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 400070
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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 EXAMINER
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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,
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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 project
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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 countries
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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 WTO
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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
WTO's 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 Round's 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 its
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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’
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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 GATT's
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 GATT's successor. There none the less
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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 WTO's 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 less
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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 WTO's 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 international
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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 dairy
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13. products), but in 1997 WTO members agreed to terminate the bovine meat and dairy
agreements, leaving only two.
Uruguay Round
Well before GATT's 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 WTO's 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 WTO
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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 WTO's 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 drawing
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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 on
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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 world's 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.
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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 WTO's 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:
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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 could
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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.
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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 WTO's 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 WTO's director-general. As of June 2012 the committee was tasked
with the Doha Development Round.
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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 WTO's 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 country's 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 less
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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) submitted
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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 applicant's 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 member's 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-
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24. to-be's commitments. Once the general council or ministerial conference approves of the terms
of accession, the applicant's 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 Taipei's 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.
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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 certification
25

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
wasn't 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 Rights
26

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 negotiations
28

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.
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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
organization's "unique contribution to the stability of the global economy".[1] A dispute
arises when one member country adopts a trade policy measure or takes some
31

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 responsible
32

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 the
35

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 acceptable
36

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 are
37

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 WTO'S 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