World Trade Organization facts for kids

"WTO" redirects here. For other uses, see WTO (disambiguation).

Quick facts for kids
World Trade Organization
Organisation mondiale du commerce Organización Mundial del Comercio

Members Members, dually represented by the EU Observers Non-participant states Not applicable
Abbreviation	WTO
Formation	1 January 1995; 30 years ago (1995-01-01)
Type	Intergovernmental organization
Purpose	Reduction of tariffs and other barriers to trade
Headquarters	Centre William Rappard, Geneva, Switzerland
Region served	Worldwide
Membership	164 members (160 UN member states, the European Union, Hong Kong, Macao, and Taiwan)
Official languages	English, French, Spanish
Director-General	Ngozi Okonjo-Iweala (since 2021)
Budget	CHF 197,203,900 (2023)
Staff	623 (December 2023)

The World Trade Organization (WTO) is a big international group based in Geneva, Switzerland. Its main job is to help manage and make rules for international trade between countries. Governments work with the United Nations System through the WTO to create, update, and make sure trade rules are followed.

The WTO is the world's largest economic organization. It has 164 member countries, which means it covers over 98% of all global trade and the world's total economic output.

The WTO helps trade in goods, services, and ideas (intellectual property) among its members. It offers a way for countries to talk and agree on trade deals. These deals usually aim to lower or remove tariffs (taxes on imports), quotas (limits on imports), and other things that make trade harder. Once agreed, these deals are signed by country leaders and approved by their governments. The WTO also has a system to solve disagreements if countries don't follow the trade rules. It tries to make sure countries treat each other fairly in trade. However, it allows exceptions for things like protecting the environment or national security.

The WTO officially started on January 1, 1995. It was created by the 1994 Marrakesh Agreement. Before the WTO, there was an agreement called the General Agreement on Tariffs and Trade (GATT), which began in 1948.

The most important group that makes decisions for the WTO is the Ministerial Conference. All member countries are part of it, and they usually meet every two years. They try to make all decisions by agreement (consensus). The daily work is handled by the General Council, which also has representatives from all members. A team of over 600 staff, led by the Director-General, helps with administration and technical support. The WTO's yearly budget is about 220 million US dollars. Members pay into this budget based on how much international trade they do.

Studies show that the WTO has helped increase trade and reduce barriers. It has also influenced many other trade agreements. Many trade deals around the world use parts of the WTO's agreements. The United Nations also sees WTO agreements as a way to reduce inequality. However, some people say that the benefits of free trade, helped by the WTO, are not shared equally by everyone.

How the WTO Started

The economists Harry White (left) and John Maynard Keynes at the Bretton Woods Conference

The WTO's earlier version was called the General Agreement on Tariffs and Trade (GATT). It was created in 1947 by 23 countries after World War II. This happened around the same time as other new international groups for money matters, like the World Bank and the International Monetary Fund. There was a plan for a similar trade organization, but it never fully started because some countries, like the United States, didn't approve the treaty. So, GATT became the main international trade group for many years.

Early Trade Talks (GATT)

Seven rounds of trade talks happened under GATT from 1949 to 1979. The first talks focused on lowering tariffs (import taxes). Later, the Kennedy Round in the 1960s added rules against unfair pricing (anti-dumping) and a section on helping developing countries.

The Tokyo Round in the 1970s was the first big try to deal with trade barriers that weren't just tariffs. It also aimed to make the system better. This led to agreements on non-tariff barriers. Some of these agreements explained existing GATT rules, while others were new. Not all GATT members accepted these agreements at first.

Uruguay Round: 1986–1994

By the mid-1980s, GATT members realized the system needed to change to keep up with the globalizing world economy. In September 1986, a meeting in Punta del Este, Uruguay, started the eighth GATT round, known as the Uruguay Round.

This was the biggest set of trade talks ever. The Uruguay Round aimed to include new areas like trade in services and intellectual property. It also wanted to fix trade rules for farming and textiles. All the original GATT rules were reviewed. The final agreement, which officially created the WTO, was signed on April 15, 1994, in Marrakesh, Morocco. This is why it's called the Marrakesh Agreement.

