International Forex marketing

Financiall environment

The Financial Environment

JAL – Boeing

JAL – Best customers of Boeing

JAL- $ 800 million to purchase aircrafts

Boeings priced in $ (737 – 35m 767 – 160m)

Lead time – Two to Six years

10 % deposit and balance 90 % on delivery

JAL’s revenue – in yen

Order for $ 100 million

1987 – 1= 240

1992 1=120

1987 hedge 1=185 but slipped to 99

Case:

Nissan – The Japanese Yen

1990	1,875,000/134+2600	16,595
1991	1,875,000/125+2600 5%	17,600
1992	1,875,000/124+2600 6.6%	17,720
1993	1,875,000/111+2600 17.4%	19,495
1994	1,875,000/99+2600 29.7%	21,540
1995	1,875,000/102+2600 26.3%	20,985
1996	1,875,000/115+2600 13.8%	18,905
1993	1,875,000/111+2600 17.4%	19,495
1994	1,875,000/99+2600 29.7%	21,540

1990	804,000/134+9000	15,000
1991	804,000/125+9000 2.7%	15,435
1992	804,000/124+9000 3.1%	15,485
1993	804,000/111+9000 8.2%	16,245
1994	804,000/99+9000 14.0	17,120
1995	804,000/102+9000 12.4%	16,885
1996	804,000/115+9000 6.5%	15,990

• Is it possible to shift manufacturing from domestic to host country ?

• Is the parity a permanent condition?

• Then the question is, if other FACTORS are favorable, why not BRAZIL or Mexico or India or China

• Possibilities of contract mnfr to be explored

• Other factors within firms control could be as per weak or strong Y conditions

• Why Suzuki in India/ BMW north Carolina/ Volks in Brazil / GM in China

	Currency weak	Currency strong	Remarks
Price	Stress on price benefits	Engage in non price competition
Costing	Full cost unless you want penetration pricing	Marginal costing and Contribution analysis
Bill	Foreign supplier in local?	Suppliers in US$
Payment terms	Cash for goods	Credit preferred
Money-Repatriation	Quick	Delay
Number of markets	As many as possible	Few strong currency countries Counter trade in weak currency countries
Product line	More	Few
Services	Domestic	Foreign

The result is assurance. Consumers and producers know that they can enjoy secure
supplies and greater choice of the finished products, components, raw materials and
services that they use. Producers and exporters know that foreign markets will remain
open to them.
The result is also a more prosperous, peaceful and accountable economic world. Decisions
in the WTO are typically taken by consensus among all member countries and they are
ratified by members’ parliaments. Trade friction is channeled into the WTO’s dispute
settlement process where the focus is on interpreting agreements and commitments, and
how to ensure that countries’ trade policies conform with them. That way, the risk of
disputes spilling over into political or military conflict is reduced.
By lowering trade barriers, the WTO’s system also breaks down other barriers between
peoples and nations.
At the heart of the system – known as the multilateral trading system – are the WTO’s
agreements, negotiated and signed by a large majority of the world’s trading nations, and
ratified in their parliaments. These agreements are the legal ground-rules for international
commerce. Essentially, they are contracts, guaranteeing member countries important trade
rights. They also bind governments to keep their trade policies within agreed limits to
everybody’s benefit.
The agreements were negotiated and signed by governments. But their purpose is to help
producers of goods and services, exporters, and importers conduct their business.
The goal is to improve the welfare of the peoples of the member countries.
THE MULTILATERAL TRADING SYSTEM–PAST,
PRESENT AND FUTURE
The World Trade Organization came into being in 1995. One of the youngest of the
international organizations, the WTO is the successor to the General Agreement on Tariffs
and Trade (GATT) established in the wake of the Second World War.
So while the WTO is still young, the multilateral trading system that was originally set up
under GATT is well over 50 years old.
The past 50 years have seen an exceptional growth in world trade. Merchandise exports
grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950.
GATT and the WTO have helped to create a strong and prosperous trading system
contributing to unprecedented growth.
The system was developed through a series of trade negotiations, or rounds, held under
GATT. The first rounds dealt mainly with tariff reductions but later negotiations included
other areas such as anti-dumping and non-tariff measures. The last round – the 1986-94
Uruguay Round – led to the WTO’s creation.
The negotiations did not end there. Some continued after the end of the Uruguay Round.
In February 1997 an 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.
In 2000, new talks started on agriculture and services. These have now been incorporated
into a broader work programme, the Doha Development Agenda (DDA), launched at the
fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.
The agenda adds negotiations and other work on non-agricultural tariffs, trade and
environment, WTO rules such as anti-dumping and subsidies, investment, competition
policy, trade facilitation, transparency in government procurement, intellectual property,
and a range of issues raised by developing countries as difficulties they face in
implementing the present WTO agreements.
WTO AGREEMENTS
How can you ensure that trade is as fair as possible, and as free as is practical? By
negotiating rules and abiding by them.
The WTO’s rules – the agreements – are the result of negotiations between the members.
The current set were the outcome of the 1986-94 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 rule-book 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. The complete set runs to some
30,000 pages consisting of about 30 agreements and separate commitments (called
schedules) made by individual members in specific areas such as lower customs duty rates
and services market-opening.
Through these agreements, WTO members operate a non-discriminatory trading system
that spells out their rights and their obligations. Each country receives guarantees that its
exports will be treated fairly and consistently in other countries’ markets. Each promises to
do the same for imports into its own market. The system also gives developing countries
some flexibility in implementing their commitments.
GOODS
It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating
lower customs duty rates and other trade barriers; the text of the General Agreement spelt
out important rules, particularly non-discrimination.
Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in
goods. It has annexes dealing with specific sectors such as agriculture and textiles, and
with specific issues such as state trading, product standards, subsidies and actions taken
against dumping.
SERVICES
Banks, insurance firms, telecommunications companies, tour operators, hotel chains and
transport companies looking to do business abroad can now enjoy the same principles of
freer and fairer trade that originally only applied to trade in goods.
These principles appear in the new General Agreement on Trade in Services (GATS). WTO
members have also made individual commitments under GATS stating which of their
services sectors they are willing to open to foreign competition, and how open those
markets are.
INTELLECTUAL PROPERTY
The WTO’s Intellectual Property Agreement amounts to rules for trade and investment in
ideas and creativity. The rules state how copyrights, patents, trademarks, geographical
names used to identify products, industrial designs, integrated circuit layout-designs and
undisclosed information such as trade secrets – “intellectual property” – should be protected
when trade is involved.
DISPUTE SETTLEMENT
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. Countries bring disputes to the WTO if they think their rights under the
agreements are being infringed. Judgements 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 borne out by the number of cases brought to the
WTO – more than 300 cases in ten years compared to the 300 disputes dealt with during the
entire life of GATT (1947-94).
TRADE POLICY REVIEW
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.
DEVELOPING COUNTRIES
DEVELOPMENT AND TRADE
Over three-quarters of WTO members are developing or leastdeveloped
countries. All WTO agreements contain special provision for
them, including longer time periods to implement agreements and
commitments, measures to increase their trading opportunities,
provisions requiring all WTO members to safeguard their trade
interests, and support to help them build the infrastructure for WTO
work, handle disputes, and implement technical standards.
The 2001 Ministerial Conference in Doha set out tasks, including
negotiations, for a wide range of issues concerning developing
countries. Some people call the new negotiations the Doha
Development Round.
Before that, in 1997, a high-level meeting on trade initiatives and
technical assistance for least-developed countries resulted in an
“integrated framework” involving six intergovernmental agencies,
to help least-developed countries increase their ability to trade, and
some additional preferential market access agreements.
A WTO Committee on Trade and Development, assisted by a Sub-
Committee on Least-Developed Countries, looks at developing
countries’ special needs. Its responsibility includes implementation of
the agreements, technical cooperation, and the increased
participation of developing countries in the global trading system.
TECHNICAL ASSISTANCE AND TRAINING
The WTO organizes hundreds of technical cooperation missions to
developing countries annually. It holds on average three trade policy
courses each year in Geneva for government officials. Regional
seminars are held regularly in all regions of the world with a special
emphasis on African countries. Training courses are also organized in
Geneva for officials from countries in transition from central
planning to market economies.
The WTO has set up reference centres in over 100 trade
ministries and regional organizations in capitals of
developing and least-developed countries. These centres
provide computers and internet access to enable
ministry officials to keep abreast of events in the WTO
through online access to the WTO’s immense database
of official documents and other material. Efforts are
also being made to help countries that do not have
permanent representatives in Geneva.
Assisting developing countries in trade policy
issues, through technical assistance and
training programmes
Cooperating with other international organizations
THE ORGANIZATION
FUNCTIONS
The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and
predictably. It does this by:
Administering trade agreements
Acting as a forum for trade negotiations
Settling trade disputes
Reviewing national trade policies
STRUCTURE
The WTO has 153 members, 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, the General Agreement on Tariffs and Trade (GATT).
The WTO’s agreements have been ratified in all members’ parliaments.
The WTO’s top level decision-making body is the Ministerial Conference which meets at
least once every two years.
Below this is the General Council (normally ambassadors and heads of delegation in
Geneva, but sometimes officials sent from members’ capitals) which meets several times a
year in the Geneva headquarters. The General Council also meets as the Trade Policy
Review Body and the Dispute Settlement Body.
At the next level, the Goods Council, Services Council and Intellectual Property
(TRIPS) Council report to the General Council.
Numerous specialized committees, working groups and working parties deal with
the individual agreements and other areas such as the environment, development,
membership applications and regional trade agreements.
SECRETARIAT
The WTO Secretariat, based in Geneva, has around 625 staff and is headed by a directorgeneral.
It does not have branch offices outside Geneva. Since decisions are taken by the
Members themselves, the Secretariat does not have the decision-making role that other
international bureaucracies are given.
The Secretariat’s main duties are to supply technical support for the various councils and
committees and the ministerial conferences, to provide technical assistance for developing
countries, to analyze world trade, and to explain WTO affairs to the public and media.
The Secretariat also provides some forms of legal assistance in the dispute settlement
process and advises governments wishing to become members of the WTO. The annual
budget is roughly 189 million Swiss francs.
FACT FILE
The WTO
Location: Geneva, Switzerland
Established: 1 January 1995
Created by: Uruguay Round negotiations (1986-94)
Membership: 153 countries (on 23 July 2008)
Budget: 189 million Swiss francs for 2009
Secretariat staff: 625
Head: Director-General, Pascal Lamy
Functions:
Administering WTO trade agreements
Forum for trade negotiations
Handling trade disputes
Monitoring national trade policies
Technical assistance and training for developing countries
Cooperation with other international organizations
FURTHER INFORMATION
10 Benefits of the WTO Trading System and 10 Common Misunderstandings about the WTO
Companion pamphlets in this series.
Understanding the WTO
In booklet and interactive electronic versions, obtainable
from WTO Publications, downloadable from the WTO website.
Guide to the Uruguay Round Agreements
By the WTO Secretariat, published jointly by the WTO and Kluwer Law International.
The WTO Website
http://www.wto.org
CONTACTING THE WTO
Rue de Lausanne 154, CH-1211 Geneva 21, Switzerland
Tel.: +41 (0)22 739 51 1 Fax: +41 (0)22 731 42 06
WTO Information and External Relations Division
Tel.: +41 (0)22 739 50 07 / 51 9 Fax: +41 (0)22 739 54 58
e-mail: enquiries@wto.org
WTO Publications
Tel.: +41 (0)22 739 52 08 / 739 53 08 +41 (0)22 739 57 92
e-mail: publications@wto.org
© World Trade Organization 2009
ISBN 978-92-870-3418-2
9 789287 034182

CONTENTS
4
CHAPTER 1 BASICS
1. What is the World Trade Organization? 9
2. Principles of the trading system 10
3. The case for open trade 13
4. The GATT years: from Havana to Marrakesh 15
5. The Uruguay Round 18
CHAPTER 2 THE AGREEMENTS
1. Overview: a navigational guide 23
2. Tariffs: more bindings and closer to zero 25
3. Agriculture: fairer markets for farmers 26
4. Standards and safety 30
5. Textiles: back in the mainstream 31
6. Services: rules for growth and investment 33
7. Intellectual property: protection and enforcement 39
8. Anti-dumping, subsidies, safeguards: contingencies, etc 44
9. Non-tariff barriers: red tape, etc 49
Import licensing: keeping procedures clear 49
Rules for the valuation of goods at customs 49
Preshipment inspection: a further check on imports 50
Rules of origin: made in ... where? 50
Investment measures: reducing trade distortions 51
10. Plurilaterals: of minority interest 51
11. Trade policy reviews: ensuring transparency 53
CHAPTER 3 SETTLING DISPUTES
1. A unique contribution 55
2. The panel process 59
3. Case study: the timetable in practice 60
CHAPTER 4 CROSS-CUTTING AND NEW ISSUES
1. Regionalism: friends or rivals? 63
2. The environment: a specific concern 65
3. Investment, competition, procurement, simpler procedures 72
4. Electronic commerce 74
5. Labour standards: highly controversial 74
5
CHAPTER 6 DEVELOPING COUNTRIES
1. Overview 93
2. Committees 95
3. WTO technical cooperation 96
4. Some issues raised 97
CHAPTER 7 THE ORGANIZATION
1. Whose WTO is it anyway? 101
2. Membership, alliances and bureaucracy 105
3. The Secretariat 108
4. Special policies 109
Current WTO members 112
CHAPTER 5 THE DOHA AGENDA
Implementation-related issues and concerns (par 12) 77
Agriculture (pars 13, 14) 80
Services (par 15) 81
Market access for non-agricultural products (par 16) 81
Trade-related aspects of intellectual property rights
(TRIPS) (pars 17–19) 82
Relationship between trade and investment (pars 20–22) 84
Interaction between trade and competition policy (pars 23–25) 84
Transparency in government procurement (par 26) 85
Trade facilitation (par 27) 85
WTO rules: anti-dumping and subsidies (par 28) 86
WTO rules: regional trade agreements (par 29) 86
Dispute Settlement Understanding (par 30) 87
Trade and environment (pars 31–33) 87
Electronic commerce (par 34) 89
Small economies (par 35) 89
Trade, debt and finance (par 36) 89
Trade and technology transfer (par 37) 89
Technical cooperation and capacity building (pars 38–41) 89
Least-developed countries (pars 42, 43) 90
Special and differential treatment (par 44) 91
Cancún 2003, Hong Kong 2005 91

7
The first step is to talk. Essentially,
the WTO is a place where member
governments go, to try to sort out the
trade problems they face with each
other.
At its heart are WTO agreements,
negotiated and signed by the bulk
of the world’s trading nations.
But the WTO is not just about
liberalizing trade, and in some
circumstances its rules support
maintaining trade barriers —
for example to protect consumers,
prevent the spread of disease
or protect the environment.
The “table” in action: WTO Trade Negotiations Committee, meeting in Geneva, 14 September 2005
BASICS
Chapter 1
The WTO was born out of negotiations;
everything the WTO does is the result of negotiations
... OR IS IT A TABLE?
Participants in a recent radio discussion
on the WTO were full of ideas. The WTO
should do this, the WTO should do that,
they said.
One of them finally interjected: “Wait a
minute. The WTO is a table. People sit
round the table and negotiate. What do
you expect the table to do?”
1. What is the World Trade Organization?
Simply put: the World Trade Organization (WTO) deals with the rules of trade
between nations at a global or near-global level. But there is more to it than that.
Is it a bird, is it a plane?
There are a number of ways of looking at the WTO. It’s an organization for liberalizing
trade. It’s a forum for governments to negotiate trade agreements. It’s a place
for them to settle trade disputes. It operates a system of trade rules. (But it’s not
Superman, just in case anyone thought it could solve — or cause — all the world’s
problems!)
Above all, it’s a negotiating forum … Essentially, the WTO is a place where member
governments go, to try to sort out the trade problems they face with each other. The first
step is to talk. The WTO was born out of negotiations, and everything the WTO does
is the result of negotiations. The bulk of the WTO’s current work comes from the
1986–94 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.
Where countries have faced trade barriers and wanted them lowered, the negotiations
have helped to liberalize trade. But the WTO is not just about liberalizing
trade, and in some circumstances its rules support maintaining trade barriers — for
example to protect consumers or prevent the spread of disease.
It’s a set of rules … At its heart are the WTO agreements, negotiated and signed
by the bulk of the world’s trading nations. These documents provide the legal
ground-rules for international commerce. They are essentially contracts, binding
governments to keep their trade policies within agreed limits. Although negotiated
and signed by governments, the goal is to help producers of goods and services,
exporters, and importers conduct their business, while allowing governments to
meet social and environmental objectives.
10
The system’s 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.
And it helps to settle disputes … This is a third important side to the WTO’s work.
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.
Born in 1995, but not so young
The WTO began life on 1 January 1995, but its trading system is half a century older.
Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the
rules for the system. (The second WTO ministerial meeting, held in Geneva in May
1998, included a celebration of the 50th anniversary of the system.)
It did not take long for the General Agreement to give birth to an unofficial, de facto
international organization, also known informally as GATT. Over the years GATT
evolved through several rounds of negotiations.
The last and largest GATT round, was the Uruguay Round which lasted from 1986
to 1994 and led to the WTO’s creation. Whereas GATT had mainly dealt with trade
in goods, the WTO and its agreements now cover trade in services, and in traded
inventions, creations and designs (intellectual property).
2. 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.
A closer look at these principles:
Trade without discrimination
1. Most-favoured-nation (MFN): treating other people equally Under the WTO
agreements, countries cannot normally discriminate between their trading partners.
Grant someone a special favour (such as a lower customs duty rate for one of
their products) and you have to do the same for all other WTO members.
This principle is known as most-favoured-nation (MFN) treatment (see box). It is so
important that it is the first article of the General Agreement on Tariffs and Trade
(GATT), which governs trade in goods. MFN is also a priority in the General
Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each
agreement the principle is handled slightly differently. Together, those three agreements
cover all three main areas of trade handled by the WTO.
‘Multilateral’ trading system ...
... i.e. the system operated by the WTO.
Most nations — including almost all the
main trading nations — are members of
the system. But some are not, so “multilateral”
is used to describe the system
instead of “global” or “world”.
In WTO affairs, “multilateral” also contrasts
with actions taken regionally or by
other smaller groups of countries. (This is
different from the word’s use in other
areas of international relations where, for
example, a “multilateral” security
arrangement can be regional.)
The principles
The trading system should be ...
• without discrimination — a country
should not discriminate between its trading
partners (giving them equally “mostfavoured-
nation” or MFN status); and it
should not discriminate between its own
and foreign products, services or nationals
(giving them “national treatment”);
• freer — barriers coming down through
negotiation;
• predictable — foreign companies, investors
and governments should be confident
that trade barriers (including tariffs and
non-tariff barriers) should not be raised
arbitrarily; tariff rates and market-opening
commitments are “bound”in the WTO;
• more competitive — discouraging
“unfair” practices such as export subsidies
and dumping products at below cost to
gain market share;
• more beneficial for less developed countries
— giving them more time to adjust,
greater flexibility, and special privileges.
11
Why ‘most-favoured’?
This sounds like a contradiction. It suggests
special treatment, but in the WTO it
actually means non-discrimination —
treating virtually everyone equally.
This is what happens. Each member treats
all the other members equally as “mostfavoured”
trading partners. If a country
improves the benefits that it gives to one
trading partner, it has to give the same
“best” treatment to all the other WTO
members so that they all remain “mostfavoured”.
Most-favoured nation (MFN) status did
not always mean equal treatment. The
first bilateral MFN treaties set up exclusive
clubs among a country’s “most-favoured”
trading partners. Under GATT and now
the WTO, the MFN club is no longer
exclusive. The MFN principle ensures that
each country treats its over-140 fellowmembers
equally.
But there are some exceptions ...
Some exceptions are allowed. For example, countries can set up a free trade agreement
that applies only to goods traded within the group — discriminating against
goods from outside. Or they can give developing countries special access to their
markets. Or a country can raise barriers against products that are considered to be
traded unfairly from specific countries. And in services, countries are allowed, in
limited circumstances, to discriminate. But the agreements only permit these exceptions
under strict conditions. In general, MFN means that every time a country lowers
a trade barrier or opens up a market, it has to do so for the same goods or services
from all its trading partners — whether rich or poor, weak or strong.
2. National treatment: Treating foreigners and locals equally Imported and locallyproduced
goods should be treated equally — at least after the foreign goods have
entered the market. The same should apply to foreign and domestic services, and to
foreign and local trademarks, copyrights and patents. This principle of “national
treatment” (giving others the same treatment as one’s own nationals) is also found
in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and
Article 3 of TRIPS), although once again the principle is handled slightly differently
in each of these.
National treatment only applies once a product, service or item of intellectual property
has entered the market. Therefore, charging customs duty on an import is not
a violation of national treatment even if locally-produced products are not charged
an equivalent tax.
Freer trade: gradually, through negotiation
Lowering trade barriers is one of the most obvious means of encouraging trade. The
barriers concerned include customs duties (or tariffs) and measures such as import
bans or quotas that restrict quantities selectively. From time to time other issues
such as red tape and exchange rate policies have also been discussed.
Since GATT’s creation in 1947–48 there have been eight rounds of trade negotiations.
A ninth round, under the Doha Development Agenda, is now underway. At
first these focused on lowering tariffs (customs duties) on imported goods. As a
result of the negotiations, by the mid-1990s industrial countries’ tariff rates on
industrial goods had fallen steadily to less than 4%
But by the 1980s, the negotiations had expanded to cover non-tariff barriers on
goods, and to the new areas such as services and intellectual property.
Opening markets can be beneficial, but it also requires adjustment. The WTO agreements
allow countries to introduce changes gradually, through “progressive liberalization”.
Developing countries are usually given longer to fulfil their obligations.
Predictability: through binding and transparency
Sometimes, promising not to raise a trade barrier can be as important as lowering
one, because the promise gives businesses a clearer view of their future opportunities.
With stability and predictability, investment is encouraged, jobs are created and
consumers can fully enjoy the benefits of competition — choice and lower prices.
The multilateral trading system is an attempt by governments to make the business
environment stable and predictable.
12
In the WTO, when countries agree to open their markets for goods or services, they
“bind” their commitments. For goods, these bindings amount to ceilings on customs
tariff rates. Sometimes countries tax imports at rates that are lower than the
bound rates. Frequently this is the case in developing countries. In developed countries
the rates actually charged and the bound rates tend to be the same.
A country can change its bindings, but only after negotiating with its trading partners,
which could mean compensating them for loss of trade. One of the achievements
of the Uruguay Round of multilateral trade talks was to increase the amount
of trade under binding commitments (see table). In agriculture, 100% of products
now have bound tariffs. The result of all this: a substantially higher degree of market
security for traders and investors.
The system tries to improve predictability and stability in other ways as well. One
way is to discourage the use of quotas and other measures used to set limits on
quantities of imports — administering quotas can lead to more red-tape and accusations
of unfair play. Another is to make countries’ trade rules as clear and public
(“transparent”) as possible. Many WTO agreements require governments to disclose
their policies and practices publicly within the country or by notifying the
WTO. The regular surveillance of national trade policies through the Trade Policy
Review Mechanism provides a further means of encouraging transparency both
domestically and at the multilateral level.
Promoting fair competition
The WTO is sometimes described as a “free trade” institution, but that is not entirely
accurate. The system does allow tariffs and, in limited circumstances, other forms
of protection. More accurately, it is a system of rules dedicated to open, fair and
undistorted competition.
The rules on non-discrimination — MFN and national treatment — are designed to
secure fair conditions of trade. So too are those on dumping (exporting at below cost
to gain market share) and subsidies. The issues are complex, and the rules try to
establish what is fair or unfair, and how governments can respond, in particular by
charging additional import duties calculated to compensate for damage caused by
unfair trade.
Many of the other WTO agreements aim to support fair competition: in agriculture,
intellectual property, services, for example. The agreement on government procurement
(a “plurilateral” agreement because it is signed by only a few WTO members)
extends competition rules to purchases by thousands of government entities in
many countries. And so on.
Encouraging development and economic reform
The WTO system contributes to development. On the other hand, developing countries
need flexibility in the time they take to implement the system’s agreements. And
the agreements themselves inherit the earlier provisions of GATT that allow for special
assistance and trade concessions for developing countries.
Over three quarters of WTO members are developing countries and countries in
transition to market economies. During the seven and a half years of the Uruguay
Round, over 60 of these countries implemented trade liberalization programmes
autonomously. At the same time, developing countries and transition economies were
much more active and influential in the Uruguay Round negotiations than in any previous
round, and they are even more so in the current Doha Development Agenda.
The Uruguay Round
increased bindings
Percentages of tariffs bound before and
after the 1986–94 talks
Before After
Developed countries 78 99
Developing countries 21 73
Transition economies 73 98
(These are tariff lines, so percentages are
not weighted according to trade volume
or value)
13
At the end of the Uruguay Round, developing countries were prepared to take on
most of the obligations that are required of developed countries. But the agreements
did give them transition periods to adjust to the more unfamiliar and, perhaps, difficult
WTO provisions — particularly so for the poorest, “least-developed” countries.
A ministerial decision adopted at the end of the round says better-off countries
should accelerate implementing market access commitments on goods exported by
the least-developed countries, and it seeks increased technical assistance for them.
More recently, developed countries have started to allow duty-free and quota-free
imports for almost all products from least-developed countries. On all of this, the
WTO and its members are still going through a learning process. The current Doha
Development Agenda includes developing countries’ concerns about the difficulties
they face in implementing the Uruguay Round agreements.
3. The case for open trade
The economic case for an open trading system based on multilaterally agreed rules is
simple enough and rests largely on commercial common sense. But it is also supported
by evidence: the experience of world trade and economic growth since the Second
World War. Tariffs on industrial products have fallen steeply and now average less than
5% in industrial countries. During the first 25 years after the war, world economic
growth averaged about 5% per year, a high rate that was partly the result of lower trade
barriers. World trade grew even faster, averaging about 8% during the period.
The data show a definite statistical link between freer trade and economic growth.
Economic theory points to strong reasons for the link. All countries, including the
poorest, have assets — human, industrial, natural, financial — which they can employ
to produce goods and services for their domestic markets or to compete overseas.
Economics tells us that we can benefit when these goods and services are traded.
Simply put, the principle of “comparative advantage” says that countries prosper first
by taking advantage of their assets in order to concentrate on what they can produce
best, and then by trading these products for products that other countries produce best.
In other words, liberal trade policies — policies that allow the unrestricted flow of
goods and services — sharpen competition, motivate innovation and breed success.
They multiply the rewards that result from producing the best products, with the
best design, at the best price.
But success in trade is not static. The ability to compete well in particular products
can shift from company to company when the market changes or new technologies
make cheaper and better products possible. Producers are encouraged to adapt
gradually and in a relatively painless way. They can focus on new products, find a
new “niche” in their current area or expand into new areas.
Experience shows that competitiveness can also shift between whole countries. A
country that may have enjoyed an advantage because of lower labour costs or
because it had good supplies of some natural resources, could also become uncompetitive
in some goods or services as its economy develops. However, with the stimulus
of an open economy, the country can move on to become competitive in
some other goods or services. This is normally a gradual process.
TRUE AND NON-TRIVIAL?
Nobel laureate Paul Samuelson was once
challenged by the mathematician
Stanislaw Ulam to “name me one proposition
in all of the social sciences which is
both true and non-trivial.”
Samuelson’s answer? Comparative advantage.
“That it is logically true need not be
argued before a mathematician; that it is
not trivial is attested by the thousands of
important and intelligent men who have
never been able to grasp the doctrine for
themselves or to believe it after it was
explained to them.”
World trade and production
have accelerated
Both trade and GDP fell in the late 1920s,
before bottoming out in 1932. After World
War II, both have risen exponentially, most
of the time with trade outpacing GDP.
(1950 = 100. Trade and GDP: log scale)
2000
1000
200
100
1929/32 38 48 60 70 80 90 1995
50
GATT
created
WTO
created
GDP
Merchandise trade
MORE ON THE WEBSITE:
www.wto.org > resources >
WTO research and analysis
14
Nevertheless, the temptation to ward off the challenge of competitive imports is
always present. And richer governments are more likely to yield to the siren call of
protectionism, for short term political gain — through subsidies, complicated red
tape, and hiding behind legitimate policy objectives such as environmental preservation
or consumer protection as an excuse to protect 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 selfdefeating
and destructive drift into protectionism.
Comparative advantage
This is arguably the single most powerful
insight into economics.
Suppose country A is better than country
B at making automobiles, and country B is
better than country A at making bread. It
is obvious (the academics would say “trivial”)
that both would benefit if A specialized
in automobiles, B specialized in bread
and they traded their products. That is a
case of absolute advantage.
But what if a country is bad at making
everything? Will trade drive all producers
out of business? The answer, according to
Ricardo, is no. The reason is the principle
of comparative advantage.
It says, countries A and B still stand to
benefit from trading with each other even
if A is better than B at making everything.
If A is much more superior at making
automobiles and only slightly
superior at making bread, then A should
still invest resources in what it does best
— producing automobiles — and export
the product to B. B should still invest in
what it does best — making bread — and
export that product to A, even if it is not
as efficient as A. Both would still benefit
from the trade. A country does not have
to be best at anything to gain from trade.
That is comparative advantage.
The theory dates back to classical economist
David Ricardo. It is one of the most
widely accepted among economists. It is
also one of the most misunderstood
among non-economists because it is confused
with absolute advantage.
It is often claimed, for example, that some
countries have no comparative advantage
in anything. That is virtually impossible.
Think about it ...
15
4. The GATT years: from Havana to Marrakesh
The WTO’s creation on 1 January 1995 marked the biggest reform of international
trade since after the Second World War. It also brought to reality — in an updated
form — the failed attempt in 1948 to create an International Trade Organization.
Much of the history of those 47 years was written in Geneva. But it also traces a journey
that spanned the continents, from that hesitant start in 1948 in Havana (Cuba),
via Annecy (France), Torquay (UK), Tokyo (Japan), Punta del Este (Uruguay),
Montreal (Canada), Brussels (Belgium) and finally to Marrakesh (Morocco) in 1994.
During that period, the trading system came under GATT, salvaged from the aborted
attempt to create the ITO. GATT helped establish a strong and prosperous multilateral
trading system that became more and more liberal through rounds of trade
negotiations. But by the 1980s the system needed a thorough overhaul. This led to
the Uruguay Round, and ultimately to the WTO.
GATT: ‘provisional’ for almost half a century
From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided
the rules for much of world trade and presided over periods that saw some of the
highest growth rates in international commerce. It seemed well-established, but
throughout those 47 years, it was a provisional agreement and organization.
The original intention was to create a third institution to handle the trade side of international
economic cooperation, joining the two “Bretton Woods” institutions, the
World Bank and the International Monetary Fund. Over 50 countries participated in
negotiations to create an International Trade Organization (ITO) as a specialized
agency of the United Nations. The draft ITO Charter was ambitious. It extended
beyond world trade disciplines, to include rules on employment, commodity agreements,
restrictive business practices, international investment, and services. The aim
was to create the ITO at a UN Conference on Trade and Employment in Havana, Cuba
in 1947.
Meanwhile, 15 countries had begun talks in December 1945 to reduce and bind customs
tariffs. With the Second World War only recently ended, they wanted to give an
early boost to trade liberalization, and to begin to correct the legacy of protectionist
measures which remained in place from the early 1930s.
This first round of negotiations resulted in a package of trade rules and 45,000 tariff
concessions affecting $10 billion of trade, about one fifth of the world’s total. The
group had expanded to 23 by the time the deal was signed on 30 October 1947. The
tariff concessions came into effect by 30 June 1948 through a “Protocol of
Provisional Application”. And so the new General Agreement on Tariffs and Trade
was born, with 23 founding members (officially “contracting parties”).
The 23 were also part of the larger group negotiating the ITO Charter. One of the
provisions of GATT says that they should accept some of the trade rules of the draft.
This, they believed, should be done swiftly and “provisionally” in order to protect the
value of the tariff concessions they had negotiated. They spelt out how they envisaged
the relationship between GATT and the ITO Charter, but they also allowed for
the possibility that the ITO might not be created. They were right.
The trade chiefs
The directors-general of GATT and WTO
• Sir Eric Wyndham White (UK) 1948–68
• Olivier Long (Switzerland) 1968–80
• Arthur Dunkel (Switzerland) 1980–93
• Peter Sutherland (Ireland)
GATT 1993–94; WTO 1995
• Renato Ruggiero (Italy) 1995–1999
• Mike Moore (New Zealand) 1999–2002
• Supachai Panitchpakdi (Thailand)
2002–2005
• Pascal Lamy (France) 2005–
16
The Havana conference began on 21 November 1947, less than a month after GATT
was signed. The ITO Charter was finally agreed in Havana in March 1948, but ratification
in some national legislatures proved impossible. The most serious opposition
was in the US Congress, even though the US government had been one of the
driving forces. In 1950, the United States government announced that it would not
seek Congressional ratification of the Havana Charter, and the ITO was effectively
dead. So, the GATT became the only multilateral instrument governing international
trade from 1948 until the WTO was established in 1995.
For almost half a century, the GATT’s basic legal principles remained much as they
were in 1948. There were additions in the form of a section on development added
in the 1960s and “plurilateral” agreements (i.e. with voluntary membership) in the
1970s, and efforts to reduce tariffs further continued. Much of this was achieved
through a series of multilateral negotiations known as “trade rounds” — the biggest
leaps forward in international trade liberalization have come through these rounds
which were held under GATT’s auspices.
In the early years, the GATT trade rounds concentrated on further reducing tariffs.
Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping
Agreement and a section on development. The Tokyo Round during the seventies
was the first major attempt to tackle trade barriers that do not take the form of tariffs,
and to improve the system. The eighth, the Uruguay Round of 1986–94, was the
last and most extensive of all. It led to the WTO and a new set of agreements.
The Tokyo Round ‘codes’
• Subsidies and countervailing measures
— interpreting Articles 6, 16 and 23 of GATT
• Technical barriers to trade — sometimes
called the Standards Code
• Import licensing procedures
• Government procurement
• Customs valuation — interpreting Article 7
• Anti-dumping — interpreting Article 6,
replacing the Kennedy Round code
• Bovine Meat Arrangement
• International Dairy Arrangement
• Trade in Civil Aircraft
Year Place/ name Subjects covered Countries
1947 Geneva Tariffs 23
1949 Annecy Tariffs 13
1951 Torquay Tariffs 38
1956 Geneva Tariffs 26
1960–1961 Geneva (Dillon Round) Tariffs 26
1964–1967 Geneva (Kennedy Round) Tariffs and anti-dumping measures 62
1973–1979 Geneva (Tokyo Round) Tariffs, non-tariff measures, “framework” agreements 102
1986–1994 Geneva (Uruguay Round) Tariffs, non-tariff measures, rules, services, intellectual property, 123
dispute settlement, textiles, agriculture, creation of WTO, etc
The GATT trade rounds
The Tokyo Round: a first try to reform the system
The Tokyo Round lasted from 1973 to 1979, with 102 countries participating. It continued
GATT’s efforts to progressively reduce tariffs. The results included 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 tariff reductions,
phased in over a period of eight years, involved an element of “harmonization”— the
higher the tariff, the larger the cut, proportionally.
In other issues, the Tokyo Round had mixed results. It failed to come to grips with the
fundamental problems affecting farm trade and also stopped short of providing a
modified agreement on “safeguards” (emergency import measures). Nevertheless, a
series of agreements on non-tariff barriers did emerge from the negotiations, in some
cases interpreting existing GATT rules, in others breaking entirely new ground. In
most cases, only a relatively small number of (mainly industrialized) GATT members
subscribed to these agreements and arrangements. Because they were not accepted by
the full GATT membership, they were often informally called “codes”.
17
They were not multilateral, but they were a beginning. Several codes were eventually
amended in the Uruguay Round and turned into multilateral commitments accepted
by all WTO members. Only four remained “plurilateral” — those on government procurement,
bovine meat, civil aircraft and dairy products. In 1997 WTO members
agreed to terminate the bovine meat and dairy agreements, leaving only two.
Did GATT succeed?
GATT was provisional with a limited field of action, but its success over 47 years in
promoting and securing the liberalization of much of world trade is incontestable.
Continual reductions in tariffs alone helped spur very high rates of world trade growth
during the 1950s and 1960s — around 8% a year on average. And the momentum of
trade liberalization helped ensure that trade growth consistently out-paced production
growth throughout the GATT era, a measure of countries’ increasing ability to trade
with each other and to 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.
But all was not well. As time passed new problems arose. The Tokyo Round in the
1970s was an attempt to tackle some of these but its achievements were limited.
This was a sign of difficult times to come.
GATT’s success in reducing tariffs to such a low level, combined with a series of
economic recessions in the 1970s and early 1980s, drove governments to devise
other forms of protection for sectors facing increased foreign competition. High
rates of unemployment and constant factory closures led governments in Western
Europe and North America to seek 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.
The problem was not just a deteriorating trade policy environment. By the early
1980s the General Agreement was clearly no longer as relevant to the realities of
world trade as it had been in the 1940s. For a start, world trade had become far more
complex and important than 40 years before: the globalization of the world economy
was underway, trade in services — not covered by GATT rules — was of major
interest to more and more countries, and international investment had expanded.
The expansion of services trade was also closely tied to further increases in world
merchandise trade. In other respects, GATT had been found wanting. For instance,
in agriculture, loopholes in the multilateral system were heavily exploited, and
efforts at liberalizing agricultural trade met with little success. In the textiles and
clothing sector, an exception to GATT’s normal disciplines was negotiated in the
1960s and early 1970s, leading to the Multifibre Arrangement. Even GATT’s institutional
structure and its dispute settlement system were causing concern.
These and other factors convinced GATT members that a new effort to reinforce
and extend the multilateral system should be attempted. That effort resulted in the
Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.
Trade rounds: progress by package
They are often lengthy — the Uruguay
Round took seven and a half years — but
trade rounds can have an advantage. They
offer a package approach to trade negotiations
that can sometimes be more fruitful
than negotiations on a single issue.
• The size of the package can mean more
benefits because participants can seek
and secure advantages across a wide
range of issues.
• Agreement can be easier to reach,
through trade-offs — somewhere in the
package there should be something for
everyone.
This has political as well as economic
implications. A government may want to
make a concession, perhaps in one sector,
because of the economic benefits. But
politically, it could find the concession difficult
to defend. A package would contain
politically and economically attractive benefits
in other sectors that could be used as
compensation.
So, reform in politically-sensitive sectors of
world trade can be more feasible as part
of a global package — a good example is
the agreement to reform agricultural
trade in the Uruguay Round.
• Developing countries and other less powerful
participants have a greater chance of
influencing the multilateral system in a trade
round than in bilateral relationships with
major trading nations.
But the size of a trade round can be both a
strength and a weakness. From time to
time, the question is asked: wouldn’t it be
simpler to concentrate negotiations on a single
sector? Recent history is inconclusive. At
some stages, the Uruguay Round seemed so
cumbersome that it seemed impossible that
all participants could agree on every subject.
Then the round did end successfully in
1993–94. This was followed by two years
of failure to reach agreement in the singlesector
talks on maritime transport.
Did this mean that trade rounds were the
only route to success? No. In 1997, singlesector
talks were concluded successfully in
basic telecommunications, information technology
equipment and financial services.
The debate continues. Whatever the
answer, the reasons are not straightforward.
Perhaps success depends on using
the right type of negotiation for the particular
time and context.
18
5. The Uruguay Round
It took seven and a half years, almost twice the original schedule. By the end, 123
countries were taking part. It covered almost all trade, from toothbrushes to pleasure
boats, from banking to telecommunications, from the genes of wild rice to
AIDS treatments. It was quite simply the largest trade negotiation ever, and most
probably the largest negotiation of any kind in history.
At times it seemed doomed to fail. But in the end, the Uruguay Round brought
about the biggest reform of the world’s trading system since GATT was created at
the end of the Second World War. And yet, despite its troubled progress, the
Uruguay Round did see some early results. 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.
A round to end all rounds?
The seeds of the Uruguay Round were sown in November 1982 at a ministerial
meeting of GATT members in Geneva. Although the ministers intended to launch
a major new negotiation, the conference stalled on agriculture and was widely
regarded as a failure. In fact, the work programme that the ministers agreed formed
the basis for what was to become the Uruguay Round negotiating agenda.
Nevertheless, it took four more years of exploring, clarifying issues and painstaking
consensus-building, before ministers agreed to launch the new round. They did so
in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating
agenda that covered virtually every outstanding trade policy issue. The talks
were going to extend the trading system into several new areas, notably trade in
services and intellectual property, and to reform trade in the sensitive sectors of agriculture
and textiles. All the original GATT articles were up for review. It was the
biggest negotiating mandate on trade ever agreed, and the ministers gave themselves
four years to complete it.
Two years later, in December 1988, ministers met again in Montreal, Canada, for
what was supposed to be an assessment of progress at the round’s half-way point.
The purpose was to clarify the agenda for the remaining two years, but the talks
ended in a deadlock that was not resolved until officials met more quietly in Geneva
the following April.
Despite the difficulty, during the Montreal meeting, ministers did agree a package
of early results. These included some 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. The round was supposed to end when ministers
met once more in Brussels, in December 1990. But they disagreed on how to reform
agricultural trade and decided to extend the talks. The Uruguay Round entered its
bleakest period.
The 1986 agenda
The 15 original Uruguay Round subjects
Tariffs
Non-tariff barriers
Natural resource products
Textiles and clothing
Agriculture
Tropical products
GATT articles
Tokyo Round codes
Anti-dumping
Subsidies
Intellectual property
Investment measures
Dispute settlement
The GATT system
Services
The Uruguay Round — Key dates
Sep 86 Punta del Este: launch
Dec 88 Montreal: ministerial mid-term review
Apr 89 Geneva: mid-term review completed
Dec 90 Brussels: “closing” ministerial
meeting ends in deadlock
Dec 91 Geneva: first draft of
Final Act completed
Nov 92 Washington: US and EC achieve
“Blair House” breakthrough on agriculture
Jul 93 Tokyo: Quad achieve market
access breakthrough at G7 summit
Dec 93 Geneva: most negotiations end
(some market access talks remain)
Apr 94 Marrakesh: agreements signed
Jan 95 Geneva: WTO created, agreements
take effect
19
Despite the poor political outlook, a considerable amount of technical work continued,
leading to the first draft of a final legal agreement. This draft “Final Act” was
compiled by the then GATT director-general, Arthur Dunkel, who chaired the negotiations
at officials’ level. It was put on the table in Geneva in December 1991. The
text fulfilled every part of the Punta del Este mandate, with one exception — it did
not contain the participating countries’ lists of commitments for cutting import
duties and opening their services markets. The draft became the basis for the final
agreement.
Over the following two years, the negotiations lurched between impending failure,
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 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 subjects (“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 (although some final touches were completed in talks on market
access a few weeks later). On 15 April 1994, the deal was signed by ministers
from most of the 123 participating governments at a meeting in Marrakesh,
Morocco.
The delay had some merits. It allowed some negotiations to progress further than
would have been possible in 1990: for example some aspects of services and intellectual
property, and the creation of the WTO itself. But the task had been immense,
and negotiation-fatigue was felt in trade bureaucracies around the world. The difficulty
of reaching agreement on a complete package containing almost the entire
range of current trade issues led some to conclude that a negotiation on this scale
would never again be possible. 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.
What happened to GATT?
The WTO replaced GATT as an international organization, but the General
Agreement still exists as the WTO’s umbrella treaty for trade in goods, updated as
a result of the Uruguay Round negotiations. Trade lawyers distinguish between
GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement
which is still the heart of GATT 1994. Confusing? For most of us, it’s enough to
refer simply to “GATT”.
20
The post-Uruguay Round built-in agenda
Many of the Uruguay Round agreements set timetables for future work. Part of this
“built-in agenda” started almost immediately. In some areas, it included new or further
negotiations. In other areas, it included assessments or reviews of the situation
at specified times. Some negotiations were quickly completed, notably in basic
telecommunications, financial services. (Member governments also swiftly agreed a
deal for freer trade in information technology products, an issue outside the “builtin
agenda”.)
The agenda originally built into the Uruguay Round agreements has seen additions
and modifications. A number of items are now part of the Doha Agenda, some of
them updated.
There were well over 30 items in the original built-in agenda.
This is a selection of highlights:
1996
• Maritime services: market access negotiations to end (30 June 1996, suspended to
2000, now part of Doha Development Agenda)
• Services and environment: deadline for working party report (ministerial conference,
December 1996)
• Government procurement of services: negotiations start
1997
• Basic telecoms: negotiations end (15 February)
• Financial services: negotiations end (30 December)
• Intellectual property, creating a multilateral system of notification and registration
of geographical indications for wines: negotiations start, now part of Doha
Development Agenda
21
1998
• Textiles and clothing: new phase begins 1 January
• Services (emergency safeguards): results of negotiations on emergency safeguards
to take effect (by 1 January 1998, deadline now March 2004)
• Rules of origin: Work programme on harmonization of rules of origin to be completed
(20 July 1998)
• Government procurement: further negotiations start, for improving rules and
procedures (by end of 1998)
• Dispute settlement: full review of rules and procedures (to start by end of 1998)
1999
• Intellectual property: certain exceptions to patentability and protection of plant
varieties: review starts
2000
• Agriculture: negotiations start, now part of Doha Development Agenda
• Services: new round of negotiations start, now part of Doha Development Agenda
• Tariff bindings: review of definition of “principle supplier” having negotiating
rights under GATT Art 28 on modifying bindings
• Intellectual property: first of two-yearly reviews of the implementation of the agreement
2002
• Textiles and clothing: new phase begins 1 January
2005
• Textiles and clothing: full integration into GATT and agreement expires 1 January

