The World Trade Organization (WTO) is an international organization created for the purpose of the liberalization of the international trade and the regulation of trading and political relations of the member states. The WTO is the successor of the General Agreement under Tariffs and Trade (GAUTT), having been operated since 1947.
The WTO was founded on January 1st, 1995, based on the system of mutual arrangements (that is the Uruguayan round) between the member countries of the GAUTT. It completely replaced the GAUATT after an annual period, on January 1st, 1996.
The WTO purposes are liberalization of the world trade by its regulation with the help of tariff methods at the consecutive reduction of the level of import duties as well as the elimination of various non-tariff barriers and quantitative restrictions.
The WTO functions are control over the implementation of trading agreements signed between the members of the WTO, the organization and ensuring of trade negotiations among the members of the WTO, the supervision over the trade policy of the members of the WTO, the settlement of the trading disputes between the members of the organization.
The main rules and principles of the WTO are:
– mutual granting of the most favored nation treatment in trade;
– mutual granting of the national treatment to the services and goods of the foreign origin;
– trade regulation by tariff methods;
– refusal of the use of quantitative and other kinds of restrictions;
– transparency of the trade policy;
– settlement of the trading disputes by negotiations and consultations, etc.
The members of the WTO are 155 states. In 2007 the organization was entered by Vietnam, Kingdom Tonga, Cape Verde and Ukraine.
About 30 states and more than 60 international organizations, including the United Nations, IMF and the World Bank, have the status of observers in the WTO.
The countries-observers are Afghanistan, Azerbaijan, Belarus, Bosnia and Herzegovina, Iran, Iraq, Kazakhstan, Russia, Serbia, Tajikistan, Uzbekistan and others. The countries-observers should begin negotiations on the accession within five years from the moment of receiving the status of observers.
The accession procedure to the WTO consists of several stages. This process takes 5-7 years, on the average.
At the first stage, within the special Working groups, there is a detailed consideration of the economic mechanism and the trading political regime of the joining country on its compliance to norms and WTO rules at the multilateral level. Then the consultations and negotiations concerning the membership of the country-competitor in this organization begin. These consultations and negotiations are, as a rule, carried out at a bilateral level with all the member countries of the Working group.
First of all, the negotiations concern “commercially significant” concessions which the joining country will be ready to provide to the members of the WTO on the access on its markets.
In turn, the joining country, as a rule, gets the right, which all other members of the WTO possess, that means the termination of its discrimination in foreign markets.
According to the established procedure, the results of all carried-out negotiations on the liberalization of the access to the markets and the conditions of the accession are legalized with the following official documents:
– the report of the Working group, where all the package of the rights and obligations, which the country-competitor will take up according to the results of negotiations, is stated;
– the list of the obligations on tariff concessions in the field of the goods and on the level of the agriculture support;
– the list of the specific obligations on the services and the list of withdrawals from the most favored nation treatment;
– the protocol on the accession, legally legalized the agreements on two – and multilateral levels.
One of the main conditions of the accession of new countries to the WTO is a reduction of their national legislation and practice of the regulation of foreign economic activity in compliance with the positions of the package of agreements of the Uruguayan round.
At the final stage of the accession, there is ratification by the national legislature of the candidate country of the whole package of the documents coordinated within the Working group and approved by the General Council. Then the specified obligations become a part of a legal package of documents of the WTO and the national legislation, and the candidate country receives the status of the member of the WTO.
The highest governing body of the WTO is the Conference of ministers. It is gathered not less often than once in two years, as a rule, at the level of ministers of trade or foreign affairs. The Conference elects the head of the WTO for a period of three years.
The current management of the organization and the supervision over the implementation of the adopted agreements are carried out by the General Council. The settlement of the trading disputes also enters into its functions between the participating countries of the WTO and the monitoring of their trade policy. “The General Council supervises the activities of the Council for the trade in goods, the Council for the trade in services, the Council for intellectual property”.
The members of the General Council are ambassadors or heads of the representations of the member countries of the WTO.
As a part of the WTO, the working and expert groups and specialized committees, which functions are establishment and control over the rules of the competition, monitoring of the regional trading agreements and the investment climate in the participating countries, the reception of new members, operate.
The director general of the WTO is Pascal Lamy (since May, 2005). The headquarters of the organization is in Geneva.
The advantages of the WTO system are proved not only by the fact that practically all large trading nations are its members now. Besides economic benefits, which are reached by the decrease in barriers to free barter, this system positively influences the political and social situation in member countries as well as the individual welfare of the citizens. The advantages of the WTO trading system are shown at all levels – a citizen, a country and a world community as a whole.
The most obvious benefit of a free trade for the consumer is a fall of the life cost at the expense of the decrease of the protectionist trading barriers. As a result of the decrease in trading barriers, not only the final imported goods and services but also domestic productions, in which the production import components are used, become cheaper.
Import tariffs, the state production subsidies (for example, in agriculture) and quantitative import restrictions (for example, in textile trade) lead not to desirable results on the domestic market protection but to increase of life cost. So, the consumers in Great Britain, according to the statistics, “pay on 500 million pounds a year more for clothes because of trading restrictions on textiles import”; for Canadians, this sum makes about 780 million Canadian dollars. A similar situation is in services: the liberalization of telecommunications in the European Union led to the reduction of prices on the average for 7-10%.
The WTO system encourages the competition and lowers trading barriers therefore consumers win. So, a large reform of textiles and clothes trade within the WTO includes the elimination of restrictions on the import volume.
A wider choice of the goods and services is also a doubtless advantage of free trading system for the consumer. Besides foreign goods, the matter is about domestic goods and services which range extends in view of the prices reduction on import materials, layout parts and the equipment. The import competition stimulates the most effective domestic production and, therefore, indirectly reduces the prices and increases the quality of the let-out production.
Besides, as a result of a more active barter, new technologies develop. For example, this happened with a mobile communication.
The increase in export of the domestic production also raises the income of the manufacturers, tax revenues to the treasury and, therefore, the income and welfare of the population as a whole.
Benefits of the WTO are resulted in the benefits of the national economy as a whole and the increase of the income. So, the fall of trading barriers promotes a trade growth that leads to increase both a state and personal income. The empirical data testify: after the Uruguayan round, resulting in the transition to a new system of commercial transactions, the world income increased from 109 to 510 billion dollars. The uniform market in the territory of the European Union also promoted the increase of the income and welfare.
The increase of the state income at the expense of the activity of successful exporters allows to redistribute the additional resources and to help other companies, facing the foreign competition, to increase their productivity, to expand the production scales, to improve the competitiveness or to switch over new kinds of activity.
I think the WTO helps greatly to its member countries. It controls over the trading agreements implementation, the organization and ensuring of trade negotiations, supervises over the trade policy of the members of the WTO, settles the trading disputes between the members of the organization. Unfortunately, it is very difficult for the least developed countries to fulfill all the WTO requirements to become the member of this organization. However, the organization made the decision to establish preferential rules for economically undeveloped countries. The duties on the agricultural production can remain at the former level for them, instead of being reduced below 50 %. The organization also promises to consider individual requests from economically undeveloped states.