Business Law

World Trade Organization (WTO)

Written by:
359233 - NARENDRA P A
359251 - EDRILLE EZRA H PAKPAHAN
361160 - ACHMAD FAIZAL AZMI
361180 - THESA PERFECIANA KUSUSMA
361200 - TIMOTHY JEVON LIEANDER
361208 - MUHAMMAD RISANG B W
365458 - IMANUEL ABRI UTOMO
Thursday, March 31st 2016

Business Law Summary: World Trade Organization

WTO Symbol

Source: google.com, wto.org, en. wikipedia.org

WTO Round Bali Package

Source: google.com, wto.org, en. wikipedia.org

Notable People of WTO

The World Trade Organization (WTO) is an

intergovernmental organization which regulates international
trade. The WTO officially commenced on 1 January 1995 under
the Marrakesh Agreement, signed by 123 nations on 15 April
1994, replacing the General Agreement on Tariffs and Trade
(GATT), which commenced in 1948. In one hand, The WTO
regulates the trade between participating countries by
providing a framework for negotiating 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 (19861994).
The WTO is attempting to complete negotiations on the
Doha Development Round, which was launched in 2001 with
an explicit focus on developing countries. As of June 2012, the
future of the Doha Round remained uncertain: the work
program lists 21 subjects in which the original deadline of 1
January 2005 was missed, and the round is still incomplete.
Even though the stalemate condition is an appropriate way to
view the latest progress of the Doha Development round; the
work is still trying to make the new resolutions regarding to the
controversies of the Industrial economic world (developed
countries) and the agricultural economic world (developing
countries). The WTO's current Director-General is Roberto
Azevdo, who leads a staff of over 600 people in Geneva,
Switzerland. A trade facilitation agreement known as the Bali
Package was reached by all members on 7 December 2013, the
first comprehensive agreement in the organization's history.

History
The notable people of WTO such as the economists Harry
White (left) and John Maynard Keynes at the Bretton Woods
Conference. Both had been strong advocates of a centralcontrolled 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).
Source: google.com, wto.org, en. wikipedia.org

Headquarter of WTO

The main building of the WTO Headquarter known as the

Centre William Rappard, was constructed on an estate which
was gradually formed by the union of a number of plots of land
between 1755 and 1893. In 1785, construction began on the
Villa Rappard, the house that still stands next to the main WTO
building and today houses a Montessori school. In 1921, the
Swiss Confederation acquired the estate and offered it to the
League of Nations, which designated the site for construction
of a headquarters for the International Labor Office.
Both bodies had been created in 1919 with the signing of the
Treaty of Versailles, which formally ended World War II. The
GATT (General Agreement on Tariffs and Trade) came into
being in 1947 as a result of the Bretton Woods Agreement,
which also created the World Bank and the International
Monetary Fund.

Source: wto.org, en. wikipedia.org

Treaty of Versailles

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. ITO was built as a
previous world-wide trade organization to be a United Nations
specialized agency and would address not only trade barriers
but other issues indirectly related to trade which includes
employment, investment, restrictive business practices, and
commodity agreements. In the other hand, 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.

GATT rounds of negotiations

The GATT was the only multilateral instrument governing
international trade from 1946 until the WTO was established
on 1 January 1995. Despite attempts in the mid-1950s and
1960s to create some form of institutional mechanism for
international trade, the GATT continued to operate for almost
half a century as a semi-institutionalized multilateral treaty
regime on a provisional basis.
From Geneva to Tokyo
Source: google.com, wto.org, en. wikipedia.org

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

Doha Round Notable Person

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.
Uruguay Round

Source: en. wikipedia.org

GATT Logo

Source: google.com

GATT 1994 Marrakesh Agreement

Source: en. wikipedia.org

During the Doha Round, the US government blamed Brazil and

India for being inflexible and the EU for impeding agricultural
imports. The then-President of Brazil, Luiz Incio Lula da Silva
(above right), responded to the criticisms by arguing that
progress would only be achieved if the richest countries
(especially the US and countries in the EU) made deeper cuts in
agricultural subsidies and further opened their markets for
agricultural goods.
Before the 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 15 April 1994, during
the ministerial meeting at Marrakesh, Morocco, and hence is
known as the Marrakesh Agreement.