GATT still exists today as the WTO's main agreement for trade in goods. It was updated during the Uruguay Round. The Marrakesh Agreement included about 60 other agreements and decisions. These agreements cover things like:

The agreement that created the WTO.
Agreements on trade in goods, including the updated GATT rules.
The General Agreement on Trade in Services (GATS).
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
How to settle trade disagreements.
Reviews of countries' trade policies.

The Uruguay Round was very successful in getting both rich and developing countries to agree to lower their tariffs.

Ministerial Conferences

The World Trade Organization Ministerial Conference of 1998, in the Palace of Nations (Geneva, Switzerland)

The highest decision-making group of the WTO is the Ministerial Conference. It usually meets every two years. All WTO members, which are countries or groups of countries, attend. The Ministerial Conference can make decisions on any topic covered by the WTO's trade agreements.

Some meetings, like the first one in Singapore in 1996 or the 2003 meeting in Cancun, had arguments between rich and developing countries. These arguments were often about things like agricultural subsidies (government help for farmers). Other meetings, like the 1999 Seattle conference, led to big protests.

The fourth conference in Doha in 2001 approved China joining the WTO. It also started the Doha Development Round of talks. The sixth conference in Hong Kong in 2005 agreed to stop government payments for farm exports. It also adopted the European Union's plan to remove tariffs for goods from the poorest countries. At this conference, the WTO also started the Aid for Trade program to help developing countries with trade. This is part of the Sustainable Development Goal 8 to boost trade and economic growth.

The Twelfth Ministerial Conference (MC12) was held in Geneva, Switzerland, from June 12-17, 2022. The Thirteenth Ministerial Conference (MC13) took place in Abu Dhabi, U.A.E., from February 26 to March 1, 2024.

Doha Round (Doha Agenda): 2001–Present

The WTO started its current round of talks, called the Doha Development Round, in Doha, Qatar, in November 2001. This was a big effort to make globalization fairer and help poor countries, especially by cutting barriers and subsidies in farming. The plan included making trade freer and creating new rules. It also promised to give more help to developing countries.

However, progress has been slow. Rich countries and major developing countries disagree on issues like taxes on industrial goods and other trade barriers. The EU and the US, for example, keep their agricultural subsidies, which act like trade barriers. Repeated attempts to restart the talks have not worked. But in 2013, the Bali Package was adopted, which helped reduce paperwork barriers to trade.

As of 2012, the future of the Doha Round was still unclear. Many deadlines were missed, and the talks are still not finished. The main problem is the conflict between wanting free trade for industrial goods and services, but keeping protection for local farmers (which rich countries want). Developing countries, on the other hand, want fair trade for farm products. This disagreement has made it hard to start new WTO talks. Because of this, more and more countries are making their own free trade agreements with each other.

What the WTO Does

The most important job of the WTO is to help trade grow. It does this by making trade easier. Other key things the WTO does include:

It checks that the trade agreements are put into action and followed.
It provides a place for countries to talk about trade and solve disagreements.

The WTO also looks at and shares information about countries' trade policies. It tries to make sure trade policies are clear and consistent around the world. Another important task is helping developing, least-developed, and low-income countries learn and follow WTO rules. It does this through training and technical help.

Here are some more specific functions of the WTO:

It helps put into practice and manage the main WTO agreements.
It offers a place for members to talk about their trade relationships.
It manages the system for settling trade disputes.
It reviews countries' trade policies.
It works with other big economic groups like the International Monetary Fund (IMF) and the World Bank.

As the world becomes more connected through globalization, an international group to manage trade is very important. When trade increases, problems like protectionism (protecting local industries), trade barriers, subsidies, and breaking intellectual property rules can come up because countries have different trade rules. The WTO acts as a mediator to help countries solve these problems. The WTO is a result of globalization and one of the most important groups in today's connected world.

The WTO also does economic research and analysis. It publishes yearly reports on global trade and research papers on specific topics. It works closely with the IMF and the World Bank.

