World Trade Organization (WTO): What It Is and What It Does

Evan Tarver has 6+ years of experience in financial analysis and 5+ years as an author, editor, and copywriter.

Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital.

What Is the World Trade Organization (WTO)?

Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the rules for global trade among nations. It superseded the 1947 General Agreement on Tariffs and Trade (GATT) created in the wake of World War II.

The WTO is based on agreements signed by a majority of the world’s trading nations. The main function of the organization is to help producers of goods and services, as well as exporters and importers, protect and manage their businesses.

On 26 February 2024, at the 13th Ministerial Conference in Abu Dhabi, Comoros and Timor Leste were approved to became the 165th and 166th members.

Key Takeaways

• The World Trade Organization (WTO) oversees global trade rules among nations and mediates disputes.
• The WTO has been a force for globalization, with both positive and negative effects.
• Big businesses tend to support the WTO for its positive impact on international economic growth.
• Skeptics see it as increasing the wealth gap and hurting local workers and communities.

Understanding the World Trade Organization (WTO)

The WTO is essentially an alternative dispute or mediation entity that upholds the international rules of trade among nations. The organization provides a platform that allows member governments to negotiate and resolve trade issues with other members. The WTO’s main focus is to provide open lines of communication concerning trade among its members.

The WTO has lowered trade barriers and increased trade among member countries. It also has also maintained trade barriers when it makes sense to do so in the global context. The WTO attempts to mediate between nations in order to benefit the global economy.

Once negotiations are complete and an agreement is in place, the WTO offers to interpret the agreement in case of a future dispute. All WTO agreements include a settlement process that allows it to conduct neutral conflict resolution.

WTO Leadership

On Feb. 15, 2021, the WTO’s General Council selected two-time Nigerian finance minister Ngozi Okonjo-Iweala as its director-general. She is the first woman and the first African to be selected for the position. She took office on March 1, 2021, for a four-year term.

No negotiation, mediation, or resolution would be possible without the foundational WTO agreements. These agreements set the legal ground-rules for international commerce that the WTO oversees. They bind a country’s government to a set of constraints that must be observed when setting future trade policies.

The agreements protect producers, importers, and exporters while encouraging world governments to meet specific social and environmental standards.

In recent years, the U.S. relationship with the WTO has been cool. The feeling is that the WTO is not doing enough to counteract China's unfair trade practices.

Advantages and Disadvantages of the WTO

The history of international trade has been a battle between protectionism and free trade, and the WTO has fueled globalization, with both positive and adverse effects. The organization’s efforts have increased global trade expansion. There are side effects to globalization, including a negative impact on local communities and human rights.

Proponents of the WTO, particularly multinational corporations, believe that the organization is beneficial to business, seeing the stimulation of free trade and a decline in trade disputes as beneficial to the global economy.

Skeptics believe that the WTO undermines the principles of organic democracy and widens the international wealth gap. They point to the decline in domestic industries and increasing foreign influence as negative impacts on the world economy.

As part of his broader attempts to renegotiate U.S. international trade deals, when he was in office, then-President Donald Trump threatened to withdraw from the WTO, calling it a “disaster.” A U.S. withdrawal from the WTO could have disrupted trillions of dollars in global trade. However, he didn’t withdraw the U.S. from the WTO during his time in office.

Why Is the World Trade Organization Important?

The World Trade Organization (WTO) is the body that keeps global trade running smoothly. It oversees the rules and mediates disputes among its member nations. It now has 164 member nations and 25 observer nations (out of a total 195 nations in the world).

What Are the Main Functions of the World Trade Organization?

The World Trade Organization (WTO) administers the trade agreements made among its member nations. It also mediates any trade disputes that arise.

Is the U.S. a Member of the World Trade Organization (WTO)

The U.S. has been a member of the WTO since 1995 and signed its General Agreement on Tariffs and Trade (GATT) in 1948.

In 1999, then-President Bill Clinton facilitated the acceptance of China into the WTO. The impact on China and on the world continues to be debated to this day.

1. World Trade Organization. “Who We Are.”
2. World Trade Organization. "WTO In Brief."
3. KRQE. “New WTO chief pushes for vaccine access, fisheries deal.”
4. NPR. “Ngozi Okonjo-Iweala Makes History As WTO’s First African And Female Leader.”
5. World Trade Organization. “Who We Are.”
6. Politico. "'All talk and no walk': America ain't back at the WTO."
7. National Geographic. "Effects of Economic Globalization."
8. Foreign Policy. “U.S. Effort to Depart WTO Gathers Momentum.”
9. World Trade Organization. "WTO In Brief."
10. Canadian Politics and Public Policy. "The Tragic Legacy of Bill Clinton's China Doctrine."

The most-favored-nation clause requires countries to offer the same trade terms to all trading partners, with notable exceptions under WTO rules.

The Food and Drug Administration is a government agency that regulates certain food, drugs, cosmetics, and medical products.

Capital control is an action taken by a government, central bank, or regulatory body to limit the flow of foreign capital in and out of a domestic economy.

The Organization of the Petroleum Exporting Countries (OPEC) consists of the major oil-exporting nations. Read about OPEC’s impact on oil supply and prices.

The Rural Electrification Act provided electricity to millions of rural Americans in the 1930s and is paving the way to expand Internet access today.

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