PROJECT REPORT ON

DISPUTE SETTLEMENT MACHANISM IN THE WTO

SUBMITTED BY
Saba Shafi Muhimtule

M.Com Semester -1
2012-13

PROJECT GUIDE
Susan Alex

SUBMITTED TO
University of Mumbai

BUNTS SANGHA MUMBAI

ANNA LEELA COLLEGE OF COMMERCE &
ECONOMICS
SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S
SHASHI MANMOHAN SHETTY HIGHER EDUCATION COMPLEX, BUNTARA BHAVANA
MARG, KURLA (EAST), MUMBAI 400070

BUNTS SANGHA MUMBAI

ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS
SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S
Shashi Manmohan Shetty Higher Education Complex,
Buntara Bhavana Marg, Kurla (East), Mumbai 400 070.

This is to certify that

Ms. Saba Shafi Muhimtule of M.Com Semester -1 has undertaken &
completed the project work titled Dispute Settlement Mechanism in
WTO during the academic year 2012-13 under the guidance of Prof. Susan
Alex submitted to this college in fulfillment of the curriculum of University of
Mumbai.

This is a bonafide project work & the information presented is true &
original to the best of our knowledge and belief.

PROJECT
GUIDE

COURSE
CO-ORDINATOR

EXTERNAL
EXAMINER

PRINCIPAL

BUNTS SANGHA MUMBAI

ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS
SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S
Shashi Manmohan Shetty Higher Education Complex,
Buntara Bhavana Marg, Kurla (East), Mumbai 400 070

DECLARATION

I, Saba shafi muhimtule of ANNA LEELA COLLEGE OF

COMMERCE & ECONOMICS, SHOBHA JAYARAM SHETTY COLLEGE FOR
B.M.S, M.com hereby declare that I have completed the project on Dispute
Settlement Mechanism in WTO in academic year2012-13.
The information submitted is true and original to the best of my knowledge
through the book business economics and also taking help with the web.
Signature of the Student,

ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me to draft
the project report. It would not have been possible for me to complete the
task without their help and guidance
First of all I would like to thank the principal Dr. K.S. Cheema and the
coordinator Prof. Susan Alex who gave me the opportunity to do this project
work. They also conveyed the important instructions from the university from
time to time. Secondly, I am very much obliged of Prof. SUSAN for giving
guidance for completing the project
Last but not the least; I am thankful to the University of Mumbai for offering
the project in the syllabus. I must mention my hearty gratitude towards my
family, other faculties and friends who supported me to go ahead with the
project

INDEX
History
From Geneva to Tokyo
Uruguay Round
Ministerial conferences
Doha Round (The Doha Agenda)
Functions

Principles of the trading system

Organizational structure

Decision-making

Accession and membership

Accession and membership

Accession process

Members and observers

Agreements

Agreement on Trade Related Investment Measures

Agreement on Trade-Related Aspects of Intellectual Property Rights

General Agreement on Tariffs and Trade

Contentious issues on WTO and Globalization

Dispute settlement in the World Trade Organization
Compliance
Compensation and retaliation
Developing countries

World Trade Organization

The World Trade Organization (WTO) is an organization that intends to

supervise

and liberalizeinternational

trade.

The

organization

officially

commenced on January 1, 1995 under the Marrakech Agreement, replacing

the General Agreement on Tariffs and Trade (GATT), which commenced in
1948. The organization deals with regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade
agreements,

and

dispute

participants'

adherence

to

resolution
WTO

process

agreements

aimed

which

at

are

enforcing
signed

by

representatives of member governments and ratified by their parliaments.

Most of the issues that the WTO focuses on derive from previous trade
negotiations, especially from the Uruguay Round (19861994).
The organization is attempting to complete negotiations on the Doha
Development Round, which was launched in 2001 with an explicit focus on
addressing the needs of developing countries. As of June 2012, the future of
the Doha Round remains uncertain: The work programmed lists 21 subjects
in which the original deadline of 1 January 2005 was missed (So was the next
unofficial target of the end of 2006.) The further imposition of free trade on
industrial goods and services and

the

protectionism on farm

subsidies to

domestic agricultural sector requested from the developed countries, and

the substantiation of

the

international

liberalization

of fair

trade on

agricultural products from developing countries remain the major obstacles.

These points of contention have hindered any progress to launch new WTO
negotiation(s) beyond the Doha Development Round. As a result of this
impasse, there has been an increasing amount of bilateral free trade
agreements
WTO's current Director-General is Pascal Lamy, who leads a staff of over 600
people in Geneva, Switzer the Uruguay Round of multilateral trade
negotiations under the auspices of GATT (General Agreement on Tariffs and
Trade,

based

on

1947

agreement)

established

the

World

Trade

Organization. Upon ratification of the Round's Final Act by members, the

WTO replaced GATT as the global multilateral trade organization, and a
series of agreements associated with but legally distinct from GATT were also
placed under the WTO umbrella (such as the GATS, the Agreement on
Agriculture, on Textiles and Clothing, on Rules of Origin, etc.).
The 1947 General Agreement on Tariffs and Trade (GATT) emerged from
wartime and post-war negotiations (see Bretton Woods) to establish a stable,
multilateral economic order. The lengthy negotiating process (1944-7)
reflected the controversial nature of the politics of international trade at
domestic and international levels of bargaining: changing patterns of
international trade could have dramatic and fairly immediate effects on
domestic employment and income levels within and among national
economies. While it has never proved possible to gain broad agreement on