23
1. Overview: a navigational guide
The WTO agreements cover goods, services and intellectual property. They spell out
the principles of liberalization, and the permitted exceptions. They include individual
countries’ commitments to lower customs tariffs and other trade barriers, and
to open and keep open services markets. They set procedures for settling disputes.
They prescribe special treatment for developing countries. They require governments
to make their trade policies transparent by notifying the WTO about laws in
force and measures adopted, and through regular reports by the secretariat on countries’
trade policies.
These agreements are often called the WTO’s trade rules, and the WTO is often
described as “rules-based”, a system based on rules. But it’s important to remember
that the rules are actually agreements that governments negotiated.
This chapter focuses on the Uruguay Round agreements, which are the basis of the
present WTO system. Additional work is also now underway in the WTO. This is
the result of decisions taken at Ministerial Conferences, in particular the meeting in
Doha, November 2001, when new negotiations and other work were launched.
(More on the Doha Agenda, later.)
Six-part broad outline
The table of contents of “The Results of the Uruguay Round of Multilateral Trade
Negotiations: The Legal Texts” is a daunting list of about 60 agreements, annexes, decisions
and understandings. In fact, the agreements fall into a simple structure with six
main parts: an umbrella agreement (the Agreement Establishing the WTO); agreements
for each of the three broad areas of trade that the WTO covers (goods, services and intellectual
property); dispute settlement; and reviews of governments’ trade policies.
The agreements for the two largest areas — goods and services — share a common
three-part outline, even though the detail is sometimes quite different.
• They start with broad principles: the General Agreement on Tariffs and trade
(GATT) (for goods), and the General Agreement on Trade in Services (GATT)
(The third area, Trade-Related Aspects of Intellectual Property Rights (TRIPS),
also falls into this category although at present it has no additional parts.)
• Then come extra agreements and annexes dealing with the special requirements
of specific sectors or issues.
• Finally, there are the detailed and lengthy schedules (or lists) of commitments
made by individual countries allowing specific foreign products or serviceproviders
access to their markets. For GATT, these take the form of binding
commitments on tariffs for goods in general, and combinations of tariffs and
quotas for some agricultural goods. For GATS, the commitments state how
much access foreign service providers are allowed for specific sectors, and
they include lists of types of services where individual countries say they are
not applying the “most-favoured-nation” principle of non-discrimination.
THE AGREEMENTS
Chapter 2
The WTO is ‘rules-based’;
its rules are negotiated agreements
The ‘additional details’
These agreements and annexes deal with
the following specific sectors or issues:
For goods (under GATT)
• Agriculture
• Health regulations for farm products (SPS)
• Textiles and clothing
• Product standards (TBT)
• Investment measures
• Anti-dumping measures
• Customs valuation methods
• Preshipment inspection
• Rules of origin
• Import licensing
• Subsidies and counter-measures
• Safeguards
For services (the GATS annexes)
• Movement of natural persons
• Air transport
• Financial services
• Shipping
• Telecommunications
24
AGREEMENT ESTABLISHING WTO Umbrella
Goods Services Intellectual property
Basic principles GATT GATS
Additional details Other goods
agreements and
annexes
Services annexes
Market access
commitments
Countries’
schedules of
commitments
Countries’ schedules
of commitments
(and MFN exemptions)
Dispute settlement DISPUTE SETTLEMENT
Transparency TRADE POLICY REVIEWS
TRIPS
In a nutshell
The basic structure of the WTO agreements: how the six main areas fit together —
the umbrella WTO Agreement, goods, services, intellectual property, disputes and trade
policy reviews.
Underpinning these are dispute settlement, which is based on the agreements and
commitments, and trade policy reviews, an exercise in transparency.
Much of the Uruguay Round dealt with the first two parts: general principles and
principles for specific sectors. At the same time, market access negotiations were
possible for industrial goods. Once the principles had been worked out, negotiations
could proceed on the commitments for sectors such as agriculture and services.
Additional agreements
Another group of agreements not included in the diagram is also important: the two
“plurilateral” agreements not signed by all members: civil aircraft and government
procurement.
Further changes on the horizon, the Doha Agenda
These agreements are not static; they are renegotiated from time to time and new
agreements can be added to the package. Many are now being negotiated under the
Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in
November 2001.
2. Tariffs: more bindings and closer to zero
The bulkiest results of Uruguay Round are the 22,500 pages listing individual countries’
commitments on specific categories of goods and services. These include commitments
to cut and “bind” their customs duty rates on imports of goods. In some
cases, tariffs are being cut to zero. There is also a significant increase in the number of
“bound” tariffs — duty rates that are committed in the WTO and are difficult to raise.
ON THE WEBSITE:
www.wto.org > trade topics > goods > goods schedules
www.wto.org > trade topics > services > services schedules
Tariff cuts
Developed countries’ tariff cuts were for the most part phased in over five years
from 1 January 1995. The result is a 40% cut in their tariffs on industrial products,
from an average of 6.3% to 3.8%. The value of imported industrial products that
receive duty-free treatment in developed countries will jump from 20% to 44%.
There will also be fewer products charged high duty rates. The proportion of
imports into developed countries from all sources facing tariffs rates of more than
15% will decline from 7% to 5%. The proportion of developing country exports facing
tariffs above 15% in industrial countries will fall from 9% to 5%.
The Uruguay Round package has been improved. On 26 March 1997, 40 countries
accounting for more than 92% of world trade in information technology products,
agreed to eliminate import duties and other charges on these products by 2000 (by 2005
in a handful of cases). As with other tariff commitments, each participating country is
applying its commitments equally to exports from all WTO members (i.e. on a mostfavoured-
nation basis), even from members that did not make commitments.
What is this agreement called? There is no legally binding agreement
that sets out the targets for tariff reductions (e.g. by what percentage they were
to be cut as a result of the Uruguay Round).
Instead, individual countries listed their commitments in schedules annexed to Marrakesh Protocol
to the General Agreement on Tariffs and Trade 1994. This is the legally binding agreement for the
reduced tariff rates. Since then, additional commitments were made under the 1997 Information
Technology Agreement.
More bindings
Developed countries increased the number of imports whose tariff rates are
“bound” (committed and difficult to increase) from 78% of product lines to 99%. For
developing countries, the increase was considerable: from 21% to 73%. Economies
in transition from central planning increased their bindings from 73% to 98%. This
all means a substantially higher degree of market security for traders and investors.
ON THE WEBSITE:
www.wto.org > trade topics > market access
> See also Doha Agenda negotiations
25
Binding’ tariffs
The market access schedules are not simply
announcements of tariff rates.They
represent commitments not to increase
tariffs above the listed rates — the rates
are “bound”. For developed countries,
the bound rates are generally the rates
actually charged. Most developing countries
have bound the rates somewhat higher
than the actual rates charged, so the bound
rates serve as ceilings.
Countries can break a commitment
(i.e. raise a tariff above the bound rate),
but only with difficulty. To do so they have
to negotiate with the countries most concerned
and that could result in compensation
for trading partners’ loss of trade.
26
And agriculture ...
Tariffs on all agricultural products are now bound. Almost all import restrictions
that did not take the form of tariffs, such as quotas, have been converted to tariffs
— a process known as “tariffication”. This has made markets substantially more
predictable for agriculture. Previously more than 30% of agricultural produce had
faced quotas or import restrictions. The first step in “tariffication” was to replace
these restrictions with tariffs that represented about the same level of protection.
Then, over six years from 1995–2000, these tariffs were gradually reduced (the
reduction period for developing countries ends in 2005). The market access commitments
on agriculture also eliminate previous import bans on certain products.
In addition, the lists include countries’ commitments to reduce domestic support
and export subsidies for agricultural products. (See section on agriculture.)
> See also Doha Agenda chapter
3. Agriculture: fairer markets for farmers
The original GATT did apply to agricultural trade, but it contained loopholes. For example,
it allowed countries to use some non-tariff measures such as import quotas, and
to subsidize. Agricultural trade became highly distorted, especially with the use of
export subsidies which would not normally have been allowed for industrial products.
The Uruguay Round produced the first multilateral agreement dedicated to the sector.
It was a significant first step towards order, fair competition and a less distorted sector.
It was implemented over a six-year period (and is still being implemented by developing
countries under their 10-year period), that began in 1995. The Uruguay Round
agreement included a commitment to continue the reform through new negotiations.
These were launched in 2000, as required by the Agriculture Agreement.
> See also Doha Agenda negotiations
What is ‘distortion’?
This a key issue. Trade is distorted if prices
are higher or lower than normal, and
if quantities produced, bought, and sold
are also higher or lower than norma
— i.e. than the levels that would usually
exist in a competitive market.
For example, import barriers and domestic
subsidies can make crops more expensive
on a country’s internal market. The higher
prices can encourage over-production.
If the surplus is to be sold on world markets,
where prices are lower, then export
subsidies are needed. As a result, the
subsidizing countries can be producing
and exporting considerably more than
they normally would.
Governments usually give three reasons
for supporting and protecting their
farmers, even if this distorts agricultural
trade:
• to make sure that enough food is
produced to meet the country’s needs
• to shield farmers from the effects of
the weather and swings in world prices
• to preserve rural society.
But the policies have often been expensive,
and they have created gluts leading to
export subsidy wars. Countries with less
money for subsidies have suffered.
The debate in the negotiations is whether
these objectives can be met without
distorting trade.
27
The Agriculture Agreement: new rules and commitments
The objective of the is to reform trade in the sector and to
make policies more market-oriented. This would improve predictability and security
for importing and exporting countries alike.
The new rules and commitments apply to:
• market access — various trade restrictions confronting imports
• domestic support — subsidies and other programmes, including those that
raise or guarantee farmgate prices and farmers’ incomes
• export subsidies and other methods used to make exports artificially competitive.
The agreement does allow governments to support their rural economies, but preferably
through policies that cause less distortion to trade. It also allows some flexibility in
the way commitments are implemented. Developing countries do not have to cut their
subsidies or lower their tariffs as much as developed countries, and they are given extra
time to complete their obligations. Least-developed countries don’t have to do this at all.
Special provisions deal with the interests of countries that rely on imports for their food
supplies, and the concerns of least-developed economies.
“Peace” provisions within the agreement aim to reduce the likelihood of disputes or
challenges on agricultural subsidies over a period of nine years, until the end of 2003.
What is this agreement called? Most provisions: Agreement on Agriculture.
Commitments on tariffs, tariff quotas, domestic supports, export subsidies:
in schedules annexed to the Marrakesh Protocol to the General Agreement
on Tariffs and Trade 1994.
Also: [Ministerial] Decision on Measures Concerning the Possible Negative Effects of the Reform
Programme on Least-Developed and Net Food-Importing Developing Countries.
(See also: “Modalities for the establishment of specific binding commitments under the reform
programme”, MTN.GNG/MA/W/24.)
Market access: ‘tariffs only’, please
The new rule for market access in agricultural products is “tariffs only”. Before the
Uruguay Round, some agricultural imports were restricted by quotas and other nontariff
measures. These have been replaced by tariffs that provide more-or-less equivalent
levels of protection — if the previous policy meant domestic prices were 75%
higher than world prices, then the new tariff could be around 75%. (Converting the
quotas and other types of measures to tariffs in this way was called “tariffication”.)
The tariffication package contained more. It ensured that quantities imported
before the agreement took effect could continue to be imported, and it guaranteed
that some new quantities were charged duty rates that were not prohibitive. This
was achieved by a system of “tariff-quotas” — lower tariff rates for specified quantities,
higher (sometimes much higher) rates for quantities that exceed the quota.
The newly committed tariffs and tariff quotas, covering all agricultural products,
took effect in 1995. Uruguay Round participants agreed that developed countries
would cut the tariffs (the higher out-of-quota rates in the case of tariff-quotas) by an
average of 36%, in equal steps over six years. Developing countries would make 24%
cuts over 10 years. Several developing countries also used the option of offering ceiling
tariff rates in cases where duties were not “bound” (i.e. committed under GATT
or WTO regulations) before the Uruguay Round. Least-developed countries do not
have to cut their tariffs. (These figures do not actually appear in the Agriculture
28
Agreement. Participants used them to prepare their schedules — i.e. lists of commitments.
It is the commitments listed in the schedules that are legally binding.)
For products whose non-tariff restrictions have been converted to tariffs, governments
are allowed to take special emergency actions (“special safeguards”) in order
to prevent swiftly falling prices or surges in imports from hurting their farmers. But
the agreement specifies when and how those emergency actions can be introduced
(for example, they cannot be used on imports within a tariff-quota).
Four countries used “special treatment” provisions to restrict imports of particularly
sensitive products (mainly rice) during the implementation period (to 2000 for
developed countries, to 2004 for developing nations), but subject to strictly defined
conditions, including minimum access for overseas suppliers. The four were:
Japan, Rep. of Korea, and the Philippines for rice; and Israel for sheepmeat,
wholemilk powder and certain cheeses. Japan and Israel have now given up this
right, but Rep. of Korea and the Philippines have extended their special treatment
for rice. A new member, Chinese Taipei, gave special treatment to rice in its first
year of membership, 2002.
Domestic support: some you can, some you can’t
The main complaint about policies which support domestic prices, or subsidize production
in some other way, is that they encourage over-production. This squeezes out
imports or leads to export subsidies and low-priced dumping on world markets. The
Agriculture Agreement distinguishes between support programmes that stimulate
production directly, and those that are considered to have no direct effect.
Domestic policies that do have a direct effect on production and trade have to be cut
back. WTO members calculated how much support of this kind they were providing
per year for the agricultural sector (using calculations known as “total aggregate
Numerical targets for agriculture
The reductions in agricultural subsidies and protection agreed in the Uruguay Round.
Only the figures for cutting export subsidies appear in the agreement.
Developed countries Developing countries
6 years: 10 years:
1995–2000 1995–2004
Tariffs
average cut for all –36% –24%
agricultural products
minimum cut per product –15% –10%
Domestic support
total AMS cuts for sector –20% –13%
(base period: 1986–88)
Exports
value of subsidies –36% –24%
subsidized quantities
(base period: 1986–90) –21% –14%
Least-developed countries do not have to make commitments to reduce tariffs or subsidies.
The base level for tariff cuts was the bound rate before 1 January 1995; or,
for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began.
The other figures were targets used to calculate countries’ legally-binding
“schedules” of commitments.
ON THE WEBSITE:
www.wto.org >trade topics > goods > agriculture
29
measurement of support” or “Total AMS”) in the base years of 1986–88. Developed
countries agreed to reduce these figures by 20% over six years starting in 1995.
Developing countries agreed to make 13% cuts over 10 years. Least-developed countries
do not need to make any cuts. (This category of domestic support is sometimes
called the “amber box”, a reference to the amber colour of traffic lights, which
means “slow down”.)
Measures with minimal impact on trade can be used freely — they are in a “green
box” (“green” as in traffic lights). They include government services such as
research, disease control, infrastructure and food security. They also include payments
made directly to farmers that do not stimulate production, such as certain
forms of direct income support, assistance to help farmers restructure agriculture,
and direct payments under environmental and regional assistance programmes.
Also permitted, are certain direct payments to farmers where the farmers are
required to limit production (sometimes called “blue box” measures), certain government
assistance programmes to encourage agricultural and rural development
in developing countries, and other support on a small scale (“de minimis”) when
compared with the total value of the product or products supported (5% or less in
the case of developed countries and 10% or less for developing countries).
Export subsidies: limits on spending and quantities
The Agriculture Agreement prohibits export subsidies on agricultural products
unless the subsidies are specified in a member’s lists of commitments. Where they
are listed, the agreement requires WTO members to cut both the amount of money
they spend on export subsidies and the quantities of exports that receive subsidies.
Taking averages for 1986–90 as the base level, developed countries agreed to cut the
value of export subsidies by 36% over the six years starting in 1995 (24% over 10 years
for developing countries). Developed countries also agreed to reduce the quantities
of subsidized exports by 21% over the six years (14% over 10 years for developing
countries). Least-developed countries do not need to make any cuts.
During the six-year implementation period, developing countries are allowed under
certain conditions to use subsidies to reduce the costs of marketing and transporting
exports.
The least-developed and those depending on food imports
Under the Agriculture Agreement, WTO members have to reduce their subsidized
exports. But some importing countries depend on supplies of cheap, subsidized
food from the major industrialized nations. They include some of the poorest countries,
and although their farming sectors might receive a boost from higher prices
caused by reduced export subsidies, they might need temporary assistance to make
the necessary adjustments to deal with higher priced imports, and eventually to
export. A special ministerial decision sets out objectives, and certain measures, for
the provision of food aid and aid for agricultural development. It also refers to the
possibility of assistance from the International Monetary Fund and the World Bank
to finance commercial food imports.
Imports entering under the tariff-quota
(up to 1,000 tons) are generally charged 10%.
Imports entering outside the tariff-quota are
charged 80%. Under the Uruguay Round
agreement, the 1,000 tons would be based
on actual imports in the base period or an
agreed “minimum access” formula.
Tariff quotas are also called “tariff-rate quotas”.
A tariff-quota
This is what a tariff-quota might look like
30
ON THE WEBSITE:
www.wto.org > trade topics > goods > sanitary
and phytosanitary measures
4. Standards and safety
Article 20 of the General Agreement on Tariffs and
Trade (GATT) allows governments to act on trade in
order to protect human, animal or plant life or
health, provided they do not discriminate or use this as disguised protectionism. In
addition, there are two specific WTO agreements dealing with food safety and animal
and plant health and safety, and with product standards in general. Both try to
identify how to meet the need to apply standards and at the same time avoid protectionism
in disguise. These issues are becoming more important as tariff barriers
fall — some compare this to seabed rocks appearing when the tide goes down. In
both cases, if a country applies international standards, it is less likely to be challenged
legally in the WTO than if it sets its own standards.
Food, animal and plant products: how safe is safe?
Problem: How do you ensure that your country’s consumers are being supplied
with food that is safe to eat — “safe” by the standards you consider appropriate? And
at the same time, how can you ensure that strict health and safety regulations are
not being used as an excuse for protecting domestic producers?
A separate agreement on food safety and animal and plant health standards (the
Sanitary and Phytosanitary Measures Agreement or SPS) sets out the basic rules.
It allows countries to set their own standards. But it also says regulations must be
based on science. They should be applied only to the extent necessary to protect
human, animal or plant life or health. And they should not arbitrarily or unjustifiably
discriminate between countries where identical or similar conditions prevail.
Member countries are encouraged to use international standards, guidelines and
recommendations where they exist. When they do, they are unlikely to be challenged
legally in a WTO dispute. However, members may use measures which
result in higher standards if there is scientific justification. They can also set higher
standards based on appropriate assessment of risks so long as the approach is
consistent, not arbitrary. And they can to some extent apply the “precautionary principle”,
a kind of “safety first” approach to deal with scientific uncertainty. Article 5.7
of the SPS Agreement allows temporary “precautionary” measures.
The agreement still allows countries to use different standards and different methods
of inspecting products. So how can an exporting country be sure the practices
it applies to its products are acceptable in an importing country? If an exporting
country can demonstrate that the measures it applies to its exports achieve the same
level of health protection as in the importing country, then the importing country is
expected to accept the exporting country’s standards and methods.
The agreement includes provisions on control, inspection and approval procedures.
Governments must provide advance notice of new or changed sanitary and phytosanitary
regulations, and establish a national enquiry point to provide information.
The agreement complements that on technical barriers to trade.
Technical regulations and standards
Technical regulations and standards are important, but they vary from country to country.
Having too many different standards makes life difficult for producers and
exporters. Standards can become obstacles to trade. But they are also necessary for a
range of reasons, from environmental protection, safety, national security to consumer
Whose international standards?
An annex to the Sanitary and
Phytosanitary Measures Agreement names:
• the FAO/WHO Codex Alimentarius
Commission: for food
• the International Animal Health
Organization (Office International des
Epizooties): for animal health
• the FAO’s Secretariat of the International
Plant Protection Convention:
for plant health.
Governments can add any other international
organizations or agreements whose
membership is open to all WTO members.
When members apply these standards,
they are likely to be safe from legal
challenge through a WTO dispute.
31
information. And they can help trade. Therefore the same basic question arises again:
how to ensure that standards are genuinely useful, and not arbitrary or an excuse for
protectionism.
The Technical Barriers to Trade Agreement (TBT) tries to ensure that regulations,
standards, testing and certification procedures do not create unnecessary obstacles.
However, the agreement also recognizes countries’rights to adopt the standards they
consider appropriate — for example, for human, animal or plant life or health, for
the protection of the environment or to meet other consumer interests. Moreover,
members are not prevented from taking measures necessary to ensure their standards
are met. But that is counterbalanced with disciplines. A myriad of regulations
can be a nightmare for manufacturers and exporters. Life can be simpler if governments
apply international standards, and the agreement encourages them to do so.
In any case, whatever regulations they use should not discriminate.
The agreement also sets out a code of good practice for both governments and nongovernmental
or industry bodies to prepare, adopt and apply voluntary standards.
Over 200 standards-setting bodies apply the code.
The agreement says the procedures used to decide whether a product conforms with
relevant standards have to be fair and equitable. It discourages any methods that
would give domestically produced goods an unfair advantage. The agreement also
encourages countries to recognize each other’s procedures for assessing whether a
product conforms. Without recognition, products might have to be tested twice, first
by the exporting country and then by the importing country.
Manufacturers and exporters need to know what the standards are in their prospective
markets. To help ensure that this information is made available conveniently, all
WTO member governments are required to establish national enquiry points and to
keep each other informed through the WTO — around 900 new or changed regulations
are notified each year. The Technical Barriers to Trade Committee is the major
clearing house for members to share the information and the major forum to discuss
concerns about the regulations and their implementation.
5. Textiles: back in the mainstream
Textiles, like agriculture, was one of the hardest-fought issues in the WTO, as it
was in the former GATT system. It has now completed fundamental change
under a 10-year schedule agreed in the Uruguay Round. The system of import
quotas that dominated the trade since the early 1960s has now been phased out.
From 1974 until the end of the Uruguay Round, the trade was governed by the
Multifibre Arrangement (MFA). This was a framework for bilateral agreements
or unilateral actions that established quotas limiting imports into countries
whose domestic industries were facing serious damage from rapidly
increasing imports.
The quotas were the most visible feature. They conflicted with GATT’s general
preference for customs tariffs instead of measures that restrict quantities. They
were also exceptions to the GATT principle of treating all trading partners equally
because they specified how much the importing country was going to accept
from individual exporting countries.
Since 1995, the WTO’s Agreement on Textiles and Clothing (ATC) took over
from the Mulltifibre Arrangement. By 1 January 2005, the sector was fully integrated
into normal GATT rules. In particular, the quotas came to an end, and
ON THE WEBSITE:
www.wto.org > trade topics > goods
> technical barriers to trade
32
importing countries are no longer able to discriminate between exporters. The
Agreement on Textiles and Clothing no longer exists: it’s the only WTO agreement
that had self-destruction built in.
Integration: returning products gradually to GATT rules
Textiles and clothing products were returned to GATT rules over the 10-year period.
This happened gradually, in four steps, to allow time for both importers and
exporters to adjust to the new situation. Some of these products were previously
under quotas. Any quotas that were in place on 31 December 1994 were carried over
into the new agreement. For products that had quotas, the result of integration into
GATT was the removal of these quotas.
Four steps over 10 years
The schedule for freeing textiles and garment products from import quotas (and returning
them to GATT rules), and how fast remaining quotas had to be expanded.
The example is based on the commonly-used 6% annual expansion rate of the old Multifibre
Arrangement. In practice, the rates used under the MFA varied from product to product.
Step Percentage of products How fast remaining
to be brought under GATT quotas should open up,
(including removal of any quotas) if 1994 rate was 6%
Step 1: 1 Jan 1995 16% 6.96%
(to 31 Dec 1997) (minimum, taking 1990 per year
imports as base)
Step 2: 1 Jan 1998 17% 8.7%
(to 31 Dec 2001) per year
Step 3: 1 Jan 2002 18% 11.05%
(to 31 Dec 2004) per year
Step 4: 1 Jan 2005 49% No quotas left
Full integration into GATT (maximum)
(and final elimination of quotas).
Agreement on Textiles and
Clothing terminates.
The actual formula for import growth under quotas was: by 0.1 x pre-1995 growth
rate in the first step; 0.25 x Step 1 growth rate in the second step;
and 0.27 x Step 2 growth rate in the third step.
The agreement stated the percentage of products that had to be brought under
GATT rules at each step. If any of these products came under quotas, then the quotas
had to be removed at the same time. The percentages were applied to the importing
country’s textiles and clothing trade levels in 1990. The agreement also said the
quantities of imports permitted under the quotas had to grow annually, and that the
rate of expansion had to increase at each stage. How fast that expansion would be
was set out in a formula based on the growth rate that existed under the old
Multifibre Arrangement (see table).
Products brought under GATT rules at each of the first three stages had to cover the
four main types of textiles and clothing: tops and yarns; fabrics; made-up textile
products; and clothing. Any other restrictions that did not come under the
Multifibre Arrangement and did not conform with regular WTO agreements by
1996 had to be made to conform or be phased out by 2005.
If further cases of damage to the industry arose during the transition, the agreement
allowed additional restrictions to be imposed temporarily under strict conditions.
ON THE WEBSITE:
www.wto.org
> trade topics > goods > textiles
33
These “transitional safeguards” were not the same as the safeguard measures normally
allowed under GATT because they can be applied on imports from specific
exporting countries. But the importing country had to show that its domestic industry
was suffering serious damage or was threatened with serious damage. And it
had to show that the damage was the result of two things: increased imports of the
product in question from all sources, and a sharp and substantial increase from the
specific exporting country. The safeguard restriction could be implemented either
by mutual agreement following consultations, or unilaterally. It was subject to
review by the Textiles Monitoring Body.
In any system where quotas are set for individual exporting countries, exporters
might try to get around the quotas by shipping products through third countries or
making false declarations about the products’ country of origin. The agreement
included provisions to cope with these cases.
The agreement envisaged special treatment for certain categories of countries — for
example, new market entrants, small suppliers, and least-developed countries.
A Textiles Monitoring Body (TMB) supervised the agreement’s implementation. It
consisted of a chairman and 10 members acting in their personal capacity. It monitored
actions taken under the agreement to ensure that they were consistent, and it
reported to the Goods Council which reviewed the operation of the agreement
before each new step of the integration process. The Textiles Monitoring Body
also dealt with disputes under the Agreement on Textiles and Clothing. If they
remained unresolved, the disputes could be brought to the WTO’s regular Dispute
Settlement Body. When the Textiles and Clothing Agreement expired on 1 January
2005, the Textiles Monitoring Body also ceased to exist.
6. Services: rules for growth and investment
The General Agreement on Trade in Services (GATS) is the first and only set of multilateral
rules governing international trade in services. Negotiated in the Uruguay
Round, it was developed in response to the huge growth of the services economy
over the past 30 years and the greater potential for trading services brought about by
the communications revolution.
Services represent the fastest growing sector of the global economy and account for
two thirds of global output, one third of global employment and nearly 20% of
global trade.
When the idea of bringing rules on services into the multilateral trading system was
floated in the early to mid 1980s, a number of countries were sceptical and even
opposed. They believed such an agreement could undermine governments’ ability
to pursue national policy objectives and constrain their regulatory powers. The
agreement that was developed, however, allows a high degree of flexibility, both
within the framework of rules and also in terms of the market access commitments.
GATS explained
The General Agreement on Trade in Services has three elements: the main text containing
general obligations and disciplines; annexes dealing with rules for specific
sectors; and individual countries’ specific commitments to provide access to their
markets, including indications of where countries are temporarily not applying the
“most-favoured-nation” principle of non-discrimination.
Basic principles
• All services are covered by GATS
• Most-favoured-nation treatment applies
to all services, except the one-off
temporary exemptions
• National treatment applies in the areas
where commitments are made
• Transparency in regulations, inquiry points
• Regulations have to be objective
and reasonable
• International payments:
normally unrestricted
• Individual countries’ commitments:
negotiated and bound
• Progressive liberalization:
through further negotiations
34
General obligations and disciplines
Total coverage The agreement covers all internationally-traded services — for
example, banking, telecommunications, tourism, professional services, etc. It also
defines four ways (or “modes”) of trading services:
• services supplied from one country to another (e.g. international telephone
calls), officially known as “cross-border supply” (in WTO jargon, “mode 1”)
• consumers or firms making use of a service in another country (e.g. tourism),
officially “consumption abroad” (“mode 2”)
• a foreign company setting up subsidiaries or branches to provide services in
another country (e.g. foreign banks setting up operations in a country), officially
“commercial presence” (“mode 3”)
• individuals travelling from their own country to supply services in another
(e.g. fashion models or consultants), officially “presence of natural persons”
(“mode 4”).
Most-favoured-nation (MFN) treatment Favour one, favour all. MFN means treating
one’s trading partners equally on the principle of non-discrimination. Under
GATS, if a country allows foreign competition in a sector, equal opportunities
in that sector should be given to service providers from all other WTO members.
(This applies even if the country has made no specific commitment to
provide foreign companies access to its markets under the WTO.)
MFN applies to all services, but some special temporary exemptions have been
allowed. When GATS came into force, a number of countries already had preferential
agreements in services that they had signed with trading partners, either bilaterally
or in small groups. WTO members felt it was necessary to maintain these
preferences temporarily. They gave themselves the right to continue giving more
favourable treatment to particular countries in particular services activities by listing
“MFN exemptions” alongside their first sets of commitments. In order to protect
the general MFN principle, the exemptions could only be made once; nothing
can be added to the lists. They are currently being reviewed as mandated, and will
normally last no more than ten years.
Commitments on market access and national treatment Individual countries’
commitments to open markets in specific sectors — and how open those markets
