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Department of international Relations
Zaman University
Instructor: Mr. Radsorin Ung
Prepared by: Aruntey Chan & Charadine Pich
Contents
I. Introduction………………………………………………………………..................3
II. The case for open trade……………………………………………………………....5
III. The GATT years: from Havana to Marrakesh
………………………………….....6
a. Did GATT
succeed?............................................
..............................................6
IV. The Uruguay Round……………………………………………………………….....7
a. A round to end all
rounds?.............................................
...................................8
V. The Doha Agenda……………………………………………………………….…...9
VI. Special policies…………………………………………………………………......13
VII. Dispute settlement……………………………………………………………….….15
VIII. Structure……………………………………………………………...………….….17
IX. Membership, Alliance, Bureaucracy………………………………...………….
…..19
X. Millennium Development Goals (MDGs) ………………………...………….
…....23
XI. News related with WTOAll 159 WTO Members have agreed on something, for the First Time
ever……....…..24
Russia threatens US with WTO action over Crimea sanctions…………………..
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…....25
China to Appeal WTO Rare-Earth Ruling………………………………………...…...25
China loses WTO bid to overturn US law against Unfair Subsidies……………...
…...26
XII. Critical Analysis: Strengths and Weaknesses………………………...
…….…........26
XIII. Conclusion………………………...………….………...……………...……….......27
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I. INT
RODUCTION
The World Trade Organization, which is known as the WTO, is
one of the most respectful and successful international
organizations, in which it plays a significant role in the
international arena. The World Trade Organization is known to
be the only organization dealing with global rules of trade
between nations. Its main concern is to ensure that global
trade flows as smoothly, predictable, and freely as possible.1
WTO is located in Geneva, Switzerland, and has 153 member
states. There are a number of feasible ways in defining the
WTO. First of all, it is an organization for trade opening.
Furthermore, it is a forum for governments to negotiate trade
agreements while also a place for them to settle disputes,
when it operates a system of trade rules. Most importantly,
the World Trade Organization is a place where member states
try to find the resolutions for trade problems they face with
each other.2 The primary objective of the WTO is to provide an
opportunity for negotiating agreements in which will help
eliminating obstacles to international trade as well as
ensuring a level playing field for all member states, thereby
1 “World Trade Organization,” WTO in brief, (2014) [online publication]; available from http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm; Internet; accessed 17 April 2014.
2 “About the WTO,” A statement by former director-general Pasal Lamy, (2014); available from http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm; Internet; accessed 17 April 2014.
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contributing to economic prosperity and development.
Furthermore, the World Trade Organization issues a legal and
institutional framework for implementation and monitoring of
these agreements, and at the same time resolving disputes
arising from their interpretation and application.3
History
The World Trade Organization came into force in on the 1st of
January 1995, which is based in Geneva. The WTO’s top
decision-making body is the Ministerial Conference, and is
normally held every two years. The creation of the
organization was preceded by the General Agreement on Tariffs
and Trade (GATT) that was concluded in 1947. The General
Agreements on Tariffs and Trade is one third of the Bretton
Woods system that was created after World War II to ensure a
stable trade and economic world environment. The International
Monetary Fund (IMF) and World Bank are the other two bodies of
the Bretton Woods system. While often referred to as as
international organization, the GATT had a "de facto" role as
an international organization before the creation of the World
Trade Organization (WTO). In the GATT context, there were
eight rounds of trade liberalization talks. Initially, their
topics were the reduction of tariffs and the phasing out of
quotas, but later other trade barriers were tackled too. The
Uruguay round was the final GATT round. It was started at a
summit in Punta del Este in 1986 and concluded in Marrakesh in
3 Ibid
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1994. The WTO was established by the Final Act of the Uruguay
Round of negotiations. It covered agriculture subsidies and
established the WTO.4 The WTO is meant to continue liberalizing
trade through negotiation rounds. For many years, however,
members did not agree on an agenda for a new round. At the
Ministerial Conference in Singapore in 1996, the rich nations
insisted it should include investors’ rights,
competition/anti-trust policy, trade facilitation and
government procurement. Developing countries disagreed,
fearing that binding rules on these “Singapore issues” would
restrict their policy space and limit their scope for. In
February 1997 agreement was reached on telecommunications
services, with 69 governments agreeing to wide-ranging
liberalization measures that went beyond those agreed in the
Uruguay Round. In the same year 40 governments successfully
concluded negotiations for tariff-free trade in information
technology products, and 70 members concluded a financial
services deal covering more than 95% of trade in banking,
insurance, securities and financial information.5 Civil society
organizations argued that the WTO served the interests of rich
nations in exploiting the Third World. On the other hand, the
WTO only passes rules when all members agree. Every member has
4 Hans Dembowski, “Trade policy,” A brief history of the WTO, (2014); available from http://www.dandc.eu/en/article/brief-history-wto; Internet; accessed 17 April 2014.5
“The multilateral trading system – past, present and future,” World Trade Organization, (2014); available from http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr01_e.htm; Internet; accessed 17 April 2014.
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the right of veto. Since many developing countries are WTO
members, their bargaining power is stronger in this context
than when they negotiate on their own with the great economic
powers. However, many developing countries felt cheated by the
Uruguay Round because it did not allow them to increase their
exports as fast as they had been made believe. One reason for
such frustration was that trade policy is very complex, and
the details may fast overburden countries with weak
governmental capacities. In 2000, new talks started on
agriculture and services. These have now been incorporated
into a broader agenda launched at the fourth WTO Ministerial
Conference in Doha, Qatar, in November 2001.6
WTO missions:
Negotiating the reduction or elimination of obstacles to
trade (import tariffs, other barriers to trade) and
agreeing on rules governing the conduct of international
trade (e.g. antidumping, subsidies, product standards,
etc.)
