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Chapter 1 Objectives and Organisation of The WTO: 1.1 What Is The World Trade Organization?
Chapter 1 Objectives and Organisation of The WTO: 1.1 What Is The World Trade Organization?
of the WTO
After reading this chapter you will be able to:
• Understand the objectives and structures of the WTO
• Explain the main features of the Dispute Settlement Mechanism
• Describe how one NGO has used the Trade Policy Review Mechanism to raise its concerns
• Evaluate the human rights risks for a small country applying to join the WTO
• Explain why it is important to distinguish between the WTO Secretariat and its Members
Preamble (extracts)
Recognizing further that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure a
share in the growth in international trade commensurate with the needs of their
economic development.
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• realizing these aims consistently with sustainable development and environmental protec-
tion
• ensuring that developing countries, especially the least developed countries (LDCs), se-
cure a proper share in the growth of international trade.
However, since its creation the WTO’s emphasis has slipped from concentrating on these
public interest goals to seeing itself primarily as ‘an organization for liberalizing trade,’ and
declaring that ‘the system’s overriding purpose is to help trade flow as freely as possible.’1
This has been the source of one of the fundamental tensions surrounding the mandate and
activities of the organization. Some (such as developing countries and non-governmental organi-
zations) would like to see added emphasis on the public interest goals, whilst others (private
companies and some industrialized countries, for instance) favour faster removal of obstacles to
free trade.
Today, an increasing number of voices are being raised to underline that free trade should not
be an end in itself, but rather a tool to achieve equitable development and a better world. That the
WTO’s public interest objectives remain out of reach of many has drawn criticism that the or-
ganization is dominated by rich countries, functions in a secretive manner, and helps feed the
greed of the rich in the name of trade liberalization.
That the purpose of the world trade regime is to raise living standards all around the world – rather than to
maximize trade per se – has never been controversial. In practice, however, these two goals – promoting devel-
opment and maximizing trade – have come to be increasingly viewed as synonymous by the WTO and multilateral
lending agencies, to the point where the latter easily substitutes for the former … the net result is a confounding
of ends and means.
Dani Rodrik, The Global Governance of Trade as if Development Really Mattered, 2001.
Asia’s experience [of gradual liberalization only after an initial period of high growth] highlights a deeper point. A
sound overall development strategy that produces high economic growth is far more effective in achieving inte-
gration with the world economy than a purely integrationist strategy that relies on openness to work its magic. A
relatively protected economy like Vietnam is integrating with the world economy much more rapidly than an
open economy like Haiti because Vietnam, unlike Haiti, has a reasonably functional economy and polity.
Dani Rodrik, “Trading in Illusions,” Foreign Policy, March/April 2001.
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Chapter 1 – Objectives and Organisation
All the WTO’s legal texts are part and parcel of the so-called ‘single undertaking’ of the WTO Words in bold in the text
agreements: Members cannot pick and choose among the agreements but are bound by the pack- refer to terms explained
age as a whole, with the exception of the two plurilateral agreements (see Box 1.2). in the glossary (Annex I)
Box 1.3 indicates the bodies responsible for carrying out the above functions. All Members
may participate in all councils, committees, etc, except the Appellate Body, the Dispute Settle-
ment panels, Textiles Monitoring Body, and plurilateral committees.
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Chapter 1 – Objectives and Organisation
for ministers to decide upon during the Conference, usually leaving the most contentious issues Groups wishing to influ-
to be determined at the ministerial level. ence the content of
In practice, only issues concerning the strategic directions of the WTO are decided there, the Ministerials’ documents
bulk of the WTO’s work being carried out by councils and committees that meet throughout the must start their work
year in Geneva. many months before the
NGOs who can demonstrate genuine interest in trade are eligible for accreditation to Ministerial Conference.