will be — are the outcome of negotiations. The commitments appear in “schedules”
that list the sectors being opened, the extent of market access being given in those
sectors (e.g. whether there are any restrictions on foreign ownership), and any limitations
on national treatment (whether some rights granted to local companies will
not be granted to foreign companies). So, for example, if a government commits
itself to allow foreign banks to operate in its domestic market, that is a marketaccess
commitment. And if the government limits the number of licences it will
issue, then that is a market-access limitation. If it also says foreign banks are only
allowed one branch while domestic banks are allowed numerous branches, that is
an exception to the national treatment principle.
35
These clearly defined commitments are “bound”: like bound tariffs for trade in
goods, they can only be modified after negotiations with affected countries. Because
“unbinding” is difficult, the commitments are virtually guaranteed conditions for foreign
exporters and importers of services and investors in the sector to do business.
Governmental services are explicitly carved out of the agreement and there is nothing
in GATS that forces a government to privatize service industries. In fact the
word “privatize” does not even appear in GATS. Nor does it outlaw government or
even private monopolies.
The carve-out is an explicit commitment by WTO governments to allow publicly funded
services in core areas of their responsibility. Governmental services are defined in
the agreement as those that are not supplied commercially and do not compete with
other suppliers. These services are not subject to any GATS disciplines, they are not
covered by the negotiations, and commitments on market access and national treatment
(treating foreign and domestic companies equally) do not apply to them.
GATS’ approach to making commitments means that members are not obliged to do
so on the whole universe of services sectors. A government may not want to make a
commitment on the level of foreign competition in a given sector, because it considers
the sector to be a core governmental function or indeed for any other reason. In
this case, the government’s only obligations are minimal, for example to be transparent
in regulating the sector, and not to discriminate between foreign suppliers.
Transparency GATS says governments must publish all relevant laws and regulations,
and set up enquiry points within their bureaucracies. Foreign companies
and governments can then use these inquiry points to obtain information about regulations
in any service sector. And they have to notify the WTO of any changes in
regulations that apply to the services that come under specific commitments.
Regulations: objective and reasonable Since domestic regulations are the most
significant means of exercising influence or control over services trade, the agreement
says governments should regulate services reasonably, objectively and impartially.
When a government makes an administrative decision that affects a service,
it should also provide an impartial means for reviewing the decision (for example a
tribunal).
GATS does not require any service to be deregulated. Commitments to liberalize do
not affect governments’ right to set levels of quality, safety, or price, or to introduce
regulations to pursue any other policy objective they see fit. A commitment to
national treatment, for example, would only mean that the same regulations would
apply to foreign suppliers as to nationals. Governments naturally retain their right
to set qualification requirements for doctors or lawyers, and to set standards to
ensure consumer health and safety.
Recognition When two (or more) governments have agreements recognizing each
other’s qualifications (for example, the licensing or certification of service suppliers),
GATS says other members must also be given a chance to negotiate comparable
pacts. The recognition of other countries’ qualifications must not be discriminatory,
and it must not amount to protectionism in disguise. These recognition agreements
have to be notified to the WTO.
36
International payments and transfers Once a government has made a commitment
to open a service sector to foreign competition, it must not normally restrict
money being transferred out of the country as payment for services supplied (“current
transactions”) in that sector. The only exception is when there are balance-ofpayments
difficulties, and even then the restrictions must be temporary and subject
to other limits and conditions.
Progressive liberalization The Uruguay Round was only the beginning. GATS
requires more negotiations, which began in early 2000 and are now part of the Doha
Development Agenda. The goal is to take the liberalization process further by
increasing the level of commitments in schedules.
The annexes: services are not all the same
International trade in goods is a relatively simple idea to grasp: a product is transported
from one country to another. Trade in services is much more diverse.
Telephone companies, banks, airlines and accountancy firms provide their services
in quite different ways. The GATS annexes reflect some of the diversity.
Movement of natural persons This annex deals with negotiations on individuals’
rights to stay temporarily in a country for the purpose of providing a service. It specifies
that the agreement does not apply to people seeking permanent employment
or to conditions for obtaining citizenship, permanent residence or permanent
employment.
Financial services Instability in the banking system affects the whole economy.
The financial services annex gives governments very wide latitude to take prudential
measures, such as those for the protection of investors, depositors and insurance policy
holders, and to ensure the integrity and stability of the financial system. The
annex also excludes from the agreement services provided when a government is
exercising its authority over the financial system, for example central banks’ services.
Telecommunications The telecommunications sector has a dual role: it is a distinct
sector of economic activity; and it is an underlying means of supplying other
economic activities (for example electronic money transfers). The annex says governments
must ensure that foreign service suppliers are given access to the public
telecommunications networks without discrimination.
Air transport services Under this annex, traffic rights and directly related activities
are excluded from GATS’s coverage. They are handled by other bilateral agreements.
However, the annex establishes that the GATS will apply to aircraft repair and
maintenance services, marketing of air transport services and computer-reservation
services. Members are currently reviewing the annex.
37
Current work
GATS sets a heavy work programme covering a wide range of subjects. Work on
some of the subjects started in 1995, as required, soon after GATS came into force
in January 1995. Negotiations to further liberalize international trade in
services started in 2000, along with other work involving study and review.
Negotiations (Article 19) Negotiations to further liberalize international
trade in services started in early 2000 as mandated by GATS (Article 19).
The first phase of the negotiations ended successfully in March 2001 when
members agreed on the guidelines and procedures for the negotiations, a key
element in the negotiating mandate. By agreeing these guidelines, members
set the objectives, scope and method for the negotiations in a clear and
balanced manner.
They also unequivocally endorsed some of GATS’ fundamental principles — i.e.
members’ right to regulate and to introduce new regulations on the supply of services
in pursuit of national policy objectives; their right to specify which services they
wish to open to foreign suppliers and under which conditions; and the overarching
principle of flexibility for developing and least-developed countries. The guidelines
are therefore sensitive to public policy concerns in important sectors such as healthcare,
public education and cultural industries, while stressing the importance of liberalization
in general, and ensuring foreign service providers have effective access
to domestic markets.
The 2001 Doha Ministerial Declaration incorporated these negotiations into the
“single undertaking” of the Doha Development Agenda. Since July 2002, a process
of bilateral negotiations on market access has been underway.
Work on GATS rules (Articles 10, 13, and 15) Negotiations started in 1995 and are
continuing on the development of possible disciplines that are not yet included in
GATS: rules on emergency safeguard measures, government procurement and subsidies.
Work so far has concentrated on safeguards. These are temporary limitations
on market access to deal with market disruption, and the negotiations aim to set up
procedures and disciplines for governments using these. Several deadlines have been
missed. The present aim is for the results to come into effect at the same time as those
of the current services negotiations.
Work on domestic regulations (Article 4.4) Work started in 1995 to establish disciplines
on domestic regulations — i.e. the requirements foreign service suppliers
have to meet in order to operate in a market. The focus is on qualification requirements
and procedures, technical standards and licensing requirements. By
December 1998, members had agreed disciplines on domestic regulations for the
accountancy sector. Since then, members have been engaged in developing general
disciplines for all professional services and, where necessary, additional sectoral disciplines.
All the agreed disciplines will be integrated into GATS and become legally
binding by the end of the current services negotiations.
MFN exemptions (Annex on Article 2) Work on this subject started in 2000.
When GATS came into force in 1995, members were allowed a once-only opportunity
to take an exemption from the MFN principle of non-discrimination between a
38
ON THE WEBSITE:
www.wto.org > trade topics > services
member’s trading partners. The measure for which the exemption was taken is
described in a member’s MFN exemption list, indicating to which member the
more favourable treatment applies, and specifying its duration. In principle, these
exemptions should not last for more than ten years. As mandated by GATS, all these
exemptions are currently being reviewed to examine whether the conditions which
created the need for these exemptions in the first place still exist. And in any case,
they are part of the current services negotiations.
Taking account of “autonomous” liberalization (Article 19) Countries that have
liberalized on their own initiative since the last multilateral negotiations want that
to be taken into account when they negotiate market access in services. The negotiating
guidelines and procedures that members agreed in March 2001 for the GATS
negotiations also call for criteria for taking this “autonomous” or unilateral liberalization
into account. These were agreed on 6 March 2003.
Special treatment for least-developed countries (Article 19) GATS mandates
members to establish how to give special treatment to least-developed countries
during the negotiations. (These “modalities” cover both the scope of the special
treatment, and the methods to be used.) The least-developed countries began the
discussions in March 2002. As a result of subsequent discussions, members agreed
the modalities on 3 September 2003.
Assessment of trade in services (Article 19) Preparatory work on this subject started
in early 1999. GATS mandates that members assess trade in services, including the
GATS objective of increasing the developing countries’ participation in services trade.
The negotiating guidelines reiterate this, requiring the negotiations to be adjusted in
response to the assessment. Members generally acknowledge that the shortage of statistical
information and other methodological problems make it impossible to conduct
an assessment based on full data. However, they are continuing their discussions
with the assistance of several papers produced by the Secretariat.
Air transport services At present, most of the air transport sector — traffic rights
and services directly related to traffic rights — is excluded from GATS’ coverage.
However, GATS mandates a review by members of this situation. The purpose of the
review, which started in early 2000, is to decide whether additional air transport services
should be covered by GATS. The review could develop into a negotiation in its own
right, resulting in an amendment of GATS itself by adding new services to its coverage
and by adding specific commitments on these new services to national schedules.
> See also Doha Agenda negotiations
39
7. Intellectual property: protection and enforcement
The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS), negotiated in the 1986–94 Uruguay Round, introduced intellectual property
rules into the multilateral trading system for the first time.
Origins: into the rule-based trade system
Ideas and knowledge are an increasingly important part of trade. Most of the value
of new medicines and other high technology products lies in the amount of invention,
innovation, research, design and testing involved. Films, music recordings,
books, computer software and on-line services are bought and sold because of the
information and creativity they contain, not usually because of the plastic, metal or
paper used to make them. Many products that used to be traded as low-technology
goods or commodities now contain a higher proportion of invention and design in
their value — for example brandnamed clothing or new varieties of plants.
Creators can be given the right to prevent others from using their inventions,
designs or other creations — and to use that right to negotiate payment in return
for others using them. These are “intellectual property rights”. They take a number
of forms. For example books, paintings and films come under copyright; inventions
can be patented; brandnames and product logos can be registered as trademarks;
and so on. Governments and parliaments have given creators these rights as an
incentive to produce ideas that will benefit society as a whole.
The extent of protection and enforcement of these rights varied widely around the
world; and as intellectual property became more important in trade, these differences
became a source of tension in international economic relations. New internationally-
agreed trade rules for intellectual property rights were seen as a way to introduce
more order and predictability, and for disputes to be settled more systematically.
The Uruguay Round achieved that. The WTO’s TRIPS Agreement is an attempt to
narrow the gaps in the way these rights are protected around the world, and to bring
them under common international rules. It establishes minimum levels of protection
that each government has to give to the intellectual property of fellow WTO members.
In doing so, it strikes a balance between the long term benefits and possible short
term costs to society. Society benefits in the long term when intellectual property protection
encourages creation and invention, especially when the period of protection
expires and the creations and inventions enter the public domain. Governments are
allowed to reduce any short term costs through various exceptions, for example to
tackle public health problems. And, when there are trade disputes over intellectual
property rights, the WTO’s dispute settlement system is now available.
The agreement covers five broad issues:
• how basic principles of the trading system and other international intellectual
property agreements should be applied
• how to give adequate protection to intellectual property rights
• how countries should enforce those rights adequately in their own territories
• how to settle disputes on intellectual property between members of the WTO
• special transitional arrangements during the period when the new system is
being introduced.
Types of intellectual property
The areas covered by the TRIPS Agreement
• Copyright and related rights
• Trademarks, including service marks
• Geographical indications
• Industrial designs
• Patents
• Layout-designs (topographies)
of integrated circuits
• Undisclosed information,
including trade secrets
40
Basic principles: national treatment, MFN, balanced protection
As in GATT and GATS, the starting point of the intellectual property agreement is
basic principles. And as in the two other agreements, non-discrimination features
prominently: national treatment (treating one’s own nationals and foreigners equally),
and most-favoured-nation treatment (equal treatment for nationals of all trading
partners in the WTO). National treatment is also a key principle in other intellectual
property agreements outside the WTO.
The TRIPS Agreement has an additional important principle: intellectual property
protection should contribute to technical innovation and the transfer of technology.
Both producers and users should benefit, and economic and social welfare should
be enhanced, the agreement says.
How to protect intellectual property: common ground-rules
The second part of the TRIPS agreement looks at different kinds of intellectual
property rights and how to protect them. The purpose is to ensure that adequate
standards of protection exist in all member countries. Here the starting point is the
obligations of the main international agreements of the World Intellectual Property
Organization (WIPO) that already existed before the WTO was created:
• the Paris Convention for the Protection of Industrial Property (patents,
industrial designs, etc)
• the Berne Convention for the Protection of Literary and Artistic Works (copyright).
Some areas are not covered by these conventions. In some cases, the standards of
protection prescribed were thought inadequate. So the TRIPS agreement adds a significant
number of new or higher standards.
Copyright
The TRIPS agreement ensures that computer programs will be protected as literary
works under the Berne Convention and outlines how databases should be protected.
It also expands international copyright rules to cover rental rights. Authors of computer
programs and producers of sound recordings must have the right to prohibit the
commercial rental of their works to the public. A similar exclusive right applies to
films where commercial rental has led to widespread copying, affecting copyrightowners’
potential earnings from their films.
The agreement says performers must also have the right to prevent unauthorized
recording, reproduction and broadcast of live performances (bootlegging) for no
less than 50 years. Producers of sound recordings must have the right to prevent the
unauthorized reproduction of recordings for a period of 50 years.
Trademarks
The agreement defines what types of signs must be eligible for protection as trademarks,
and what the minimum rights conferred on their owners must be. It says that
service marks must be protected in the same way as trademarks used for goods. Marks
that have become well-known in a particular country enjoy additional protection.
What’s the difference?
Copyrights, patents, trademarks, etc apply
to different types of creations or inventions.
They are also treated differently.
Patents, industrial designs, integrated circuit
designs, geographical indications and
trademarks have to be registered in order
to receive protection. The registration
includes a description of what is being
protected — the invention, design, brandname,
logo, etc — and this description is
public information.
Copyright and trade secrets are protected
automatically according to specified conditions.
They do not have to be registered,
and therefore there is no need to disclose,
for example, how copyrighted computer
software is constructed.
Other conditions may also differ, for
example the length of time that each type
of protection remains in force.
41
Geographical indications
A place name is sometimes used to identify a product. This “geographical indication”
does not only say where the product was made. More importantly it identifies the
products special characteristics, which are the result of the product’s origins.
Well-known examples include “Champagne”, “Scotch”, “Tequila”, and “Roquefort”
cheese. Wine and spirits makers are particularly concerned about the use of placenames
to identify products, and the TRIPS Agreement contains special provisions for
these products. But the issue is also important for other types of goods.
Using the place name when the product was made elsewhere or when it does not
have the usual characteristics can mislead consumers, and it can lead to unfair competition.
The TRIPS Agreement says countries have to prevent this misuse of place
names.
For wines and spirits, the agreement provides higher levels of protection, i.e. even
where there is no danger of the public being misled.
Some exceptions are allowed, for example if the name is already protected as a trademark
or if it has become a generic term. For example, “cheddar” now refers to a particular
type of cheese not necessarily made in Cheddar, in the UK. But any country
wanting to make an exception for these reasons must be willing to negotiate with
the country which wants to protect the geographical indication in question.
The agreement provides for further negotiations in the WTO to establish a multilateral
system of notification and registration of geographical indications for wines. These are
now part of the Doha Development Agenda and they include spirits. Also debated in
WTO, is whether to negotiate extending this higher level of protection beyond wines
and spirits.
Industrial designs
Under the TRIPS Agreement, industrial designs must be protected for at least 10 years.
Owners of protected designs must be able to prevent the manufacture, sale or importation
of articles bearing or embodying a design which is a copy of the protected design.
Patents
The agreement says patent protection must be available for inventions for at least
20 years. Patent protection must be available for both products and processes, in
almost all fields of technology. Governments can refuse to issue a patent for an
invention if its commercial exploitation is prohibited for reasons of public order or
morality. They can also exclude diagnostic, therapeutic and surgical methods, plants
and animals (other than microorganisms), and biological processes for the production
of plants or animals (other than microbiological processes).
Plant varieties, however, must be protectable by patents or by a special system (such
as the breeder’s rights provided in the conventions of UPOV — the International
Union for the Protection of New Varieties of Plants).
The agreement describes the minimum rights that a patent owner must enjoy. But it
also allows certain exceptions. A patent owner could abuse his rights, for example by
42
failing to supply the product on the market. To deal with that possibility, the
agreement says governments can issue “compulsory licences”, allowing a competitor
to produce the product or use the process under licence. But this can only
be done under certain conditions aimed at safeguarding the legitimate interests
of the patent-holder.
If a patent is issued for a production process, then the rights must extend
to the product directly obtained from the process. Under certain conditions
alleged infringers may be ordered by a court to prove that they have not used
the patented process.
An issue that has arisen recently is how to ensure patent protection for pharmaceutical
products does not prevent people in poor countries from having access to medicines —
while at the same time maintaining the patent system’s role in providing incentives for
research and development into new medicines. Flexibilities such as compulsory licensing
are written into the TRIPS Agreement, but some governments were unsure of how
these would be interpreted, and how far their right to use them would be respected.
A large part of this was settled when WTO ministers issued a special declaration at
the Doha Ministerial Conference in November 2001. They agreed that the TRIPS
Agreement does not and should not prevent members from taking measures to protect
public health. They underscored countries’ ability to use the flexibilities that are
built into the TRIPS Agreement. And they agreed to extend exemptions on pharmaceutical
patent protection for least-developed countries until 2016. On one
remaining question, they assigned further work to the TRIPS Council — to sort out
how to provide extra flexibility, so that countries unable to produce pharmaceuticals
domestically can import patented drugs made under compulsory licensing. A waiver
providing this flexibility was agreed on 30 August 2003.
Integrated circuits layout designs
The basis for protecting integrated circuit designs (“topographies”) in the TRIPS agreement
is the Washington Treaty on Intellectual Property in Respect of Integrated
Circuits, which comes under the World Intellectual Property Organization. This was
adopted in 1989 but has not yet entered into force. The TRIPS agreement adds a number
of provisions: for example, protection must be available for at least 10 years.
Undisclosed information and trade secrets
Trade secrets and other types of “undisclosed information” which have commercial
value must be protected against breach of confidence and other acts contrary to honest
commercial practices. But reasonable steps must have been taken to keep the
information secret. Test data submitted to governments in order to obtain marketing
approval for new pharmaceutical or agricultural chemicals must also be protected
against unfair commercial use.
Curbing anti-competitive licensing contracts
The owner of a copyright, patent or other form of intellectual property right can
issue a licence for someone else to produce or copy the protected trademark, work,
invention, design, etc. The agreement recognizes that the terms of a licensing contract
could restrict competition or impede technology transfer. It says that under certain
conditions, governments have the right to take action to prevent anti-competitive
licensing that abuses intellectual property rights. It also says governments must
be prepared to consult each other on controlling anti-competitive licensing.
43
ON THE WEBSITE:
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> trade topics > intellectual property
Enforcement: tough but fair
Having intellectual property laws is not enough. They have to be enforced. This is covered
in Part 3 of TRIPS. The agreement says governments have to ensure that intellectual
property rights can be enforced under their laws, and that the penalties for
infringement are tough enough to deter further violations. The procedures must be
fair and equitable, and not unnecessarily complicated or costly. They should not entail
unreasonable time-limits or unwarranted delays. People involved should be able to
ask a court to review an administrative decision or to appeal a lower court’s ruling.
The agreement describes in some detail how enforcement should be handled, including
rules for obtaining evidence, provisional measures, injunctions, damages and
other penalties. It says courts should have the right, under certain conditions, to order
the disposal or destruction of pirated or counterfeit goods. Wilful trademark counterfeiting
or copyright piracy on a commercial scale should be criminal offences.
Governments should make sure that intellectual property rights owners can receive the
assistance of customs authorities to prevent imports of counterfeit and pirated goods.
Technology transfer
Developing countries in particular, see technology transfer as part of the bargain in
which they have agreed to protect intellectual property rights. The TRIPS Agreement
includes a number of provisions on this. For example, it requires developed-country
governments to provide incentives for their companies to transfer technology to
least-developed countries.
Transition arrangements: 1, 5 or 11 years or more
When the WTO agreements took effect on 1 January 1995, developed countries were
given one year to ensure that their laws and practices conform with the TRIPS
agreement. Developing countries and (under certain conditions) transition
economies were given five years, until 2000. Least-developed countries have 11 years,
until 2006 — now extended to 2016 for pharmaceutical patents.
If a developing country did not provide product patent protection in a particular area
of technology when the TRIPS Agreement came into force (1 January 1995), it had
up to 10 years to introduce the protection. But for pharmaceutical and agricultural
chemical products, the country had to accept the filing of patent applications from
the beginning of the transitional period, though the patent did not need to be granted
until the end of this period. If the government allowed the relevant pharmaceutical
or agricultural chemical to be marketed during the transition period, it had to
— subject to certain conditions — provide an exclusive marketing right for the product
for five years, or until a product patent was granted, whichever was shorter.
Subject to certain exceptions, the general rule is that obligations in the agreement
apply to intellectual property rights that existed at the end of a country’s transition
period as well as to new ones.
> See also Doha Development Agenda
44
8. Anti-dumping, subsidies, safeguards: contingencies, etc
Binding tariffs, and applying them equally to all trading partners (most-favourednation
treatment, or MFN) are key to the smooth flow of trade in goods. The WTO
agreements uphold the principles, but they also allow exceptions — in some circumstances.
Three of these issues are:
• actions taken against dumping (selling at an unfairly low price)
• subsidies and special “countervailing” duties to offset the subsidies
• emergency measures to limit imports temporarily, designed to “safeguard”
domestic industries.
Anti-dumping actions
If a company exports a product at a price lower than the price it normally charges
on its own home market, it is said to be “dumping” the product. Is this unfair
competition? Opinions differ, but many governments take action against dumping
in order to defend their domestic industries. The WTO agreement does not
pass judgement. Its focus is on how governments can or cannot react
to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-
Dumping Agreement”. (This focus only on the reaction to dumping contrasts with
the approach of the Subsidies and Countervailing Measures Agreement.)
The legal definitions are more precise, but broadly speaking the WTO agreement
allows governments to act against dumping where there is genuine (“material”)
injury to the competing domestic industry. In order to do that the government has
to be able to show that dumping is taking place, calculate the extent of dumping
(how much lower the export price is compared to the exporter’s home market price),
and show that the dumping is causing injury or threatening to do so.
GATT (Article 6) allows countries to take action against dumping. The Anti-
Dumping Agreement clarifies and expands Article 6, and the two operate together.
They allow countries to act in a way that would normally break the GATT principles
of binding a tariff and not discriminating between trading partners — typically antidumping
action means charging extra import duty on the particular product from
the particular exporting country in order to bring its price closer to the “normal
value” or to remove the injury to domestic industry in the importing country.
There are many different ways of calculating whether a particular product is being
dumped heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a product’s “normal value”. The main
one is based on the price in the exporter’s domestic market. When this cannot be used,
two alternatives are available — the price charged by the exporter in another country,
or a calculation based on the combination of the exporter’s production costs, other
expenses and normal profit margins. And the agreement also specifies how a fair comparison
can be made between the export price and what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping measures
can only be applied if the dumping is hurting the industry in the importing country.
Therefore, a detailed investigation has to be conducted according to specified rules
first. The investigation must evaluate all relevant economic factors that have a bearing
on the state of the industry in question. If the investigation shows dumping is taking
place and domestic industry is being hurt, the exporting company can undertake to
raise its price to an agreed level in order to avoid anti-dumping import duty.
What is this agreement called?
Agreement on the implementation
of Article VI [i.e 6] of the General
Agreement on Tariffs and Trade 1994
What is this agreement called?
Agreement on Subsidies and
Countervailing Measures
45
‘AD-CVD’?
People sometimes refer to the two together
— “AD-CVD” — but there are fundamental
differences. Dumping and subsidies —
together with anti-dumping (AD) measures
and countervailing duties (CVD) — share a
number of similarities. Many countries
handle the two under a single law, apply a
similar process to deal with them and give
a single authority responsibility for investigations.
Occasionally, the two WTO committees
responsible for these issues meet
jointly.
The reaction to dumping and subsidies is
often a special offsetting import tax
(countervailing duty in the case of a subsidy).
This is charged on products from specific
countries and therefore it breaks the GATT
principles of binding a tariff and treating
trading partners equally (MFN). The agreements
provide an escape clause, but they
both also say that before imposing a duty,
the importing country must conduct a
detailed investigation that shows properly
that domestic industry is hurt.
But there are also fundamental differences,
and these are reflected in the agreements.
Dumping is an action by a company. With
subsidies, it is the government or a government
agency that acts, either by paying out
subsidies directly or by requiring companies
to subsidize certain customers.
But the WTO is an organization of countries
and their governments. The WTO does
not deal with companies and cannot regulate
companies’ actions such as dumping.
Therefore the Anti-Dumping Agreement
only concerns the actions governments
may take against dumping. With
subsidies, governments act on both sides:
they subsidize and they act against each
others’ subsidies. Therefore the subsidies
agreement disciplines both the subsidies
and the reactions.
Detailed procedures are set out on how anti-dumping cases are to be initiated, how
the investigations are to be conducted, and the conditions for ensuring that all interested
parties are given an opportunity to present evidence. Anti-dumping measures
must expire five years after the date of imposition, unless an investigation shows
that ending the measure would lead to injury.
Anti-dumping investigations are to end immediately in cases where the authorities
determine that the margin of dumping is insignificantly small (defined as less than
2% of the export price of the product). Other conditions are also set. For example,
the investigations also have to end if the volume of dumped imports is negligible
(i.e. if the volume from one country is less than 3% of total imports of that product
— although investigations can proceed if several countries, each supplying less than
3% of the imports, together account for 7% or more of total imports).
The agreement says member countries must inform the Committee on Anti-
Dumping Practices about all preliminary and final anti-dumping actions, promptly
and in detail. They must also report on all investigations twice a year. When differences
arise, members are encouraged to consult each other. They can also use the
WTO’s dispute settlement procedure.
ON THE WEBSITE:
www.wto.org > trade topics > goods > antidumping
> See also Doha Agenda negotiations
Subsidies and countervailing measures
This agreement does two things: it disciplines the use of subsidies, and it regulates
the actions countries can take to counter the effects of subsidies. It says a country
can use the WTO’s dispute settlement procedure to seek the withdrawal of the subsidy
or the removal of its adverse effects. Or the country can launch its own investigation
and ultimately charge extra duty (known as “countervailing duty”) on subsidized
imports that are found to be hurting domestic producers.
The agreement contains a definition of subsidy. It also introduces the concept of a
“specific” subsidy — i.e. a subsidy available only to an enterprise, industry, group of
enterprises, or group of industries in the country (or state, etc) that gives the subsidy.
The disciplines set out in the agreement only apply to specific subsidies. They
can be domestic or export subsidies.
The agreement defines two categories of subsidies: prohibited and actionable. It originally
contained a third category: non-actionable subsidies. This category existed for
five years, ending on 31 December 1999, and was not extended. The agreement
applies to agricultural goods as well as industrial products, except when the subsidies
are exempt under the Agriculture Agreement’s “peace clause”, due to expire at the
end of 2003.
• Prohibited subsidies: subsidies that require recipients to meet certain export
targets, or to use domestic goods instead of imported goods. They are prohibited
because they are specifically designed to distort international trade,
and are therefore likely to hurt other countries’ trade. They can be challenged
in the WTO dispute settlement procedure where they are handled under an
46
accelerated timetable. If the dispute settlement procedure confirms that the
subsidy is prohibited, it must be withdrawn immediately. Otherwise, the