GATT 1994 - Uruguay Round

Source: google.com

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 World Trade Organization Ministerial

Conference of 1998, in the Palace of Nations
(Geneva, Switzerland).

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
(GATS)
Intellectual property the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS)
Dispute settlement (DSU)
Reviews of governments' trade policies (TPRM)

Source: en.wikipedia.org

The highest 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.
WTO Ministerial Conference - Hong Kong

Source: google.com

WTO Ministerial Conference - Doha

The inaugural ministerial conference (1996) was held in

Singapore.
The second ministerial conference (1998) was held in Geneva
in Switzerland.
The third conference (1999) in Seattle, Washington .
The fourth ministerial conference (2001) was held in Doha in
the Persian Gulf nation of Qatar; The conference also approved
the joining of China, which became the 143rd member to join.
The fifth ministerial conference (2003) was held in Cancn,
Mexico, aiming at forging agreement on the Doha round.
The sixth WTO ministerial conference (2005) was held in Hong
Kong; tariff lines exempted.

Doha Round (Doha Agenda)

The Doha Development Round started in 2001 is at an impasse.

Source: en.wikipedia.org

The WTO launched the current round of negotiations, the Doha

Development Round, at the fourth ministerial conference in
Doha, Qatar in 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.

FUNCTION
The World Trade Organization is also known as WTO. The main functions of the WTO are

To oversee the implementation, administration and operation of covered

agreement and also to provide forum for negotiations and also for settling
disputes.
Review and propagate the national trade policies which means that they have an
obligation to help advertise the national trade policies. The WTO also have an
obligation to assist developing the least-developed and low income country that is
trying to adjust to the rules of WTO. They are obliged to do this by providing
technical cooperation and also to provide training.

In addition to these functions, there is also another set of function which is called the
additional functions. These additional function consists of:
The WTO must facilitate the implementation, administration and operation and further

the objectives this Agreement and of the Multilateral Trade Agreements, and shall also
provide the framework for the implementation, administration and operation of the
Multilateral Trade Agreement.
The WTO is also obligated to provide the forum for negotiations among its member state
concerning multilateral trade relations in matter that dealt under the Agreement in the
Annexes to this Agreement.
The WTO shall administer the Understanding on Rules and Procedure Governing the
Settlement of Disputes
The WTO shall administer Trade Policy Review Mechanism
With a view to achieving greater coherence in global economic policy making, the WTO
shall cooperate, as appropriate, with the International Monetary Fund (IMF) and with the
International Bank for Reconstruction and Development (IBRD) and its affiliate agency
WTO Countries (Green and Blue)

Source: en.wikipedia.org

The WTO also functions

as a center for
economic research and
analysis for regular
assessments of the
global trade picture in
its annual publication
and research reports on
specific topics are
produced by the
organization. And last
but not least the WTO
cooperates with the
Bretton Woods system
which consists of the
IMF and the World
Bank.

PRINCIPLE
The WTO establishes a framework for trade policies; it does not define or specify
outcome. It is concerned with setting the rules of the trade policy games. The five principle
of WTO are:

1. Non-discrimination: Non-discrimination is divided into two major components which is

the Most Favored Nation (MFN) and also the national treatment policy. The difference
between these two is that the MFN rule requires WTO member must apply the same
condition on all trade with WTO member. On the other hand National Treatment
means that imported goods should be treated no less favorably than domestically
produced 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 from unilateral liberalization; reciprocal
concessions intend to ensure that such gains will materialize.

3. Transparency: Members of WTO is required to publish their trade regulations, to

maintain a facility for reviewing decision making that will affect trade, to respond to
information by other nation and notify if there is any changes in trade policies by WTO

4. 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.

