The World Trade Organization

The World Trade Organization (WTO) is one of the three international organizations (the other two are the International Monetary Fund and the World Bank Group) which deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. It can be argued that the WTO plays a particularly significant role in the promotion of free international trade. The organization acts as an umbrella institution, that is an organization covering the agreements concluded at the Uruguay Round. The Uruguay Round was the preparatory stage for the launch of the WTO. The Round was based on the General Agreement on Tariffs and Trade (GATT).

The crucial role of the WTO is to provide a common institutional framework for the implementation of those agreements. The organization is the result of the Uruguay Round of negotiations (1986-1994) and was formally created in 1995.

WTO framework facilitates the development of international trade. It achieves this by providing the following: an executive apparatus: effectively, the Director General and the Secretariat acting in their administrative capacity; a legislative apparatus: effectively, the Ministerial Conference and the General Council acting in their decision-making capacity; an enforcement apparatus for a code of conduct regulating international trade policies and practices of nation states: effectively, this is the General Council acting in its capacity as the Dispute Settlement Body.

The WTO framework tolerates regional variation in its application and does not cover all aspects of international trade. The WTO adheres to four principles. These are: non-discrimination; reciprocity, e.g. mutual tariff reduction; transparency, e.g. clear unambiguous trade measures; fairness, e.g. restrictions on dumping goods.

The WTO’s main functions are as follows: it administers the WTO agreements and it reviews trade policies of member states acting as a forum for the resolution of international trade disputes.

Organizational Structure of the WTO:

1. The Ministerial Conference is the highest organ of the WTO and is to meet at least once every two years. It is normally composed of all the Ministers of Trade of the Members of the WTO. The Ministerial Conference has supreme authority over all matters, as expressed under Article IV: 1 WTO Agreement.

2. The General Council is composed of representatives of all the members – normally country delegates based in Geneva. The General Council is in session between the meetings of the Ministerial Council. In essence this is the real engine of the WTO and has all the powers of the Ministerial Council when that body is not in operation. The General Council also acts as the Dispute Settlement Body and the Trade Policy Body (Article IV: 2-4 WTO Agreement).

3. The Council for Trade in Goods, the Council for Trade in Services and the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) have been established with specific spheres of responsibility. In fact, there are separate agreements within the framework of WTO that define and confine their operation (Article IV: 5 WTO Agreement).

4. The Committee on Trade and Development, the Committee on Balance-of-Payments Restrictions and the Committee on Budget, Finance and Administration have self-evident functions (see Article IV: 7 WTO Agreement). Likewise the Director-General and the Secretariat operate on a purely administrative basis. However, it should be stated that the Director-General and the staff of the Secretariat shall be exclusively international in character and they shall not seek or accept instructions from any government or any other authority external to the WTO (Article VI: 4 WTO Agreement).

And now we shall look at the regime for subsidies under the WTO Agreement. The provisions concerned with subsidies in the WTO Agreement are Article VI and Article XVI of the General Agreement on Tariffs and Trade (GATT). Article VI of GATT contains general rules governing the application of anti-dumping and countervailing duties. Article XVI contains the general provisions on subsidies.

Subsidies were defined for the first time during the URUGUAY Round Subsidies Agreement negotiations. They will be deemed to exist if there is a financial contribution by government or any public body where the government practice involves: a direct transfer of funds (e.g. grants, loans, and equity infusion); potential direct transfers of funds or liabilities (e.g. loan guarantees); government revenue that is otherwise due but is foregone; government provision of goods or services other than general infrastructure; government payments to a funding mechanism or direction to a private body to carry out any of the foregoing functions; if a benefit is merely conferred on the recipient.

There are three types of subsidies when it comes to their actionability: actionable subsidies (Article 5 of the WTO Agreement on Subsidies and Countervailing Measures); prohibited subsidies (Article 3 of the WTO Agreement on Subsidies and Countervailing Measures); non-actionable subsidies (Article 8 of the WTO Agreement on Subsidies and Countervailing Measures).

Finally, the WTO members are entitled to proceed with countervailing measures in case they have the subject matter of illegal subsidies from another state. Part V of the WTO Agreement on Subsidies and Countervailing Measures sets out detailed rules governing countervailing duty actions.