WTO or World Trade Organization is the only international organization in the world, which is authorized to regulate international trade.The organization, which began in 1995, has carried out its role based on a series of agreements negotiated and agreed upon by a large number of countries in the world and ratified through parliament.
The main purpose of the WTO can be stated that the WTO seeks to help producers of goods and services,xporters and importers in conducting international trade activities. In short, the World Trade Organization (WTO) is the only international organization dealing with global trade rules, which has the main function of ensuring that world trade flows run smoothly, predictably and as freely as possible.
Until 2019, the number of WTO members consisted of 164 member countries, the majority of which were developing countries. Liberia joined on July 14, 2016, and became the 163rd WTO member country. Then, following Afghanistan which joined the WTO on July 26 and became the 164th WTO member.
Meanwhile, outside the WTO members, there are also 23 observer countries. Meanwhile, a list of 23 WTO observer countries, including: Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Equatorial Guinea, Ethiopia, Holy See, Iran, Iraq, Lebanese Republic, Libya, Sao Tomé and Principe, Serbia, Somalia, South Sudan, Sudan, Syrian Arab Republic, Timor-Leste, Uzbekistan.
WTO is the successor of the International Trade Organization (ITO, International Trade Organization ). The background history of the WTO journey can again refer to the era of the second world war. After the second world war, the world economy experienced a downturn.
The countries of the world, led by the United States , are working to improve the world economy through the Bretton Woods negotiations. In the negotiations, one of them agreed on the establishment of ITO ( International Trade Organization ).
Then, through the Havana Charter, in November 1947 in Havana, ITO prepared the GATT ( General Agreement on Tariff and Trade ). GATT contains rules related to tariff deals and trade in goods to support the pace of free trade. The main aim of GATT is to trade liberalism or encourage free world trade by removing tariff and non-tariff barriers.
However, ITO’s journey must be stopped because the US Congress was reluctant to ratify the Havana Charter so that ITO failed to be born. Therefore, through the PPA ( Protocol of Provisional Application ), GATT has been elevated to become a new regime, replacing ITO’s role as an organization.
GATT was accepted as a new regime in international trade and succeeded in holding various rounds to discuss various free trade policy packages. At least, there were eight GATT rounds during 1947 to 1986.
In the Uruguay Round of GATT, an initiation emerged to re-form an international organization to accommodate the GATT. This is because GATT is considered to still have some weaknesses that make it necessary to be addressed. Some weaknesses of GATT, including:
GATT only focuses on trade in goods, and is less concerned about trade in services.
GATT is ad hoc and is only valid for a certain period of time so that it cannot be implemented as a whole.
Agreements taken by GATT do not require ratification by parliament from member countries.
GATT does not provide clear and binding dispute resolution procedures in case of conflict between GATT member countries.
The need for an international organization to accommodate GATT was considered important. Arthur Dunkel, Secretary General of GATT at that time also immediately accelerated efforts to form an international organization, which was later named WTO ( World Trade Organization ).
The WTO was successfully ratified on April 15, 1994 and began carrying out its duties on January 1, 1995. Furthermore, the WTO became the most complex international organization in dealing with world trade.
Uruguay Round Process
In an effort to form the WTO, the GATT regime sought to realize it through the Uruguay round. The business went through a fairly long process. In detail, the following is a chronology of the Uruguay Round process which became a milestone in the birth of the WTO:
September 1986 – Punta Del Este: Launch
December 1988 – Montreal: Midterm ministerial level review
April 1989 – Geneva: Midtern Review completed
December 1990 – Brussels: Ministerial meeting ends deadlock
December 1991 – Geneva: First draft of final act completed
November 1992 – Washington: US and EC agree Blair House in agriculture
July 1993- Tokyo: Quad agrees market access at G37 meeting
December 1993 – Geneva: Many negotiations end
April 1994 – Marrakech: Agreement signed
January 1995 – Geneva: WTO is established and the agreement enters into force
So, the WTO was ratified on April 15, 1994 in Marrakech, Morocco. After ratification, the WTO began carrying out its various tasks starting from January 1, 1995.
WTO objectives can be divided into three main objectives, namely to:
Encouraging trade flows between countries
Facilitating negotiations by providing a more permanent negotiating forum
Resolving trade disputes
If referring to Article III of the WTO agreement, it can be explained that the function of the existence of the WTO is to:
Facilitate implementation, administer and ensure implementation of WTO agreements.
Provide a permanent forum for negotiations between members
As a place to administer the WTO dispute resolution system
As the place of administration of the review mechanism of trade policy
As a facilitator in collaborating with other international and non-government organizations
The role of the WTO in international trade
In international trade, the WTO has several vital roles. The role of the WTO in trade can be described in several details, including:
Administer various agreements resulting from the Uruguay Round
Oversee the implementation of market access commitments in the tariff and non-tariff fields.
Oversee international trade practices
reviewing the trade policies of member countries and through notification procedures.
As a forum for resolving disputes and providing conciliation mechanisms to resolve trade disputes that arise.
Provide technical assistance needed for its members, including developing countries in implementing the results of the Uruguay Round
As a forum for member countries to continuously negotiate concession exchanges in the trade sector in order to repeat the barriers to international trade
WTO and GATT relations
Many are sometimes still confused about the relationship between WTO and GATT. There are also those who think that the WTO is a substitute for GATT. In fact, in fact, the WTO and GATT are complementary.
