· Trade without discrimination: 1) Most-favored-nation treatment, 2) National treatment;
· Transparency
· Predictable and growing access to markets
· Single undertaking
Highest Authority: the Ministerial Conference
Ministerial Conference is the supreme body of the WTO, composed of representatives of all Members. The Ministerial Conference is authorized to carry out the functions of the WTO, take the actions necessary to this effect, and take decisions on matters under any of the Multilateral Trade Agreements if so requested by a Member. The Ministerial Conference is to meet at least once every two years. The first WTO Ministerial Conference was held in Singapore in December, 1996 (the Ministerial Declaration on Trade in Information Technology Products), the second in Geneva in May, 1998 (Declaration on Global Electronic Commerce), the Third in Seattle, Washington State, US between 30 November and 3 December 1999, and the Fourth in Doha, Qatar from 9 to 13 November 2001.
Second Level: General Council
General Council, also composed of representatives of all WTO members, is in charge of the daily business of the WTO and normally meets once every two months. General Council acts on behalf of the Ministerial Conference in the periods between its meetings, and reports directly to it. The General Council convenes also as the Dispute Settlement Body (DSB) and the Trade Policy Review Body (TPRB).
Third Level: Councils for each broad area of trade, namely, the Council for Trade in Goods (Goods Council), the Council for Trade in Services (Services Council), the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPs Council). The three councils, consisting of all WTO members, deal with their respective areas of trade.
Six committees, also consisting of all WTO members, report to the General Council for different issues such as trade and development, the environment, regional trading arrangements, and administrative issues.
Fourth Level: Committees and working party dealing with specific subjects
The Goods Council has 11 committees. They consist of all WTO members. The Textiles Monitoring Body also reports to the Goods Council.
It should be noted that important breakthroughs are rarely made in any of these formal bodies. With consensus and without voting, informal consultations play a vital role in bringing a vastly diverse membership round to an agreement. Occasionally a deadlock can only be broken in a small group of two, three or four countries; sometimes at meetings they have organized themselves in their own countries. A multilateral package of commitments is usually the result of numerous bilateral, informal bargaining sessions. These informal consultations, however, are not separated from the formal meetings which are necessary for making formal decisions. Nor are the formal meetings unimportant. They are the forums for exchanging views, putting countries’ positions on the record, and ultimately for confirming decisions. The art of achieving Agreement among all WTO Members is to strike an appropriate balance, so that a breakthrough achieved among only a few countries can be acceptable to the rest of the membership.
The WTO Secretariat: In Article VI of the WTO Agreement, provision is made for the establishment of a Secretariat and the appointment of its Director-General. At present it has approximately five hundred staff members. The Secretariat, based in Geneva, Switzerland, has no decision-making powers. Its main duties are to supply technical and professional support for the various councils and committees, to provide technical assistance for developing countries, to monitor and analyze developments in world trade, to provide information to the public and the media and to organize the ministerial conferences. It also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become Members of the WTO. The WTO Secretariat is organized into 24 Divisions with functional, information and liaison, and support roles. Divisions are normally headed by a Director who reports to a Deputy-Director General or directly to the Director General. The professional staff is composed mostly of economists, lawyers and others with a specialization in international trade policy. The working languages of the WTO are English, French and Spanish.
Any state or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters related with its trade policies is eligible to accede to the WTO on terms agreed between it and WTO Members. Accession to the WTO is essentially a process of negotiation—quite different from the process of accession to other international entities, like the IMF, which is largely an automatic process.
The accession procedure:
Commencement of the Accession Process: An applicant submits a communication to the Director-General of the WTO, expressing its desire to accede to the WTO under Article XII. The General Council then considers the application and establishes a working party. Any member of the WTO can join the working party. The working party is chaired by a Chairperson selected after consultation with WTO Members and the applicant.
The fact-finding process: The applicant provides a Memorandum describing in detail its foreign trade regime, together with information on the currently applicable tariff schedule and copies of relevant laws and regulations in one of the WTO official languages. Members of the working party then ask questions about the Memorandum, examine the Memorandum and the questions and answers to study the conformity of the regime with the requirements of the WTO Agreements. Technical assistance at each stage of the accession process can be obtained from the Secretariat.