Administering and monitoring the application of the WTO's
agreed rules for trade in goods, trade in services, and
trade-related intellectual property rights
Monitoring and reviewing the trade policies of our
members, as well as ensuring transparency of regional and
bilateral trade agreements
6 “The multilateral trading system – past, present and future,” World Trade Organization, (2014).
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Settling disputes among our members regarding the
interpretation and application of the agreements
Building capacity of developing country government
officials in international trade matters
Assisting the process of accession of some 30 countries
who are not yet members of the organization
Conducting economic research and collecting and
disseminating trade data in support of the WTO's other
main activities
Explaining to and educating the public about the WTO, its
mission and its activities.
II. THE CASE FOR OPEN TRADE
The case for an open trading system rests upon the economic
benefits of all members in which the agreement is based
largely on the consensus of the member states. Evidently, an
increase of world trade and economic have been experience
since the Second World War. Tariffs on industrial products
have reduced significantly and now average less than 5% in
industrial countries. In the first 25 years after the war,
world economic growth averaged about 25% per year as a result
of lower trade barriers. Liberal trade policies allowed
unrestricted flows goods and services that sharpen
competition, motivate innovation and breed success. This is a
result of comparative advantage in which countries take
advantage of their asset to concentrate on what they can
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produce best, and then trading these products for products
that others countries produce best.7
In contrast, a success in trade is not static, because the
ability to compete well in one product can shift from company
to company when the market changes and new technology emerge
which make the cheaper and better to use. Therefore producers
must stay alert as well as adapt to these changes in order to
stay competitive in global market. On the other hand,
challenges to a free trading system are always present. This
usually happens in developed countries such as protectionism
through subsidies, complicated red tape, to protect the
domestic producers. Protection ultimately leads to bloated,
inefficient producers supplying consumers with outdated,
unattractive products. In the end, factories close and jobs
are lost despite the protection and subsidies. If other
governments around the world pursue the same policies, markets
contract and world economic activity is reduced. One of the
objectives that governments bring to WTO negotiations is to
prevent such a self-defeating and destructive drift into
protectionism.8
III. THE GATT YEARS: FROM HAVANA TO MARRAKESH
Between 1948 and 1994, the General Agreement on Tariffs and
Trade (GATT) served as rules for much of global trading7 “Understanding the WTO,” World Trade Organization (2014); available from
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact3_e.htm; Internet; accessed 18 April 2014.
8 Ibid
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system. Throughout those 47 years, it worked as a provisional
agreement and an organization regulating world trade. The GATT
trade rounds concentrated on further reducing tariffs. Later,
the Kennedy Round in mid 1960s brought about a GATT Anti-
Dumping Agreement and a section on development. Then, the
Tokyo Round came in 1970s, which resulted in an average one-
third cut in customs duties in the world’s nine major
industrial markets, bringing the average tariff on industrial
products down to 4.7%. The eighth round, known as the Uruguay
Round of 1986-1994, was the last and most extensive of all,
which led to the emergence of the WTO and new sets of
agreements.9
Did GATT succeed?
GATT was a provisional with a limited field of action, but it
was successful in promoting and securing the liberalization of
world trade. Apparently, the reduction in tariffs alone spur
very high rate of world trade growth between 1950s and 1960s,
at around 8% a year. During the GATT era the trade growth has
consistently out-paced production growth, this measure the
countries’ increasing ability to trade with each other and
reap the benefits of trade. The rush of new members during the
Uruguay Round demonstrated that the multilateral trading
system was recognized as an anchor for development and an
instrument of economic and trade reform.10 Although the GATT
9
Ibid10 “Understanding the WTO,” World Trade Organization (2014).
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was seen to be success, during the economic recession in the
1970s and early 1980s, countries again started to form
protectionism policy for sectors facing increase foreign
competition. There was also an increased in unemployment rate
and bankruptcy which caused the government in Western Europe
and North America bilateral market-sharing arrangements with
competitors and to embark on a subsidies race to maintain
their holds on agricultural trade. Both these changes
undermined GATT’s credibility and effectiveness.11 As time goes
by, world trade had become more complex, the globalization of
world economy was underway, trade in services was not cove by
GATT rules, which was a major interest of most countries, and
international investment had expanded. Besides, in
agriculture, loopholes in the multilateral system were heavily
exploited, and efforts at liberalizing agricultural trade met
with little success. Many issues arose within the trading
system, which led the GATT members to look for new effort to
reinforce and extend the multilateral system, and that effort
resulted in the Uruguay Round, the Marrakesh Declaration, and
the creation of the WTO.12
IV. THE URUGUAY ROUND
The Uruguay Round was the largest trade negotiation ever, and
most probably the largest negotiation of any kind in history.
11
Ibid12
Ibid
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It covered almost of types of trade from toothbrushes to
pleasure boats, from banking to telecommunications, from the
genes of wild rice to AIDS treatments. The negotiation took
seven and half years to reach the conclusion. Within only two
years, participants had agreed on a package of cuts in import
duties on tropical products — which are mainly exported by
developing countries. They had also revised the rules for
settling disputes, with some measures implemented on the spot.
And they called for regular reports on GATT members’ trade
policies, a move considered important for making trade regimes
transparent around the world.13
A round to end all rounds?
This round started in September 1986 in Punta Del Este,
Uruguay. The negotiation was based on the GATT articles for
review. These talks was going to extend the trading system
into several new areas including trade in services and
intellectual property, and to reform trade in sensitive
sectors of agriculture and textiles. The early result of the
round concerned concessions on market access for tropical
products — aimed at assisting developing countries — as well
as a streamlined dispute settlement system, and the Trade
Policy Review Mechanism which provided for the first
comprehensive, systematic and regular reviews of national
trade policies and practices of GATT members.14 The later
13
“Understanding the WTO,” World Trade Organization (2014).
