How the WTO Makes Decisions

Introduction

The World Trade Organization (WTO) is an organization that oversees international trade agreements between its member nations. Headquartered in Geneva, Switzerland and established in 1995, the WTO currently has 164 members that represent nearly all of global commerce.

The purpose of this material is to provide an overview of how decisions are made within the WTO. Specifically, we will explore the consensus-based approach to decision making, the roles of the Ministerial Conferences and General Council, the process of trade agreement negotiations, the implementation of WTO agreements, and the dispute settlement mechanism. Gaining a better understanding of these topics will shed light on how the rules and regulations governing international trade are determined by the members of the WTO.

Consensus-Based Decision Making

The World Trade Organization operates on a consensus basis, where all major decisions are made collectively by all member countries. For a decision to be approved, there simply needs to be no formal objection raised by any member. This consensus-based approach means that every country has to agree for a decision to be made.

The WTO’s highest decision-making body is the Ministerial Conference, which is composed of trade ministers representing each member’s interests. The Ministerial Conference meets at minimum every two years to make major decisions and set direction. Within the Ministerial Conference, decisions are made by consensus without voting - if no member formally objects, then a consensus is considered reached and the decision is approved. This gives each member country an effective veto over any potential decision.

The emphasis on consensus preserves the rights of even the smallest member countries. It promotes an inclusive approach where every member has a voice and role in shaping decisions. This consensus-based decision making process is a foundation of how the World Trade Organization operates.

The General Council

The General Council is composed of representatives from all WTO member governments. Ambassadors or senior trade officials typically represent members. The General Council convenes regularly to carry out the organization’s day-to-day business and oversees the operation of the agreement in between the biennial Ministerial Conferences. This includes overseeing the implementation of agreements as well as admitting new members to the organization.

The General Council acts on behalf of the WTO’s highest decision-making body, the Ministerial Conference, which meets at least every two years. The General Council also acts as the Dispute Settlement Body and Trade Policy Review Body of the WTO. Overall, the General Council has the authority to act on behalf of the Ministerial Conference on all WTO affairs. As such, the General Council handles the WTO’s budget, work program and committee business, and informs and consults with WTO observers. Day-to-day operations at the WTO are handled by the Secretariat, based in Geneva. The Secretariat has over 600 regular staff.

Ministerial Conferences

The Ministerial Conference is the highest decision-making body in the WTO and meets at least once every two years. This conference brings together all members of the WTO at the ministerial level to take stock of the organization’s activities and give direction for the future.

The Ministerial Conference provides WTO members an opportunity to engage at the highest political level to shape the course of the multilateral trading system. At these conferences, members assess the state of global trade, provide political guidance, and direct negotiations among members.

While the General Council conducts the day-to-day operations of the WTO, the Ministerial Conference has the authority to make final decisions on all matters under any of the multilateral trade agreements. All members must reach consensus through negotiations at the Ministerial Conference before a decision can be made.

The first Ministerial Conference was held in Singapore in 1996. Since then conferences have taken place about every two years in locations around the world. The conferences provide a venue for trade ministers to engage directly on outstanding implementation issues and future work. Some key conferences have resulted in major declarations or decisions that shape WTO activities.

Ratification by Member Parliaments

The process of decision-making in the World Trade Organization (WTO) is dominated by the practice of consensus. While the highest decision-making bodies like the Ministerial Conference and General Council take decisions on agreements, these decisions must still be ratified by the parliaments of member countries before coming into effect.

Once a consensus is reached on an agreement through negotiations, it must undergo a ratification process in the parliaments of member nations. The parliaments of WTO member countries examine the negotiated texts and must ratify the agreement’s terms based on domestic lawmaking procedures before the agreement enters into force. This ratification by national parliaments provides democratic legitimacy to the WTO’s decision-making process.

For example, the Trade Facilitation Agreement reached at the 2013 Bali Ministerial Conference had to be ratified by two-thirds of the WTO’s members before it could take effect. The TFA entered into force once the ratification threshold was met in February 2017 after countries completed their respective parliamentary processes. Thus, although member parliaments do not directly participate in WTO negotiations, they hold the ultimate authority to approve or reject the consensus agreements reached in the WTO councils and conferences.

Trade Negotiation Rounds

Trade agreements in the World Trade Organization (WTO) are negotiated through rounds of negotiations where all members must reach a consensus. The most recent and ongoing round is the Doha Development Agenda, launched in 2001.

The Doha Round aims to lower trade barriers around the world to facilitate increased global trade. The round is also known as the Doha Development Agenda as it emphasizes developing countries’ interests, such as provisions to increase agricultural exports from developing countries.

Previous rounds of trade negotiations under the WTO’s predecessor organization the General Agreement on Tariffs and Trade (GATT) include the Kennedy Round in the 1960 s, the Tokyo Round in the 1970 s, and the Uruguay Round in 1986-1994 which established the WTO.

Earlier rounds focused on reducing tariffs for manufactured goods and improving market access. The Uruguay Round also brought agriculture, services, intellectual property, textiles and clothing within the purview of multilateral trade negotiations.

