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SUBMITTED TO Dr. S. K. Chadha
SUBMITTED BY Ekjot Kaur Gagandeep Singh Garima Hardeep Singh
Contents.............................................................................................2 WORLD TRADE ORGANIZATION..........................................................4 OBJECTIVES OF WTO...........................................................................6 FUNCTIONS OF WTO...........................................................................7 WTO STRUCTURE................................................................................7 THE DOHA ROUND..............................................................................8 WTO AGREEMENTS:..........................................................................10
FROM GATT TO WTO The WTO came into existence on 1st January 1995. But there is a long history attached
to the establishment of this organisation dating back to 1945. The original intention was to create a third institution to handle the trade side of the international economic cooperation, joining the two “Bretton woods” institutions, the International Monetary Fund and the World Bank. Over 50 countries participated in the negotiations to create an International Trade Organisation (ITO) as a specialised agency of the UN. The aim was to create the ITO at a UN Conference on Trade and Employment in Havana, Cuba in 1947. Meanwhile 15 countries had begun talks in December 1945 to reduce and bind custom tariffs. With the Second World War just recently ended, the main aim was to give a boost to international trade and rectify the harm caused by the protectionist measures. The first round of negotiation was a success and by the time the General Agreement on Trade and Tariff or GATT 1947 came into effect on 30th October 1947 through a “protocol of provisional application”, the group had expanded to 23(“contracting parties”). The 23 were also a part of the larger group negotiating the ITO Charter. The Havana conference began on 21 November 1947, less than a month after GATT was signed. The ITO Charter was finally agreed in Havana in March 1948, but it never came into existence as it was never passed by the US Congress even though the US was one of its major driving forces.. The main purpose of GATT 1947 was to reduce tariffs internationally in order to facilitate free trade, the outcome of which is the various tariff concessions schedules created under GATT. GATT evolved as a result of a series of multilateral trade negotiations known as “trade rounds”. 8 trade rounds took place under GATT’s auspices. The earlier trade rounds concentrated on further reducing tariffs. Later on the Kennedy round brought about an agreement on anti-dumping. The Tokyo rounds concentrated on reducing non-tariff trade barriers. This was the first ever attempt made to look into trade barriers other than tariffs. In the Tokyo round various issues were brought to the forefront, some successful, some not so successful. In most cases, a relatively small number of GATT members subscribed to such arrangements. Since they were not accepted by all members, they were informally called “codes”. These agreements and arrangement were not multilateral, but a good start. Later in the Uruguay round, many of these agreements became multilateral, accepted by all members. Only four remained “plurilateral”, later in 1997, the number reducing to two which included Government procurements and civil aircrafts. These plurilateral agreements became a part of WTO as we will see when we proceed further on the discussion of coming into force of the agreement that finally established the WTO. The final chapter of the trade negotiations under GATT was the Uruguay round. All was not going well under the GATT and with the world trade becoming more and more complex, GATT was not able to deal with it. For instance, in agriculture, loopholes in the multilateral system were heavily exploited, and efforts at liberalizing agricultural trade met with little success. In the textiles and clothing sector, an exception to GATT’s normal disciplines was negotiated in the 1960s and early 1970s, leading to the Multifibre Arrangement. Even GATT’s dispute settlement systems were causing concern as will be discussed later. The Uruguay round negotiations lasted for about seven and a half years, twice the time originally planned for. But it was worth the trouble, basically all issues related to trade were discussed in these negotiations, previous GATT articles were reviewed and most importantly the Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed during the April 1994 ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh Agreement.
The Marrakesh agreement was the document that gave the legal sanction to the establishment of the World Trade Organisation on January 1, 1995. This agreement consisted of a preamble which laid down the basic objectives of this organisation, 16 articles which basically put forward the structure, functions, decision making process, accession and various other key aspects of the World trade organisation. Now the main function of the WTO as mentioned in Article 3:1 of the agreement is to administer the implementation of the multilateral trade agreements which are a part of the Marrakesh agreement in the form of annexes. Annex 1 consists of agreements on trade in goods, agreements on trade in services and agreements on trade related aspects of intellectual property rights. There are other annexes relating to dispute settlement undertaking, Trade policy review mechanism and plurilateral agreements. Now an important question that arises is what happened to GATT after the establishment of the WTO. Well the answer to that is that GATT 1947 is a part of the Marrakesh agreement as Annex 1A in the form of GATT 1994 which is mainly GATT 1947 plus the various developments decided on during the various trade negotiations. The contracting parties of GATT 1947 automatically became the members of WTO (Article IX: Original membership) and then the agreement was opened to be accession by other countries (Article X: Accession). The WTO framework ensures a “single undertaking approach” to the results of the Uruguay Round — thus, membership in the WTO entails accepting all the results of the Round without exception. The WTO replaced GATT as an international organization, but the General Agreement still exists as the WTO’s umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. Trade lawyers distinguish between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994.
WORLD TRADE ORGANIZATION The World Trade Organization (WTO) is an international organization designed by its founders to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General 4
Agreement on Tariffs and Trade (GATT), which commenced in 1947. The World Trade 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 currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. However, the negotiation has been dogged by "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. At this time, the future of the Doha Round is uncertain." The WTO has 153 members, representing more than 97% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland. 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 from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize 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 countryspecific 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. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and 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.
OBJECTIVES OF WTO The preamble to the WTO Agreement describes its objectives as including: raising standards of living ensuring full employment 6
realizing these aims consistently with sustainable development and environmental protection ensuring that developing countries, especially the least developed countries (LDCs), secure 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.’ 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 nongovernmental organizations) 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 organization is dominated by rich countries, functions in a secretive manner, and helps feed the greed of the rich in the name of trade liberalization.