the extent of liberalization in most domains of international trade, it was

accepted that the unilateralist and discriminatory practices of the inter-war
period had had particularly negative consequences for all concerned
GATT itself was an interim accord which sought to codify the rules of the
emerging trade regime and to proceed with important reductions in national
barriers to trade. The US delegation was determined to press other countries
to reduce their discriminatory trade practices (particularly the British
Imperial Preference) and in exchange the United States was willing to
reduce its traditionally high tariffs. The USSR and its allies remained outside
GATT, only considering membership at the end of the Cold War in 1989.
Following the signature of the Havana Charter in 1948, the GATT was
supposed to form the rule book of the newly established International Trade
Organization (ITO). The ITO charter prescribed a far more ambitious
multilateral institution than the eventual WTO, but this was in part its
eventual downfall. When the US failed to ratify the ITO charter, the institution
was dead and only the interim GATT survived.
The GATT agreement enunciated the principles of reciprocity and nondiscrimination, encapsulated in the Most Favored Nation (MFN) and National
Treatment concepts. National Treatment implies that governments cannot
treat foreign exporting firms any less favorably than domestic producers.
Reciprocity meant that any negotiations among trading partners were to
yield roughly reciprocal concessions and/or benefits in the eyes of the

parties. Non-discrimination meant that any trade concession advanced by a

country to one GATT trading partner had to be extended to all others
simultaneously. In this way, bilateral negotiations among trading parties
would be multilateral zed, leading to the establishment of a liberal trading
order.
GATT negotiating Rounds were difficult due to the weak state of most postwar economies, and the extraordinary competitive edge of American industry
at the time. Most economies would have experienced severe balance-ofpayments difficulties had they removed barriers to imports, and domestic
employment would have been adversely affected as well. As post-war
recovery rendered more liberal trading policies acceptable, the American
government sought to replace the piecemeal approach with reciprocal
across-the-board tariff cuts by all participating parties on a wide range of
traded products. This initiative developed into the Kennedy Round
agreements of June 1967 which stands as a watershed in post-war trade
liberalization. Tariffs on manufactured goods were reduced by 36 per cent on
average, and this progress was continued in the later Tokyo Round (1974-9).
The United States had originally taken unilateral measures to keep
agricultural trade out of the GATT process in 1955, but had reversed this
position in the Kennedy Round. This led to a long-running conflict with
the EU (with its Common Agricultural Policy, which represented a delicate
internal compromise difficult to disturb) and Japan, both with protected

agricultural markets. Agriculture is still central to conflict over the trade

regime, and held up the Uruguay Round of negotiations (completed in
December 1993).
As tariffs were lowered, so-called non-tariff barriers (NTBs) became the
remaining instruments of trade policy. Examples were voluntary export
restraint agreements and Orderly Marketing Arrangements, running against
the spirit of GATT non-discrimination. As these were voluntary, GATT rules
theoretically did not apply. Furthermore, the principles of liberalization called
into question many economic policy measures associated with successful
national

economic

development

strategies

in

the

post-war

period,

particularly in Japan, Europe, and the developing world. Finally, the Less
Developed Countries sought exemption from many of GATT's rules, pointing
out that their weak economies benefited little from free trade arrangements.
All governments abused the escape clauses in GATT (e.g. through antidumping measures) and attempts have been made to tighten up the rules
over time. None of these disputes is likely to be resolved in any permanent
fashion; it is the nature of the eventual compromise which will be crucial to
the continued success of the WTO as GATT's successor. There none the less
remains broad agreement on the need to continue the momentum of the
liberalization process through further rounds of WTO negotiations.
The Uruguay Round negotiations successfully expanded the scope of GATT.
It now includes multilateral rules applied to the services sector (see GATS),

intellectual property, investment measures, and some aspects of agricultural

trade. The Round also ended the provisional status of GATT by establishing
the World Trade Organization with an enhanced institutional framework and
dispute settlement procedure. The WTO's judgments on trade disputes now
bind member countries to change their trade practices, though the US
Congress formally refuses this implication and asserts the superiority of US
laws.
The new WTO is not without tensions among its members and their societies,
as its history would suggest is likely to be the case. Developing countries
argue strongly that the WTO as constituted does not adequately take into
account the difficulties and asymmetries of economic development under
conditions of liberalization. Developed countries and the international
organizations they control such as the IMF have put strong pressure on
developing countries to liberalize their trade laws despite uncertain
consequences for long-run development prospects. Developed countries are
often less than generous in opening their markets to developing country
exports, especially in the domain of agriculture and garment production.