5. Safety Valves: 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.

Organizational Structure and Decision Making

The WTO is run by its member governments. All major decisions are made by the membership
as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or
delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.
When WTO rules impose disciplines on countries policies that is the outcome of negotiations
among WTO members. The rules are enforced by the members themselves under agreed procedures
that they negotiated, including the possibility of trade sanctions. But those sanctions are imposed by
member countries, and authorized by the membership as a whole. There are four stages of the
decision making hierarchy the first is and the highest authority is The Ministerial Conference.
The Ministerial Conference has to meet at least once every two years. The Ministerial
Conference can take decisions on all matters under any of the multilateral trade agreements.

The second is General Council in three guises. Day-to-day work in between the ministerial
conferences is handled by three bodies:
- The General Council
- The Dispute Settlement Body
- The Trade Policy Review Body
All three are in fact the same the Agreement Establishing the WTO states they are all the
General Council, although they meet under different terms of reference. Again, all three consist of all
WTO members. They report to the Ministerial Conference.
The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It meets
as the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures for settling
disputes between members and to analyze members trade policies.
The third is Councils for each broad area of trade, and more. Three more councils, each
handling a different broad area of trade, report to the General Council:
- The Council for Trade in Goods (Goods Council)
- The Council for Trade in Services (Services Council)
- The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)
As their names indicate, the three are responsible for the workings of the WTO agreements
dealing with their respective areas of trade. Again they consist of all WTO members. The three also
have subsidiary bodies. The scope of their coverage is smaller, so they are committees. But they still
consist of all WTO members. They cover issues such as trade and development, the environment,
regional trading arrangements, and administrative issues. The Singapore Ministerial Conference in
December 1996 decided to create new working groups to look at investment and competition policy,
transparency in government procurement, and trade facilitation.
The Fourth level are the committees that make up the subsidiary of the councils above. The
Goods Council has 11 committees dealing with specific subjects (such as agriculture, market access,
subsidies, anti-dumping measures and so on). Again, these consist of all member countries. Also
reporting to the Goods Council is the Textiles Monitoring Body, which consists of a chairman and 10
members acting in their personal capacities, and groups dealing with notifications (governments
informing the WTO about current and new policies or measures) and state trading enterprises.
The Services Councils subsidiary bodies deal with financial services, domestic regulations,
GATS rules and specific commitments.
At the General Council level, the Dispute Settlement Body also has two subsidiaries: the
dispute settlement panels of experts appointed to adjudicate on unresolved disputes, and the
Appellate Body that deals with appeals.

Accession and Membership

ACCESSION
Article XII of the WTO Agreement states that accession to the WTO will be on terms to be
agreed between the acceding government and the WTO. Accession to the WTO is
essentially a process of negotiation quite different from the process of accession to
other international entities, like the IMF, which is largely an automatic process.

Because each accession Working Party takes decisions by consensus, all interested WTO
Members must be in agreement that their individual concerns have been met and that
outstanding issues have been resolved in the course of their bilateral and multilateral
negotiations.
All documentation examined by the accession Working Party during the process of
negotiation remains restricted until completion of the process.

Who can apply

Any state or customs territory having full autonomy in the conduct of its trade policies is
eligible to accede to the WTO on terms agreed between it and WTO Members. (Article XII
of the WTO Agreement).

The request for accession

The accession process commences with the submission of a formal written request for
accession by the applicant government. This request is considered by the General Council
which establishes a Working Party to examine the accession request and, ultimately, to
submit the findings of the Working Party to the General Council for approval. The Working
Party is open to all Members of the WTO.

Submission of a memorandum on the foreign trade regime

The applicant government presents a memorandum covering all aspects of its trade and
legal regime to the Working Party. This memorandum forms the basis for detailed fact
finding by the Working Party
Subsequent Working Party meetings will see the examination of questions posed by WTO
Members based on the information provided in the memorandum and the replies
provided by the applicant government.

Conditions of entry
After examining all aspects of the existing trade and legal regimes of the acceding
government the Working Party goes into the substantive part of the multilateral
negotiations involved in accessions. This determines the terms and conditions of entry for
the applicant government. Terms and conditions include commitments to observe WTO
rules and disciplines upon accession and transitional periods required to make any
legislative or structural changes where necessary to implement these commitments.

