From tariffs to turtles: A beginner's guide to the WTO

By Matthew T McGrath -- Logistics Management, 9/1/1998

Most people in the business of buying, selling, and moving goods internationally think of the World Trade Organization (WTO) as a vaguely defined international forum where governments discuss arcane international trade diplomacy issues. They also tend to believe that it has little direct relevance to their daily activities. Fortunately, the business community is becoming more aware of the benefits this global organization can offer and of its potential to facilitate trade in goods, services, and ideas in more immediate and concrete ways than its predecessor, the General Agreement on Tariffs and Trade (GATT), could accomplish.

Founded in 1995, the WTO has grown to 133 members. Thirty other countries have applied for admission. In addition to its traditional work of reducing tariffs, the WTO implements and enforces agreements in such areas as customs regulations, environmental restrictions, intellectual property rights, and antidumping and countervailing duty disciplines.

The WTO has a permanent structure headed by a Council of Ministers representing member countries. Routine work is handled by a General Council, and administration of the various agreements is apportioned among various councils and committees that oversee differing aspects of international trade, such as intellectual property rights, competition policy, and regional trading agreements. The WTO employs more than 500 permanent staff members.

The WTO's principal purpose is to implement agreements that effectively "de-regulate" trade through the reduction of trade barriers and the timely resolution of trade disputes. The organization was created to overcome the GATT's most glaring weakness--its ineffectiveness at resolving disputes. Under the GATT's rules, a member country that was the target of a complaint brought to the organization would often simply block the acceptance of the dispute panel's decision, rendering the entire process meaningless.

The WTO Agreement is far more effective because it mandated for the first time a strict timetable for consultation, the presentation of arguments and evidence to a panel, the option of appeal to a Dispute Settlement Body, and the mandatory implementation of the WTO's decisions. The timetable for the process limits the period from initial complaint to implementation of the WTO's decision to less than two years, bringing predictability to the process.

The new dispute-resolution procedure has been the WTO's most visible achievement in its short life. In the GATT's 46 years of existence, 314 disputes were brought before dispute panels; few of them were definitively resolved. In the three years since WTO was founded, by contrast, 120 disputes have been brought under its system. The speed with which WTO is proceeding has helped to establish a greater level of confidence in the dispute-resolution system than the GATT ever achieved. Though U.S. special interests sometimes criticize the new system as surrendering sovereignty to global bureaucrats, the fact is that the United States has initiated--and won--more disputes under the WTO than any other member state.

The WTO has provided a forum for U.S. exporters to challenge foreign pre-shipment inspection services' incorrect decisions about the customs valuation of their merchandise, for U.S. and Canadian meat exporters to challenge European restrictions on imports of beef that have been fed growth hormones, and for European exporters to challenge the U.S. imposition of the Harbor Maintenance Tax as an unauthorized increase in tariffs. If a party disagrees with the decision, it may choose to offer compensation--a result that now is under consideration by the United States relative to its import ban on shrimp from countries that fail to protect endangered turtle species. In other cases, the very presence of an invigorated dispute process has moved parties closer to resolution on their own.

In a word, the WTO is not just for tariffs anymore. It now brings a discipline to trading rules, operates as a forum for effective enforcement, and offers a meeting ground for trade liberalization. The impact on even the most mundane aspects of trade is profound.

Matthew T. McGrath is a partner in the law firm of Barnes, Richardson & Colburn in Washington, D.C., specializing in customs and international trade law practice. Mr. McGrath is a member of the ICC's Committee on Customs and Trade Regulations, which participates in deliberations of the World Customs Organization, and also is Washington Counsel to the American Association of Exporters and Importers. He may be reached at (202) 457-0300.