FUNCTIONS OF WTO Some of the major functions of WTO are: Administering and Implementing the multilateral and plurilateral trade agreements. Acting as a forum for multilateral trade negotiations . Seeking to resolve trade disputes. Overseeing national trade policies. Cooperating with other international institutions. Maintaining trade related database. Acting as a watchdog of international trade. Technical assistance and training for developing countries.
WTO STRUCTURE The structure of the WTO is dominated by its highest authority, the Ministerial Conference, composed of representatives of all WTO members, which is required to 7
meet at least every two years and which can take decisions on all matters under any of the multilateral trade agreements. The day-to-day work of the WTO, however, falls to a number of subsidiary bodies; principally the General Council, also composed of all WTO members, which is required to report to the Ministerial Conference. As well as conducting its regular work on behalf of the Ministerial Conference, the General Council convenes in two particular forms - as the Dispute Settlement Body, to oversee the dispute settlement procedures and as the Trade Policy Review Body to conduct regular reviews of the trade policies of individual WTO members. The General Council delegates responsibility to three other major bodies - namely the Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of Intellectual Property. The Council for Goods oversees the implementation and functioning of all the agreements (Annex 1A of the WTO Agreement) covering trade in goods, though many such agreements have their own specific overseeing bodies. The latter two Councils have responsibility for their respective WTO agreements (Annexes 1B and 1C) and may establish their own subsidiary bodies as necessary.Three other bodies are established by the Ministerial Conference and report to the General Council. The Committee on Trade and Development is concerned with issues relating to the developing countries and, especially, to the "least-developed" among them. The Committee on Balance of Payments is responsible for consultations between WTO members and countries which take trade-restrictive measures, under Articles XII and XVIII of GATT, in order to cope with balance-of-payments difficulties. Finally, issues relating to WTO's financing and budget are dealt with by a Committee on Budget.Each of the four plurilateral agreements of the WTO - those on civil aircraft, government procurement, dairy products and bovine meat - establish their own management bodies which are required to report to the General Council.
THE DOHA ROUND
The WTO launched the current round of negotiations, the Doha Development Agenda 8
(DDA) or Doha Round, at the fourth ministerial conference in Doha, Qatar in November 2001. The Doha round 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 rulemaking, underpinned by commitments to strengthen substantial assistance to developing countries. The negotiations have been highly contentious and agreement has not been reached, despite the intense negotiations at several ministerial conferences and at other sessions. Disagreements still continue over several key areas including agriculture subsidies. The Doha Development Round or Doha Development Agenda (DDA) is the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001. Its objective is to lower trade barriers around the world, which allows countries to increase trade globally. As of 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies. The most significant differences are between developed nations led by the European Union (EU), the United States (USA), and Japan and the major developing countries led and represented mainly by India, Brazil, China, and South Africa. There is also considerable contention against and between the EU and the U.S. over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers. The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings took place in Cancún, Mexico (2003), and Hong Kong (2005). Related negotiations took place in Geneva, Switzerland (2004, 2006, 2008); Paris, France (2005); and Potsdam, Germany (2007). The most recent round of negotiations, July 23-29 2008, broke down after failing to reach a compromise on agricultural import rules. After the breakdown, major negotiations were not expected to resume until 2009. Nevertheless, intense negotiations, mostly between the USA, China, and India, were held in the end of 2008 in order to agree on negotiation modalities. However, these negotiations did not result in any progress. Several countries have called for negotiations to start again. Brazil and Pascal Lamy have led this process. Luiz Inácio Lula da Silva, president of Brazil, called several countries leaders to urge them to renew negotiations. Lamy visited India to discuss possible solutions to the impasse. The declaration at the end of the G20 summit of world leaders in London in 2009 included a pledge to complete the Doha round. Although a WTO ministerial conference scheduled in November 2009 would not be a negotiating session, there would be several opportunities over the year 2009 to discuss the progress. In early 2010, Brazil and Lamy have focused on the role of the United States in overcoming the deadlock. Lula has urged Barack Obama to end the trade dispute between Brazil and the US over cotton subsidies following his increase in tariffs on over 100 US goods.. Lamy has highlighted the difficulty of obtaining agreement from the US without the Presidential fast track authority and biennial elections.. One of the consequences of the economic crisis of 2008 - 2009 is the desire of political leaders to shelter their constituents from the increasingly competitive market experienced during market contractions. Lamy hopes that the drop in trade of 12% in 2009, quoted as the largest annual drop since the Second World War, could be countered by successful conclusion of the Doha round.
All countries participating in the negotiations believe that there is some economic benefit in adopting the agreement; however, there is considerable disagreement of how much benefit the agreement would actually produce. A study by the University of Michigan found that if all trade barriers in agriculture, services, and manufactures were reduced by 33% as a result of the Doha Development Agenda, there would be an increase in global welfare of $574.0 billion. A 2008 study by World Bank Lead Economist Kym Anderson found that global income could increase by more than $3000 billion per year, $2500 billion of which would go to the developing world. Others had been predicting more modest outcomes, e.g. world net welfare gains ranging from $84 billion to $287 billion by the year 2015. Pascal Lamy has conservatively estimated that the deal with bring an increase of $130 billion.. Several think tanks and public organizations assess that the conclusion of the trade round will result in a net gain. However, the restructuring and adjustment costs required to prevent the collapse of local industries, particularly in developing countries, is a global concern. For example, a late 2009 study by the Carnegie Endowment for International Peace, the United Nations Economic Commission for Africa (UNECA), the United Nations Development Programme and the Kenyan Institute for Research and Policy Analysis found that Kenya would see gains in its exports of flowers, tea, coffee and oil seeds. It would concurrently lose in the tobacco and grains markets, as well as manufacturing of textiles and footwear, machinery and equipment. The Copenhagen Consensus, which evaluates solutions for global problems regarding the cost-benefit ratio, in 2008 ranked the DDA as the second-best investment for global welfare, after the provision of vitamin supplements to the world's 140 million malnourished children.