complaining country can take counter measures. If domestic producers are
hurt by imports of subsidized products, countervailing duty can be imposed.
• Actionable subsidies: in this category the complaining country has to show
that the subsidy has an adverse effect on its interests. Otherwise the subsidy
is permitted. The agreement defines three types of damage they can cause.
One country’s subsidies can hurt a domestic industry in an importing country.
They can hurt rival exporters from another country when the two compete
in third markets. And domestic subsidies in one country can hurt exporters
trying to compete in the subsidizing country’s domestic market. If the Dispute
Settlement Body rules that the subsidy does have an adverse effect, the subsidy
must be withdrawn or its adverse effect must be removed. Again, if
domestic producers are hurt by imports of subsidized products, countervailing
duty can be imposed.
Some of the disciplines are similar to those of the Anti-Dumping Agreement.
Countervailing duty (the parallel of anti-dumping duty) can only be charged after the
importing country has conducted a detailed investigation similar to that required for
anti-dumping action. There are detailed rules for deciding whether a product is being
subsidized (not always an easy calculation), criteria for determining whether imports
of subsidized products are hurting (“causing injury to”) domestic industry, procedures
for initiating and conducting investigations, and rules on the implementation
and duration (normally five years) of countervailing measures. The subsidized
exporter can also agree to raise its export prices as an alternative to its exports being
charged countervailing duty.
Subsidies may play an important role in developing countries and in the transformation
of centrally-planned economies to market economies. Least-developed countries
and developing countries with less than $1,000 per capita GNP are exempted
from disciplines on prohibited export subsidies. Other developing countries are
given until 2003 to get rid of their export subsidies. Least-developed countries must
eliminate import-substitution subsidies (i.e. subsidies designed to help domestic
production and avoid importing) by 2003 — for other developing countries the
deadline was 2000. Developing countries also receive preferential treatment if their
exports are subject to countervailing duty investigations. For transition economies,
prohibited subsidies had to be phased out by 2002.
What is this agreement called?
Agreement on Safeguards
ON THE WEBSITE:
www.wto.org > trade topics > goods > subsidies
and countervailing measures
> See also Doha Agenda negotiations
47
Safeguards: emergency protection from imports
A WTO member may restrict imports of a product temporarily (take “safeguard”
actions) if its domestic industry is injured or threatened with injury caused by a
surge in imports. Here, the injury has to be serious. Safeguard measures were
always available under GATT (Article 19). However, they were infrequently used,
some governments preferring to protect their domestic industries through “grey
area” measures — using bilateral negotiations outside GATT’s auspices, they persuaded
exporting countries to restrain exports “voluntarily” or to agree to other
means of sharing markets. Agreements of this kind were reached for a wide range
of products: automobiles, steel, and semiconductors, for example.
The WTO agreement broke new ground. It prohibits “grey-area” measures, and it
sets time limits (a “sunset clause”) on all safeguard actions. The agreement says
members must not seek, take or maintain any voluntary export restraints, orderly
marketing arrangements or any other similar measures on the export or the import
side. The bilateral measures that were not modified to conform with the agreement
were phased out at the end of 1998. Countries were allowed to keep one of these
measures an extra year (until the end of 1999), but only the European Union — for
restrictions on imports of cars from Japan — made use of this provision.
An import “surge” justifying safeguard action can be a real increase in imports
(an absolute increase); or it can be an increase in the imports’ share of a shrinking
market, even if the import quantity has not increased (relative increase).
Industries or companies may request safeguard action by their government. The
WTO agreement sets out requirements for safeguard investigations by national
authorities. The emphasis is on transparency and on following established rules and
practices — avoiding arbitrary methods. The authorities conducting investigations
have to announce publicly when hearings are to take place and provide other appropriate
means for interested parties to present evidence. The evidence must include
arguments on whether a measure is in the public interest.
The agreement sets out criteria for assessing whether “serious injury” is being
caused or threatened, and the factors which must be considered in determining the
impact of imports on the domestic industry. When imposed, a safeguard measure
should be applied only to the extent necessary to prevent or remedy serious injury
and to help the industry concerned to adjust. Where quantitative restrictions (quotas)
are imposed, they normally should not reduce the quantities of imports below
the annual average for the last three representative years for which statistics are
available, unless clear justification is given that a different level is necessary to prevent
or remedy serious injury.
48
In principle, safeguard measures cannot be targeted at imports from a particular
country. However, the agreement does describe how quotas can be allocated among
supplying countries, including in the exceptional circumstance where imports from
certain countries have increased disproportionately quickly. A safeguard measure
should not last more than four years, although this can be extended up to eight
years, subject to a determination by competent national authorities that the measure
is needed and that there is evidence the industry is adjusting. Measures
imposed for more than a year must be progressively liberalized.
When a country restricts imports in order to safeguard its domestic producers, in
principle it must give something in return. The agreement says the exporting country
(or exporting countries) can seek compensation through consultations. If no agreement
is reached the exporting country can retaliate by taking equivalent action — for
instance, it can raise tariffs on exports from the country that is enforcing the safeguard
measure. In some circumstances, the exporting country has to wait for three years
after the safeguard measure was introduced before it can retaliate in this way — i.e. if
the measure conforms with the provisions of the agreement and if it is taken as a
result of an increase in the quantity of imports from the exporting country.
To some extent developing countries’ exports are shielded from safeguard actions.
An importing country can only apply a safeguard measure to a product from a developing
country if the developing country is supplying more than 3% of the imports
of that product, or if developing country members with less than 3% import share
collectively account for more than 9% of total imports of the product concerned.
The WTO’s Safeguards Committee oversees the operation of the agreement and is
responsible for the surveillance of members’ commitments. Governments have to
report each phase of a safeguard investigation and related decision-making, and the
committee reviews these reports.
ON THE WEBSITE:
www.wto.org > trade topics > goods > safeguards
49
9. Non-tariff barriers: red tape, etc
A number of agreements deal with various bureaucratic or legal issues that could
involve hindrances to trade.
• import licensing
• rules for the valuation of goods at customs
• preshipment inspection: further checks on imports
• rules of origin: made in ... where?
• investment measures
Import licensing: keeping procedures clear
Although less widely used now than in the past, import licensing systems are subject
to disciplines in the WTO. The Agreement on Import Licensing Procedures
says import licensing should be simple, transparent and predictable. For example,
the agreement requires governments to publish sufficient information for traders to
know how and why the licences are granted. It also describes how countries should
notify the WTO when they introduce new import licensing procedures or change
existing procedures. The agreement offers guidance on how governments should
assess applications for licences.
Some licences are issued automatically if certain conditions are met. The agreement
sets criteria for automatic licensing so that the procedures used do not restrict trade.
Other licences are not issued automatically. Here, the agreement tries to minimize
the importers’ burden in applying for licences, so that the administrative work does
not in itself restrict or distort imports. The agreement says the agencies handling
licensing should not normally take more than 30 days to deal with an application —
60 days when all applications are considered at the same time.
Rules for the valuation of goods at customs
For importers, the process of estimating the value of a product at customs presents
problems that can be just as serious as the actual duty rate charged. The WTO agreement
on customs valuation aims for a fair, uniform and neutral system for
the valuation of goods for customs purposes — a system that conforms to
commercial realities, and which outlaws the use of arbitrary or fictitious customs
values. The agreement provides a set of valuation rules, expanding and giving
greater precision to the provisions on customs valuation in the original GATT.
A related Uruguay Round ministerial decision gives customs administrations the right
to request further information in cases where they have reason to doubt the accuracy
of the declared value of imported goods. If the administration maintains a reasonable
doubt, despite any additional information, it may be deemed that the customs value of
the imported goods cannot be determined on the basis of the declared value.
What is this agreement called?
Agreement on Implementation of Article VII
(i.e. 7) of the General Agreement on
Tariffs and Trade 1994; and related
ministerial decisions: “Decision Regarding
Cases Where Customs Administrations Have
Reasons to Doubt the Truth or Accuracy of
the Declared Value” and “Decisions on Texts
Relating to Minimum Values and Imports by
Sole Agents, Sole Distributors and Sole
Concessionaires”.
ON THE WEBSITE:
www.wto.org > trade topics > goods > customs valuation
Preshipment inspection: a further check on imports
Preshipment inspection is the practice of employing specialized private companies
(or “independent entities”) to check shipment details — essentially price, quantity
and quality — of goods ordered overseas. Used by governments of developing countries,
the purpose is to safeguard national financial interests (preventing capital flight,
commercial fraud, and customs duty evasion, for instance) and to compensate for
inadequacies in administrative infrastructures.
The Preshipment Inspection Agreement recognizes that GATT principles and obligations
apply to the activities of preshipment inspection agencies mandated by governments.
The obligations placed on governments which use preshipment inspections include
non-discrimination, transparency, protection of confidential business information,
avoiding unreasonable delay, the use of specific guidelines for conducting price verification
and avoiding conflicts of interest by the inspection agencies. The obligations
of exporting members towards countries using preshipment inspection include nondiscrimination
in the application of domestic laws and regulations, prompt publication
of those laws and regulations and the provision of technical assistance where
requested.
The agreement establishes an independent review procedure. This is administered
jointly by the International Federation of Inspection Agencies (IFIA), representing
inspection agencies, and the International Chamber of Commerce (ICC), representing
exporters. Its purpose is to resolve disputes between an exporter and an
inspection agency.
Rules of origin: made in ... where?
“Rules of origin” are the criteria used to define where a product was made. They
are an essential part of trade rules because a number of policies discriminate
between exporting countries: quotas, preferential tariffs, anti-dumping actions,
countervailing duty (charged to counter export subsidies), and more. Rules of
origin are also used to compile trade statistics, and for “made in ...” labels that
are attached to products. This is complicated by globalization and the way a
product can be processed in several countries before it is ready for the market.
The Rules of Origin Agreement requires WTO members to ensure that their rules
of origin are transparent; that they do not have restricting, distorting or disruptive
effects on international trade; that they are administered in a consistent, uniform,
impartial and reasonable manner; and that they are based on a positive standard (in
other words, they should state what does confer origin rather than what does not).
For the longer term, the agreement aims for common (“harmonized”) rules of origin
among all WTO members, except in some kinds of preferential trade — for
example, countries setting up a free trade area are allowed to use different rules of
origin for products traded under their free trade agreement. The agreement establishes
a harmonization work programme, based upon a set of principles, including
making rules of origin objective, understandable and predictable. The work was due
to end in July 1998, but several deadlines have been missed. It is being conducted
by a Committee on Rules of Origin in the WTO and a Technical Committee under
the auspices of the World Customs Organization in Brussels. The outcome will be
a single set of rules of origin to be applied under non-preferential trading conditions
by all WTO members in all circumstances.
50
51
An annex to the agreement sets out a “common declaration” dealing with the operation
rules of origin on goods which qualify for preferential treatment.
Investment measures: reducing trade distortions
The Trade-Related Investment Measures (TRIMs) Agreement applies only to measures
that affect trade in goods. It recognizes that certain measures can restrict and distort
trade, and states that no member shall apply any measure that discriminates against
foreigners or foreign products (i.e. violates “national treatment” principles in GATT).
It also outlaws investment measures that lead to restrictions in quantities (violating
another principle in GATT). An illustrative list of TRIMs agreed to be inconsistent
with these GATT articles is appended to the agreement. The list includes measures
which require particular levels of local procurement by an enterprise (“local content
requirements”). It also discourages measures which limit a company’s imports or set
targets for the company to export (“trade balancing requirements”).
Under the agreement, countries must inform fellow-members through the WTO of all
investment measures that do not conform with the agreement. Developed countries
had to eliminate these in two years (by the end of 1996); developing countries had five
years (to the end of 1999); and least-developed countries seven. In July 2001, the Goods
Council agreed to extend this transition period for a number of requesting developing
countries.
The agreement establishes a Committee on TRIMs to monitor the implementation
of these commitments. The agreement also says that WTO members should
consider, by 1 January 2000, whether there should also be provisions on investment
policy and competition policy. This discussion is now part of the Doha Development
Agenda.
10. Plurilaterals: of minority interest
For the most part, all WTO members subscribe to all WTO agreements. After the
Uruguay Round, however, there remained four agreements, originally negotiated in
the Tokyo Round, which had a narrower group of signatories and are known as
“plurilateral agreements”. All other Tokyo Round agreements became multilateral
obligations (i.e. obligations for all WTO members) when the World Trade
Organization was established in 1995. The four were:
• trade in civil aircraft
• government procurement
• dairy products
• bovine meat.
The bovine meat and dairy agreements were terminated in 1997.
Fair trade in civil aircraft
The Agreement on Trade in Civil Aircraft entered into force on 1 January 1980. It
now has 30 signatories. The agreement 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 subassemblies
of civil aircraft, and flight simulators and their parts and components. It
contains disciplines on government-directed procurement of civil aircraft and
inducements to purchase, as well as on government financial support for the civil
aircraft sector.
ON THE WEBSITE:
www.wto.org > trade topics > goods
> rules of origin
ON THE WEBSITE:
www.wto.org > trade topics > investment
ON THE WEBSITE:
www.wto.org
> trade topics > goods > civil aircraft
52
Government procurement: opening up for competition
In most countries the government, and the agencies it controls, are together the
biggest purchasers of goods of all kinds, ranging from basic commodities to hightechnology
equipment. At the same time, the political pressure to favour domestic
suppliers over their foreign competitors can be very strong.
An Agreement on Government Procurement was first negotiated during the Tokyo
Round and entered into force on 1 January 1981. Its purpose is to open up as much
of this business as possible to international competition. It is designed to make
laws, regulations, procedures and practices regarding government procurement
more transparent and to ensure they do not protect domestic products or suppliers,
or discriminate against foreign products or suppliers.
The agreement has 28 members. It has two elements — general rules and obligations,
and schedules of national entities in each member country whose procurement
is subject to the agreement. A large part of the general rules and obligations
concern tendering procedures.
The present agreement and commitments were negotiated in the Uruguay Round.
These negotiations achieved a 10-fold expansion of coverage, extending international
competition to include national and local government entities whose collective purchases
are worth several hundred billion dollars each year. The new agreement also
extends coverage to services (including construction services), procurement at the
sub-central level (for example, states, provinces, departments and prefectures), and
procurement by public utilities. The new agreement took effect on 1 January 1996.
It also reinforces rules guaranteeing fair and non-discriminatory conditions of international
competition. For example, governments will be required to put in place
domestic procedures by which aggrieved private bidders can challenge procurement
decisions and obtain redress in the event such decisions were made inconsistently
with the rules of the agreement.
The agreement applies to contracts worth more than specified threshold values.
For central government purchases of goods and services, the threshold is SDR
130,000 (some $185,000 in June 2003). For purchases of goods and services
by sub-central government entities the threshold varies but is generally in the
region of SDR 200,000. For utilities, thresholds for goods and services is generally
in the area of SDR 400,000 and for construction contracts, in general the threshold
value is SDR 5,000,000.
Dairy and bovine meat agreements: ended in 1997
The International Dairy Agreement and International Bovine Meat Agreement were
scrapped at the end of 1997. Countries that had signed the agreements decided that
the sectors were better handled under the Agriculture and Sanitary and
Phytosanitary agreements. Some aspects of their work had been handicapped by the
small number of signatories. For example, some major exporters of dairy products
did not sign the Dairy Agreement, and the attempt to cooperate on minimum prices
therefore failed — minimum pricing was suspended in 1995.
ON THE WEBSITE:
www.wto.org > trade topics > goods >
government procurement
53
11. Trade policy reviews: ensuring transparency
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 reviews 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 midway 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:
• to increase the transparency and understanding of countries’ trade policies and
practices, through regular monitoring
• improve the quality of public and intergovernmental debate on the issues
• 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 fulfil 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
China — are examined approximately 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.
What is this agreement called?
Trade Policy Review Mechanism
ON THE WEBSITE:
www.wto.org > trade topics > trade policy reviews
This page: Hearing of a dispute panel on steel.
Facing page: The Appellate Body
1. A unique contribution
Dispute settlement is the central pillar of the multilateral trading system, and
the WTO’s unique contribution to the stability of the global economy. Without
a means of settling disputes, the rules-based system would be less effective
because the rules could not be enforced. The WTO’s procedure underscores the rule
of law, and it makes the trading system more secure and predictable. The system is
based on clearly-defined rules, with timetables for completing a case. First rulings
are made by a panel and endorsed (or rejected) by the WTO’s full membership.
Appeals based on points of law are possible.
However, the point is not to pass judgement. The priority is to settle disputes, through
consultations if possible. By January 2008, only about 136 of the 369 cases had reached
the full panel process. Most of the rest have either been notified as settled “out of
court” or remain in a prolonged consultation phase — some since 1995.
Principles: equitable, fast, effective, mutually acceptable
Disputes in the WTO are essentially about broken promises. WTO members have
agreed that if they believe fellow-members are violating trade rules, they will use the
multilateral system of settling disputes instead of taking action unilaterally. That
means abiding by the agreed procedures, and respecting judgements.
A dispute arises when one country adopts a trade policy measure or takes some
action that one or more fellow-WTO members considers to be breaking the WTO
agreements, or to be a failure to live up to obligations. A third group of countries
can declare that they have an interest in the case and enjoy some rights.
A procedure for settling disputes existed under the old GATT, but it had no fixed
timetables, rulings were easier to block, and many cases dragged on for a long time
inconclusively. The Uruguay Round agreement introduced a more structured
What is this agreement called?
Understanding on Rules and Procedures
Governing the Settlement of Disputes
55
SETTLING DISPUTES
Chapter 3
The priority is to settle disputes, not to pass judgement
Panels
Panels are like tribunals. But unlike in a
normal tribunal, the panellists are usually
chosen in consultation with the countries
in dispute. Only if the two sides cannot
agree does the WTO director-general
appoint them.
Panels consist of three (possibly five)
experts from different countries who
examine the evidence and decide who
is right and who is wrong. The panel’s
report is passed to the Dispute Settlement
Body, which can only reject the report by
consensus.
Panellists for each case can be chosen
from a permanent list of well-qualified
candidates, or from elsewhere. They serve
in their individual capacities. They cannot
receive instructions from any government.
56
process with more clearly defined stages in the procedure. It introduced greater discipline
for the length of time a case should take to be settled, with flexible deadlines
set in various stages of the procedure. The agreement emphasizes that prompt settlement
is essential if the WTO is to function effectively. It sets out in considerable
detail the procedures and the timetable to be followed in resolving disputes. If a case
runs its full course to a first ruling, it should not normally take more than about one
year — 15 months if the case is appealed. The agreed time limits are flexible, and if
the case is considered urgent (e.g. if perishable goods are involved), it is accelerated
as much as possible.
The Uruguay Round agreement also made it impossible for the country losing a
case to block the adoption of the ruling. Under the previous GATT procedure, rulings
could only be adopted by consensus, meaning that a single objection could
block the ruling. Now, rulings are automatically adopted unless there is a consensus
to reject a ruling — any country wanting to block a ruling has to persuade all other
WTO members (including its adversary in the case) to share its view.
Although much of the procedure does resemble a court or tribunal, the preferred
solution is for the countries concerned to discuss their problems and settle the dispute
by themselves. The first stage is therefore consultations between the governments
concerned, and even when the case has progressed to other stages, consultation
and mediation are still always possible.
How are disputes settled?
Settling disputes is the responsibility of the Dispute Settlement Body (the General
Council in another guise), which consists of all WTO members. The Dispute
Settlement Body has the sole authority to establish “panels” of experts to consider
the case, and to accept or reject the panels’ findings or the results of an appeal. It
monitors the implementation of the rulings and recommendations, and has the
power to authorize retaliation when a country does not comply with a ruling.
• 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
appointment can no longer be blocked (unless there is a consensus against appointing
the panel).
Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations.
But because the panel’s report can only be rejected by consensus in
the Dispute Settlement Body, its conclusions are difficult to overturn. The panel’s
findings have to be based on the agreements cited.
The panel’s final report should normally be given to the parties to the dispute within
six months. In cases of urgency, including those concerning perishable goods,
the deadline is shortened to three months.
More cases can be good news
If the courts find themselves handling an
increasing number of criminal cases, does
that mean law and order is breaking
down? Not necessarily. Sometimes it
means that people have more faith in the
courts and the rule of law. They are turning
to the courts instead of taking the law
into their own hands.
For the most part, that is what is happening
in the WTO. No one likes to see countries
quarrel. But if there are going to be
trade disputes anyway, it is healthier that
the cases are handled according to internationally
agreed rules. There are strong
grounds for arguing that the increasing
number of disputes is simply the result of
expanding world trade and the stricter
rules negotiated in the Uruguay Round;
and that the fact that more are coming to
the WTO reflects a growing faith in the
system.
57
The agreement describes in some detail how the panels are to 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 the complaining country and defence: 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 submit 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.
• 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
not include findings and conclusions.
• Interim report: The panel then submits an interim report, including its findings
and conclusions, 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 trade
measure does break a WTO agreement or an obligation, it recommends that the
measure be made to conform with 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 the report (and in some cases both sides do).
Appeals
Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to
be based on points of law such as legal interpretation — they cannot reexamine
existing evidence or examine new issues.
Each appeal is heard by three members of a permanent seven-member Appellate
Body set up by the Dispute Settlement Body and broadly representing the range of
WTO membership. Members of the Appellate Body have four-year terms. They have
to be individuals with recognized standing in the field of law and international
trade, not affiliated with any government.
The appeal can uphold, modify or reverse the panel’s legal findings and conclusions.
Normally appeals should not last more than 60 days, with an absolute maximum of
90 days.
The Dispute Settlement Body has to accept or reject the appeals report within 30 days
— and rejection is only possible by consensus.
How long to settle a dispute?
These approximate periods for each stage
of a dispute settlement procedure are
target figures — the agreement is flexible.
In addition, the countries can settle their
dispute themselves at any stage. Totals are
also approximate.
60 days Consultations,
mediation, etc
45 days Panel set up and
panellists appointed
6 months Final panel report
to parties
3 weeks Final panel report
to WTO members
60 days Dispute Settlement
Body adopts report
(if no appeal)
Total = 1 year (without appeal)
60–90 days Appeals report
30 days Dispute Settlement
Body adopts appeals
report
Total = 1y 3m (with appeal)
58
The case has been decided: what next?
Go directly to jail. Do not pass Go, do not collect … . Well, not exactly. But the sentiments
apply. If a country has done something wrong, it should swiftly correct its
fault. And if it continues to break an agreement, it should offer compensation or
suffer a suitable penalty that has some bite.
Even once the case has been decided, there is more to do before trade sanctions (the
conventional form of penalty) are imposed. The priority at this stage is for the losing
“defendant” to bring its policy into line with the ruling or recommendations.
The dispute settlement agreement stresses that “prompt compliance with recommendations
or rulings of the DSB [Dispute Settlement Body] is essential in order to
ensure effective resolution of disputes to the benefit of all Members”.
If the country that is the target of the complaint loses, it must follow the recommendations
of the panel report or the appeal report. It must state its intention to do
so at a Dispute Settlement Body meeting held within 30 days of the report’s adoption.
If complying with the recommendation immediately proves impractical, the
member will be given a “reasonable period of time” to do so. If it fails to act within
this period, it has to enter into negotiations with the complaining country (or countries)
in order to determine mutually-acceptable compensation — for instance, tariff
reductions in areas of particular interest to the complaining side.
If after 20 days, no satisfactory compensation is agreed, the complaining side may
ask the Dispute Settlement Body for permission to impose limited trade sanctions
(“suspend concessions or obligations”) against the other side. The Dispute
Settlement Body must grant this authorization within 30 days of the expiry of the
“reasonable period of time” unless there is a consensus against the request.
In principle, the sanctions should be imposed in the same sector as the dispute. If
this is not practical or if it would not be effective, the sanctions can be imposed 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 action can be taken under another
agreement. The objective is to minimize the chances of actions spilling over into
unrelated sectors while at the same time allowing the actions to be effective.
In any case, the Dispute Settlement Body monitors how adopted rulings are implemented.
Any outstanding case remains on its agenda until the issue is resolved.
> See also Doha Agenda negotiations
Consultations
(Art. 4)
60 days
by
2nd DSB meeting
0–20 days
20 days (+10 if
Director-General
asked to pick panel)
6 months
from panel’s
composition,
3 months if urgent
up to 9 months
from panel’s
establishment
60 days for
panel report
unless appealed …
‘REASONABLE
PERIOD
OF TIME’:
determined by:
member proposes,
DSB agrees;
or parties in
dispute agree;
or arbitrator
(approx. 15 months
if by arbitrator)
30 days after
‘reasonable
period’ expires
Panel established
by Dispute Settlement Body (DSB)
(Art. 6) During all stages
good offices, conciliation,
or mediation (Art. 5)
Terms of reference (Art. 7)
Composition (Art. 8)
Panel examination
Normally 2 meetings with parties (Art. 12),
1 meeting with third parties (Art. 10)
Expert review group
(Art. 13; Appendix 4)
Appellate review
(Art. 16.4 and 17)
NOTE: a panel
can be ‘composed’
(i.e. panellists chosen)
up to about 30 days
after its ‘establishment’
(i.e. after DSB’s
decision to have
a panel
max 90 days
90 days
… 30 days for
appellate report
TOTAL FOR REPORT
ADOPTION:
Usually up to
9 months (no appeal),
or 12 months (with
appeal) from
establishment of
panel to adoption of
report (Art.20)
Review meeting
with panel
upon request
(Art. 15.2)
Interim review stage
Descriptive part of report
sent to parties for comment (Art. 15.1)
Interim report sent to parties for comment (Art. 15.2)
Panel report issued to parties
(Art. 12.8; Appendix 3 par 12(j))
Panel report issued to DSB
(Art. 12.9; Appendix 3 par 12(k))
DSB adopts panel/appellate report(s)
including any changes to panel report made by appellate report
(Art. 16.1, 16.4 and 17.14)
Implementation
report by losing party of proposed implementation
within ‘reasonable period of time’ (Art. 21.3)
Dispute over
implementation:
Proceedings possible,
including referral
to initial panel on
implementation
(Art. 21.5)
Possibility of arbitration
on level of suspension
procedures and
principles
of retaliation
(Art. 22.6 and 22.7)
In cases of non-implementation
parties negotiate compensation pending full
implementation (Art. 22.2)
Retaliation
If no agreement on compensation, DSB authorizes retaliation
pending full implementation (Art. 22)
Cross-retaliation:
same sector, other sectors, other agreements
(Art. 22.3) 59
2. The panel process
The various stages a dispute can go through in the WTO. At all stages, countries in dispute are encouraged to consult each other
in order to settle “out of court”. At all stages, the WTO director-general is available to offer his good offices, to mediate or to help
achieve a conciliation.
Note: some specified times are maximums, some are minimums, some binding, some not
60
3. Case study: the timetable in practice
On 23 January 1995, Venezuela complained to the Dispute Settlement Body that the
United States was applying rules that discriminated against gasoline imports, and
formally requested consultations with the United States. Just over a year later (on
29 January 1996) the dispute panel completed its final report. (By then, Brazil had
joined the case, lodging its own complaint in April 1996. The same panel considered
both complaints.) The United States appealed. The Appellate Body completed its
report, and the Dispute Settlement Body adopted the report on 20 May 1996, one
year and four months after the complaint was first lodged.
The United States and Venezuela then took six and a half months to agree on what
the United States should do. The agreed period for implementing the solution was
15 months from the date the appeal was concluded (20 May 1996 to 20 August 1997).
The case arose because the United States applied stricter rules on the chemical characteristics
of imported gasoline than it did for domestically-refined gasoline.
Venezuela (and later Brazil) said this was unfair because US gasoline did not have to
meet the same standards — it violated the “national treatment” principle and could
not be justified under exceptions to normal WTO rules for health and environmental
conservation measures. The dispute panel agreed with Venezuela and Brazil. The
appeal report upheld the panel’s conclusions (making some changes to
the panel’s legal interpretation). The United States agreed with Venezuela
that it would amend its regulations within 15 months and on 26 August
1997 it reported to the Dispute Settlement Body that a new regulation had
been signed on 19 August.
ON THE WEBSITE:
www.wto.org > trade topics > dispute settlement
61
Time
(0 = start of case)
–5 years
–4 months
0
+1 month
+2 months
+21/2 months
+3 months
+6 months
+11 months
+1 year
+1 year, 1 month
+1 year, 3 months
+1 year, 4 months
+1 year, 101/2 months
+1 year, 111/2 months
+2 years, 7 months
Target/
actual period
“60 days”
“30 days”
9 months
(target is 6–9)
“60 days”
“30 days”
Date
1990
September 1994
23 January 1995
24 February 1995
25 March 1995
10 April 1995
28 April 1995
10–12 July and
13–15 July 1995
11 December 1995
29 January 1996
21 February 1996
29 April 1996
20 May 1996
3 December 1996
9 January 1997
19-20 August 1997
Action
US Clean Air Act amended
US restricts gasoline imports under
Clean Air Act
Venezuela complains to Dispute
Settlement Body, asks for
consultation with US
Consultations take place. Fail.
Venezuela asks Dispute Settlement
Body for a panel
Dispute Settlement Body agrees to
appoint panel. US does not block.
(Brazil starts complaint, requests
consultation with US.)
Panel appointed. (31 May, panel
assigned to Brazilian complaint as well)
Panel meets
Panel gives interim report to US,
Venezuela and Brazil for comment
Panel circulates final report to
Dispute Settlement Body
US appeals
Appellate Body submits report
Dispute Settlement Body adopts
panel and appeal reports
US and Venezuela agree on what
US should do (implementation
period is 15 months from 20 May)
US makes first of monthly reports to
Dispute Settlement Body on status
of implementation
US signs new regulation (19th).
End of agreed implementation
period (20th)

