International Economics

Learning Objectives

Scope , Functions and Structure of WTO

Procedure for Settlement of Disputes

Shortcomings in the Procedure

 International Economics

Introduction

* World Trade Organization was set up in

1995.

* It builds up on the organization structure

of the GATT & its Secretariat.

* ‘Principle of open & non-discriminatory

trade’ is its foundation.

* Unlike GATT, every WTO member has to

submit a schedule of tariff concessions
and service commitments.
 International Economics

25.1 Scope of WTO

√ WTO and its agreements are permanent and

ratified by the governments of member
countries.

√ WTO covers goods, services and

intellectual property as well.

√ WTO dispute settlement scheme is

effective and faster than old GATT system.
 International Economics

25.2 Functions of WTO

1. Administering Trade Agreements.

2. Acting as a Forum for trade negotiations.
3. Settling the disputes.
4. Reviewing national trade policies.

5. Assisting developing countries in trade

policy issues, through technical
assistance & training programmes.

6. Cooperating with other international

organizations like IMF, World Bank etc.
 International Economics

25.3 Structure of WTO

WTO has over 130 members accounting for

90% of the world trade. Decisions are
taken by all members usually through
consensus.

Ministerial Conference is its top level

decision making body. It meets every two
years. Next comes General Council which
also works as Trade policy Review Body &
the Dispute Settlement Body.
 International Economics

25.4 Secretariat

The Secretariat is located in Geneva and

does not have decision making rights as
members take all decisions. Its main
duties include
• to supply technical support for the
various councils , committees and the
ministerial conference.
• to provide technical assistance to
developing countries
• to analyze world trade
• to explain WTO affairs to the public &
media.
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25.4 Secretariat

Decision Making in the WTO

Decision Type of Issue

making rule

Unanimity Amendments concerning

general principles such
as non discrimination.

Three Quarters Interpretation of the

Majority provisions of WTO and
waivers of WTO
disciplines for members.
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25.4 Secretariat

Decision Making in the WTO

Decision Type of Issue
making rule
Two thirds Amendments to the WTO
majority relating to issues other
than general principles,
accession.
Consensus as a Where not otherwise
rule specified. Decisions of
the Dispute Settlement
Body etc.
 International Economics

25.4 Secretariat

Dispute Settlement Procedure

This is a unique feature of WTO, it

enables developing countries to oppose
unilateral actions by large traders.

The use of this procedure is mandatory for

all disputes concerning concluded
agreements.

The WTO council itself works as Disputes

Settlement Board [DSB]
 International Economics

25.5 Settlement of Disputes : Steps

DSB is responsible for settlement of

disputes. It establishes experts’ panel,
decides whether to accept or reject its
verdict, or results of an appeal.

It monitors implementation of the rulings

and has power to authorize retaliation
when a country does not comply with a
ruling.

When dispute arises countries have to

engage in consultations to resolve it.
 International Economics

25.5 Settlement of Disputes : Steps

If consultations fail, the panel is

appointed which has to conclude its
recommendation in six months.

Both sides present their case to the panel

in the first hearing. In the second
hearing parties submit written rebuttals.

If any technical issues are raised by any

party, experts are appointed to assist the
panel.
 International Economics

25.5 Settlement of Disputes : Steps

The panel thereafter submits its first

draft of descriptive sections without any
findings for comments.

After review of comments received, interim

report with findings is submitted for
review by disputants.

The final report then is submitted to two

parties and all members of the WTO. Unless
it is rejected by consensus, the report
becomes a ruling of the WTO.
 International Economics

25.6 Appeals

Shortcomings of Dispute Settlement

Procedure
Major problems regarding implementation of
the DSB rulings were caused by divergent
regulatory regimes of members related to
health & safety. Even if a ruling is given
by DSB, its ability to enforce it, is very
asymmetric.
The cost of the process is very
significant especially for developing
countries.
 International Economics

Conclusion

WTO signifies political economy aspects

of the multi lateral trading system.

It is an international organization based

on strong legal framework.

In spite of many drawbacks, it has

succeeded in fostering an environment of
trust among members by providing a much
needed forum for international trade
negotiations and settlement of disputes.
The End !