World Trade Organisation

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The World Trade Organisation (WTO) describes itself as

the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

Background

The World Trade Organisation (WTO) came into existence on 1 January 1995. The organisation developed from an earlier treaty known as the General Agreement on Tariffs and Trade or GATT. GATT was established in 1948, in the aftermath of WWII as a "treaty and not a legally established organisation." It is important to note this as it was partly the need for a legally established organisation which led to the eventual formation of the WTO in 1995.

Lead-up to formation

The GATT was formed at a UN Conference on Trade and Employment in Havana, Cuba 1947. It was believed that this agreement would soon be replaced by the creation of an International Trade Organisation (ITO). It was thought that such an organisation (the ITO) would complement the already existing international institutions, the World Bank and the International Monetary Fund. The ITO would have been responsible for dealing with the trade aspects of international economic cooperation. The ITO was however never formed. The draft of the Charter for this organisation was apparently too ambitious. Not only did it include issues related to world trade disciplines but it extended beyond this to cover rules on employment, commodity agreements, restrictive business practices, international investment, and services. Perhaps as a result of this over-ambitiousness, the 50-plus countries present at the UN Conference failed come to an agreement and the provisional GATT remained in place.

The function of GATT was "to constrain member States from imposing measures that restrain international trade, according to the theory that liberalized trade promotes efficient allocation of production and consumption among States."

Despite its rather accidental formation, throughout its 47 years in charge of world trade, GATT helped "establish a strong and prosperous multilateral trading system", that became stronger through each round of negotiations which followed in the intervening years.

Problems with GATT

There were however problems with GATT. This organisation was not only concerned about the trade between developed and less developed countries but also about the trade within these two groups. Less developed countries were found to have reservations about the present and potential usefulness of GATT in relation to the furthering of their development. This was perhaps completely understandable given that the GATT was formed due to the initiative of these developed countries. The rules and regulations which defined the actions of the GATT were created by the countries regarded as world leaders; the USA and also the major colonial powers of Western Europe. There was also a problem in that the original GATT text made no distinction between members with varying degrees of economic development. The same rules applied to all countries involved which of course proved beneficial to the developed countries at the expense of those less economically developed. It was therefore suggested that GATT was not suited to dealing with the interests of less developed countries and that a more specialised organisation, one which would deal specifically with less developed countries, was needed.

The Uruguay Round and eventual formation of the WTO

There were eight rounds of negotiations by GATT, each round addressing various trade issues and lasting several years. The most recent, the Uruguay Round, was launched by Ministers of GATT member countries, meeting on the occasion of a Special Session of the GATT Contracting Parties, at Punta del Este, Uruguay, in September 1986; the negotiations and process ended, eight years later and an estimated three years behind schedule, with the signing of the Final Act of the Marrakesh Agreement in April 1994 at Marrakesh, Morocco.

The Uruguay Round is thought to have "brought about the biggest reform of the world’s trading system since GATT was created at the end of the Second World War," but this was by no means easily achieved.

This particular round "addressed issues such as tariffs, services, and the trade related aspects of intellectual property and investment measures." It aimed at a roll-back of non barrier tariffs for trade and also at the strengthening of a non discriminatory world trading system. Formerly exempt sectors such as services, textiles and agriculture were now included in this new agreement. Issues such as Trade-Related Intellectual Property Rights (TRIPS)and Trade-Related Investment Measures (TRIMS) were also covered. At several points during the eight years, as deadlines passed and agreements failed to be reached, the Uruguay Round seemed destined to fail. However despite difficulties this round eventually led to an agreement being reached by the 123 countries which were involved by its conclusion. As a result, trade barriers were reduced and an agreement was reached to create world trade rules.

The Uruguay Round agreement led to the formation of the World Trade Organisation, which came into being nearly nine months after the signing of the Final Act, on 1 January 1995.

Although the WTO eventually replaced GATT, GATT was updated as a result of the Uruguay Round negotiations and still exists as the WTO's treaty regarding the trade in goods.

