The WTO establishes a framework for trade policies; it does not define or specify outcomes. It is concerned with setting the rules of the trade policy games. Five principles are of particu-lar importance in understanding both the pre-1994 GATT and the WTO:
1) Non- Discrimination
It has two major components: the most favoured nation (MFN) rule, and the national treat-ment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO mem-bers, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members. Grant someone a special favour and you have to do the same for all other WTO members. National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).
It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a na-tion to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will ma-terialise.
3) Binding and enforceable commitments
The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceil-ing bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not ob-tained, the complaining country may invoke the WTO dispute settlement procedures
The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.
5) Safety Valves
Under specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneco-nomic objectives, articles aimed at ensuring "fair competition", and provisions permitting intervention in trade for economic reasons. Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions..
Critics contend that smaller countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the politicians representing the most influen-tial nations in the WTO focus on the commercial interests of profit-making companies ra-ther than the interests of all. The WTO does not seem to manage the global economy impar-tially, but in its operation has a systematic bias toward rich countries and multinational cor-porations and harms smaller countries which have less negotiation power.
The Journal of Commerce Article
IISD website http://www.gao.gov/new.items/d01727.pdf
WTO and the Environment working paper by Alan Oxley