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The WTO and its Development Obligation: Prospects for Global Trade available in Hardcover
‘The WTO and its Development Obligation: Prospects for Global Trade’ boldly argues that, in view of the WTO's development-based focus, there is an urgent need for developing countries to realise the potential benefits of global trade in their domestic environment. Ezeani also acknowledges and examines the underlying factors which make it challenging for developing countries to make meaningful gains from participating in global trade.
|Series:||Anthem Studies in Development and Globalization Series|
|Product dimensions:||6.20(w) x 9.10(h) x 1.10(d)|
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The WTO and its Development Obligation
Prospects for Global Trade
By Elimma C. Ezeani
Wimbledon Publishing CompanyCopyright © 2011 Elimma C. Ezeani
All rights reserved.
THE WTO AND THE RULES-BASED SYSTEM
1.1. Understanding the WTO
The WTO is an umbrella organisation established after the Uruguay Round of multilateral trade negotiations. The WTO Agreement states that the Organisation is meant to provide the common institutional frame works for the implementation of those agreements. The basic functions of the WTO are:
(a) to implement, administer, and carry out the WTO Agreement and its Annexes,
(b) to act as a forum for ongoing multilateral trade negotiations,
(c) to serve as a tribunal for resolving disputes, and
(d) to review the trade policies and practices of member states.
The package of agreements is annexed to the WTO Agreement and is binding on all members of the organisation as a single body of law. Under Article II (2) of the WTO, the Multilateral Trade Agreements under Annex 1, 2, 3 are binding on all the members. Pursuant to Article II (3) however, Annex 4 on the Plurilateral Trade Agreements is binding only on members who have accepted it. These Agreements are geared towards the provision of a common institutional framework for the conduct of trade relations among Members of the WTO in matters related to the agreements and associated legal instruments included in the Annexes to the Agreement.
The reference to the WTO as a 'rules-based' system is due to the sophisticated structure of international trade regulation based on various trade agreements and also, by the compulsory dispute settlement system which includes a judicial-style review mechanism.
The Agreements under the WTO are as follows:
1. The Final Act
2. Agreement Establishing the WTO
Annex 1A: Agreement on Trade in Goods
1. General Agreement on Tariffs and Trade (1994)
2. Uruguay Round Protocol to the General Agreement on Tariffs and Trade
3. Agreement on Agriculture
4. Agreement on Sanitary and Phytosanitary measures
5. Agreement on Textiles and Clothing
6. Agreement on Technical Barriers to Trade
7. Agreement on Trade-Related Investment Measures
8. Agreement on Implementation of Article VI (on antidumping)
9. Agreement on Implementation of Article VI (on customs valuation)
10. Agreement on Preshipment Inspection
11. Agreement on Rules of Origin
12. Agreement on Import Licensing Procedures
13. Agreement on Subsidies and Countervailing Measures
14. Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services
Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights
Annex 2: Understanding of Rules and Procedures Governing the Settlement of Disputes
Annex 3: Trade Policy Review Mechanism
Annex 4: Plurilateral Trade Agreements
4(a): Agreement on Trade in Civil Aviation
4(b): Agreement on Government Procurement
4(c): International Dairy Agreement
4(d): International Bovine Meat Agreement
3. Ministerial Decisions and Declarations
To enable it administer these Agreements the WTO has five main organs:
a. The Ministerial Conference.
b. A General Council which functions as the WTO Dispute Settlement Body and Trade Policy Review Body.
c. A Council on Trade in Goods.
d. A Council for Trade in Services.
e. A Council for Trade Related Aspects of Intellectual Property Rights.
The Ministerial Conference and the General Council are made up of representatives from all the Member states.
The Ministerial Conference is the highest authority of the WTO. It may take decisions on all matters under any of the multilateral trade agreements. The Conference is required to meet every two years. Five standing committees deal with trade and development; balance-of-payments restrictions; budget, finance and administration; trade and the environment; and regional agreements.
The General Council handles the day to day functions of the Organisation in between Ministerial Conferences. It names the members of the other main organs. It also convenes "as appropriate", as the WTO Dispute Settlement Body and as the WTO Trade Policy Review Body. Article IV (5) of the WTO Agreement provides that the three councils (Council for Trade in Goods, Council for Trade in Services, and the Council for Trade-Related Aspects of Intellectual Property Rights) working under the guidance of the General Council shall oversee the implementation and administration of the three main WTO Agreements.
A Trade Negotiations Committee (TNC) was set up by the Doha Declaration at the WTO Ministerial Conference in Doha, Qatar. This Committee also operates under the authority of the General Council. Under Article V (1; 2), the General Council is also responsible for 'co-operation' with other organisations (both inter-governmental organisations and non-governmental organisations in responsibilities and matters 'related to those of the WTO'.