Policy-making

WTO Headquarters, Geneva

Voting

The World Trade Organization (WTO) describes itself as a ‘member-driven’ organization on account of its system of policy making, in which the member states that make up the WTO are supposedly the sole players, and theoretically also equal participants in the organization’s decision-making processes. Due to its ‘one vote per member’ system, the WTO has been considered somewhat more just in its operations than other organizations, such as the IMF and World Bank, in which voting power is allocated according to the financial contributions of each member country. Each of the member governments in the WTO are represented either by ministers or their delegates or ambassadors. While most decisions in the WTO are taken by consensus, in the event that a consensus cannot be reached, most policies are passed based on a three-quarters majority. There are however also instances where only a two-thirds majority is required.

Structure

The member countries of the WTO make decisions through various councils and committees. The Ministerial Conference occupies the highest level of this structure. It unites all of the members of the WTO, and must meet a minimum of once every two years. Next is the General Council, which is responsible for the ongoing operations that take place between ministerial conferences. The General Council is divided into three bodies that carry out its operations. These bodies are: the General Council, the Dispute Body, and the Trade Policy Review Body. All three of these groups consist of WTO member representatives, all of which report to the Ministerial Conference. On the next level down, are three councils that deal with different broad areas of trade, and report to the General Council. These councils are: the Council for Trade in Goods (the Goods Council), the Council for Trade in Services (the Services Council), and the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council). These councils deal with the respective areas indicated by their names, and are also made up of WTO members. In addition to these councils, there are a number of committees and subsidiary bodies that are also made up of WTO members, but which deal with more specific areas. Numerous international organizations, industrial groups, and scholars also actively participate in the functions of the WTO and must be included as actors in the organization’s operations.

Criticisms

The role of developing countries

One of the major areas of criticism of the WTO is related to the limited role of developing countries in policy-making. Although there has been some initiative taken towards allowing developing countries a greater voice in negotiations, monitoring, and capacity building within the WTO, there is a continuing disparity between the powers of developing countries compared to that of developed countries in these areas.

The 'Green Room'

Much of the decision-making within the WTO takes place in what are referred to as ‘Green Room’ meetings, where a small number of member countries get together to negotiate policies, which are later presented to the larger membership for a final consensus to be reached. These meetings tend to be limited to a small number of WTO members, and are largely dominated by developed countries. As major trading partners, the United-States, the European Union, Japan, and Canada, which have been labelled as ‘the Quad’, have traditionally dominated informal (as well as formal) negotiations within the WTO. Particularly under the former operations of GATT, only a handful of less developed countries were included in these negotiations.

Participation in these informal Green Room meetings varies depending on the issue. In the past, the standard number of participants was usually around eight. This number has increased significantly overtime as a result of increased membership in the WTO, and the insistence on the part of a greater number of member countries to be included in these informal decision-making forums. At present, it is not uncommon for up to thirty members to be represented in such discussions.

Developing countries have become more frequently represented in informal negotiations, although it is largely only the more powerful of these countries that are included. Many coalitions have been formed by developing countries to address key trading issues. The G-6 (EU, US, Japan, Australia, India, and Brazil) and the G-4 (EU, US, India, and Brazil) for example, are small groups that have been formed since 2004, for the purpose of consensus building. Although this has been beneficial to larger developing countries, the vast majority of less developed countries have yet to benefit significantly from these groupings, due to inadequate capabilities and resources, which prevent them from participating in the vast majority of informal trade discussions.

Obstacles

Limited technical and human resources contribute heavily to the inability of many developing countries to take a significant part in trade negotiations. This means that although the WTO is supposedly ‘member-driven’, a significant part of its membership is disadvantaged, as they are unable to adequately engage in discussions, and as such, do not enjoy the same level of representation as the dominant member states. This restricted form of consensus building has triggered a great deal of criticism from many non-governmental organizations (NGOs) and scholars on account of its illegitimacy and unresponsiveness to the demands of less developed countries. The fact that these countries make up the majority of the WTO membership and are also more significantly impacted by many of the policies over which they have little control is particularly distressing.