With each successive round, WTO members have sought to further open global markets and address new issues to facilitate trade. The long-running Doha Round aims to build on work from previous negotiations.

WTO Trade Agreements

The agreements negotiated and ratified by WTO members are comprehensive legal texts that cover a wide range of trade-related activities. From agriculture to textiles and clothing, from banking to telecommunications, WTO agreements address key areas that impact international trade.

Some of the major sectors and issues covered by WTO agreements include:

• Agriculture - Issues such as market access, domestic support for producers, export subsidies, and more. The Agreement on Agriculture aims to reform trade in agricultural products.

• Textiles and clothing - The Agreement on Textiles and Clothing (ATC) sets out a transitional process for the eventual removal of quotas on textiles and clothing.

• Banking - The General Agreement on Trade in Services (GATS) covers financial services. Members make commitments to open markets in specific service sectors.

• Telecommunications - The GATS agreement also covers telecommunications services like voice telephone, data transmission, and more.

• Government procurement - The Plurilateral Agreement on Government Procurement opens up certain government purchases of goods and services to international competition.

• Product standards - The Agreement on Technical Barriers to Trade aims to ensure standards, regulations, testing procedures do not create unnecessary obstacles to trade.

• Food sanitation - The Agreement on the Application of Sanitary and Phytosanitary Measures covers food safety and animal/plant health regulations.

• Intellectual property - The Agreement on Trade-Related Aspects of Intellectual Property Rights sets minimum standards on IP rights protection.

The comprehensive scope of WTO agreements and rules aim to establish an international framework that promotes open and non-discriminatory trade in goods and services.

Progressive Liberalization

The WTO agreements allow member countries to introduce changes to their trade policies gradually, through progressive liberalization. This provides flexibility for developing countries to open their markets to international trade and competition at a pace they are comfortable with.

When a country joins the WTO, they do not need to immediately eliminate all barriers to trade or open their markets fully. Instead, the agreements set out timelines and roadmaps for countries to incrementally adopt more open trade policies over time. There are transition periods built into the agreements that phase-in commitments over several years or decades.

For example, when China joined the WTO in 2001, they were given 15 years to fully liberalize certain sectors like banking and telecommunications. This allowed China to slowly adjust its regulatory framework and domestic industries to be more competitive internationally. Other developing countries often have even longer transition timelines written into their terms of WTO accession.

The principle of progressive liberalization provides policy space for countries to sequence their reforms and capacity building. It enables gradual exposure of domestic firms to competition, giving them time to technologically upgrade and become more efficient. With each passing year or scheduled milestone, the country opens its markets further as their producers become more mature and ready to compete globally. This structured timeline approach helps manage the risks and social impacts of integrating into the global trading system.

Dispute Settlement Process

The WTO provides a dispute settlement process to help resolve trade conflicts between member countries. This allows members to settle differences in a structured way based on agreed rules rather than resorting to unilateral action.

If a WTO member believes another member’s trade policies have harmed their interests, they can initiate a dispute by requesting consultations. If consultations fail to resolve the issue within 60 days, the complaining country can request that a panel examine and rule on the dispute.

The panel is typically composed of 3 experts from different countries who examine the evidence and determine whether the trade policies in question violate WTO agreements. The panel issues a report with its findings and recommendations for how to remedy violations.

Parties can appeal a panel’s ruling, in which case the dispute goes to the WTO’s Appellate Body. The Appellate Body reviews the legal aspects of the case and can uphold, modify, or reverse the panel’s conclusions. However, it cannot reexamine existing evidence or consider new issues.

If the defending country is found to have violated a WTO agreement, the panel or Appellate Body will recommend that the country bring its policies into conformity. If the country fails to comply within a reasonable period of time, the WTO can authorize the complaining country to impose trade sanctions against the violator.

The dispute settlement system is considered one of the WTO’s most important achievements. It provides security and predictability to the trading system by applying agreed rules in a fair and even-handed manner through independent expert judgements. Over 500 disputes have been brought to the WTO since it was established in 1995.

Conclusion

The World Trade Organization serves an important role in facilitating trade and settling disputes between its member nations. Key points around the WTO’s decision-making processes and activities include:

• The WTO operates on a consensus model, where all major decisions are made collectively by the entire membership. Consensus is reached if no country formally objects.
• The highest decision-making body is the Ministerial Conference, composed of representatives from all member nations. It meets at least every two years.
• The General Council, made up of member nation ambassadors, is another key decision-making entity that oversees day-to-day operations.
• Trade agreements are negotiated through rounds where all members must agree. The Doha Development Agenda is the latest major round focused on developing nations’ concerns.
• The WTO’s agreements cover a wide range of trade activities from agriculture to intellectual property to telecommunications. They allow for progressive liberalization.
• A dispute settlement process is in place to resolve differences over agreement interpretations. Independent experts make judgements based on WTO rules.
• In summary, the WTO establishes a rules-based system for international trade. Its member-driven structure relies on building consensus to move forward.