WTO AGREEMENTS: These agreements are often called the WTO’s trade rules and because of them, the WTO is called the rule-based organization. These rules are actually agreements that the WTO-member-governments negotiated. The WTO agreements cover trade in goods, services and intellectual property. They
spell out the principles of liberalization with permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, and through regular reports by the secretariat on countries’ trade policies. The purpose of the agreements is to help producers of goods and services, exporters and importers conduct their business in a free and predictable manner. Uruguay round agreements are the basis of the present WTO system. New negotiations are and have been launched at other Ministerial Conferences, especially at the Doha Ministerial conference, 2001. STRUCTURE OF AGREEMENTS: The results of the Uruguay round produced about 60 agreements, annexes, decisions and undertakings. The simple structure of agreements has 6 main parts1. An umbrella agreement (Agreement establishing the WTO). 2. Agreements on trade in goods 3. Agreements on trade in services 4. Agreement on trade in intellectual property. 5. Dispute Settlement 6. Reviews of Governments’ trade policies. The agreements for the two largest areas in trade- goods and services- share a common three part outline• Broad principles: General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS) and Trade related aspects of Intellectual Property Rights (TRIPS). • • Extra agreements and annexes: dealing with the special requirements of specific sectors or issues. Schedules (or lists) of commitments made by individual countries allowing specific foreign products or service-providers access to their markets. For GATT, these take the form of binding agreements on tariffs for goods in general, and combinations of tariffs and quotas for some agricultural goods. For GATS, the commitments state how much access foreign service providers are allowed for specific sectors, and they include lists of types of services where individual countries say they are not applying the “most-favoured-nation” principle of non-discrimination. Underpinning these is, dispute settlement, based on agreements and commitments. Trade policy Reviews- an exercise in transparency.
The basic structure of the WTO agreements: how the six main areas fit together — the umbrella WTO Agreement, goods, services, intellectual property, disputes and trade policy reviews.
Umbrella Goods Basic principles Additional details GATT
AGREEMENT ESTABLISHING WTO Services GATS Services annexes Intellectual property TRIPS
Other goods agreements and annexes
Market access commitments Dispute settlement Transparency
Countries’ schedules Countries’ schedules of commitments of commitments(and MFN exemptions) DISPUTE SETTLEMENT TRADE POLICY REVIEWS
ADDITIONAL AGREEMENTS: Another group of agreements not included in the diagram is also important: the two Plurilateral Agreements not signed by all members: civil aircraft and government procurement. PRINCIPLES ON WHICH THE AGREEMENTS ARE BASED: 1. 2. 3. 4. 5. Most-favoured-nation (MFN) Principle Non- discrimination or National Treatment of all products. Free Trade Making trade predictable- for countries, governments and investors. More benefits for less developed countries.
AGREEMENTS: 1. Umbrella agreement (Agreement establishing the WTO): It came into existence when the countries signed on the agreement creating the WTO in 1995. It gives a broad indication of what the WTO is all about. Its primary purpose is to help trade flow freely. It serves as an umbrella agreement because it recognizes WTO as a single institutional framework that encompasses the GATT, all other agreements and arrangements concluded under it and complete results of the Uruguay Round. It also elaborates the rules for amendments in these agreements. It establishes the World Trade Organization as having a distinct and a legal personality. The agreement lays out the structure and functioning of the organization, in detail. 12
As the competent body on international trade, WTO has been provided some enforcement provisions, which say that a member which accepts agreements shall implement concessions and obligations as provided in the multi-lateral agreements. Each member shall ensure conformity of its laws, regulations and administrative procedures with its obligations as provided in the agreements.
2. General Agreement on Tariffs and Trade: Provisions under the GATT 1994 are applied in this agreement. The principles on which the provisions are based are: • General MFN treatment: If a concession or any other privilege, or tariff, formality or rules are applied to any product of one country, the same is to be granted to similar products of all other trading partners. Each member treats all the other members equally as ‘most favoured’. Exceptions to MFN principle: i) ii) iii) • Preferential Arrangements Customs Unions and Free Trade Areas Preferential Arrangements for the benefit of developing countries, either bilaterally or unilaterally.
Non-discrimination: Imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. Exception: government assistance for economic development, protective measures in case of surge of imports or applying Quantitative Restrictions (QRs) for Balance of Payment (BoP) purposes.
The general rule is that QRs on the importation and exportation of products are prohibited. Exceptions: i) Agriculture: import restrictions where restrictions are necessary for enforcement of govt. Programs in marketing, production control or removal of surpluses. Balance of Payment: import restrictions can be applied. Economic development of developing countries: these countries can use non-discriminatory import quotas to encourage infant 13
industries. iv) • National security.
Schedule of concessions: each country is obliged to file its schedule of concessions in respect of each product. They specify ‘tariff binding rates’. Countries can not charge a higher rate than that shown in the schedule of concessions.
