What is WTO

The WTO is an international organization and a forum of multilateral negotiations of its Members on global trade liberalization rules, their administration and application. Mainly, the WTO system is understood as the set of external trade rules or "traffic rules" in external trade, which all Members must follow.

The WTO was established in 1995, as the result of the Uruguay round negotiations. With the establishment of the organization, a set of WTO agreements was also concluded – with regard to goods, services, intellectual property, dispute settlement, multilateral agreements. Until the establishment of the WTO multilateral trade relations were governed by General Agreement on Tariffs and Trade (GATT), concluded on 1947 and which opened the trade liberalization and reduction of tariff barriers.

The main goal of the WTO is a free and facilitated trade, governed by equal rules, while similarly taking into account also the potential of developing countries.

In the WTO are represented almost all countries of the world – currently the WTO has 147 Members, 26 are in the accession process. Acceding countries have observer status in the WTO, they are entitled to participate in the round of multilateral negotiations without aright to vote. As the observers in the WTO are also several international organizations – the World Bank, International Monetary Fund, World Customs organization, etc.

The organizational structure of the WTO. The main decision making body is the WTO Ministerial Conference, which is held at least once in two years. The recent, 5^th Ministerial Conference was held in September, 2003 in Cancun, Mexico. The next will take place in the end of 2005, in Hongkong, China.

In between Ministerial Conferences the main body that takes decisions is the General Council, which runs the everyday business of the WTO and is responsible to Ministerial Conference. The General Council operates at the level of Members' ambassadors or permanent representatives. The General Council also runs the Dispute Settlement Mechanism as well as reviews Members' trade policies on a regular basis.

Under the supervision of the General Council function the regular councils (Goods, Services and Intellectual property), specialized committees, which supervises the application of WTO agreements and operates on the experts level.

The WTO Secretariat performs the everyday administrative tasks.

The WTO is located in Geneva.

To enter the WTO, acceding country must submit a detailed information on its trade regime and economic policy as far as it concerns the scope of WTO agreements. The information further is analyzed by a specially established working party, in which every interested Member participates. Similarly, acceding country opens bilateral negotiations with interested Members (both Members and acceding countries) on the market access of that acceding country. The results of bilateral negotiations with the country's accession to the WTO will be equally applied to all WTO Members, according to the Most Favored Nation principle.

After the working party has finished the evaluation of acceding country's trade regime, it decides on the accession commitments. Eventually, the prepared package of accession documents (working party report, accession protocol and schedules of commitments) is submitted to the General Council of Ministerial Conference. Formally country is enrolled to the WTO if it is supported by 2/3 of Members, however, in practice such decision is always based on a consensus. After a positive decision country is entitled to sign the accession protocol.

Nonetheless the fact that there is a net of free trade agreements around the world, countries choose accession to the WTO as a priority. Mostly that is because the WTO is a set of rules and provisions that gives confidence of the stability of trade partner's legal system, including the capability to fulfill commitments of free trade agreements. The WTO is like a quality mark for a country that is integrating in the international system of work division. It is important to note that already in the accession process countries must comply with the WTO basic principles, otherwise there is no ground to regard that a country is able to fulfill the WTO requirements, which cannot be implemented in a day. The countries that are acceded to the WTO have already for a certain period proven their capability and readiness to comply with the internationally accepted norms. Partially that is why the accession process takes a considerable time period before it is completed.

Commitments by WTO Members 

The compatibility of national legal acts regulating state's trade regime with the WTO provisions is a precondition to accede to the WTO.

Acceding to the WTO the state undertakes commitments in regard of its market access. A maximum level or "the roof" of customs tariff is set for trade in goods. The WTO is not a free trade agreement. Free trade agreement basically is intended to eliminate customs duties already when the agreement becomes effective or providing for a transitory period. The WTO agreement provides for a flexible approach towards the market protection. Country can apply as high customs duty as is required not to threaten the local industry, while similarly the customs duty applied must not exceed a certain agreed limits. However, the tariff roof can be exceeded in an extreme case due to unpredictable crisis in a market sector. In such case it must be renegotiated with other Members affected with a view to agree on compensational measures in other sectors. In a critical situation, a country also can apply trade defense mechanism – when certain goods are being imported to country in excessive amount thus causing loss to local producers. For example, in a case of rapidly growing chicken import (the required criteria are both absolute and relative growth of import as well as causal material loss for local producers) the state can apply special trade defense mechanism or safeguard measures.

Becoming a Member the state also commits itself in the field of agricultural subsidies. These subsidies are not being eliminated, instead are put within a regulatory framework to control how the funds planned for the subsidies are used. Subsidies cannot exceed certain limit agreed for support measures of a certain product, or in other words, it is not allowed to spend all the money to excessively promote one or a few products.

Similarly the Member undertakes certain level of commitments providing for a non-discriminatory treatment with respect to foreign investors investing in the local industry of services as well as providing for a right to cross – border supply of services.

Advantages of being a Member of the WTO 

• A multilateral compromise –in the process of multilateral negotiations Members of the WTO elaborate binding rules while similarly respecting the specific needs and interests of the each one. However, the adoption of the rules is governed by the principle of unanimity thus excluding any discrimination. In the result the outcome of multilateral negotiations ensure the most fair and efficient result.
• An opportunity to reach the best favorable conditions in the bilateral negotiations on market access – individual negotiations with the WTO acceding country allow concluding a good agreement on goods and services that are of particular trade interest for the Member. The results of all bilateral negotiations are codified in the single schedule of commitments of the new Member. Thus applying the Most Favored Nation (MFN) regime, after country becomes a Member it will apply the most advantaged results of individual negotiations to all Members equally.
• Dispute Settlement Mechanism – the WTO provides for an efficient sanction mechanism in a case of non-compliance with the WTO provisions. Each Member can submit a claim to the WTO against a Member that has failed to comply with the rules of the WTO Agreements. The WTO decides on the validity of the claim and if a violation is recognized then the violating Member must eliminate the infringing situation. If regardless, it fails to do so, then the other Members whose interests are affected are entitled to apply trade related countermeasures with respect the Member.

Undeniably, the sectors that gain most from the country's membership in the WTO are those orientated on export. As a proof serve the characteristics of disputes being solved in the WTO, where main interested parties are exactly exporters. The WTO by eliminating discriminatory trade barriers promotes for a fair competition on the global market. Similarly, reduced are the large amounts of subsidies, which are an unfair – in this case state regulated competition. Membership to the WTO is more advantageous for countries or country unions that implement a liberal and open trade policy, as it is an opportunity to participate in the multilateral negotiations (rounds of negotiations) with a view to reduce discrimination in the external trade and achieve more favorable conditions for national exporters.