How Powerful is the WTO?

WTO is a major global economic actor and the first organization to come closer to becoming a world economic government. It has been established on January 1, 1995 in as a modification of the GATT (general agreement on Trade and Tariffs). The organization was created during the Uruguay Round negotiations (1986-94). The membership of the organization consists of 153 countries (on 23 July 2008), accounting for 97% of world trade volume. The 2007 Secretariat Staff consisted of 625 people headed by the Director-General, Pascal Lamy who was the European commissioner on Trade. The functions of the WTO as stated officially include administering WTO trade agreements, acting as a forum for Trade negotiations, Handling Trade Disputes, monitoring National Trade Policies, providing Technical Assistance and training for developing countries, facilitating cooperation with other international organizations. The WTO agreements cover goods, services and intellectual property. They design the principles of liberalization, is committed to lower customs tariffs and barriers and open service markets.

The WTO represents a turning point in the process of establishing a truly global economic order because it lays out a comprehensive set of rules intended to guide all aspects of global economic activity, the WTO will undoubtedly exert a profound influence over the future course of human affairs. Indeed it is not unrealistic to regard the WTO as representing effective world government for the first time in human history. There are several reasons that justify such an assessment. First, we really do now live in an integrated global economy. Multinational corporations control more than one third of the world’s productive assets and the organization of their production and distribution systems has little to do with national or even regional boundaries. Decisions about locating factories, sourcing materials, processing information or raising capital are made on a global basis and any particular product may include components from several countries. The WTO has extended the reach of trade rules into every sphere of economic activity. Historically, trade agreements were concerned with the trade of goods – manufactured goods and natural resource products. But under the WTO, international trade agreements have been dramatically extended to include investment measures, intellectual property rights, domestic regulations and services. Now it would be difficult to identify an issue of social, cultural, economic or environmental significance that would not fall within the domain of these new rules of “trade”. Lastly, the most important source of WTO authority and influence stems from the powerful enforcement tools it has available to ensure that all governments respect the limits on their authority imposed by its trade rules.

The dispute settlement system is the “backbone” of today’s multilateral trading regime (WTO). It had created a stronger and more binding system to ensure trading rules are “respected and enforced”. The system is often referred to as a “unique contribution to the stability of the global economy” and as a great improvement from the GATT enforcement system. By reinforcing the rule of law, the dispute settlement system makes the trading system more secure and predictable. The dispute settlement system is compulsory. All WTO Members are subject to it, as they have all signed and ratified the WTO Agreement as a single undertaking. Moreover, the dispute settlement system provides a mechanism through which WTO Members can ensure that their rights under the WTO Agreement can be enforced. Only WTO Member governments can bring disputes, it follows that private individuals or companies do not have direct access to the dispute settlement system, even if they may often be the ones (as exporters or importers) most directly and adversely affected by the measures allegedly violating the WTO Agreement. The system has both strengthens and weaknesses. For example, with respect to its weaknesses, despite the deadlines, a full dispute settlement procedure still takes a considerable amount of time and the winning party does not receive compensation after the case is settled to cover the legal expenses. Therefore, there is evidence that many poor nations cannot afford the time and money to make use of the Dispute settlement body as often as developed nations. Moreover, the agreements which were signed during the WTO are usually dominated by those richer nations. Looking at the cases brought to the DSU, the majority of them are brought by the United States or the European Union. Nevertheless, operation of the dispute settlement system has been a success. The large number of cases in which parties invoked the dispute settlement system in the first eight and a half years of the (WTO) (which is already significantly larger than the number of disputes brought under GATT 1947 during a period of nearly 50 years) suggests that Members have faith in the system. It appears that the WTO dispute settlement system has fulfilled its main function: to contribute to the settlement of trade disputes.

Thailand vs. EU case

Thailand, the world’s third largest producer of canned tuna, filed a complaint against the EU which had established a 24 percent tariff for their tuna while at the same time having zero tariffs for countries in the African and Caribbean Pacific region (ACP),

which was proving detrimental to the legitimate economic interests of Thailand as a major producer of canned tuna and also directed investments towards the ACP region. Thailand in this case had the legal right to complaint because the WTO agreement states that each member has to have equal treatment, however, also under the WTO rules is that there are ‘certain forms of positive discrimination” which are acceptable when concerning the poorest developing countries. The complaints concluded that the 24 % import tariff damaged the fair competition practice and displaced Thai tuna from the EU market. The mediators conclusion was that the complainants case merits are accepted. The terms were set by the EU council Regulation in 2003 in which the tariff rate quota as suggested by the mediator was adopted. This case is a good example of how developing country members were able to use their WTO rights to secure more equitable treatment from a developed country trading partner.

This case sets a precedent for other countries that binding agreements can be reached even without court rulings.

The WTO is likely to emerge as the most important and powerful international institution ever to have been created. The WTO regime can accurately be considered an economic constitution for the planet. Its wide range of agreements and function as an international forum foster international trade and integration and thus serve the basic function intended during its creation- increase in economic growth, efficiency. Through the dispute settlement body, the WTO has the unique tool of a global government which can create binding agreements and make sure they are respected and enforced.

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