Ministerials, which is not the case for other WTO bodies. Almost 800 NGOs – including busi- See Chapter 7.3 for
ness groups – were accredited to participate in the Cancún Ministerial Conference. However, considerations as to
unlike the UN, where the Credentials Committee of ECOSOC has clear procedures for granting whether it is worth while
NGOs consultative status, the WTO’s selection criteria are not clearly defined, and remain ad for your NGO to apply to
hoc. Since the Seattle Ministerial Conference in 1999, which saw unprecedented street protests, attend a Ministerial.
the WTO Secretariat has placed increasingly strict controls on the number of accredited NGO
personnel that may attend. In Doha in 2001, each accredited NGO was allowed only two passes
to enter the Conference site; in Cancún, NGOs were only allowed one.
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Chairpersons of negotiat- • it supervises the overall conduct of negotiations such as the Doha Work Programme (see
ing groups (names avail- Chapter 3.5). Since the Trade Negotiations Committee (TNC) was set up to carry out the
able at www.wto.org) Doha negotiations, the General Council has regularly reviewed its work under a standing
under the Doha Work agenda item. The TNC reports to each regular meeting of the General Council on the ac-
Programme, for instance, tivities of its negotiating groups.
can be influential in • The General Council also deals with systemic issues (such as selection of Directors-Gen-
organizing the negotia- eral and external transparency), and performs specific tasks assigned to it by the Minis-
tions, setting interim terial Conference.
deadlines, and producing
draft texts which can
frame further discus- 1.7 The Dispute Settlement Mechanism
sions.
The Dispute Settlement Mechanism (DSM) is a quasi-judicial system for resolving trade dis-
putes. The Dispute Settlement Body (DSB) can authorize trade retaliation measures, or ‘suspen-
sion of concessions’ in WTO jargon if Members do not comply with DSM panel or Appellate
Body rulings. This particular enforcement mechanism of the WTO regime, though a last resort,
remains unique among international tribunals.
The DSB is composed of all WTO Members. Its functions are:
• to establish panels which examine the case in dispute
• to appoint the members of the standing Appellate Body
• to adopt reports of panels and the Appellate Body (the body which deals with appeals)
• to monitor implementation of rulings and recommendations
• to authorize sanctions or retaliation measures under the WTO agreements
• to adjudicate cases on textiles and clothing if they are not resolved by the Textiles Monitor-
ing Body (TMB), the only other WTO body dealing with disputes
The WTO dispute settlement mechanism is arguably more efficient and effective than almost
any other international tribunal dealing with non-criminal matters. The DSM sets clear time-
frames for different stages in resolving trade disputes among Members, which avoids cases drag-
ging on for a long time. It usually takes between 12 to 18 months to settle a dispute, but the
application of rulings often takes longer.
The system nevertheless seems slow to traders, especially when the disputed measures are
temporary in nature. For example, the US decision to impose temporary (for three years) higher
tariffs on certain steel products triggered a dispute case in March 2002. By the time the DSB
made a final decision in December 2003 that the measures were illegal, the higher tariffs had
been in place for 19 months, long enough for significant harm to have been caused to countries
and companies exporting steel to the US.
It is also worth noting that dispute complaints are typically filed at the request of business
interests, who usually seek their own – expensive – legal advice before turning to their govern-
ment to request it to take up their case.2
The mechanism applies to all WTO agreements, and can cover plurilateral agreements as
well, should parties to these agreements so decide. It applies only to WTO agreements: a Mem-
ber can only turn to the DSM for resolution of a dispute concerning a WTO rule. The DSM will
The US banned imports of shrimp from four Asian countries – India, Malaysia,
Pakistan and Thailand – claiming that the way they caught shrimp harmed endan-
gered species of sea turtles. The four Asian countries above complained about the
2
Lori Wallach and Patrick Woodall, ban to the WTO. In their rulings, the panel and Appellate Body took international
Whose Trade Organization – The environmental law into account in determining that a ban such as the US had im-
Comprehensive Guide to the WTO, posed, could be legitimate under WTO law.
2004.