Perhaps the biggest challenge to the WTO comes not

from member states but from civil society groups such as non-governmental
organizations. Many social activists in the anti-globalization movement draw
attention to the difficulties of liberalization in both developed and developing
countries, especially for the weaker members of society and less market-

competitive forms of economic organization which may none the less be

crucial to local identities and cultures. Organized labour maintains an uneasy
relationship with the liberalization process, for fear of job losses. Finally, the
emergence of the European Union (EU), the NAFTA, and other nascent
regional arrangements such as MERCOSUR or the Asia Pacific Economic Cooperation Forum (APEC), are also potential challenges to young WTO. So far
these regional arrangements have not emerged as discriminatory trading
blocs, and the WTO expressly permits regional economic integration if
compatible with its rules. Despite the ultimate success of the long Uruguay
Round, regional arrangements and indeed bilateral/unilateral solutions
(especially on the part of the United States) may become the order of the
day if ongoing agreement cannot be reached on outstanding issues.
However, global companies would be likely to put up stiff resistance to any
attempt to substantially restrict the liberal or global nature of the trade
regime. In short, conflict in the WTO continues to mirror socio-political
tensions across its member economies and is intimately related to the
tensions of global economic integration largely driven by liberalization
policies.

History
The economists Harry White (left) and John Maynard Keynes at the Breton
Woods Conference. Both had been strong advocates of a liberal international
trade environment and recommended the establishment of three institutions:

the IMF(for fiscal and monetary issues); the World Bank (for financial and
structural issues); and the ITO (for international economic cooperation).
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT),
was

established

after World

War

II in

the

wake

of

other

new multilateral institutions dedicated to international economic cooperation

notably theBretton Woods institutions known as the World Bank and
the International Monetary Fund. A comparable international institution for
trade,

named

the International

Trade

Organization was

successfully

negotiated. The ITO was to be a United Nations specialized agency and

would address not only trade barriers but other issues indirectly related to
trade, including employment, investment, restrictive business practices, and
commodity agreements. But the ITO treaty was not approved by the U.S. and
a few other signatories and never went into effect.
In the absence of an international organization for trade, the GATT would
over the years "transform itself" into a de facto international organization.

From Geneva to Tokyo

Seven rounds of negotiations occurred under GATT. The first real GATT trade
rounds concentrated on further reducing tariffs. Then, the Kennedy Round in
the mid-sixties brought about a GATT anti-dumping Agreement and a section
on development. The Tokyo Round during the seventies was the first major
attempt to tackle trade barriers that do not take the form of tariffs, and to

improve the system, adopting a series of agreements on non-tariff barriers,

which in some cases interpreted existing GATT rules, and in others broke
entirely

new

ground.

Because

these plurilateral

agreements were

not

accepted by the full GATT membership, they were often informally called
"codes". Several of these codes were amended in the Uruguay Round, and
turned into multilateral commitments accepted by all WTO members. Only
four remained plurilateral (those on government procurement, bovine meat,
civil aircraft and dairy products), but in 1997 WTO members agreed to
terminate the bovine meat and dairy agreements, leaving only two.

Uruguay Round
Well before GATT's 40th anniversary, its members concluded that the GATT
system was straining to adapt to a new globalizing world economy In
response to the problems identified in the 1982 Ministerial Declaration
(structural deficiencies, spill-over impacts of certain countries' policies on
world trade GATT could not manage etc.), the eighth GATT round known as
the Uruguay Round was launched in September 1986, in Punta del
Este, Uruguay.
It was the biggest negotiating mandate on trade ever agreed: the talks were
going to extend the trading system into several new areas, notably trade in
services and intellectual property, and to reform trade in the sensitive
sectors of agriculture and textiles; all the original GATT articles were up for

review.

The

Final

Act

concluding

the

Uruguay

Round

and

officially

establishing the WTO regime was signed April 15, 1994, during the
ministerial

meeting

atMarrakesh, Morocco,

and

hence

is

known

as

the Marrakesh Agreement.

The GATT still exists as the WTO's umbrella treaty for trade in goods,
updated as a result of the Uruguay Round negotiations (a distinction is made
between GATT 1994, the updated parts of GATT, and GATT 1947, the original
agreement which is still the heart of GATT 1994). GATT 1994 is not however
the only legally binding agreement included via the Final Act at Marrakesh; a
long list of about 60 agreements, annexes, decisions and understandings
was adopted. The agreements fall into a structure with six main parts:

The Agreement Establishing the WTO

Goods and investment the Multilateral Agreements on Trade in

Goods including the GATT 1994 and the Trade Related Investment
Measures (TRIMS)

Services the General Agreement on Trade in Services

Intellectual property the Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS)

Dispute settlement (DSU)

Reviews of governments' trade policies (TPRM)

In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the
Uruguay Round has been successful in increasing binding commitments by
both developed and developing countries, as may be seen in the
percentages of tariffs bound before and after the 1986-1994 talks.

Ministerial conferences
The topmost decision-making body of the WTO is the Ministerial Conference,
which usually meets every two years. It brings together all members of the
WTO, all of which are countries or customs unions. The Ministerial
Conference can take decisions on all matters under any of the multilateral
trade

agreements.

in Singapore in

1996.

