WTO trade rules are applied without discrimination by the member states. NTR can be partially suspended in cases of regional economic agreements or preferential trade arrangements favoring developing countries.
The WTO has no enforcement powers, so the only way to ensure that countries are observing the commitments they have made during the trade negotiations is to rely on the members themselves to indicate that any violations have taken place. Complaints that a country has violated its commitments under the WTO can lead to the initiation of the WTO’s dispute resolution process. Dispute resolution panels determine whether a violation has occurred and oversee discussions aimed at putting an end to the trade dispute. If the parties to the dispute find it impossible to agree on acceptable policy changes or a satisfactory level of compensation, the countries harmed by the disputed trade barriers are allowed to retaliate by implementing trade barriers of their own. These retaliatory barriers would normally place the countries implementing them in violation of their WTO commitments. Because they are employed only as a last resort, after all efforts to negotiate a settlement have failed, the WTO does not consider them to be a violation of a country’s trade obligations.
Antiglobalization activists protest at the World Trade Organization conference in Seattle, Washington, in December 1999. (© Steve Rubin/The Image Works)
E. Wesley F. Peterson
See also: Trade Organizations.
Hoekman, Bernard, and Michel Kostecki. The Political Economy of the World Trading System: From GATT to WTO. Oxford: Oxford University Press, 1996.
World Trade Organization. “Trading into the Future: The Introduction to the WTO” (www.wto.org/english/thewto_e/whatis_e/tif_e/tif_e.htm, accessed October 2002).