14 Ibid
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negotiation lurched between impending failures, to predictions
of imminent success. Several deadlines came and went. New
points of major conflict emerged to join agriculture:
services, market access, anti-dumping rules, and the proposed
creation of a new institution. Differences between the United
States and European Union became central to hopes for a final,
successful conclusion. In November 1992, the US and the EU
settled most of their differences on agriculture in a deal
known informally as the “Blair House accord”. By July 1993 the
“Quad” (US, EU, Japan and Canada) announced significant
progress in negotiations on tariffs and related subject,
market access. It took until 15 December 1993 for every issue
to be finally resolved and for negotiations on market access
for goods and services to be concluded On 15 April 1994, the
deal was signed by ministers from most of the 123
participating governments at a meeting in Marrakesh, Morocco.
Yet, the Uruguay Round agreements contain timetables for new
negotiations on a number of topics. And by 1996, some
countries were openly calling for a new round early in the
next century. The response was mixed, but the Marrakesh
agreement did already include commitments to reopen
negotiations on agriculture and services at the turn of the
century. These began in early 2000 and were incorporated into
the Doha Development Agenda in late 2001.15
V. THE DOHA AGENDA
15
“Understanding the WTO,” World Trade Organization (2014).
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In November 2001 WTO member governments agreed to launch new
negotiations in Doha, Qatar. They also agreed to work on other
issues, in particular the implementation of the present
agreements. The entire package is called the Doha Development
Agenda (DDA). The negotiations take place in the Trade
Negotiations Committee and its subsidiaries, which are
usually, both regular councils and committees meeting in
“special sessions”, or specially created negotiating groups.
Other work under the work program takes place in other WTO
councils and committees. This round of negotiation was
designed to help all nations move towards globalization. This
was to be accomplished by lowering trade barriers, especially
the use of subsidies to protect agriculture sector.16 The round
was originally supposed to finish by the end of 2005 in Hong
Kong, and be completed by 2006. However, due to a host of
problems and breakdown in negotiations, the deadline has been
extended to 2013. During the negotiation, a few issues have
been resolved except the problem concerning agriculture
sector. The developed countries are reluctant to scale back on
their own program, while the developing countries want special
measures to protect them in case of supply surplus and price
fall. The issue led to the extension of Doha Round
negotiation. Although the round isn’t complete and has had
many major problems, there has been some success. There has
been a partial cut backs as the US agreed in 2008 to
cut back it farming subsides from $18.2 to $15, showing some16 “Doha Development Agenda,” World Trade Organization, (2014); available
from http://www.wto.org/english/tratop_e/dda_e/dda_e.htm; Internet; accessed 19 April 2014.
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compromise to developing nations terms. Furthermore, under
previous rounds, Trade-related Intellectual Property Rights
(TRIPs) were heavily protected. This included the patents of
medicines, held by companies in developed countries. In 2003
it was agreed that patented medicines could be manufactured in
developed countries and then traded to developing countries
without regards to the patent. This has helped increase
healthcare and quality of life in developing countries.17
Principles of the trading system
The WTO agreements are lengthy and complex because they are
legal texts covering a wide range of activities. They deal
with: agriculture, textiles and clothing, banking,
telecommunications, government purchases, industrial standards
and product safety, food sanitation regulations, intellectual
property, and much more. But a number of simple, fundamental
principles run throughout all of these documents. These
principles are the foundation of the multilateral trading
system.18
Trade Without discrimination
1. Most-favored nation (MFN): treating other people equally – under the
agreement of the WTO, member states cannot normally
discriminate between their trading partners. All17
“The Doha Round,” Trade project, (2014); available from http://matthewgordonbrown.tumblr.com/ post/378730962/the-doha-round-summary-success; Internet; accessed 19 April 2014.
18 “Understanding the WTO,” World Trade Organization (2014).
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countries are granted a special favor such as lower
custom duty rate for one of their products. This is the
first most important article of the General Trade
Agreement on Tariffs and Trade (GATT) that govern trade
in goods. This principle is also used on the General
Agreement on Trade in Services (Article 2) and the
Agreement on Trade Related Aspects of Intellectual
Property Rights (Article 4), while the principle is
handled slightly different in each agreement. However,
the rules allow some exceptions to member states.
Particularly, countries are allow to establish a free
trade agreement that applies only to goods traded within
the group – discriminating against goods from non-member
states. At the same time, countries can raise barriers
against products, which considered being trade unfairly
from specific countries. on the other hand, in services,
counties are allowed to discriminate, but to a limited
circumstances. However, these exceptions are permitted
under very strict conditions. Basically, MFN is to assure
that at any time a countries lower a trade barriers or
open up its market, it has to do so for the same goods or
services from all of its trading partners regardless of
rich or poor, strong or weak.19
2. National Treatment: treating foreigners and locals equally – imported
or domestically produced goods should be treated equally,
19 Ibid
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at least after the foreign goods have entered the market.
Foreign and domestic services should also be treated
similarly, as well as foreign and local trademarks,
copyrights and patents. This principle of national
treatment only applies once a product, service or item of
intellectual property has entered the market. Therefore,
charging custom duty on an import is not a violation of
national treatment even if locally produced-products are
not charged an equivalent tax.20
Free trade: gradually, through negotiations
Obviously, reducing trade barriers is seen to be one of the
most encouraging procedures to free trade. The barriers
concerned consists of custom duties or tariffs and measures
such as import bans or quotas the restrict quantity
selectively. From time to time other issues such as red tape
and exchange rate policies have also take into the discussion.