The inaugural
Disagreements

ministerial
between

conference was
largely

developed

held
and

developing economies emerged during this conference over four issues

initiated by this conference, which led to them being collectively referred to
as the "Singapore issues". Thesecond ministerial conference was held
in Geneva in Switzerland. The third conference in Seattle, Washington ended
in failure, with massive demonstrations and police and National Guard crowd
control

efforts

drawing

worldwide

attention.

The fourth

ministerial

conference was held in Doha in the Persian Gulf nation of Qatar. The Doha
Development Round was launched at the conference. The conference also
approved the joining of China, which became the 143rd member to join.

The fifth ministerial conference was held in Cancn, Mexico, aiming at

forging agreement on the Doha round. An alliance of 22 southern states,
theG20 developing nations (led by India, China, Brazil, ASEAN led by
the Philippines), resisted demands from the North for agreements on the socalled

"Singapore

issues"

and

called

for

an

end

to agricultural

subsidies within the EU and the US. The talks broke down without progress.
The sixth WTO ministerial conference was held in Hong Kong from 1318
December

2005.

It

was

considered

vital

if

the

four-year-old

Doha

Development Round negotiations were to move forward sufficiently to

conclude the round in 2006. In this meeting, countries agreed to phase out
all their agricultural export subsidies by the end of 2013, and terminate any
cotton export subsidies by the end of 2006. Further concessions to
developing countries included an agreement to introduce duty free, tariff free
access

for

goods

from

the

Least

Developed

Countries,

following

the Everything but Arms initiative of the European Union but with up to 3%
of tariff lines exempted. Other major issues were left for further negotiation
to be completed by the end of 2010. The WTO General Council, on 26 May
2009, agreed to hold a seventh WTO ministerial conference session
in Geneva from 30 November-3 December 2009. A statement by chairman
Amb. Mario Matus acknowledged that the prime purpose was to remedy a
breach of protocol requiring two-yearly regular meetings, which had lapsed
with the Doha Round failure in 2005, and that the scaled-down meeting
would not be a negotiating session, but emphasis will be on transparency

and open discussion rather than on small group processes and informal
negotiating structures. The general theme for discussion was The WTO, the
Multilateral Trading System and the Current Global Economic Environment

Doha Round (The Doha Agenda)

The WTO launched the current round of negotiations, the Doha Development
Round, at the fourth ministerial conference in Doha, Qatarin November 2001.
This was to be an ambitious effort to make globalization more inclusive and
help the world's poor, particularly by slashing barriers and subsidies in
farming. The initial agenda comprised both further trade liberalization and
new rule-making, underpinned by commitments to strengthen substantial
assistance to developing countries.
The negotiations have been highly contentious. Disagreements still continue
over several key areas including agriculture subsidies, which emerged as
critical in July 2006.According to a European Union statement, "The 2008
Ministerial meeting broke down over a 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." The position of the European
Commissionis that "The successful conclusion of the Doha negotiations
would confirm the central role of multilateral liberalisation and rule-making.
It would confirm the WTO as a powerful shield against protectionist

backsliding." An impasse remains and As of June 2012, agreement has not

been

reached,

despite

intense

negotiations

at

several

ministerial

conferences and at other sessions.

Functions
Among the various functions of the WTO, these are regarded by analysts as
the most important:

It oversees the implementation, administration and operation of the

covered agreements.

It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade
policies, and to ensure the coherence and transparency of trade policies
through surveillance in global economic policy-making. Another priority of
the WTO is the assistance of developing, least-developed and low-income
countries in transition to adjust to WTO rules and disciplines through
technical cooperation and training.
The WTO is also a center of economic research and analysis: regular
assessments of the global trade picture in its annual publications and
research reports on specific topics are produced by the organization. Finally,

the WTO cooperates closely with the two other components of the Bretton
Woods system, the IMF and the World Bank.

Principles of the trading system

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 freeriding 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 fromunilateral liberalization; reciprocal concessions
intend to ensure that such gains will materialise
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 country-specific 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. The WTOs agreements permit members to take
measures to protect not only the environment but also public health,
animal health and plant health.
There are three types of provision in this direction:

articles allowing for the use of trade measures to attain noneconomic objectives;

articles aimed at ensuring "fair competition"; members must not

use environmental protection measures as a means of disguising
protectionist policies.

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.

Organizational structure
Council for Trade in Goods
There are 11 committees under the jurisdiction of the Goods Council each
with a specific task. All members of the WTO participate in the committees.
The Textiles Monitoring Body is separate from the other committees but still

under the jurisdiction of Goods Council. The body has its own chairman and
only 10 members. The body also has several groups relating to textiles.[40]

Council for Trade-Related Aspects of Intellectual

Property Rights
Information on intellectual property in the WTO, news and official records of
the activities of the TRIPS Council, and details of the WTO's work with other
international organizations in the field.[41]

Council for Trade in Services

The Council for Trade in Services operates under the guidance of the General
Council and is responsible for overseeing the functioning of the General
Agreement on Trade in Services (GATS). It is open to all WTO members, and
can create subsidiary bodies as required.