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Chapter 1 – Objectives and Organisation
therefore only rule on other matters, such as environmental policy, human rights or social ques- To track WTO disputes
tions, if these arise in a dispute concerning a WTO rule, as was the case in the Shrimp-Turtle chronologically, by subject
dispute (Box 1.5). or by country, refer to the
Nevertheless, the concern remains that the broad reach of WTO rules and their implications Frequently Asked Ques-
for a wide array of domestic policies makes the DSM a particular threat because it ensures strong tions in Chapter 8.3.
enforcement of rules designed to favour trade liberalization, rather than to promote well-being or
respect for human rights.
Panels
A panel is a quasi-judicial body which examines the evidence and decides on the merits of the
case, according to the Dispute Settlement Understanding (DSU):
• A panel usually consists of three (but sometimes five) experts from different countries.
Panellists for each case are chosen from a roster of qualified professionals3 or from else-
where, in consultation with Members involved in the dispute. The Director-General can
also appoint panellists if the parties cannot agree on the panel.
• In a dispute between a developed country and a developing country, the latter can request
that at least one of the panellists be from a developing country.
• Panellists serve in their individual capacity and do not receive instructions from any gov-
ernment. In general, panellists are considered to be impartial and competent.
• Panels have the right to seek information and technical advice from any individual or body
which they deem appropriate. In many disputes the panel has consulted scientific experts
or appointed an expert review group to prepare an advisory report. However, the question
of uninvited, non-governmental input into the dispute settlement process is a contentious
issue (see amicus curiae briefs below).
Appellate Body
Either party to a dispute may appeal to the standing Appellate Body against a panel’s ruling on 3
WTO, Indicative List of
points of law and legal interpretation of WTO agreements. The Appellate Body can uphold, Governmental and Non-
modify or reverse the legal findings of a panel and its conclusion, but cannot re-examine existing Governmental Panelists, WT/DSB/
33, 6 March 2003.
evidence or examine new issues.
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• The Appellate Body consists of seven permanent members, and three of them hear each
appeal case.
• Members of the Appellate Body are individuals recognized in the field of law and interna-
tional trade, and not affiliated to any government.
If an NGO wishes to • Members are appointed for a four-year term by the DSB, renewable once.
submit an amicus brief,
the best time to do so is
before the first panel
hearing. Since the dates
of panel hearings are not
Box 1.7 Why submit an amicus brief?
announced publicly, the
First it could be that, for their own reasons, the lawyers representing the govern-
best way to follow this
ment parties to the dispute are not making appropriate arguments that reflect the
process is through the
kind of interests and values the submitting NGO is concerned with. Second, to
WTO External Relations
signal publicly that a great deal is at stake in the dispute, i.e. that it is not a techni-
Division directly or by
cal matter but something that deserves widespread pubic attention. Third, to give
contacting a Geneva-
the adjudicator the benefit of a general perspective on the case to which they oth-
based NGO that follows
erwise might not be sensitized. This is similar to the first reason but not the same;
such issues (see
a general perspective is different from having a set of legal arguments unlikely to
Chapter 8).
be raised by the parties, and might go to ways of looking at the facts more than the
Another strategy is to ask law...
a government involved in ...The success of amicus intervention should not be measured by whether the
a particular dispute to adjudicator says explicitly that they relied upon or followed the brief. That’s not
submit an amicus brief on going to happen very often; it doesn’t happen domestically either very often. But
the interested party’s the existence of such briefs, if there are serious and reputable groups behind them,
behalf – although some adds gravitas to the position being advocated that, psychologically, adjudicators
NGOs do not do this are unlikely to ignore. They and their clerks will read the arguments, and sublimi-
because they do not nal influence is going to be often the key. That’s important also in thinking about
necessarily agree with how to draft such briefs.
that government’s
Robert Howse, personal communication, 20 August 2004.
position.
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More cases have been launched in the WTO’s 10-year history than under the GATT
from 1947 to 1994, indicating a significant ‘buy-in’ to the dispute settlement proc-
ess on the part of Member States. Since the establishment of the WTO until June
2004:
• 312 disputes have been brought to the DSM, with 92 panel and Appellate Body
reports adopted.
• The US and the EC are by far the most frequent users of the WTO dispute
settlement mechanism, both as complainants (139) and as respondents (128).