GATT as an international agreement, is a document that contains provisions to regulate international trade. Whereas the WTO is an international organization created to support the GATT agreement.
So, GATT still exists and applies in the presence of WTO, because basically, the form of GATT and WTO is different. GATT is an agreement, while the WTO is the organization. GATT can even be equated as a law for the WTO.
However, GATT is not the only rule that is run by the WTO. In addition to GATT, the WTO also seeks to make various other agreements to support the goals and functions of the WTO, such as GATS, TRIPS, TRIMS and others.
WTO Member Obligations to the Agreement
Every member of the WTO must be willing to submit to various provisions in the WTO. There are provisions for WTO members, that each WTO member is automatically bound to certain agreements.
So, WTO members do not need to make a separate ratification of the agreement. WTO members have no choice not to enter into this type of agreement.
In addition, there are also several agreements that need to be ratified by WTO members separately, if they want to agree on the agreement. In this agreement that needs to be ratified, WTO members can choose whether or not to follow the agreement, according to their interests.
The following are agreements that must or must be followed by WTO members automatically, without having to ratify them again:
1. Multilateral Agreements:
GATT (General Agreement on Tariff and Trade) 1994;
GATS (General Agreement on Trade in Services);
TRIPs (Trade-Related Aspects of Intellectual Property Rights);
2. Dispute Settlement Rules;
3. Trade Policy Review Mechanism.
Rules and Basic Principles of WTO
Each WTO member must agree and be willing to implement the various rules and basic principles established by the WTO. The basic principles of the WTO include:
1. The principle of non-discrimination;
The principle of non-discrimination in it contains two main aspects, namely the Most Favored Nations Principle and the National Treatment Principle . Most Favored Nations means that member countries must not privilege or discriminate against other countries in trade relations.
Whereas the principle of national treatment means that a country cannot treat imported products worse than local products, which circulate in the domestic market.
2. Rules regarding market access;
The rules on market access contain rules so that member countries apply transparency to the various trade rules that apply in their countries, thereby opening up market access opportunities for any country to trade, as long as they are able to meet the applicable rules.
These rules include customs rules; rules about other levies; quantitative restriction rules; and various other Non-Tariff Barrier rules .
3. Rules regarding unfair trade ;
Rules on unfair trade mean that member countries must be able to conduct free trade openly and allow private trade actors to compete freely and fairly. This is related to the rules relating to dumping, subsidies and also the protection of intellectual property rights.
4. Rules regarding conflicts between trade liberalization and the interests and social values of society;
The WTO also regulates conflicts between trade liberalization and the interests and social values of the people. This includes the principle of providing exceptions to the principle of non-discrimination as long as deemed necessary.
This exception can be applied to provide environmental protection, public health, public morals and security. In addition, there are also rules regarding the protection of the domestic industry if deemed threatened due to the booming imports.
5. Rules regarding special or different treatment for developing countries;
The WTO principles also allow for the possibility of special treatment for developing countries. Developing countries are given special tariff differences to be able to compete with companies from developed countries.
The specificity of developing country tariffs is contained in the Generalized System of Preferences (GSP). This is in accordance with Article 1 Enabling Clause : ” Notwithstanding the provisions of Article 1 of the General Agreement, members may accord differential and more favorable treatment to developing countries, without according to such treatment to other members “.
In addition, the WTO also allows the protection of the “baby” industry ( infant industry ), a term for an industry that has just been established and will develop in a country. This startup industry is considered to need special support in order to have the opportunity to compete with established industries.
6. Rules for sticky resolution
The WTO has also provided procedural and institutional rules regarding decision making and resolution of trade disputes that take place between WTO member countries. Each member country must follow the principles of dispute resolution in this WTO.
Settlement of Disputes in the WTO
The dispute resolution system at the WTO is designed in such a way as to produce the best decisions for its members. This is based on the experience of resolving trade disputes that have been carried out in the GATT regime since 1947.
The process of resolving sticky at WTO, is determined as follows:
Consultation can be carried out for 60 days, to produce certain agreements;
If the consultation fails to produce an agreement, the country submitting the suit can propose the formation of a Panel to resolve the dispute;
After approval, the Panel was formed and began to convene. Haisl panel is issuing Panel Report. This process can take 9 months;
The Panel Report that has been submitted can be taken to the Appellate Body appeals agency if it still does not produce an agreement that satisfies both parties;
If no appeal is submitted, the panel report will be adopted by the DSB ( Dispute Settlement Body ) or the special dispute resolution body at the WTO;
The Appellate Body then produces an Appellate Body Report that can last for 90 days;
The DSB can then adopt the Appellate Body Report ;
Consequently, a country found guilty must implement a decision or recommendation from the DSB.
WTO Dispute Resolution Principles
In the WTO dispute resolution process, there are several principles that must be met, which include:
Decisions issued by the DSB ( Dispute Settlement Body ) are automatically endorsed and apply to the member countries or disputing countries. Except, this decision can be canceled only if there is a consensus to reject the results of the decision ( consensus not to adopt ).
Consensus not to adopt means that all WTO members must agree to cancel the results of the DSB decision, including the warring countries. That is, a country that wants to block a ruling must approach all other WTO members (including its opponents) in order to be willing to support the cancellation of the Panel.
WTO dispute resolution contains principles that must be: fair, fast, effective, and mutually beneficial.