Arm-twisting and bullying

Not only are poorer developing countries largely excluded from policy-making within the WTO, but they are also often subject to pressure from richer developed countries to accept policies that often contradict their own best interests. ‘Arm-twisting’ and bullying tactics are among a variety of strategies used by powerful member states, such as the United States and the European Union, in order to sway less developed countries into accepting policies that benefit the interests of these richer countries, as well as those of multinational corporations. These policies often involve harmful implications for developing countries, and in many cases are counterproductive to their development. Such ‘arm-twisting’ and bullying tactics may involve threats to end trade agreements that are beneficial to developing countries, or to cut spending on their aid budgets. Personal attacks against WTO delegates have even been known to occur as a mode of swaying votes.

Corporate influence

The ‘member-driven’ claim of the WTO is put into question not only with respect to the lack of input that developing countries have in policy-making, but also in the excessive influence of multinational corporations in such operations. Given that the primary aim of the WTO is to reduce trade barriers to international trade, it stands to reason that global corporations take great interest in its activities. The WTO has proven to be very useful to MNCs by transferring power away from national governments to these corporations.

By setting up global networks, multinational companies are able to use their influence to mould the negotiating positions of developing countries to suit their needs. These companies have both direct and indirect influence over WTO policies. Some of their methods of asserting direct influence include: directly contacting policy-makers, either through face-to-face meetings, presentations, letters, emails, or memos, through formal submissions to government consultations, and through government advisory committees, on which many representatives of corporations serve. Companies also use a variety of indirect tactics, which are equally, if not more, insidious in terms of their influence on policy-making. Through the control of the media, the formation of think-tanks and research projects, the funding of ‘grassroots’ and public relations campaigns, as well as through hosting corporate hospitality events, to which policy-makers are invited, corporations are able to indirectly affect influence on the policy-making of the WTO. Through lobbying campaigns supported by WTO rules, corporations are even able to re-write national laws according to their own interests.

Member-driven?

Though it may be a ‘member-driven’ organization, the fact that the policy-making systems of the WTO allow the voices of developing countries to be muted while priority is given to global business, seriously undermines the legitimacy of the organization as a whole. In this regard, there has been a significant call for reform of these systems, which would require that the WTO increase transparency and participatory rights within their policy-making system.

People

Secretariat

The secretariat’s “main duties are to supply technical and professional support for the various councils and committees, to provide technical assistance for developing countries, to monitor and analyze developments in world trade, to provide information to the public and the media and to organize the ministerial conferences”. The secretariat has no decision making powers, as it is only the member countries who can make decisions within the WTO. Its only office is in Geneva, Switzerland and has over 600 employees. The office is headed by the Director General.

Director-General

Pascal Lamy, Director- General of WTO

In 2005, Pascal Lamy was appointed as the fifth Director-General of the WTO for a four year term. Previously, from 1999-2004, Lamy was the Commissioner for Trade at the European Commission.

During his time at the European Commission, Lamy was a great supporter of the WTO, as an opinion piece authored by him in The Guardian (2003) illustrates. Lamy writes:

The WTO, often portrayed as the vanguard of untrammeled globalisation, is quite the opposite: it provides a framework in which member countries negotiate how to regulate trade and investment, and ensures the respect of the rules agreed by common accord...In a way, the WTO is the UN for trade, with the crucial difference that all countries have a seat in its Security Council. That is the best bulwark against unilateralism. The rules are far from perfect, I admit. But I do not agree that they are intrinsically unfair to poor countries.

Although he has always been an ally of WTO, Lamy drew criticism over his views and the actions he took towards world trade as the Commissioner for Trade. The journalist George Monbiot stated that Lamy, in his role as the European Commissioner for Trade, ruined world trade talks in September 2003 by trying to "force through new rules on investment, competition and procurement, which would have allowed corporations to dictate terms to the poor world’s governments". This destroyed the trade talks and stopped a fairer trading system from being set up, meaning rich countries were able to trade with weaker countries on unfair terms.

As the Director-General of the WTO, Lamy is the public face of the organisation. He represents the WTO on the global stage and is therefore the person in charge of the Information and Media Relations within the WTO. Division As the public face of the WTO Lamy holds a lot of power as his opinion and agenda can come to the foreground of a media debate, or even within the organisation.

Deputy Directors-General

There are four Deputy Directors-General, each in charge of a different area within the WTO. The first is Alejandro Jara, of Chile, who previously worked with the Foreign Service of Chile. He overlooks the Accessions Department, for those countries who wish to join the WTO; the Economic Research and Statistics Division; the Legal Affairs Division; and the Rules Division. And so Jara can be said to overlook divisions relating to breaches of WTO regulation and legal matters, and also is chief in deciding which countries may become members of the WTO.

