WTO: Guardian of world trade

WTO-Building © BDI/Eckart von Unger

What would our shops look like without goods and products from all over the world? Whether we are talking about fruit, clothes, or the latest technology, components or finished products: it is international trade that ensures the availability of a broad, varied, and affordable range of products in Germany. Enabling this trade requires clear rules, and these rules need to be monitored. That is the task of the World Trade Organization (WTO). The multilateral organization is the guardian of world trade. If it is to continue to guarantee free trade among its 162 member-states, it needs to be strengthened, and its rulebook needs to be expanded. Modern trade requires a modern multilateral trade regime.

Germany is one of the world’s leading trading nations. In 2014, it exported goods and services worth considerably more than €1 trillion, while its imports amounted to €900 billion. Most German exports come from industry. According to the Federal Statistical Office, one in four jobs depend on exports in Germany; in industry, it is one in two. If problems occur in foreign trade, many Germans are affected directly and indirectly.

In the WTO, member states have agreed on a comprehensive catalogue of binding and non-discriminatory rules. When adopting new rules, decisions are made by consensus. The goal is to dismantle obstacles to trade worldwide. With its transparency mechanisms and binding dispute settlement procedures, the WTO constitutes the backbone of the international trade order. Internationally operating companies can rely on its uniform set of rules and do not need to deal with a multitude of different treaties.

At the same time, the 163 WTO members have a long way to go before trade is free of all major obstacles and clearly regulated in all respects. Many areas that affect world trade are not yet or only partially multilaterally regulated (e.g. investment, competition, public procurement). Moreover, many trade powers like Brazil and China continue to insist on similar privileges and opt-outs as much smaller developing countries.

Current trends in world trade

International trade in goods and services continues to be impeded by numerous import tariffs and other trade barriers. Non-tariff trade barriers may take very different forms, including for example complex approval procedures, forced technology transfer, and state price-setting. When the global economic crisis broke out in 2008, the G20 tasked the WTO with preparing regular reports on potentially protectionist trade measures adopted by its members, the 20 largest economies. Since the first report, the number of such obstacles to trade has grown continuously, despite all the G20 governments having agreed to cut back such state interventions. The best way to combat protectionism and strengthen the WTO would be to conclude the so-called Doha Round. In 2001 in Doha (Qatar), the WTO members agreed on a very comprehensive negotiating agenda. But to this day, only a few areas have been concluded successfully. These include a trade facilitation agreement that will probably come into effect in 2016. The expanded Information Technology Agreement (ITA II), which eliminates import tariffs on about 200 IT products, should also come into force this year. Currently 53 WTO members have signed. These countries account for more than 90 percent of exports covered in the agreement.

Further tasks and initiatives for the WTO

The WTO does not only offer its members a forum to negotiate new rules and liberalize trade. It also helps to establish transparency in world trade, oversees existing agreements, and resolves disputes between its members.

The rules book of the WTO includes:

  • General Agreement on Tariffs and Trade, GATT, 
  • General Agreement on Tariffs in Services, GATS ,
  • Agreement on Trade-related Aspects of Intellectual Property Rights, TRIPS,
  • Government Procurement Agreement, GPA,
  • Information Technology Agreement, ITA.

The GPA and the ITA are plurilateral agreements, which not all WTO members have joined. A group of WTO states are currently negotiating a new Trade in Services Agreement, (TiSA). It is still unclear whether TiSA will later become an official WTO agreement. Nonetheless, TiSA must still adhere to the WTO’s rules for preferential agreements, to which all WTO members committed in GATS and in an agreement on transparency in preferential agreements. The WTO must be notified of all preferential agreements.