Since the establishment of GATT between 1947- 1948 there have
been eight rounds of negotiations. The ninth round, which is
known as the Doha development agenda, is currently underway.
This focused on lowering tariffs on imported goods. As a
result of negotiation, industrial countries tariff rate on
industrial goods has fallen steadily to less than 4% by mid-
20 “Understanding the WTO,” World Trade Organization (2014).
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1990s. Later in 1980s, this Doha round negotiation had
expanded to cover non-tariffs barriers on goods, as well as to
other areas such as services and intellectual property.
Evidently, opening market can be advantageous, but this also
requires adjustment. Under this agreement, countries are
allowed to introduce change gradually, through progressively
liberalization. Developing member states are usually given
longer period of time to fulfill their obligations.21
Predictability: through binding and transparency
Promising not to raise trade barrier can be as important as
lowering one, due to the fact that this promise gives
businesses a clearer view of their future opportunities. With
this stability and predictability, investment is then
encouraged, jobs are created and consumers can fully enjoy the
benefits of competition (choices and lower prices). This
multilateral trading system is a primary effort by governments
to envisage and stabilize the business environment.
With in the World Trade Organization, when member countries
agree to open their markets for goods and services, they bind
their commitments. In terms of goods, these bindings amount to
ceiling on custom tariff rates. However, sometimes countries
tax imports at rates that are lower than the bound rates. This
is frequently happen in developing countries while in
developed counties the rate charged and the bound rate are
21 Ibid
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actually the same. Yet, bindings the can be changed only after
negotiating with its trading partners, in which this could
mean compensating them for loss of trade. With one of the
achievement of the Uruguay round of multilateral trade
negotiation, which was to increase the amount trade under
binding commitments, 100% percent of agricultural products now
have bound tariffs. This later result in a substantially
higher degree of market security for traders and investors.
The system is to improve predictability and stability in many
ways including discouraging the use of quotas and other
measures used to limit quantities of imports. Furthermore, to
make countries’ trade rule as transparent and public as
possible.22
Promoting fair competition
Generally, WTO is known as a “free-trade” institution, yet
this is not solely accurate. This organization does allow
tariffs, to some extent, other forms of protection. Obviously,
it is more of a system of rules dedicated to open, fair and
undistorted competition, the rule of non-discrimination – MFN
and national treatment, in particular. There are also others
such as dumping and subsidies. The established rules are to
try to balance out trade between countries and how governments
able to respond, charging additional import duties calculated
to compensate to damaged caused by unfair trade.23
22 “Understanding the WTO,” World Trade Organization (2014).
23 Ibid
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Encouraging development and economic reform
We acknowledge that WTO does contribute to development.
However, members who are developing states need to be flexible
in the time they take to implement the system’s agreement.
Also the agreement themselves include the earlier provisions
of GATT, which allow specific assistance and trade concessions
for those developing countries. Over three quarters of WTO
members are developing countries and countries that are in the
process of transforming to into market economies. Meanwhile,
the Uruguay round negotiation is more influential and more
active in those countries than the developed ones. And they
are even more active in the current Doha Development Agenda.
After the Uruguay round, developing member states were to take
on most of the obligation required by the developed countries,
and the agreement did allow them some time to adjust the
difficulties of the listed provisions. According to the
ministerial decision adopted at the end of the round, better-
off countries should facilitate implementing market access
commitment on goods exported by the least-developed ones, as
well as to increase technical assistance for them. As a
result, developed countries have begun to allow duty-free and
quota-free imports for almost all products from least-
developed partners.24
24 “Understanding the WTO,” World Trade Organization (2014).
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VI.
SPECIAL POLICIES
The WTO’s main functions are to do with trade negotiations and
the enforcement of negotiated multilateral trade rules,
including dispute settlement. Special focus is given to four
particular policies supporting these functions.25
Assisting developing and transition economies - much
attention is paid to the special needs and problems of
developing and transition economies. The WTO
Secretariat’s Training and Technical Cooperation
Institute organizes a number of programs to explain how
the system works and to help train government officials
and negotiators. The subjects can be anything from help
in dealing with negotiations to join the WTO and
implementing WTO commitments to guidance in participating
effectively in multilateral negotiations.26
Specialized help for exporting: the International Trade
Center – GATT established this Centre in 1964 at the
request of the developing countries to help them promote
their exports. The center responds to requests from
developing countries for assistance in formulating and
implementing export promotion programs as well as import
operations and techniques. It provides information and
25 Ibid
26 Ibid
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advice on export markets and marketing techniques. It
assists in establishing export promotion and marketing
services, and in training personnel required for these
services.27
The WTO in global economic policy-making - the
declaration envisages an increased contribution by the
WTO to achieving greater coherence in global economic
policy-making. It recognizes that different aspects of
economic policy are linked, and it calls on the WTO to
develop its cooperation with the international
organizations responsible for monetary and financial
matters — the World Bank and the International Monetary
Fund.28
Transparency (1): keeping the WTO informed - Often the
only way to monitor whether commitments are being
implemented fully is by requiring countries to notify the
WTO promptly when they take relevant actions. Many WTO
agreements say member governments have to notify the WTO
Secretariat of new or modified trade measures. For
example, details of any new anti-dumping or
countervailing legislation, new technical standards
affecting trade, changes to regulations affecting trade
in services, and laws or regulations concerning the
27 “Understanding the WTO,” World Trade Organization (2014).