It includes elaborate agreements on 12 subjects namely: a. Agriculture b. Textiles and clothing c. Sanitary and Phytosanitary measures d. Technical Barriers to Trade e. Trade Related Investment Measures (TRIMS) f. Anti-dumping measure g. Customs Valuation h. Pre-shipment inspection i. Rules of Origin j. Import Licensing k. Subsidies and counter-vailing measures l. Safeguards
a) Agreement on Agriculture (AoA): The original GATT did apply to agricultural trade, but it contained loopholes. For example, it allowed countries to use some non-tariff measures such as import quotas, and to subsidize. Agricultural trade became highly distorted, especially with the use of export subsidies which would not normally have been allowed for industrial products. The Uruguay Round produced the first multilateral agreement dedicated to the sector. It was a significant first step towards order, fair competition and a less distorted sector. The Uruguay Round agreement included a commitment to continue the reform through new negotiations. These were launched in 2000, as required by the Agriculture Agreement. The new rules and commitments apply to: Market Access: various trade restrictions confronting imports
Domestic Subsidies: subsidies and other programmes, including those that raise or guarantee farmgate prices and farmers’ incomes Export subsidies and other methods used to make exports artificially competitive.
Market access: The reductions in agricultural subsidies and protection agreed in the Uruguay Round. Only the figures for cutting export subsidies appear in the agreement.
Developed Developing countries countries 6 years: 1995-2000 10 years: 1995-2004 Tariffs average cut for all agricultural products minimum cut per product Domestic support total AMS cuts for sector (base period: 198688) Exports value of subsidies subsidized quantities (base period: 1986-90) -36% -15% -20% -36% -21% -24% -10% -13% -24% -14%
Least developed countries do not have to make commitments to reduce tariffs or subsidies. It also ensured that quantities imported before the agreement took effect could continue to be imported, and it guaranteed that some new quantities were charged duty rates that were not prohibitive. This was achieved by a system of ‘tariff quotas’— lower tariff rates for specified quantities, higher (sometimes much higher) rates for quantities that exceed the quota. For products whose non-tariff restrictions have been converted to tariffs, governments are allowed to take special emergency actions (“special safeguards”) in order to prevent swiftly falling prices or surges in imports from hurting their farmers. But the agreement specifies when and how those emergency actions can be introduced (for example, they cannot be used on imports within a tariff-quota). Domestic support: domestic subsidies have put into ‘boxes’. Amber box: Domestic policies that do have a direct effect on production and trade have to be cut back. WTO members calculated how much support of this kind they were providing per year for the agricultural sector (using calculations known as “total aggregate measurement of support” or “Total AMS”) in the base years of 1986-88. Developed countries agreed to reduce these figures by 20% over six years starting in 1995. Developing countries agreed to make 13% cuts over 10 years. Least-developed 15
countries do not need to make any cuts. Green Box: Measures with minimal impact on trade can be used freely. They include government services such as research, disease control, infrastructure and food security. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers restructure agriculture, and direct payments under environmental and regional assistance programmes. Blue Box: Also permitted, are certain direct payments to farmers where the farmers are required to limit production, certain government assistance programmes to encourage agricultural and rural development in developing countries, and other support on a small scale (“de minimis”) when compared with the total value of the product or products supported (5% or less in the case of developed countries and 10% or less for developing countries). Export subsidies: The Agriculture Agreement prohibits export subsidies on agricultural products unless the subsidies are specified in a member’s lists of commitments. Where they are listed, the agreement requires WTO members to cut both the amount of money they spend on export subsidies and the quantities of exports that receive subsidies. Taking averages for 1986-90 as the base level, developed countries agreed to cut the value of export subsidies by 36% over the six years starting in 1995 (24% over 10 years for developing countries). Developed countries also agreed to reduce the quantities of subsidized exports by 21% over the six years (14% over 10 years for developing countries). Least-developed countries do not need to make any cuts. During the six-year implementation period, developing countries are allowed under certain conditions to use subsidies to reduce the costs of marketing and transporting exports. b) Agreement on Textiles and Clothing: From 1974 until the end of the Uruguay Round, the trade was governed by the Multi fibre Agreement (MFA). This was a framework for bilateral agreements or unilateral actions that established quotas limiting imports into countries whose domestic industries were facing serious damage from rapidly increasing imports. Quotas conflicted with GATT’s general preference for customs tariffs instead of measures that restrict quantities. They were also exceptions to the GATT principle of treating all trading partners equally because they specified how much the importing country was going to accept from individual exporting countries. Since 1995, the WTO’s Agreement in Textiles and Clothing took over from the Multi fibre Arrangement. By 1 January 2005, the sector was fully integrated into normal GATT rules. In particular, the quotas came to an end, and importing countries are no longer able to discriminate between exporters. The Agreement on Textiles and Clothing no longer exists: it’s the only WTO agreement that had self-destruction built in. Textiles and clothing products were returned to GATT rules over the 10-year period. This happened gradually, in four steps, to allow time for both importers and exporters to adjust to the new situation. 16
Step 1: 1 jan 1995- 31 dec 1997 Step 2: 1 jan 1998- 31 dec 2001 Step 3: 1 jan 2002- 31 dec 2005 Step 4: 1 jan 2005- abolition of quotas Products brought under GATT rules at each of the first three stages had to cover the four main types of textiles and clothing: tops and yarns; fabrics; made-up textile products; and clothing. If any cases of damage to the industry arose during the transition, the agreement allowed additional restrictions to be imposed temporarily under strict conditions. These “transitional safeguards” were not the same as the safeguard measures normally allowed under GATT because they can be applied on imports from specific exporting countries. But the importing country had to show that its domestic industry was suffering serious damage or was threatened with serious damage. And it had to show that the damage was the result of two things: increased imports of the product in question from all sources, and a sharp and substantial increase from the specific exporting country. The safeguard restriction could be implemented either by mutual agreement following consultations, or unilaterally. It was subject to review by the Textiles Monitoring Body. The agreement envisaged special treatment for certain categories of countries — for example, new market entrants, small suppliers, and least-developed countries. c) Sanitary and Phytosanitary Measures: It is a separate agreement on food safety and plant and animal health standards. It allows countries to set their own standards but regulations must be based on science. They should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail. Member countries are encouraged to use international standards, guidelines and recommendations where they exist. When they do, they are unlikely to be challenged legally in a WTO dispute. However, members may use measures which result in higher standards if there is scientific justification. The agreement includes provisions on control, inspection and approval procedures. Governments must provide advance notice of new or changed sanitary and phytosanitary regulations, and establish a national enquiry point to provide information. The agreement complements that on technical barriers to trade. d) Agreement on Technical Barriers to Trade: Standards can become obstacles to trade and can be used as an excuse for protectionism. But they are also necessary for a range of reasons, from environmental protection, safety, national security to consumer information. The Technical Barriers to Trade Agreement (TBT) tries to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles.
