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World trade organization 1

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  • 1. PROJECT REPORT ON DISPUTE SETTLEMENT MACHANISM IN THE WTO SUBMITTED BY Saba Shafi Muhimtule M.Com Semester -1 2012-13 PROJECT GUIDE Susan Alex SUBMITTED TO University of Mumbai BUNTS SANGHA MUMBAI ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S SHASHI MANMOHAN SHETTY HIGHER EDUCATION COMPLEX, BUNTARA BHAVANA MARG, KURLA (EAST), MUMBAI 4000701
  • 2. BUNTS SANGHA MUMBAI ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S Shashi Manmohan Shetty Higher Education Complex, Buntara Bhavana Marg, Kurla (East), Mumbai 400 070. This is to certify that Ms. Saba Shafi Muhimtule of M.Com Semester -1 has undertaken & completed the project work titled Dispute Settlement Mechanism in WTO during the academic year 2012-13 under the guidance of Prof. Susan Alex submitted to this college in fulfillment of the curriculum of University of Mumbai. This is a bonafide project work & the information presented is true & original to the best of our knowledge and belief. PROJECT COURSE EXTERNAL PRINCIPAL GUIDE CO-ORDINATOR EXAMINER2
  • 3. BUNTS SANGHA MUMBAI ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S Shashi Manmohan Shetty Higher Education Complex, Buntara Bhavana Marg, Kurla (East), Mumbai 400 070 DECLARATION I, Saba shafi muhimtule of ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS, SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S, M.com hereby declare that I have completed the project on Dispute Settlement Mechanism in WTO in academic year2012- 13. The information submitted is true and original to the best of my knowledge through the book business economics and also taking help with the web. Signature of the Student,3
  • 4. ACKNOWLEDGMENT I hereby acknowledge all those who directly or indirectly helped me to draft the project report. It would not have been possible for me to complete the task without their help and guidance First of all I would like to thank the principal Dr. K.S. Cheema and the coordinator Prof. Susan Alex who gave me the opportunity to do this project work. They also conveyed the important instructions from the university from time to time. Secondly, I am very much obliged of Prof. SUSAN for giving guidance for completing the project Last but not the least; I am thankful to the University of Mumbai for offering the project in the syllabus. I must mention my hearty gratitude towards my family, other faculties and friends who supported me to go ahead with the project4
  • 5. INDEX History From Geneva to Tokyo Uruguay Round Ministerial conferences Doha Round (The Doha Agenda) Functions Principles of the trading system Organizational structure Decision-making Accession and membership Accession and membership Accession process Members and observers Agreements Agreement on Trade Related Investment Measures Agreement on Trade-Related Aspects of Intellectual Property Rights General Agreement on Tariffs and Trade Contentious issues on WTO and Globalization Dispute settlement in the World Trade Organization Compliance Compensation and retaliation Developing countries5
  • 6. World Trade Organization The World Trade Organization (WTO) is an organization that intends to supervise and liberalizeinternational trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994). The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remains uncertain: The work programmed lists 21 subjects in which the original deadline of 1 January 2005 was missed (So was the next unofficial target of the end of 2006.) The further imposition of free trade on industrial goods and services and the protectionism on farm subsidies to domestic agricultural sector requested from the developed countries, and the substantiation of the international liberalization of fair trade on agricultural products from developing countries remain the major obstacles. These points of contention have hindered any progress to launch new WTO6
  • 7. negotiation(s) beyond the Doha Development Round. As a result of this impasse, there has been an increasing amount of bilateral free trade agreements WTOs current Director-General is Pascal Lamy, who leads a staff of over 600 people in Geneva, Switzer the Uruguay Round of multilateral trade negotiations under the auspices of GATT (General Agreement on Tariffs and Trade, based on a 1947 agreement) established the World Trade Organization. Upon ratification of the Rounds Final Act by members, the WTO replaced GATT as the global multilateral trade organization, and a series of agreements associated with but legally distinct from GATT were also placed under the WTO umbrella (such as the GATS, the Agreement on Agriculture, on Textiles and Clothing, on Rules of Origin, etc.). The 1947 General Agreement on Tariffs and Trade (GATT) emerged from wartime and post-war negotiations (see Bretton Woods) to establish a stable, multilateral economic order. The lengthy negotiating process (1944-7) reflected the controversial nature of the politics of international trade at domestic and international levels of bargaining: changing patterns of international trade could have dramatic and fairly immediate effects on domestic employment and income levels within and among national economies. While it has never proved possible to gain broad agreement on the extent of liberalization in most domains of international trade, it was accepted that the unilateralist and discriminatory practices of the inter-war period had had particularly negative consequences for all concerned GATT itself was an interim accord which sought to codify the rules of the emerging trade regime and to proceed with important reductions in national barriers to trade. The US delegation was determined to press other countries to reduce their discriminatory trade practices (particularly the British ‘Imperial Preference’) and in exchange the United States was willing to reduce its7
