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

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

BUNTS SANGHA MUMBAIANNA LEELA COLLEGE OF COMMERCE & ECONOMICS

SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.SShashi 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,

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

INDEXHistory

From Geneva to TokyoUruguay RoundMinisterial conferencesDoha Round (The Doha Agenda)Functions

Principles of the trading system

Organizational structure

Decision-making

Accession and membership

Accession and membership

Accession processMembers and observersAgreements

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 GlobalizationDispute settlement in the World Trade OrganizationCompliance

Compensation and retaliation

Developing countries

World Trade Organization

The World Trade Organization (WTO) is an organization that intends to supervise

and liberalize international 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

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

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’

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 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

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

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

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

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

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

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.

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:

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

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.

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.

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

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

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-

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.

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

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

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.

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.

Of the original GATT members, Syria [5] [6] and the SFR Yugoslavia has not rejoined the WTO.

Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations

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.

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.

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

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

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]

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]

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

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

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

automatically adopted unless there is a consensus to reject a ruling — any country wanting to

block a ruling has to persuade all other WTO members (including its adversary in the case) to

share its view.

Although much of the procedure does resemble a court or tribunal, the preferred solution is for

the countries concerned to discuss their problems and settle the dispute by themselves. The

first stage is therefore consultations between the governments concerned, and even when the

case has progressed to other stages, consultation and mediation are still always possible.

How are disputes settled?

Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in

another guise), which consists of all WTO members. The Dispute Settlement Body has the sole

authority to establish “panels” of experts to consider the case, and to accept or reject the

panels’ findings or the results of an appeal. It monitors the implementation of the rulings and

recommendations, and has the power to authorize retaliation when a country does not comply

with a ruling.

First stage: consultation (up to 60 days). Before taking any other actions the countries in

dispute have to talk to each other to see if they can settle their differences by themselves. If

that fails, they can also ask the WTO director-general to mediate or try to help in any other

way.

Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the

panel to conclude). If consultations fail, the complaining country can ask for a panel to be

appointed. The country “in the dock” can block the creation of a panel once, but when the

Dispute Settlement Body meets for a second time, the appointment can no longer be blocked

(unless there is a consensus against appointing the panel).

Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations.

But because the panel’s report can only be rejected by consensus in the Dispute Settlement

Body, its conclusions are difficult to overturn. The panel’s findings have to be based on the

agreements cited.

The panel’s final report should normally be given to the parties to the dispute within six

months. In cases of urgency, including those concerning perishable goods, the deadline is

shortened to three months.

The agreement describes in some detail how the panels are to work. The main stages are:

Before the first hearing: each side in the dispute presents its case in writing to the panel.

First hearing: the case for the complaining country and defence: the complaining country (or

countries), the responding country, and those that have announced they have an interest in the

dispute, make their case at the panel’s first hearing.

Rebuttals: the countries involved submit written rebuttals and present oral arguments at the

panel’s second meeting.

Experts: if one side raises scientific or other technical matters, the panel may consult experts

or appoint an expert review group to prepare an advisory report.

First draft: the panel submits the descriptive (factual and argument) sections of its report to

the two sides, giving them two weeks to comment. This report does not include findings and

conclusions.

Interim report: The panel then submits an interim report, including its findings and

conclusions, to the two sides, giving them one week to ask for a review.

Review: The period of review must not exceed two weeks. During that time, the panel may

hold additional meetings with the two sides.

Final report: A final report is submitted to the two sides and three weeks later, it is circulated

to all WTO members. If the panel decides that the disputed trade measure does break a WTO

agreement or an obligation, it recommends that the measure be made to conform with WTO

rules. The panel may suggest how this could be done.

The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or

recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report

(and in some cases both sides do).

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.