However, the agreement also recognizes countries’ rights to adopt the standards they consider appropriate — for example, for human, animal or plant life or health, for the protection of the environment or to meet other consumer interests. Moreover, members are not prevented from taking measures necessary to ensure their standards are met. But that is counterbalanced with disciplines. The agreement also sets out a code of good practice for both governments and nongovernmental or industry bodies to prepare, adopt and apply voluntary standards. Manufacturers and exporters need to know what the latest standards are in their prospective markets. To help ensure that this information is made available conveniently, all WTO member governments are required to establish national enquiry points and to keep each other informed through the WTO — around 900 new or changed regulations are notified each year. The Technical Barriers to Trade Committee is the major clearing house for members to share the information and the major forum to discuss concerns about the regulations and their implementation. e) Trade related Investment Measures (TRIMS): The Trade-Related Investment Measures (TRIMs) Agreement applies only to measures that affect trade in goods. It recognizes that certain measures can restrict and distort trade, and states that no member shall apply any measure that discriminates against foreigners or foreign products. It also outlaws investment measures that lead to restrictions in quantities. An illustrative list of TRIMs agreed to be inconsistent with these GATT articles is appended to the agreement. The list includes measures which require particular levels of local procurement by an enterprise (“local content requirements”). It also discourages measures which limit a company’s imports or set targets for the company to export (“trade balancing requirements”). Under the agreement, countries must inform fellow-members through the WTO of all investment measures that do not conform with the agreement. Developed countries had to eliminate these in two years (by the end of 1996); developing countries had five years (to the end of 1999); and least-developed countries seven. In July 2001, the Goods Council agreed to extend this transition period for a number of requesting developing countries. The agreement establishes a Committee on TRIMs to monitor the implementation of these commitments. f) Agreement on Anti-Dumping Measures: The WTO agreement allows governments to act against dumping where there is genuine (“material”) injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so. Anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country. A detailed 18
investigation has to be conducted according to specified rules to check whether the injury is genuine. The investigation must evaluate all relevant economic factors that have a bearing on the state of the industry in question. If the investigation shows dumping is taking place and domestic industry is being hurt, the exporting company can undertake to raise its price to an agreed level in order to avoid anti-dumping import duty. Detailed procedures are set out on how anti-dumping cases are to be initiated, how the investigations are to be conducted, and the conditions for ensuring that all interested parties are given an opportunity to present evidence. Anti-dumping measures must expire five years after the date of imposition, unless an investigation shows that ending the measure would lead to injury. Anti-dumping investigations are to end immediately in cases where the authorities determine that the margin of dumping is insignificantly small (defined as less than 2% of the export price of the product). Other conditions are also set. For example, the investigations also have to end if the volume of dumped imports is negligible (i.e. if the volume from one country is less than 3% of total imports of that product — although investigations can proceed if several countries, each supplying less than 3% of the imports, together account for 7% or more of total imports). The agreement says member countries must inform the Committee on Anti-Dumping Practices about all preliminary and final anti-dumping actions, promptly and in detail. g) Agreement on Subsidies and Counter-vailing measures: This agreement does two things: it disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies. It says a country can use the WTO’s dispute settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigation and ultimately charge extra duty (known as “countervailing duty”) on subsidized imports that are found to be hurting domestic producers. The disciplines set out in the agreement only apply to specific subsidies. A specific subsidy is a subsidy available only to an enterprise, industry, group of enterprises, or group of industries in the country that gives the subsidy. They can be domestic or export subsidies. The agreement defines two categories of subsidies: prohibited and actionable. Prohibited subsidies require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries’ trade. If domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. Actionable Subsidies: In this category the complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise the subsidy is permitted. The agreement defines three types of damage they can cause. One country’s subsidies can hurt a domestic industry in an importing country. They can hurt rival exporters from another country when the two compete in third markets. And domestic subsidies in one 19
country can hurt exporters trying to compete in the subsidizing country’s domestic market. If the Dispute Settlement Body rules that the subsidy does have an adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again, if domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. Subsidies may play an important role in developing countries and in the transformation of centrally-planned economies to market economies. Least-developed countries and developing countries with less than $1,000 per capita GNP are exempted from disciplines on prohibited export subsidies. Other developing countries are given until 2003 to get rid of their export subsidies. Countervailing duty (the parallel of anti-dumping duty) can only be charged after the importing country has conducted a detailed investigation similar to that required for anti-dumping action. There are detailed rules for deciding whether a product is being subsidized (not always an easy calculation), criteria for determining whether imports of subsidized products are hurting (“causing injury to”) domestic industry, procedures for initiating and conducting investigations, and rules on the implementation and duration (normally five years) of countervailing measures. The subsidized exporter can also agree to raise its export prices as an alternative to its exports being charged countervailing duty. EXAMPLES FOR THE ABOVE AGREEMENTS: Both the free trade agreements and the new Doha Accord of WTO will see India moving towards a zero tax regime (nil customs duty) by 2018. It will open a vista of new challenges as well as opportunities for the micro, small and medium enterprises (MSMEs). As regards anti-dumping measures taken by India in the FY 2009-10, it imposed 15 anti-dumping duties on products such as fabrics, industrial chemicals, auto parts, electronic items and machineries. The countries on which the duty was imposed include Taiwan, Korea, Thailand, Malaysia, China, the US and the UK. According to the agreement on subsidies and counter-vailing measures developing country members (with per