Order Code 98-928 E
CRS Report for Congress
Received through the CRS Web
The World Trade Organization:
Background and Issues
Updated June 4, 2001
Lenore Sek
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
The World Trade Organization (WTO), which was established on January 1, 1995, is the
principal organization for rules governing international trade. This report provides general
background on the WTO: its establishment, principles, administrative bodies, and
membership. It also includes a brief discussion of policy issues pertaining to the WTO
agenda, U.S. sovereignty and membership in the WTO, the congressional role in U.S.
participation in the WTO, and pursuit of U.S. trade goals in the WTO compared to other
options. This report will be updated periodically.

The World Trade Organization: Background and Issues
Summary
The World Trade Organization (WTO) was established on January 1, 1995,
under an agreement reached during the Uruguay Round of multilateral trade
negotiations. The Uruguay Round was the last of a series of periodic trade
negotiations held under the auspices of the WTO’s predecessor, the General
Agreement on Tariffs and Trade (GATT).
The WTO is the most important international organization that governs world
trade. It has 140 members and 32 observer governments (most of which have applied
for membership), and members represent over 95% of world trade. Agreements
administered by the WTO cover a broad range of goods and services trade and apply
to virtually all government practices that directly relate to trade, for example tariffs,
subsidies, government procurement, and trade-related intellectual property rights.
Coverage of the agreements is growing through negotiation.
The WTO continues to apply many of the principles that were included originally
in the GATT. One of these principles is most-favored-nation treatment, which states
that any advantage given by one member country to a product of another member
must also be extended unconditionally to a like product of any other member.
Another principle is national treatment, which requires that countries must treat
imports no worse than domestic products. Countries also commit to open
information on rules and regulations, negotiated limits on trade barriers, and
settlement of disputes under specific procedures.
Several bodies in the WTO administer the agreements reached during the
Uruguay Round. The highest level body is the Ministerial Conference, which is the
group of trade ministers from member countries. The Ministerial Conference meets
at least every two years. The General Council is the body that oversees the day-to-
day operations of the WTO. Each member country has a representative on the
General Council. The Council also meets in two other capacities: it reviews national
trade policies, and it oversees the dispute settlement process. Three major bodies
under the General Council administer rules on (1) trade in goods, (2) trade in services,
and (3) trade-related aspects of intellectual property rights (copyrights, trademarks,
and patents). Also under the General Council are numerous committees and working
groups.
Among the questions asked during debate on U.S. trade policy and the WTO
are: Should the WTO continue to cover traditional trade issues only, or should it be
broadened to include nontraditional issues such as labor and the environment? Can
the United States maintain its sovereignty as a member of the WTO? What is the role
of Congress in U.S. participation in the WTO? To what extent should the United
States meet its trade goals in the WTO versus other options?

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The World Trade Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Appendix 1. WTO Membership (as of January 1, 2001) . . . . . . . . . . . . . . . . . . 7
Appendix 2. WTO Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The World Trade Organization:
Background and Issues
Background
Following World War II, nations throughout the world, led by the United States
and several other developed countries, sought to establish an open and
nondiscriminatory trading system with the goal of raising the economic well-being of
all countries. Aware of the role of trade barriers in contributing to the economic
depression in the 1930s, and the military aggression that rose following the
depression, the countries that met to discuss the new trading system saw open trade
as essential for economic stability and peace.
The intent of these negotiators was to establish an International Trade
Organization (ITO), which would address not only trade barriers but other issues
indirectly related to trade, including employment, investment, restrictive business
practices, and commodity agreements. The ITO was to be a United Nations
specialized agency, but the ITO treaty was not approved by the United States and a
few other signatories and never went into effect. Instead, a provisional agreement on
tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT)
was reached and went into effect in 1948. This provisional GATT became the
principal set of rules governing international trade for the next 47 years.
The GATT document established trade principles that continue to be applied
today. Among the most important of these principles was nondiscrimination with
regard to the treatment of trade in goods among countries. The most-favored-nation
principle, which was Article I of the GATT, states that any advantage given by a
contracting party to a product of another country must be extended unconditionally
to a like product of all other contracting parties. A second rule of nondiscrimination
was national treatment, which said that imported and domestic goods should be
treated equally. Although nondiscrimination was a cornerstone of the GATT, some
exceptions were allowed. For example customs unions, free-trade areas, and special
treatment for developing countries were permitted.
Another principle was the open and fair application of any trade barriers. Tariffs
were the most common and visible form of trade barrier at the time the GATT was
established. Tariffs were to be “bound,” or set at maximum levels, and not increased
above the negotiated level. In general, quantitative restrictions such as quotas were
not allowed, since tariffs were much easier to identify and to eventually reduce.
The GATT also included a forum and process for countries to follow in trying
to resolve disputes. The dispute process allowed countries to consult with each other