Trade Negotiations Committee

The Trade Negotiations Committee (TNC) is the committee that deals with
the current trade talks round. The chair is WTO's director-general. As of June
2012 the committee was tasked with the Doha Development Round.
The Service Council has three subsidiary bodies: financial services, domestic
regulations, GATS rules and specific commitments. The General council has
several different committees, working groups, and working parties. There are
committees

on

the

following:

Trade

and

Environment;

Trade

and

Development (Subcommittee on Least-Developed Countries); Regional Trade

Agreements; Balance of Payments Restrictions; and Budget, Finance and
Administration. There are working parties on the following: Accession. There
are working groups on the following: Trade, debt and finance; and Trade and
technology transfer.

Decision-making
The WTO describes itself as "a rules-based, member-driven organization
all decisions are made by the member governments, and the rules are the
outcome of negotiations among members". The WTO Agreement foresees
votes where consensus cannot be reached, but the practice of consensus
dominates the process of decision-making.
Richard Harold Steinberg (2002) argues that although the WTO's consensus
governance model provides law-based initial bargaining, trading rounds close
through power-based bargaining favouring Europe and the U.S., and may not
lead to Pareto improvement.

Accession and membership

The process of becoming a WTO member is unique to each applicant
country, and the terms of accession are dependent upon the country's stage

of economic development and current trade regime. The process takes about
five years, on average, but it can last more if the country is less than fully
committed to the process or if political issues interfere. The shortest
accession negotiation was that of the Kyrgyz Republic, while the longest was
that ofRussia, which, having first applied to join GATT in 1993, was approved
for membership in December 2011 and became a WTO member on August
22, 2012. The second longest was that of Vanuatu, whose Working Party on
the Accession of Vanuatu was established on 11 July 1995.

After

a final meeting of the Working Party in October 2001, Vanuatu requested

more time to consider its accession terms. In 2008, it indicated its interest to
resume and conclude its WTO accession. The Working Party on the Accession
of Vanuatu was reconvened informally on 4 April 2011 to discuss Vanuatus
future WTO membership. The re-convened Working Party completed its
mandate on 2 May 2011. The General Council formally approved the
Accession Package of Vanuatu on 26 October 2011. On 24 August 2012, the
WTO welcomed Vanuatu as its 157th member. An offer of accession is only
given once consensus is reached among interested parties.

Accession process

Members (including dual-representation with the European Union)

Draft Working Party Report or Factual Summary adopted

Goods and/or Services offers submitted
Memorandum on Foreign Trade Regime (FTR) submitted
Observer, negotiations to start later or no Memorandum on FTR submitted
Frozen procedures or no negotiations in the last 3 years
No official interaction with the WTO
A country wishing to accede to the WTO submits an application to the
General Council, and has to describe all aspects of its trade and economic
policies that have a bearing on WTO agreements. The application is
submitted to the WTO in a memorandum which is examined by a working
party open to all interested WTO Members.
After all necessary background information has been acquired, the working
party focuses on issues of discrepancy between the WTO rules and the
applicant's international and domestic trade policies and laws. The working
party determines the terms and conditions of entry into the WTO for the
applicant nation, and may consider transitional periods to allow countries
some leeway in complying with the WTO rules.
The final phase of accession involves bilateral negotiations between the
applicant

nation

and

other

working

party

members

regarding

the

concessions and commitments on tariff levels and market access for goods

and services. The new member's commitments are to apply equally to all
WTO members under normal non-discrimination rules, even though they are
negotiated bilaterally
When the bilateral talks conclude, the working party sends to the general
council or ministerial conference an accession package, which includes a
summary of all the working party meetings, the Protocol of Accession (a draft
membership

treaty),

and

lists

("schedules")

of

the

member-to-be's

commitments. Once the general council or ministerial conference approves

of the terms of accession, the applicant's parliament must ratify the Protocol
of Accession before it can become a member

Members and observers

The WTO has 157 members and 27 observer governments. In addition to
states, the European Union is a member. WTO members do not have to be
fullsovereign nation-members. Instead, they must be a customs territory with
full autonomy in the conduct of their external commercial relations.
Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT
contracting party, and the Republic of China (Taiwan) acceded to the WTO in
2002 as "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu"
(Chinese Taipei) despite its disputed status. The WTO Secretariat omits the
official titles (such as Counselor, First Secretary, Second Secretary and Third
Secretary) of the members of Chinese Taipei's Permanent Mission to the

WTO, except for the titles of the Permanent Representative and the Deputy
Permanent Representative.
Iran is the biggest economy outside the WTO. With the exception of the Holy
See, observers must start accession negotiations within five years of
becoming

observers.

number

of

international

intergovernmental

organizations have also been granted observer status to WTO bodies. 14

states and two territories so far have no official interaction with the WTO.

Agreements
The WTO oversees about 60 different agreements which have the status of
international legal texts. Member countries must sign and ratify all WTO
agreements on accession. A discussion of some of the most important
agreements follows. The Agreement on Agriculture came into effect with the
establishment of the WTO at the beginning of 1995. The Ana has three
central concepts, or "pillars": domestic support, market access and export
subsidies. The General Agreement on Trade in Services was created to
extend the multilateral trading system to service sector, in the same way as
the General Agreement on Tariffs and Trade (GATT) provided such a system
for merchandise trade. The agreement entered into force in January 1995.
The Agreement on Trade-Related Aspects of Intellectual Property Rights sets
down minimum standards for many forms of intellectual property (IP)

regulation. It was negotiated at the end of the Uruguay Round of the General
Agreement on Tariffs and Trade (GATT) in 1994.
The Agreement on the Application of Sanitary and Phytosanitary Measures
also known as the SPS Agreementwas negotiated during the Round of
GATT, and entered into force with the establishment of the WTO at the
beginning of 1995. Under the SPS agreement, the WTO sets constraints on
members' policies relating to food safety (bacterial contaminants, pesticides,
inspection and labeling) as well as animal and plant health (imported pests
and

diseases).