28 Ibid
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intellectual property agreement — they all have to be
notified to the appropriate body of the WTO. Special
groups are also established to examine new free-trade
arrangements and the trade policies of countries joining
as new members.29
Transparency (2): keeping the public informed - the main
public access to the WTO is the WTO website. News of the
latest developments are published daily. Background
information and explanations of a wide range of issues
are also available. And those wanting to follow the
nitty-gritty of WTO work can consult or download an ever-
increasing number of official documents, now over
150,000, in Documents Online. The objective is to make
more information available to the public. An important
channel is through the media, with regular briefings on
all major meetings for journalists in Geneva, and
increasingly by email and other means for journalists
around the world.30
VII. DISPUTE SETTLEMENT
A unique contribution
Dispute settlement is one of the most important issues in
multilateral trading system, and the WTO’s unique contribution
29 Ibid
30 “Understanding the WTO,” World Trade Organization (2014).
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to the stability of the global economy. If the means of
settling dispute is excluded, the rules then could not be
enforced which will undermine the effectiveness of the WTO.
Its system is based on a clearly defined-rules, with timetable
for completing a case. Still, the objective is not to pass
judgment, the priority is to settle dispute through
consultations if possible. Particularly, by 2008 only around
136 out of 369 cases had reached the full panel process, the
others have been settled out of court or remain in a prolonged
consultation phase.31
Principles: equitable, fast, effective, mutually acceptable
Most disputes that happen within the WTO are usually about the
broken promises. A dispute may arise when one country adopt a
trade policy measures or take some actions that others
believed to be breaking the WTO agreements, or to be a failure
to live up to obligations. All member states agreed that if
one violates the trade rules, they would use the multilateral
system of settling dispute rather than taking action
unilaterally.
The procedures existed under the old GATT rules, which were
not so effective as it did not have a fixed timetable, ruling
were easier to block, and many case keep extending for a long
time without final conclusions. However, after the Uruguay
Round was introduced, there is more structured process with
31 “Dispute settlement,” World Trade Organization (2014); available from http://www.wto.org/english/ tratop_e/dispu_e/dispu_e.htm; Internet; accessed 20 April 2014.
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more clearly defined stages in the procedure. It includes
greater discipline for the length of time, with flexible
deadlines set in various stages of the procedure.
How disputes are settled
Settling disputes is the responsibility of the Dispute
Settlement Body (the General Council) that consists of the all
WTO members. The Dispute Settlement Body has the authority to
establish “panels” of expert to consider the case, and to
accept or reject the panel’s finding or the result of an
appeal. It also monitors the implementation of rulings and
recommendations, and has the power to authorize retaliation
when a member does not obey the ruling.32
First stage: consultation (up to 60 days). Before taking
any other actions the countries in dispute have to talk
to each other to see if they can settle their differences
by themselves. If that fails, they can also ask the WTO
director-general to mediate or try to help in any other
way.
Second stage: the panel (up to 45 days for a panel to be
appointed, plus 6 months for the panel to conclude). If
consultations fail, the complaining country can ask for a
panel to be appointed. The country “in the dock” can
block the creation of a panel once, but when the Dispute
Settlement Body meets for a second time, the appointment32
“Dispute settlement,” World Trade Organization (2014).
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can no longer be blocked (unless there is a consensus
against appointing the panel).33
Basically, the function of the panel is to help the Dispute
Settlement body making rulings and recommendations. Because
the panel’s report can only be rejected by consensus in the
Dispute Settlement Body, it conclusions are difficult to
overturn.
The agreement describes in some detail how the panels work.
The main stages are:
Before the first hearing: each side in the dispute
presents its case in writing to the panel.
First hearing – the case for complaining country and
defense: the complaining country or countries, the
responding country, and those that have announced they
have an interest in the dispute, make their case at the
panel’s first hearing.
Rebuttals: the countries involved summit written
rebuttals and present oral arguments at the panel’s
second meeting.
Experts: if one side raises scientific or other technical
matters, the panel may consult experts or appoint an
expert review group to prepare an advisory report.
33 Ibid
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First draft: the panel submits the descriptive (factual
and argument), sections of its report to the two sides,
giving them two weeks to comment. This report does
include findings and conclusion.
Interim report: the panel then submits an interim report,
including its finding and conclusion, to the two sides,
giving them one week to ask for a review.
Review: the period of review must not exceed two weeks.
During that time, the panel may hold additional meetings
with the two sides.
Final report: a final report is submitted to the two
sides and three weeks later, it is circulated to all WTO
members. If the panel decides that the disputed measure
does break a WTO agreement and an obligation, it
recommends that the measure be made to conform to the WTO
rules. The panel may suggest how this could be done.
The report becomes a ruling: the report becomes the
Dispute Settlement Body’s ruling or recommendation within
60 days, unless a consensus rejects it. Both sides can
appeal a report (and in some cases both sides do).34
34 “Dispute settlement,” World Trade Organization (2014)
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VIII.
STRUCTURE
The Ministerial Conference is the governing body of the WTO
which compose of international trade ministers from all its
member states; of whom meets up at least once every two years.
Its responsible for setting strategic direction for the
organization and making all final decisions on agreements;
generally taken by consensus (although voting can take place)
thus making the process difficult due to 136 very different
membership composition.
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The General Council is the key decision-making arena for the
WTO for most issues and is responsible for the day-to-day
operation of the organization as a whole. Thus, several bodies
to be described below also report directly to the General
Council. It composed of senior representatives of all members
(usually ambassador level).
The Trade Policy Review Body reviews the Trade Policies of all
of its member states periodically; “intended to provide a
general indication of how states are implementing their
obligations, and to contribute to improved adherence by the
WTO parties to their obligations.”
The Dispute Settlement Body oversees the effectiveness of the
dispute resolution process and the implementation of all WTO
agreements on the disputes. Dispute resolution is mandatory
and binding on all members. Two bodies are being used for the
disputes to be heard and ruled: Dispute resolution panels
(which is chosen individually for each case) and the permanent
Appellate Body (established in 1994 by the Understanding on
Rules and Procedures Governing the Settlement of Disputes to
consider appeals to decisions by Dispute Settlement panels). A
full consensus of the Dispute Settlement Body is needed to
have the final decision of the Appellate Body being reversed.