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and if that was not successful, a country could ask that a panel hear the complaint.
Although the panel’s decision was not enforceable, the panel report carried some
force of opinion and encouraged countries to work toward an agreeable resolution.
One of the GATT’s chief purposes was the reduction of barriers to trade. With
this goal in mind, GATT contracting parties met periodically to negotiate further
reduction of tariffs and other trade barriers and changes to GATT rules. These
negotiations were called “rounds.” Early rounds dealt only with tariff reductions, but
later rounds also included nontariff barriers to trade. The most recent round, the
Uruguay Round, lasted from 1986 to 1994 and included the most encompassing set
of negotiations in the history of the GATT. On the agenda was reform of the existing
GATT system, as well as expansion of rules to cover new areas such as services trade
and the trade aspects of intellectual property rights (copyrights, trademarks, and
patents). The agreements that resulted from the Uruguay Round also contained a
built-in agenda requiring that further negotiations on agriculture, services, intellectual
property rights, and government procurement begin by the year 2000.
One of the most important changes that came about from the Uruguay Round
was the establishment of a new trade structure, the World Trade Organization
(WTO), which incorporated the many changes reached during the Uruguay Round:
the former GATT with its newly negotiated reforms, bodies to oversee the new trade
issues, a stronger dispute resolution procedure, a regular review of members’ trade
policies, and many other committees and councils. In contrast to the GATT, the
WTO was created as a permanent structure, with “members” instead of “contracting
parties.” The WTO went into effect on January 1, 1995.
The World Trade Organization
There are 141 members of the WTO, representing over 95% of world trade, 33
observer governments (most of which have applied for membership in the WTO), and
seven international organization observers. (Members and observers governments are
listed in Appendix 1.) The WTO is located in Geneva, Switzerland. Its top official
is Director-General Mike Moore from New Zealand, whose 3-year term began on
September 1, 1999. Following Mr. Moore, Supachai Panitchpakdi of Thailand will
serve as Director-General for a 3-year term. The WTO staff numbers about 500. Its
budget for the year 2000 was 127.7 million Swiss francs, or about $80 million (1.5996
Sf = $1). Countries contribute according to their share of world trade.1
Decisions within the WTO are made by members, not staff, and they are made
by consensus, not by formal vote. The highest level body in the WTO is the
Ministerial Conference, which is the body of political representatives (trade
ministers) from each member country. (See the WTO structure in Appendix 2.) The
Ministerial Conference examines current programs and sets the agenda for future
work. It must meet at least every two years. The first meeting of the Ministerial was
1 In 2000, the U.S. share was 15.7% of total contributions to the WTO budget. The
U.S. contribution is part of the Department of State budget and was $12 million in fiscal year
2000.