Important Publications

The WTO is known for its important yearly reports that help explain the complex world of global trade. These documents are very useful for anyone interested in trade policies and trends.

World Trade Report

The World Trade Report is a key publication from the WTO. It looks at current trade trends and challenges. It gives detailed information about how the global trading system is changing and its effects on society and the economy.

WTO Annual Report

The WTO Annual Report gives a full overview of what the organization did, how it operated, and its progress throughout the year. It includes detailed reports on the WTO's budget and staff. This shows its commitment to being open and responsible in managing global trade.

World Trade Statistical Review

The World Trade Statistical Review has replaced the older International Trade Statistics. It is the WTO's main source for yearly trade data. It offers deep analysis and statistics on the latest developments in world trade. This makes it a very important tool for global trade information.

Main Rules of the Trading System

The WTO sets up a framework for trade policies, but it doesn't tell countries exactly what to do. Instead, it focuses on setting the rules for "trade policy." Five main rules are very important for understanding the WTO:

Fair Treatment. This has two main parts: the most favored nation (MFN) rule and the national treatment rule.

* The MFN rule means that if a WTO member gives a special trade benefit to one country, it must give the same benefit to all other WTO members. For example, if you lower a tax on cars from one country, you must lower it for cars from all other WTO members. There are some exceptions, like for free trade agreements or special help for developing countries. * National treatment means that imported goods should be treated just as well as goods made in the home country, once they have entered the market. This rule helps stop hidden trade barriers, like technical rules that might unfairly target imported goods.

Give and Take (Reciprocity). This means that when countries agree to lower trade barriers, they expect other countries to do the same. This helps make sure that all countries gain from the trade talks.

Strong Promises. When WTO members agree to lower tariffs, these promises are written down in official lists. These lists set a "ceiling" for tariffs, meaning a country can't raise them above that level without talking to its trade partners first. If a country breaks its promise, other countries can use the WTO's system to solve the dispute.

Openness (Transparency). WTO members must publish their trade rules. They also need to have ways for people to review trade decisions. They must answer questions from other members and tell the WTO about changes in their trade policies. The WTO also reviews countries' trade policies regularly. The system also tries to make trade more predictable and stable, discouraging the use of limits on imports.

Safety Rules. In certain situations, governments can limit trade. WTO agreements allow members to take steps to protect the environment, public health, and animal and plant health. This means countries can use trade measures for non-economic reasons. However, members must not use environmental protection as an excuse to unfairly protect their own industries. There are also rules allowing trade intervention for economic reasons.

There are also exceptions to the fair treatment rule. These allow for special treatment for developing countries, regional free trade areas, and customs unions.

How the WTO is Organized

The highest authority in the WTO is the Ministerial Conference, which must meet at least every two years. The most recent meeting was in June 2022 in Geneva.

Between these conferences, the daily work is handled by three main groups. Their members are the same, but they have different jobs:

The General Council
The Dispute Settlement Body (which handles trade disagreements)
The Trade Policy Review Body (which reviews countries' trade policies)

The General Council has other groups under it that look after different areas:

Council for Trade in Goods: This council has 11 committees, each with a specific job related to goods trade. All WTO members are part of these committees.

Council for Trade-Related Aspects of Intellectual Property Rights: This council deals with rules about intellectual property, like copyrights and patents.

Council for Trade in Services: This council oversees how the General Agreement on Trade in Services (GATS) works. It is open to all WTO members.

Trade Negotiations Committee: This committee handles the ongoing trade talks, like the Doha Development Round. The WTO's Director-General leads this committee.

The WTO also has various other committees and working groups that focus on specific topics like trade and the environment, trade and development, regional trade agreements, and budget matters.

As of December 31, 2019, the WTO had 623 staff members.

How Decisions Are Made

The WTO says it is "a rules-based, member-driven organization—all decisions are made by the member governments." While the WTO Agreement allows for voting if needed, most decisions are made by agreement among all members (consensus).