The Council on Trade in Goods and Trade in Services operate under
the General Council and is responsible for “oversee the
details of the general and specific agreements on trade in
goods and services. There is also a Council for the Agreement on
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Trade-Related Aspects of Intellectual Property Rights dealing with just
that agreement and subject area.”35
The Secretariat has 639 regular staff, with offices only in
Geneva, who has no legal decision-making powers but their role
is to provide vital services and advice to those who do. They
undertake the administrative as well as technical functions
(for developing countries and especially for the least-
developed) for WTO delegate bodies. They provide independent
supports, such as trade performance and trade policy analysis
to WTO member governments of all aspects of the organization,
as well as legal and accession assistance in resolving
disputes and for membership admission, respectively.36
Director General is elected by the members and supervising
the Secretariat. Roberto Azevêdo is the sixth Director-General
of the WTO. His appointment took effect on 1 September 2013
for a four-year term.37
The Committee on Trade and Development and Committee on Trade
and Environment work on these specific aspects to ensure on how35 “Structure of the World Trade Organization,” United Nations Environment
Programme, International Institute for Sustainable Development, (2000) [online article]; available from http://www.iisd.org/trade/ handbook/3_1.htm; Internet; accessed 12 April 2014.
36 “Overview of the WTO,” World Trade Organization, (2014) [online publication]; available from http://www.wto.org/english/thewto_e/secre_e/intro_e.htm; Internet; accessed12 April 2014.37
“WTO Director-General: Robert Azevedo,” World Trade Organization, (2014) [online publication]; available from http://www.wto.org/english/thewto_e/dg_e/dg_e.htm; Internet; accessed 12 April 2014.
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the WTO deals with sustainable development issues. They are
both active as the “discussing grounds” but do not actually
negotiate trade rules.38
IX. MEMBERSHIP, ALLIANCES, AND BUREAUCRACY
WTO currently has 159 members, up till 2 March 2013.39 Member
states have joined the system through the process of
negotiation. Membership means “the balance of rights and
obligations,” thus they would enjoy privileges being offered
to them from other member states as well as the trade security
under which the rules provide. In return, they have to agree
to open up their markets and abided by the rules which is the
result of the accession negotiations. Countries negotiating
membership are WTO “observers.”40
38 “Structure of the World Trade Organization,” United Nations Environment Programme, International Institute for Sustainable Development, (2000).39
“Members and Observers,” World Trade Organization, (2014) [online publication]; available from http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm; Internet; accessed 12 April 2014.
40 “Membership, alliances and bureaucracy,” World Trade Organization,
(2014) [online publication]; available from http://www.wto.org/english/thewto_e/whatis_e/tif_e/org3_e.htm#join; Internet; accessed 12 April 2014.
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Observer Governments
“With the exception of the Holy See (Vatican), observers must
start accession negotiations within five years of becoming
observers.” Current observer governments include Afghanistan,
Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia
and Herzegovina, Comoros, Equatorial Guinea, Ethiopia, Holy
See (Vatican), Iran, Iraq, Kazakhstan, Lebanese Republic,
Republic of Liberia, Libya, Sao Tomé and Principe, Serbia,
Seychelles, Sudan, Syrian Arab Republic, Uzbekistan, Yemen.41
Accession Process
41 “Members and Observers,” World Trade Organization, (2014) [online publication].
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Any state or customs territory having full autonomy in the
conduct of its trade policies may join (“accede to”) the WTO,
but WTO members must agree on the terms. Broadly speaking the
application goes through four stages:
First, “tell us about yourself.” The government applying
for membership has to submit a memorandum describing all
aspects of trade and economic policies that might have a
bearing on WTO agreements. This memorandum is to be examined
by the working party (open to all WTO members) dealing with
the country’s application.
Second, “work out with us individually what you have to
offer.” After the working party has made sufficient progress
on the application progress, parallel bilateral talks begin
between prospective new member and other WTO member states,
since different countries have different trading and economic
interests including tariff rates, the accessibility of their
markets commitment and other policies in the trade of goods
and services. These talks are done through non-discrimination rules
in which all member states of WTO are equally applicable; to
determine the benefits they can expect once accepting the new
member.
Third, “let’s draft membership terms.” After the
examination of member’s application memorandum and the
parallel bilateral negotiations are completed, the working
party finalizes the term of accession which appear in a
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report, a draft membership treaty (“protocol of accession”)
and lists (“schedule”) of the member-to-be’s commitments.
Finally, “the decision.” The final packages of the term
of accession are then presented to the WTO General Council or
the Ministerial Conference. A two-third majority vote in favor
is needed in order to have the protocol signed and for the
applicant to accede to the organization. “In many cases, the
country’s own parliament or legislature has to ratify the
agreement before membership is complete.”
Representing WTO…
Although the work of the WTO is undertaken by the binding
relations among representatives of member states, its root
lies in the everyday activity of industry and commerce and as
a result, trade policies and negotiation positions usually
taking into account the advice from private firms, business
organizations, farmers, consumers and other interest groups.
Most countries have their diplomatic mission in Geneva, headed
by their special ambassadors to the WTO but sometimes expert
representatives from specific field are sent directly to
present their government’s views on the issue.
Representing Groups of Countries
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Establishing groups or alliances within the WTO has become a
common practice and even in many cases, they speak with one
voice by having a single spokesman or a negotiating team to
represent them all. It somehow reflects “the broader spread of
bargaining power in the WTO” which commonly seen as the result
of economic integrations – more customs union, free trade
areas and common markets are being set up. Coalition-building
also seen as a mean for smaller countries to increasing their
bargaining power with their larger trading partners and to
ensure that their voice are being heard when the consultation
held. With this coalition, common positions that are adopted
by groups of countries can also reached more easily. Sometimes
it is created to break the deadlock and create a compromising
stance rather than to stick with the common position.