The workings of the WTO are overseen by the WTO Secretariat. This administrative office is located in Geneva and is headed by a Director General. Since decisions are taken only by WTO Members themselves, the Secretariat actually has no decision making powers. Its various divisions either come directly under the director-general or one of his deputies. The main duties of the Secretariat are:
to provide administrative support to the various councils and committees;
to provide administrative support under the dispute settlement system;
to provide technical assistance to developing countries;
to monitor and analyse developments in world trade;
to provide information to public and media; and
to organise ministerial conferences.
1.2. Decision Making and Policy Review in the WTO
Article IX (1) of the WTO Agreement states that, 'the WTO shall continue the practice of decision-making by consensus followed under GATT 1947'. The explanatory note to this Article explains that 'the body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision'. A consensus is also required for a decision to grant a waiver in respect of any obligation subject to a transition period or a period for staged implementation that the requesting Member has not performed by the end of the relevant period.
Where a consensus cannot be reached, the WTO can make a decision by a vote. At meetings of the Ministerial Conference and the General Council, each WTO member state has one vote with the European Union having a number of votes equal to (but not more than) the number of its member states that are members of the WTO. Where a vote is required, the decision will be made by simple majority unless it has been provided otherwise under the WTO Agreement or the other Multilateral Trade Agreements. The significance of the vote and its influence on the decision making process can be accounted for under the increasing number of WTO Member States. Under GATT 1947, there were fewer countries and less controversial concessions to be made. This was because the GATT 1947 had only 23 signatories. More than a hundred countries signed the Uruguay Round accords in Marrakesh in April 1994 (with others still adopting the observer status in the GATT). Currently, the Organisation boasts of over a hundred and fifty Members including Least-Developed Countries (LDCs) designated as such by the United Nations.
It is important to bear in mind that the WTO Agreement is a single undertaking binding all its members with the exception of the plurilateral Agreements. As such, countries must comply with the obligations under the Agreement. They cannot elect trade policies contrary to their obligations, an obligation drastically reducing the power of States to determine their economic policies. Thus, in addition to an expanding Membership, the increased interest of various diverse protest groups including media scrutiny in the negotiations of the WTO means there are more interests to pacify. In the early days of the Organisation, Jeffery J Schott commented that:
[...] The WTO will likely suffer from slow and cumbersome policy-making and management — an organization with more than 120 member countries cannot be run by a 'committee of the whole'. Mass management simply does not lend itself to operational efficiency or serious policy discussion [...]
Generally speaking, unless there is a well co-ordinated opposition to decisions which adversely affect the weaker Members of any organisation, the interests of stronger factions will almost always prevail. Fears that countries would lose a hold on their policies and will have their interests and concerns ignored in the face of the ever-expanding free-trade Organisation have been present right from the inception of the WTO. However, some scholars five years after the WTO was established noted that:
The reciprocal influence of the processes taking place in the context of the WTO, in particular encouragement for the multilateral negotiation and development of internationally agreed standards and for practices of dialogue and consultation before the adoption of trade-restrictive action, may provide some (albeit slight) cause for optimism in the face of fears about the growth of a free trade leviathan which increasingly restricts the policy choices not only of individual states, but also of the European Union itself.
The WTO seems to have anticipated the interests of a Member State who considers that it may not be able to carry out the obligations imposed by the Agreement. Article IX:(3) provides that in exceptional circumstances, the Ministerial Conference may decide to waive an obligation imposed on a Member by this Agreement or any of the Multilateral Trade Agreements, provided that any such decision shall be taken by three fourths of the Members. Article IX:4 provides that 'a decision by the Ministerial Conference granting a waiver shall state the exceptional circumstances justifying the decision, the terms and conditions governing the application of the waiver, and the date on which the waiver shall terminate'.
A Member State applying for a waiver must describe the measures it proposes to take, specify the policy objectives it seeks to obtain, and explain why it cannot achieve those objectives without violating its objectives under GATT 1994. In other words, a waiver of obligations under the WTO Agreements must be specific. The measures to be taken in respect to the waiver must be clearly stated making this exception necessarily strict in order to preserve the uniformity of the general obligations undertaken by of all WTO Member States. In EC-Bananas III, the EC (under the Lomé waiver) sought to extend the scope of the waiver granted under GATT Article 1 (Most-Favoured-Nation Treatment) to Article XIII (Non-Discriminatory Administration of Quantitative Restrictions). Overruling the Panel's acceptance that the scope of Article 1 was identical to that of Article XIII, the AB noted:
Although the WTO Agreement does not provide any specific rules on the interpretation of waivers, Article IX of the WTO Agreement and the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994, which provide requirements for granting and renewing waivers, stress the exceptional nature of waivers and subject waivers to strict disciplines. Thus, waivers should be interpreted with great care.
The WTO maintains a list of waivers in three categories: Waivers concerning the Harmonised System; Waivers concerning Regional Trade Agreements; and Other Waivers which concern certain provisions under respective Agreements.
