The purpose of the WTO is to abolish all tariffs and other barriers to trade in order to achieve the goal of global free trade and thereby promote growth in the world. The WTO is constantly expanding and regulates more and more areas that affect world trade.
At the same time, the process that is intended to negotiate new agreements is slow. The agreements in force were negotiated during the Uruguay Round held under the GATT agreement. No new round of negotiations has been completed since the WTO was established in 1995; the so-called Doha Round, which began in 2001, was in practice down in early 2009.
As defined by dentistrymyth, WTO agreements must be incorporated into a country’s legislation, so that all international business transactions are covered. A company that decides to open an office in another country, for example, must therefore comply with WTO rules. It is estimated that about 97 percent of world trade is covered by these rules.
An important task for the WTO is the review of its members’ trade policy. A special body conducts regular audits on the basis of a report from the WTO Secretariat and a statement from the audited country. Reviews are conducted every two years by the largest trading blocs – the EU, the US, Japan and Canada. There are also special committees that monitor various combinations of issues, such as trade and the environment.
One of the WTO’s tasks is to resolve disputes over how the various agreements should be interpreted. Typically, one government accuses another of violating a WTO rule. An attempt is then made to find a solution through mediation between the parties. If this is not successful, a panel of independent experts will be tasked with deciding which of the two parties’ views is most in line with the rules. Thereafter, the WTO Council (in the form of the Dispute Settlement Body, see Structure) must approve the panel’s decision. The disputing parties may not vote when the Council takes a position on a panel decision, and can therefore not block a decision. On the other hand, it is possible to appeal the decision to a special review body consisting of seven people. When a country is involved in a dispute, the country that considers itself to have been discriminated against has the right to punish the country through punitive duties.
During the first 14 years of the WTO (up to January 2009), 390 disputes were reported, which is comparable to the approximately 300 disputes raised during the almost fifty years of the old GATT agreement. As a member of the EU, Sweden is involved in a large number of cases, but has itself only been a respondent in one. The United States had a complaint regarding intellectual property rights, but the dispute could be resolved through mediation.
A well-known example of a dispute in the WTO is the “banana war” between the EU on the one hand and the United States and Latin American countries on the other. The EU has sought to protect banana production within the Union and in former European colonies, at the expense of US banana-growing companies in Latin America. The conflict has been going on since the mid-1990’s; At the end of 2008, the WTO ruled for the eighth time that the EU was violating trade rules. Along the way, the United States has had the right to impose punitive tariffs on EU exports. Another example is the conflict over genetically modified crops, where the EU has also lost to the United States and Canada and Argentina.
The most important WTO agreements
GATT (General Agreement on Tariffs and Trade): The general customs and trade agreement consists of the parts of the old GATT agreement that specifically regulate trade in goods and involve the removal of various trade tariffs. Within the framework of GATT, there are sub-agreements on, for example, agriculture, dumping and trade-related investment measures. An agreement on textiles and clothing, ATC (Agreement on Textiles and Clothing) existed before, but was the only WTO agreement so far written so that it would be phased out. Since 2005, the textile trade is covered by other agreements on trade in goods.
GATS (General Agreement on Trade in Services): The agreement on trade in services will make it easier for companies such as banks and transport companies, and also companies in sectors such as education and healthcare, to establish themselves in other countries. Countries may exempt certain services, such as health care or energy supply. For the time being, developing countries are allowed to open fewer sectors and do so at a slower pace than developed countries.
TRIPS (Trade Related Aspects of Intellectual Property Rights): The agreement on trade-related intellectual property rights deals with the countries’ rules on the protection of results of intellectual work: copyright, patents, design protection and trademark protection. TRIPS also includes patents on life forms, such as various chemical substances in plants that can be used for medicines. When the agreement was negotiated, the developing countries were granted an exemption with the application of TRIPS until the year 2000, and until 2005 in the case of medicines. The least developed countries were given a deadline of 2006; it was later extended to 2016.