  • 8. traditionally high tariffs. The USSR and its allies remained outside GATT, only considering membership at the end of the Cold War in 1989. Following the signature of the Havana Charter in 1948, the GATT was supposed to form the ‘rule book’ of the newly established International Trade Organization (ITO). The ITO charter prescribed a far more ambitious multilateral institution than the eventual WTO, but this was in part its eventual downfall. When the US failed to ratify the ITO charter, the institution was dead and only the ‘interim’ GATT survived. The GATT agreement enunciated the principles of reciprocity and non-discrimination, encapsulated in the Most Favored Nation (MFN) and National Treatment concepts. National Treatment implies that governments cannot treat foreign exporting firms any less favorably than domestic producers. Reciprocity meant that any negotiations among trading partners were to yield roughly reciprocal concessions and/or benefits in the eyes of the parties. Non- discrimination meant that any trade concession advanced by a country to one GATT trading partner had to be extended to all others simultaneously. In this way, bilateral negotiations among trading parties would be ‘multilateral zed’, leading to the establishment of a liberal trading order. GATT negotiating ‘Rounds’ were difficult due to the weak state of most post-war economies, and the extraordinary competitive edge of American industry at the time. Most economies would have experienced severe balance-of-payments difficulties had they removed barriers to imports, and domestic employment would have been adversely affected as well. As post-war recovery rendered more liberal trading policies acceptable, the American government sought to replace the piecemeal approach with reciprocal across-the-board tariff cuts by all participating parties on a wide range of traded products. This initiative developed into the ‘Kennedy Round’8
  • 9. agreements of June 1967 which stands as a watershed in post-war trade liberalization. Tariffs on manufactured goods were reduced by 36 per cent on average, and this progress was continued in the later Tokyo Round (1974-9). The United States had originally taken unilateral measures to keep agricultural trade out of the GATT process in 1955, but had reversed this position in the Kennedy Round. This led to a long- running conflict with the EU (with its Common Agricultural Policy, which represented a delicate internal compromise difficult to disturb) and Japan, both with protected agricultural markets. Agriculture is still central to conflict over the trade regime, and held up the Uruguay Round of negotiations (completed in December 1993). As tariffs were lowered, so-called non-tariff barriers (NTBs) became the remaining instruments of trade policy. Examples were voluntary export restraint agreements and Orderly Marketing Arrangements, running against the spirit of GATT non-discrimination. As these were ‘voluntary’, GATT rules theoretically did not apply. Furthermore, the principles of liberalization called into question many economic policy measures associated with successful national economic development strategies in the post-war period, particularly in Japan, Europe, and the developing world. Finally, the Less Developed Countries sought exemption from many of GATTs rules, pointing out that their weak economies benefited little from free trade arrangements. All governments abused the escape clauses in GATT (e.g. through anti-dumping measures) and attempts have been made to tighten up the rules over time. None of these disputes is likely to be resolved in any permanent fashion; it is the nature of the eventual compromise which will be crucial to the continued success of the WTO as GATTs successor. There none the less9
  • 10. remains broad agreement on the need to continue the momentum of the liberalization process through further rounds of WTO negotiations. The Uruguay Round negotiations successfully expanded the scope of GATT. It now includes multilateral rules applied to the services sector (see GATS), intellectual property, investment measures, and some aspects of agricultural trade. The Round also ended the provisional status of GATT by establishing the World Trade Organization with an enhanced institutional framework and dispute settlement procedure. The WTOs judgments on trade disputes now bind member countries to change their trade practices, though the US Congress formally refuses this implication and asserts the superiority of US laws. The new WTO is not without tensions among its members and their societies, as its history would suggest is likely to be the case. Developing countries argue strongly that the WTO as constituted does not adequately take into account the difficulties and asymmetries of economic development under conditions of liberalization. Developed countries and the international organizations they control such as the IMF have put strong pressure on developing countries to liberalize their trade laws despite uncertain consequences for long-run development prospects. Developed countries are often less than generous in opening their markets to developing country exports, especially in the domain of agriculture and garment production. Perhaps the biggest challenge to the WTO comes not from member states but from civil society groups such as non-governmental organizations. Many social activists in the anti-globalization movement draw attention to the difficulties of liberalization in both developed and developing countries, especially for the weaker members of society and less10
