The World Trade Organization: Background and Issues

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The World Trade Organization (WTO) was established on January 1, 1995, under an agreement
reached during the Uruguay Round of multilateral trade negotiations. The Uruguay Round was
the last of a series of periodic trade negotiations held under the auspices of the WTO’s
predecessor, the General Agreement on Tariffs and Trade (GATT).
The WTO is the most important international organization that governs world trade. Decisions are
made by the member countries. The WTO has 151 members and 31 observer governments (most
of which have applied for membership), and members represent over 95% of world trade. The
highest-level decisions are made at the Ministerial Conference, which is the meeting of trade
ministers from member countries. The Ministerial Conference must meet at least every two years.
The General Council is the body of national representatives that oversees the day-to-day
operations of the WTO. The General Council meets approximately monthly. It also meets in two
other capacities: it reviews national trade policies, and it oversees the dispute settlement process.
Under the General Council are numerous committees, working groups, and other bodies.
Assisting the members is a WTO Secretariat that numbers about 635 and is located in Geneva,
Switzerland. The top official of the Secretariat is Director-General Pascal Lamy of France, whose
three-year term began on September 1, 2005.
Trade agreements administered by the WTO cover a broad range of goods and services trade and
apply to virtually all government practices that directly relate to trade, for example tariffs,
subsidies, government procurement, and trade-related intellectual property rights. The WTO
agreements are based on the principle of non-discriminatory treatment among countries. Some
exceptions however, such as preferential treatment for developing countries, are allowed. Other
basic principles of the WTO are open information on rules and regulations, negotiated limits on
trade barriers, and settlement of disputes under specific procedures.
The 110^th Congress may examine the relationship between the United States and the WTO in two
ways. Congress may consider implementing legislation for a potential Doha Round agreement.
U.S. Trade Promotion Authority (TPA) expired on July 1, 2007, however, Congress may extend
or reauthorize TPA to consider such an agreement. Secondly, Congress may consider changes to
U.S. laws in response to WTO dispute settlement procedures.

Backgr ound ..................................................................................................................................... 1
The World Trade Organization........................................................................................................2
Policy Issues....................................................................................................................................5
Figure B-1. WTO Structure...........................................................................................................10
Table A-1. Members (151)..............................................................................................................8
Table A-2. Observer Governments (31)..........................................................................................9
Table A-3. International Organization Observers to General Council (8).......................................9
Appendix A. WTO Members (as of January 2008).........................................................................8
Appendix B. WTO Structure.........................................................................................................10
Author Contact Information...........................................................................................................11
Acknowledgments .......................................................................................................................... 11

Following World War II, nations throughout the world, led by the United States and several other
developed countries, sought to establish an open and nondiscriminatory trading system with the
goal of raising the economic well-being of all countries. Aware of the role of trade barriers in
contributing to the economic depression in the 1930s, and the military aggression that rose
following the depression, the countries that met to discuss the new trading system saw open trade
as essential for economic stability and peace.
The intent of these negotiators was to establish an International Trade Organization (ITO), which
would address not only trade barriers but other issues indirectly related to trade, including
employment, investment, restrictive business practices, and commodity agreements. The ITO was
to be a United Nations specialized agency, but the ITO treaty was not approved by the United
States and a few other signatories and never went into effect. Instead, a provisional agreement on
tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT) was reached
and went into effect in 1948. This provisional GATT became the principal set of rules governing
international trade for the next 47 years.
The GATT established trade principles that continue to be applied today. Among the most
important of these principles was nondiscrimination with regard to the treatment of trade in goods
among countries. The most-favored-nation principle, Article I of the GATT, states that any
advantage given by a contracting party to a product of another country must be extended
unconditionally to a like product of all other contracting parties. A second rule of
nondiscrimination is national treatment, the principle that imported and domestic goods should be
treated equally. Although nondiscrimination is a cornerstone of the GATT, some exceptions are
allowed. For example, customs unions, free-trade areas, and special treatment for developing
countries are permitted.
Another principle is the open and fair application of any trade barriers. Tariffs were the most
common and visible form of trade barrier at the time the GATT was established. Tariffs are
“bound,” or set at maximum levels, and not to increase above the negotiated level. In general,
quantitative restrictions such as quotas were not allowed, since tariffs were much easier to
identify and to eventually reduce.
The GATT also included a forum and process for countries to follow in trying to resolve disputes.
The dispute process allowed countries to consult with each other and if that was not successful, a
country could ask that a panel hear the complaint. Although the panel’s decision was not
enforceable, the panel report carried some force of opinion and encouraged countries to work
toward an agreeable resolution.
One of the GATT’s chief purposes was the reduction of barriers to trade. With this goal in mind,
GATT contracting parties met periodically to negotiate further reduction of tariffs and other trade
barriers and changes to GATT rules. These negotiations were called “rounds.” Early rounds dealt
only with tariff reductions, but later rounds also included nontariff barriers to trade. The most
recent round, the Uruguay Round, lasted from 1986 to 1994 and included the most encompassing
set of negotiations in the history of the GATT. On the agenda was reform of the existing GATT
system, as well as expansion of rules to cover new areas such as services trade and the trade
aspects of intellectual property rights (copyrights, trademarks, and patents). The agreements that
resulted from the Uruguay Round also contained a built-in agenda requiring that further