capita income below $ 1000) are exempted from prohibition of export subsidies as long as exports of individual products are lower than 3.25 % of world trade for two consecutive years. This is called ‘export competitiveness’. The US has asked the WTO to examine whether India still qualifies for concessions which allows it to give export subsidies to the textiles and the clothing sector. India and Brazil have raised concern about the US and the EU using standards as an excuse to protectionism. Arbitrary standards coupled with little information about them results in cost implications to the exporters who have to divert the shipments. Both the countries have asked the WTO to integrate information about changing standards in the integrated database. This amounts to Technical Barriers to trade. The UK has relatively high standards of animal welfare as compared to the rest of the world including the EU. However there are no restrictions on importing meat from countries that do not impose such standards where costs are lower. This step may compromise human and animal health. There are renewed calls from consumer and farming groups for better labelling of products and action to 20
bring standards into line at least across EU. This amounts to the agreement on Sanitary and Phytosanitary measures. h) Rules of Origin: Rules of origin are defined as those laws, regulations and administrative determinations of general application applied by any Member to determine the country of origin of goods provided. There are two common types of rules of origin depending upon application, the preferential and non-preferential rules of origin. Preferential RoO are part of a free trade area or preferential trade arrangement which includes tariff concessions. The rules of origin determine what products can benefit from the tariff concession or preference. Non-preferential rules of origin are used to determine the country of origin for certain purposes which states that if a product is wholly obtained or produced completely within one country the product shall be deemed having origin in that country. For a product which has been produced in more than one country the product shall be determined to have origin in the country where the last substantial transformation took place. Rules of origin do not themselves create restrictive, distorting, or disruptive effects on international trade. They do not pose unduly strict requirements or require the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin. However, costs not directly related to manufacturing or processing may be included for the purposes of the application of an ad valorem percentage criterion. The rules of origin applied to imports and exports are not more stringent than the rules of origin applied to determine whether or not a good is domestic and there should be no discriminate between other Members, irrespective of the affiliation of the manufacturers of the good concerned. The rules of origin are administered in a consistent, uniform, impartial and reasonable manner. Under rules of origin, the country to be determined as the origin of a particular good is either the country where the good has been wholly obtained or, when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out. i) Customs Valuation: Customs valuation is a customs procedure applied to determine the customs value of imported goods. If the rate of duty is ad valorem, the customs value is essential to determine the duty to be paid on an imported good. For importers, the process of estimating the value of a product at
customs presents problems that can be just as serious as the actual duty rate charged. The WTO agreement on customs valuation aims for a fair, uniform and neutral system for the valuation of goods for customs purposes. It is a system that conforms to commercial realities and which outlaws the use of arbitrary or fictitious customs values. The Committee on Customs Valuation of the Council for Trade in Goods (CGT) carries out work in the WTO on customs valuation. Customs duties can be designated in either specific or ad valorem terms or as a mix of the two. In case of a specific duty, a concrete sum is charged for a quantitative description of the good, for example USD 1 per item or per unit. The customs value of the good does not need to be determined, as the duty is not based on the value of the good. In this case, no rules on customs valuation are needed and the Valuation Agreement does not apply. In contrast, an ad valorem duty depends on the value of a good. Under this system, the customs valuation is multiplied by an ad valorem rate of duty (e.g. 5 per cent) in order to arrive at the amount of duty payable on an imported item. j) Safeguard Measures: A WTO member may take a “safeguard” action (restrict imports of a product temporarily) to protect a specific domestic industry from an increase in imports of any product which is causing, or which is threatening to cause, serious injury to the industry. Safeguard measures were always available under the GATT. However, they were infrequently used, and some governments preferred to protect their industries through “voluntary” export restraint arrangements on products such as cars, steel and semiconductors. The WTO Safeguards Agreement broke new ground in prohibiting these “grey area” measures and setting time limits (“sunset clause”) on all safeguard actions. The agreement stipulates that a member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side. Any such measure in effect at the time of entry into force of the agreement would be brought into conformity with this agreement, or would have to be phased out within four years after the entry into force of the agreement establishing the WTO. An exception could be made for one specific measure for each importing member, subject to mutual agreement with the directly concerned member. A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established
and made public in consonance with Article X of GATT 1994. This investigation includes reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law. Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. Such information shall not be disclosed without permission of the party submitting it. Parties providing confidential information may be requested to furnish non-confidential summaries thereof or, if such parties indicate that such information cannot be summarized, the reasons why a summary cannot be provided. However, if the competent authorities find that a request for confidentiality is not warranted and if the party concerned is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct. For the purposes of this Agreement: • • "serious injury" shall be understood to mean a significant overall impairment in the position of a domestic industry "threat of serious injury" shall be understood to mean serious injury that is clearly imminent, in accordance with the provisions of paragraph 2. A determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility; and in determining injury or threat thereof, a "domestic industry" shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Member, or those whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products
In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment. 23
