World Trade Organization (WTO): What is it and how does it work?

Established on 1 January 1995 in Geneva, Switzerland, World Trade Organization (WTO) is the only international organization that deals with the rules of trade between different nations. It helps its member states to raise living standards, create jobs and improve people’s lives via trade. 

Born out of five decades of negotiations to lessen obstacles to trade, the organization's overriding purpose is to help trade flow as freely as possible. Conversely, in certain cases, the WTO maintains trade barriers to protect consumers or the environment. 

The organization also harmoniously settle disputes through a neutral procedure based on an agreed legal foundation.

How does the organization work?

World Trade Organization (WTO) is run by its member governments and all the major decisions are made by the membership as a whole-- either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva).

The Secretariat employing more than 600 staff members, and experts assist WTO members daily to ensure that negotiations progress smoothly and that the rules of international trade are correctly applied and enforced.

Trade negotiations

The WTO agreements cover goods, services, intellectual property, and the principles of liberalizations and permitted exceptions. The agreements further include member countries' commitments to lower customs tariffs and other trade barriers for the benefit of all. 

It is worth mentioning that these agreements are not static and are renegotiated from time to time. 

Implementation and monitoring

As per the WTO agreements, the member states are required to notify their trade policies to the WTO. Various WTO councils and committees ensure that these requirements are being followed and WTO agreements are being properly implemented. Additionally, each member nation undergoes periodic scrutiny of its trade policies and practices. 

Dispute settlement

The organization resolves trade disputes between nations under the Dispute Settlement Understanding. If a country is of the view that its rights under the agreements are being infringed, it can bring the dispute to WTO. Specially appointed independent experts pronounce judgements based on the interpretations of the agreements and individual countries’ commitments.

Building trade capacity

The agreements contain special provisions for developing countries such as longer time periods implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, handle disputes and implement technical standards. 

The organization further maintains a regular dialogue with NGOs, Parliamentarians, media, and the general public to enhance cooperation and increase awareness of WTO activities. 

Fundamental Principles

Fundamental principles as mentioned in the WTO agreements are mentioned below:

1- Non-discrimination between trading partners and between their own and foreign products, services or nationals. 

2- Encouraging trade by lowering trade barriers which may include customs duties (or tariffs), import bans or quotas. 

3- Predictability and transparency to encourage investment, job opportunities, and benefits of competition for consumers. 

4- Fair competition by discouraging unfair trade means such as export subsidies and dumping products at below normal value to gain market share. 

5- Supporting less-developed nations as over three-quarters of WTO members are developing economies or in transition to market economies. 

6- Sustainable approach towards both national and foreign businesses. However, the environmental factors must not be used as an excuse for discriminatory trade barriers. 

7- Inclusive trading system to allow more women and small businesses to participate in trade and to reap the economic benefits of global trading.

8- Enhancing cooperation and building partnerships through regular dialogue with civil society, labour unions, universities, and the business community. 

Members and Observers

WTO has had 164 members since 29 July 2016. The below-mentioned table below comprises Member Nations of the World Trade Organization along with their date of joining.

Observer Nations

WTO has 25 Observer Nations. These are as follows:

1. Algeria

2. Andorra

3. Azerbaijan

4. The Bahamas

5. Belarus

6. Bhutan

7. Bonia and Herzegovinana

8. Comoros

9. Curaçao

10. Equitorial Guinea

11. Ethiopia

12. Holy See

13. Iran

14. Iraq

15. Lebanese Republic

16. Libya

17. Sao Tomé and Principe

18. Serbia

19. Somalia

20. South Sudan

21. Sudan

22. The Syrian Arab Republic

23. Timor-Leste

24. Turkmenistan

25. Uzbekistan

Director-General and Deputy Directors-General of WTO

Ngozi Okonjo-Iweala is the seventh Director-General of the WTO. She is also the first woman and the first African to serve on the post. She took office on 1 March 2021 and her term of office will expire on 31 August 2025.

On 4 May 2021, she appointed Angela Ellard of the United States, Anabel González of Costa Rica, Ambassador Jean-Marie Paugam of France and Ambassador Xiangchen Zhang of China as her four Deputy Directors-General.

All about WTO's Seventh Trade Policy Review (TPR) of India