negotiations on agriculture, services, intellectual property rights, and government procurement
begin by the year 2000.
One of the most important changes that came about from the Uruguay Round was the
establishment of a new trade structure, the World Trade Organization (WTO), which incorporated
the many changes reached during the Uruguay Round: the former GATT with its newly
negotiated reforms, bodies to oversee the new trade agreements, a stronger dispute resolution
procedure, a regular review of members’ trade policies, and many other committees and councils.
In contrast to the GATT, the WTO was created as a permanent structure, with “members” instead
of “contracting parties.” The WTO went into effect on January 1, 1995.

There are 150 members of the WTO, representing over 95% of world trade, 31 observer
governments (most of which have applied for membership in the WTO), and seven international
organization observers. Members and observers are listed in Appendix A. All decisions are made
by member countries, and decisions are usually by consensus.
The WTO is located in Geneva, Switzerland. The WTO Secretariat assists member countries and
numbered 625 in 2007. The WTO budget for the year 2007 is 182.0 million Swiss Francs (CHF), ¹
or about $151.7 million (1.20 CHF = $1, average for 2007). Countries contribute according to ²
their share of world trade, based on trade in goods, services and intellectual property rights.
Decisions within the WTO are made by members, not staff, and they are made by consensus, not
by formal vote. The highest level body in the WTO is the Ministerial Conference, which is the
body of political representatives (trade ministers) from each member country. (See the WTO
structure in Appendix B.) The Ministerial Conference examines current programs and sets the
agenda for future work. It must meet at least every two years. The WTO’s Director-General is ³
Pascal Lamy of France, whose three-year term began on September 1, 2005.
The first meeting of the Ministerial Conference was held in Singapore on December 9-13, 1996.
At that meeting, trade ministers reviewed the work of the WTO, since its establishment and
agreed on a work schedule for the next few years. They also approved an action plan for least-
developed countries, and many members entered into an agreement to eliminate tariffs on
information technology products by the year 2000. The second meeting of the Ministerial
Conference was held in Geneva on May 18 and 20, 1998. Again, it reviewed the work of the
WTO and approved a future work program. It called for an examination of issues related to global
electronic commerce and started preparations for the next meeting.