  • 11. market-competitive forms of economic organization which may none the less be crucial to local identities and cultures. Organized labour maintains an uneasy relationship with the liberalization process, for fear of job losses. Finally, the emergence of the European Union (EU), the NAFTA, and other nascent regional arrangements such as MERCOSUR or the Asia Pacific Economic Co-operation Forum (APEC), are also potential challenges to young WTO. So far these regional arrangements have not emerged as discriminatory trading blocs, and the WTO expressly permits regional economic integration if compatible with its rules. Despite the ultimate success of the long Uruguay Round, regional arrangements and indeed bilateral/unilateral solutions (especially on the part of the United States) may become the order of the day if ongoing agreement cannot be reached on outstanding issues. However, global companies would be likely to put up stiff resistance to any attempt to substantially restrict the liberal or global nature of the trade regime. In short, conflict in the WTO continues to mirror socio-political tensions across its member economies and is intimately related to the tensions of global economic integration largely driven by liberalization policies. History The economists Harry White (left) and John Maynard Keynes at the Breton Woods Conference. Both had been strong advocates of a liberal international trade environment and recommended the establishment of three institutions: the IMF(for fiscal and monetary issues); the World Bank (for financial and structural issues); and the ITO (for international economic cooperation). The WTOs predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international11
  • 12. economic cooperation — notably theBretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect. In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization. From Geneva to Tokyo Seven rounds of negotiations occurred under GATT. The first real 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, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others broke entirely new ground. Because these plurilateral agreements were not accepted by the full GATT membership, they were often informally called "codes". Several of these codes were 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 dairy12
  • 13. products), but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two. Uruguay Round Well before GATTs 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy In response to the problems identified in the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries policies on world trade GATT could not manage etc.), the eighth GATT round — known as the Uruguay Round — was launched in September 1986, in Punta del Este, Uruguay. It was the biggest negotiating mandate on trade ever agreed: 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. The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed April 15, 1994, during the ministerial meeting atMarrakesh, Morocco, and hence is known as the Marrakesh Agreement. The GATT still exists as the WTOs umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations (a distinction is made between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994). GATT 1994 is not however the only legally binding agreement included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into a structure with six main parts:  The Agreement Establishing the WTO13
  • 14.  Goods and investment — the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures (TRIMS)  Services — the General Agreement on Trade in Services  Intellectual property — the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)  Dispute settlement (DSU)  Reviews of governments trade policies (TPRM) In terms of the WTOs principle relating to tariff "ceiling-binding" (No. 3), the Uruguay Round has been successful in increasing binding commitments by both developed and developing countries, as may be seen in the percentages of tariffs bound before and after the 1986-1994 talks. Ministerial conferences The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the "Singapore issues". Thesecond ministerial conference was held in Geneva in Switzerland. The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing14
  • 15. worldwide attention. The fourth ministerial conference was held in Doha in the Persian Gulf nation of Qatar. The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join. The fifth ministerial conference was held in Cancún, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, theG20 developing nations (led by India, China, Brazil, ASEAN led by the Philippines), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress. The sixth WTO ministerial conference was held in Hong Kong from 13–18 December 2005. It was considered vital if the four-year-old Doha Development Round negotiations were to move forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries, following the Everything but Arms initiative of the European Union — but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2010. The WTO General Council, on 26 May 2009, agreed to hold a seventh WTO ministerial conference session in Geneva from 30 November-3 December 2009. A statement by chairman Amb. Mario Matus acknowledged that the prime purpose was to remedy a breach of protocol requiring two-yearly “regular” meetings, which had lapsed with the Doha Round failure in 2005, and that the “scaled-down” meeting would not be a negotiating session, but “emphasis will be on transparency and open discussion rather than on15
  • 16. small group processes and informal negotiating structures”. The general theme for discussion was “The WTO, the Multilateral Trading System and the Current Global Economic Environment” Doha Round (The Doha Agenda) The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatarin November 2001. This was to be an ambitious effort to make globalization more inclusive and help the worlds poor, particularly by slashing barriers and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries. The negotiations have been highly contentious. Disagreements still continue over several key areas including agriculture subsidies, which emerged as critical in July 2006.According to a European Union statement, "The 2008 Ministerial meeting broke down over a disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a special safeguard measure to protect farmers from surges in imports." The position of the European Commissionis that "The successful conclusion of the Doha negotiations would confirm the central role of multilateral liberalisation and rule-making. It would confirm the WTO as a powerful shield against protectionist backsliding." An impasse remains and As of June 2012, agreement has not been reached, despite intense negotiations at several ministerial conferences and at other sessions.16