Bilateral negotiations
At the same time, the applicant government engages in bilateral negotiations with
interested Working Party members on concessions and commitments on market access

for goods and services. The results of these bilateral negotiations are consolidated into a
document which is part of the final accession package.

The final accession package

The accession package consists of three documents which represent the results of both
the multilateral and bilateral phases outlined above. These are:

a Report of the Working Party containing a summary of proceedings and

conditions of entry and a Protocol of Accession.

Schedules of market access commitments in goods and services agreed between

the acceding government and WTO Members.

Approval of the accession package

Once both the Working Party's Draft Report and Protocol of Accession and the market
access commitments in goods and services are completed to the satisfaction of members
of the Working Party, the accession package is adopted at a final formal meeting of the
Working Party.
The documents are then presented to the General Council or the Ministerial Conference
for adoption. Once approved by the General Council or the Ministerial Conference, the
accessions package is redistributed as a non-restricted document.
Two final documents will be issued:

The Decision of the General Council

The Protocol of Accession of the new entrant a Protocol of Accession annexed to
the Report which states that the country accedes to the WTO Agreement, defines
the Schedules and outlines final provisions for timing of acceptance of the
Protocol and full membership of the WTO.

Becoming a full member

Once approved by the General Council of Ministerial Conference, the applicant is then
free to sign the Protocol of Accession stating that it accepts the approved accessions
package subject to ratification in its national parliament. Normally three months is given
from signature of the Protocol of Accession for this to take place.
Thirty days after the applicant government notifies the WTO Secretariat that it has
completed its ratification procedures, the applicant government becomes a full Member
of the WTO.

Dispute Settlements and Agreements

A.

Importance of the WTO dispute settlement system

The best international agreement is not worth very much if its obligations cannot be enforced
when one of the signatories fails to comply with such obligations. An effective mechanism to
settle disputes thus increases the practical value of the commitments the signatories undertake
in an international agreement. The fact that the Members of the (WTO) established the current
dispute settlement system during the Uruguay Round of Multilateral Trade Negotiations
underscores the high importance they attach to compliance by all Members with their
obligations under the WTO Agreement.
Settling disputes in a timely and structured manner is important. It helps to prevent the
detrimental effects of unresolved international trade conflicts and to mitigate the imbalances
between stronger and weaker players by having their disputes settled on the basis of rules rather
than having power determine the outcome. Most people consider the WTO dispute settlement
system to be one of the major results of the Uruguay Round. After the entry into force of the
WTO Agreement in 1995, the dispute settlement system soon gained practical importance as
Members frequently resorted to using this system.
B. The Dispute Settlement Understanding
The current dispute settlement system was created as part of the WTO Agreement during
the Uruguay Round. It is embodied in the Understanding on Rules and Procedures Governing the
Settlement of Disputes, commonly referred to as the Dispute Settlement Understanding and
abbreviated DSU (referred to as such in this guide). The DSU, which constitutes Annex 2 of the
WTO Agreement, sets out the procedures and rules that define todays dispute settlement
system. It should however be noted that, to a large degree, the current dispute settlement
system is the result of the evolution of rules, procedures and practices developed over almost
half a century under the GATT 1947.

C. Functions, objectives and key features of the dispute settlement system

Providing security and predictability to the multilateral trading system
A central objective of the (WTO) dispute settlement system is to provide security and
predictability to the multilateral trading system (Article 3.2 of the DSU). Although international
trade is understood in the WTO as the flow of goods and services between Members, such trade
is typically not conducted by States, but rather by private economic operators. These market
participants need stability and predictability in the government laws, rules and regulations
applying to their commercial activity, especially when they conduct trade on the basis of longterm transactions. In light of this, the DSU aims to provide a fast, efficient, dependable and ruleoriented system to resolve disputes about the application of the provisions of the WTO
Agreement. By reinforcing the rule of law, the dispute settlement system makes the trading
system more secure and predictable. Where non-compliance with the WTO Agreement has been
alleged by a WTO Member, the dispute settlement system provides for a relatively rapid
resolution of the matter through an independent ruling that must be implemented promptly, or
the non-implementing Member will face possible trade sanctions.
Preserving the rights and obligations of WTO Members
Typically, a dispute arises when one WTO Member adopts a trade policy measure that one or
more other Members consider to be inconsistent with the obligations set out in the WTO