Application of Safeguard Measures A Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment. If a quantitative restriction is used, such a measure shall not reduce the quantity of imports below the level of a recent period which shall be the average of imports in the last three representative years for which statistics are available, unless clear justification is given that a different level is necessary to prevent or remedy serious injury. Members should choose measures most suitable for the achievement of these objectives. In cases in which a quota is allocated among supplying countries, the Member applying the restrictions may seek agreement with respect to the allocation of shares in the quota with all other Members having a substantial interest in supplying the product concerned. In cases in which this method is not reasonably practicable, the Member concerned shall allot to Members having a substantial interest in supplying the product shares based upon the proportions, supplied by such Members during a previous representative period, of the total quantity or value of imports of the product, due account being taken of any special factors which may have affected or may be affecting the trade in the product. 3. Agreement on Rights (TRIPS) Trade Related Aspects of Intellectual Property
It is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulations as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. 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, 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 specifies 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. 24
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." TRIPS has been criticized by the alter-globalization movement. Members of the movement object, for example, to its consequences with regards to the AIDS pandemic in Africa. Background and History TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. Its inclusion was the culmination of a program of intense lobbying by the United States, supported by the European Union, Japan and other developed nations. Campaigns of unilateral economic encouragement under the Generalized System of Preferences and coercion under Section 301 of the Trade Act played an important role in defeating competing policy positions that were favoured by developing countries, most notably Korea and Brazil, but also including Thailand, India and Caribbean Basin states. In turn, the United States strategy of linking trade policy to intellectual property standards can be traced back to the entrepreneurship of senior management at Pfizer in the early 1980s, who mobilized corporations in the United States and made maximizing intellectual property privileges the number one priority of trade policy in the United States. After the Uruguay round, the GATT became the basis for the establishment of the World Trade Organization. Because ratification of TRIPS is a compulsory requirement of World Trade Organization membership, any country seeking to obtain easy access to the numerous international markets opened by the World Trade Organization must enact the strict intellectual property laws mandated by TRIPS. For this reason, TRIPS is the most important multilateral instrument for the globalization of intellectual property laws. States like Russia and China that were very unlikely to join the Berne Convention have found the prospect of WTO membership a powerful enticement. Furthermore, unlike other agreements on intellectual property, TRIPS has a powerful enforcement mechanism. States can be disciplined through the WTO's dispute settlement mechanism. Requirements of TRIPS:
TRIPS requires member states to provide strong protection for intellectual property rights. For example, under TRIPS: Copyright terms must extend to 50 years after the death of the author, although films and photographs are only required to have fixed 50 and to be at least 25 year terms, respectively.(Art. 7(2),(4))
Copyright must be granted automatically, and not based upon any "formality", such as registrations or systems of renewal.
Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.
National exceptions to copyright (such as "fair use" in the United States) are constrained by the Berne three-step test
Patents must be granted in all "fields of technology," although exceptions for certain public interests are allowed (Art. 27.2 and 27.3) and must be enforceable for at least 20 years (Art 33).
Exceptions to the exclusive rights must be limited, provided that a normal exploitation of the work (Art. 13) and normal exploitation of the patent (Art 30) is not in conflict.
No unreasonable prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.
Legitimate interests of third parties have to be taken into account by patent rights (Art 30).
In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPs signatories by the principles of national treatment (with certain limited exceptions, Art. 3 and 5). TRIPS also has a most favoured nation clause.
Access to Essential Medicines: The most visible conflict has been over AIDS drugs in Africa. Despite the role which patents have played in maintaining higher drug costs for public health programs across Africa, this controversy has not led to a revision of TRIPs. Instead, an interpretive statement, the Doha Declaration, was issued in November 2001, which indicated that TRIPs should not prevent states from dealing with public health crises. After Doha, PhRMA, the United States and to a lesser extent other developed nations began working to minimize the effect of the declaration. A 2003 agreement loosened the domestic market requirement, and allows developing countries to export to other countries where there is a national health problem as long as drugs exported are not part of a commercial or industrial policy. Drugs exported under 26
such a regime may be packaged or coloured differently to prevent them from prejudicing markets in the developed world. Implementation in Developing Countries: The obligations under TRIPS apply equally to all member states, however developing countries were allowed extra time to implement the applicable changes to their national laws, in two tiers of transition according to their level of development. The transition period for developing countries expired in 2005. The transition period for least developed countries was extended to 2016, and could be extended beyond that. Developed countries are massive net-exporters of copyright-, patent- and trademarkrelated royalties. It has therefore been argued that the TRIPS standard of requiring all countries to create strict intellectual property systems will be detrimental to poorer countries' development. Many argue that it is, prima facie, in the strategic interest of most if not all underdeveloped nations to use any flexibility available in TRIPS to write the weakest IP laws possible. This has not happened in most cases. A 2005 report by the WHO found that many developing countries have not incorporated TRIPS flexibilities (compulsory licensing, parallel importation, limits on data protection, use of broad research and other exceptions to patentability, etc) into their legislation to the extent authorized under Doha. This is likely caused by the lack of legal and technical expertise needed to draft legislation that implements flexibilities, which has often led to developing countries directly copying developed country IP legislation, or relying on technical assistance from the World Intellectual Property Organization (WIPO). 4. Settlement of Disputes: It is regarded by the WTO as the central pillar of the multilateral trading system and as the organization's "unique contribution to the stability of the global economy”. A dispute arises when one member country adopts a trade policy measure or takes some action that one or more fellow members considers to be 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.