63
The WTO’s work is not confined to specific agreements with specific obligations.
Member governments also discuss a range of other issues, usually in special committees
or working groups. Some are old, some are new to the GATT-WTO system.
Some are issues in their own right, some cut across several WTO topics. Some
could lead to negotiations.
They include:
• regional economic groupings
• trade and the environment
• trade and investment
• competition policy
• transparency in government procurement
• trade “facilitation” (simplifying trade procedures, making trade flow more smoothly
through means that go beyond the removal of tariff and non-tariff barriers)
• electronic commerce
One other topic has been discussed a lot in the WTO from time to time. It is:
• trade and labour rights
This is not on the WTO’s work agenda, but because it has received a lot of attention,
it is included here to clarify the situation.
1. Regionalism: friends or rivals?
The European Union, the North American Free Trade Agreement, the Association
of Southeast Asian Nations, the South Asian Association for Regional Cooperation,
the Common Market of the South (MERCOSUR), the Australia-New Zealand Closer
Economic Relations Agreement, and so on.
By July 2005, only one WTO member — Mongolia — was not party to a regional
trade agreement. The surge in these agreements has continued unabated since the
early 1990s. By July 2005, a total of 330 had been notified to the WTO (and its predecessor,
GATT). Of these: 206 were notified after the WTO was created in January
1995; 180 are currently in force; several others are believed to be operational
although not yet notified.
One of the most frequently asked questions is whether these regional groups help
or hinder the WTO’s multilateral trading system. A committee is keeping an eye on
developments.
CROSS-CUTTING AND NEW ISSUES
Chapter 4
Subjects that cut across the agreements,
and some newer agenda items
64
ON THE WEBSITE:
www.wto.org > trade topics > goods
> regional trade agreements
Regional trading arrangements
They seem to be contraditory, but often regional trade agreements can actually support
the WTO’s multilateral trading system. Regional agreements have allowed
groups of countries to negotiate rules and commitments that go beyond what was
possible at the time multilaterally. In turn, some of these rules have paved the way
for agreement in the WTO. Services, intellectual property, environmental standards,
investment and competition policies are all issues that were raised in regional negotiations
and later developed into agreements or topics of discussion in the WTO.
The groupings that are important for the WTO are those that abolish or reduce barriers
on trade within the group. The WTO agreements recognize that regional
arrangements and closer economic integration can benefit countries. It also recognizes
that under some circumstances regional trading arrangements could hurt the
trade interests of other countries. Normally, setting up a customs union or free trade
area would violate the WTO’s principle of equal treatment for all trading partners
(“most-favoured-nation”). But GATT’s Article 24 allows regional trading arrangements
to be set up as a special exception, provided certain strict criteria are met.
In particular, the arrangements should help trade flow more freely among the countries
in the group without barriers being raised on trade with the outside world. In
other words, regional integration should complement the multilateral trading system
and not threaten it.
Article 24 says if a free trade area or customs union is created, duties and other trade
barriers should be reduced or removed on substantially all sectors of trade in the
group. Non-members should not find trade with the group any more restrictive than
before the group was set up.
Similarly, Article 5 of the General Agreement on Trade in Services provides for economic
integration agreements in services. Other provisions in the WTO agreements
allow developing countries to enter into regional or global agreements that include the
reduction or elimination of tariffs and non-tariff barriers on trade among themselves.
On 6 February 1996, the WTO General Council created the Regional Trade Agreements
Committee. Its purpose is to examine regional groups and to assess whether they
are consistent with WTO rules. The committee is also examining how regional
arrangements might affect the multilateral trading system, and what the relationship
between regional and multilateral arrangements might be.
> See also Doha Agenda negotiations
65
‘Green’ provisions
Examples of provisions in the WTO agreements
dealing with environmental issues
• GATT Article 20: policies affecting trade in
goods for protecting human, animal or
plant life or health are exempt from
normal GATT disciplines under certain
conditions.
• Technical Barriers to Trade (i.e. product
and industrial standards), and Sanitary
and Phytosanitary Measures (animal and
plant health and hygiene): explicit
recognition of environmental objectives.
• Agriculture: environmental programmes
exempt from cuts in subsidies
• Subsidies and Countervail: allows subsidies,
up to 20% of firms’ costs, for
adapting to new environmental laws.
• Intellectual property: governments can
refuse to issue patents that threaten
human, animal or plant life or health, or
risk serious damage to the environment
(TRIPS Article 27).
• GATS Article 14: policies affecting trade
in services for protecting human, animal
or plant life or health are exempt from
normal GATS disciplines under certain
conditions.
2. The environment: a specific concern
The WTO has no specific agreement dealing with the environment. However, the
WTO agreements confirm governments’ right to protect the environment, provided
certain conditions are met, and a number of them include provisions dealing with
environmental concerns. The objectives of sustainable development and environmental
protection are important enough to be stated in the preamble to the
Agreement Establishing the WTO.
The increased emphasis on environmental policies is relatively recent in the 60-year
history of the multilateral trading system. At the end of the Uruguay Round in 1994,
trade ministers from participating countries decided to begin a comprehensive
work programme on trade and environment in the WTO. They created the Trade
and Environment Committee. This has brought environmental and sustainable
development issues into the mainstream of WTO work. The 2001 Doha Ministerial
Conference kicked off negotiations in some aspects of the subject.
> See also Doha Agenda negotiations
The committee: broad-based responsibility
The committee has a broad-based responsibility covering all areas of the multilateral
trading system — goods, services and intellectual property. Its duties are to
study the relationship between trade and the environment, and to make recommendations
about any changes that might be needed in the trade agreements.
The committee’s work is based on two important principles:
• The WTO is only competent to deal with trade. In other words, in environmental
issues its only task is to study questions that arise when environmental policies
have a significant impact on trade. The WTO is not an environmental agency. Its
members do not want it to intervene in national or international environmental
policies or to set environmental standards. Other agencies that specialize in environmental
issues are better qualified to undertake those tasks.
• If the committee does identify problems, its solutions must continue to uphold
the principles of the WTO trading system.
More generally WTO members are convinced that an open, equitable and nondiscriminatory
multilateral trading system has a key contribution to make to national
and international efforts to better protect and conserve environmental resources
and promote sustainable development. This was recognized in the results of the
1992 UN Conference on Environment and Development in Rio (the “Earth
Summit”) and its 2002 successor, the World Summit on Sustainable Development
in Johannesburg.
The committee’s work programme focuses on 10 areas. Its agenda is driven by proposals
from individual WTO members on issues of importance to them. The following
sections outline some of the issues, and what the committee has concluded so far:
66
WTO and environmental agreements: how are they related?
How do the WTO trading system and “green” trade measures relate to each other?
What is the relationship between the WTO agreements and various international
environmental agreements and conventions?
There are about 200 international agreements (outside the WTO) dealing with various
environmental issues currently in force. They are called multilateral environmental
agreements (MEAs).
About 20 of these include provisions that can affect trade: for example they ban
trade in certain products, or allow countries to restrict trade in certain circumstances.
Among them are the Montreal Protocol for the protection of the ozone
layer, the Basel Convention on the trade or transportation of hazardous waste across
international borders, and the Convention on International Trade in Endangered
Species (CITES).
Briefly, the WTO’s committee says the basic WTO principles of non-discrimination
and transparency do not conflict with trade measures needed to protect the environment,
including actions taken under the environmental agreements. It also
notes that clauses in the agreements on goods, services and intellectual property
allow governments to give priority to their domestic environmental policies.
The WTO’s committee says the most effective way to deal with international environmental
problems is through the environmental agreements. It says this
approach complements the WTO’s work in seeking internationally agreed solutions
for trade problems. In other words, using the provisions of an international environmental
agreement is better than one country trying on its own to change other
countries’ environmental policies (see shrimp-turtle and dolphin-tuna case studies).
The committee notes that actions taken to protect the environment and having an
impact on trade can play an important role in some environmental agreements, particularly
when trade is a direct cause of the environmental problems. But it also
points out that trade restrictions are not the only actions that can be taken, and they
are not necessarily the most effective. Alternatives include: helping countries
acquire environmentally-friendly technology, giving them financial assistance,
providing training, etc.
The problem should not be exaggerated. So far, no action affecting trade and taken
under an international environmental agreement has been challenged in the GATTWTO
system. There is also a widely held view that actions taken under an environmental
agreement are unlikely to become a problem in the WTO if the countries
concerned have signed the environmental agreement, although the question is not
settled completely. The Trade and Environment Committee is more concerned
about what happens when one country invokes an environmental agreement to take
action against another country that has not signed the environmental agreement.
> See also Doha Agenda negotiations
A key question
If one country believes another country’s
trade damages the environment, what can
it do? Can it restrict the other country’s
trade? If it can, under what circumstances?
At the moment, there are no definitive
legal interpretations, largely because the
questions have not yet been tested in a
legal dispute either inside or outside the
WTO. But the combined result of the
WTO’s trade agreements and environmental
agreements outside the WTO suggest:
1. First, cooperate: The countries concerned
should try to cooperate to prevent
environmental damage.
2. The complaining country can act
(e.g. on imports) to protect its own
domestic environment, but it cannot
discriminate. Under the WTO agreements,
standards, taxes or other measures applied
to imports from the other country must also
apply equally to the complaining country’s
own products (“national treatment”) and
imports from all other countries
(“most-favoured-nation”).
3. If the other country has also signed
an environment agreement, then what
ever action the complaining country takes
is probably not the WTO’s concern.
4. What if the other country has not
signed? Here the situation is unclear and
the subject of debate. Some environmental
agreements say countries that have signed
the agreement should apply the agreement
even to goods and services from countries
that have not. Whether this would break
the WTO agreements remains untested
because so far no dispute of this kind has
been brought to the WTO. One proposed
way to clarify the situation would be to
rewrite the rules to make clear that countries
can, in some circumstances, cite an
environmental agreement when they take
action affecting the trade of a country that
has not signed. Critics say this would allow
some countries to force their environmental
standards on others.
5. When the issue is not covered by an
environmental agreement, WTO rules
apply. The WTO agreements are interpreted
to say two important things. First,
trade restrictions cannot be imposed on a
product purely because of the way it has
been produced. Second, one country cannot
reach out beyond its own territory to
impose its standards on another country.
67
Disputes: where should they be handled?
Suppose a trade dispute arises because a country has taken action on trade (for
example imposed a tax or restricted imports) under an environmental agreement
outside the WTO and another country objects. Should the dispute be handled under
the WTO or under the other agreement? The Trade and Environment Committee
says that if a dispute arises over a trade action taken under an environmental agreement,
and if both sides to the dispute have signed that agreement, then they should
try to use the environmental agreement to settle the dispute. But if one side in the
dispute has not signed the environment agreement, then the WTO would provide
the only possible forum for settling the dispute. The preference for handling disputes
under the environmental agreements does not mean environmental issues
would be ignored in WTO disputes. The WTO agreements allow panels examining
a dispute to seek expert advice on environmental issues.
A WTO dispute: The ‘shrimp-turtle’ case
This was a case brought by India, Malaysia, Pakistan and Thailand against the US.
The appellate and panel reports were adopted on 6 November 1998. The official title
is “United States — Import Prohibition of Certain Shrimp and Shrimp Products”,
the official WTO case numbers are 58 and 61.
What was it all about?
Seven species of sea turtles have been identified. They are distributed around the
world in subtropical and tropical areas. They spend their lives at sea, where they
migrate between their foraging and nesting grounds.
Sea turtles have been adversely affected by human activity, either directly (their meat,
shells and eggs have been exploited), or indirectly (incidental capture in fisheries,
destroyed habitats, polluted oceans).
In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint
against a ban imposed by the US on the importation of certain shrimp and shrimp
products. The protection of sea turtles was at the heart of the ban.
The US Endangered Species Act of 1973 listed as endangered or threatened the five
species of sea turtles that occur in US waters, and prohibited their “take” within the
US, in its territorial sea and the high seas. (“Take” means harassment, hunting, capture,
killing or attempting to do any of these.)
Under the act, the US required US shrimp trawlers to use “turtle excluder devices”
(TEDs) in their nets when fishing in areas where there is a significant likelihood of
encountering sea turtles.
Section 609 of US Public Law 101–102, enacted in 1989, dealt with imports. It said,
among other things, that shrimp harvested with technology that may adversely
affect certain sea turtles may not be imported into the US — unless the harvesting
nation was certified to have a regulatory programme and an incidental take-rate
comparable to that of the US, or that the particular fishing environment of the harvesting
nation did not pose a threat to sea turtles.
In practice, countries that had any of the five species of sea turtles within their jurisdiction,
and harvested shrimp with mechanical means, had to impose on their fishermen
requirements comparable to those borne by US shrimpers if they wanted to
be certified to export shrimp products to the US. Essentially this meant the use of
TEDs at all times.
WHAT THE APPELLATE BODY SAID
‘... We have not decided that the sovereign
nations that are members of the WTO
cannot adopt effective measures to protect
endangered species, such as sea turtles.
Clearly, they can and should. ...’
Legally speaking ...
The panel considered that the ban
imposed by the US was inconsistent with
GATT Article 11 (which limits the use of
import prohibitions or restrictions), and
could not be justified under GATT Article
20 (which deals with general exceptions
to the rules, including for certain environmental
reasons).
Following an appeal, the Appellate Body
found that the measure at stake did qualify
for provisional justification under Article
20(g), but failed to meet the requirements
of the chapeau (the introductory
paragraph) of Article 20 (which defines
when the general exceptions can be cited).
The Appellate Body therefore concluded
that the US measure was not justified
under Article 20 of GATT (strictly speaking,
“GATT 1994”, i.e. the current version
of the General Agreement on Tariffs and
Trade as modified by the 1994 Uruguay
Round agreement).
At the request of Malaysia, the original
panel in this case considered the measures
taken by the United States to comply with
the recommendations and rulings of the
Dispute Settlement Body. The panel report
for this recourse was appealed by Malaysia.
The Appellate Body upheld the panel's
findings that the US measure was now
applied in a manner that met the requirements
of Article 20 of the GATT 1994.
68
The ruling
In its report, the Appellate Body made clear that under WTO rules, countries have
the right to take trade action to protect the environment (in particular, human, animal
or plant life and health) and endangered species and exhaustible resources).
The WTO does not have to “allow” them this right.
It also said measures to protect sea turtles would be legitimate under GATT Article
20 which deals with various exceptions to the WTO’s trade rules, provided certain
criteria such as non-discrimination were met.
The US lost the case, not because it sought to protect the environment but because
it discriminated between WTO members. It provided countries in the western
hemisphere — mainly in the Caribbean — technical and financial assistance and
longer transition periods for their fishermen to start using turtle-excluder devices.
It did not give the same advantages, however, to the four Asian countries (India,
Malaysia, Pakistan and Thailand) that filed the complaint with the WTO.
The ruling also said WTO panels may accept “amicus briefs” (friends-of-the-court
submissions) from NGOs or other interested parties.
‘What we have not decided ...’
This is part of what the Appellate Body said:
“185. In reaching these conclusions, we wish to underscore what we have not
decided in this appeal. We have not decided that the protection and preservation of
the environment is of no significance to the Members of the WTO. Clearly, it is. We
have not decided that the sovereign nations that are Members of the WTO cannot
adopt effective measures to protect endangered species, such as sea turtles. Clearly,
they can and should. And we have not decided that sovereign states should not act
together bilaterally, plurilaterally or multilaterally, either within the WTO or in other
international fora, to protect endangered species or to otherwise protect the environment.
Clearly, they should and do.
“186. What we have decided in this appeal is simply this: although the measure of
the United States in dispute in this appeal serves an environmental objective that is
recognized as legitimate under paragraph (g) of Article XX [i.e. 20] of the GATT
1994, this measure has been applied by the United States in a manner which constitutes
arbitrary and unjustifiable discrimination between Members of the WTO,
contrary to the requirements of the chapeau of Article XX. For all of the specific reasons
outlined in this Report, this measure does not qualify for the exemption that
Article XX of the GATT 1994 affords to measures which serve certain recognized,
69
legitimate environmental purposes but which, at the same time, are not applied in
a manner that constitutes a means of arbitrary or unjustifiable discrimination
between countries where the same conditions prevail or a disguised restriction on
international trade. As we emphasized in United States — Gasoline [adopted 20
May 1996, WT/DS2/AB/R, p. 30], WTO Members are free to adopt their own policies
aimed at protecting the environment as long as, in so doing, they fulfill their
obligations and respect the rights of other Members under the WTO Agreement.”
A GATT dispute: The tuna-dolphin dispute
This case still attracts a lot of attention because of its implications for environmental
disputes. It was handled under the old GATT dispute settlement procedure. Key
questions are:
• can one country tell another what its environmental regulations should be? and
• do trade rules permit action to be taken against the method used to produce goods
(rather than the quality of the goods themselves)?
What was it all about?
In eastern tropical areas of the Pacific Ocean, schools of yellowfin tuna often
swim beneath schools of dolphins. When tuna is harvested with purse seine
nets, dolphins are trapped in the nets. They often die unless they are released.
The US Marine Mammal Protection Act sets dolphin protection standards for the
domestic American fishing fleet and for countries whose fishing boats catch yellowfin
tuna in that part of the Pacific Ocean. If a country exporting tuna to the
United States cannot prove to US authorities that it meets the dolphin protection
standards set out in US law, the US government must embargo all imports of the
fish from that country. In this dispute, Mexico was the exporting country concerned.
Its exports of tuna to the US were banned. Mexico complained in 1991 under the
GATT dispute settlement procedure.
The embargo also applies to “intermediary” countries handling the tuna en route
from Mexico to the United States. Often the tuna is processed and canned in an one
of these countries. In this dispute, the “intermediary” countries facing the embargo
were Costa Rica, Italy, Japan and Spain, and earlier France, the Netherlands Antilles,
and the United Kingdom. Others, including Canada, Colombia, the Republic of
Korea, and members of the Association of Southeast Asian Nations (ASEAN), were
also named as “intermediaries”.
The panel
Mexico asked for a panel in February 1991. A number of “intermediary” countries
also expressed an interest. The panel reported to GATT members in September
1991. It concluded:
• that the US could not embargo imports of tuna products from Mexico simply
because Mexican regulations on the way tuna was produced did not satisfy US
regulations. (But the US could apply its regulations on the quality or content of
the tuna imported.) This has become known as a “product” versus “process” issue.
• that GATT rules did not allow one country to take trade action for the purpose of
attempting to enforce its own domestic laws in another country — even to protect animal
health or exhaustible natural resources. The term used here is “extra-territoriality”.
PS. The report was never adopted
Under the present WTO system, if WTO
members (meeting as the Dispute
Settlement Body) do not by consensus
reject a panel report after 60 days, it is
automatically accepted (“adopted”). That
was not the case under the old GATT.
Mexico decided not to pursue the case
and the panel report was never adopted
even though some of the “intermediary”
countries pressed for its adoption. Mexico
and the United States held their own
bilateral consultations aimed at reaching
agreement outside GATT.
In 1992, the European Union lodged its
own complaint. This led to a second panel
report circulated to GATT members in mid
1994. The report upheld some of the
findings of the first panel and modified
others. Although the European Union
and other countries pressed for the report
to be adopted, the United States told
a series of meetings of the GATT Council
and the final meeting of GATT Contracting
Parties (i.e. members) that it had not had
time to complete its studies of the report.
There was therefore no consensus to
adopt the report, a requirement under the
old GATT system. On 1 January 1995,
GATT made way for the WTO.
70
What was the reasoning behind this ruling? If the US arguments were accepted,
then any country could ban imports of a product from another country merely
because the exporting country has different environmental, health and social policies
from its own. This would create a virtually open-ended route for any country to
apply trade restrictions unilaterally — and to do so not just to enforce its own laws
domestically, but to impose its own standards on other countries. The door would
be opened to a possible flood of protectionist abuses. This would conflict with the
main purpose of the multilateral trading system — to achieve predictability through
trade rules.
The panel’s task was restricted to examining how GATT rules applied to
the issue. It was not asked whether the policy was environmentally correct
or not. It suggested that the US policy could be made compatible
with GATT rules if members agreed on amendments or reached a decision
to waive the rules specially for this issue. That way, the members could negotiate
the specific issues, and could set limits that would prevent protectionist abuse.
The panel was also asked to judge the US policy of requiring tuna products to be
labelled “dolphin-safe” (leaving to consumers the choice of whether or not to buy the
product). It concluded that this did not violate GATT rules because it was designed
to prevent deceptive advertising practices on all tuna products, whether imported or
domestically produced.
Eco-labelling: good, if it doesn’t discriminate
Labelling environmentally-friendly products is an important environmental policy
instrument. For the WTO, the key point is that labelling requirements and practices
should not discriminate — either between trading partners (most-favoured nation
treatment should apply), or between domestically-produced goods or services and
imports (national treatment).
One area where the Trade and Environment Committee needs further discussion
is how to handle — under the rules of the WTO Technical Barriers to Trade
Agreement — labelling used to describe whether for the way a product is produced
(as distinct from the product itself) is environmentally-friendly.
Transparency: information without too much paperwork
Like non-discrimination, this is an important WTO principle. Here, WTO members
should provide as much information as possible about the environmental policies
they have adopted or actions they may take, when these can have a significant
impact on trade. They should do this by notifying the WTO, but the task should not
be more of a burden than is normally required for other policies affecting trade.
The Trade and Environment Committee says WTO rules do not need changing for this
purpose. The WTO Secretariat is to compile from its Central Registry of Notifications
all information on trade-related environmental measures that members have submitted.
These are to be put in a single database which all WTO members can access.
ON THE WEBSITE:
www.wto.org > trade topics > environment
71
Domestically prohibited goods: dangerous chemicals, etc
This is a concern of a number of developing countries, which are worried that certain
hazardous or toxic products are being exported to their markets without them being
fully informed about the environmental or public health dangers the products may
pose. Developing countries want to be fully informed so as to be in a position to decide
whether or not to import them.
A number of international agreements now exist (e.g. the Basel Convention on the
Control of Transboundary Movements of Hazardous Wastes and their Disposal, and
the London Guidelines for Exchange of Information on Chemicals in International
Trade). The WTO’s Trade and Environment Committee does not intend to duplicate
their work but it also notes that the WTO could play a complementary role.
Liberalization and sustainable development: good for each other
Does freer trade help or hinder environmental protection? The Trade and
Environment Committee is analysing the relationship between trade liberalization
(including the Uruguay Round commitments) and the protection of the environment.
Members say the removal of trade restrictions and distortions can yield benefits both
for the multilateral trading system and the environment. Further work is scheduled.
Intellectual property, services: some scope for study
Discussions in the Trade and Environment Committee on these two issues have
broken new ground since there was very little understanding of how the rules of the
trading system might affect or be affected by environmental policies in these areas.
On services, the committee says further work is needed to examine the relationship
between the General Agreement on Trade in Services (GATS) and environmental
protection policies in the sector.
The committee says that the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) helps countries obtain environmentally-sound technology
and products. More work is scheduled on this, including on the relationship
between the TRIPS Agreement and the Convention of Biological Diversity.
> See also Doha Agenda negotiations
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3. Investment, competition, procurement, simpler procedures
Ministers from WTO member-countries decided at the 1996 Singapore Ministerial
Conference to set up three new working groups: on trade and investment, on competition
policy, and on transparency in government procurement. They also
instructed the WTO Goods Council to look at possible ways of simplifying trade procedures,
an issue sometimes known as “trade facilitation”. Because the Singapore
conference kicked off work in these four subjects, they are sometimes called the
“Singapore issues”.
These four subjects were originally included on the Doha Development Agenda.
The carefully negotiated mandate was for negotiations to start after the 2003
Cancún Ministerial Conference, “on the basis of a decision to be taken, by explicit
consensus, at that session on modalities of negotiations”. There was no consensus,
and the members agreed on 1 August 2004 to proceed with negotiations in only one
subject, trade facilitation. The other three were dropped from the Doha agenda.
> See also Doha Development Agenda
Investment and competition: what role for the WTO?
Work in the WTO on investment and competition policy issues originally took the
form of specific responses to specific trade policy issues, rather than a look at the
broad picture.
Decisions reached at the 1996 Ministerial Conference in Singapore changed the perspective.
The ministers decided to set up two working groups to look more generally
at how trade relates to investment and competition policies.
The working groups’ tasks were analytical and exploratory. They would not negotiate
new rules or commitments without a clear consensus decision.
The ministers also recognized the work underway in the UN Conference on Trade
and Development (UNCTAD) and other international organizations. The working
groups were to cooperate with these organizations so as to make best use of available
resources and to ensure that development issues are fully taken into account.
An indication of how closely trade is linked with investment is the fact that about
one third of the $6.1 trillion total for world trade in goods and services in 1995 was
trade within companies — for example between subsidiaries in different countries
or between a subsidiary and its headquarters.
The close relationships between trade and investment and competition policy have
long been recognized. One of the intentions, when GATT was drafted in the late
1940s, was for rules on investment and competition policy to exist alongside those
for trade in goods. (The other two agreements were not completed because the
attempt to create an International Trade Organization failed.)
Over the years, GATT and the WTO have increasingly dealt with specific aspects of
the relationships. For example, one type of trade covered by the General Agreement
on Trade in Services (GATS) is the supply of services by a foreign company setting
up operations in a host country — i.e. through foreign investment. The Trade-
Related Investment Measures Agreement says investors’ right to use imported
goods as inputs should not depend on their export performance.
The same goes for competition policy. GATT and GATS contain rules on monopolies
and exclusive service suppliers. The principles have been elaborated considerably
in the rules and commitments on telecommunications. The agreements on
intellectual property and services both recognize governments’ rights to act against
anti-competitive practices, and their rights to work together to limit these practices.
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ON THE WEBSITE:
www.wto.org > trade topics > government procurement
ON THE WEBSITE:
www.wto.org > trade topics > trade facilitation
ON THE WEBSITE:
www.wto.org > trade topics > investment
www.wto.org > trade topics > competition policy
Transparency in government purchases: towards multilateral rules
The WTO already has an Agreement on Government Procurement. It is plurilateral
— only some WTO members have signed it so far. The agreement covers such
issues as transparency and non-discrimination.
The decision by WTO ministers at the 1996 Singapore conference did two things. It
set up a working group that was multilateral — it included all WTO members. And
it focused the group’s work on transparency in government procurement practices.
The group did not look at preferential treatment for local suppliers, so long as the
preferences were not hidden.
The first phase of the group’s work was to study transparency in government procurement
practices, taking into account national policies. The second phase was to
developments for inclusion in an agreement.
Trade facilitation: a new high profile
Once formal trade barriers come down, other issues become more important. For
example, companies need to be able to acquire information on other countries’
importing and exporting regulations and how customs procedures are handled.
Cutting red-tape at the point where goods enter a country and providing easier
access to this kind of information are two ways of “facilitating” trade.
The 1996 Singapore ministerial conference instructed the WTO Goods Council to
start exploratory and analytical work “on the simplification of trade procedures in
order to assess the scope for WTO rules in this area”. Negotiations began after the
General Council decision of 1 August 2004.
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4. Electronic commerce
A new area of trade involves goods crossing borders electronically. Broadly speaking,
this is the production, advertising, sale and distribution of products via telecommunications
networks. The most obvious examples of products distributed electronically
are books, music and videos transmitted down telephone lines or through
the Internet.
The declaration on global electronic commerce adopted by the Second (Geneva)
Ministerial Conference on 20 May 1998 urged the WTO General Council to establish
a comprehensive work programme to examine all trade-related issues arising
from global electronic commerce. The General Council adopted the plan for this
work programme on 25 September 1998, initiating discussions on issues of electronic
commerce and trade by the Goods, Services and TRIPS (intellectual property)
Councils and the Trade and Development Committee.
In the meantime, WTO members also agreed to continue their current practice of
not imposing customs duties on electronic transmissions.
ON THE WEBSITE:
www.wto.org > trade topics > electronic commerce
5. Labour standards: consensus, coherence and controversy
Labour standards are those that are applied to the way workers are treated. The term
covers a wide range of things: from use of child labour and forced labour, to the
right to organize trade unions and to strike, minimum wages, health and safety conditions,
and working hours.
Consensus on core standards, work deferred to the ILO
There is a clear consensus: all WTO member governments are committed to a narrower
set of internationally recognized “core” standards — freedom of association,
no forced labour, no child labour, and no discrimination at work (including gender
discrimination).
At the 1996 Singapore Ministerial Conference, members defined the WTO’s role on
this issue, identifying the International Labour Organization (ILO) as the competent
body to negotiate labour standards. There is no work on this subject in the
WTO’s Councils and Committees. However the secretariats of the two organizations
work together on technical issues under the banner of “coherence” in global
economic policy-making.
However, beyond that it is not easy for them to agree, and the question of international
enforcement is a minefield.
Why was this brought to the WTO? What is the debate about?
Four broad questions have been raised inside and outside the WTO.
• The analytical question: if a country has lower standards for labour rights, do its
exports gain an unfair advantage? Would this force all countries to lower their
standards (the “race to the bottom”)?
The official answer
What the 1996 Singapore ministerial
declaration says on core labour standards
“We renew our commitment to the
observance of internationally recognized
core labour standards. The International
Labour Organization (ILO) is the competent
body to set and deal with these standards,
and we affirm our support for its
work in promoting them. We believe that
economic growth and development
fostered by increased trade and further
trade liberalization contribute to the promotion
of these standards. We reject the
use of labour standards for protectionist
purposes, and agree that the comparative
advantage of countries, particularly
low-wage developing countries, must in
no way be put into question. In this
regard, we note that the WTO and ILO
Secretariats will continue their existing
collaboration.”
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• The response question: if there is a “race to the bottom”, should countries only
trade with those that have similar labour standards?
• The question of rules: should WTO rules explicitly allow governments to take
trade action as a means of putting pressure on other countries to comply?
• The institutional question: is the WTO the proper place to discuss and set rules on
labour — or to enforce them, including those of the ILO?
In addition, all these points have an underlying question: whether trade actions
could be used to impose labour standards, or whether this would simply be an
excuse for protectionism. Similar questions are asked about standards, i.e. sanitary
and phytosanitary measures, and technical barriers to trade.
The WTO agreements do not deal with labour standards as such.
On the one hand, some countries would like to change this. WTO rules and disciplines,
they argue, would provide a powerful incentive for member nations to
improve workplace conditions and “international coherence” (the phrase used to
describe efforts to ensure policies move in the same direction).
On the other hand, many developing countries believe the issue has no place in the
WTO framework. They argue that the campaign to bring labour issues into the WTO
is actually a bid by industrial nations to undermine the comparative advantage of lower
wage trading partners, and could undermine their ability to raise standards through
economic development, particularly if it hampers their ability to trade. They also argue
that proposed standards can be too high for them to meet at their level of development.
These nations argue that efforts to bring labour standards into the arena of multilateral
trade negotiations are little more than a smokescreen for protectionism.
At a more complex legal level is the question of the relationship between the
International Labour Organization’s standards and the WTO agreements — for
example whether or how the ILO’s standards can be applied in a way that is consistent
with WTO rules.
What has happened in the WTO?
In the WTO, the debate has been hard-fought, particularly in 1996 and 1999. It was
at the 1996 Singapore conference that members agreed they were committed to recognized
core labour standards, but these should not be used for protectionism. The
economic advantage of low-wage countries should not be questioned, but the WTO
and ILO secretariats would continue their existing collaboration, the declaration
said. The concluding remarks of the chairman, Singapore’s trade and industry minister,
Mr Yeo Cheow Tong, added that the declaration does not put labour on the
WTO’s agenda. The countries concerned might continue their pressure for more
work to be done in the WTO, but for the time being there are no committees or
working parties dealing with the issue.
The issue was also raised at the Seattle Ministerial Conference in 1999, but with
no agreement reached. The 2001 Doha Ministerial Conference reaffirmed the
Singapore declaration on labour without any specific discussion.

