Chapter Six: World Trade Organization

V. How The WTO Works

The WTO Secretariat is located in Geneva. It has around 630 staff, headed by director-general Roberto Azevêdo. The WTO has a budget of SFr 197m, provided by its member states. Its responsibilities include:

The size of the WTO and its budget are puny compared to its peer organisations such as the IMF and the World Bank, while its reach and its impact are equal or greater. However, it should be remembered that representatives of member governments do a great deal of work in committees and other fora, whose cost is of course absorbed by the countries concerned. Still, it may be fair to say that never in the history of human trade conflict has so much been achieved by so few.

In the WTO, when countries agree to open their markets for goods or services, they "bind" their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same. A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade.

One of the achievements of the Uruguay Round of multilateral trade talks was to increase the amount of trade under binding commitments. In agriculture, 100% of products now have bound tariffs.

The system tries to improve predictability and stability in other ways as well. One way is to discourage the use of quotas and other measures used to set limits on quantities of imports – administering quotas can lead to more red-tape and accusations of unfair play. Another is to make countries’ trade rules as clear and public ("transparent") as possible. Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO. The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level.

The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system’s agreements. And the agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries.

Any state or customs territory having full autonomy in the conduct of its trade policies may join the WTO, but WTO members must agree on the terms. This means that an applicant country must negotiate bilaterally with many member countries until a consensus is reached that all identified issues have been dealt with. This can take a long time, and results finally in an agreement, including many detailed commitments, which is set before, and hopefully approved by the General Council or the Ministerial Conference. A two-thirds majority among members is required.

Market access negotiations as in the Uruguay Round and now the Doha Round also involve a painstaking process of bilateral meetings prior to any attempt to form over-arching agreements.

The working method of the WTO sounds highly complex; but it is probably the only way of getting willing treaty adherence from such a large number of parties. Everyone has to feel that they have been fully involved.