A Three-Year Review of the WTO:
The World Trade Organization (WTO) is an international trade institution.
The WTO superseded and replaced the GATT. The GATT was a provisional, multilateral
agreement governing international trade from 1947 until January 1, 1995.
The creation of the WTO was negotiated in the final GATT round, the Uruguay
Round. The WTO inherited a number of core principles from the GATT. These
- Non-discrimination, which in practice means two things. The first principle is MFN - most favored nation treatment. Any trade concession a nation offers to one member, it must offer to all. The second principle is national treatment. This means that imported products must be treated the same as domestic goods.
- Reciprocity of Trade Concessions.
- Trade Liberalization.
- Transparency and predictability in import and export rules and regulations.
- Favorable treatment to less developed countries.
Although built on the GATT legacy, the Uruguay Round and WTO added many
new issues and features. To begin with, many older agreements were replaced
by new, stronger agreements. For example, the Agreement on Textiles and
Clothing established a time-table to liberalize textile trade, while the
Agreement on Sanitary and Phytosanitary Measures established a more transparent
regime for trade in agricultural goods and ensures plant and animal health
standards are followed. The WTO also broke new ground, adding a number
of trade sectors and issues not addressed by the GATT:
- The General Agreement on Trade in Services (GATS) adds services.
- Trade in Intellectual Property Rights (TRIPs) adds copyrights, trademarks
- Trade Related Investment Measures (TRIMs) sets rules for Foreign Direct
- Government Procurement (GPA) & the Information Technologies (ITA)
agreements also international rules on new product areas.
These new agreements are ambitious issues additions to the rule governing
the world trading system. However, at this stage there are significant
enforcement problems and numerous loopholes that countries use to evade
their obligations. It is not yet clear if these agreements will benefit
the US in the long run.
The WTO differs from the GATT not only in scope, but in institutional
functioning. The WTO has two significant functions that the GATT did not.
First, the WTO has a Trade Policy Review Mechanism. This process periodically
accesses a country's trade policies and notes any changes. It is a non-judgmental,
More controversial is the Dispute Settlement Body and its dispute settlement
panels. These panels, composed of economists, hand down binding judgments
in trade disputes.
Several cases have already gone against the US, raising concerns among
some Americans that the WTO is eroding US sovereignty. As the world's largest
economy and export market, however, the US maintains considerable influence
on the shape of the world trading system.
The WTO currently has 132 members, and 31 nations are actively seeking
to join. The US plays an important role in all accession negotiations,
ensuring that US economic interests are well represented.
to Table of Contents) (Go on to Chapter 1)
Last Updated on 4/1/98