ON THE WEBSITE:
www.wto.org
> trade topics > Doha Development Agenda
www.wto.org >
the WTO > General Council
www.wto.org >
trade topics > Doha Development Agenda
> Trade Negotiations Committee
77
At the Fourth Ministerial Conference in Doha, Qatar, in November 2001 WTO
member governments agreed to launch new negotiations. 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, either regular councils and committees meeting in
“special sessions”, or specially-created negotiating groups. Other work under the
work programme takes place in other WTO councils and committees.
The Fifth Ministerial Conference in Cancún, Mexico, in September 2003, was intented
as a stock-taking meeting where members would agree on how to complete the rest
of the negotiations. But the meeting was soured by discord on agricultural issues,
including cotton, and ended in deadlock on the “Singapore issues” (see below ). Real
progress on the Singapore issues and agriculture was not evident until the early hours
of 1 August 2004 with a set of decisions in the General Council (sometines called the
July 2004 package). The original 1 January 2005 deadline was missed. After that,
members unofficially aimed to finish the negotiations by the end of 2006, again
unsuccessfully. Further progress in narrowing members’ differences was made at the
Hong Kong Ministerial Conference in December 2005, but some gaps remained
unbridgeable and Director-General Pascal Lamy suspended the negotiations in July
2006. Efforts then focused on trying to achieve a breakthrough in early 2007.
There are 19–21 subjects listed in the Doha Declaration, depending on whether to
count the “rules” subjects as one or three. Most of them involve negotiations; other
work includes actions under “implementation”, analysis and monitoring. This is an
unofficial explanation of what the declaration mandates (listed with the declaration’s
paragraphs that refer to them):
Implementation-related issues and concerns (par 12)
“Implementation” is short-hand for developing countries’ problems in implementing
the current WTO Agreements, i.e. the agreements arising from the Uruguay
Round negotiations.
No area of WTO work received more attention or generated more controversy during
nearly three years of hard bargaining before the Doha Ministerial Conference. Around
100 issues were raised during that period. The result was a two-pronged approach:
• More than 40 items under 12 headings were settled at or before the Doha conference
for immediate delivery.
• The vast majority of the remaining items immediately became the subject of
negotiations.
This was spelt out in a separate ministerial decision on implementation, combined
with paragraph 12 of the main Doha Declaration.
The implementation decision includes the following (detailed explanations can be
seen on the WTO website):
General Agreement on Tariffs and Trade (GATT)
• Balance-of-payments exception: clarifying less stringent conditions in GATT for developing
countries if they restrict imports in order to protect their balance-of-payments.
• Market-access commitments: clarifying eligibility to negotiate or be consulted on
quota allocation.
THE DOHA AGENDA
Chapter 5
The work programme lists 21 subjects. The original deadline
of 1 January 2005 was missed. So was the next unofficial
target of the end of 2006
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Agriculture
• Rural development and food security for developing countries.
• Least-developed and net food-importing developing countries.
• Export credits, export credit guarantees or insurance programmes.
• Tariff rate quotas.
Sanitary and phytosanitary (SPS) measures
• More time for developing countries to comply with other countries’ new SPS measures.
• Reasonable interval” between publication of a country’s new SPS measure and its
entry into force.
• Equivalence: putting into practice the principle that governments should accept that
different measures used by other governments can be equivalent to their own measures
for providing the same level of health protection for food, animals and plants.
• Review of the SPS Agreement.
• Developing countries’ participation in setting international SPS standards.
• Financial and technical assistance.
Textiles and clothing
• “Effective” use of the agreement’s provisions on early integration of products into
normal GATT rules, and elimination of quotas.
• Restraint in anti-dumping actions.
• The possibility of examining governments’ new rules of origin.
• Members to consider favourable quota treatment for small suppliers and leastdeveloped
countries, and larger quotas in general.
Technical barriers to trade
• Technical assistance for least-developed countries, and reviews of technical assistance
in general.
• When possible, a six-month “reasonable interval” for developing countries to
adapt to new measures.
• The WTO director-general encouraged to continue efforts to help developing
countries participate in setting international standards.
Trade-related investment measures (TRIMs)
• The Goods Council is “to consider positively” requests from least-developed countries
to extend the seven-year transition period for eliminating measures that are
inconsistent with the agreement.
Anti-dumping (GATT Article 6)
• No second anti-dumping investigation within a year unless circumstances have
changed.
• How to put into operation a special provision for developing countries (Article 15 of
the Anti-Dumping Agreement), which recognizes that developed countries must
give “special regard” to the situation of developing countries when considering applying
anti-dumping measures.
• Clarification sought on the time period for determining whether the volume of
dumped imported products is negligible, and therefore no anti-dumping action
should be taken.
• Annual reviews of the agreement’s implementation to be improved.
ON THE WEBSITE:
www.wto.org > trade topics > Doha Development
Agenda > Implementation Decision Explained
79
Customs valuation (GATT Article 7)
• Extending the deadline for developing countries to implement the agreement.
• Dealing with fraud: how to cooperate in exchanging information, including on
export values.
Rules of origin
• Completing the harmonization of rules of origin among member governments.
• Dealing with interim arrangements in the transition to the new, harmonized rules
of origin.
Subsidies and countervailing measures
• Sorting out how to determine whether some developing countries meet the test of
being below US$1,000 per capita GNP allowing them to pay subsidies that require
the recipient to export.
• Noting proposed new rules allowing developing countries to subsidize under programmes
that have “legitimate development goals” without having to face countervailing
or other action.
• Review of provisions on countervailing duty investigations.
• Reaffirming that least-developed countries are exempt from the ban on export
subsidies.
• Directing the Subsidies Committee to extend the transition period for certain developing
countries.
Trade-related aspects of intellectual property rights (TRIPS)
• “Non-violation” complaints: the unresolved question of how to deal with possible
TRIPS disputes involving loss of an expected benefit even if the TRIPS Agreement
has not actually been violated.
• Technology transfer to least-developed countries.
Cross-cutting issues
• Which special and differential treatment provisions are mandatory? What are the
implications of making mandatory those that are currently non-binding?
• How can special and differential treatment provisions be made more effective?
• How can special and differential treatment be incorporated in the new negotiations?
• Developed countries are urged to grant preferences in a generalized and nondiscriminatory
manner, i.e. to all developing countries rather than to a selected group.
Outstanding implementation issues
• To be handled under paragraph 12 of the main Doha Declaration.
Final provisions
• The WTO Director-General is to ensure that WTO technical assistance gives priority
to helping developing countries implement existing WTO obligations, and to
increase their capacity to participate more effectively in future negotiations.
• The WTO Secretariat is to cooperate more closely with other international organizations
so that technical assistance is more efficient and effective.
The implementation decision is tied into the main Doha Declaration, where ministers
agreed on a future work programme to deal with unsettled implementation
questions. “Negotiations on outstanding implementation issues shall be an integral
part of the Work Programme” in the coming years, they declared. In the declaration,
the ministers established a two-track approach. Those issues for which there was an
agreed negotiating mandate in the declaration would be dealt with under the terms
of that mandate.
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Those implementation issues where there is no mandate to negotiate, would be the
taken up as “a matter of priority” by relevant WTO councils and committees. These
bodies were to report on their progress to the Trade Negotiations Committee by the
end of 2002 for “appropriate action”.
Agriculture (pars 13, 14)
Negotiations on agriculture began in early 2000, under Article 20 of the WTO
Agriculture Agreement. By November 2001 and the Doha Ministerial Conference, 121
governments had submitted a large number of negotiating proposals.
These negotiations have continued, but now with the mandate given by the Doha
Declaration, which also includes a series of deadlines. The declaration builds on the
work already undertaken, confirms and elaborates the objectives, and sets a
timetable. Agriculture is now part of the single undertaking in which virtually all the
linked negotiations were to end by 1 January 2005, now with the unofficial target of
the end of 2006.
The declaration reconfirms the long-term objective already agreed in the present
WTO Agreement: to establish a fair and market-oriented trading system through a
programme of fundamental reform. The programme encompasses strengthened
rules, and specific commitments on government support and protection for agriculture.
The purpose is to correct and prevent restrictions and distortions in world
agricultural markets.
Without prejudging the outcome, member governments commit themselves to
comprehensive negotiations aimed at:
• market access: substantial reductions
• exports subsidies: reductions of, with a view to phasing out, all forms of these (in the
1 August 2004 “framework” members agreed to eliminate export subsidies by a date to
be negotiated)
• domestic support: substantial reductions for supports that distort trade (in the 1 August
2004 “framework”, developed countries pledged to slash trade-distorting domestic subsidies
by 20% from the first day any Doha Agenda agreement is implemented).
The declaration makes special and differential treatment for developing countries
integral throughout the negotiations, both in countries’ new commitments and in
any relevant new or revised rules and disciplines. It says the outcome should be
effective in practice and should enable developing countries to meet their needs,
in particular in food security and rural development.
The ministers also take note of the non-trade concerns (such as environmental
protection, food security, rural development, etc) reflected in the negotiating
proposals already submitted. They confirm that the negotiations will take these
into account, as provided for in the Agriculture Agreement.
A first step along the road to final agreement was reached on 1 August 2004 when
members agreed on a “framework” (Annex A of the General Council decision).
The negotiations take place in “special sessions” of the Agriculture Committee.
Key dates: agriculture
Start: early 2000
“Framework” agreed:
1 August 2004
Formulas and other “modalities” for countries’
commitments: originally 31 March 2003,
now by 6th Ministerial Conference, 2005
(in Hong Kong, China)
Countries’ comprehensive draft commitments
and stock taking: originally
by 5th Ministerial Conference, 2003
(in Mexico)
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
ON THE WEBSITE:
www.wto.org > trade topics > goods > agriculture > agriculture negotiations
81
ON THE WEBSITE:
www.wto.org > trade topics > market access >
market access negotiations
Services (par 15)
Negotiations on services were already almost two years old when they were incorporated
into the new Doha agenda.
The WTO General Agreement on Trade in Services (GATS) commits member governments
to undertake negotiations on specific issues and to enter into successive
rounds of negotiations to progressively liberalize trade in services. The first round
had to start no later than five years from 1995.
Accordingly, the services negotiations started officially in early 2000 under the
Council for Trade in Services. In March 2001, the Services Council fulfilled a key
element in the negotiating mandate by establishing the negotiating guidelines and
procedures.
The Doha Declaration endorses the work already done, reaffirms the negotiating
guidelines and procedures, and establishes some key elements of the timetable
including, most importantly, the deadline for concluding the negotiations as part of
a single undertaking.
The negotiations take place in “special sessions” of the Services Council and regular
meetings of its relevant subsidiary committees or working parties.
Market access for non-agricultural products (par 16)
The ministers agreed to launch tariff-cutting negotiations on all non-agricultural
products. The aim is “to reduce, or as appropriate eliminate tariffs, including the
reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as
non-tariff barriers, in particular on products of export interest to developing countries”.
These negotiations shall take fully into account the special needs and interests
of developing and least-developed countries, and recognize that these countries
do not need to match or reciprocate in full tariff-reduction commitments by other
participants.
At the start, participants have to reach agreement on how (“modalities”) to conduct
the tariff-cutting exercise (in the Tokyo Round, the participants used an agreed
mathematical formula to cut tariffs across the board; in the Uruguay Round, participants
negotiated cuts product by product). The agreed procedures would include
studies and capacity-building measures that would help least-developed countries
participate effectively in the negotiations. Back in Geneva, negotiators decided that
the “modalities” should be agreed by 31 May 2003. When that date was missed,
members agreed on 1 August 2004 on a new target: the Hong Kong Ministerial
Conference in December 2005.
While average customs duties are now at their lowest levels after eight GATT
Rounds, certain tariffs continue to restrict trade, especially on exports of developing
countries — for instance “tariff peaks”, which are relatively high tariffs, usually on
“sensitive” products, amidst generally low tariff levels. For industrialized countries,
tariffs of 15% and above are generally recognized as “tariff peaks”.
Another example is “tariff escalation”, in which higher import duties are applied on
semi-processed products than on raw materials, and higher still on finished products.
This practice protects domestic processing industries and discourages the
development of processing activity in the countries where raw materials originate.
The negotiations take place in a Market Access Negotiating Group.
Key dates: services
Start: early 2000
Negotiating guidelines and procedures:
March 2001
Initial requests for market access:
by 30 June 2002
Initial offers of market access:
by 31 March 2003
Stock taking: originally 5th Ministerial
Conference, 2003 (in Mexico)
Revised market-access offers: by 31 May 2005
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
Key dates: market access
Start: January 2002
Stock taking: 5th Ministerial Conference,
2003 (in Mexico)
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
ON THE WEBSITE:
www.wto.org > trade topics> services >
services negotiations
82
Trade-related aspects of intellectual property rights (TRIPS)
(pars 17–19)
TRIPS and public health. In the declaration, ministers stress that it is important
to implement and interpret the TRIPS Agreement in a way that supports public
health — by promoting both access to existing medicines and the creation of new
medicines. They refer to their separate declaration on this subject.
This separate declaration on TRIPS and public health is designed to respond to concerns
about the possible implications of the TRIPS Agreement for access to medicines.
It emphasizes that the TRIPS Agreement does not and should not prevent member
governments from acting to protect public health. It affirms governments’ right to use
the agreement’s flexibilities in order to avoid any reticence the governments may feel.
The separate declaration clarifies some of the forms of flexibility available, in particular
compulsory licensing and parallel importing. (For an explanation of these
issues, go to the main TRIPS pages on the WTO website)
For the Doha agenda, this separate declaration sets two specific task. The TRIPS
Council has to find a solution to the problems countries may face in making use of
compulsory licensing if they have too little or no pharmaceutical manufacturing
capacity, reporting to the General Council on this by the end of 2002 (this was
achieved in August, 2003, see intellectual property section of the “Agreements” chapter).
The declaration also extends the deadline for least-developed countries to apply provisions
on pharmaceutical patents until 1 January 2016.
Geographical indications — the registration system. Geographical indications are
place names (in some countries also words associated with a place) used to identify
products with particular characteristics because they come from specific places. The
WTO TRIPS Council has already started work on a multilateral registration system
for geographical indications for wines and spirits. The Doha Declaration sets a deadline
for completing the negotiations: the Fifth Ministerial Conference in 2003.
These negotiations take place in “special sessions” of the TRIPS Council.
Key dates: intellectual property
Report to the General Council — solution on
compulsory licensing and lack of pharmaceutical
production capacity: originally by end
of 2002, decision agreed 30 April 2003
Report to TNC — action on outstanding implementation
issues under par 12: by end of 2002
(missed)
Deadline — negotiations on geographical indications
registration system (wines and spirits):
by 5th Ministerial Conference, 2003
(in Mexico) (missed)
Deadline — negotiations specifically mandated
in Doha Declaration: now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
Least-developed countries to apply pharmaceutical
patent provisions: 2016
83
Geographical indications — extending the “higher level of protection” to other
products. The TRIPS Agreement provides a higher level of protection to geographical
indications for wines and spirits. This means they should be protected
even if there is no risk of misleading consumers or unfair competition. A number
of countries want to negotiate extending this higher level to other products. Others
oppose the move, and the debate in the TRIPS Council has included the question of
whether the relevant provisions of the TRIPS Agreement provide a mandate for
extending coverage beyond wines and spirits.
The Doha Declaration notes that the TRIPS Council will handle this under the declaration’s
paragraph 12 (which deals with implementation issues). Paragraph 12
offers two tracks: “(a) where we provide a specific negotiating mandate in this
Declaration, the relevant implementation issues shall be addressed under that mandate;
(b) the other outstanding implementation issues shall be addressed as a matter
of priority by the relevant WTO bodies, which shall report to the Trade
Negotiations Committee [TNC], established under paragraph 46 below, by the end
of 2002 for appropriate action.”
In papers circulated at the Ministerial Conference, member governments expressed
different interpretations of this mandate.
Argentina said it understands “there is no agreement to negotiate the ‘other outstanding
implementation issues’ referred to under (b) and that, by the end of 2002,
consensus will be required in order to launch any negotiations on these issues”.
Bulgaria, the Czech Republic, EU, Hungary, India, Liechtenstein, Kenya, Mauritius,
Nigeria, Pakistan, the Slovak Republic, Slovenia, Sri Lanka, Switzerland, Thailand
and Turkey argued that there is a clear mandate to negotiate immediately.
Reviews of TRIPS provision. Two reviews have been taking place in the TRIPS
Council, as required by the TRIPS Agreement: a review of Article 27.3(b) which
deals with patentability or non-patentability of plant and animal inventions, and the
protection of plant varieties; and a review of the entire TRIPS Agreement (required
by Article 71.1).
The Doha Declaration says that work in the TRIPS Council on these reviews or any
other implementation issue should also look at: the relationship between the TRIPS
Agreement and the UN Convention on Biodiversity; the protection of traditional
knowledge and folklore; and other relevant new developments that member governments
raise in the review of the TRIPS Agreement. It adds that the TRIPS
Council’s work on these topics is to be guided by the TRIPS Agreement’s objectives
(Article 7) and principles (Article 8), and must take development fully into account.
ON THE WEBSITE:
www.wto.org > trade topics > intellectual property
84
Relationship between trade and investment (pars 20–22)
This is a “Singapore issue” i.e. a working group set up by the 1996 Singapore
Ministerial Conference has been studying it.
In the period up to the 2003 Ministerial Conference, the declaration instructs the
working group to focus on clarifying the scope and definition of the issues, transparency,
non-discrimination, ways of preparing negotiated commitments, development
provisions, exceptions and balance-of-payments safeguards, consultation and
dispute settlement. The negotiated commitments would be modelled on those
made in services, which specify where commitments are being made — “positive
lists” — rather than making broad commitments and listing exceptions.
The declaration also spells out a number of principles such as the need to balance
the interests of countries where foreign investment originates and where it is invested,
countries’ right to regulate investment, development, public interest and
individual countries’ specific circumstances. It also emphasizes support and technical
cooperation for developing and least-developed countries, and coordination
with other international organizations such as the UN Conference on Trade and
Development (UNCTAD).
Since the 1 August 2004 decision, this subject has been dropped from the Doha
agenda.
ON THE WEBSITE:
www.wto.org > trade topics > investment
Interaction between trade and competition policy (pars 23–25)
This is another “Singapore issue”, with a working group set up in 1996 to study the
subject.
In the period up to the 2003 Ministerial Conference, the declaration instructs the
working group to focus on clarifying:
• core principles including transparency, non-discrimination and procedural fairness,
and provisions on “hardcore” cartels (i.e. cartels that are formally set up)
• ways of handling voluntary cooperation on competition policy among WTO member
governments
• support for progressive reinforcement of competition institutions in developing
countries through capacity building.
The declaration says the work must take full account of developmental needs. It
includes technical cooperation and capacity building, on such topics as policy analysis
and development, so that developing countries are better placed to evaluate the
implications of closer multilateral cooperation for various developmental objectives.
Cooperation with other organizations such as the UN Conference on Trade and
Development (UNCTAD) is also included.
Since the 1 August 2004 decision, this subject has been dropped from the
Doha agenda.
Key dates: trade and competition policy
Continuing work in working group with
defined agenda: to 5th Ministerial
Conference, 2003 (in Mexico)
Negotiations: after 5th Ministerial
Conference, 2003 (in Mexico) subject to
“explicit consensus” on modalities with
deadline: by 1 January 2005, part of single
undertaking. But no consensus:
dropped from Doha agenda
in 1 August 2004 decision
ON THE WEBSITE:
www.wto.org > trade topics > competition policy
The four ‘Singapore’ issues:
no negotiations until …
For trade and investment, trade and
competition policy, transparency in
government procurement and trade
facilitation, the 2001 Doha declaration
does not launch negotiations immediately.
It says “negotiations will take place after
the Fifth Session of the Ministerial
Conference on the basis of a decision to
be taken, by explicit consensus, at that
session on modalities of negotiations
[i.e. how the negotiations are to be conducted].”
But consensus eluded members on
negotiating the four subjects. Finally
agreements was reached on 1 August
2004 to negotiate trade facilitation
alone. The three other subjects were
dropped from the Doha agenda.
Key dates: trade and investment
Continuing work in working group with
defined agenda: to 5th Ministerial
Conference, 2003 (in Mexico)
Negotiations: after 5th Ministerial
Conference, 2003 (in Mexico) subject to
“explicit consensus” on modalities with
deadline: by 1 January 2005, part of single
undertaking. But no consensus: dropped from
Doha agenda in 1 August 2004 decision
85
Transparency in government procurement (par 26)
A third “Singapore issue” that was handled by a working group set up by the
Singapore Ministerial Conference in 1996.
The Doha Declaration says that the “negotiations shall be limited to the transparency
aspects and therefore will not restrict the scope for countries to give preferences
to domestic supplies and suppliers” — it is separate from the plurilateral
Government Procurement Agreement.
The declaration also stresses development concerns, technical assistance and capacity
building.
Since the 1 August 2004 decision, this subject has been dropped from the Doha
agenda.
ON THE WEBSITE:
www.wto.org > trade topics > government procurement
Trade facilitation (par 27)
A fourth “Singapore issue” kicked off by the 1996 Ministerial Conference.
The declaration recognizes the case for “further expediting the movement, release
and clearance of goods, including goods in transit, and the need for enhanced technical
assistance and capacity building in this area”.
In the period until the Fifth Ministerial Conference in 2003, the WTO Goods
Council, which had been working on this subject since 1997, “shall review and as
appropriate, clarify and improve relevant aspects of Articles 5 (‘Freedom of Transit’),
8 (‘Fees and Formalities Connected with Importation and Exportation’) and 10
(‘Publication and Administration of Trade Regulations’) of the General Agreement
on Tariffs and Trade (GATT 1994) and identify the trade facilitation needs and priorities
of Members, in particular developing and least-developed countries”.
Those issues were cited in the 1 August 2004 decision that broke the Cancún deadlock.
Members agreed to start negotiations on trade facilitation, but not the three
other Singapore issues.
ON THE WEBSITE:
www.wto.org > trade topics > trade facilitation
Key dates: government
procurement (transparency)
Continuing work in working group with
defined agenda: to 5th Ministerial
Conference, 2003 (in Mexico)
Negotiations: after 5th Ministerial
Conference, 2003 (in Mexico) subject to
“explicit consensus” on modalities with deadline:
by 1 January 2005, part of single undertaking.
But no consensus: dropped from Doha
agenda in 1 August 2004 decision
Key dates: trade facilitation
Continuing work in Goods Council with
defined agenda: to 5th Ministerial
Conference, 2003 (in Mexico)
Negotiations: after 5th Ministerial
Conference, 2003 (in Mexico) subject to
“explicit consensus” on modalities, agreed in
1 August 2004 decision.
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
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WTO rules: anti-dumping and subsidies (par 28)
The ministers agreed to negotiations on the Anti-Dumping (GATT Article 6) and
Subsidies agreements. The aim is to clarify and improve disciplines while preserving
the basic, concepts, principles of these agreements, and taking into account the
needs of developing and least-developed participants.
In overlapping negotiating phases, participants first indicated which provisions of
these two agreements they think should be the subject of clarification and improvement
in the next phase of negotiations. The ministers mention specifically fisheries
subsidies as one sector important to developing countries and where participants
should aim to clarify and improve WTO disciplines.
Negotiations take place in the Rules Negotiating Group.
ON THE WEBSITE:
www.wto.org > trade topics > goods > antidumping
www.wto.org > trade topics > goods > subsidies and countervailing measures
WTO rules: regional trade agreements (par 29)
WTO rules say regional trade agreements have to meet certain conditions. But interpreting
the wording of these rules has proved controversial, and has been a central
element in the work of the Regional Trade Agreements Committee. As a result,
since 1995 the committee has failed to complete its assessments of whether individual
trade agreements conform with WTO provisions.
This is now an important challenge, particularly when nearly all member governments
are parties to regional agreements, are negotiating them, or are considering
negotiating them. In the Doha Declaration, members agreed to negotiate a solution,
giving due regard to the role that these agreements can play in fostering development.
The declaration mandates negotiations aimed at “clarifying and improving disciplines
and procedures under the existing WTO provisions applying to regional trade
agreements. The negotiations shall take into account the developmental aspects of
regional trade agreements.”
These negotiations fell into the general timetable established for virtually all negotiations
under the Doha Declaration. The original deadline of 1 January 2005 was
missed and the current unofficial aim is to finish the talks by the end of 2006. The
2003 Fifth Ministerial Conference in Mexico was intented to take stock of progress,
provide any necessary political guidance, and take decisions as necessary.
Negotiations take place in the Rules Negotiating Group.
ON THE WEBSITE:
www.wto.org > trade topics > goods > regional trade agreements
Key dates: anti-dumping, subsidies
Start: January 2002
Stock taking: 5th Ministerial Conference,
2003 (in Mexico)
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
Key dates: regional trade
Start: January 2002
Stock taking: 5th Ministerial Conference,
2003 (in Mexico)
Deadline: Now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
87
Dispute Settlement Understanding (par 30)
The 1994 Marrakesh Ministerial Conference mandated WTO member governments
to conduct a review of the Dispute Settlement Understanding (DSU, the WTO
agreement on dispute settlement) within four years of the entry into force of the
WTO Agreement (i.e. by 1 January 1999).
The Dispute Settlement Body (DSB) started the review in late 1997, and held a series
of informal discussions on the basis of proposals and issues that members identified.
Many, if not all, members clearly felt that improvements should be made to the understanding.
However, the DSB could not reach a consensus on the results of the review.
The Doha Declaration mandates negotiations and states (in par 47) that these will
not be part of the single undertaking — i.e. that they will not be tied to the overall
success or failure of the other negotiations mandated by the declaration. Originally
set to conclude by May 2003, the negotiations are continuing without a deadline.
Negotiations take place in “special sessions” of the Dispute Settlement Body.
ON THE WEBSITE:
www.wto.org > trade topics > dispute settlement
Key dates: disputes understanding
Start: January 2002
Deadline: originally by May 2003, currently
no deadline, separate from single
undertaking
Key dates: environment
Committee reports to ministers: 5th and 6th
Ministerial Conference, 2003 and 2005
(in Mexico and Hong Kong, China)
Negotiations stock taking: 5th Ministerial
Conference, 2003 (in Mexico)
Negotiations deadline: now none.
Originally by 1 January 2005,
then unofficially by end of 2006.
Part of single undertaking
Trade and environment (pars 31–33)
New negotiations
Multilateral environmental agreements. Ministers agreed to launch negotiations
on the relationship between existing WTO rules and specific trade obligations set
out in multilateral environmental agreements. The negotiations will address how
WTO rules are to apply to WTO members that are parties to environmental agreements,
in particular to clarify the relationship between trade measures taken under
the environmental agreements and WTO rules.
So far no measure affecting trade taken under an environmental agreement has
been challenged in the GATT-WTO system.
Information exchange. Ministers agreed to negotiate procedures for regular
information exchange between secretariats of multilateral environmental agreements
and the WTO. Currently, the Trade and Environment Committee holds an
information session with different secretariats of the multilateral environmental
agreements once or twice a year to discuss the trade-related provisions in these environmental
agreements and also their dispute settlement mechanisms. The new
information exchange procedures may expand the scope of existing cooperation.
Observer status. Overall, the situation concerning the granting of observer status in
the WTO to other international governmental organizations is currently blocked for
political reasons. The negotiations aim to develop criteria for observership in WTO.
Trade barriers on environmental goods and services. Ministers also agreed to
negotiations on the reduction or elimination of tariff and non-tariff barriers to environmental
goods and services. Examples of environmental goods and services are
catalytic converters, air filters or consultancy services on wastewater management.
ON THE WEBSITE:
www.wto.org > trade topics > environment
88
Fisheries subsidies. Ministers agreed to clarify and improve WTO rules that apply
to fisheries subsidies. The issue of fisheries subsidies has been studied in the Trade
and Environment Committee for several years. Some studies demonstrate these
subsidies can be environmentally damaging if they lead to too many fishermen
chasing too few fish.
Negotiations on these issues, including concepts of what are the relevant environmental
goods and services, take place in “special sessions” of the Trade and
Environment Committee. Negotiations on market access for environmental goods
and services take place in the Market Access Negotiating Group and Services
Council “special sessions”.
Work in the committee
Ministers instructed the Trade and Environment Committee, in pursuing work on
all items on its agenda, to pay particular attention to the following areas:
• The effect of environmental measures on market access, especially for developing
countries.
• Win-win-win” situations: when eliminating or reducing trade restrictions and distortions
would benefit trade, the environment and development.
• Intellectual property. Paragraph 19 of the Ministerial Declaration mandates the
TRIPS Council to continue clarifying the relationship between the TRIPS Agreement
and the Biological Diversity Convention. Ministers also ask the Trade and Environment
Committee to continue to look at the relevant provisions of the TRIPS agreement.
• Environmental labelling requirements. The Trade and Environment Committee is
to look at the impact of eco-labelling on trade and examine whether existing WTO
rules stand in the way of eco-labelling policies. Parallel discussions are to take place
in the Technical Barriers to Trade (TBT) Committee.
• For all these issues: when working on these (market access, “win-win-win” situations,
intellectual property and environmental labelling), the Trade and Environment
Committee should identify WTO rules that would need to be clarified.
• General: ministers recognize the importance of technical assistance and capacity
building programmes for developing countries in the trade and environment
area. They also encourage members to share expertise and experience on national
environmental reviews.
89
Electronic commerce (par 34)
The Doha Declaration endorses the work already done on electronic commerce and
instructs the General Council to consider the most appropriate institutional
arrangements for handling the work programme, and to report on further progress
to the Fifth Ministerial Conference.
The declaration on electronic commerce from the Second Ministerial Conference in
Geneva, 1998, said that WTO members will continue their practice of not imposing
customs duties on electronic transmissions. The Doha Declaration states that members
will continue this practice until the Fifth Ministerial Conference.
ON THE WEBSITE:
www.wto.org > trade topics > electronic commerce
Small economies (par 35)
Small economies face specific challenges in their participation in world trade, for
example lack of economy of scale or limited natural resources.
The Doha Declaration mandates the General Council to examine these problems
and to make recommendations to the next Ministerial Conference as to what traderelated
measures could improve the integration of small economies.
Trade, debt and finance (par 36)
Many developing countries face serious external debt problems and have been
through financial crises. WTO ministers decided in Doha to establish a Working
Group on Trade, Debt and Finance to look at how trade-related measures can contribute
to find a durable solution to these problems. This working group will report
to the General Council which will in turn report to the next Ministerial Conference.
Trade and technology transfer (par 37)
A number of provisions in the WTO agreements mention the need for a transfer of
technology to take place between developed and developing countries.
However, it is not clear how such a transfer takes place in practice and if specific
measures might be taken within the WTO to encourage such flows of technology.
WTO ministers decided in Doha to establish a working group to examine the issue.
The working group will report to the General Council which itself will report to the
next Ministerial Conference.
Technical cooperation and capacity building (pars 38–41)
Through various paragraphs of the Doha Declaration, WTO member governments
have made new commitments on technical cooperation and capacity building.
For example, the section on the relationship between trade and investment includes
a call (par 21) for enhanced support for technical assistance and capacity building in
this area.
Within the specific heading “technical cooperation and capacity building”,
paragraph 41 lists all the references to commitments on technical cooperation within
the Doha Declaration: paragraphs 16 (market access for non-agricultural
products), 21 (trade and investment), 24 (trade and competition policy), 26 (transparency
in government procurement), 27 (trade facilitation), 33 (environment),
Key date: electronic commerce
Report on further progress: 5th Ministerial
Conference, 2003 (in Mexico)
Key date: small economies
Recommendations: 5th and 6th Ministerial
Conferences, 2003 and 2005 (in Mexico
and Hong Kong, China)
Key date: debt and finance
General Council report: 5th and 6th
Ministerial Conferences, 2003 and 2005
(in Mexico and Hong Kong, China)
Key date: technology transfer
General Council report: 5th and 6th
Ministerial Conferences, 2003 and 2005
(in Mexico and Hong Kong, China)
Key dates: technical cooperation
Technical assistance funding raised 80%;
Development Agenda Global Trust Fund set up:
December 2001
Director-General reports to General Council:
December 2002
Director-General reports to ministers:
5th and 6th Ministerial Conferences, 2003
and 2005 (in Mexico and Hong Kong, China)
ON THE WEBSITE:
www.wto.org > trade topics > development
ON THE WEBSITE:
www.wto.org > trade topics > development > technical cooperation & training
90
38-40 (technical cooperation and capacity building), 42 and 43 (least-developed
countries). (Paragraph 2 in the preamble is also cited.)
Under this heading (i.e. pars 38–41), WTO member governments reaffirm all technical
cooperation and capacity building commitments made throughout the declaration
and add general commitments:
• The Secretariat, in coordination with other relevant agencies, is to encourage
WTO developing-country members to consider trade as a main element for reducing
poverty and to include trade measures in their development strategies.
• The agenda set out in the Doha Declaration gives priority to small, vulnerable, and
transition economies, as well as to members and observers that do not have permanent
delegations in Geneva.
• Technical assistance must be delivered by the WTO and other relevant international
organizations within a coherent policy framework.
The Director-General reported to the General Council in December 2002 and to the
Fifth Ministerial Conference on the implementation and adequacy of these new
commitments.
Following the declaration’s instructions to develop a plan ensuring long-term funding
for WTO technical assistance, the General Council adopted on 20 December
2001 (one month after the Doha conference) a new budget that increased technical
assistance funding by 80% and established a Doha Development Agenda Global
Trust Fund with a proposed core budget of 15 million Swiss francs. The fund now
has an annual budget of 24 million Swiss francs.
Key date: least-developed countries
Reports to: General Council: July 2002,
5th and 6th Ministerial Conferences,
2003 and 2005 (in Mexico and Hong Kong,
China)
Least-developed countries (pars 42, 43)
Many developed countries have now significantly decreased or actually scrapped tariffs
on imports from least-developed countries (LDCs).
In the Doha declaration, WTO member governments commit themselves to the
objective of duty-free, quota-free market access for LDCs’ products and to consider
additional measures to improve market access for these exports.
Members also agree to try to ensure that least-developed countries can negotiate
WTO membership faster and more easily.
Some technical assistance is targeted specifically for least-developed countries. The Doha
Declaration urges WTO member donors to significantly increase their contributions.
In addition, the Sub-Committee for LDCs (a subsidiary body of the WTO Committee
on Trade and Development) designed a work programme in February 2002, as
instructed by the Doha Declaration, taking into account the parts of the declaration
related to trade that was issued at the UN LDC Conference.
ON THE WEBSITE:
www.wto.org > trade topics > development
91
Special and differential treatment (par 44)
The WTO agreements contain special provisions which give developing countries
special rights. These special provisions include, for example, longer time periods for
implementing agreements and commitments or measures to increase trading
opportunities for developing countries.
In the Doha Declaration, member governments agree that all special and differential
treatment provisions should be reviewed with a view to strengthening them and
making them more precise.
More specifically, the declaration (together with the Decision on Implementation-
Related Issues and Concerns) mandates the Trade and Development Committee to
identify which of those special and differential treatment provisions are mandatory,
and to consider the implications of making mandatory those which are currently
non-binding.
The Decision on Implementation-Related Issues and Concerns instructed the committee
to make its recommendations for the General Council before July 2002. But
because members needed more time, this was postponed to the end of July 2005.
Key date: special and differential treatment
Recommendations to General Council:
July 2002, July 2005
Cancún 2003, Hong Kong 2005
The Doha agenda set a number of tasks to be completed before or at the Fifth
Ministerial Conference in Cancún, Mexico, 10–14 September 2003. On the eve of
the conference, on 30 August, agreement was reached on the TRIPS and public
health issue. However, a number of the deadlines were missed, including “modalities”
for agriculture and the non-agricultural market access negotiations, reform of
the Dispute Settlement Understanding, and recommendations on special and differential
treatment. Nor were members near to agreement on the multilateral geographical
indications register for wines and spirits, due to be completed in Cancún.
Although Cancún saw delegations move closer to consensus on a number of key
issues, members remained deeply divided over a number of issues, including the
“Singapore” issues — launching negotiations on investment, competition policy,
transparency in government procurement, and trade facilitation — and agriculture.
The conference ended without consensus. Ten months later, the deadlock was broken
in Geneva when the General Council agreed on the “July package” in the early
hours of 1 August 2004, which kicked off negotiations in trade facilitation but not
the three other Singapore issues. The delay meant the 1 January 2005 deadline for
finishing the talks could not be met. Unofficially, members aimed to complete the
next phase of the negotiations at the Hong Kong Ministerial Conference, 13–18
December 2005, including full “modalities” in agriculture and market access for
non-agricultural products, and to finish the talks by the end of the following year.
ON THE WEBSITE:
www.wto.org > the wto > decision making > ministerial conferences

