Geoffrey HalePolitical Science 3170

The University of LethbridgeOctober 12, 2010

OutlineWhat is the WTO?

Short HistoryPurposesOrganizational Structure and Governance

Facts, myths, and theoretical insights.

What is the World Trade Organization?A multilateral organization, successor to the General

Agreement on Trade and Tariffs (GATT) – an intergovernmental treaty (not formal organization)

“Single institutional framework for world trade”, including:“modified GATT”“General Agreement on Trade in Services” (GATS)Agreement on “Trade-Related Aspects of Intellectual

Property Rights” (TRIPS)“Rules and Procedures Governing the Settlement of

Disputes”“Trade Policy Review Mechanism” (surveillance process)assorted Plurilateral Trade Agreements

WTO – A Short HistoryPost-Second World War predecessor – the GATT

1947 -- 23 countries conclude first agreement (effective 1/48)Successive trade “rounds”: Torquay (1951), Geneva (1956),

Dillon (1960-61), Kennedy (1964-67), Tokyo (1973-79)Negotiation of Multi-fibre Agreement (MFA) on textiles as

“managed trade agreement” within GATT.Uruguay Round (1986-93) leads to creation of WTO (1995)

WTO Sub-AgreementsInformation Technology Agreement (1997) – 40 countriesAccession of China to WTO (2001); Doha Round launched.Textiles and Clothing Agreement replaces MFA (2005)

Purposes of WTOOversee ongoing development of “rules-based” (vs.

“outcomes” or “results-based”) trading system technically, a “trade policy exchange market”

Engage and attempt to coordinate domestic (non-tariff) policies that have impact on trade.

Key principles Non-discrimination among signatory nations

Most-Favoured Nation (MFN) – “a product made in one member country should be treated no less favourably than a “like” good that originates in any other country (limited exceptions for regional agreements, Article XIII exemptions)

“Once negotiations concluded with one country, the results extend to all” countries within the relevant categories.

National Treatment – “foreign goods should be treated no less favourably, once having passed national borders, should be treated no less favourably than domestic goods with regard to domestic taxes and regulations”

Purposes of WTOKey principles (continued)

Transparency – information sharing among member countries Applies to WTO and national trade regulations, administrative

rulings Supplemented by multilateral “surveillance” – published reports

on trade policies of individual countries (through Trade Policy Review Mechanism).

Accountability – enforceable commitments Carried out through terms of tariff “bindings”, intergovernmental

consultations, and dispute resolution processes among governments (not private entities)

Flexibility Safeguards (against “trade injury”), National Security rules, non-

economic objectives (e.g. health, environmental policies), trade remedy measures (e.g. anti-dumping; countervailing duties against subsidies)

WTO Governance Structures Headed by ministerial conference of all 153 members

H&K notes limited utility of committee of 153 in negotiations when most issues determined by bargaining among larger powers or coalitions of nations

Key (informal) steering group in negotiations: the G-6 Australia (for Cairns Group - 19) * Brazil * European Union Japan (for self, G-10 ag importers) * India * United States plus other regional coalitions that emerge over time.

Major non-members Russia; Iran; Iraq; several ‘post-Soviet’ countries; Serbia; several Arab,

African countries; a few smaller, land-locked Asian countries; General council – composed of WTO staff, headed by Director

General, delegations from member countries Subordinate councils (GATT, GATS, TRIPS) + specialized sector

and topical committees (Figure 2.1 in H&K) H&K – “very large, dispersed network comprising official representatives

of members” and their home country counterparts in central agencies and relevant line departments (e.g. trade, agriculture, environment)

Overlap with UNCTAD, WIPO, ILO etc.

Role of WTO Secretariat (professional staff)Secretariat

Provision of technical, logistical support to members Preparation of research reports, background documentation. Minimal power to take policy initiatives. Support work of dispute resolution panels and related appellate

body – which function independently from WTO.Director General

Limited direct authority, but serves as broker among national interests “guardian” of WTO processes. Senior trade officials (1948-95); typically political officials since

1995. Pascal Lamy (since 2005) – former EU Trade Commissioner (1999-04),

Chief of Staff to EU Commission President Jacques Delors (1985-94) Deputies from Chile, U.S., Rwanda, and India.

Previous DGs from Thailand (2002-05); New Zealand (1999-02); Italy (1995-99); Ireland (1993-95); Switzerland (1968-80, 1980-93); UK (1948-68).

Other major governance issuesBudget – distributed in proportion to member countries’

share of global trade – EU > 40%; US: 13.5%; China: 5.9%; Canada 3.36%Total Budget - 189 MM CHF $C 180 MM.

Decision-makingBy consensus – not unanimity (except for changes to general

principles guiding WTO), but not against opposition of major trading power.

Usually requires “log rolling” among major nations, coalitions¾ vote on interpretations of WTO rules, waiving disciplines

against members.Tw0-thirds vote for technical rule changes, approving

“accession” of new members.

WTO Accession ProcessApplicants must agree to WTO processes, make

binding undertakings re: own trade and related policies.Must negotiate entry with existing WTO members

who may negotiate specific terms in return for approving accession.

Negotiations typically “asymmetric”Negotiations have become more demanding with

growth, diversity of existing WTO membership.

WTO Facts and MythsWTO is intergovernmental

organization Members determine start (and

terms) of new negotiating rounds

National governments broker level and terms of autonomy on specific rule clusters

Medium-sized and smaller countries benefit from “club rules” capacity to cooperate in rule enforcement

WTO is not international trade constitution – precluded by detailed negotiations on rules. Still major power

asymmetries. Rule commitments are

cumulative.

Medium-sized, smaller countries cannot compel compliance of large countries, although international coalitions help.

Other useful policy insights (per Froese)Political institutions still matter as much as economic ones

in trade policiesNational / regional decision-making structures determine

terms and context of participation, negotiating positions, especially of larger, medium-sized trading countries.

National sovereignty not incompatible with global governanceGovernments still retain capacity for policy discretion within

boundaries of international, regional agreements. Policy “realism” heavily circumscribed by realities of

interdependence for large, small countries alike. WTO embedded within complex networks of international,

regional and sectoral agreements with interconnected implications.