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held in Singapore on December 9-13, 1996. At that meeting, trade ministers reviewed
the work of the WTO since its establishment and agreed on a work schedule for the
next few years. They also approved an action plan for least-developed countries, and
many members entered into an agreement to eliminate tariffs on information
technology products by the year 2000. The second meeting of the Ministerial
Conference was held in Geneva on May 18 and 20, 1998. Again, the Ministerial
Conference reviewed the work of the WTO and approved a future work program.
It called for an examination of issues related to global electronic commerce and
started preparations for the next meeting. The third Ministerial Conference was held
in Seattle on November 29-December 3, 1999. That meeting was intended to review
an agenda for a new round of trade negotiations, but trade ministers could not reach
agreement and suspended their work. The WTO Director-General was directed to
consult with delegations and discuss ways in which countries might bridge remaining
differences. The fourth Ministerial Conference will be held in Doha, Qatar on
November 9-13, 2001. The regular meetings of the Ministerial Conference, together
with interim preparations by other bodies of the WTO, creates a continual evaluation
and negotiation process.
The body that oversees the day-to-day operations of the WTO is the General
Council, which consists of a representative from each member. The Council
generally meets monthly and provides a forum for countries to discuss a range of
trade matters. The U.S. delegate is the Deputy U.S. Trade Representative in Geneva.
The General Council also meets in two unique capacities. One is the Trade
Policy Review Mechanism (TPRM). The TPRM was established under the
Uruguay Round agreements to allow closer monitoring of national trade policies of
member countries. The four countries with the largest shares of world trade are
reviewed every two years, the next 16 largest traders are reviewed every four years,
and other countries are reviewed every 6 years, although least-developed countries
might be reviewed less frequently. The trade reviews provide information on a
country’s trade policies and comment on whether a country is pursuing market-
opening or market-restrictive policies. This public examination is a mild form of
pressure for a country to avoid practices that discourage trade.
The General Council also meets in the capacity of the Dispute Settlement Body
(DSB). The Uruguay Round agreements greatly strengthened the process for
settlement of disputes. The first stage of the process is consultation between the
governments involved. If consultation is not successful, the complainant may ask the
DSB to establish a dispute panel. The dispute panel hears the case and reports back
to the DSB. If the complaint is upheld, the respondent must either change its practice
or negotiate an agreeable resolution. Otherwise, the complainant may request that the
DSB authorize suspension of obligations, thereby giving permission for the
complainant to retaliate. For example, a complainant may receive permission to
increase tariffs against a respondent country that disregards a decision by the DSB.
Permission is automatic unless unanimously disapproved. Procedures are clearly set
out with specific timetables at each stage. The United States has been relatively
successful in presenting its cases before the WTO.
More specialized work is done in three major bodies under the General Council.
One of these is the Council for Trade in Goods, under which committees work on

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a number of trade areas. One committee works on trade in agriculture. Another
committee oversees the related topic of sanitary and phytosanitary measures, which
are measures that pertain respectively to animal and plant health and safety. Some
committees monitor practices that are considered “unfair” if not implemented in
accordance with WTO rules (antidumping, subsidies and countervailing measures).
Other committees examine practices that are not necessarily “unfair” but could be
trade-distorting nonetheless (rules of origin, safeguards, technical barriers, customs
valuation, and import licensing). One committee works on the relatively new area of
trade-related investment measures, and another addresses market access issues (tariffs
and nontariff measures).
Also under the Council for Trade in Goods are the Information Technology
Agreement Committee and the Textiles Monitoring Body. Before the Uruguay
Round, trade in textiles had been regulated by an extensive system of bilateral quotas
under the Multifiber Agreement, but the Uruguay Round agreement on textiles will
eventually replace the quota system with tariffs, and these tariffs will be reduced
through multilateral negotiation.
A second major body under the General Council is the Council for Trade in
Services, which oversees the Uruguay Round agreement on trade in services. The
Uruguay Round services agreement has three parts. The first part lists basic principles
that countries agree to observe, including national treatment, most-favored-nation
treatment, and transparency (open information about relevant laws and regulations).
The second part contains four annexes with rules on: (1) the movement of persons
who provide services, (2) financial services, (3) telecommunications, and (4) air
transport services. The third part is a schedule of country commitments. These
commitments are bound and cannot be reduced in scope, much like the tariff levels
on goods, which cannot be increased once they are bound. The service commitments
may include exceptions to the national treatment and most-favored-nation principles
if countries included these exceptions when they originally negotiated the
commitments. The Uruguay Round services agreement also called for further
negotiation on liberalizing trade in services, and these negotiations are held under the
Council for Trade in Services.
The Council for Trade-Related Aspects of Intellectual Property Rights
(TRIPS) is the third major body under the General Council. The TRIPS Council
monitors the agreement on intellectual property rights that was reached during the
Uruguay Round and supervises members’ compliance. The TRIPS agreement has
three parts. The first part outlines basic principles that countries must observe,
including national treatment and most-favored-nation treatment. The second part
establishes standards for the different types of intellectual property rights. For
example, it ensures copyright protection for computer programs, sets rules for rental
rights, protects integrated circuit designs and geographical indications (e.g.,
“champagne” indicates a wine from a specific region), and ensures minimum lengths
of time for protections. The third part of the agreement establishes enforcement
processes. Developing, transition, and least-developed countries are allowed
additional time to implement the changes.
In addition to the bodies discussed above, there are many other committees and
working groups under the General Council. For example, working groups cover the