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The third Ministerial Conference was held in Seattle on November 29-December 3, 1999. That
meeting was intended to review an agenda for a new round of trade negotiations, but trade
ministers could not reach agreement and suspended their work. The WTO Director-General was
directed to consult with delegations and discuss ways in which countries might bridge remaining
differences. Known as the “Battle at Seattle,” the Ministerial was characterized by street violence
and anti-globalization protesters.
The fourth Ministerial Conference was held in Doha, Qatar on November 9-14, 2001. At that
meeting, trade ministers agreed to launch a new round of multilateral trade negotiations, called
the Doha Development Agenda, and set a deadline for final agreements of January 1, 2005. They
established a work program for the new round and agreed to consider numerous developing-⁴
country issues.
The fifth Ministerial Conference was held September 10-14, 2003, in Cancun, Mexico. According
to the Ministerial Declaration released two years earlier in Doha, Qatar, the fifth Ministerial
Conference was intended to “...take stock of progress in the negotiations, provide any necessary
political guidance, and take decisions as necessary.” Many trade ministers at the Cancun
Ministerial attempted to reach a framework to guide the remaining negotiations of the new round,
but they could not resolve major differences, and the negotiations stalled.
The sixth Ministerial Conference was held in Hong Kong on December 13-18,2005. Although an
original goal of the Ministerial was to agree on a package of modalities for the ongoing Doha
Development Agenda (DDA) round of trade negotiations, this aim was dropped and members
agreed to some modest advancements in agriculture, industrial tariffs, and duty and quota-free
access for least developed countries.
The body that oversees the day-to-day operations of the WTO is the General Council, which
consists of a representative from each member country. The Council generally meets monthly and
provides a forum for countries to discuss a range of trade matters. The U.S. delegate to the
General Council is the Deputy U.S. Trade Representative in Geneva.
The General Council also meets in two other, unique capacities. One is the Trade Policy Review
Mechanism (TPRM). The TPRM was established under the Uruguay Round agreements to allow
closer monitoring of national trade policies of member countries. The four countries with the
largest shares of world trade are reviewed every two years, the next 16 largest traders are
reviewed every four years, and other countries are reviewed every six years, although least-
developed countries might be reviewed less frequently. The trade reviews provide information on
a country’s trade policies and comment on whether a country is pursuing market-opening or
market-restrictive policies. This public examination is a mild form of pressure for a country to
avoid practices that discourage trade.
The General Council also meets in the capacity of the Dispute Settlement Body (DSB). The
Uruguay Round agreements greatly strengthened the process for settlement of disputes. The first
stage of the process is consultation between the governments involved. If consultation is not
successful, the complainant may ask the DSB to establish a dispute panel. The dispute panel hears
the case and reports back to the DSB. If the complaint is upheld, the respondent must either

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change its practice or negotiate an agreeable resolution. Otherwise, the complainant may request
that the DSB authorize suspension of obligations, thereby giving permission for the complainant
to retaliate. For example, a complainant may receive permission to increase tariffs against a
respondent country that disregards a decision by the DSB. Permission is automatic unless
unanimously disapproved. Procedures are clearly set out with specific timetables at each stage.
More specialized work is done in three major bodies under the General Council. One of these is
the Council for Trade in Goods, under which committees work on a number of trade areas. One
committee works on trade in agriculture. Another committee oversees the related topic of sanitary
and phytosanitary measures, which are measures that pertain respectively to animal and plant
health and safety. Some committees monitor practices that are considered “unfair” if not
implemented in accordance with WTO rules (antidumping, subsidies and countervailing
measures). Other committees examine practices that are not necessarily “unfair” but could be
trade-distorting nonetheless (rules of origin, safeguards, technical barriers, customs valuation, and
import licensing). One committee works on the relatively new area of trade-related investment
measures, and another addresses market access issues (tariffs and nontariff measures). Also under
the Council for Trade in Goods is the Information Technology Agreement Committee.
A second major body under the General Council is the Council for Trade in Services, which
oversees the Uruguay Round agreement on trade in services. The Uruguay Round services
agreement has three parts. The first part lists basic principles that countries agree to observe,
including national treatment, most-favored-nation treatment, and transparency (open information
about relevant laws and regulations). The second part contains four annexes with rules on: (1) the
movement of persons who provide services, (2) financial services, (3) telecommunications, and
(4) air transport services. The third part is a schedule of country commitments. These
commitments are bound and cannot be reduced in scope, much like the tariff levels on goods,
which cannot be increased once they are bound. The service commitments may include
exceptions to the national treatment and most-favored-nation principles, if countries included
these exceptions when they originally negotiated the commitments.
The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) is the third
major body under the General Council. The TRIPS Council monitors the agreement on
intellectual property rights reached during the Uruguay Round and supervises members’
compliance. The TRIPS agreement has three parts. The first part outlines basic principles that
countries must observe, including national treatment and most-favored-nation treatment. The
second part establishes standards for the different types of intellectual property rights such as
patents, trademarks, copyrights, industrial designs, and geographical indications (e.g.,
“champagne” indicates a wine from a specific region), and ensures minimum lengths of time for
protections. The third part of the agreement establishes enforcement processes.
In addition to the bodies discussed above, there are many other committees and working groups
under the General Council. For example, there are working groups on trade, debt, and finance and
on trade and transfer of technology. There are committees on plurilateral agreements, which are
not signed by all WTO members, on civil aircraft and on government procurement. The
Committee on Trade and Development often works with other international institutions on special
concerns of countries in development. Working parties on accession meet with applicant countries
to identify changes that are necessary to bring the applicant’s trade regime into line with WTO
rules and principles. The Uruguay Round also established a committee on trade and environment.