The largest and most comprehensive group is the European Union
which consists of its 27 member states with a customs union
and a single external trade policy and tariff; having the
European Commission speaking for the EU at almost all WTO
meetings. “A lesser degree of economic integration has so far
been achieved by WTO members in the ASEAN.” Nevertheless, they
do have many common trade interests and frequently speak with
a single voice for the coordinate positions. “MERCOSUR, the
Southern Common Market (Argentina, Brazil, Paraguay, Uruguay
and Venezuela, with Bolivia, Chile, Colombia, Ecuador and Peru
as associate members) has a similar set-up.” North American
Free Trade Agreement: NAFTA (Canada, US and Mexico) has not
yet reached constituent stance to have a single spokesman on
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WTO issues. “Among other groupings which occasionally present
unified statements are the African Group, the least-developed
countries, Caribbean and Pacific Group (ACP) and the Latin
American Economic System (SELA).” A well-known alliance of a
very different kind, from four continents and members ranging
from OECD countries to the least developed, is the Cairns
Group. The group’s common objective is to has agriculture to
be liberalized due to the lack of resources to compete with
larger countries in domestic and export subsidies.42
International Intergovernmental Organizations granted Observer status to
WTO bodies
The purpose of granting the observer status to international
intergovernmental organizations in the WTO is to enable them
to follow discussions therein on matters of their direct
interests. The guidelines provided that those organizations
shall not be considered for meetings of the Committee on
Budget, Finance and Administration or the Dispute Settlement
Body. Also, the Textiles Monitoring Body and the Accession
Working Parties are not included and thus have no
international intergovernmental organization observers.
42 “Membership, alliances and bureaucracy,” World Trade Organization, (2014) [online publication].
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“The International Trade Centre UNCTAD/WTO, as a joint subsidiary organ of the
WTO and UNCTAD, is not required to formally submit a request for observer status
in the WTO bodies and is invited as appropriate to attend meetings of those WTO
bodies it wishes to attend (WT/GC/M/25, item 1). The IMF and World Bank have
observer status in WTO bodies as provided for in their respective Agreements with
the WTO (WT/L/195).”43
X. MILLENNIUM DEVELOPMENT GOALS (MDGS)
The work of the WTO is to achieve a number of Millennium
Development Goals (therein MDGs), especially for poorer
countries, that it is essential to “enabling” international
environment to create a stable multilateral trading system and
building more “favorable” global environment for developing
countries. A fundamental aim of the Doha Round of trade
negotiations is to ensure that the developing countries are
provided with trade opportunities that will enhance their
development prospects and would allow them to benefit
equitably from international trade along with countries that
are better off which is a significant contribution toward the
achievement of the MDGs.
In fact, some developing countries, especially the least-
developed countries, are still incapable of receiving those
trade opportunities to be offered due to the demand for
further technical and financial assistance from the43 “International intergovernmental organizations granted observer
status to WTO bodies,” World Trade Organization, (2014) [online publication]; available from http://www.wto.org/english/thewto_e/whatis_e/ tif_e/org3_e.htm#join; Internet; accessed 12 April 2014.
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international community. The Aid for Trade Initiative, WTO is
a leading proponent, aims to help them to strengthen their
production capacities and trade-related infrastructure which
are the fundamental element to gains from trade opening.
In achieving and making those MDGs a reality, WTO will
continue to join forces with other international organizations
and other actors to strengthen their strong and harmonious
cooperative efforts. Since 2000, the international community
has made progress in achieve the MDG 8 in the Doha Development
Round; in providing Aid for Trade to poor countries and the
improvement of having access to medicines. However, the 2015
plan is to achieve further goals.44
XI. NEWS RELATED WITH WTO
All 159 WTO Members have agreed on something, for the First Time ever
Since its establishment eighteen years ago, WTO was expected
to be a harmonious and collaborative arena in fostering global
trade and the benefits that each member states could boldly
carried forward. In fact, it turns out to be the opposite.
WTO’s agreement has become a resistance to free trade and the
uncertainty of bringing down commerce barrier. In early
December 2013, however, all 159 WTO members have agreed to “a
package of protrade and development” for the very first time in44 “Summing Up,” World Trade Organization, (2014) [online publication];
available from http://www.wto.org/english/thewto_e/coher_e/mdg_e/summing_up_e.htm; Internet; accessed 12 April 2014.
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this organization’s history. The pact included making
exchanges more convenient by “smoothing” customs procedures
and reducing “red tape” around the world. It also offers
opportunity for the least-developed countries to have better
access to the markets of developed ones. The International
Chamber of Commerce figures out that the pact could increase
world exports by $1 trillion and create 18 million “much
needed” jobs in the developing world.
The success over such cooperative spirit also raises the hope
that it will lead to the agreement over other trade deals
being negotiated. The two major pacts that the White House has
been push forward for, one with the EU and the other with a
collection of Pacific Rim nations called the Trans-Pacific
Partnership; if succeed would be the most ambitious trade
deals by the US since NAFTA, back 20 years ago.45
Russia threatens US with WTO action over Crimea sanctions
Russia has threatened to take the US to WTO regarding the
sanctions imposed on the context of Crimea or the Ukraine
crisis. Travel bans and financial sanctions against Russia has
been imposed by the US and the EU. “The WTO said that Russia
had expressed concern about a recent Executive Order signed by
45 Michael Schuman, “All 159 WTO Members have agreed on something, for the First Time Ever,” TIME, (2013) [online news]; available from http://world.time.com/2013/12/09/all-159-wto-members-have-agreed-on-something-for-the-first-time-ever/; Internet; accessed 12 April 2014.
