The World Trade Organisation (WTO) acts as a negotiating forum for representatives of member countries to sort out multilateral solutions to international trade issues. The general direction of such negotiations is to open up and liberalise world trade, while keeping in place necessary restrictions such as health and safety regulations.
International trade is regulated by the WTO agreements, which are the background rules on which world trade is based and are intended to help importers, exporters, producers of goods and suppliers of services to conduct their business as unimpeded as possible by unnecessary barriers to their trade. By removing obstacles such as unnecessarily high tariffs or quotas, the WTO agreements free up the flows of trade and allow traders to pursue their business with more certainty because the rules are transparent.
The WTO is also a forum for dispute resolution, the rules for this also being laid down in the WTO agreements. The resolution of a trade dispute takes the form of consideration of the issue by a panel, which reports its findings to the parties to the dispute and to the WTO members. If there is no appeal, the report is adopted by the Dispute Settlement Body. In the event of an appeal, there is a further appeal procedure.
The country found to be at fault is given time to adjust its policy or provide compensation, and if it does not do so within the requisite time period the complainant country can ask for limited trade sanctions to be applied. The existence of a dispute resolution mechanism thereby ensures that the WTO agreements and the rules of international trade are enforceable.
The WTO pursues its work by way of rounds of negotiations between member governments, the latest being the Doha round which was launched in Qatar in 2001. The Doha Round has encountered a number of obstacles because some of the issues being discussed would require important policy changes in some large industrialised countries. Talks have broken down more than once, but in July 2010 the Director-General of the WTO suggested that “after some months of impasse in negotiations, my own sense is that we are beginning to see signs of a new dynamic emerging”.
Special and differential treatment
One of the central aims of the current round of negotiations is economic development. Part of the WTO agreements is the “special and differential” treatment (SDT) provisions that give special rights to developing countries. In the “Doha Declaration” in 2001 the WTO members expressed the intention to revise the SDT provisions to make them stronger and more effective.
The SDT provisions that are already in place include measures aiming to create more trading opportunities for the developing countries. They particularly aim to give support to developing countries in building the infrastructure necessary to implement the agreements, to meet the required technical standards and handle dispute resolution. Developing countries are given more time to implement agreements and there are special provisions for those countries defined as least developed countries (LDCs).
The Doha Declaration has given a mandate to the Committee on Trade and Development to identify those SDT provisions which are mandatory on the WTO members, and where such a provision is not currently mandatory the Committee is given the task of looking at the practical implications of making these provisions mandatory. Assistance is to be given to the LDCs to ensure that they make the best use of the SDT provisions. Consultation on this issue is to continue in the autumn of 2010 focusing on a monitoring mechanism for the provisions.
Another highly sensitive issue is that of agriculture, where the Doha round negotiations aim to phase out subsidies for agricultural exports and cut the support given by governments to their agricultural producers to the extent that this has a distorting effect on international trade.
On the issue of agricultural tariff cuts, for example, the developing countries wish to keep tariffs in place so as to protect domestic farmers from international competition, while major exporting countries such as the US and Australia have an interest in securing tariff cuts on agricultural imports. On the other hand, on the important issue of removal of domestic subsidies for agriculture, the US is unwilling to change its policy and has been unable to find a compromise.
The negotiations on non-agricultural market access (NAMA) are intended to “reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, as well as non-tariff barriers, in particular on products of interest to developing countries.”
Non-agricultural tariff reductions would be based on a simple formula that would have separate coefficients for developed and developing WTO member states. The developing countries would be given some options relating to the flexibility they require. The tariff reductions would be implemented over five years for developed countries and ten years for developing countries.
Negotiations on services are related to the General Agreement on Trade in Services (GATS) which provides for negotiations to achieve a greater degree of liberalisation. The Doha round negotiations aim to give flexibility to developing countries and to give special priority to LDCs. Another aim is equal treatment in services and special attention is to be given to the export needs of developing countries.
The World Trade Organisation provides a forum in which discussions can take place, but ultimately progress in reaching agreements is the responsibility of the member countries. The Doha Round talks have up to now broken down because of the contentious nature of the issues under consideration and the conflicting interests of the countries that have been unable to compromise.
Success in the trade talks depends on the ability of countries to see the overall benefit to world trade (including their own economies) from the boost that further liberalisation would provide. Even if the goals of the current talks have been watered down and will not bring all the benefits originally intended, a successful conclusion would help the world’s economic recovery. The speed of the recovery and the future of the WTO may depend on the success of the Doha Round.
“RIP, WTO” by Paul Blustein, in Foreign Policy Jan/Feb 2010
“Export Practice and Management” by Alan Branch, Thomson Learning
See also the WTO website www.wto.org