Bilateral negotiations: Bilateral market access negotiations between the applicant and Members of the working party on goods and services, as well as on the other specific terms of accession constitute the most critical element of the accession process. The phase commences either by the applying government tabling its initial offer on goods or services or interested WTO Members submitting their request lists to the applicant. The resulting market-access commitments of acceding governments can be considered to be the payment for the entry ticket into the WTO.
Report, Protocol of Accession and Entry into Force: Following the conclusion of bilateral negotiations between interesting Members and the Applicant, the working party prepares a Report and a draft Decision and Protocol of Accession, containing the terms of accession agreed by the Applicant and members of the working party. As part of the draft Protocol of Accession, the Schedule of Concessions and Commitments on Goods and the Schedule of Specific Commitments on Services are prepared. When the Draft Report, Draft Protocol and Schedule on Goods and Services have been finalized, the working party submits the package to the WTO General Council/ Ministerial Conference for approval. Following the decision of the General Council/ Ministerial Conference to adopt the package, the Protocol of Accession enters into force. Thirty days after acceptance by the applicant, it becomes a WTO member.
Now, the WTO has around 30 applicants negotiating membership. They are WTO observers. Besides, the WTO has 7 international organizations observers: UN,UNCTAD (United Nations Conference on Trade and Development), IMF, World Bank, Food and Agricultural Organization, World Intellectual Property Organization, Organization for Economic Co-operation and Development.
Unlike other international organizations, the WTO normally makes decisions by consensus. Consensus is defined as the situation where no member, present at a meeting where a decision is taken, formally objects to the proposed decision. It should be noted that this is not the same as unanimity, since consensus is defeated only by a formal objection by a member present at the meeting. Thus, those absent do not prevent a consensus, nor does an abstention prevent a consensus. The main advantage is that decisions made this way are more acceptable to all Members. In case of trade sanctions, the sanctions are imposed by Members, not by the organization.
The WTO Agreement envisages four specific situations involving voting:
1) An interpretation of any of the multilateral trade Agreements can be adopted by a majority of three-quarters of WTO Members.
2) The Ministerial Conference can waive an obligation imposed on a particular member by a multilateral Agreement through a three-quarters majority.
3) Decisions to amend provisions of the multilateral Agreements can be adopted through approval either by all Members or by a two-thirds majority depending on the nature of the provision concerned. But the amendments only take effect for those WTO Members which accept them.
4) A decision to admit a new Member is taken by a two-thirds majority in the Ministerial Conference, or the General Council in between conferences.
TPRM was introduced into GATT in 1989 following the Mid-term Review of the Uruguay. The review covers the full range of individual Members’ trade policies and practices and their impact on the functioning of the multilateral trading system in order to encourage governments to follow closely the WTO rules and disciplines and to fulfill their commitments.
The TPRB is formally the General Council. The frequency of reviews of a Member is related to its weight in the multilateral trading system, as defined by the Member’s share of world trade in goods and services. On this principle, the frequency of review for individual Members, based on trade flows in October 1995, is as follows:
· every four years for the four largest trading entities, counting the European Communities (as one trading entity), the US, Japan and Canada;
· every four years for the next sixteen Members;
· every six years for other Members, with provision for a longer interval for least-developed countries.
Variations in trade in goods and services flows may alter the ranking of Members and thus their review cycles. The accession of new Members to the WTO could also affect the position of existing Members in all the three review cycles.
A TPRM review consists of several steps whose timing is agreed between the Secretariat and the country under review.
Collection of information: The Secretariat prepares and sends a detailed country questionnaire to the Member under review and the Member has four weeks to prepare and provide replies.
Visit to the capital: A Secretariat team consisting of 2 or 3 staff members of the Trade Policy Review Division undertakes a visit of one week or ten days to the country under review for discussion with government ministers and agencies, as well as private enterprise (Chamber of Commerce) and research institutes.
The TPRB meeting: Preparation and publication of documents. For each review, two documents are prepared: a detailed report written independently by the WTO Secretariat and a policy statement by the government under review. The Secretariat report focuses on the trade policies and practices of the Member under review in the context of the evolution of overall macro-economic and structural policies in a representative period up to the present date. The government’s policy statement by Members aims to outline the objectives and main directions of trade policies, as well as a succinct presentation of recent trends and problems, including those encountered in foreign markets.
