A Project OnHistorical Background And Organizational Structure Of WTO

SUBMITTED TOMs. Ankit Awasthi(FACULTY Trade And Investment)

SUBMITTED BYVIVEK KUMAR SAISEMESTER-XROLL NO. 146B.A. L.L.B. (HONS)

HIDAYATULLAH NATIONAL LAW UNIVERSITY

ACKNOWLEDGEMENT

I would like to express my gratitude to Mr. Ankit Awasthi for granting me such an interesting and unconventional topic and expect his leniency in judging the same.Words fail to express my deep sense of glee to my teacher Mr. Ankit Awasthi, who enlightened me with his beautiful work on this topic. I would like to thank him for guiding me in doing all sorts of researches, suggestions and having discussions regarding my project topic by devoting her precious time. I thank to the H.N.L.U for providing Library, Computer and Internet facilities. And lastly I thank my friends and all those persons who have helped me in the completion of this project.

VIVEK KUMAR SAI

Research Methodology

This is a descriptive and analytical research paper. My research paper is largely based on secondary and electronic sources of information.

Table of Contents

Introduction5Historical Background7GATT Rounds10Objectives11Functions11Organizational Structure12Ministerial Conferences13Conclusion15

IntroductionThe World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. [footnoteRef:2] [2: https://www.wto.org/english/res_e/booksp_e/anrep_e/wtr11-2b_e.pdf]

The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTOs current work comes from the 198694 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the Doha Development Agenda launched in 2001. [footnoteRef:3] [3: https://www.wto.org/english/thewto_e/cwr_e/cwr_history_e.html]

Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to open markets for trade. But the WTO is not just about opening markets, and in some circumstances its rules support maintaining trade barriers for example, to protect consumers or prevent the spread of disease. The systems overriding purpose is to help trade flow as freely as possible so long as there are no undesirable side effects because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be transparent and predictable. Trade relations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements.The WTO is run by its member governments.[footnoteRef:4] All major decisions are made by the membership as a whole, either by ministers (who usually meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). While the WTO is driven by its member states, it could not function without its Secretariat to coordinate the activities. The Secretariat employs over 600 staff, and its experts lawyers, economists, statisticians and communications experts assist WTO members on a daily basis to ensure, among other things, that negotiations progress smoothly, and that the rules of international trade are correctly applied and enforced.[footnoteRef:5] [4: https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm] [5: https://www.wto.org/english/thewto_e/countries_e/org6_map_e.htm]

Historical Background

Following World War II, nations throughout the world, led by the United States and several other developed countries, sought to establish an open and nondiscriminatory trading system with the goal of raising the economic well-being of all countries.

Aware of the role of trade barriers in contributing to the economic depression in the 1930s, and the military aggression that rose following the depression, the countries that met to discuss the new trading system saw open trade as essential for economic stability and peace. The intent of these negotiators was to establish an International Trade Organization (ITO), which would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. The ITO was to be a United Nations specialized agency, but the ITO treaty was not approved by the United States and a few other signatories and never went into effect.

Instead, a provisional agreement on tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT) was reached and went into effect in 1948. This provisional GATT became the principal set of rules governing international trade for the next 47 years. The WTO is a relatively powerful international organisation. Its dispute settlement body can impose sanctions to enforce decisions on member countries disagreements over what WTO rules mean in practice.

The WTO was preceded by the General Agreement on Tariffs and Trade (GATT), which was concluded in 1947. Back then, the original idea was to start an International Trade Organisation, but that did not materialise. In the GATT context, there were eight rounds of trade liberalisation talks. Initially, their topics were the reduction of tariffs and the phasing out of quotas, but later other trade barriers were tackled to.

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 1994. It capped agriculture subsidies and established the WTO. [footnoteRef:6] [6: en.wikipedia.org/wiki/Uruguay_Round]

Other important results included: the end of textiles quotas at the beginning of 2005, the Agreement on Trade Related Intellectual Property Rights (TRIPS)[footnoteRef:7] and [7: en.wikipedia.org/wiki/TRIPS_Agreement]

the General Agreement on Trades in Services (GATS).

The WTO is meant to continue liberalising trade through negotiation rounds. For many years, however, members did not agree on an agenda for a new round. At the Ministerial Conference[footnoteRef:8] 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 growth. [8: https://www.wto.org/english/thewto_e/minist_e/minist_e.htm]

The next summits in Geneva in 1998 and Seattle in 1999 similarly failed. Protests, which are now considered the beginning of the movement of globalisation sceptics, overshadowed the meeting in Seattle. Civil society organisations argued that the WTO served the interests of rich nations in exploiting the Third World.

Such criticism was misleading. The WTO only passes rules when all members agree. Every member has 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.

Nonetheless, there was reason to protest. 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. The EU and US delegations arrive at Ministerial Conferences with armies of legal advisers, but small and poor countries are typically only represented by a handful of diplomats.

At the turn of the Millennium, moreover, a global dispute erupted over pharma patents, which, according to TRIPS, are protected all over the world. Brazil, Thailand, South Africa and other nations, however, urgently needed low cost HIV/AIDS medication. The Ministerial Conference in Doha in 2001 dealt with this matter by allowing members to break patents if doing so is necessary to protect public health because those who own intellectual property rights do not make essential medication available at acceptable prices.