Valentine Rugwabiza, from Rwanda, is the second Deputy Director-General. Her previous work includes advising the Rwandan government and representing them at international conferences. She overlooks the Development Division, for trade and development in developing countries; the External Relations Division, which includes relations with the UN and other multinational organisations; the Technical Cooperation Audit; and the Training and Technical Cooperation Institute. Rugwabiza’s previous work representing the Rwandan government holds her in good stead for her position with the WTO, as she regularly deals with government representatives and members from other organisations.

The third Deputy Director-General is Harsha Vardhana Singh, from India, who previously worked for the General Agreement on Trade and Tariffs (GATT), the predecessor to the WTO before the WTO was established. He is in charge of overseeing the Agriculture and Commodities Division; the Trade and Environment Division; and the Trade in Services Division. The area Singh oversees, therefore, is on an environmental and agricultural level.

The fourth Deputy Director General is Rufus Yerxa, from the USA. He has worked with the WTO since it was established and also worked for GATT. He overlooks the Administration and General Services Division; the Market Access Division, looking at areas concerning tariffs and customs; the Informatics Division; the Intellectual Property Division, for competition and government procurement; the Language Services and Documentation Division; and the Trade Policies Review Division. Yerxa, therefore, deals in matters concerning a more regional aspect of the WTO.

Connections

The World Trade Organisation maintains a working relationship with around 200 other international organisations. This is due to the fact that WTO member states are members of various other international organisations and agreements and so the WTO must also have a relationship with these organisations. The organisations that the WTO are affiliated with include: Food and Agriculture Organisation (FAO), International Labour Organisation (ILO), International Monetary Fund (IMF), International Trade Centre (ITC), United Nations (UN), World Bank (WB), World Customs Organisation (WCO), and World Health Organisation (WHO). Each of the other organisations mentioned “is specifically mandated in WTO agreements, ministerial declarations or decisions, or General Council decisions” and so are linked to the WTO through bounding agreements, illustrating the WTO’s close links with other international organisations.

The two main organisations with which the WTO is linked are the International Monetary Fund (IMF) and the World Bank. Both of these organisations were established in the post-World War II conference at Bretton Woods. The IMF was established to “regulate an international monetary system based on convertible currencies to facilitate global trade” while the World Bank was established to help with the financial restoration of Europe after the war and in the development of poorer developing countries. Together with the WTO, they aim to open up trade barriers and provide a global trading market.

International Monetary Fund

The World Trade Organisation has close ties to the International Monetary Fund (IMF). They have 143 member states in common and so there must be some form of coherence between the two multinational organisations in order for them to both run as smoothly as possible. The IMF states that “the IMF's central focus is on the international monetary and financial system, and the WTO's is on the international trading system, both work together to ensure a sound system for global trade and payments”. Their main shared aim is to ensure greater consistency in international economic policies. They do this by having observer status in each other's organisations and attending each other's meetings. IMF provides the WTO with input about member states' economic policies and the WTO must consult the IMF when dealing with matters of monetary importance.

This interconnected relationship implies that the WTO will not enforce any regulations that militate against the IMF’s stance on the same issue. The WTO also works with the IMF to open up trade barriers in the global market, which enables multinational corporations to purchase and control everything from water to healthcare and educational resources, often in the poorest of developing countries. This takes away power from local enterprises and institutions at a state level, which in turn takes away benefits and much needed resources from local people, and puts money into the hands of the multinational corporations and foreign investors, who often stand accused of not giving back as much as they take from developing nations.

World Bank

The WTO also works closely with the World Bank and has signed agreements with them to build greater global economic agreements. The two organisations also cooperate with each other on matters relating to developing countries, as the WTO wants the World Bank to provide developing nations with loans in order for them to begin to enter the global trading market. This can be controversial as developing countries may be able to trade in the global market but they are still far poorer than many Western states and so they’re being exploited on a global scale, with massive debts being owed to the World Bank and unfair trade agreements imposed on them by the WTO.

