World Trade Organisation (WTO)
Countries around the world negotiate conditions for international trade in the World Trade Organisation (WTO). This page contains more information on the development of the WTO, an historic retrospect on the various negotiation rounds, on the agreements that form the WTO's rules - GATT, GATS and TRIPS - and on the Ministerial Conference, which is the top level decision-making body of the WTO.
WTO agreements
The General Agreement on Tariffs and Trade (GATT) forms the basis of the multilateral trade rules. GATT entered into force in 1948, with 23 countries participating from the start. By 1994, the agreement had been developed and included more countries, the primary exception being state-trading countries. The overall aim then, as it is now, was to contribute to economic growth and increased prosperity by facilitating trade.
The Uruguay Round, which was the eighth and final round of negotiations held under GATT, was concluded in 1994 and led to the creation of the World Trade Organisation (WTO) to administer the agreements and serve as a forum for negotiations.
The WTO was launched on 1 January 1995, and its headquarters are in Geneva. It currently has 147 members, with new members joining every year. Some 25 additional countries have applied for membership. At the fourth WTO Ministerial Conference in Doha in November 2001, China was also voted in as a member of the WTO.
Originally, GATT rules primarily covered duties on industrial goods and other traditional trade barriers, while the current agreements also cover other trade barriers. The main agreements consist of the General Agreement on Tariffs and Trade (formerly GATT), the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO also has special rules on settling trade disputes.
- GATT - trade in goods
- GATS - trade in services
- TRIPS - intellectual property rights
- ITA - information technology agreement
- SPS - agreement on sanitary and phytosanitary measures
- TBT - technical barriers to trade
GATT - trade in goods
The General Agreement on Tariffs and Trade was concluded in 1947. It contains the multilateral rules for trade in goods. The fundamental components of GATT are the 'most-favoured-nation' (MFN) principle and the 'national treatment' principle.
The MFN principle means that all trade benefits given to one country are automatically to be extended to the other members. National treatment means that imported and domestic goods are to be treated equally with regard to taxation and various regulations.
One central component of GATT consists of bound tariffs. This means that the countries have committed themselves to bind their tariffs at a certain level that must not be exceeded. Binding tariffs creates a stable and predictable basis for trade. During the more than 60 years that the agreement has been in force, tariff levels have decreased significantly, primarily in industrialised countries. However, as the relative importance of tariffs has decreased, other trade barriers have become more important, which has led to the need for amendments to GATT.
GATS - trade in services
The services sector represents an essential part of the modern and effective economy. It was therefore of great importance that negotiations on a worldwide set of rules for trade in services were successfully concluded in the Uruguay Round. The agreement has three main elements:
1. A framework agreement with general obligations that apply to all parties to the agreement and in principle to all trade in services.
2. National schedules of commitments on market entrance and national treatment for each trade in services sector, including lists of exceptions from the most favoured nation principle.
3. Annexes and ministerial decisions concerning special conditions, including extended negotiations, in certain trade in services sectors.
In practice, GATS, with its schedules of commitments and annexes, does not contain any undertakings for new liberalisation commitments. However, by signing the agreement, the participating countries have made a commitment not to introduce any new limitations on market entrance.
TRIPS - intellectual property rights
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) meant that a new, important area was incorporated into WTO rules. The agreement deals with protecting intellectual property rights in areas such as copyrights, trademarks, patents, industrial designs, integrated circuit designs and geographical indications. Members are required to introduce certain procedures in their national legal systems that allow taking effective measures against infringements of intellectual property rights.
The agreement means that fundamental WTO concepts such as most favoured nation treatment and national treatment also apply to the field of intellectual property rights. For industrialised countries, the agreement entered into force in 1996. Developing countries began implementing the TRIPS agreement in 2000. However, for the least developed countries, the agreement applied from 2006.
ITA - information technology agreement
The Information Technology Agreement (ITA) is an agreement on removing tariffs on IT products. The agreement was initiated by the EU, the US, Japan and Canada. At the WTO Ministerial Conference in 1996, these countries, together with eleven others, adopted a declaration in which they stated that they were prepared to eliminate customs duties and other charges that had an equivalent effect on IT products by 1 January 2000. The countries promoting the declaration represented over 80 per cent of the trade. When the ITA entered into force, there were 39 signatories to the agreement, representing 92 per cent of the trade. The first tariff reduction was implemented on 1 July 1997 and was later followed by further reductions. In most cases, the tariffs were completely eliminated by the time stipulated in the agreement.
SPS - agreement on sanitary and phytosanitary measures
Health issues have become increasingly important in the context of trade. Avian influenza, mad cow disease and foot-and-mouth disease have all contributed in calling attention to these issues. One issue that is politically controversial in many countries concerns the area of genetically modified organisms (GMOs).
The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) contains rules on how protective standards should be designed so that trade barriers are avoided and, at the same time, the life and health of humans, animals and plants are protected. The agreement entered into force in 1995. It covers food and veterinary regulations, and rules for protecting plants.
The agreement emphasises that protective measures are to be in line with international rules, and that decisions on protective measures are to be based on scientific principles. They are not to disrupt trade more than what is necessary to achieve the intended purpose. As far as possible, they are also to be based on international standards.
The following measures are covered by the SPS agreement:
1. Measures to protect humans and animals from health risks linked to food and animal fodder
2. Measures to protect humans from health risks linked to diseases among animals and plants
3. Measures to protect animals and plants from risks associated with the spread of pests and diseases
4. Measures for protection against risks of other harm as a result of the spread of plant diseases.
TBT - technical barriers to trade
Differences between countries' technical regulations often present an obstacle to international trade, and the importance of TBT issues has increased at the same rate as tariff levels have decreased. Removing technical barriers to trade would mean a considerable reduction in the costs for companies.
The current wording of the Agreement on Technical Barriers to Trade (TBT Agreement) is a result of the Uruguay Round and entered into force on 1 January 1995. It covers all goods, including industrial and agricultural goods. The agreement aims to prevent designing technical regulations, standards and certification procedures in such a way that they become unnecessary obstacles to international trade.
The agreement regulates the creation and application of technical regulations and standards, including requirements on packaging, marking and labelling, and methods for testing and certifying compliance with technical regulations and standards.
WTO members must report proposals on new regulations and test methods to the organisation if they differ from international standards and if they are expected to have a considerable impact on trade. This provides an opportunity for other countries to submit comments. It is hoped that by giving individual members the chance to influence the design of the regulations, new trade barriers will be avoided.