  • 17. Functions Among the various functions of the WTO, these are regarded by analysts as the most important:  It oversees the implementation, administration and operation of the covered agreements.  It provides a forum for negotiations and for settling disputes. Additionally, it is the WTOs duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least- developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training. The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank. Principles of the trading system The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:17
  • 18. 1. Non-discrimination. It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members. "Grant someone a special favour and you have to do the same for all other WTO members." National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods). 2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available fromunilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise 3. Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could18
  • 19. mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures. 4. Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports. 5. Safety valves. In specific circumstances, governments are able to restrict trade. The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. There are three types of provision in this direction:  articles allowing for the use of trade measures to attain non-economic objectives;  articles aimed at ensuring "fair competition"; members must not use environmental protection measures as a means of disguising protectionist policies.  provisions permitting intervention in trade for economic reasons. Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions.19
  • 20. Organizational structure Council for Trade in Goods There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles.[40] Council for Trade-Related Aspects of Intellectual Property Rights Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTOs work with other international organizations in the field.[41] Council for Trade in Services The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required. Trade Negotiations Committee The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTOs director-general. As of June 2012 the committee was tasked with the Doha Development Round.20
  • 21. The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments. The General council has several different committees, working groups, and working parties. There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on Least-Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer. Decision-making The WTO describes itself as "a rules-based, member-driven organization — all decisions are made by the member governments, and the rules are the outcome of negotiations among members". The WTO Agreement foresees votes where consensus cannot be reached, but the practice of consensus dominates the process of decision-making. Richard Harold Steinberg (2002) argues that although the WTOs consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the U.S., and may not lead to Pareto improvement. Accession and membership The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the countrys stage of economic development and current trade regime. The process takes about five years, on average, but it can last more if the country is less21
  • 22. than fully committed to the process or if political issues interfere. The shortest accession negotiation was that of the Kyrgyz Republic, while the longest was that ofRussia, which, having first applied to join GATT in 1993, was approved for membership in December 2011 and became a WTO member on August 22, 2012. The second longest was that of Vanuatu, whose Working Party on the Accession of Vanuatu was established on 11 July 1995. After a final meeting of the Working Party in October 2001, Vanuatu requested more time to consider its accession terms. In 2008, it indicated its interest to resume and conclude its WTO accession. The Working Party on the Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss Vanuatu’s future WTO membership. The re-convened Working Party completed its mandate on 2 May 2011. The General Council formally approved the Accession Package of Vanuatu on 26 October 2011. On 24 August 2012, the WTO welcomed Vanuatu as its 157th member. An offer of accession is only given once consensus is reached among interested parties. Accession process Members (including dual-representation with the European Union) Draft Working Party Report or Factual Summary adopted Goods and/or Services offers submitted Memorandum on Foreign Trade Regime (FTR) submitted22
  • 23. Observer, negotiations to start later or no Memorandum on FTR submitted Frozen procedures or no negotiations in the last 3 years No official interaction with the WTO A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members. After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicants international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules. The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new members commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally When the bilateral talks conclude, the working party sends to the general council or ministerial conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-23
