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The WTO agreements are the results of negotiations between the members. The current set were the outcome of the 1986-1994 Uruguay Round negotiations, which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the WTO's principal rulebook for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews.
I. The Objectives
In the preamble of the Marrakesh Agreement establishing the WTO, the parties to the Agreement recognize certain objectives, to which they wish to contribute through the multilateral trading system. It is recognized that Member's relations "in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the
objective of sustainable development. . . ". The Agreement also recognizes the need for "positive efforts to ensure that developing countries, and especially the least-developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development".
1.1 To raise standards of living
Relations among Members of the WTO in the field of trade and economic endeavor should be conducted with a view to raising the standards of living of their populations,
1.2 To ensure full employment
to ensure full employment of their economies,
1.3 Growing volume of real income and effective demand
to promote the steady growth of real incomes and effective demand in their markets,
1.4 Expanding the production of and trade in goods & services
to expand the production of and trade in goods and services,
1.5 Sustainable development and environmental protection
while allowing for the optimal use of the world's reserves in accordance with the objective of sustainable development, and protecting and preserving the environment, and
1.6 Developing countries
in a manner consistent with the respective needs and concerns ofMembers at different levels of development.
II. The Main Functions
The WTO provides the common institutional framework for the conduct of trade relations among its Members in matters related to the Agreements negotiated during the Uruguay Round. It monitors and oversees, through its various bodies, the implementation, operation and administration of the various agreements. It also administers the trade policy review mechanism and the dispute settlement mechanism. In addition, the WTO provides the forum for further negotiations between its Members, in matters dealt with under the Agreements and also more generally concerning their multilateral trade relations.
2.1 Implementation, administration and operation of the covered agreements
The WTO facilitates the implementation, administration and operation of the WTO Agreement and the Multilateral Trade Agreements, and furthers their objectives. It also provides the framework, for those of its Members that have accepted them, for the implementation, administration and operation of the Plurilateral Trade Agreements.
2.2 Forum for negotiations
The WTO provides the forum for negotiations on multilateral trade relations in matters covered by its various agreements. It may also, on decision by the Ministerial Conference, provide a forum for further negotiations, and a framework for the implementation of their results, on other issues arising in the multilateral trade relations among its Members.
2.3 Dispute settlement
The WTO administers the integrated dispute settlement system, which is a central element in providing security and predictability to the multilateral trading system, serving to preserve the rights and obligations of the Members of the WTO.
2.4 Review of national trade policies
The WTO administers the Trade Policy Review Mechanism, which is designed to contribute to greater transparency and understanding of the trade policies and practices of WTO Members, to their improved adherence to the rules, disciplines and commitments of the multilateral trading system, and hence to the smoother functioning of the system.
2.5 Coherence in global economic policy-making
A Ministerial Declaration adopted at the Marrakesh Ministerial Meeting recognizes the role of trade liberalization in achieving greater coherence in global economic policy-making. For this purpose, the WTO cooperates, as appropriate, with the International Monetary Fund and with the World Bank.
III. The Structure
The WTO has more than 140 members (now 144) , accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTO's predecessor, GATT. The WTO's agreements have been ratified in all members' parliaments.
3.1 Ministerial Conference
The Ministerial Conference is the supreme body of the WTO, composed of representatives of all Members, with the authority 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 and the second in Geneva in May 1998. The Third took place in Seattle of the United States in November@ December 1999. And the fourth in Doha, Qatar in November 2001.
3.2 General Council
The day to day business of the WTO is conducted by the General Council, also composed of representatives of all WTO Members, which meets on a regular basis (normally once every two months). The General Council acts on behalf of the Ministerial Conference in the periods between its meetings, and reports directly to it.
3.2.1 Dispute Settlement Body
The General Council convenes also as the Dispute Settlement Body (DSB), which has its own Chairman and its own rules of procedure, to discharge the functions assigned to the DSB under the Dispute Settlement Understanding.
3.2.2 Trade Policy Review Body
The General Council meets also as the Trade Policy Review Body, which again has its own Chairman and rules of procedure, to carry out the review of Members' trade policies and practices, as provided for in the Trade Policy Review Mechanism.
3.3 Councils
Three sectoral councils have been established for goods, services and TRIPs matters, respectively. These Councils, operating under the general guidance of the General Council, carry out the responsibilities assigned to them by their respective agreements and by the General Council; they meet as necessary to carry out their functions; and they are open to representatives of all WTO Members. They may also establish subsidiary bodies, such as committees and working parties.