Dispute Settlement Understanding (DSU) In 1994, the members of World Trade Organisation (WTO) agreed on the DISPUTE SETTLEMENT UNDERSTANDING (DSU). According to this understanding, the member states can engage in consultations to resolve trade disputes or, if unsuccessful, have a WTO panel hear the case. The priority, however, is to settle disputes, through consultations, if possible. The rules and procedures of this Understanding apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding. The rules and procedures of this Understanding also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of the Agreement Establishing the World Trade Organization and of this Understanding taken in isolation or in combination with any other covered agreement. Dispute Settlement Body (DSB) The Dispute Settlement Body is established to administer the rules and procedures and, except as otherwise provided in a covered agreement, the consultation and dispute settlement provisions of the covered agreements. Accordingly, the DSB has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements. With respect to disputes arising under a covered agreement which is a Plurilateral Trade Agreement, the term "Member" refers only to those Members that are parties to the relevant Plurilateral Trade Agreement. Where the DSB administers the dispute settlement provisions of a Plurilateral Trade Agreement, only those Members that are parties to that Agreement may participate in decisions or actions taken by the DSB with respect to that dispute. The DSB informs the relevant WTO Councils and Committees of any developments in disputes related to provisions of the respective covered agreements. DSB meets as often as necessary to carry out its functions within the time-frames provided in this Understanding. The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered 28
agreements. Before bringing a case, a Member exercises its judgement as to whether action under these procedures would be fruitful. The aim of the dispute settlement mechanism is to secure a positive solution to a dispute. A solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred. In the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements. The provision of compensation is resorted to only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement. The last resort which this Understanding provides to the Member invoking the dispute settlement procedures is the possibility of suspending the application of concessions or other obligations under the covered agreements on a discriminatory basis vis-à-vis the other Member, subject to authorization by the DSB of such measures. In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This means that there is normally a presumption that a breach of the rules has an adverse impact on other Members parties to that covered agreement, and in such cases, it is up to the Member against whom the complaint has been brought to rebut the charge. If a request for consultations is made pursuant to a covered agreement, the Member to which the request is made, unless otherwise mutually agreed, replies to the request within 10 days after the date of its receipt and enters into consultations in good faith within a period of no more than 30 days after the date of receipt of the request, with a view to reaching a mutually satisfactory solution. If the Member does not do so, then the Member that requested the holding of consultations may proceed directly to request the establishment of a panel. All such requests for consultations are notified to the DSB and the relevant Councils and Committees by the Member which requests consultations. Any request for consultations is submitted in writing and reasons are given for the request, including identification of the measures at issue and an indication of the legal basis for the complaint. In the course of consultations in accordance with the provisions of a covered agreement, before resorting to further action under this Understanding, Members attempt to obtain satisfactory adjustment of the matter.
Consultations are confidential, and without prejudice to the rights of any Member in any further proceedings. If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request the establishment of a panel. The complaining party may request a panel during the 60day period if the consulting parties jointly consider that consultations have failed to settle the dispute. In cases of urgency, including those which concern perishable goods, Members shall into consultations within a period of no more than 10 days after the date of receipt of the request. If the consultations have failed to settle the dispute within a period of 20 days after the date of receipt of the request, the complaining party may request the establishment of a panel. In cases of urgency, including those which concern perishable goods, the parties to the dispute, panels and the Appellate Body make every effort to accelerate the proceedings to the greatest extent possible. 5. Trade Policy Review Mechanism: The surveillance of national trade policies is a fundamentally important activity running throughout the work of the WTO. At the centre of this work is the Trade Policy Review Mechanism (TPRM). Trade Policy Review Mechanism (TPRM) The objectives of Trade Policy Review Mechanism (TPRM) are as follows: The purpose of the Trade Policy Review Mechanism ("TPRM") is to contribute to improved adherence by all Members to rules, disciplines and commitments made under the Multilateral Trade Agreements and, where applicable, the Plurilateral Trade Agreements, and hence to the smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of Members. Accordingly, the review mechanism enables the regular collective appreciation and evaluation of the full range of individual Members' trade policies and practices and their impact on the functioning of the multilateral trading system. It is not, however, intended to serve as a basis for the enforcement of specific obligations under the Agreements or for dispute settlement procedures, or to impose new policy commitments on Members. The assessment carried out under the review mechanism takes place, to the extent relevant, against the background of the wider economic and developmental needs, policies and objectives of the Member concerned, as well as of its external environment. However, the function of the review mechanism is to examine the impact of a Member's trade policies and practices on the multilateral trading system.
The procedures for review of Trade Policies is as follows: The Trade Policy Review Body (TPRB) is established to carry out trade policy reviews. All WTO members are reviewed, the frequency of each country’s review varying according to its share of world trade. The first four trading entities so identified (counting the European Communities as one) are to be subject to review every two years. The next 16 are to be reviewed every four years. Other Members are to be reviewed every six years, except that a longer period may be fixed for least-developed country Members. Exceptionally, in the event of changes in a Member's trade policies or practices that may have a significant impact on its trading partners, the Member concerned may be requested by the TPRB, after consultation, to bring forward its next review.
TRADE AND ENVIRONMENT:
Sustainable development, protection and preservation of the environment are fundamental goals of the WTO. WTO’s objective is to reduce trade barriers and eliminate discriminatory treatment in international trade relations. While under WTO rules, members can adopt trade-related measures aimed at protecting the environment provided a number of conditions to avoid the misuse of such measures for protectionist ends are fulfilled. The WTO contributes to protection and preservation of the environment through its objective of trade openness, through its rules and enforcement mechanism, through work in different WTO bodies. The Doha Agenda includes specific negotiations on trade and environment and some tasks assigned to the regular Trade and Environment Committee.
1. 2. 3. 4. 5.
http://www.wto.org/ http://econ2.econ.iastate.edu/classes/econ355/Choi/wtoworks.htm http://www.legalserviceindia.com/article/l378-From-GATT-to-WTO.html http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact3_e.htm “Business Environment” by Shaikh Saleem, 2nd edition, Pearson Edu.
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