  • 24. to-bes commitments. Once the general council or ministerial conference approves of the terms of accession, the applicants parliament must ratify the Protocol of Accession before it can become a member Members and observers The WTO has 157 members and 27 observer governments. In addition to states, the European Union is a member. WTO members do not have to be fullsovereign nation-members. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT contracting party, and the Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei) despite its disputed status. The WTO Secretariat omits the official titles (such as Counselor, First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipeis Permanent Mission to the WTO, except for the titles of the Permanent Representative and the Deputy Permanent Representative. Iran is the biggest economy outside the WTO. With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. A number of international intergovernmental organizations have also been granted observer status to WTO bodies. 14 states and two territories so far have no official interaction with the WTO.24
  • 25. Agreements The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. A discussion of some of the most important agreements follows. The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The Ana has three central concepts, or "pillars": domestic support, market access and export subsidies. The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade. The agreement entered into force in January 1995. The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. The Agreement on the Application of Sanitary and Phytosanitary Measures—also known as the SPS Agreement—was negotiated during the Round of GATT, and entered into force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement, the WTO sets constraints on members policies relating to food safety (bacterial contaminants, pesticides, inspection and labeling) as well as animal and plant health (imported pests and diseases). The Agreement on Technical Barriers to Trade is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994. The object ensures that technical negotiations and standards, as well as testing and certification25
  • 26. procedures, do not create unnecessary obstacles to trade" The Agreement on Customs Valuation, formally known as the Agreement on Implementation of Article VII of GATT, prescribes methods of customs valuation that Members are to follow. Chiefly, it adopts the "transaction value" approach. Agreement on Trade Related Investment Measures The Agreement on Trade Related Investment Measures (TRIMs) are rules that apply to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement was agreed upon by all members of the World Trade Organization. (The WTO wasnt established at that time, it was its predecessor, the GATT (General Agreement on Trade and Tariffs). The WTO came about in 1994-1995. Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned. Trade Related Investment Measures is the name of one of the four principal legal agreements of the WTO trade treaty. TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets. Agreement on Trade-Related Aspects of Intellectual Property Rights26
  • 27. The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.[2] It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date. In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO statement that clarifies the scope of TRIPS, stating for example that TRIPS can and should be interpreted in light of the goal "to promote access to medicines for all." Specifically, TRIPS contains requirements that nations laws must meet for copyright rights, including the rights of performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; monopolies for the developers of new plant varieties; trademarks; trade dress; and undisclosed or confidential information. TRIPS also specify enforcement procedures, remedies, and dispute resolution procedures. Protection and enforcement of all intellectual property rights shall meet the objectives to contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.27
  • 28. General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating international trade. According to its preamble, its purpose is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International (ITO). GATT was signed in 1948 and lasted until 1993, when it was replaced by the World Trade Organization in 1995. The original GATT text (GATT 1958) is still in effect under the WTO framework, subject to the modifications of GATT 1994.[1 In 1993, the GATT was updated (GATT 1994) to include new obligations upon its signatories. One of the most significant changes was the creation of the World (WTO). The 75 existing GATT members and the European Communities became the founding members of the WTO on 1 January 1995. The other 52 GATT members rejoined the WTO in the following two years (the last being Congo in 1997). Since the founding of the WTO, 21 new non-GATT members have joined and 29 are currently negotiating membership. There are a total of 157 member countries in the WTO, with Russia and Vanuatu being new members as of 2012. [5] [6] Of the original GATT members, Syria and the SFR Yugoslavia has not rejoined the WTO. Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations28
  • 29. later split in two), is not recognized as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to establish a working party to examine the request of Syria for WTO membership.[7] [8] the contracting parties who founded the WTO ended official agreement of the "GATT 1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage of the negotiations and are expected to become the newest members of the WTO in 2012 or in near future. Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The WTO expanded its scope from traded goods to include trade within the service sector and intellectual property rights. Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral agreements created selective trading and caused fragmentation among members. WTO arrangements are generally a multilateral agreement settlement mechanism of GATT. Contentious issues on WTO and Globalization Environmental groups argue that globalization harms the environment; they want the WTO to change its rules so that trade sanctions can be used to enforce environmental goals. They blame global corporations for global warming, depletion of natural resources, production of harmful chemicals and destruction of organic agriculture.29