The summit in Doha also started a new round of negotiations. Among other things, it is supposed to further reduce agricultural subsidies and phase out export subsidies for agricultural products. These issues matter very much to developing countries that depend on agriculture. Subsidies in richer nations thwart their farmers competitiveness.

In Doha, moreover, the rich nations put the Singapore issues on the agenda, even though the developing countries, led by India, made it clear they would not accept rules on these matters. So far, trade facilitation is the only Singapore issue on which talks have made reasonable progress. All in all, however, the Doha Round looks stuck. The USA and the EU are pursuing bilateral strategies and so are emerging giants like China and India.

GATT Rounds[footnoteRef:9] [9: Source: adapted from W.J. Bernstein (2008) A Splendid Exchange: How Trade Shaped the World, New York: Atlantic Monthly Press, p. 358.]

YearRoundAction

1947Geneva45,000 reductions in bilateral tariffs covering 20% of world trade.

1949Annency, France5,000 reductions in bilateral tariffs.

1951Torquay, England8,700 reductions in bilateral tariffs covering a new range of goods.

1955-56GenevaReductions in bilateral tariffs.

1960-62Dillon RoundReductions in bilateral tariffs. EEC talks begin.

1964-67Kennedy RoundReductions in bilateral tariffs. Negotiation rules established.

1973-79Tokyo RoundReductions in bilateral tariffs. Procedures on dispute resolution, dumping and licensing.

1986-93Uruguay RoundAdditional tariff reductions. Stalemate for agricultural tariffs.

1995WTO establishedWTO replaces the GATT.

2001-Doha RoundDivergences between developing and developed countries. Issues over agricultural subsidies.

ObjectivesThe important objectives of WTO are:1. To improve the standard of living of people in the member countries.2. To ensure full employment and broad increase in effective demand.3. To enlarge production and trade of goods.4. To increase the trade of services.5. To ensure optimum utilization of world resources.6. To protect the environment.7. To accept the concept of sustainable development.

FunctionsThe main functions of WTO are discussed below:1. To implement rules and provisions related to trade policy review mechanism.2. To provide a platform to member countries to decide future strategies related to trade and tariff.3. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.4. To administer the rules and processes related to dispute settlement.5. To ensure the optimum use of world resources.6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal Economic Policy determination.

Organizational Structure

Ministerial ConferencesThe topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.The Trade Policy Review Body (TPRB)The WTO General Council meets as the Trade Policy Review Body to undertake trade policy reviews of Members under the TPRM and to consider the Director-General's regular reports on trade policy developement. The TPRB is thus open to all WTO Members. The current chair isAmbassador Atanas Atanassov PAPARIZOV (Bulgaria).The WTO General Council[footnoteRef:10] [10: https://www.wto.org/english/thewto_e/gcounc_e/gcounc_e.htm]

The General Council is the WTOs highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The current chairperson is H.E. Mr. Jonathan FRIED (Canada).The General Council also meets, under different rules, as theDispute Settlement Bodyand as theTrade Policy Review Body.GATT and the Goods Council[footnoteRef:11] [11: https://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm]

The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from all WTO member countries. The current chairperson is Amb. Dacio CASTILLO (Honduras).The Goods Council has 10 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so on). Again, these committees consist of all member countries.Also reporting to the Goods Council are a working party on state trading enterprises, and the Information Technology Agreement (ITA) Committee.

The Services Council, its Committees and other subsidiary bodies[footnoteRef:12] [12: https://www.wto.org/english/tratop_e/serv_e/s_coun_e.htm]

The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). Its open to all WTO members, and can create subsidiary bodies as required.Plurilateral agreement on trade in civil aircraftThis agreement entered into force on 1 January 1980. It now has32signatories(Albania; Austria; Belgium; Bulgaria; Canada; Chinese Taipei; Denmark; Egypt; Estonia; European Union (formerly EC); France; Georgia; Germany; Greece; Ireland; Italy; Japan; Latvia; Lithuania; Luxembourg; Macao, China; Malta; Montenegro; Netherlands; Norway; Portugal; Romania; Spain; Sweden; Switzerland; United Kingdom; United States). Most WTO agreements are multilateral since they are signed by all WTO members. The agreement on trade in civil aircraft is one of two plurilateral agreements (with the agreement on government procurement) signed by a smaller number of WTO members. It eliminates import duties on all aircraft, other than military aircraft, as well as on all other products covered by the agreement civil aircraft engines and their parts and components, all components and sub-assemblies of civil aircraft, and flight simulators and their parts and components.[footnoteRef:13] [13: https://www.wto.org/english/tratop_e/civair_e/civair_e.htm]

Conclusion

The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTOs current work comes from the 198694 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the Doha Development Agenda launched in 2001The WTO describes itself as "a rules-based, member-driven organization all decisions are made by the member governments, and the rules are the outcome of negotiations among members".The WTO Agreement foresees votes where consensus cannot be reached, but the practice of consensus dominates the process of decision-making. Richard Harold Steinberg(2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the U.S., and may not lead toPareto improvement.

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