Trade and Investment

The World Trade Organization. Here's what it actually does


Who makes the rules for global trade? Image: REUTERS

Rosamond Hutt
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After 15 years of arduous negotiations, China finally joined the World Trade Organization (WTO) on 11 December 2001.

Fifteen years later, the long road to WTO membership has paid off: China is the world’s leading exporter. It's also the second biggest importer.

 World's top exporters
Image: WTO

Despite that, on the 15th anniversary of China’s accession, there’s a huge question mark hanging over its relationship with other main players in the WTO.

China says that it is automatically entitled to market economy status when a WTO rule on “dumping” – or exports at unfairly cheap prices – expires after 15 years. But the US and other major economies want to block this move, fearing it will make it much harder to challenge China’s cheap exports.

As the body that deals with the global rules of trade, the WTO acts as a kind of referee for governments to sort out their trade quarrels. As China marks this key membership milestone, here’s a closer look at the WTO.

 WTO members and observers
Image: WTO

What is the WTO?

The WTO’s main aim is to promote free trade by lowering tariffs and other barriers. It does this through agreements negotiated and signed by most of the world’s trading nations.

The WTO then polices these agreements to make sure all nations stick to the rules. When trade disputes between governments flare up, it steps in as mediator and, if necessary, arbitrator.

And when member countries don’t play by the agreed rules, the WTO can impose trade sanctions against them.

 WTO disputes
Image: WTO dispute settlement data/Raul A. Torres

The organization was set up in 1995 to replace a provisional international trade agreement, the General Agreement on Tariffs and Trade (GATT). It was signed in 1948 by 23 countries in an effort to boost trade liberalization after the Second World War.

The WTO’s remit, however, is much broader than its predecessor’s, covering trade in services and intellectual property as well as goods.

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How does it work?

The WTO is governed by its member countries – there are currently 164 – which make the major decisions, via ministers, ambassadors or delegates.

Day-to-day operations are coordinated by the Secretariat, in Geneva, Switzerland, which employs more than 600 staff and experts, including lawyers, economists and statisticians.

The Ministerial Conference is the WTO’s highest decision-making body. It usually meets every two years, bringing together all members (countries and customs unions) and is the backdrop for the WTO’s trade rounds, the multilateral negotiations aimed at lowering barriers to free trade.

The General Council acts on behalf of the Ministerial Conference and runs the Dispute Settlement Body and the Trade Policy Review Body. It is made up of representatives (usually ambassadors) from all member governments.

 WTO structure
Image: WTO

The General Council also decides on the appointment of the Director-General of the Secretariat, currently Roberto Azevêdo, a Brazilian diplomat.

World Trade Organization (WTO) Director-General Roberto Azevedo attends a session at the World Economic Forum (WEF) in Davos January 25, 2014. REUTERS/Denis Balibouse (SWITZERLAND  - Tags: POLITICS BUSINESS)   - RTX17TXA
Director-General of the Secretariat Image: REUTERS/Denis Balibouse

Globalization and the WTO

Over the years, the WTO’s free trade agenda has become a focal point for critics of globalization.

During his campaign, President-Elect Donald Trump said he might pull the US out of the WTO if it tried to block his policies.

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Trade and InvestmentGeographies in Depth
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