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Understanding the WTO: Nature and Concept (1)

This is a three-part series on the WTO, its nature, concept, principles and agreements.

Philippine Membership to the WTO. On January 1, 1995, the World Trade Organization (WTO) was officially established with more than 120 countries, including the Philippines, as members. However, prior to the formal establishments of the WTO, a multilateral trading system was already operational for almost 50 years through the General Agreement on Tariffs and Trade (GATT), which first started in 1948.

As a requirement to membership to the WTO, the Philippines acceded to numerous agreements governing the trade in goods and services and other trade-related activities. For the international trading community, the agreements covered a wide array of subjects such as agriculture, customs valuation, tariff restructuring, dumping, countervailing, safeguards, rules of origin, and the intellectual property rights.

Since that time, there had been much controversy following the Philippines’ membership in the WTO. Much has already been written on the advantages and benefits (including the ill-effects) of the trade reforms resulting from the WTO membership. In the latest meeting of the 146-member WTO in Cancun, Mexico, talks on further trade reforms collapsed due to the unwillingness of various parties to compromise on issues such as agricultural subsidies and trade facilitation.

What is the World Trade Organization (WTO)? For many in the trading community, the concept of the WTO remains something of a mystery even if most would agree that the positive (or negative effects) on local industries have been widely felt. Thus, the questions remain – what really is the WTO?

The WTO actually has many faces and there are various ways to look at it. In layman’s terms, the WTO is an international agreement, an international forum, an intergovernmental body and at the same time, an international court.

An International Agreement on Trade in Goods and Services. The WTO is an international general agreement governing trade in goods and services. It operates a system of trade rules resulting from decades of negotiations and agreements among trading countries. In other words, it is a multilateral trading system. At the heart of the WTO are the agreements which have been negotiated and signed by most member countries. Most of the agreements under the WTO resulted from the Uruguay Round of negotiations under GATT during the period 1986-2004. From the original 15-point agenda in 1986, the present set of agreements now covers over 30 items ranging from customs valuation and intellectual property to maritime, telecommunication and financial services. The agreements are essentially contracts that bind the countries in regards to their trade policies.

An Intergovernmental Body. The WTO is an intergovernmental body with its own structure and set of officials similar to the United Nations (UN) and other international bodies. It is composed of 4 levels of structure. The first level is the Ministerial Conference composed of all WTO members and meets at least once every two years, the last of which was this September 2003 in Cancun, Mexico. The second level is the General Council composed of three bodies, namely: (a) The General Council; (a) The Dispute Settlement Body, and (c) The Trade Policy Review Body. The third level of the WTO is composed of three councils and six committees, which report directly to the General Council. The councils, with each handling a broad area of trade, are as follows:

  1. The Council for Trade in Goods (Goods Council)
  2. The Council for Trade in Services (Services Council)
  3. The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)

The six committees handle specific areas of trade and report directly to the General Council. The fourth level of the WTO refers to the various other committees and bodies under the three main councils mentioned above.

An International Forum and Court. As an intergovernmental body, the WTO likewise serves as a forum for governments to negotiate further agreements governing the trade in goods and services. As trade agreements often involve conflicting interests, disputes in regards to the interpretation and application of the various agreements normally arise. In order to settle the differences among countries, the WTO provides a forum for countries to resolve trade disputes among themselves. In addition, a dispute settlement process provides the legal foundation on the procedure for resolving trade disputes among countries.

The dispute settlement process is one of the central pillars of the multilateral trading system. It underscores the rule of law, making the system more secure and predictable. Under the system, countries are obliged to first consult with each other within a period of 60 days before formal action is taken. If consultations fail, a panel is appointed to settle the dispute. Since the recommendation of the panel can only be rejected by the Dispute Settlement Body in consensus, it is often the case that the panel’s recommendation becomes the final ruling of the dispute body. From 1995 to March 2003, there had been 286 complaints filed under the dispute settlement mechanism of the WTO. One of the complaints is the one filed by the US against the Philippines for the removal of the local content rule under the Philippine Car Development Program.

Our next Article will discuss the various principles governing the WTO.

The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at and 


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