The World Trade Organization promotes and manages free trade for its members only. Its competitive trading benefits make WTO membership crucial for all countries. But it's especially critical for a developing country that needs all the trade help it can get.
Can any country join? Yes, as long as it controls its own trade policies. The country applying for membership is called an Observer. It can remain an observer for five years. That gives it time to learn more about the WTO. An observing country can participate in WTO meetings and receive technical assistance. In return, it must contribute to the WTO.
The Six-Step Process
A country has to go through a six-step process before becoming a WTO member.
First of all, the country submits an application. This application is reviewed by a Working Party for Accession forms. Any current WTO member can join the Working Party. It can also include representatives of the United Nations, United Nations Conference on Trade and Development, International Monetary Fund, the World Bank, World Intellectual Property Organization, European Bank for Reconstruction and Development, and European Free Trade Association. The Working Party then oversees the entire application process.
Second, the Observer then submits forms that describe its current trade policies in detail. This is called Memorandum of the Foreign Trade Regime. It includes statistics about that country’s economy. It also includes existing free trade agreements and any laws affecting international trade. Then the Working Party reviews these forms to determine how they would affect its ability to conform to WTO requirements. The Secretariat distributes them to all WTO members. Every WTO member can ask the Observer questions. After a series of discussions and negotiations, the Secretariat consolidates it in the Factual Summary of Points Raised.
Third, the Working Party then outlines all the terms and conditions that the Observer must meet before becoming a member.
After becoming a member of WTO, the Observer must agree to follow all WTO rules. It must agree to make the legislative and structural changes needed to meet these rules.
Fourth, the Observer then negotiates bilateral trade agreements with any country it wishes. The agreements will set, reduce, or remove tariffs. The agreements will open up access to the countries' markets. They will also adjust different policies to trade goods and services more freely. Every agreement must also be applied to all other WTO members. The bilateral agreements can take a long time to negotiate because the stakes are so high.
Fifth, the Working Party drafts the terms of membership. The so-called Accession Package has three agreements. It includes changes that the observer has made to its trade policies. It also contains the terms of bilateral trade agreements. It also has a membership treaty, called the Protocol of Accession. Last but not least is the list of commitments made by the applicant. Those obligations are called the schedules.
Sixth, the General Council approves the Protocol of Accession. It issues its decision and publishes the approved Protocol of Accession. The country has only three months to rectify the agreement. After rectifications, it notifies the WTO Secretariat. One month later, it becomes a member.
The WTO has 164 members. 128 countries were members of the General Agreement on Tariff and Trade. These countries symbolically joined the WTO on January 1, 1995 and quickly transitioned official business to the new structure. The remaining countries went through the six-step process to become WTO members. Here are the five newest members:
- Afghanistan was accepted on July 29, 2016.
- Liberia was accepted on July 14, 2016.
- Seychelles was accepted on April 26, 2015.
- Kazakhstan, on November 30, 2015.
- Yemen became a member on June 26, 2014.
There are 25 observer countries currently in this application process. They have five years to complete it unless they request an extension. They are Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Curaçao, Equatorial Guinea, Ethiopia, the Vatican, Iran, Iraq, Lebanon, Libya, Sao Tome and Principe, Serbia, Somalia, South Sudan, Sudan, Syria, Timor-Leste, Turkmenistan, and Uzbekistan.
Only 14 countries are not WTO members. These nations do not wish to become members. They are Aruba, Eritrea, Kiribati, Kosovo, Marshall Islands, Micronesia, Monaco, Nauru, North Korea, Palau, the Palestinian Territories, San Marino, Sint Maarten, and Tuvalu.
Resolving Trade Disputes
Because countries may, rightly or wrongly, defend their domestic industries through trade protectionism, the WTO has trade laws in place to regulate nations’ attempts to correct their trade imbalances through raising and levying tariffs, product dumping, and use of subsidies. The WTO resolves trade disputes through a process that investigates whether any violation of multilateral agreements have been committed. This process ideally takes anywhere from one year to 15 months, after which the guilty party must either compensate the offended nation or suffer trade sanctions.
It is interesting to note that the United States, under President Trump, bypassed the laws of the WTO when it imposed tariffs on Chinese steel and aluminum.
The Doha Round
Officially launched in Qatar in November 2001, the Doha Round of Trade Talks was an ambitious attempt to create a universal multilateral agreement between all member countries of the WTO. The aim was to create a better global trading system. For this to work, all member countries, not just a majority, must agree to any decisions laid out for the entire agreement. There would be no sub-agreements for certain countries.
Although the Doha Round could have ushered in a new global economic order, the talks failed because two major global economies, the United States and the European Union, could not agree to stop subsidizing their agricultural sectors.