WTO: STRUCTURE AND AGREEMENTS

INTRODUCTION

The General Agreement on Tariffs and Trade (GATT) was an international

organization created in 1947 to reduce trade barriers through multilateral

negotiations. In January 1995, the GATT was replaced by a stronger World

Trade Organization (WTO), the result of eight years of GATT negotiations.

Today, as on May 2012 there were 155 member countries in WTO. WTO rules

apply to over 90 per cent of international trade.

The WTO has become increasingly controversial as it has expanded the scope

of its work from its original narrow GATT focus on reducing tariffs on

manufactured goods to agriculture and services. The WTO now also works to

eliminate non-tariff barriers, and can be used to challenge environmental,

health, and other regulations that may serve legitimate social goals but may be

regarded as impediments to international trade. The 1995 replacement of GATT

by the WTO heightened concern among critics because its stronger enforcement

powers represent a further shift in power from citizens and national

governments and national governments to a global authority.

The GATT’s (and now the WTO’s) approach to reducing trade barriers was

based on the “most – favoured nation” principle, which requires that when a

nation grants a trade privilege to one country, it must grant the same privilege to

all GATT members. Another guiding principle is that of “national treatment,”

which requires nations to give equal treatment to foreign imports of goods or

services as to domestic goods or services.

The most controversial outcome of the Uruguay Round was the establishment

of much stronger enforcement mechanisms in the WTO. Although GATT

always had a dispute resolution process, member nations often ignored its

rulings since they lacked serious enforcement power. Unlike GATT, WTO

panel decisions are binding. If one nation makes a complaint to the WTO that

another nation’s law or regulation is protectionist and in violation of WTO

rules, the WTO can make that nation bring the law into compliance with the

WTO standard (with minor exceptions). If the country fails to comply, the WTO

can authorize the complainant nation to impose trade sanctions.

The WTO’s work is not confined to specific agreement with specific

obligations. Member countries also discuss a range of other issues to Ministerial

Conferences, committees or working groups. Some are old and some are new to

the GATT – WTO system. The issues become contentions due to disagreement

between, mainly, developed and developing countries. They cover a wide range

of subjects including trade and investment, competition policy, transparency in

government procurement, trade facilitation, trade and labour standards, trade

and environment, and electronic commerce.

THE EVOLUTION OF THE WORLD TRADE ORDER

The experience of the Great Depression of the 1930s played an important role in

formation of the international economic order after the Second World War. The

United Nations Organization (UNO), founded in 1945, pays tribute to this

experience through the Council (ECOSOC). In addition, Art. 55 of the Charter

of the United Nations commits the Member States to far reaching cooperation

on economic and social issues. It thus accommodates the notion that peace

cannot be understood to mean merely the absence of violence, but can also

include economic and social aspects that are essential for the effective

preservation of peace.

Still during World War II, at the Bretton Woods Conference in 1944, a new

order for the coordination of international financial relations had been set up in

the form of the world trade , the ECOSOC was intended to create a similar

system that would - under its surveillance as a United Nations specialized

agency – regulate cooperation between States with regard to world trade. The

United Nations Conference on Trade and Employment that had been convened

for this purpose in 1947 adopted the HAVANA CHARTER (named after the

conference location) establishing the International Trade Organization (ITO). In

addition to the formation of such an organization, the ITO Charter contained

comprehensive and far reaching international trade regulations. For example, it

made provisions for commitments regarding economic development, the labour

market, and trade in natural resources, and even included a special chapter on

the regulation of competition. These regulations, which in different respects

went far beyond a mere free trade concept, encountered firm rejection by the US

Senate when it was called upon to ratify the Charter. In consequence, the

originally US-led initiative eventually failed through lack of US support.

As a preparatory effort, the States participating at the conference, with the

support of an interim commission, had negotiated separately about the

reciprocal reduction of tariffs. In the course of these negotiations the States

agreed several general rules that were meant later to become part of the Havana

Charter. There was considerable interest in bringing these agreements into force

quickly as a means of overcoming the economic crisis in the U.S., and

achieving the war economies’ transition into a free market. So, the Protocol of

October 30, 1947 provided for the preliminary application of the rules from

January 1, 1948. Since, according to the Protocol, conflicting national law was

to remain unaltered (so –called “grandfather clause”), and since there was

therefore no need for ratification by Congress, the US government was able to

conclude the agreement by itself in exercise of its temporary negotiation

authority with respect to tariff reductions. The General Agreement on Tariffs

and Trade (GATT), having become effective on this basis, was administered

by the Interim Commission whose term of office was prolonged especially for

this purpose. Later on the commission was appointed the Secretariat of the

GATT. Following the unsuccessful attempt to establish the ITO, the GATT,

which had originally been set up as a merely interim arrangement, became a

permanent institution. During the course of several decade, due to the needs of

the CONTRATCTING PARTIES for coordination, cooperation and dispute

settlement in the context of the agreement, the GATT evolved more and more

into a de facto organisation.