3.3.1 Council for Trade in Goods
The Council for Trade in Goods oversees the functioning of the multilateral agreements on trade in goods. These include the General Agreement on Tariffs and Trade (GATT) and related Understandings, and twelve other agreements, as contained in Annex I A to the WTO Agreement.
3.3.2 Council for Trade in Services
The Council for Trade in Services overseas the functioning of the General Agreement on Trade in Services (GATS).
3.3.3 Council for TRIPs
The Council for TRIPs oversees the functioning of the Agreement on Trade-Related Aspects of Intellectual Property Rights ( TRIPs Agreement).
3.4 Committees and other subsidiary bodies
Three main committees are established by the WTO Agreement: the Committee on Trade and Development, the Committee on Balance-of-Payments Restrictions, and the Committee on Budget, Finance and Administration. Membership of these committees is also open to all Members of the WTO. The General Council has established two other committees reporting to it: the Committee on Trade and Environment and the Committee on Regional Trade Agreements.
3.5 Decision-making
The WTO continues the practice of decision-making by consensus followed under the GATT 1947. Consensus is defined as the situation where no Member, present at a meeting where a decision is taken, formally objects to the proposed decision. However, it is recognized that there may be situations where a consensus cannot be reached, in which case the matter may be decided by voting. Voting rules are set out in the WTO Agreement.
IV. Dispute Settlement System
The WTO's procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Gauntries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially-appointed independent experts are based on interpretations of the agreements and individual countries' commitments. The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is lxirne out by the number of cases brought to the WTO, almost 250 cases in seven years compared to some 300 disputes dealt with during the entire life of GATT (1947-1994).
4.1 The integrated dispute settlement system
The integrated dispute settlement system is an important part of the multilateral trading system embodied in the WTO. It is based on Articles XXII and XXIII of the GATT 1994, and the rules and pro- cedures further elaborated in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) contained in the WTO Agreement. The rules have evolved on the basis of past practice in GATT 1947.
4.2 Coverage: goods, services and intellectual property
The dispute settlement system covers all the multilateral trade agreements, that is, it is applicable to trade in goods, trade in services, and intellectual property issues arising from the TRIPs Agreement. It is also applicable to disputes arising under the plurilateral Government Procurement Agreement. Some of these agreements have dispute settlement provisions that apply only to disputes arising under that specific agreement that add to or change the rules of the DSU. The dispute settlement system is administered by the Dispute Settlement Body.
4.3 Procedures: strict time-limits
The dispute settlement process is initiated through a request for consultations made by one Member to another in respect of a specific issue. If consultations fail to resolve a dispute, a Member may ask the DSB to establish a panel, normally consisting of three independent trade experts, to rule on the issue. After hearing the parties, the panel issues a report to the DSB. For the panel, strict time-limits have been agreed so as to achieve the greatest efficiency possible under the system. A large degree of automaticity is involved in this process.
4.4 Adoption of panel reporte: the reverse consensus
Under GATT practice, the report of a panel was submitted to the GATT contracting Parties for adoption. Since the contracting Parties normally took decisions by consensus, any Party (including the losing Party) could block adoption of a panel report. While this did not occur frequently, it happened from time to time. An innovative formula has been agreed upon in the DSU, whereby a consensus in the negative is required in order not to adopt a panel report. This formula allows for a smoother functioning of the system.
4.5 Appellate Body Review
The WTO dispute settlement mechanism gives the possibility of appeal to either party in a panel proceeding. However, any such appeal must be limited to issues of law covered in the panel report and the legal interpretations developed by the panel. Appeals are heard by a standing Appellate Body consisting of seven members appointed by the DSB for four year terms. The report of the Appellate Body must be unconditionally accepted by the parties to the dispute, and the report is to be adopted by the DSB unless there is a negative consensus, that is, a consensus against adoption.
4.6 Non-compliance with recommendations
The Dispute Settlement Body keeps under surveillance the implementation of adopted recommendations or rulings, and any outstanding issue remains in its agenda until its resolution. Time-limits are also established for compliance with recommendations of panel reports. When a party is unable to implement those recommendations within a reasonable period of time, it is obliged to enter into negotiations with the complainant in order to determine mutually acceptable
compensation. If these negotiations fail, the Dispute Settlement Body may authorize the complainant party to suspend concessions or obligations against the other party. Compensation and suspension of concessions are, however, interim solutions until such time when the recommendations of the DSB are implemented by the member concerned.
