Introduction to World Trade Organisation (WTO)

The World Trade Organisation (WTO) is the only international body dealing with the multilaterally agreed rules on trade among its member nations. These agreements provide the legal ground-rules for international commerce. They are essentially contracts, binding governments to trade policies within agreed limits. The WTO can be viewed as an international agreement, an organisation and trade rules discipline.

The WTO promotes global trade through market opening measures and establishment of rules. These rules:

  • Provide transparency, security and predictability
  • Prevent adoption of unilateral measures on trade matters
  • Provide redressal of differences through dispute settlement mechanism
  • Allows for protection on legitimate grounds and to pursue development goals
  • Allows for remedial action on unfair trade practice through anti- dumping, countervailing measures to protect local industries affected by unfair trade practice
  • Provides relief through safeguard measures against sudden surge of imports
  • Are evolving and are decided by consensus
  • Are not perfect but provide safeguards against actions by bigger trading partners
  • Will be strengthened through negotiations
Malaysia is fully engaged in the rule making process and will continue to do so.
WTO as an International Agreement

The Marrakesh Agreement establishing the World Trade Organization

  • Signed in Marrakech on 15 April 1994
  • Entered into force on 1st January 1995

WTO as an organisation

  • Members driven
    –128 original Members
    –148 Members (as of 9 December 2003 )
    – Serviced by a permanent Secretariat (596 employees) - Headquarters in Geneva
  • legal and institutional foundation
  • guardian of multilateral trading system through multilateral negotiated rules
  • an intergovernmental institution to monitor implementation and to settle disputes
  • platform for collective debate and negotiations
WTO as Trade Rules and Disciplines

Covers:

  • Goods
  • Services
  • Trade-related aspects of intellectual property rights
  • Dispute settlement
  • Trade policy review

WTO Main Principles

  • Most Favoured Nation
    – no discrimination between countries i.e. tariffs and regulations applied to any one Member county will have to be the same to all other WTO Members (exception - Free Trade Areas and Generalised System of Preferences (GSP))
  • National Treatment
    – no discrimination between imported products and equivalent domestically produced products, on areas associated with levy of internal taxes and in the application of internal regulations
  • Predictability through binding of tariffs
  • Fair Competition
    – AD and CVD actions can be taken against unfairly traded good
  • Special and Differential Treatment to developing countries
    – flexibility in terms of longer time-frame for implementation of obligations
    – assistance to infant industries
    – principles of progressive liberalisation
    – technical assistance/cooperation

Why the WTO is Important to Malaysia?

  • Malaysian economy is highly dependent on exports
  • Malaysia needs multilateral trade rules to govern international trade with recourse to dispute settlement
  • WTO rules ensure a predictable and stable environment for conduct of trade under conditions of fair and equitable competition to seek better access through multilateral trade liberalisation
  • Multilateral trading system needs a strong multilateral institution with workable multilateral trade rules to govern international trade Forum to seek market access opportunities through multilateral negotiations

Benefits For Malaysia

  • Trade expansion, facilitated by rules and liberal environment contributed to overall economic growth
  • Malaysia in 2003 ranked 18th largest exporter and 18th largest importer (1973 - 40th largest exporter and 34th largest importer)
  • Ability to seek better access through negotiations in Uruguay Round, Information Technology Agreement and accession process
  • Ability to use trade remedies to counter unfair trade practices - anti-dumping (AD) and countervailing (CV) measures against unfair trade practice
  • Pursuit of development and socio-economic goals through Special and Differential treatment provisions

Malaysia's Commitments And Obligations

  • New legislations/ amendments on AD and CVD, Customs and TRIPs
  • Compliance with WTO agreements such as phasing out TRIMs, licensing procedures, disciplines on use of incentives and subsidies
  • Tariff reductions due to commitments under Uruguay Round (UR) and Information Technology Agreement (ITA)
  • Establishment of enquiry points for TBT, SPS and services
  • Regular notification on implementation of commitments in agriculture, new TBT and SPS measures and AD and CV actions initiated
  • Malaysia has completed the third Trade Policy Review (TPR) in December 2001.

(This article has been taken from the Ministry of International Trade and Industry website, www.miti.gov.my)