During six more rounds of negotiations – the so-called GATT Rounds – the

parties progressively agreed upon more and more far ranging tariff concessions,

which formed the core of separate agreements with open membership. It was

supplemented by additional regulations on subsidies and countervailing duties,

technical barriers to trade, import licence procedures, public procurement and

anti-dumping.

The eighth GATT Round started with a Ministerial Conference in Punta

del Este, Uruguay, in 1986, in the middle of a crisis for the GATT: its

regulations were no longer in tune with the realities of world trade,

especially the increasing role of trade in services; furthermore, the

GATT’s authority was challenged by the emergence of dissenting silent

or explicit agreements between individual Member States, by its

inefficient consensus-based dispute settlement mechanism, and by

unilateral trade sanctions. In the course of the eight-year-long

negotiations in the Uruguay Round which ended in 1994, basically a

new, consolidated and essentially enlarged system for the world trade

order was finally set up on the basis of the (old) GATT.

In contrast to the GATT Rounds until then, a “single undertaking

approach” prevailed in the Uruguay Round, according to which the

traditional structuring of the legal order into separate agreements was

maintained, while the regulations and negotiation results contained

therein could, however, be accepted or rejected by the States only in their

entirety as a package. The final act of the Uruguay Round, negotiations

on which began in Marrakesh in December 1993 and which was signed

on April 15, 1994, therefore contains no less than 46 agreements and 25

resolutions. Of fundamental importance in this context is the Agreement

Establishing the World Trade Organisation (WTO Agreement), to

which the other agreements are attached in groups. It entered into force

on January 1, 1995, following 76 ratifications.

The fourth Ministerial Conference at Doha/Quatar adopted a mandate to

start a new round of trade negotiations that become known as the “Doha

Round”. An extensive work programme, including tariff negotiations,

implementation issues, as well as the reform of WTO law on anti-

dumping, subsidies, regional trade agreements and dispute settlement,

was started. However, the deadline of January 1, 2005 has expired

without the finalization of the agenda.

The objectives of the world trade order, section one of the Preamble to

the WTO Agreement mentions:

STRUCTURE OF THE WORLD TRADE ORGANISATION

The World Trade Organization came into force on January 1, 1995, fully

replacing the previous GATT Secretariat as the organization responsible for

administering the international trade regime. The basic structure of the WTO

includes the following bodies:

All WTO members may participate in all councils, committees, etc., except

Appellate Body, Dispute Settlement panels, and plurilateral committees.

The Ministerial Conference, which is composed of international trade ministers from all member countries. This is the governing body of the WTO, responsible for setting the strategic direction of the organization and making all final decisions on agreements under its wings. The Ministerial Conference meets at least once every two years. Although voting can take place, decisions are generally taken by consensus, a process that can at times be difficult, particularly in a body composed of 136 very different members.

The General Council, composed of senior representatives (usually ambassador level) of all members. It is responsible for overseeing the day-to-day business and management of the WTO, and is based at the WTO headquarters in Geneva. In practice, this is the key decision-making arm of the WTO for most issues. Several of the bodies described below report directly to the General Council.

The Trade Policy Review Body is also composed of all the WTO members, and oversees the Trade Policy Review Mechanism, a product of the Uruguay Round. It periodically reviews the trade policies and practices of all member states. These reviews are 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 is also composed of all the WTO members. It oversees the implementation and effectiveness of the dispute resolution process for all WTO agreements, and the implementation of the decisions on WTO disputes. Disputes are heard and ruled on by dispute resolution panels chosen individually for each case, and the permanent Appellate Body that was established in 1994. Dispute resolution is mandatory and binding on all members. A final decision of the Appellate Body can only be reversed by a full consensus of the Dispute Settlement Body.

The Councils on Trade in Goods and Trade in Services operate under the mandate of the General Council and are composed of all members. They provide a mechanism to oversee the details of the general and

specific agreements on trade in goods (such as those on textiles and agriculture) and trade in services. There is also a Council for the Agreement on Trade-Related Aspects of Intellectual Property Rights, dealing with just that agreement and subject area.

The Secretariat and Director General of the WTO reside in Geneva, in the old home of GATT. The Secretariat now numbers just under 550 people, and undertakes the administrative functions of running all aspects of the organization. The Secretariat has no legal decision-making powers but provides vital services, and often advice, to those who do. The Secretariat is headed by the Director General, who is elected by the members.

The Committee on Trade and Development and Committee on Trade and Environment are two of the several committees continued or established under the Marrakech Agreement in 1994. They have specific mandates to focus on these relationships, which are especially relevant to how the WTO deals with sustainable development issues. The Committee on Trade and Development was established in 1965. The forerunner to the Committee on Trade and Environment (the Group on Environmental Measures and International Trade) was established in 1971, but did not meet until 1992. Both Committees are now active as discussion grounds but do not actually negotiate trade rules.

The Committee on Trade and Environment