The Agreement

on

Technical

Barriers

to

Trade is

an

international treaty of the World Trade Organization. It was negotiated during

the Uruguay Round of the General Agreement on Tariffs and Trade, and
entered into force with the establishment of the WTO at the end of 1994. The
object ensures that technical negotiations and standards, as well as testing
and certification procedures, do not create unnecessary obstacles to trade"
The Agreement on Customs Valuation, formally known as the Agreement on
Implementation of Article VII of GATT, prescribes methods of customs
valuation that Members are to follow. Chiefly, it adopts the "transaction
value" approach.

Agreement on Trade Related Investment Measures

The Agreement on Trade Related Investment Measures (TRIMs) are

rules that apply to the domestic regulations a country applies to foreign
investors, often as part of an industrial policy. The agreement was agreed
upon by all members of the World Trade Organization. (The WTO wasn't
established at that time, it was its predecessor, the GATT (General
Agreement on Trade and Tariffs). The WTO came about in 1994-1995.
Policies such as local content requirements and trade balancing rules that
have traditionally been used to both promote the interests of domestic
industries and combat restrictive business practices are now banned.
Trade Related Investment Measures is the name of one of the four principal
legal agreements of the WTO trade treaty.
TRIMs are rules that restrict preference of domestic firms and thereby enable
international firms to operate more easily within foreign markets.

Agreement

on

Trade-Related

Aspects

of

Intellectual

Property Rights

The Agreement on Trade Related Aspects of Intellectual Property

Rights (TRIPS) is an international agreement administered by the World
Trade Organization (WTO) that sets down minimum standards for many forms

of intellectual property (IP) regulation as applied to nationals of other WTO

Members.[2] It

was

negotiated

at

the

end

of

the Uruguay

Round of

the General Agreement on Tariffs and Trade (GATT) in 1994.

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."
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

indications,

including appellations of origin; industrial designs; integrated circuit layoutdesigns; patents;

monopolies

varieties; trademarks; trade

information.
and dispute

TRIPS

also

for

dress;
specify

resolution procedures.

the

developers

and

undisclosed

of new

or confidential

enforcement procedures,
Protection

and

plant

remedies,

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.

General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade (GATT) is a multilateral
agreement regulating international trade. According to its preamble, its
purpose is the "substantial reduction of tariffs and other trade barriers and
the elimination of preferences, on a reciprocal and mutually advantageous
basis."
It was negotiated during the UN Conference on Trade and Employment and
was the outcome of the failure of negotiating governments to create the
International (ITO). GATT was signed in 1948 and lasted until 1993, when it
was replaced by the World Trade Organization in 1995. The original GATT text
(GATT 1958) is still in effect under the WTO framework, subject to the
modifications of GATT 1994.[1
In 1993, the GATT was updated (GATT 1994) to include new obligations upon
its signatories. One of the most significant changes was the creation of the
World (WTO).

The

75

existing

GATT

members

and

the European

Communities became the founding members of the WTO on 1 January 1995.

The other 52 GATT members rejoined the WTO in the following two years
(the last being Congo in 1997). Since the founding of the WTO, 21 new nonGATT members have joined and 29 are currently negotiating membership.
There are a total of 157 member countries in the WTO, with Russia and
Vanuatu being new members as of 2012.
Of the original GATT members, Syria
rejoined

the

WTO.

Since FR

[5] [6]

and the SFR Yugoslavia has not

Yugoslavia,

(renamed

to Serbia

and

Montenegro and with membership negotiations later split in two), is not

recognized as a direct SFRY successor state; therefore, its application is
considered a new (non-GATT) one. The General Council of WTO, on 4 May
2010, agreed to establish a working party to examine the request of Syria for
WTO membership.[7]
official

agreement

[8]

the contracting parties who founded the WTO ended

of

the

"GATT

1947"

terms

on

31

December

1995. Serbia and Montenegro are in the decision stage of the negotiations
and are expected to become the newest members of the WTO in 2012 or in
near future.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an
institutional body. The WTO expanded its scope from traded goods to include
trade within the service sector and intellectual property rights. Although it
was designed to serve multilateral agreements, during several rounds of
GATT

negotiations

(particularly

the Tokyo Round) plurilateral agreements

created selective trading and caused fragmentation among members. WTO

arrangements are generally a multilateral agreement settlement mechanism
of GATT.

Contentious issues on WTO and Globalization

Environmental groups argue that globalization harms the environment;

they want the WTO to change its rules so that trade sanctions can be
used to enforce environmental goals.