Some experts say that while the WTO tries to be fair in its early talks, the final trade agreements often favor powerful countries like Europe and the U.S.

Solving Trade Disputes

The WTO has a system for solving trade disputes. This system has grown over nearly 50 years under GATT. In 1994, WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). The WTO sees this dispute settlement system as a key part of the global trading system and a "unique contribution to the stability of the global economy." WTO members agree that if they think another member is breaking trade rules, they will use this system instead of acting alone.

The WTO's dispute settlement process involves special groups (panels), an Appellate Body (for appeals), the Director-General, and WTO staff. The main goal is to solve disputes, ideally through an agreement that both sides like. The process is designed to be quick. If a case goes to a full decision, it should usually take no more than one year for a panel ruling, and no more than 16 months if it's appealed. WTO members must accept this process as the only way to solve these kinds of disputes.

One study in 2018 suggested that countries are less likely to act on WTO rule-breaking if the problem affects many countries in a small way. This is because countries might expect others to pay the costs of fighting the case. Another study in 2016 questioned if the WTO dispute system always leads to more trade.

However, the dispute settlement system cannot be used for trade problems that come from political disagreements. For example, when Qatar asked for a dispute panel about measures taken by the UAE and other countries, they quickly said it was a political issue about national security, not something for the WTO.

Joining the WTO

Becoming a WTO member is different for each country. The rules for joining depend on how developed the country's economy is and its current trade system. On average, the process takes about five years. But it can take longer if the country isn't fully committed or if political issues get in the way. The fastest country to join was the Kyrgyz Republic. The longest was Russia, which applied in 1993 and finally joined in 2012. Kazakhstan also had a very long process, joining in 2015 after applying in 1996. A country is only invited to join once all interested members agree.

A 2017 study suggested that political connections, rather than just trade benefits, often decide who joins the WTO. It showed that being a democracy and having similar foreign policies encourage countries to join. This challenges the idea that countries first make their trade rules freer just to join the WTO.

How Countries Join

WTO accession progress: Draft Working Party Report or Factual Summary adopted Goods or Services offers submitted Working party meetings Memorandum on Foreign Trade Regime submitted Working party established

A country that wants to join the WTO sends an application to the General Council. It must describe all its trade and economic policies that relate to WTO agreements. This information is put into a document called a memorandum. A special working group, open to all WTO members, then looks at this document.

Once all the necessary information is gathered, the working group focuses on any differences between the WTO rules and the applicant country's trade policies and laws. The group decides the terms and conditions for the country to join the WTO. They might also allow a transition period, giving the country some time to meet all the WTO rules.

The final step involves talks between the applicant country and other members of the working group. These talks are about what the new member will agree to regarding tariff levels and access to its markets for goods and services. Even though these talks are bilateral (between two parties), the new member's promises apply equally to all WTO members under the fair treatment rules. For example, when Armenia joined the WTO, it agreed to a 15% maximum tariff rate on goods entering its market.

When these talks are finished, the working group sends a package to the General Council or Ministerial Conference. This package includes a summary of the meetings, a draft membership treaty, and lists of the country's promises. Once the General Council or Ministerial Conference approves the terms, the applicant country's government must officially approve the treaty before it can become a member. Some countries, like Vietnam, faced tougher and longer talks, taking over 11 years before it became a member in January 2007.

Members and Observers

Further information: Member states of the World Trade Organization

The WTO has 164 members and 25 governments that are observers. Liberia became the 163rd member in July 2016, and Afghanistan became the 164th member in July 2016. In February 2024, Comoros and Timor Leste were approved to become the 165th and 166th members once they finish their own approval steps.

Besides countries, the European Union is also a member, and each EU country is also a member on its own. WTO members don't have to be fully independent countries. They just need to be a customs territory that can fully manage its own trade with other countries. This is why Hong Kong has been a member since 1995 (as "Hong Kong, China" since 1997), even before the People's Republic of China joined in 2001. Taiwan joined the WTO in 2002 as the "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu."