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relationship between trade and investment, the interaction between trade and
competition policy, and transparency in government procurement. Plurilateral groups,
which do not necessarily include all WTO members, deal with civil aircraft and with
government procurement. The Committee on Trade and Development often works
with other international institutions on special concerns of countries in development.
Working parties on accession meet with applicant countries to identify changes that
are necessary to bring the applicant’s trade regime into line with WTO rules and
principles. The Uruguay Round also established a committee on trade and
environment.
Policy Issues
Congressional debate on trade negotiations in the WTO has focused on four
major issues. These issues concern traditional versus nontraditional topics in the
WTO, U.S. sovereignty, the congressional role in U.S. participation in the WTO, and
meeting U.S. trade goals in the WTO versus other options.
1. Should the WTO cover traditional trade issues only, or should it be
broadened to include nontraditional issues such as labor and the environment?
The GATT first established rules on border measures only (tariffs and quotas) and
later added rules on certain internal practices that clearly had direct effects on trade
in goods (e.g., subsidies, government procurement). The WTO further expanded
trade rules to cover new areas such as trade in services, but still did not include rules
that reached into areas that were not directly related to trade practices. The WTO’s
built-in agenda for future talks still pertains only to recognized trade topics such as
agriculture and services. U.S. businesses generally want the WTO to cover only these
traditional issues, because they argue that the greatest export opportunities will be
achieved only if negotiators focus on trade barriers and not include social factors.
Many groups, however, argue that the WTO should be expanded to include
nontraditional topics. Two topics that have been at the center of current trade debate
are labor and the environment. Labor groups argue that countries sometimes exploit
workers, including children, to produce low-cost products for foreign markets, and
environmental groups want more consideration of the environmental effects of the
production of goods for trade included under WTO rules. There is strong
disagreement domestically on traditional and nontraditional topics in trade
negotiations, and internationally countries hold a wide range of positions on this
question.
2. Can the United States maintain its sovereignty as a member of the
WTO? Some have raised the question of whether the United States will lose its
sovereignty as a member of the WTO. As a member of the WTO, the United States
does commit to act in accordance with the rules of the multilateral body. It is legally
obligated to ensure national laws do not conflict with WTO rules; however, the WTO
cannot force members to adhere to their obligations. The United States and any other
WTO member may act in its own national interest in spite of WTO rules. The WTO
even recognizes certain allowable exceptions such as national security. However, any
multilateral institution is only as strong as its members’ adherence to the institution’s

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rules. If the United States or any other member country chooses to take unilateral
action contrary to WTO rules, that action may weaken the institution. It is a decision
for U.S. policymakers whether the discipline imposed by the WTO is an acceptable
cost for the benefits of more open trade.
3. What is the role of Congress in how the United States participates in the
WTO? Although the executive branch maintains a staff in Geneva and conducts
trade negotiations in the WTO, Congress has had an important role in how the United
States participates in the WTO through its constitutional responsibility for the conduct
of foreign commerce. In legislation that has delegated trade negotiating authority to
the President, Congress has prescribed trade objectives for U.S. negotiators.
Congress has required the executive branch to consult with it as a condition for fast-
track procedures for legislation to implement nontariff trade agreements. Although
the President has been required by statute to submit legislation to implement nontariff
trade agreements under fast-track procedures in the past, Congress has worked jointly
with the executive branch in drafting that legislation. Finally, Congress ultimately
decides whether or not to approve implementing legislation.
The role for Congress has evolved as one way to address the separate
constitutional authorities of the executive and legislative branches on trade matters,
but this role is not rigid and is often debated and reevaluated. Some say that
Congress must come to a consensus on delegation of trade negotiating authority to
the President, so that the United States can fully participate in on-going trade
negotiations. However, others maintain that Congress should have a stronger hand
in trade policy formulation and that the executive-legislative relationship under fast-
track procedures is no longer useful or appropriate.
4. To what extent should the United States meet its trade goals in the WTO
versus other alternatives? As it presently exists, the WTO has many benefits for the
United States: it provides the only multilateral dispute mechanism for international
trade, administers rules to discourage discrimination, and ensures greater security on
how trade will be conducted. However, critics of the WTO charge that the WTO is
slow-moving because there are so many members with such varied national interests
and decisions are by consensus. One option is to pursue U.S. goals through another
multilateral body. For example, the United States and other (mostly developed)
countries have pursued negotiations on shipbuilding and investment in the
Organization for Economic Cooperation and Development, but with mixed success.
Another option is to pursue regional or bilateral agreements. The United States
concluded a free trade agreement with two of its major trading partners, Canada and
Mexico, and U.S. trade with these countries has been steady and strong. Some trade
experts warn, however, that a policy of regionalism or bilateralism may distract the
United States and other countries from possibly greater benefits from a policy of
multilateralism.