Agreement. In such a case, any Member that feels aggrieved is entitled to invoke the procedures
and provisions of the dispute settlement system in order to challenge that measure.
If the parties to the dispute do not manage to reach a mutually agreed solution, the complainant
is guaranteed a rules-based procedure in which the merits of its claims will be examined by an
independent body (panels and the Appellate Body). If the complainant prevails, the desired
outcome is to secure the withdrawal of the measure found to be inconsistent with the WTO
Agreement. Compensation and countermeasures (the suspension of obligations) are available
only as secondary and temporary responses to a contravention of the WTO Agreement (Article
3.7 of the DSU).
Thus, the dispute settlement system provides a mechanism through which WTO Members can
ensure that their rights under the WTO Agreement can be enforced. This system is equally
important from the perspective of the respondent whose measure is under challenge, since it
provides a forum for the respondent to defend itself if it disagrees with the claims raised by the
complainant. In this way, the dispute settlement system serves to preserve the Members rights
and obligations under the WTO Agreement (Article 3.2 of the DSU). The rulings of the bodies
involved (the DSB the Appellate Body, panels and arbitrations1) are intended to reflect and
correctly apply the rights and obligations as they are set out in the WTO Agreement. They must
not change the WTO law that is applicable between the parties or, in the words of the DSU, add
to or diminish the rights and obligations provided in the WTO Agreements (Articles 3.2 and 19.2
of the DSU).
Clarification of rights and obligations through interpretation
The precise scope of the rights and obligations contained in the WTO Agreement is not always
evident from a mere reading of the legal texts. Legal provisions are often drafted in general
terms so as to be of general applicability and to cover a multitude of individual cases, not all of
which can be specifically regulated. Whether the existence of a certain set of facts gives rise to
a violation of a legal requirement contained in a particular provision is, therefore, a question
that is not always easy to answer. In most cases, the answer can be found only after
interpreting the legal terms contained in the provision at issue.
In addition, legal provisions in international agreements often lack clarity because they are
compromise formulations resulting from multilateral negotiations. The various participants in a
negotiating process often reconcile their diverging positions by agreeing to a text that can be
understood in more than one way so as to satisfy the demands of different domestic
constituents. The negotiators may thus understand a particular provision in different and
opposing ways.
For those reasons, as in any legal setting, individual cases often require an interpretation of the
pertinent provisions. One might think that such an interpretation cannot occur in (WTO) dispute
settlement proceedings because Article IX:2 of the WTO Agreement provides that the Ministerial
Conference and the General Council of the WTO have the exclusive authority to adopt
interpretations of the WTO Agreement. However, the DSU expressly states that the dispute
settlement system is intended to clarify the provisions of the WTO Agreement in accordance
with customary rules of interpretation of public international law
The DSU, therefore, recognizes the need to clarify WTO rules and mandates that this
clarification take place pursuant to customary rules of interpretation. In addition, Article
17.6 of the DSU implicitly recognizes that panels may develop legal interpretations. The
exclusive authority of the WTO Agreement must therefore be understood as the possibility to
adopt authoritative interpretations that are of general validity for all WTO Members unlike
interpretations by panels and the Appellate Body, which are applicable only to the parties and
to the subject matter of a specific dispute. Accordingly, the DSU mandate to clarify WTO rules is

without prejudice to the rights of Members to seek authoritative interpretations under Article
IX:2 of the WTO Agreement .
As regards the methods of interpretation, the DSU refers to the customary rules of
interpretation of public international law (Article 3.2 of the DSU). While customary
international law is normally unwritten, there is an international convention that has codified
some of these customary rules of treaty interpretation. Notably, Articles 31, 32 and 33 of the
Vienna Convention on the Law of Treaties embody many of the customary rules of interpretation
of public international law. While the reference in Article 3.2 of the DSU does not refer directly
to these Articles, the Appellate Body has ruled that they can serve as a point of reference for
discerning the applicable customary rules .The three Articles read as follows
1