1.3. Dispute Settlement Under the GATT/WTO
At the time the ITO Charter was drafted, there were no elaborate provisions on dispute settlement. Provisions on dispute settlement were incorporated into GATT Articles XXII and XXIII although these provisions were not extensive. 'Consultation' was encouraged between contracting parties and Article XXII provided that there should be a 'sympathetic consideration' to any desires for a consultation by any contracting parties in matters regarding the operation of the GATT. Article XXIII on the other hand, provided for circumstances where any contracting party considered that its benefits under the Agreement were being nullified or impaired due to the failure of another party to carry out its obligations, by the application of any measures, or by the existence of any situation. The provisions did not impose any sanctions but counselled the party complained against to give 'sympathetic consideration to the representations or proposals made to it'.
After the initial consultation, Article XXIII (2) gave the CONTRACTING PARTIES power to investigate and recommend action and to give a ruling on the complaint. It also gave the CONTRACTING PARTIES power to authorise in serious cases the suspension of GATT obligations to other contracting parties.
In Australian Ammonium Sulphate an early case under GATT 1947, 'nullification or impairment' was defined as including actions by a contracting party which harmed the trade of another, and which "could not reasonably have been anticipated" by the other at the time it was negotiated for a concession. Subsequently, the Panel in the dispute – Uruguayan Recourse to Article XXIII while considering the provisions on 'nullification or impairment', was of the view that where measures applied by a contracting party were in conflict with the provisions of the GATT, a prima facie case of nullification or impairment had arisen. It went further to state that while it is not precluded that a prima facie case could arise even where there has been no infringement of the GATT, it was incumbent on the complaining country invoking Article XXIII to give detailed submissions of its grounds or reasons for invoking Article XXIII. The burden of proof then shifted to the accused country asserting that it had not breached Nullification or Impairment provisions.
It is important to note that significant advancements have been made in this area of dispute settlement in international trade relations. At first, diplomatic negotiations were the sole means of dealing with controversies. Then working parties composed of country representatives were established to investigate and formulate recommendations. In 1995, the GATT Contracting Parties began referring disputes to 'Panels', ad hoc groups of experts acting in a neutral capacity. However Panel decisions had no official or binding effect but were referred to the GATT Council which could make the 'appropriate recommendations'.
Apart from a number of shortcomings including the sparse provisions on the dispute settlement process, delays in the formation of panels, the blocking of an unacceptable decision and delays in the implementation of Council recommendations, the dispute settlement process under the GATT was relatively successful. A series of agreements and understandings on dispute settlement were created over the years to formalise the panel procedures. 52To make the dispute settlement process even better, a more comprehensive mechanism was adopted by the WTO in the Understanding on the Rules and Procedures Governing the Settlement of Disputes. Article 3 (1) of the DSU affirms the continued application of Articles XXII and XXIII of GATT 1947.
The primary aim of the WTO dispute settlement mechanism is 'to secure a positive solution to a dispute'. The DSU provides for a variety of dispute settlement mechanisms: Consultations; Good offices, Conciliation and Mediation, Ruling/Recommendation of established Panels, Review by Appellate Body, and Arbitration.
Each covered agreement incorporates its provisions on consultations. A Member's request for consultation under a covered agreement, shall unless mutually agreed be replied to within 10 days after its receipt and consultations entered into within 30 days of receipt of the request. If these terms are not met, the Member requesting consultations may proceed directly to the establishment of a panel. In cases of urgency, including those concerning perishable goods, Members shall enter into consultation within a period of no more than 10 days after receipt of the request. If after 20 days from the date of receipt of the request, the dispute is not settled, the complaining party may request the establishment of a panel. Requests for consultation are notified to the DSB and the relevant Councils and Committees by the requesting Member. Consultations are confidential and without prejudice to the rights of Members in any future proceedings.
1.3.2. Good Offices, Conciliation and Mediation
The Director-General may, acting in an ex-officio capacity, offer any of these means with a view to assisting Members to settle a dispute. The procedures are voluntary, confidential and without prejudice to the rights of either party in any further proceedings under the DSU. They may be requested or terminated at any time. Once terminated, a complaining party may request the establishment of a panel. They may also continue during the course of a panel proceeding.
Excerpted from The WTO and its Development Obligation by Elimma C. Ezeani. Copyright © 2011 Elimma C. Ezeani. Excerpted by permission of Wimbledon Publishing Company.
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Table of Contents
Table of Cases; Table of Statutes and International Agreements; Abbreviations Introduction; Chapter 1: The WTO and the Rules-based System; Chapter 2: Development and the WTO Approach; Chapter 3: Developing Country Integration; Chapter 4: Judicial Review of the Development Question; Chapter 5: The Way Forward - Multilateral Co-operation and Internal Reform; Conclusion; Appendix 1 (Selected Case Study): Obligations and Challenges Under the WTO Agreement on Sanitary and Phytosanitary Standards; Bibliography
What People are Saying About This
'This book adopts an interdisciplinary perspective, taking the law of the WTO as its foundation, but also delving into questions of political economy, international relations, and development studies. A significant contribution to the debate on trade and development, and the role of the WTO.' —Piet Eeckhout, Director of the Centre of European Law, Kings College London