History of WTO

World Trade Organization (WTO)

History of WTO

While the WTO began on January 1, 1995, its origins go back almost half a century.  Its precursor, the General Agreement on Tariffs and Trade (GATT) was first intended to be a set of provisional trade rules.  The fledgling GATT grew into an unexpected economic powerhouse, a testament to the ingenuity, pragmatism and perseverance of its leaders.

GATT believed in the need for trade rules to make world trade both stable and predictable.  The new trade rules aimed to reduce protectionism which was crippling the world economy.  Protectionism policies were exacerbating poverty, conflict, and geopolitical instability.  GATT imposed a discipline on world trade that led to the reduction of tariffs and more steady and established trade rules.

Twenty-three countries became Contracting Parties (CPs) to the original GATT in 1948.  The CPs met every six months to discuss a range of trade problems, and dealt with trade disputes.  Every few years, larger negotiating sessions or “rounds” were held to deal with new issues, or renew efforts to further reduce tariffs. 

At the 1960 Dillon Round, GATT covered $4.9 billion worth of trade involving 45 countries.  By the beginning of the Uruguay Round in 1986, GATT covered $3.7 trillion in trade involving over 120 countries.  Also, from 1950 to 1986, tariffs dropped 35% every round (about every five years).

Over the years, GATT evolved to cover more issues and assume greater responsibility.  With tariffs falling substantially, countries turned their attention to combating non-tariff trade barriers that were hurting world trade.  

CPs dramatically increased the breadth of GATT trade activities by negotiating “Codes” during the Tokyo Round in 1973-79.  These Codes covered non-tariff measures that distorted trade including subsidies, government procurement, and the widespread use of product standards to block trade.

At the start of the Uruguay Round, no-one expected it to give birth to a much-expanded trade organization, covering a host of new subject matter.  More than 120 countries participated in the Uruguay Round, the largest and most complex trade negotiations ever.  The results of the Uruguay Round negotiations were formally signed in Marrakesh, Morocco on 15 April, 1994 and the World Trade Organization (WTO) was born.

Whereas GATT had mainly dealt with trade in goods, the WTO and its two dozen corollary agreements covered a much broader range of activities including trade in services, investment, subsidies, standards, safeguards, market access, and intellectual property (inventions, trademarks, and designs). 

It launched a first rate dispute settlement mechanism, which many experts consider the best system for settling economic disputes in the world.  Where GATT cobbled together a tiny secretariat over time, the WTO Charter set up a full-fledged international organization.  Countries still control the overall WTO process, but there is now an international organization to propel issues forward and manage the overall system governing international trade.