Understanding the WTO’s rules and functions

“The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters and importers, conduct their business.” – The WTO.

I DECIDED to focus this week on understanding the World Trade Organization (WTO) after reading and hearing some recent commentaries. Dr Nigel Clarke’s announcement in his Budget presentation that the Government would be removing the General Consumption Tax (GCT) from imported raw foodstuff in keeping with WTO requirements, generated a lot of interest and commentary.

The problems regarding understanding of the WTO started in Dr Clarke’s remarks, continued in commentaries in the media, and was even detected in the remarks of the leader of the Opposition in his Budget presentation.

In this column, I have written several articles about the WTO, including in 2020, ‘Jamaica: 25 years at the WTO, Parts I and II’. The intent was to improve public awareness of the WTO and the issues arising there. There are, indeed, many contentious issues at the WTO and power pressures. It is about bread and butter issues.

Depending on to whom you speak, the WTO agreements serve nobody’s interest; everybody is being disadvantaged. The developed countries are complaining and so are the developing and least developed countries (LDCs).

INCEPTION OF TRADE RULES

In recognition of the importance of international trade to growth and development, the General Agreement on Tariffs on Trade (GATT) was negotiated and adopted in 1947 as, from the lessons learnt from previous decades, full free trade ( laissezfaire) and protectionism were seriously problematic. Thus, agreed rules were required with proper monitoring of international trade.

The WTO succeeded the GATT in 1995 following the conclusion of the Uruguay Round of Multilateral Trade Negotiations, 1986-1994. These negotiations included all GATT members. It was aimed at further liberalising trade to the benefit of all members. It also intended to ensure that there were rules governing all aspects of trade, including in agriculture and services.

At that time, GATT was a UN-linked body. The WTO is an i ndependent i nternational organisation now with 166 members which include countries and customs territories. They all undertook to implement the resulting agreements and to upgrade their trade regimes, as necessary.

The WTO Secretariat has an administrative staff of public servants numbering approximately 620, led by the director general. They do not make decisions or take any action against members. They can provide advice, training, make proposals, do research and analysis, prepare documentation, and service meetings. The director general chairs the Trade Negotiating Committee with members’ approval.

Decisions by members are taken by consensus. The main decisionmaking bodies are the biennial Ministerial Conferences and the General Council of member representatives based in Geneva. All agreements are approved and ratified by the members. Again, the WTO is a members-driven organisation.

There are continuing negotiations among WTO members further i mproving or setting rules governing international trade. There are committees and councils of member representatives who oversee the application of all existing rules and conduct negotiations. Of the 15 CARICOM countries, 13 are WTO members, including Jamaica. The Bahamas is still acceding to membership. Bilateral and regional trade agreements are built on WTO rules and are required to be notified in the WTO. Thus, the CARICOM Treaty of Chaguaramas was notified. The WTO also allows CARICOM to have non-reciprocal trade arrangements with major trade partners, USA and Canada.

In WTO agreements, there are development flexibilities negotiated in the interest of developing countries. These are known as special and differential treatment. To negotiate in the WTO, there are interest groups forming alliances, in some cases, developed and developing countries coming together. CARICOM works with the Organization of African, Caribbean and Pacific States (OACPS) and the Group of Small Vulnerable Economies (SVEs). They can also work with the European Union (EU) depending on the issue.

TRANSPARENCY MECHANISMS

Transparency is very important in the WTO. Thus, built into the agreements are requirements for members to submit information on the trade measures which they are applying. I am not sure that any WTO member is fully compliant in their notification requirements.

Every WTO member also has to undergo a periodic trade policy review. The four major traders (EU, USA, Japan and China) are reviewed every two years, the next 16 global traders are reviewed every four years, and others, mainly developing countries, are reviewed every six years. There can be a longer period for LDCs. For this, I refer to my article of November 8, 2023 on Jamaica’s pending Trade Policy Review.

A comprehensive report is prepared by the secretariat’s staff and another by the country being reviewed. The actual review is conducted by the members, making comments and asking questions, in a special meeting at the WTO headquarters.

DISPUTE SETTLEMENT

The WTO Dispute Settlement Mechanism is currently functioning. It takes different forms, commencing with a trading partner notifying another that it has various concerns about non-compliance and its impact on its trade. It can then move to consultations before the formal initiation of a case with the request for the establishment of a panel. Panels were established in 2022 and 2023, and with continuing work in 2024. Arbitration can also be used. To present a case at the WTO, members must know the rules and demonstrate the injury to their trade and economy.

The section of the mechanism which is not now functioning is the Appellate Body which enabled members to appeal aspects of panel rulings.

We have a problem in Jamaica, and in other CARICOM countries, with little interest being demonstrated in international trade matters, including in the work of the WTO. Outside of the government ministries with portfolio responsibilities and in the CARICOM Secretariat, few experts on WTO matters can be found among private sector bodies and civil society organisations.

Although international trade policy courses are offered at the Sir Shridath Ramphal Centre at the University of the West Indies, Cave Hill Campus, one does not get the impression that many of the graduates are employed as trade specialists, outside of the public sector.

The WTO faces problems like any other international organisation. However, I do not see it being closed anytime soon, as its rules and functions are still required. Especially for small countries like Jamaica, a rules-based multilateral trading system has value.

We need people to pay more attention to the work of the WTO, understanding the rules and functions, in order to comment from a position of knowledge.