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U.S. President Barack Obama regarding listed persons of
Russian Federation whose bank accounts were blocked.”46
“The application of trade sanctions for geopolitical reasons
has never been tested in the WTO,” and thus if Russia is
headed forward, this would be the first formal challenge to
trade sanctions in the global arena. Though, this is due in
part because of the broad exemption for national security reasons
stated in Article 21 of the GATT in which all member states
are given rights to take actions that might otherwise violate
the body’s rule during when their national security is being
challenged or to abide by UN Security Council decisions as
well as in time of war or in the state of emergency in
international relations.47
China to Appeal WTO Rare-Earth Ruling
The WTO has ruled in favor of the complaint submitted by the
US, the EU, and Japan who accused China of violating global
trade rules by imposing quotas on exports rare-earth mineral.
In response, China plans to file a complaint against WTO’s
ruling of favoring this accusation. Rare-earth minerals are a
crucial raw material to manufacture a range of technologies
46 “Russia mulls lawsuit against US in WTO over sanctions,” Reuters, (2014) [online news]; available from http://www.reuters.com/article/2014/04/16/us-russia-banks-wto-idUSBREA3F0PZ20140416; Internet; accessed 12 April 2014. 47
“Russia threatens US with WTO action over Crimea sanctions,” Financial Times, (2014) [online news]; available from http://www.ft.com/intl/cms/s/0/5418ad46-c57c-11e3-97e4-00144feabdc0.html #slide1; Internet; accessed 12 April 2014.
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from smartphones to missile-defense systems. China, on the
other hand, has pointed out that the restrictions are done in
place for environmental-protection reasons.48
China loses WTO bid to overturn US law against Unfair Subsidies
A WTO dispute panel rejected China’s claim that the US’s
public law 112-99 (also known as the “GPX fix”), signed by
President Barrack Obama in March 2012, broke the world trade
rules. The dispute concerned over the capability of the US to
remedy unfair subsidies and dumping by China, “for the benefit
of American businesses and workers.” The US won the bid but
Michael Froman, a US trade representative, had stated that he
was disappointed that China has actually won another part of
the case in which some Chinese exports went “twice over” –
being subsidized and dumped. “Both sides have 60 days to
appeal the ruling, which came a day after China lost a WTO
dispute over its restrictions on exports of rare earth metals,
tungsten and molybdenum.”49
48
“China to appeals WTO rare-earth ruling,” The Wall Street Journal, (2014) [online news]; available from http://online.wsj.com/news/articles/SB10001424052702304626304579506551522446682?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com
%2Farticle%2FSB10001424052702304626304579506551522446682.html; Internet; accessed 12 April 2014. 49 Tom Miles, “China loses WTO bid to overturn US law against unfair
subsidies,” Reuters, (2014) [online news]; available from http://www.reuters.com/article/2014/03/27/us-china-usa-wto-idUSBREA2Q11M20140327; Internet; accessed 12 April 2014.
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XII.
CRITICAL ANALYSIS: STRENGTHS AND WEAKNESSES
If we compare the WTO dispute settlement system with the
previous system of GATT 1947, WTO’s is far more effective.
Compares with other multilateral systems of dispute resolution
in international law, “the compulsory nature and the
enforcement mechanism” of the WTO’s certainly stand out.
“Moreover, its quasi-judicial and quasi-automatic character
enables it to handle more difficult case. These features also
provide greater guarantees for Members that wish to defend
their rights.”
On the other hand, one of the critical bodies of the WTO is
the Dispute Settlement body. Major weaknesses include the
“datelines” and the consequences afterward. One could argues
that it has taken a considerable amount of time for this WTO’s
body to resolve disputes which in turn, has lead to the
continuation of major economic harms to the complainant.
During the dispute settlement procedure itself, “no
provisional measures” are there to protect the economic and
trade interests of the successful complainant and no
compensation are to be offered to them for their suffering
during the time of economic harm applied. “Nor does the
winning party receive any reimbursement from the other side
for its legal expenses.”50 50 “Evaluation of the WTO dispute settlement system: result to date,”
World Trade Organization, (2014) [online publication]; available from http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/ c12s3p1_e.htm; Internet; accessed 12 April 2014.
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Other criticism of the WTO arises from the question over the
efficiency of free trade. The belief that free trade was good
for all came under serious question as the developing world
“sucked-up” low-skilled manufacturing jobs from the
industrialized West and that they were not gaining the
advantages required to pursue their own developments from the
free trade deals. As a result, the aims and objectives that
the WTO has been trying to pursue are of its rare source of
hope.51
XIII. CONCLUSION
Even if WTO is being perceived as one of the most, if not the
most, effective international institutions, it does have major
counter arguments that raise our attention. The question of
controversy between “the global trade rules” versus “ the
broad exemption of national security reasons” lead us to
debate over the effectiveness of WTO in resolving disputes
arise between member states. One could argue the tendency of
favoring certain developed nations rather than the others or
in particular, the fact of favoring the US and its allies
rather than China (as concluded from the extracted news
article above). Many people speculate the domination of the US
over WTO’s ruling which somehow lessen its own ruling power
and the notion of being an internationally neutral figure.
51 Michael Schuman, “All 159 WTO Members have agreed on something, for the First Time Ever,” TIME, (2013) [online news].
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The question over free trade is another aspect that WTO should
have dealt with. One could state that it only benefits the
developed world and leave the developing ones behind; as if
all of the trade deals are some sort of exploitations rather.
The effectiveness of the WTO itself is questionable in the
long run, especially when the frustration level reaches its
max.
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