Related articles

Aids drug controversy

The World Trade Organisation has been criticised in recent years for allowing multi-national corporations to promote their commercial interests through the opening up of developing countries markets. This was demonstrated during the production of the drug antiretroviral (ARV) used for the treatment of AIDS. Because of its soaring price, countries such as India and South Africa began to produce their own, cheaper version of the AIDS drug. In India, the cost of treating a patient with AIDS was slashed from $15000 to less that $200 thus by reducing the price of this patented drug it meant that it was available not only for the rich but also for the poor. Further to this, India's pharmaceutical industry was responsible for providing treatment for almost half of the 700,000 HIV-infected people in developing countries including those in Africa . However after the WTO introduced an agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) during the Uruguay Round in 1994, this process came to an end.

The TRIPS Agreements was to give creators "the right to prevent others from using their inventions, designs or other creations — and to use that right to negotiate payment in return for others using them". For example, music and film were now copyrighted and invention of drugs were to be patented.

This therefore meant that developing countries such as Africa could no longer produce their own version of the AIDS drug. When India joined the WTO in January 1995 they too began to change their regulations in relation to the production of patented drugs. This was exemplified in 2005 when the Indian Parliament passed a bill which now made it illegal to produce alternative versions of patented drugs, thus demonstrating its loyalty to the WTO. Permission from the patent holder had to be obtained and a royalty paid, resulting in increased costs of production.

So rather than improve the regulation surrounding intellectual property, TRIPS was now manipulated by large pharmaceutical companies and enabled them to protect their profits. Pharmaceutical corporations therefore had the legislation available to assist them in lawsuits brought against developing countries. In 1998, 39 pharmaceuticals-producing countries brought a lawsuit against South Africa's medicines act which permitted "generic drugs, compulsory licensing and parallel imports to provide cheaper and more available medicines". This case was fortunately abandoned due to public upheaval and negative publicity and forced the WTO to reconsider its agreement on TRIPS.

At the Doha Ministerial Conference in 2001 the WTO acknowledged the effect TRIPS was having on the rising costs of medicines for HIV/AIDS, tuberculosis, malaria and other epidemics in developing countries. Consequently they professed that during a public health emergency patent laws should be relaxed. The declaration states under section five "we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all".

While WTO did alter its policy on this occasion, this case study shows the WTO's tendency to advocate and assist the corporation in protecting its profits and power.

It has also been suggested by many critics that the WTO is in existence to benefit countries of the developed world in the West and does very little to improve trade within smaller, developing countries like Africa. In addition, by encouraging free trade, the WTO is subjecting the developing worlds to corporate greed and its commercial interests. The AIDS drug provides a clear example of how the pharmaceutical companies would risk human life to preserve profits.

Banana wars

The Lome Convention is an agreement between the European Union members and African, Caribbean and Pacific countries (ACP's). It was first signed in 1975 and it was hoped that it would support "ACP states' efforts to achieve comprehensive, self reliant and self-sustained development.” As a result of this each Caribbean country has had a quota of bananas since 1975, “enabling them to sell to Europe as many as they wanted to support” whilst stabilizing their economy. This secured trade of bananas between developing ACP countries and the EU. Only 7% of Europe’s bananas came from Caribbean whilst an astonishing 75% came from Latin America.

However in 1997, when the US’s trade deficit was at an all time high, in order to protect its own profits from EU trade, it filed a complaint against the EU to the WTO. The US Government was under pressure from US corporations, believing that the EU were “restricting entry from other countries, including several in Latin America where US companies predominate[d]”. This case was won by the US when the WTO Panel report claimed that "the EU’s banana import regime was discriminatory and inconsistent with the GATT, the WTO agreement on Import Licensing and the GATS.

This is yet another example of the WTO's promotion of US interests. The WTO believed that the EU's membership with the ACP countries through the Lome Convention was inequitable in relation to free trade. Increased trade competition for local producers within ACP countries will lead to them having "to compete on a “level playing field” with giant multinationals and Latin-American “dollar” bananas" grown on corporate owned plantations. In the Caribbean in particular "half the population... rely on the banana industry to supply their basic needs such as food, shelter and education". Therefore, the Lome Convention is discarded and their "preferential treatment" of the Caribbean economy could subside. Rather than serve as an unbiased organisation, the WTO provides rich countries and corporations with the power to negotiate and influence decision making. Smaller, developing countries are disregarded and directly harmed as a result.