For the most part, all WTO members subscribe to all WTO agreements. There remain, however, two agreements, originally negotiated in the Tokyo Round, which have a narrower group of signatories and are known as “plurilateral agreements”. All other Tokyo Round agreements became multilateral obligations when the WTO was established in 1995. The two are:
1) Agreement on Trade in Civil Aircraft
2) Agreement on Government Procurement
The other two plurilateral agreements, namely, International Dairy Agreement and International Bovine Meat Agreement, were scrapped at the end of 1997 and incorporated into the Agriculture and Sanitary and Phytosanitary agreements.
Nature: The GATT was ad hoc and provisional. The WTO and its agreements are permanent. The WTO has a legal man status.
Scope: The GATT rules applied to trade in goods. The WTO Agreement covers trade in goods, trade in services and trade-related aspects of intellectual property rights.
Approach: Though the GATT was a multilateral instrument, a series of new agreements were adopted during the Tokyo Round on a plurilateral - that is, selective-basis, causing a fragmentation of the multilateral trading system. The WTO has been adopted and accepted by its members, as a single undertaking: the agreements are all multilateral.
Dispute Settlement: The WTO dispute settlement procedure reversed the unanimity principle which had hindered acceptance of reports. The WTO dispute settlement mechanism has specific time limits and is therefore faster than the GATT system; it operates more automatically, thus ensuring less blockages than in the GATT; for example, panel reports are now automatically adopted sixty days after being issued unless there is a consensus that it be rejected (Since the side benefiting from the report would be unlikely to agree to reject, it seems most probable that a consensus to reject would very rarely be achieved.); and it has a permanent appellate body to review findings by dispute settlement panels. There are also more detailed rules on the process of the implementation of findings.
1. Describe the basic structure and tasks of the WTO.
2. Discuss the major principles of the WTO.
3. Who may become a member of GATT/WTO?
4. What are the main differences of WTO from the GATT system?
5. Explain decision-making rules of the WTO.
1. John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (2nd ed., Cambridge, MA: MIT Press, 1997). P. 31-78.
2. Petersmann, World Trade Principles, IV EPIL (2000), 1529-1542.
3. Trading into the Future – WTO, 3rd edition, Revised August 2003. p. 100-112
The WTO agreement contains some 29 individual legal texts covering everything from agriculture to textiles and clothing, and from services to government procurement, rules of origin and intellectual property. Added to these are more than 25 additional Ministerial declarations, decisions and understandings which spell out further obligations and commitments for WTO members. However, a number of simple and fundamental principles run throughout all of these instruments which, together, make up the multilateral trading system.
For almost fifty years, key provisions of GATT outlawed discrimination among members and between imported and domestically-produced merchandise. This basic principle of the multilateral trading system is embodied in the WTO Agreement, deriving mostly from the principles that constituted the foundations of the GATT. This principle is guaranteed through the operation of various clauses included in the multilateral agreements on the trade in goods, in the GATS, and in the TRIPs Agreement.
The principle of non-discrimination consists of three aspects:
The first is the most-favored-nation status, the cornerstone of multilateral trade. It emphasizes that no matter which country or region a product, service or provider of the service comes from, the items should be treated equally upon entering customs. The most-favored-nation status oversees equality and fairness, but not the depth of trade.
The second is national status, which means a product, service or provider of the service is treated as its own national by the government of the country upon whose customs house the items reach, or into which they enter, according to the foreign investment policy of that given country.
The third is mutual benefit, which means an equal degree of opening to each other, and equal rates of tariff duties.
There are four important exceptions to the key GATT principle of non-discrimination.
1. Developed countries can give tariff preference to developing countries.
2. Countries entering into regional free trade agreements do not need to extend the preferences negotiated in this context on an MFN basis.
3. A country can invoke temporary «safeguard» protection to one of its industries suffering serious injury due to a surge of imports.
4. Temporary quantitative restrictions can be invoked by a country with serious balance of payment problems.
In the latter two cases, these measures are temporary exceptions to the member’s commitment to the GATT, and a public investigation has to be undertaken to allow for limited relief from GATT obligations.