Congressional debate involving the WTO has focused on several major issues. These concern: (1)
achievement of U.S. trade goals through a multilateral forum; (2) assurance of U.S. sovereignty in
trade decisions; (3) the WTO dispute process and U.S. interests; (4) traditional and nontraditional
topics in the WTO; and (5) the congressional role in U.S. participation in the WTO.

1. To what extent are U.S. trade goals achieved through the WTO’s multilateral forum,

compared to other means such as bilateral or regional trade agreements or unilateral
action? The WTO has many benefits for the United States: it provides the only multilateral
dispute mechanism for international trade, administers rules to discourage discrimination, and
ensures greater security on how trade will be conducted. However, some criticize the WTO as
slow-moving and cumbersome because of its large membership, varied national interests, and
consensus-based decisionmaking. One alternative is to pursue U.S. goals through another
multilateral body. For example, the United States and other (mostly developed) countries have
pursued negotiations on shipbuilding and investment in the Organization for Economic
Cooperation and Development, but with mixed success. Another option is to pursue trade benefits
through regional or bilateral agreements. These agreements can offer benefits to U.S. exporters
and are easier to negotiate. However, some contend that regional and bilateral agreements create
trade diversion and may distract the United States and other countries from potentially greater
benefits from multilateral negotiations.
2. Can the United States maintain its sovereignty as a member of the WTO? Some critics of
the WTO have raised the question of whether the United States will lose its sovereignty as a
member of the WTO. As a member, the United States does commit to act in accordance with the
rules of the multilateral body. Article XVI(4) of the Agreement Establishing the World Trade
Agreement, states, “Each Member shall ensure the conformity of its laws, regulations and
administrative procedures with its obligations as provided in the annexed Agreements.” Those
annexed Agreements are the agreements reached during the Uruguay Round covering trade in
goods, trade in services, intellectual property rights, dispute settlement, and other trade areas. The
WTO, however, cannot force members to adhere to their obligations. The United States and any
other WTO member may act in its own national interest. The WTO recognizes certain allowable
exceptions such as national security. However, any multilateral institution is only as strong as its
members’ adherence to the institution’s rules. If the United States or another member country
chooses to take unilateral action contrary to WTO rules, that action may weaken the institution. It
is a decision for U.S. policymakers whether the discipline imposed by the WTO is an acceptable
cost for the benefits of an open trading system.
3. Are U.S. interests served through the WTO dispute process? The United States realizes
several benefits from the existence of a multilateral forum for trade disputes. Such a forum in
general allows countries to peacefully resolve disputes without having to resort to more drastic
measures. The WTO dispute process presents a clear, understandable set of rules to be followed, ⁵
and the process is nondiscriminatory among countries. The United States has been relatively
successful in using the process as a complainant. As of October 2006, the U.S. Trade
Representative reports that 24 cases were resolved to U.S. satisfaction without litigation; 26 cases