They blame global corporations for global warming, depletion of

natural resources, production of harmful chemicals and destruction of
organic agriculture.

They have particular criticism against global investment, which they

argue takes advantage of the lack of regulation in poorer developing
countries. Hence, global companies may locate polluting industries in
poor countries, log tropical forests, or develop mines with inadequate
controls.

They oppose production, use and global trade in toxic chemicals,

nuclear materials and other products of which they do not approve,
such as GM foods, or endangered wildlife, including fish.

They oppose the existing rules of the WTO, which do not allow
countries to ban imports of goods just because their production may
have damaged the environment in the country of origin.

Environmental groups argue that WTO rules are unacceptable from the
environmental perspective and they want the rules amended to give
them the right to present arguments in its appeals court.

Other groups share a concern that global financial institutions, such as

the IMF and the WB, are not doing enough to alleviate poverty and,
indeed, may be contributing to it. They argue that poor countries
should have their debts to international banks excused.

Some are critical of the WTO saying that its rules favor companies from
wealthy countries. They argue that by making it difficult for countries
to protect their own industries with discriminatory tariffs, it is hard for
poor countries to build domestic industries.

Allegation as the spread of capitalism, in which the labour of the poor

is exploited for the benefit of the rich.

Leftist organizations have mounted a series of 'global action days'

starting with the WTO Summit in Seattle in September 1999, and
targeting meetings of the World Bank, the IMF and the private business
conference organization, the World Economic Forum.

Dispute settlement in the World Trade Organization

In 1994, the WTO members agreed on the Understanding on Rules and

Procedures Governing the Settlement of Disputes (DSU) annexed to the
"Final Act" signed in Marrakesh in 1994. [48] Dispute settlement is regarded by
the WTO as the central pillar of the multilateral trading system, and as a
"unique contribution to the stability of the global economy". [49] WTO
members have agreed that, if they believe fellow-members are violating
trade rules, they will use the multilateral system of settling disputes instead
of taking action unilaterally.[50]

The operation of the WTO dispute settlement process involves the DSB
panels,

the

Appellate

Body,

the

WTO

Secretariat,

arbitrators,

independent experts and several specialized institutions. [51] Bodies

involved in the dispute settlement process, World Trade Organization
Dispute

settlement is

regarded

by

the World

Trade

Organization (WTO) as the central pillar of the multilateral trading

system, and as the organization's "unique contribution to the stability
of

the global

economy".[1] A

dispute

arises

when

one member

country adopts a trade policy measure or takes some action that one
or more fellow members considers to 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.[2] A former WTO
Director-General characterized the WTO dispute settlement system as
"the most active international adjudicative mechanism in the world
today."[3]

In 1994, the WTO members agreed on the Understanding on Rules and

Procedures Governing the Settlement of Disputes or Dispute Settlement
Understanding (DSU) (annexed to the "Final Act" signed in Marrakesh in
1994).[4] Pursuant to the rules detailed in the DSU, member states can
engage in consultations to resolve trade disputes pertaining to a "covered
agreement" or, if unsuccessful, have a WTO panel hear the case. [5] The
priority, however, is to settle disputes, through consultations if possible. By
January 2008, only about 136 of the nearly 369 cases had reached the full
panel process.[2]
The operation of the WTO dispute settlement process involves the parties
and third parties to a case and may also involve the DSB panels, the
Appellate Body, the WTO Secretariat, arbitrators, independent experts, and
several

specialized

institutions.[6] The

General

Council

discharges

its

responsibilities under the DSU through the Dispute Settlement Body (DSB).

[7]

Like the General Council, the DSB is composed of representatives of all

WTO Members. The DSB is responsible for administering the DSU, i.e. for
overseeing the entire dispute settlement process. It also has the authority to
establish panels, adopt panel and Appellate Body reports, maintain
surveillance of implementation of rulings and recommendations, and
authorize the suspension of obligations under the covered agreements. [8] The
DSB meets as often as necessary to adhere to the timeframes provided for in
the DSU.[9]

Compliance
The DSU addresses the question of compliance and retaliation. Within thirty
days of the adoption of the report, the member concerned is to inform the
DSB of its intentions in respect of implementation of the recommendations
and rulings. If the member explains that it is impracticable to comply
immediately with the recommendations and rulings, it is to have a
"reasonable period of time" in which to comply. If no agreement is reached
about the reasonable period for compliance, that issue is to be the subject of
binding arbitration; the arbitrator is to be appointed by agreement of the
parties. If there is a disagreement as to the satisfactory nature of the
measures adopted by the respondent state to comply with the report that
disagreement is to be decided by a panel, if possible the same panel that
heard the original dispute, but apparently without the possibility of appeal
from its decision. The DSU provides that even if the respondent asserts that

it has complied with the recommendation in a report, and even if the

complainant party or the panel accepts that assertion, the DSB is supposed
to keep the implementation of the recommendations under surveillance.[19]

Compensation and retaliation

If all else fails, two more possibilities are set out in the DSU:

If a member fails within the "reasonable period" to carry out the

recommendations and rulings, it may negotiate with the complaining
state for a mutually acceptable compensation. Compensation is not
defined, but may be expected to consist of the grant of a concession by
the respondent state on a product or service of interest to the
complainant state.[20]