Mutually Agreed Solutions as Preferred Solution - Although the dispute settlement system
is intended to uphold the rights of aggrieved Members and to clarify the scope of the rights and
obligations, which gradually achieves higher levels of security and predictability, the primary
objective of the system is not to make rulings or to develop jurisprudence. Rather, like other
judicial systems, the priority is to settle disputes, preferably through a mutually agreed solution
that is consistent with the WTO Agreement (Article 3.7 of the DSU). Adjudication is to be used
only when the parties cannot work out a mutually agreed solution. By requiring
formal consultations as the first stage of any dispute, the DSU provides a framework in which
the parties to a dispute must always at least attempt to negotiate a settlement. Even when the
case has progressed to the stage of adjudication, a bilateral settlement always remains possible,
and the parties are always encouraged to make efforts in that direction (Articles 3.7 and 11 of
the DSU).
Prompt settlement of disputes - The DSU emphasizes that prompt settlement of disputes is
essential if the (WTO) is to function effectively and the balance of rights and obligations
between the Members is to be maintained .It is well known that, to be achieved, justice must
not only provide an equitable outcome but also be swift. Accordingly, the DSU sets out in
considerable detail the procedures and corresponding deadlines to be followed in resolving
disputes. The detailed procedures are designed to achieve efficiency, including the right of a
complainant to move forward with a complaint even in the absence of agreement by the
respondent. If a case is adjudicated, it should normally take no more than one year for a panel
ruling and no more than 16 months if the case is appealed. If the complainant deems the case
urgent, consideration of the case should take even less time.
These time-frames might still appear long, considering that time for implementation will have
to be added after the ruling. Also, for the entire duration of the dispute, the complainant may
still suffer economic harm from the challenged measure; and even after prevailing in dispute
settlement, the complainant will receive no compensation for the harm suffered before the
time by which the respondent must implement the ruling.
However, one must take into account that disputes in the WTO are usually very complex in both
factual and legal terms. Parties generally submit a considerable amount of data and
documentation relating to the challenged measure, and they also put forward very detailed
legal arguments. The parties need time to prepare these factual and legal arguments and to
respond to the arguments put forward by the opponent. The panel (and the Appellate Body)
assigned to deal with the matter needs to consider all the evidence and arguments, possibly
hear experts, and provide detailed reasoning in support of its conclusions. Considering all these
aspects, the dispute settlement system of the WTO functions relatively fast and, in any event,
much faster than many domestic judicial systems or other international systems of adjudication.
Prohibition against unilateral determinations
WTO Members have agreed to use the multilateral system for settling their WTO trade disputes
rather than resorting to unilateral action (Article 23 of the DSU). That means abiding by the
agreed procedures and respecting the rulings once they are issued and not taking the law into
their own hands.

If Members were to act unilaterally, this would have obvious disadvantages that are well known
from the history of the multilateral trading system. Imagine that one Member accuses another
Member of breaking WTO rules. As a unilateral response, the accusing Member could decide to
take a countermeasure, i.e. to infringe WTO obligations with regard to the other Member (by
erecting trade barriers). Under traditional international law, that Member could argue that it
has acted lawfully because its own violation is justified as a countermeasure in response to the
other Members violation that had occurred first. If, however, the accused Member disagrees on
whether its measure truly infringes WTO obligations, it will not accept the argument of a
justified countermeasure. On the contrary, it may assert that the countermeasure is illegal and,
on that basis, it may feel justified in taking a countermeasure against the first countermeasure.
The original complainant, based on its legal view on the matter, is likely to disagree and to
consider that second countermeasure illegal. In response, it may adopt a further
countermeasure. This shows that, if the views differ, unilateral actions are not able to settle
disputes harmoniously. Things may spiral out of control and, unless one of the parties backs
down, there is a risk of escalation of mutual trade restrictions, which may result in a trade
war.
To prevent such downward spirals, the DSU mandates the use of a multilateral system of dispute
settlement to which WTO Members must have recourse when they seek redress against another
Member under the WTO Agreement (Article 23.1 of the DSU). This applies to situations in which
a Member believes that another Member violates the WTO Agreement or otherwise nullifies or
impairs benefits under the WTO Agreements or impedes the attainment of an objective of one
of the agreements.
1

