Lecture on the World Trade Organization for a graduate course on International Political Economy I taught in 2004.

2. THE WORLD TRADE
ORGANIZATION

3. Misconceptions
• The WTO replaced the General Agreement on
Tariffs and Trade (GATT).
• The WTO creates the rules that govern
international trade.
• WTO-member countries cannot deviate from
the trade standards set by the organization.
• WTO negotiations only take place during
ministerial meetings and summits.

4. What is the WTO?
• The World Trade Organization (WTO) is
responsible for providing the common
institutional framework for the conduct of trade
relations among its members.
• It represents a rules-based approach to
multilateral cooperation.
• Trade in Goods (GATT)
• Trade Services (GATS)
• Trade Related Intellectual Property (TRIPs)
• Dispute Settlement and Trade Policy Review

5. Functions of the WTO
• Facilitate the implementation of multilateral
trade agreements.
• Provide a forum for negotiations on trade-
related issues.
• Administer the Understanding among members
on Dispute Settlement and Trade Policy Review.
• Enhance coherence in global economic policy-
making.

6. Perspectives on the WTO
• A code of conduct among members.
• The WTO can be seen as a club of countries
with respect to trade.
• Member countries must abide by the club’s rules
or receive sanctions accordingly.
• A market for members.
• The WTO can be understood as a market where
countries exchange trade policies.
• The objective of such exchange is to secure the
maximum benefit for the countries concerned.

7. CORNERSTONES OF THE
WORLD TRADE ORGANIZATION
Non-discrimination
Reciprocity
Market Access
Fair Trade

8. Non-Discrimination
• Two underlying principles:
• Most Favored Nation (MFN)
• Products from member countries must be treated
no less favorably than coming from any other
country.
• Precedent: Cobden-Chevalier Treaty (1860).
• National Treatment
• Foreign goods must be treated no less favorably
than domestic goods.
• Equivalence of treatment is what matters.

9. Reciprocity
• Within the WTO, countries engage in reciprocal
exchange of market-access commitments.
• The exchange of trade concessions occurs on a
quid pro quo basis.
• Countries are willing to lower trade restrictions
only if their counterparts are willing to do the
same.
• This also means that WTO stipulations
(privileges and obligations) apply equally to new
and old members alike.

10. Access and Competition
• These principles are often at odds with one
another.
• The principle of market access means that
countries have the right to seek redress should
contracting parties renege on their trade
concessions.
• The principle of fair competition in the WTO
context means that member countries have the
right to make erect trade barriers if competition
from imports becomes injurious to domestic
industries.

11. A History of
Multilateral Trade
Negotiations

12. ROUND AGENDA OUTCOMES
Geneva • Tariff reductions on specific items. • Concessions on 45,000 tariff lines.
(1947: 23)
Annecy • Tariff reductions on specific items.
• Modest tariff reductions.
(1949: 29) • Accession negotiations.
Torquay • Tariff reductions on specific items.
•8,700 tariff concessions.
(1950-51: 32) • Accession negotiations.
Geneva
• Tariff reductions on specific items. • Modest tariff reductions.
(1955-56: 33)
Dillon • Tariff reductions on specific items. • Tariff adjustments and 4,400 tariff
(1960-61: 39) • Tariff implications of the formation of the EEC. concessions.
• Across-the-board formula approach to tariff reductions for • 35% average tariff reductions by
Kennedy industrial products. developed countries.
• Preferential treatment for developing countries. • Binding of tariff lines.
(1963-67: 74)
• Non-tariff measures (1). • Anti-dumping and customs
valuation agreements.
• 1/3 reduction in average tariffs by
• Across-the-board formula approach to tariff reductions for
developed countries.
Tokyo industrial products.
• Adoption of the Enabling Clause.
(1973-79: 99) • Preferential treatment for developing countries.
• Establishment of codes of conduct
• Non-tariff measures (2).
on other non-tariff measures.
• 1/3 average reduction in tariffs by
• Tariff reductions: item negotiations and formula approach.
Uruguay developed countries.
• Non-tariff measures (3).
• Agreements on services and
(1986-94: 128) • Agriculture, textiles, trade in services, intellectual property rights,
intellectual property.
dispute settlement, trade policy transparency and surveillance.
• Creation of the WTO
?
• Tariff reductions: item negotiations and formula approach.
Doha
• Developing countries: implementation issues, market access, trade
(2000-05: 148) and the environment.

13. The Structure of the
World Trade Organization

15. Some Features of the
World Trade Organization

16. “New” Issues Addressed
• Agriculture and Textiles
• Trade Facilitation
• Elimination of Non-Tariff Barriers
• Trade Remedies
• Anti-dumping agreement
• Agreement on subsidies and countervailing
measures
• Agreement on safeguards

17. Trade in Goods
• Customs tariff: in principle, the only instrument
of protection allowed under the GATT.
• Non-discriminatory application of tariffs.
• Binding of tariff rates.
• Prohibition against quantitative restrictions
(except for agricultural commodities under
certain conditions).
• Trade in goods in the WTO can be described as
a form of “shallow integration”.
• i.e. Cooperative agreements not to do certain
things.

18. Trade in Services
• General Agreement on Trade in Services
(GATS)
• Application of the MFN principle and national
treatment to the service sector.
• Applies to the following types of services:
• Cross-border
• Movement of consumer abroad
• Movement of supplier abroad
• Temporary movement of people

19. TRIMs and TRIPs
• Trade-Related Investment Measures (TRIMs)
pertain to government policies that impose
performance standards on foreign investors.
• Examples: local content requirements, export
obligations, trade balancing requirements, etc.
• The Agreement on Trade Related Intellectual
Property Rights (TRIPs) imposes member
governments to adopt specific, similar policies.
• Minimum standards of protection as outlined by
existing IPR conventions and eventual
harmonization with standards of industrialized
countries.

20. Dispute Settlement
• Monitoring: Trade Policy Review Mechanism
• The General Council can sit as a Dispute
Settlement Body (DSB) to resolve trade conflicts
among members.
• Concerned parties must attempt to resolve their
dispute bi-laterally.
• Failing that, the DSB creates a panel to
investigate the matter at hand.
• Findings accepted by the DSB may be appealed.
• The implementation of panel decisions allows
cross-compensation and retaliatory measures.

21. LOOKING FORWARD:
ISSUES FACING THE WTO
Singapore Issues:
• Labor Standards
• Trade and the Environment
• Investments
• Competition Policy
• E-commerce
Concerns over the equity of the system (particularly with
respect to developing and least-developed countries).
Institutional and programmatic adjustments.

22. fin