WHAT IS THE WORLD TRADE ORGANIZATION?

You may remember seeing news footage of the protests at the doors of the World Trade
Organization's (WTO) Third Ministerial Conference held in Seattle, Washington, in 1999. Similar
demonstrations against the WTO have also occurred in Italy, Spain, Canada and Switzerland. What
is the WTO, and why do so many people oppose it? The following article addresses these questions
and concerns regarding the world's only international organization that deals with the global rules of
trade.
The WTO was born out of the General Agreement on Tariffs and Trade (GATT), which was
established in 1947. A series of trade negotiations, GATT rounds began at the end of World War II
and were aimed at reducing tariffs for the facilitation of global trade on goods. The rationale for
GATT was based on the Most Favored Nation (MFN) clause, which, when assigned to one country
by another, gives the selected country privileged trading rights. As such, GATT aimed to help all
countries obtain MFN-like status so that no single country would be at a trading advantage over
others.
The WTO replaced GATT as the world's global trading body in 1995, and the current set of
governing rules stems from the Uruguay Round of GATT negotiations, which took place
throughout 1986-1994. GATT trading regulations established between 1947 and 1994 (and in
particular those negotiated during the Uruguay Round) remain the primary rule book for
multilateral trade in goods. Specific sectors such as agriculture have been addressed, as well as
issues dealing with anti-dumping.
The Uruguay Round also laid the foundations for regulating trade in services. The General
Agreement on Trade in Services (GATS) is the guideline directing multilateral trade in services.
Intellectual property rights were also addressed in the establishment of regulations protecting the
trade and investment of ideas, concepts, designs, patents, and so forth.
The purpose of the WTO is to ensure that global trade commences smoothly, freely and predictably.
The WTO creates and embodies the legal ground rules for global trade among member nations and
thus offers a system for international commerce. The WTO aims to create economic peace and
stability in the world through a multilateral system based on consenting member states (currently
there are slightly more than 140 members) that have ratified the rules of the WTO in their
individual countries as well. This means that WTO rules become a part of a country's domestic legal
system. The rules, therefore, apply to local companies and nationals in the conduct of business in
the international arena. If a company decides to invest in a foreign country, by, for example, setting
up an office in that country, the rules of the WTO (and hence, a country's local laws) will govern
how that can be done. Theoretically, if a country is a member to the WTO, its local laws cannot
contradict WTO rules and regulations, which currently govern approximately 97% of all world
trade.
Decisions are made by consensus, though a majority vote may also rule (this is very rare). Based in
Geneva, Switzerland, the Ministerial Committee, which holds meetings at least every two years,
makes the top decisions. There is also a General Council, a Goods Council, Services Council, and
an Intellectual Property Rights Council, which all report to the General Council. Finally, there are a
number of working groups and committees.
If a trade dispute occurs, the WTO works to resolve it. If, for example, a country erects a trade
barrier in the form of a customs duty against a particular country or a particular good, the WTO
may issue trade sanctions against the violating country. The WTO will also work to resolve the
conflict through negotiations.
The anti-WTO protests we have seen around the world are a response to the consequences
of establishing a multilateral trading system. Critics say that the after-effects of WTO
policies are undemocratic because of the lack of transparency during negotiations.
Opponents also argue that since the WTO functions as a global authority on trade and
reserves the right to review a country's domestic trade policies, national sovereignty is
compromised. For example, regulations that a country may wish to establish to protect its
industry, workers or environment could be considered barriers to the WTO's aim to
facilitate free trade. A country may have to sacrifice its own interests to avoid violating
WTO agreements. Thus, a country becomes limited in its choices. Moreover, brutal
regimes that are pernicious to their own countries may inadvertently be receiving
concealed support from foreign governments who continue, in the name of free trade, to
do business with these regimes. Unfavorable governments in favor of big business
therefore remain in power at the cost of a representative government.
One high profile WTO controversy has to do with intellectual property rights and a
government's duty to its citizens versus a global authority. One well known example is
HIV/AIDS treatments and the cost of patented medicines. Poor, very needy countries,
such as those in South America and sub- Saharan Africa, simply cannot afford to buy
these patented drugs. If they were to buy or manufacture these same drugs under an
affordable generic label, which would save thousands of lives, these countries would, as
members of the WTO, be in violation of intellectual property rights (TRIPS) agreements
and subject to possible trade sanctions.

[Adapted from http://www.investopedia.com/articles/03/040203.asp (Feb 26 2009)]

1. Why is the Most Favored Nation (MFN) clause considered to be a good thing in
international trade?

2. What is the main function of the WTO?

3. Why, in your opinion, is it necessary to have legislation against dumping

(esportazione sotto costo)?

4. Which methods does the WTO use to resolve trade disputes between member states?

5. Why do critics of the WTO feel that the consequences of WTO policies are not
democratic?

6. Under WTO's policies, "national sovereignty is compromised." Explain the

underlined phrase.

7. What evidence is there in the passage to show the WTO's principles may
encourage the abuse of human rights?

.
8. How can the WTO's efforts to protect intellectual property harm people in poor countries?