In such cases, a Member cannot take action based on unilateral determinations that any of these
situations exist, but may only act after recourse to dispute settlement under the rules and
procedures of the DSU. Whatever actions the complaining Member takes, it may only take them
based on the findings of an adopted panel or Appellate Body report or arbitration award (Article
23.2(a) of the DSU). The Member concerned must also respect the procedures foreseen in the
DSU for the determination of the time and impose countermeasures only on the basis of an
authorization by the DSB (Article 23.2(b) and (c) of the DSU). This excludes unilateral actions
such as those described above.
Exclusive jurisdiction- By mandating recourse to the multilateral system of the WTO for the
settlement of disputes, Article 23 of the DSU not only excludes unilateral action, it also
precludes the use of other fora for the resolution of a WTO-related dispute.
Compulsory nature- The dispute settlement system is compulsory. All WTO Members are
subject to it, as they have all signed and ratified the WTO Agreement as a single undertaking ,
of which the DSU is a part. The DSU subjects all WTO Members to the dispute settlement system
for all disputes arising under the WTO Agreement. Therefore, unlike other systems of
international dispute resolution, there is no need for the parties to a dispute to accept the
jurisdiction of the WTO dispute settlement system in a separate declaration or agreement. This
consent to accept the jurisdiction of the WTO dispute settlement system is already contained in
a Members accession to the WTO. As a result, every Member enjoys assured access to the
dispute settlement system and no responding Member may escape that jurisdiction.
2

Criticism
1. WTO benefits for developed countries than developing countries, hurts poor countries
The aim of World Trade Organization (WTO) is to ensure that the trade flows as smoothly,
predictably, and freely as possible. However, WTO does not claim to be a free market
organization. The implementation usually does allow tariffs and protection. The WTO itself
actually give more benefits toward developed countries than developing countries. The
domination of international trade by rich countries in order to fulfil their individual
interest. It is argued that the developing countries need some trade protection to be able
to develop the new industries. In addition, it has been argued that the WTO being unfair

and ignoring the needs of developing countries as the developing countries that need to
diversify into another sector, as they more specialize in the primary product such as
agricultural products, need some tariff protection for at least short term period.
There are some of suggestion regarding the criticism of WTO in giving more benefits
towards developed countries rather than developing countries. The increase of non-tariff
barriers such as anti-dumping measures allowed actually against the developing countries.
The rich countries are able to maintain high import duties and quotas in certain products,
while blocking the imports from developing countries. In addition, The Agreement on
Trade-Related Aspects of Intellectual Property Rights, limits the developing countries from
utilizing some technology that originates from abroad in their local systems.
Martin Khor argues that the WTO does not manage the global economy impartially, but in
its operation has a systematic bias toward rich countries and multinational corporations,
harming smaller countries which have less negotiation power. To build real global security,
we need international agreements that respect peoples rights to democracy and trade
systems that promote global justice.
2.

WTO tends to be more undemocratic

World Trade Organization (WTO) is criticized for being fundamentally undemocratic. The
lack of transparency is often seen as a problem for democracy. Politicians can negotiate
for regulations that would not be possible or accepted in a democratic process in their
own nations. The policy of WTO genuinely give impacts toward all aspect of society.
However, in reality, the rules are written by and only for corporation who can make
access to the negotiations. The citizen input does not get attention or even consistently
ignored. The structure enables the richer country to win what their interest or desire. It
seems to be more private or exclusive for the rich countries.