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were won by the United States on core issues; in 4 cases the United States did not prevail on core
issues; and 24 other cases were in panel stage, in consultation, or monitoring progress or ⁶
otherwise inactive.
There are many complaints about the WTO dispute settlement process. In some cases, countries
have not adhered to dispute panels’ findings. An example is the U.S. complaint against European
Union (EU) trade restrictions on imports of beef produced with hormones. Critics say that some
cases are filed for political, not economic, reasons. For example, some analysts say that the EU
took no action for years against a U.S. tax benefit for exports (the Foreign Sales Corporation), but
then filed a challenge after a U.S. win in another case. Finally, the United States as defendant has
lost several cases involving trade remedies, and this has led some Members of Congress to charge
that the WTO dispute panels are assuming too much authority in interpreting trade agreements.
The United States has not done well as a respondent. As of October 2006, the United States won
14 cases on core issues but did not prevail in 30 cases, while 17 cases were resolved without
completing litigation, 10 cases were in the litigation or appellate stage, and 22 cases were either ⁷
in pre-litigation consultation stage or inactive.
4. Should the WTO cover traditional trade issues only, or should it be broadened to include
nontraditional issues such as labor and the environment? The GATT agreement first
established rules only on border measures (tariffs and quotas) and later added rules on certain
internal practices that clearly had direct effects on trade in goods (e.g., subsidies, government
procurement). The Uruguay Round agreements further expanded trade rules to cover new areas
such as trade in services and intellectual property rights. U.S. businesses generally want the WTO
to refrain from extending beyond these traditionally trade-related issues, because they argue that
the greatest export opportunities will be achieved only if negotiators focus on trade barriers and
do not include social factors.
Many groups, however, argue that the WTO should be expanded to include non-traditional topics.
Two topics that have been at the center of current trade debate are labor and the environment.
Labor groups argue that many countries exploit workers, including children, to produce low-cost
products for foreign markets. Environmental groups want more consideration of the
environmental effects of the production of goods for trade included under WTO rules. Recently,
there has been discussion about the possible role of the WTO in enforcing potential future climate
change obligations. There is strong disagreement domestically on traditional and nontraditional
topics in trade negotiations. Internationally, countries hold a wide range of positions on this
question.
5. What is the role of Congress in how the United States participates in the WTO? Although
the executive branch maintains a staff in Geneva and conducts trade negotiations in the WTO,
Congress has an important role in how the United States participates in the WTO through its
constitutional authority over the conduct of foreign commerce. In trade promotion authority
(TPA) legislation (P.L. 107-210) that approved expedited procedures for legislation to implement
trade agreements passed in 2002, Congress prescribed trade objectives for U.S. negotiators and
required the executive branch to consult with it. During negotiations, Congress maintains
oversight, and the Congressional Oversight Group, which was established under P.L. 107-210,

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has an active advisory role. Once an implementing bill has been introduced, Congress decides
whether or not to approve those legislative changes necessary to implement the trade agreement.
The current TPA legislation expired in July 2007, and Congress may renew or extend TPA if a
Doha Round agreement is reached. Congress may also consider changes to U.S. trade laws in
response to possible adverse rulings under WTO Dispute Settlement procedures.
The congressional role described above has evolved to help coordinate and streamline activities
of the executive and legislative branches on trade matters, but this role is continually debated and
reevaluated. Many of those involved in the debate question whether this executive-legislative
relationship is still useful or appropriate. The Administration has called for greater authority in
trade negotiations, saying that the need for repeated reauthorization of trade promotion authority
interrupts U.S. trade policy and keeps the United States from participating in trade negotiations.
However, many Members assert that Congress has given up too much of its constitutional role
and should have a stronger hand in trade policy formulation and in oversight of trade
negotiations.
Periodically, Congress also has the opportunity to vote to withdraw from the WTO. Under the
Uruguay Round Agreements Act (P.L. 103-465), the U.S. Trade Representative (USTR) must
submit to the Congress every five years a report that analyzes the costs and benefits of continued
U.S. participation in the WTO. Once Congress receives this comprehensive report, any Member
of Congress may introduce a joint resolution withdrawing congressional approval of the
Agreement establishing the WTO. This report was issued in 2005 on the tenth anniversary of U.S.
accession to the WTO, and House Members considered a joint resolution (H.J.Res. 27) to
withdraw congressional approval of the agreement establishing the WTO. The House Ways and
Means Committee reported the resolution adversely on May 26, 2005, and the full House
disapproved the resolution by a vote of 338-86 on June 9, 2005. Debate on the resolution offered
Members an opportunity to examine the costs and benefits of WTO participation and examine
other aspects of WTO membership.