The dispute settlement system of the GAIT is generally considered to be one of the cornerstones of the multilateral trade order. The system has already been strengthened and streamlined as a result of reforms agreed following the Mid-Term Review Ministerial Meeting held in Montreal in December 1988. Disputes currently being dealt with by the Council are subject to these new rules, which include greater automaticity in decisions on the establishment, terms of reference and composition of panels, such that these decisions are no longer dependent upon the consent of the parties to a dispute. The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) will further strengthen the existing system significantly, extending the greater automaticity agreed in the Mid-Term Review to the adoption of the panels' and a new Appellate Body's findings. Moreover, the DSU will establish an integrated system permitting WTO Members to base their claims on any of the multilateral trade agreements included in the Annexes to the Agreement establishing the WTO. For this purpose, a Dispute Settlement Body ( DSB ) will exercise the authority of the General Council and the Councils and committees of the covered agreements. The DSU emphasizes the importance of consultations in securing dispute resolution, requiring a Member to enter into consultations within 30 days of a request for consultations from another Member. If after 60 days from the request for consultations there is no settlement, the complaining party may request the establishment of a panel. Where consultations are denied, the complaining party may move directly to request a panel. The parties may voluntarily agree to follow alternative means of dispute settlement, including good offices, conciliation, mediation and arbitration.
Where a dispute is not settled through consultations, the DSU requires the establishment of a panel, at the latest, at the meeting of the DSB following that at which a request is made, unless the DSB decides by consensus against establishment. The DSU also sets out specific rules and deadlines for deciding the terms of reference and composition of panels. Standard terms of reference will apply unlessthe parties agree to special terms within 20 days of the panel's establishment. And where the parties do not agree on the composition of the panel within the same 20 days, this can be decided by the Director-General. Panels normally consist of three persons of appropriate background and experience from countries not party to the dispute. The Secretariat will maintain a list of experts satisfying the criteria. Panel procedures are set out in detail in the DSU. It is envisaged that a panel will normally complete its work within six months or, in cases of urgency, within three months. Panel reports may be considered by the DSB for adoption 20 days after they are issued to Members. Within 60 days of their issuance, they will be adopted, unless the DSB decides by consensus not to adopt the report or one of the parties notifies the DSB of its intention to appeal.
The concept of appellate review is an important new feature of the DSU. An Appellate Body will be established, composed of seven members, three of whom will serve on any one case. An appeal will be limited to issues of law covered in the panel report and legal interpretations developed by the panel. Appellate proceedings shall not exceed 60 days from the date a party formally notifies its decision to appeal. The resulting report shall be adopted by the DSB and unconditionally accepted by the parties within 30 days following its issuance to Members, unless the DSB decides by consensus against its adoption.
Once the panel report or the Appellate Body report is adopted, the party concerned will have to notify its intentions with respect to implementation of adopted recommendations. If it is impracticable to comply immediately, the party concerned shall be given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of thereport or through arbitration within 90 days of adoption. In any event, the DSB will keep the implementation under regular surveillance until the issue is resolved.
Further provisions set out rules for compensation or the suspension of concessions in the event of non-implementation. Within a specified time-frame, parties can enter into negotiations to agree on mutually acceptable compensation. Where this has not been agreed, a party to the dispute may request authorization of the DSB to suspend concessions or other obligations to the other party concerned. The DSB will grant such authorization within 30 days of the expiry of the agreed time-frame for implementation. Disagreements over the proposed level of suspension may be referred to arbitration. In principle, concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement. In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions may be made under another agreement.
One of the central provisions of the DSU reaffirms that Members shall not themselves make determinations of violations or suspend concessions, but shall make use of the dispute settlement rules and procedures of the DSU.
The DSU contains a number of provisions taking into account the specific interests of the developing and the least-developed countries.
It also provides some special rules for the resolution of disputes which do not involve a violation of obligations under a covered agreement but where a Member believes nevertheless that benefits are being nullified or impaired. Special decisions to be adopted by Ministers in 1994 foresee that the Montreal Dispute Settlement Ruleswhich would otherwise have expired at the time of the April 1994 meeting are extended until the entry into force of the WTO. Another decision foresees that the new rules and procedures will be reviewed within four years after the entry into force of the WTO.
V. Trade Policy Review Mechanism
An agreement confirms the Trade Policy Review Mechanism, introduced at the time of the Mid-term Review, and encourages greater transparency in national trade policy-making. A further Ministerial decision reforms the notification requirements and procedures generally.