3.

WTO destroying the environment

Free trade has often ignored environmental considerations. e.g. Free trade has enabled
imports to be made from countries with the least environmental protection. The WTO is
being used by corporations to dismantle hard-won local and national environmental
protections, which are attacked as barriers to trade. The WTO is attempting to
deregulate industries including logging, fishing, water utilities, and energy distribution,
which will lead to further exploitation of these natural resources. The WTO declared
illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be
caught with an inexpensive device allowing endangered sea turtles to escape. In the
absence of proper environmental regulation and resource management, increased trade
might cause so much adverse damage that the gains from trade would be less than the
environmental costs. Labor unions condemn the labor rights record of developing
countries, arguing that to the extent the WTO succeeds at promoting globalization, then
in equal measure do the environment and labor rights suffer

4.

Decision Making
WTO requires all countries to treat each other and treat all corporation equally.
Developing countries are prohibited to create local laws that developed countries once
pursued, such as protecting new, domestic industries until they can be internationally

competitive. As mentioned before that WTO supposed to operate on consensus basis,

with equal decision-making power for all. However, practically many important decisions
are not involving the poor countries and they did not even know were being discusses.
Many countries not even have enough trade personnel to participate in all the
negotiations or to even have a permanent representative at the WTO meeting. It would
give disadvantages to the poor countries as they are unable to give or present their
interest.
Dr Raoul Marc Jennar argues that a consultative parliamentary assembly would be
ineffective for the following reasons:
It does not resolve the problem of "informal meetings" whereby industrialized

countries negotiate the most important decisions;

It does not reduce the de facto inequality which exists between countries with regards

to an effective and efficient participation to all activities within all WTO bodies;
It does not rectify the multiple violations of the general principles of law which affect

the dispute settlement mechanism

Office of WTO and the Influential General Director

Peter Sunterland (First WTO General-Director)
In 1993, he became Director General of the General
Agreement on Tariffs and Trade (now the World Trade
Organisation). Later Mickey Kantor, the US Trade Minister,
credited him with being the father of globalization and said
that without him there would have been no WTO. The
Uruguay round of global trade talks, concluded in December
1993 with Sutherland as chair of GATT, produced a
"comprehensive", rules-based and global trade
regime,which was the biggest trade agreement in history
and established the World Trade Organisation. His integral
role in the successful conclusion of these negotiations has
been cited as "indispensable".Chairing the Uruguay Round,
Sutherland "employed tactics the likes of which had never
been seen before in GATT. He worked to create the sense of
unstoppable momentum" by mobilising the press and media
and instigating "a more aggressive public relations than the
staid GATT had ever before seen".

Roberto Azevdo (Current WTO General-Director)

In May 2013 Azevdo was announced to be the sixth
Director-General of the WTO. During his time as DirectorGeneral, Ambassador Azevdo has overseen two
successful WTO Ministerial Conferences in Bali in 2013
and Nairobi in 2015 which delivered a series of
significant outcomes in support of growth and
development. The package of outcomes delivered in Bali
contained a range of decisions on agriculture issues,
support for least developed countries and the Trade
Facilitation Agreement, which was the first multilateral
agreement delivered by the WTO.
During his tenure Ambassador Azevdo has prioritised
efforts to increase the trading capacity of developing and
least-developed countries. Along with advances in
negotiations, he hosted the 5th Global Review of Aid for
Trade in 2015, supported the renewal of the Enhanced
Integrated Framework into its second phase, which
began in January 2016, and created the Trade Facilitation
Agreement Facility to ensure that developing and leastdeveloped countries can access the support they need to
implement the Agreement. As Director-General,
Ambassador Azevdo has also overseen the expansion of
the WTO membership, with the accessions of Yemen,
Seychelles, Kazakhstan, Liberia and Afghanistan. In
addition, he has taken steps to strengthen the WTO
Secretariat, putting in place a range of reforms to
improve the service provided for WTO Members (while
also meeting budgetary goals set by Members), including
by increasing resources in the dispute settlement
system.