93
1. Overview
About two thirds of the WTO’s around 150 members are developing countries. They
play an increasingly important and active role in the WTO because of their numbers,
because they are becoming more important in the global economy, and because they
increasingly look to trade as a vital tool in their development efforts. Developing
countries are a highly diverse group often with very different views and concerns.
The WTO deals with the special needs of developing countries in three ways:
• the WTO agreements contain special provisions on developing countries
• the Committee on Trade and Development is the main body focusing on work in
this area in the WTO, with some others dealing with specific topics such as trade
and debt, and technology transfer
• the WTO Secretariat provides technical assistance (mainly training of various
kinds) for developing countries.
In the agreements: more time, better terms
The WTO agreements include numerous provisions giving developing and leastdeveloped
countries special rights or extra leniency — “special and differential treatment”.
Among these are provisions that allow developed countries to treat developing
countries more favourably than other WTO members.
The General Agreement on Tariffs and Trade (GATT, which deals with trade in
goods) has a special section (Part 4) on Trade and Development which includes provisions
on the concept of non-reciprocity in trade negotiations between developed
and developing countries — when developed countries grant trade concessions to
developing countries they should not expect the developing countries to make
matching offers in return.
Both GATT and the General Agreement on Trade in Services (GATS) allow developing
countries some preferential treatment.
DEVELOPING COUNTRIES
Chapter 6
How the WTO deals with the special needs
of an increasingly important group
94
Other measures concerning developing countries in the WTO agreements include:
• extra time for developing countries to fulfil their commitments (in many of the
WTO agreements)
• provisions designed to increase developing countries’ trading opportunities
through greater market access (e.g. in textiles, services, technical barriers to trade)
• provisions requiring WTO members to safeguard the interests of developing countries
when adopting some domestic or international measures (e.g. in anti-dumping,
safeguards, technical barriers to trade)
• provisions for various means of helping developing countries (e.g. to deal with
commitments on animal and plant health standards, technical standards, and in
strengthening their domestic telecommunications sectors).
Legal assistance: a Secretariat service
The WTO Secretariat has special legal advisers for assisting developing countries in
any WTO dispute and for giving them legal counsel. The service is offered by the
WTO’s Training and Technical Cooperation Institute. Developing countries regularly
make use of it.
Furthermore, in 2001, 32 WTO governments set up an Advisory Centre on WTO
law. Its members consist of countries contributing to the funding, and those receiving
legal advice. All least-developed countries are automatically eligible for advice.
Other developing countries and transition economies have to be fee-paying members
in order to receive advice.
Least-developed countries: special focus
The least-developed countries receive extra attention in the WTO. All the WTO
agreements recognize that they must benefit from the greatest possible flexibility,
and better-off members must make extra efforts to lower import barriers on leastdeveloped
countries’ exports.
Since the Uruguay Round agreements were signed in 1994, several decisions in
favour of least-developed countries have been taken.
Meeting in Singapore in 1996, WTO ministers agreed on a “Plan of Action for Least-
Developed Countries”. This included technical assistance to enable them to participate
better in the multilateral system and a pledge from developed countries to
improved market access for least-developed countries’ products.
A year later, in October 1997, six international organizations — the International
Monetary Fund, the International Trade Centre, the United Nations Conference for
Trade and Development, the United Nations Development Programme, the World
Bank and the WTO — launched the “Integrated Framework”, a joint technical assistance
programme exclusively for least-developed countries.
In 2002, the WTO adopted a work programme for least-developed countries. It contains
several broad elements: improved market access; more technical assistance;
support for agencies working on the diversification of least-developed countries’
economies; help in following the work of the WTO; and a speedier membership
process for least-developed countries negotiating to join the WTO.
At the same time, more and more member governments have unilaterally scrapped
import duties and import quotas on all exports from least-developed countries.
95
A ‘maison’ in Geneva: being present is important, but not easy for all
The WTO’s official business takes place mainly in Geneva. So do the unofficial contacts
that can be equally important. But having a permanent office of representatives
in Geneva can be expensive. Only about one third of the 30 or so least-developed
countries in the WTO have permanent offices in Geneva, and they cover all United
Nations activities as well as the WTO.
As a result of the negotiations to locate the WTO headquarters in Geneva, the Swiss
government has agreed to provide subsidized office space for delegations from
least-developed countries.
A number of WTO members also provide financial support for ministers and
accompanying officials from least-developed countries to help them attend WTO
ministerial conferences.
ON THE WEBSITE:
www.wto.org > trade topics > development
2. Committees
Work specifically on developing countries within the WTO itself can be divided into
two broad areas: (i) work of the WTO committees (this heading), and (ii) training for
government officials (and others) by the WTO Secretariat as mandated by the committee
(next heading).
Trade and Development Committee
The WTO Committee on Trade and Development has a wide-ranging mandate.
Among the broad areas of topics it has tackled as priorities are: how provisions
favouring developing countries are being implemented, guidelines for technical
cooperation, increased participation of developing countries in the trading system,
and the position of least-developed countries.
Member countries also have to inform the WTO about special programmes involving
trade concessions for products from developing countries, and about regional
arrangements among developing countries. The Trade and Development Committee
handles notifications of:
• Generalized System of Preferences programmes (in which developed countries
lower their trade barriers preferentially for products from developing countries)
• preferential arrangements among developing countries such as MERCOSUR (the
Southern Common Market in Latin America), the Common Market for Eastern
and Southern Africa (COMESA), and the ASEAN Free Trade Area (AFTA).
96
Sub-committee on Least-Developed Countries
The Sub-committee on Least-Developed Countries reports to the Trade and
Development Committee, but it is an important body in its own right. Its work
focuses on two related issues:
• ways of integrating least-developed countries into the multilateral trading system
• technical cooperation.
The sub-committee also examines periodically how special provisions favouring
least-developed countries in the WTO agreements are being implemented.
The Doha agenda committees
The Doha Ministerial Conference in November 2001, added new tasks and some
new working groups. The Trade and Development Committee meets in “special sessions”
to handle work under the Doha Development Agenda. The ministers also set
up working groups on Trade, Debt and Finance, and on Trade and Technology
Transfer. (For details see the chapter on the Doha Agenda.)
3. WTO technical cooperation
Technical cooperation is an area of WTO work that is devoted almost entirely to
helping developing countries (and countries in transition from centrally-planned
economies) operate successfully in the multilateral trading system. The objective is
to help build the necessary institutions and to train officials. The subjects covered
deal both with trade policies and with effective negotiation.
Training, seminars and workshops
The WTO holds regular training sessions on trade policy in Geneva. In addition, it
organizes about 500 technical cooperation activities annually, including seminars
and workshops in various countries and courses in Geneva.
Targeted are developing countries and countries in transition from former socialist
or communist systems, with a special emphasis on African countries. Seminars
have also been organized in Asia, Latin America, the Caribbean, Middle East and
Pacific.
Funding for technical cooperation and training comes from three sources: the WTO’s
regular budget, voluntary contributions from WTO members, and cost-sharing either
by countries involved in an event or by international organizations.
97
The present regular WTO budget for technical cooperation and training is 7 million
Swiss francs.
Extra contributions by member countries go into trust funds administered by the
WTO Secretariat or the donor country. In 2004, contributions to trust funds totalled
24 million Swiss francs.
A WTO Reference Centre programme was initiated in 1997 with the objective of creating
a network of computerized information centres in least-developed and developing
countries. The centres provide access to WTO information and documents
through a print library, a CD-ROM collection and through the Internet to WTO websites
and databases. The centres are located mainly in trade ministries and in the
headquarters of regional coordination organizations. There are currently 140 reference
centres.
4. Some issues raised
The Uruguay Round (1986–94) saw a shift in North-South politics in the GATTWTO
system. Previously, developed and developing countries had tended to be in
opposite groups, although even then there were exceptions. In the run up to the
Uruguay Round, the line between the two became less rigid, and during the round
different alliances developed, depending on the issues. The trend has continued
since then.
In some issues, the divide still appears clear — in textiles and clothing, and some
of the newer issues debated in the WTO, for example — and developing countries
have organized themselves into alliances such as the African Group and the Least-
Developed Countries Group.
In many others, the developing countries do not share common interests and may
find themselves on opposite sides of a negotiation. A number of different coalitions
among different groups of developing countries have emerged for this reason.
The differences can be found in subjects of immense importance to developing
countries, such as agriculture.
This is a summary of some of the points discussed in the WTO.
Peaks’ and ‘escalation’: what are they?
Tariff peaks: Most import tariffs are now
quite low, particularly in developed countries.
But for a few products that governments
consider to be sensitive — they
want to protect their domestic producers
— tariffs remain high. These are “tariff
peaks”. Some affect exports from developing
countries.
Tariff escalation: If a country wants to
protect its processing or manufacturing
industry, it can set low tariffs on imported
materials used by the industry (cutting the
industry’s costs) and set higher tariffs on
finished products to protect the goods
produced by the industry. This is “tariff
escalation”. When importing countries
escalate their tariffs in this way, they make
it more difficult for countries producing
raw materials to process and manufacture
value-added products for export. Tariff
escalation exists in both developed and
developing countries. Slowly, it is being
reduced.
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Participation in the system: opportunities and concerns
The WTO agreements, which were the outcome of the 1986–94 Uruguay Round of
trade negotiations, provide numerous opportunities for developing countries to
make gains. Further liberalization through the Doha Agenda negotiations aims to
improve the opportunities.
Among the gains are export opportunities. They include:
• fundamental reforms in agricultural trade
• phasing out quotas on developing countries’ exports of textiles and clothing
• reductions in customs duties on industrial products
• expanding the number of products whose customs duty rates are “bound” under
the WTO, making the rates difficult to raise
• phasing out bilateral agreements to restrict traded quantities of certain goods —
these “grey area” measures (the so-called voluntary export restraints) are not really
recognized under GATT-WTO.
In addition, liberalization under the WTO boosts global GDP and stimulates world
demand for developing countries’ exports.
But a number of problems remain. Developing countries have placed on the Doha
Agenda a number of problems they face in implementing the present agreements.
And they complain that they still face exceptionally high tariffs on selected products
(“tariff peaks”) in important markets that continue to obstruct their important
exports. Examples include tariff peaks on textiles, clothing, and fish and fish products.
In the Uruguay Round, on average, industrial countries made slightly smaller
reductions in their tariffs on products which are mainly exported by developing
countries (37%), than on imports from all countries (40%). At the same time, the
potential for developing countries to trade with each other is also hampered by the
fact that the highest tariffs are sometimes in developing countries themselves. But
the increased proportion of trade covered by “bindings” (committed ceilings that are
difficult to remove) has added security to developing country exports.
A related issue is “tariff escalation”, where an importing country protects its processing
or manufacturing industry by setting lower duties on imports of raw materials
and components, and higher duties on finished products. The situation is
improving. Tariff escalation remains after the Uruguay Round, but it is less severe,
with a number of developed countries eliminating escalation on selected products.
Now, the Doha agenda includes special attention to be paid to tariff peaks and escalation
so that they can be substantially reduced.
99
Erosion of preferences
An issue that worries developing countries is the erosion of preferences — special
tariff concessions granted by developed countries on imports from certain developing
countries become less meaningful if the normal tariff rates are cut because the
difference between the normal and preferential rates is reduced.
Just how valuable these preferences are is a matter of debate. Unlike regular WTO
tariff commitments, they are not “bound” under WTO agreements and therefore
they can be changed easily. They are often given unilaterally, at the initiative of the
importing country. This makes trade under preferential rates less predictable than
under regular bound rates which cannot be increased easily. Ultimately countries
stand to gain more from regular bound tariff rates.
But some countries and some companies have benefited from preferences. The
gains vary from product to product, and they also depend on whether producers can
use the opportunity to adjust so that they remain competitive after the preferences
have been withdrawn.
The ability to adapt: the supply-side
Can developing countries benefit from the changes? Yes, but only if their economies
are capable of responding. This depends on a combination of actions: from improving
policy-making and macroeconomic management, to boosting training and
investment. The least-developed countries are worst placed to make the adjustments
because of lack of human and physical capital, poorly developed infrastructures,
institutions that don’t function very well, and in some cases, political instability.