The Trade Policy Review Mechanism's purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat. Surveillance of national trade policies is a fundamentally important activity running throughout the work of the WTO. All WTO members are periodically reviewed, the frequency of each country's review varying according to its share of world trade. Individuals and companies involved in trade have to know as much as possible about the conditions of trade. It is therefore fundamentally important that regulations and policies are transparent. In the WTO, this is achieved in two ways: governments have to inform the WTO and fellow-members of specific measures, policies or laws through regular "notifications"; and the WTO conducts regular re- views of individual countries' trade policies, the trade policy reviews. These reviews are part of the Uruguay Round agreement, but they began several years before the round ended, they were an early result of the negotiations. Participants agreed to set up the reviews at the December 1988 ministerial meeting that was intended to be the mid-way assessment of the Uruguay Round. The first review took place the following year. Initially they operated under GATT and, like GATT, they focused on goods trade. With the creation of the WTO in 1995, their scope was extended, like the WTO, to include services and intellectual property. The importance countries attach to the process is reflected in the seniority of the Trade Policy Review Body, it is the WTO General Council in another guise. The objectives are:
(1) to increase the transparency and understanding of countries' trade policies and practices, through regular monitoring,
(2) to improve the quality of public and intergovernmental debate on the issues' and to
(3) to enable a multilateral assessment of the effects of policies on the world trading system.
The reviews focus on members' own trade policies and practices. But they also take into account the countries' wider economic and developmental needs, their policies and objectives, and the external economic environment that they face. These "peer reviews" by other WTO members encourage governments to follow more closely the WTO rules and disciplines and to fulfill their commitments. In practice the reviews have two broad results: they enable outsiders to understand a country's policies and circumstances, and they provide feedback to the reviewed country on its performance in the system. Over a period of time, all WTO members are to come under scrutiny. The frequency of the reviews depends on the country's size:
·The four biggest traders, the European Union, the United States, Japan and Canada (the "Quad")—are examined approxi-mately once every two years.
·The next 16 countries (in terms of their share of world trade) are reviewed every four years.
·The remaining countries are reviewed every six years, with the possibility of a longer interim period for the least-developed countries. For each review two documents are prepared: a policy statement by the government under review and a detailed report written independently by the WTO Secretariat. These two reports, together with the proceedings of the Trade Policy Review Body's meetings, are published shortly afterwards.
VI. The Procedure of Accession to WTO
Any state or customs territory having full autonomy in the conduct of its trade policies may become a member ("accede to") the WTO, but all WTO members must agree on the terms. This is done through the establishment of a working party of WTO members and through a process of negotiations.
6.1 Commencement of the accession's process
The process of accession to the WTO commences when 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. The standard tern-is of reference of working parties are "to examine the application for accession to the WTO under Article XII and to submit to the General Council/Ministerial Conference recommendations which may include a draft Protocol of Accession". Any member of the WTO can join the working party. The working party is chaired by a Chairperson selected after consultations with WTO Members and the applicant.
6.2 Working party and the fact-finding process
Once the working party is established, 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 (English, French and Spanish).
Following the circulation of the Memorandum, members of the working party ask questions in relation to it to obtain more information about the applicant's foreign trade regime. After the replies to the questions are received, the first meeting of the working party is scheduled. At the initial meeting of the working party, members of the working party examine the Memorandum and the questions and answers to study the conformity of the regime with the various requirements of the WTO Agreements. At the end of the first and any subsequent meeting of the working party, the Chairperson outlines the next steps required for future meetings. Thereafter, additional questions in writing, replies and further information papers are exchanged. Especially in the case of least developed and small economy applicants, technical assistance at each stage of the accession process can be obtained from the Secretariat.
6.3 Bilateral negotiations
When the examination of the foreign trade regime is sufficiently advanced, members of the working party and the applicant commence bilateral market access negotiations on goods and services, as well as on the other specific terms of accession. The negotiating phase and the fact-finding work on the foreign trade regime usually overlap and proceed in parallel. 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 negotiations on market access constitute the most critical element of the accessions process as Members want to ensure that acceding governments grant concessions which are comparable to the concessions that they will be benefiting from in the markets of Members. The resulting market-access commitments of acceding governments can be considered to be the payment for the entry ticket into the WTO.
6.4 Report, Protocol of Accession and Entry into Force
The summary of the discussions in the working party is contained in the Report of the working party together with a draft Decision and Protocol of Accession. The Protocol of Accession contains the terms of accession agreed by the Applicant and members of the working party. Following the conclusion of bilateral negotiations between interested Members and the Applicant, the Schedule of Concessions and Commitments on Goods and the Schedule of Specific Commitments on Services are prepared. These Schedules are annexed to and are part of the draft Protocol of Accession. When the Draft Report, Draft Protocol and Schedules 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.
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