  • 30. They have particular criticism against global investment, which they argue takes advantage of the lack of regulation in poorer developing countries. Hence, global companies may locate polluting industries in poor countries, log tropical forests, or develop mines with inadequate controls. They oppose production, use and global trade in toxic chemicals, nuclear materials and other products of which they do not approve, such as GM foods, or endangered wildlife, including fish. They oppose the existing rules of the WTO, which do not allow countries to ban imports of goods just because their production may have damaged the environment in the country of origin. Environmental groups argue that WTO rules are unacceptable from the environmental perspective and they want the rules amended to give them the right to present arguments in its appeals court. Other groups share a concern that global financial institutions, such as the IMF and the WB, are not doing enough to alleviate poverty and, indeed, may be contributing to it. They argue that poor countries should have their debts to international banks excused. Some are critical of the WTO saying that its rules favor companies from wealthy countries. They argue that by making it difficult for countries to protect their own industries with discriminatory tariffs, it is hard for poor countries to build domestic industries.30
  • 31. Allegation as the spread of capitalism, in which the labour of the poor is exploited for the benefit of the rich. Leftist organizations have mounted a series of global action days starting with the WTO Summit in Seattle in September 1999, and targeting meetings of the World Bank, the IMF and the private business conference organization, the World Economic Forum. Dispute settlement in the World Trade Organization In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994.[48] Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy". [49] 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. [50] The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions.[51] Bodies involved in the dispute settlement process, World Trade Organization Dispute settlement is regarded by the World Trade Organization (WTO) as the central pillar of the multilateral trading system, and as the organizations "unique contribution to the stability of the global economy".[1] A dispute arises when one member country adopts a trade policy measure or takes some31
  • 32. action that one or more fellow members considers to a breach of WTO agreements or to be a failure to live up to obligations. By joining the WTO, member countries have agreed that if they believe fellow members are in violation of trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally — this entails abiding by agreed procedures (Dispute Settlement Understanding) and respecting judgments, primarily of the Dispute Settlement Body (DSB), the WTO organ responsible for adjudication of disputes.[2] A former WTO Director-General characterized the WTO dispute settlement system as "the most active international adjudicative mechanism in the world today."[3] In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes or Dispute Settlement Understanding (DSU) (annexed to the "Final Act" signed in Marrakesh in 1994).[4] Pursuant to the rules detailed in the DSU, member states can engage in consultations to resolve trade disputes pertaining to a "covered agreement" or, if unsuccessful, have a WTO panel hear the case.[5] The priority, however, is to settle disputes, through consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached the full panel process.[2] The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions.[6] The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body (DSB).[7] Like the General Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible32
  • 33. for administering the DSU, i.e. for overseeing the entire dispute settlement process. It also has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize the suspension of obligations under the covered agreements.[8] The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU.[9] Compliance The DSU addresses the question of compliance and retaliation. Within thirty days of the adoption of the report, the member concerned is to inform the DSB of its intentions in respect of implementation of the recommendations and rulings. If the member explains that it is impracticable to comply immediately with the recommendations and rulings, it is to have a "reasonable period of time" in which to comply. If no agreement is reached about the reasonable period for compliance, that issue is to be the subject of binding arbitration; the arbitrator is to be appointed by agreement of the parties. If there is a disagreement as to the satisfactory nature of the measures adopted by the respondent state to comply with the report that disagreement is to be decided by a panel, if possible the same panel that heard the original dispute, but apparently without the possibility of appeal from its decision. The DSU provides that even if the respondent asserts that it has complied with the recommendation in a report, and even if the complainant party or the panel accepts that assertion, the DSB is supposed to keep the implementation of the recommendations under surveillance.[19]33