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Appendix 1. WTO Membership (as of June 1, 2001)
Members
Albania
Dominican Republic
Kyrgyz Republic
Portugal
Angola
Ecuador
Latvia
Qatar
Antigua and Barbuda
Egypt
Lesotho
Romania
Argentina
El Salvador
Liechtenstein
Rwanda
Australia
Estonia
Lithuania
Saint Kitts and Nevis
Austria
European Communities
Luxembourg
Saint Lucia
Bahrain
Fiji
Macau
Saint Vincent & the
Bangladesh
Finland
Madagascar
Grenadines
Barbados
France
Malawi
Senegal
Belgium
Gabon
Malaysia
Sierra Leone
Belize
Gambia
Maldives
Singapore
Benin
Georgia
Mali
Slovak Republic
Bolivia
Germany
Malta
Slovenia
Botswana
Ghana
Mauritania
Solomon Islands
Brazil
Greece
Mauritius
South Africa
Brunei Darussalam
Grenada
Mexico
Spain
Bulgaria
Guatemala
Mongolia
Sri Lanka
Burkina Faso
Guinea
Morocco
Suriname
Burundi
Guinea Bissau
Mozambique
Swaziland
Cameroon
Guyana
Myanmar
Sweden
Canada
Haiti
Namibia
Switzerland
Central African Republic
Honduras
Netherlands, for the King- Tanzania
Chad
Hong Kong, China
dom in Europe and for
Thailand
Chile
Hungary
the Netherlands, Antilles Togo
Colombia
Iceland
New Zealand
Trinidad and Tobago
Congo
India
Nicaragua
Tunisia
Costa Rica
Indonesia
Niger
Turkey
Côte d'Ivoire
Ireland
Nigeria
Uganda
Croatia
Israel
Norway
United Arab Emirates
Cuba
Italy
Oman
United Kingdom
Cyprus
Jamaica
Pakistan
United States
Czech Republic
Jordan
Panama
Uruguay
Democratic Republic of the Japan
Papua New Guinea
Venezuela
Congo
Kenya
Paraguay
Zambia
Denmark
Korea
Peru
Zimbabwe
Djibouti
Kuwait
Philippines
Dominica
Poland
Observer Governments
Algeria
Former Yugoslav Republic of
Saudi Arabia
Andorra
Macedonia
Seychelles
Armenia
Holy See (Vatican)
Sudan
Azerbaijan
Kazakstan
Chinese Taipei
Bahamas
Lao People's Democratic Republic
Tonga
Belarus
Lebanon
Ukraine
Bhutan
Moldova
Uzbekistan
Bosnia and Herzegovina
Nepal
Vanuatu
Cambodia
Russian Federation
Vietnam
Cape Verde
Samoa
Yemen
People's Republic of China
Sao Tome and Principe
Yugoslavia, Fed. Rep. of
Ethiopia
International Organization Observers to General Council
United Nations (UN)
Food and Agricultural Organization (FAO)
United Nations Conference on Trade and
World Intellectual Property Organization (WIPO)
Development (UNCTAD)
Organization for Economic Co-operation and
International Monetary Fund (IMF)
Development (UNCTAD)
World Bank
Source: World Trade Organization web page [http://www.wto.org/].


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Appendix 2. WTO Structure
All WTO members may participate in all councils, committees, etc., except Appellate Body, Dispute
Settlement panels, Textiles Monitoring Body, and plurilateral committees.
Source: World Trade Organization web page at [http://www.wto.org/].