Table A-1. Members (151)
^{Albania Dominica}^Kyrgyz^Repu^blic^Qatar
^Angola^{Dominican Republic}^Latvia^Romania
^{Antigua & Bar}^buda^Ecuador^Lesotho^Rwanda
^Argentina^Egypt^{Liechtenstein}^{Saint Kitts and Nevis}
^Armenia^{El Salvador}^Lithuania^{Saint Lucia}
^Australia^Estonia^Luxem^bourg^{Saint Vincent and}
^{the G}^renadines
^Austria^Europea^{n Commu}^nities^{Macao, China}^{Saudi Arabia}
^{Bahrain Fij}ⁱ^Madagascar^Senegal
^{Bangladesh Finland}^Malawi^Sierra^Leone
^{Barbados Macedonia}^Malaysia^Singapore
^{Belgium France}^Maldives^Slovak^Republic
^{Belize Gabon}^Mali^Slovenia
^Benin^{The Gam}^bia^Malta^Sol^{omon Islands}
^Bol^{ivia Georgia}^Mauritania^South^Africa
^{Botswana Germa}^ny^Mauritius^Spain
^{Brazil Ghana}^Mexico^Sri^Lanka
^{Brunei Daru}^ssalam^Greece^Moldova^Suriname
^{Bulgaria Grenada}^Mongolia^Swaziland
^{Burkina Faso}^Guatemala^Morocco^Sweden
^Buru^{ndi Guinea}^Mozambique^Switzerland
^Cambodia^{Guinea Bissau}^Myanma^r^{Chinese Taipei}
^{Cameroon Guya}^na^Namibia^Tanzania
^{Canada Haiti}^Nepal^Thailand
^{Central Africa Rep}^ublic^Honduras^Netherlands/^Togo
^Netherlands^Antilles
^Chad^{Hong Kong, China}^{New Zealand}^Tonga
^Chile^Hunga^ry^Nicaragua^{Trinidad and Tobago}
^{China Iceland}^Niger^Tunisia
^{Colombia India}^Nigeria^Turkey
^{Congo Indonesia}^Norway^Uganda
^{Costa Rica}^Ireland^Oman
^{Cote d’Ivoire}^Israel^Pakistan^{United Arab E}^mirates
^{Croatia Italy}^Panama^United^Kingdom
^Cuba^Jamaica^{Papua New}^G^uinea^{United States}
^{Cyprus Japan}^Paraguay^Uruguay

^{Czech Repu}^blic^Jordan^Peru^Venezuela
^{D R Congo}^Kenya^Philippines^Vietnam
^Denmark^{Korea, Republic of}^Poland^Zambia
^{Djibouti Kuwait}^Portugal^Zimbabwe
^Source:^{World Trade Organization web page}^{http://www.wto.org/.}
Table A-2. Observer Governments (31)
^Afghanistan^{Holy See (Vatican)}^Serbia
^{Algeria Iran}^Seychelles
^{Andorra Iraq}^Sudan
^{Azerbaijan Kazakhstan}^Tajik^istan
^{Bahamas Laos}^Ukraine
^{Belarus Lebanon}^Uzbekistan
^{Bhutan Libya}^Vanuatu
^{Bosnia and Herzegovina}^Monteneg^ro^Yemen
^{Cape Verde}^a^Russian^Federation
^Equa^{torial Guinea}^Samoa
^Ethiopia^{Sao Tome and Principe}
^Source:^{World Trade Organization web page}^{http://www.wto.org/.}
^a.^{Cape Verde’s accession was a}^ppr^{oved by the}^Gene^{ral Council on}^December^{18, 2}⁰⁰^{7. It will become a}
^{member a}^{fter domestic ratification of the a}^{ccession agreem}^ent..
Table A-3. International Organization Observers to General Council (8)
^{Food and Agricultural Organization (FAO)}^{United Nations (U.N.)}
^Inter^{national Monetary F}^{und (IM}^F)^{United Nations Confere}^{nce on T}^{rade and Development}
^(UNCTAD)
^Inter^{national Trade Centre (ITC)}^{World Bank}
^{Organization for Economic Co-operation and}^{World Intellectual Property Orga}^{nization (WIPO)}
^{Development (OECD)}
^Source:^{World Trade Organization web page}^{http://www.wto.org/.}

All WTO members may participate in all councils, committees, etc., except Appellate Body,
Dispute Settlement panels, Textiles Monitoring Body, and plurilateral committees. The
negotiations mandated by the Doha Declaration take place in the Trade Negotiations Committee
and its subsidiaries.
Figure B-1. WTO Structure
^Source:^{World Trade Organization web page at}^htt^p://www.wto.^org/.

^I^a^{n F.}^Fe^r^g^us^soⁿ
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ⁱ^f^ergu^ss^on@^crs^.^l^o^c.g^o^v^,^7-⁴⁹⁹⁷

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