  • 34. Compensation and retaliation If all else fails, two more possibilities are set out in the DSU:  If a member fails within the "reasonable period" to carry out the recommendations and rulings, it may negotiate with the complaining state for a mutually acceptable compensation. Compensation is not defined, but may be expected to consist of the grant of a concession by the respondent state on a product or service of interest to the complainant state.[20]  If no agreement on compensation is reached within twenty days of the expiry of the "reasonable period", the prevailing state may request authorization from the DSB to suspend application to the member concerned of concessions or other obligations under the covered agreements.[20] The DSU makes clear that retaliation is not favored, and sets the criteria for retaliation.[21] In contrast to prior GATT practice, authorization to suspend concessions in this context is semi-automatic, in that the DSB "shall grant the authorization [...] within thirty days of the expiry of the reasonable period", unless it decides by consensus to reject the request.[22] Any suspension or concession or other obligation is to be temporary. If the respondent state objects to the level of suspension proposed or to the consistency of the proposed suspension with the DSU principles, still another arbitration is provided for, if possible by the original panel members or by an arbitrator or arbitrators appointed by the Director-General, to be completed within sixty days from expiration of the reasonable period.[22]34
  • 35. While such "retaliatory measures" are a strong mechanism when applied by economically powerful countries like the United States or the European Union, when applied by economically weak countries against stronger ones, they can often be ignored. [23] Whether or not the complainant has taken a measure of retaliation, surveillance by the DSB is to continue, to see whether the recommendations of the panel or the Appellate Body have been implemented.[24] Developing countries Like most of the agreements adopted in the Uruguay Round, the DSU contains several provisions directed to developing countries.[25] The Understanding states that members should give "special attention" to the problems and interests of developing country members.[26] Further, if one party to a dispute is a developing country, that party is entitled to have at least one panelist who comes from a developing country.[27] If a complaint is brought against a developing country, the time for consultations (before a panel is convened) may be extended, and if the dispute goes to a panel, the deadlines for the developing country to make its submissions may be relaxed.[28] Also, the Secretariat is authorized to make a qualified legal expert available to any developing country on request. Formal complaints against least developed countries are discouraged, and if consultations fail, the Director-General and the Chairman of the DSB stand ready to offer their good offices before a formal request for a panel is made.[29] As to substance, the DSU provides that the report of panels shall "explicitly indicate" how account has been taken of the "differential and more favorable treatment" provisions of the agreement under which the complaint is brought. Whether or not a developing country is a party to a particular proceeding, "particular attention" is to be paid to the interests of the35
  • 36. developing countries in the course of implementing recommendations and rulings of panels.[30] In order to assist developing countries in overcoming their limited expertise in WTO law and assist them in managing complex trade disputes, an Advisory Centre on WTO Law was established in 2001. The aim is to level the playing field for these countries and customs territories in the WTO system by enabling them to have a full understanding of their rights and obligations under the WTO Agreement.[31] 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 nearly 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 acceptable36
  • 37. 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 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 are37
  • 38. 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.38
  • 39. 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. 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.39
  • 40. 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).40
  • 41. SUMMARY The World Trade Organization (WTO) is among the most powerful, and one of the most secretive international bodies on earth. It is rapidly assuming the role of global government, as 149 nation-states, including the U.S., have ceded to its vast authority and powers. The WTO represents the rules-based regime of the policy of economic globalization. The central operating principal of the WTO is that commercial interests should supersede all others. Any obstacles in the path of operations and expansion of global business enterprise must be subordinated. In practice these "obstacles" are usually policies or democratic processes that act on behalf of working people, labor rights, environmental protection, human rights, consumer rights, social justice, local culture, For the WTO Ministerial in Cancun, Mexico (10-14 September 2003), the IFG hosted a two-day, Teach-In that helped unite a robust movement. Our event helped to identify and provided analyses of the critical issues and how they affect communities and impact the work of existing movements; the event also provided capacity to plan joint strategies and programs. Foremost among the events was a focus on Alternatives to Globalization [A Better World Is Possible], our report released November 2002, that provides a framework and principles for an alternative agenda to the current global economic model. The report helped form the basis for discussion and action in Cancun and national sovereignty. The dispute settlement mechanism played a key role in the WTOS 1999 Ministerial in Settle, and focused its efforts throughout most of 1999 on the WTO and its relation to the larger issue of economic globalization.41

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