Facts about the WTO

Professor Fiona Smith, School of Law, University of Leeds
Professor Tim Benton, Research Director, Chatham House and University of Leeds

What is the WTO?

The WTO (World Trade Organization) is located in Geneva, Switzerland. It was established on 1st January 1995 after eight years of talks between over 125 countries from around the world. The WTO has three functions: (1) Government representatives can come together and negotiate global trade rules; (2) Its Secretariat (like the UK Civil Service) manages those global trade rules, monitors countries’ trade policies, and helps train countries’ trade officials, especially those from developing countries; and (3) countries can bring their trade disputes to the WTO and trade experts help resolve those disagreements.

Why is the WTO important?

A well-functioning global trade-system brings peace and economic prosperity to all countries. As far back as 1941, Winston Churchill and Franklin D Roosevelt believed that wars would end when every country openly traded on equal terms whether the country was large or small, rich or poor. Every country would benefit as more jobs were created, and the profits from trade could be funnelled back into important services like health, social care and education. Such open trade required global rules and an organisation to coordinate activities and settle disputes. In 1947, the UK helped take the first steps, and the General Agreement on Tariffs and Trade (GATT) came into being, providing  global rules until 1994., Many countries grew very wealthy and prosperous during this time of peace. The WTO continues this long tradition of generating economic prosperity and protecting world peace. Today, the WTO has 164 members, and another 23 countries are in the process of joining. This means that 97% of all trade across the world is between WTO members and takes place in accordance with its global trade rules. Only North Korea, Greenland and Turkmenistan are not actively seeking to join the WTO.

What does ‘trading on WTO rules’ mean?

This is a slogan used by the UK government and in the media, but you won’t find it in any trade rules. The slogan tries to explain what happens if the UK cannot conclude a trade deal with the EU, or with any other WTO country, like the USA or New Zealand for example. Trade is governed by a hierarchy of rules: (1) global trade rules administered by the WTO (WTO rules); and (2) rules in trade agreements that are negotiated between two or more countries. The WTO rules cover trade in goods (like food), trade in services (like banking) and trade in intellectual property (like patents on inventions, trademarks on cigarette packages, as well as protection of the names of some familiar food and drink, like Champagne). The WTO rules also set out how disputes about trade between WTO member countries should be conducted.

Trade regulation in the WTO allows countries to decide their own policies re food trade. If countries want to promote trade in healthy, sustainable food, they can do so. WTO rules do not interfere with any food policy governments want to introduce, they only constrain the methods government uses to implement those policies (e.g. subsidies, tariffs and standards). Countries can also develop more stringent trade rules than those in the WTO by entering into trade agreements (e.g. with the USA or with the EU). These agreements might be very comprehensive and cover a wide range of production and product standards; or they can be limited to agreements about quality standards. If a country ‘trades on WTO rules’ it means that country does not have a special trade relationship with another country and must rely on the WTO rules to protect its trade relationship instead.

How is the WTO relevant to me?

Governments see trade as important for economic prosperity and a lot of the implications for us as citizens and consumers often gets lost in the technical details. 

Trade discussions can appear secretive as negotiations take place in Geneva (WTO) or in other states (e.g. in the US for US-UK trade deals), and therefore away from Parliamentary and public scrutiny. Trade negotiations are also that, a negotiation: standards are subject to strong negotiation particularly in areas like food safety, food quality and animal welfare, with each country trying to insist on its own standards. The power in such a negotiation lies often with the biggest economy – which will not always be with the UK.

Some standards are also negotiated in a range of global fora outside the UK (e.g. standards relating to food are developed within the Codex Alimentarius Commission, based in Rome). These global standards then become locked into international agreements on trade, like the WTO, and so become the norm.

Government often assumes consumers’ interest lies mainly in cheaper goods and more consumption – this is often far from the case. We might like the buzz of a bargain whilst not liking the cumulative effects of too much consumption, or not recognising that lower prices often come with some implications for how that price came about. As citizens, rather than simply “consumers”, people have complex sets of values about human, animal and environmental ethics, which are often skated over.

You can be part of the process of setting trade standards by speaking to your MP and telling them what’s important to you.