As of 2007, WTO member countries made up 96.4% of global trade and 96.7% of the world's total economic output. Iran and Algeria were the largest economies outside the WTO in 2005. Except for the Holy See, observer countries must start talks to join within five years of becoming observers. Many international organizations also have observer status in WTO groups. Ten UN members are not part of the WTO.

Agreements

The WTO oversees about 60 different agreements. These are like international laws. Member countries must sign and approve all WTO agreements when they join. Here are some of the most important ones:

The Agreement on Agriculture started when the WTO was created in 1995. It focuses on three main things: government support for farmers, allowing foreign products into markets, and payments for exports.

The General Agreement on Trade in Services was made to bring the rules of the global trading system to the service industry. It works for services in the same way that GATT worked for goods. This agreement started in January 1995.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets basic rules for many types of intellectual property, like inventions and creative works. It was agreed upon at the end of the Uruguay Round in 1994.

The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) also started in 1995. Under this agreement, the WTO sets rules for how members handle food safety (like bacteria and pesticides) and animal and plant health (like imported pests and diseases).

The Agreement on Technical Barriers to Trade is another international agreement from the WTO. It aims to make sure that technical rules and standards, as well as testing and certification, don't create unnecessary problems for trade.

The Agreement on Customs Valuation sets out how members should value goods for customs purposes. It mainly uses the "transaction value," which is the price actually paid for the goods.

In December 2013, the biggest agreement within the WTO was signed. It is known as the Bali Package.

Director-General's Office

The headquarters of the World Trade Organization in Geneva, Switzerland

The way the WTO Director-General is chosen was updated in 2003. They serve for four years. There are also four Deputy Directors-General. As of June 13, 2018, under Director-General Ngozi Okonjo-Iweala, the four deputies are:

Angela Ellard from the United States (since May 4, 2021)
Anabel González from Costa Rica (since May 4, 2021)
Ambassador Jean-Marie Paugam from France (since May 4, 2021)
Ambassador Xiangchen Zhang from China (since May 4, 2021)

List of Directors-General

Source: Official website

Name	Country	Term
Peter Sutherland	Ireland	1995
Renato Ruggiero	Italy	1995–1999
Mike Moore	New Zealand	1999–2002
Supachai Panitchpakdi	Thailand	2002–2005
Pascal Lamy	France	2005–2013
Roberto Azevêdo	Brazil	2013–2021
Ngozi Okonjo-Iweala	Nigeria	2021–

Choosing the Director-General in 2020

Further information: Director-General of the World Trade Organization#2020 Director-General selection

In May 2020, Director-General Roberto Azevedo announced he would leave his job on August 31, 2020. A process to find a new leader began with eight candidates. On February 15, 2021, WTO members made history. They all agreed to choose Ngozi Okonjo-Iweala of Nigeria as the organization's seventh Director-General.

Okonjo-Iweala became the first woman and the first African person to be chosen for this role. Her term will end on August 31, 2025, and can be renewed.

Budget

The WTO gets most of its money for its yearly budget from its members. Each member's contribution is based on how much international trade they do.

2023 Top 10 Members' contributions to the consolidated budget of the WTO
Rank	Country	CHF	Percentage
1	United States	22,808,985	11.667%
2	China	21,031,890	10.758%
3	Germany	14,058,405	7.191%
4	Japan	7,411,405	3.791%
5	France	7,387,945	3.779%
6	United Kingdom	7,274,555	3.721%
7	Netherlands	5,778,980	2.956%
8	Hong Kong	5,501,370	2.814%
9	South Korea	5,350,835	2.737%
10	Italy	4,940,285	2.527%
Others		93,955,345	48.059%
TOTAL		195,500,000	100%

Impact of the WTO

Studies show that the WTO has helped increase trade around the world. Research suggests that without the WTO, countries would face much higher taxes on their exports. The WTO's system for solving trade disputes is one way it helps boost trade.

According to a 2017 study, almost all recent trade agreements between countries mention the WTO. Often, large parts of these agreements are copied directly from WTO agreements. This shows how much the WTO influences global trade rules.