• Developing countries have brought 113 cases to the dispute settlement mecha-
nism – 65 against developed countries and 48 against other developing coun-
tries.
• The DSB has authorized trade sanctions in just seven cases, where Members
had failed to bring their legislation in line with WTO rules.
WTO, Update of WTO Dispute Settlement Cases, WT/DS/OV/21, 30 June 2004.
To find out how to read the To date, NGOs continue to submit amicus briefs by sending them to the WTO Secretariat,
full text of the decision on though no specific guidelines exist for admitting or refusing them, either at the panel or the
the India-EU dispute, see Appellate Body level. This means that in practice it is still up to the individual panels and/or
Chapter 8.3. Appellate Body members to decide on acceptance or refusal. In the absence of rules, no record is
kept of which dispute panels or Appellate Bodies actually received, accepted or used amicus
briefs. Hence the process remains case-by-case.
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Chapter 1 – Objectives and Organisation
trade statistics. There is no agreed format or standard guidelines on what elements should There is no official proce-
be included, and Members are free to submit whatever information they deem appropri- dure in place for NGOs to
ate. The 2004 US report mentioned labour standards but in general, reports tend to focus submit information or
on narrowly-defined trade issues, usually ignoring the broader economic or social ef- alternative reports to the
fects of a country’s trade liberalization. TPRB. The only NGO to
2. a detailed report prepared independently by economists in the Secretariat’s Trade Policy provide alternative re-
Review Division. So far, the reports prepared by the Secretariat have not explicitly in- ports* on a regular basis
cluded issues related to human rights or to labour standards, even though there has been is the International
discussion in the TPRB of the latter. Confederation of Free
• The reports, together with the TPRB chairperson’s concluding remarks, are made public Trade Unions (ICFTU).
and available to the press after the review process. Minutes of the TPRB meetings are These are given to its
published four weeks later. national affiliates and
• The review process allows other Members to submit written questions in advance of the faxed to selected WTO
TPRB meeting and to raise oral questions at the meeting. A discussant is chosen among missions in Geneva (those
representatives of Members to stimulate the debate. they consider most likely
to raise labour issues at
In 2000, Canada proposed making the TPRM more transparent by opening it up to accredited the TPRB, such as the US
observers from the public and webcasting its own trade policy review, declaring that live web and the EU) prior to TPRB
feeds of the meeting would enhance the quality of discussions between Members and provide a meetings. As NGO docu-
progressive example of the WTO’s openness to public. The proposal was resisted by a number of ments have no official
developing countries, including India, Pakistan, Argentina and Mexico, who argued that opening status in the TPRM, it is
up the process could threaten the intergovernmental character of the WTO and set a precedent up to individual Members
for other committees that they were not prepared to consider. Without agreement on the matter, whether to bring up
the TPRB remains closed to outsiders. issues raised in these
reports during the review
process.
1.9 The WTO Secretariat * available at www.icftu.org
The WTO is located in Geneva, Switzerland. Its official languages are English, French and Spanish.
The Secretariat, with over 500 staff headed by the WTO Director-General, services the daily
activities of different WTO bodies. Although the Secretariat is officially neutral, many observers
criticize it for being too pro-trade liberalization, regardless of the benefits or otherwise for indi-
vidual WTO Members. Other critics claim that the Secretariat defends the interests of the power-
ful WTO Members rather than being neutral or defending developing countries.4
The Director-General is chosen by Members through consensus. The office term of Supachai
Panitchpakdi as Director-General comes to an end in August 2005. Given that Members them-
selves make all decisions concerning the organization, the position of Director-General has little
formal authority, but does play an important informal role of facilitator among Member govern-
4
ments. This is particularly so during sensitive negotiations, such as those at Ministerial Confer- Fatoumata Jawara and Aileen Kwa,
Behind the Scenes at the WTO – the
ences and under the current Doha negotiations: the Director-General chairs ex officio, the Trade real world of international trade
Negotiating Committee (TNC). negotiations, 2003.
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