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1. Whose WTO is it anyway?
The WTO is run by its member governments. All major decisions are made by the
membership as a whole, either by ministers (who meet at least once every two years)
or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are
normally taken by consensus.
In this respect, the WTO is different from some other international organizations
such as the World Bank and International Monetary Fund. In the WTO, power is
not delegated to a board of directors or the organization’s head.
When WTO rules impose disciplines on countries’ policies, that is the outcome of
negotiations among WTO members. The rules are enforced by the members themselves
under agreed procedures that they negotiated, including the possibility of
trade sanctions. But those sanctions are imposed by member countries, and authorized
by the membership as a whole. This is quite different from other agencies
whose bureaucracies can, for example, influence a country’s policy by threatening
to withhold credit.
Reaching decisions by consensus among some 150 members can be difficult. Its
main advantage is that decisions made this way are more acceptable to all members.
And despite the difficulty, some remarkable agreements have been reached.
Nevertheless, proposals for the creation of a smaller executive body — perhaps like
a board of directors each representing different groups of countries — are heard periodically.
But for now, the WTO is a member-driven, consensus-based organization.
Highest authority: the Ministerial Conference
So, the WTO belongs to its members. The countries make their decisions through
various councils and committees, whose membership consists of all WTO members.
Topmost is the ministerial conference which has to meet at least once every
two years. The Ministerial Conference can take decisions on all matters under any
of the multilateral trade agreements.
THE ORGANIZATION
Chapter 7
The WTO is ‘member-driven’, with decisions taken
by consensus among all member governments
ON THE WEBSITE:
www.wto.org > the WTO > decision making
> ministerial conferences
ALTERNATIVE VIEW
‘The WTO will likely suffer from slow and
cumbersome policy-making and management
— an organization with more than
120 member countries cannot be run by a
“committee of the whole”. Mass management
simply does not lend itself to operational
efficiency or serious policy discussion.
Both the IMF and the World Bank have an
executive board to direct the executive
officers of the organization, with permanent
participation by the major industrial
countries and weighted voting. The WTO
will require a comparable structure to
operate efficiently. ... [But] the political
orientation of smaller ... members
remains strongly opposed.’
Jeffrey J Schott
Institute for International Economics,
Washington
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Second level: General Council in three guises
Day-to-day work in between the ministerial conferences is handled by three bodies:
• The General Council
• The Dispute Settlement Body
• The Trade Policy Review Body
All three are in fact the same — the Agreement Establishing the WTO states they
are all the General Council, although they meet under different terms of reference.
Again, all three consist of all WTO members. They report to the Ministerial
Conference.
The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It
meets as the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures
for settling disputes between members and to analyze members’ trade policies.
ON THE WEBSITE:
www.wto.org > the WTO > General Council
Third level: councils for each broad area of trade, and more
Three more councils, each handling a different broad area of trade, report to the
General Council:
• 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)
As their names indicate, the three are responsible for the workings of the WTO
agreements dealing with their respective areas of trade. Again they consist of all
WTO members. The three also have subsidiary bodies (see below).
Six other bodies report to the General Council. The scope of their coverage is smaller,
so they are “committees”. But they still consist of all WTO members. They cover
issues such as trade and development, the environment, regional trading arrangements,
and administrative issues. The Singapore Ministerial Conference in December
1996 decided to create new working groups to look at investment and competition
policy, transparency in government procurement, and trade facilitation.
Two more subsidiary bodies dealing with the plurilateral agreements (which are not
signed by all WTO members) keep the General Council informed of their activities
regularly.
Fourth level: down to the nitty-gritty
Each of the higher level councils has subsidiary bodies. The Goods Council has
11 committees dealing with specific subjects (such as agriculture, market access,
subsidies, anti-dumping measures and so on). Again, these consist of all member
countries. Also reporting to the Goods Council is the Textiles Monitoring Body,
which consists of a chairman and 10 members acting in their personal capacities,
and groups dealing with notifications (governments informing the WTO about current
and new policies or measures) and state trading enterprises.
Voting is possible, too
The WTO continues GATT’s tradition of
making decisions not by voting but by consensus.
This allows all members to ensure
their interests are properly considered even
though, on occasion, they may decide to
join a consensus in the overall interests of
the multilateral trading system.
Where consensus is not possible, the WTO
agreement allows for voting — a vote being
won with a majority of the votes cast and
on the basis of “one country, one vote”.
The WTO Agreement envisages four specific
situations involving voting:
• An interpretation of any of the multilateral
trade agreements can be adopted
by a majority of three quarters of
WTO members.
• The Ministerial Conference can waive an
obligation imposed on a particular member
by a multilateral agreement, also
through a three-quarters majority.
• 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.
• 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.
Goods Council’s committees
Market access
Agriculture
Sanitary and phytosanitary measures
Textiles Monitoring Body
Technical barriers to trade
Subsidies and countervail
Anti-dumping
Customs valuation
Rules of origin
Import licensing
Investment measures
Safeguards
State trading (working party)
Ministerial Conference
General Council meeting as
Dispute Settlement Body
General Council meeting as
Trade Policy Review Body
Council for Trade-Related
Aspects of Intellectual
Property Rights
Council for
Trade in Goods
Council for
Trade in Services
Committees on
Trade and Environment
Trade and Development
Sub-committee on Least-
Developed Countries
Regional Trade Agreements
Balance of Payments
Restrictions
Budget, Finance and
Administration
Working parties on
Accession
Working groups on
Trade, debt and finance
Trade and technology
transfer
(Inactive:
(Relationship between
Trade and Investment
(Interaction between
Trade and Competition Policy
(Transparency in
Government Procurement)
Committees on
Market Access
Agriculture
Sanitary and Phytosanitary
Measures
Technical Barriers to Trade
Subsidies and
Countervailing Measures
Anti-Dumping Practices
Customs Valuation
Rules of Origin
Import Licensing
Trade-Related Investment
Measures
Safeguards
Working party on
State-Trading Enterprises
Committees on
Trade in Financial Services
Specific Commitments
Working parties on
Domestic Regulation
GATS Rules
Plurilaterals
Trade in Civil Aircraft
Committee
Government Procurement
Committee
Doha Development Agenda:
TNC and its bodies
Special Sessions of
Services Council / TRIPS Council / Dispute
Settlement Body / Agriculture Committee and
Cotton Sub-Committee / Trade and Development
Committee / Trade and Environment Committee
Negotiating groups on
Market Access / Rules / Trade Facilitation
Appellate Body
Dispute Settlement panels
Plurilateral
Information Technology
Agreement Committee
Key
Reporting to General Council (or a subsidiary)
Reporting to Dispute Settlement Body
Plurilateral committees inform the General Council or Goods
Council of their activities, although these agreements are not signed by all WTO members
Trade Negotiations Committee reports to General Council
The General Council also meets as the Trade Policy Review Body and Dispute Settlement Body
Trade Negotiations
Committee
General Council
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WTO structure
All WTO members may participate in all councils, committees, etc, except Appellate Body, Dispute Settlement panels,
Textiles Monitoring Body, and plurilateral committees.
104
The Services Council’s subsidiary bodies deal with financial services, domestic regulations,
GATS rules and specific commitments.
At the General Council level, the Dispute Settlement Body also has two subsidiaries:
the dispute settlement “panels” of experts appointed to adjudicate on unresolved
disputes, and the Appellate Body that deals with appeals.
‘HODs’ and other bods: the need for informality
Important breakthroughs are rarely made in formal meetings of these bodies, least of
all in the higher level councils. Since decisions are made by consensus, without voting,
informal consultations within the WTO play a vital role in bringing a vastly
diverse membership round to an agreement.
One step away from the formal meetings are informal meetings that still include the
full membership, such as those of the Heads of Delegations (HOD). More difficult
issues have to be thrashed out in smaller groups. A common recent practice is for the
chairperson of a negotiating group to attempt to forge a compromise by holding consultations
with delegations individually, in twos or threes, or in groups of 20–30 of the
most interested delegations.
These smaller meetings have to be handled sensitively. The key is to ensure that everyone
is kept informed about what is going on (the process must be “transparent”) even
if they are not in a particular consultation or meeting, and that they have an opportunity
to participate or provide input (it must be “inclusive”).
One term has become controversial, but more among some outside observers than
among delegations. The “Green Room” is a phrase taken from the informal name of
the director-general’s conference room. It is used to refer to meetings of 20–40 delegations,
usually at the level of heads of delegations. These meetings can take place
elsewhere, such as at Ministerial Conferences, and can be called by the minister chairing
the conference as well as the director-general. Similar smaller group consultations
can be organized by the chairs of committees negotiating individual subjects,
although the term Green Room is not usually used for these.
In the past delegations have sometimes felt that Green Room meetings could lead to
compromises being struck behind their backs. So, extra efforts are made to ensure
that the process is handled correctly, with regular reports back to the full membership.
The way countries now negotiate has helped somewhat. In order to increase their
bargaining power, countries have formed coalitions. In some subjects such as
agriculture virtually all countries are members of at least one coalition —
and in many cases, several coalitions. This means that all countries can be
represented in the process if the coordinators and other key players are present.
The coordinators also take responsibility for both “transparency” and
“inclusiveness” by keeping their coalitions informed and by taking the positions
negotiated within their alliances.
In the end, decisions have to be taken by all members and by consensus. The
membership as a whole would resist attempts to impose the will of a small
group. No one has been able to find an alternative way of achieving consensus
on difficult issues, because it is virtually impossible for members
to change their positions voluntarily in meetings of the full membership.
Market access negotiations also involve small groups, but for a completely
different reason. The final outcome is a multilateral package of individual
countries’ commitments, but those commitments are the result of numerous bilateral,
informal bargaining sessions, which depend on individual countries’ interests.
(Examples include the traditional tariff negotiations, and market access talks in services.)
Same people, different hats?
No, not exactly.
Formally, all of these councils and committees
consist of the full membership
of the WTO. But that does not mean
they are the same, or that the distinctions
are purely bureaucratic.
In practice the people participating in the
various councils and committees are different
because different levels of seniority and
different areas of expertise are needed.
Heads of missions in Geneva (usually
ambassadors) normally represent their
countries at the General Council level.
Some of the committees can be highly
specialized and sometimes governments
send expert officials from their capital
cities to participate in these meetings.
Even at the level of the Goods, Services
and TRIPS councils, many delegations
assign different officials to cover the different
meetings.
105
So, informal consultations in various forms play a vital role in allowing consensus to
be reached, but they do not appear in organization charts, precisely because they are
informal.
They are not separate from the formal meetings, however. They are necessary for
making formal decisions in the councils and committees. 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.
2. Membership, alliances and bureaucracy
All members have joined the system as a result of negotiation and therefore membership
means a balance of rights and obligations. They enjoy the privileges that
other member countries give to them and the security that the trading rules provide.
In return, they had to make commitments to open their markets and to abide by the
rules — those commitments were the result of the membership (or “accession”)
negotiations. Countries negotiating membership are WTO “observers”.
How to join the WTO: the accession process
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
describe all aspects of its trade and economic policies that have a bearing on WTO
agreements. This is submitted to the WTO in a memorandum which is examined
by the working party dealing with the country’s application. These working parties
are open to all WTO members.
• Second, “work out with us individually what you have to offer”. When the
working party has made sufficient progress on principles and policies, parallel bilateral
talks begin between the prospective new member and individual countries. They
are bilateral because different countries have different trading interests. These talks
cover tariff rates and specific market access commitments, and other policies in goods
and services. The new member’s commitments are to apply equally to all WTO members
under normal non-discrimination rules, even though they are negotiated bilaterally.
In other words, the talks determine the benefits (in the form of export opportunities
and guarantees) other WTO members can expect when the new member joins.
(The talks can be highly complicated. It has been said that in some cases the negotiations
are almost as large as an entire round of multilateral trade negotiations.)
• Third, “let’s draft membership terms”. Once the working party has completed its
examination of the applicant’s trade regime, and the parallel bilateral market
access negotiations are complete, the working party finalizes the terms of accession.
These appear in a report, a draft membership treaty (“protocol of accession”)
and lists (“schedules”) of the member-to-be’s commitments.
• Finally, “the decision”. The final package, consisting of the report, protocol and
lists of commitments, is presented to the WTO General Council or the Ministerial
Conference. If a two-thirds majority of WTO members vote in favour, the applicant
is free to sign the protocol and to accede to the organization. In many cases,
the country’s own parliament or legislature has to ratify the agreement before
membership is complete.
ON THE WEBSITE:
www.wto.org > the WTO > accessions
The Quad, the Quint, the Six and ‘not’
Some of the most difficult negotiations
have needed an initial breakthrough in
talks among four to six “major“ members.
Once upon a time, there was the
“Quadrilaterals“ or the “Quad”:
• Canada
• European Union
• Japan
• United States
Since the turn of the century and the
launch of the Doha Round, developing
countries’ voices have increased considerably,
bringing in Brazil and India — and
Australia as a representative of the Cairns
Group. Japan remains in the picture not
only in its own right, but also as a member
of the G-10 group in agriculture.
Since 2005, four, five or six of the following
have got together to try to break
deadlocks, particularly in agriculture:
• Australia
• Brazil
• European Union
• India
• Japan
• United States
They have been called “the new Quad“,
the “Four/Five Interested Parties” (FIPS),
the “Quint“ and the “G-6.” The Doha
Round was suspended in July 2006
because the six could not agree.
Afterwards an alternative group of six,
sometimes called the “non-G-6“ or the
“Oslo Group” tried their hand at compromise,
sometimes listed in reverse order to
emphasise their “alternative“ nature —
Norway, New Zealand, Kenya, Indonesia,
Chile, Canada
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Representing us ...
The work of the WTO is undertaken by representatives of member governments but
its roots lie in the everyday activity of industry and commerce. Trade policies and
negotiating positions are prepared in capitals, usually taking into account advice from
private firms, business organizations, farmers, consumers and other interest groups.
Most countries have a diplomatic mission in Geneva, sometimes headed by a special
ambassador to the WTO. Officials from the missions attend meetings of the
many councils, committees, working parties and negotiating groups at WTO headquarters.
Sometimes expert representatives are sent directly from capitals to put forward
their governments’ views on specific questions.
Representing groups of countries ...
Increasingly, countries are getting together to form groups and alliances in the
WTO. In many cases they even speak with one voice using a single spokesman or
negotiating team. In the agriculture negotiations, well over 20 coalitions have submitted
proposals or negotiated with a common position, most of them still active.
The increasing number of coalitions involving developing countries reflects the
broader spread of bargaining power in the WTO. One group is seen as politically
symbolic of this change, the G-20, which includes Argentina, Brazil, China, Egypt,
India, South Africa, Thailand and many others, but there are other, overlapping
“Gs” too, and one “C” — the Cotton Four (C-4), an alliance of sub-Saharan countries
lobbying for trade reform in the sector.
Coalition-building is partly the natural result of economic integration — more customs
unions, free trade areas and common markets are being set up around the
world. It is also seen as a means for smaller countries to increase their bargaining
power in negotiations with their larger trading partners and to ensure they are
represented when consultations are held among smaller groups of members.
Sometimes when groups of countries adopt common positions consensus can be
reached more easily. Sometimes the groups are specifically created to compromise
and break a deadlock rather than to stick to a common position. But there are no
hard and fast rules about the impact of groupings in the WTO.
The largest and most comprehensive group is the European Union (for legal reasons
known officially as the “European Communities” in WTO business) and its 27
member states. The EU is a customs union with a single external trade policy and
tariff. While the member states coordinate their position in Brussels and Geneva,
the European Commission alone speaks for the EU at almost all WTO meetings.
The EU is a WTO member in its own right as are each of its member states.
A lesser degree of economic integration has so far been achieved by WTO members
in the Association of South East Asian Nations (ASEAN) — Brunei Darussalam,
Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand, Singapore
and Viet Nam. (The remaining member, Laos is applying to join the WTO.)
Nevertheless, they have many common trade interests and are frequently able to
coordinate positions and to speak with a single voice. The role of spokesman rotates
among ASEAN members and can be shared out according to topic. 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.
More recent efforts at regional economic integration have not yet reached the point
where their constituents frequently have a single spokesman on WTO issues. An
European Union or Communities?
For legal reasons, the European Union
is known officially as the European
Communities in WTO business.
The EU is a WTO member in its own
right as are each of its 27 member states
— making 28 WTO members.
While the member states coordinate
their position in Brussels and Geneva, the
European Commission alone speaks for
the EU at almost all WTO meetings.
For this reason, in most issues WTO materials
refer to the EU or the more legallycorrect
EC.
However, sometimes references are made
to the specific member states, particularly
where their laws differ. This is the case in
some disputes when an EU member’s law
or measure is cited, or in notifications of
EU member countries’laws, such as in
intellectual property (TRIPS). Sometimes
individuals’nationalities are identified,
such as for WTO committee chairpersons.
The Cairns Group
From four continents, members ranging
from OECD countries to the least developed
Argentina
Australia
Bolivia
Brazil
Canada
Chile
Colombia
Costa Rica
Guatemala
Indonesia
Malaysia
New Zealand
Paraguay
Peru
Philippines
South Africa
Thailand
Uruguay
107
examples is the North American Free Trade Agreement: NAFTA (Canada, US and
Mexico). Among other groupings which occasionally present unified statements are
the African Group, the least-developed countries, the African, Caribbean and Pacific
Group (ACP) and the Latin American Economic System (SELA).
A well-known alliance of a different kind is the Cairns Group. It was set up just
before the Uruguay Round began in 1986 to argue for agricultural trade liberalization.
The group became an important third force in the farm talks and remains in
operation. Its members are diverse, but sharing a common objective — that agriculture
has to be liberalized — and the common view that they lack the resources to
compete with larger countries in domestic and export subsidies.
The WTO Secretariat and budget
The WTO Secretariat is located in Geneva. It has around 630 staff and is headed by
a director-general. Its responsibilities include:
• Administrative and technical support for WTO delegate bodies (councils, committees,
working parties, negotiating groups) for negotiations and the implementation of
agreements.
• Technical support for developing countries, and especially the least-developed.
• Trade performance and trade policy analysis by WTO economists and statisticians.
• Assistance from legal staff in the resolution of trade disputes involving the interpretation
of WTO rules and precedents.
• Dealing with accession negotiations for new members and providing advice to
governments considering membership.
Some of the WTO’s divisions are responsible for supporting particular committees: the
Agriculture Division assists the committees on agriculture and on sanitary and phytosanitary
measures, for example. Other divisions provide broader support for WTO
activities: technical cooperation, economic analysis, and information, for example.
The WTO budget is over 160 million Swiss francs with individual contributions calculated
on the basis of shares in the total trade conducted by WTO members. Part
of the WTO budget also goes to the International Trade Centre.
108
3. The Secretariat
The WTO Secretariat is headed by a director-general. Divisions come directly under
the director-general or one of his deputies. This is the structure at the beginning of
September 2005.
Director-general
Pascal Lamy
Deputy director-general
Alejandro Jara
Deputy director-general
Valentine Rugwabiza
Deputy director-general
Harsha Vardhana Singh
Deputy director-general
Rufus Yerxa
Office of the director-general: administrative support for
(disputes) Appellate Body
Council and Trade Negotiations Committee Division:
General Council, Dispute Settlement Body, Trade Negotiations
Committee (DDA), etc
DDA Special Duties Division:
Special focus on development assistance aspects of cotton
and other selected Doha Development Agenda issues
Human Resources Division
Information and Media Relations Division
Accessions Division:
negotiations to join the WTO
Economic Research and Statistics Division
Legal Affairs Division: Dispute settlement, etc
Rules Division:
anti-dumping, subsidies, safeguards, state trading, civil aircraft, etc
Development Division:
trade and development, least-developed countries
External Relations Division:
relations with intergovernmental and non-governmental
organizations, protocol
Technical Cooperation Audit
Trade and Finance Division:
TRIMs; trade, debt and finance; balance of payments; links with
IMF and World Bank; trade facilitation (simplification of trade
procedures); trade and investment; etc
Training and Technical Cooperation Institute
Agriculture and Commodities Division:
agriculture, sanitary and phytosanitary measures, etc
Trade and Environment Division:
trade and environment, technical barriers to trade, etc
Trade in Services Division:
GATS etc.
Administration and General Services Division:
budget, finance and administration
Informatics Division
Intellectual Property Division:
TRIPS, competition and government procurement
Language Services and Documentation Division
Market Access Division:
Goods Council, market access, tariffs, customs valuation,
non-tariff measures, import licensing, rules of origin,
preshipment inspection
Trade Policies Review Division: trade policy reviews, regional
trade agreements
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4. 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:
• Assisting developing and transition economies
• Specialized help for export promotion
• Cooperation in global economic policy-making
• Routine notification when members introduce new trade measures or alter old ones.
Assisting developing and transition economies
Developing countries make up about three quarters of the total WTO membership.
Together with countries currently in the process of “transition” to market-based
economies, they play an increasingly important role in the WTO.
Therefore, 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 programmes to explain how the system works and
to help train government officials and negotiators. Some of the events are in Geneva,
others are held in the countries concerned. A number of the programmes are organized
jointly with other international organizations. Some take the form of training
courses. In other cases individual assistance might be offered.
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. Developing countries, especially the least-developed
among them, are helped with trade and tariff data relating to their own export interests
and to their participation in WTO bodies.
Specialized help for exporting: the International Trade Centre
The International Trade Centre was established by GATT in 1964 at the request of
the developing countries to help them promote their exports. It is jointly operated
by the WTO and the United Nations, the latter acting through UNCTAD (the UN
Conference on Trade and Development).
The centre responds to requests from developing countries for assistance in formulating
and implementing export promotion programmes as well as import operations
and techniques. It provides information and advice on export markets and
marketing techniques. It assists in establishing export promotion and marketing
services, and in training personnel required for these services. The centre’s help is
freely available to the least-developed countries.
The WTO in global economic policy-making
An important aspect of the WTO’s mandate is to cooperate with the International
Monetary Fund, the World Bank and other multilateral institutions to achieve
greater coherence in global economic policy-making. A separate Ministerial
Declaration was adopted at the Marrakesh Ministerial Meeting in April 1994 to
underscore this objective.
ON THE WEBSITE:
www.wto.org > trade topics > development
> WTO Training Institute
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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.
The declaration also recognizes the contribution that trade liberalization makes to
the growth and development of national economies. It says this is an increasingly
important component in the success of the economic adjustment programmes
which many WTO members are undertaking, even though it may often involve significant
social costs during the transition.
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 antidumping
or countervailing legislation, new technical standards affecting trade,
changes to regulations affecting trade in services, and laws or regulations concerning
the intellectual property agreement — they all have to be notified to the appropriate
body of the WTO. Special groups are also established to examine new freetrade
arrangements and the trade policies of countries joining as new members.
Transparency (2): keeping the public informed
The main public access to the WTO is the website, www.wto.org. News of the latest
developments are published daily. Background information and explanations of a wide
range of issues — including “Understanding the WTO” — are also available. And
those wanting to follow the nitty-gritty of WTO work can consult or download an everincreasing
number of official documents, now over 150,000, in Documents Online.
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On 14 May 2002, the General Council decided to make more documents available
to the public as soon as they are circulated. It also decided that the minority of documents
that are restricted should be made public more quickly — after about two
months, instead of the previous six. This was the second major decision on transparency.
On 18 July 1996, the General Council had agreed to make more information
about WTO activities available publicly and decided that public information,
including derestricted WTO documents, would be accessible on-line.
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.
Meanwhile, over the years, the WTO Secretariat has enhanced its dialogue with civil
society — non-governmental organizations (NGOs) interested in the WTO, parliamentarians,
students, academics, and other groups.
In the run-up to the Doha Ministerial Conference in 2001, WTO members proposed
and agreed on several new activities involving NGOs. In 2002, the WTO
Secretariat increased the number of briefings for NGOs on all major WTO meetings
and began listing the briefing schedules on its website. NGOs are also regularly
invited to the WTO to present their recent policy research and analysis directly to
member governments.
A monthly list of NGO position papers received by the Secretariat is compiled and circulated
for the information of member governments. A monthly electronic news bulletin
is also available to NGOs, enabling access to publicly available WTO information.
ON THE WEBSITE:
www.wto.org > community/forums
Albania 8 September 2000 (n)
Angola 1 December 1996 (g)
Antigua and Barbuda 1 January 1995
Argentina 1 January 1995
Armenia 5 February 2003 (n)
Australia 1 January 1995
Austria 1 January 1995
Bahrain 1 January 1995
Bangladesh 1 January 1995
Barbados 1 January 1995
Belgium 1 January 1995
Belize 1 January 1995
Benin 22 February 1996 (g)
Bolivia 13 September 1995 (g)
Botswana 31 May 1995 (g)
Brazil 1 January 1995
Brunei Darussalam 1 January 1995
Bulgaria 1 December 1996 (n)
Burkina Faso 3 June 1995 (g)
Burundi 23 July 1995 (g)
Cambodia 13 October 2004 (n)
Cameroon 13 December 1995 (g)
Canada 1 January 1995
Cape Verde 23 July 2008
Central African Republic
31 May 1995 (g)
Chad 19 October 1996 (g)
Chile 1 January 1995
China 11 December 2001 (n)
Colombia 30 April 1995 (g)
Congo 27 March 1997 (g)
Costa Rica 1 January 1995
Côte d’Ivoire 1 January 1995
Croatia 30 November 2000 (n)
Cuba 20 April 1995 (g)
Cyprus 30 July 1995 (g)
Czech Republic 1 January 1995
Democratic Republic of the Congo
1 January 1997 (g)
Denmark 1 January 1995
Djibouti 31 May 1995 (g)
Dominica 1 January 1995
Dominican Republic
9 March 1995 (g)
Ecuador 21 January 1996 (n)
Egypt 30 June 1995 (g)
El Salvador 7 May 1995 (g)
Estonia 13 November 1999 (n)
European Communities 1 January 1995
Fiji 14 January 1996 (g)
Finland 1 January 1995
Former Yugoslav Republic of
Macedonia 4 April 2003 (n)
France 1 January 1995
Gabon 1 January 1995
Gambia 23 October 1996 (g)
Georgia 14 June 2000 (n)
Germany 1 January 1995
Ghana 1 January 1995
Greece 1 January 1995
Grenada 22 February 1996 (g)
Guatemala 21 July 1995 (g)
Guinea Bissau 31 May 1995 (g)
Guinea 25 October 1995 (g)
Guyana 1 January 1995
Haiti 30 January 1996 (g)
Honduras 1 January 1995
Hong Kong, China 1 January 1995
Hungary 1 January 1995
Iceland 1 January 1995
India 1 January 1995
Indonesia 1January 1995
Ireland 1 January 1995
Israel 21 April 1995 (g)
Italy 1 January 1995
Jamaica 9 March 1995 (g)
Japan 1 January 1995
Jordan 11 April 2000 (n)
Kenya 1 January 1995
Korea 1 January 1995
Kuwait 1 January 1995
Kyrgyz Republic
20 December 1998 (n)
Latvia 10 February 1999 (n)
Lesotho 31 May 1995 (g)
Liechtenstein 1 September 1995 (g)
Lithuania 31 May 2001 (n)
Luxembourg 1 January 1995
Macao, China 1 January 1995
Madagascar 17 November 1995 (g)
Malawi 31 May 1995 (g)
Malaysia 1 January 1995
Maldives 31 May 1995 (g)
Mali 31 May 1995 (g)
Malta 1 January 1995
Mauritania 31 May 1995 (g)
Mauritius 1 January 1995
Mexico 1 January 1995
Moldova 26 July 2001 (n)
Mongolia 29 January 1997 (n)
Morocco 1 January 1995
Mozambique 26 August 1995 (g)
Myanmar 1 January 1995
Namibia 1 January 1995
Netherlands — including Netherlands
Antilles 1 January 1995
Nepal 23 April 2004 (n)
New Zealand 1 January 1995
Nicaragua 3 September 1995 (g)
Niger 13 December 1996 (g)
Nigeria 1 January 1995
Norway 1 January 1995
Oman 9 November 2000 (n)
Pakistan 1 January 1995
Panama 6 September 1997 (n)
Papua New Guinea 9 June 1996 (g)
Paraguay 1 January 1995
Peru 1 January 1995
Philippines 1 January 1995
Poland 1 July 1995 (g)
Portugal 1 January 1995
Qatar 13 January 1996 (g)
Romania 1 January 1995
Rwanda 22 May 1996 (g)
Saint Kitts and Nevis 21 February
1996 (n)
Saint Lucia 1 January 1995
Saint Vincent & the Grenadines
1 January 1995
Saudi Arabia 11 December 2005
Senegal 1 January 1995
Sierra Leone 23 July 1995 (g)
Singapore 1 January 1995
Slovak Republic 1 January 1995
Slovenia 30 July 1995 (g)
Solomon Islands 26 July 1996 (g)
South Africa 1 January 1995
Spain 1 January 1995
Sri Lanka 1 January 1995
Suriname 1 January 1995
Swaziland 1 January 1995
Sweden 1 January 1995
Switzerland 1 July 1995 (g)
Chinese Taipei 1 January 2002 (n)
Tanzania 1 January 1995
Thailand 1 January 1995
Togo 31 May 1995 (g)
Trinidad and Tobago
1 March 1995 (g)
Tonga 27 July 2007
Tunisia 29 March 1995 (g)
Turkey 26 March 1995 (g)
Uganda 1 January 1995
Ukraine 16 May 2008
United Arab Emirates
10 April 1996 (g)
United Kingdom 1 January 1995
United States 1 January 1995
Uruguay 1 January 1995
Venezuela 1 January 1995
Viet Nam 11 January 2007
Zambia 1 January 1995
Zimbabwe 3 March 1995 (g)
Current WTO members
153 governments, since July 2008, with date of membership (“g” = the 51 original GATT members who joined
after 1 January 1995; “n” = new members joining the WTO through a working party negotiation):
Note: With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers.
Afghanistan
Algeria
Andorra
Azerbaijan
Bahamas
Belarus
Bhutan
Bosnia and Herzegovina
Comoros
Equatorial Guinea
Ethiopia
Holy See (Vatican)
Iran
Iraq
Kazakhstan
Lao People's Democratic Republic
Lebanese Republic
Libya
Montenegro
Republic of Liberia
Russian Federation
Samoa
Sao Tome and Principe
Serbia
Seychelles
Sudan
Tajikistan
Uzbekistan
Vanuatu
Yemen
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Observers

ISBN: 978-92-870-3495-3