The Seattle Ministerial Conference

The Seattle Ministerial Conference of 1999 marked the launch a new round of trade negotiations that would be conducted by the WTO. As it turned out however, the mass protests that took place in Seattle throughout the conference severely impeded the processes of negotiations. The protests were aimed to bring attention to the inequities that exist within the systems of the WTO, and to the damaging effects of many of the WTO’s policies, particularly with respect to their negative impact on Third World Countries.

Protests

Seattle Protests

It is estimated that the Seattle protests, nicknamed 'N30', gathered upwards of 50,000 protesters from all over the world, which made them the most massive demonstrations in America since the Vietnam War protests. The protests took place in the streets outside the hotels and convention centres where the conference was being held. Among those that made up the masses were human rights and environmental groups, students, religious leaders, labour rights activists, anarchists, as well as local, national, and international non-governmental organizations. The methods used by these activists came in many different forms, ranging from well-planned passive events directed towards the press or for educational purposes, to improvised acts of violence, such as vandalism and looting. The protests were so overwhelming that the Seattle police and National Guard declared a state of emergency. At one point, the mayor of Seattle put martial law into effect, which led to curfews, arrests, tear-gassing, pepper spraying, and the shooting of rubber bullets into crowds. In the end over six hundred arrests were made. There was a great deal of controversy generated over the extreme methods used to subdue the protests, as many felt that they were aimed without warrant at non-violent protesters.

Negotiations

The protests going on outside were not the only complications that interfered with negotiations. Within the conference itself tensions had risen to a breaking point. The Seattle ministerial conference was the first time that the representatives of many Third World countries spoke out against the policy-making systems of the WTO, through which the dominating First World countries continually discounted the interests of poorer countries. Among the issues raised was that of the ‘green room’ discussions, from which poor countries were, for the most part, excluded. One African delegate was actually physically barred from attending one of these meetings. The fact that the countries excluded from these meetings were not being properly briefed on the happenings of the negotiations from which they were excluded also added insult to injury. Clement Rohu, the Foreign Minister from Guyana, made the following statement in this regard:

We from developing countries were invited to this meeting, and asked to participate, but then treated like delinquents... We didn’t come here to sit outside and drink coffee while the decisions were taken by the richer countries.

In addition to the issue of participation was the speed of the negotiations, which many of the poorer countries felt to be far too fast paced. Many of the policies set in the previous round of negotiations, five years prior to Seattle, had not been effectively implemented by many poor countries, whose capacities were already at their limit. There was also a great deal of concern from the Third World countries with respect to the effects that another round of liberalization would have on employment, the environment, and cultural and social issues within their countries.

The divergences between the industrialized and developing nations with respect to free trade and its effects prevented the achievement of solid resolutions. As a result of the upheaval both inside and outside the conference, the secretariat panicked, cancelling press conferences, briefings, and backroom discussions only hours from the time the talks were set to conclude. Although Mike Moore, the Director General of the WTO at the time, insisted that progressive advancements had been made in Seattle, the bulk of the negotiations were extended for further discussions that were to take place in Switzerland in the spring.

Media portrayal

The media portrayal of the Seattle Ministerial Conference is a prime example of the presence of corporate influence and its control within today’s global society. The corporately owned mainstream media that dominated the coverage of the Seattle Ministerial Conference painted a distorted and incomplete image of the event. With the exception of some independent media organizations that provided alternative coverage, the majority of the press released depicted the protesters as “loony leftists” who were against international trade in any form. The actual issues being raised, such as that the lack of democracy and fairness within the WTO’s trade model, were largely ignored. In cases where the goals of the protests were addressed, it was done through vague generalizations that rendered the issues at hand meaningless, and for the most part inaccurate. The example of the media portrayal in Seattle demonstrates the ability of corporations to influence every level of society. Not only does corporate influence have tremendous power in dictating the policy-making agenda of the WTO, but on top of this, but it is able to control the way that the WTO's procedures are projected to the outside world.

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