If no agreement on compensation is reached within twenty days of the

expiry of the "reasonable period", the prevailing state may request
authorization from the DSB to suspend application to the member
concerned of concessions or other obligations under the covered
agreements.[20] The DSU makes clear that retaliation is not favored, and
sets the criteria for retaliation. [21] In contrast to prior GATT practice,
authorization to suspend concessions in this context is semi-automatic, in
that the DSB "shall grant the authorization [...] within thirty days of the
expiry of the reasonable period", unless it decides by consensus to reject
the request.[22] Any suspension or concession or other obligation is to be

temporary. If the respondent state objects to the level of suspension

proposed or to the consistency of the proposed suspension with the DSU
principles, still another arbitration is provided for, if possible by the
original panel members or by an arbitrator or arbitrators appointed by the
Director-General, to be completed within sixty days from expiration of the
reasonable period.[22]
While such "retaliatory measures" are a strong mechanism when applied by
economically powerful countries like the United States or the European
Union, when applied by economically weak countries against stronger ones,
they can often be ignored.[23] Whether or not the complainant has taken a
measure of retaliation, surveillance by the DSB is to continue, to see whether
the recommendations of the panel or the Appellate Body have been
implemented.[24]

Developing countries
Like most of the agreements adopted in the Uruguay Round, the DSU
contains

several

provisions

directed

to

developing

countries. [25] The

Understanding states that members should give "special attention" to the

problems and interests of developing country members. [26] Further, if one
party to a dispute is a developing country, that party is entitled to have at
least one panelist who comes from a developing country. [27] If a complaint is
brought against a developing country, the time for consultations (before a

panel is convened) may be extended, and if the dispute goes to a panel, the
deadlines for the developing country to make its submissions may be
relaxed.[28] Also, the Secretariat is authorized to make a qualified legal expert
available to any developing country on request. Formal complaints against
least developed countries are discouraged, and if consultations fail, the
Director-General and the Chairman of the DSB stand ready to offer their good
offices before a formal request for a panel is made. [29] As to substance, the
DSU provides that the report of panels shall "explicitly indicate" how account
has been taken of the "differential and more favorable treatment" provisions
of the agreement under which the complaint is brought. Whether or not a
developing country is a party to a particular proceeding, "particular
attention" is to be paid to the interests of the developing countries in the
course of implementing recommendations and rulings of panels. [30] In order
to assist developing countries in overcoming their limited expertise in WTO
law and assist them in managing complex trade disputes, an Advisory Centre
on WTO Law was established in 2001. The aim is to level the playing field for
these countries and customs territories in the WTO system by enabling them
to have a full understanding of their rights and obligations under the WTO
Agreement.[31]

A unique contribution
Dispute settlement is the central pillar of the multilateral trading system, and
the WTOs unique contribution to the stability of the global economy. Without

a means of settling disputes, the rules-based system would be less effective

because the rules could not be enforced. The WTOs procedure underscores
the rule of law, and it makes the trading system more secure and
predictable. The system is based on clearly-defined rules, with timetables for
completing a case. First rulings are made by a panel and endorsed (or
rejected) by the WTOs full membership. Appeals based on points of law are
possible.
However, the point is not to pass judgement. The priority is to settle
disputes, through consultations if possible. By January 2008, only about 136
of the nearly 369 cases had reached the full panel process. Most of the rest
have either been notified as settled out of court or remain in a prolonged
consultation phase some since 1995.

Principles: equitable, fast, effective, mutually

acceptable
Disputes in the WTO are essentially about broken promises. WTO members
have agreed that if they believe fellow-members are violating trade rules,
they will use the multilateral system of settling disputes instead of taking
action unilaterally. That means abiding by the agreed procedures, and
respecting judgements.

A dispute arises when one country adopts a trade policy measure or takes
some action that one or more fellow-WTO members considers to be breaking
the WTO agreements, or to be a failure to live up to obligations. A third group
of countries can declare that they have an interest in the case and enjoy
some rights.
A procedure for settling disputes existed under the old GATT, but it had no
fixed timetables, rulings were easier to block, and many cases dragged on
for a long time inconclusively. The Uruguay Round agreement introduced a
more structured process with more clearly defined stages in the procedure. It
introduced greater discipline for the length of time a case should take to be
settled, with flexible deadlines set in various stages of the procedure. The
agreement emphasizes that prompt settlement is essential if the WTO is to
function effectively. It sets out in considerable detail the procedures and the
timetable to be followed in resolving disputes. If a case runs its full course to
a first ruling, it should not normally take more than about one year 15
months if the case is appealed. The agreed time limits are flexible, and if the
case is considered urgent (e.g. if perishable goods are involved), it is
accelerated as much as possible.
The Uruguay Round agreement also made it impossible for the country losing
a case to block the adoption of the ruling. Under the previous GATT
procedure, rulings could only be adopted by consensus, meaning that a
single objection could block the ruling. Now, rulings are automatically

adopted unless there is a consensus to reject a ruling any country wanting

to block a ruling has to persuade all other WTO members (including its
adversary in the case) to share its view.
Although much of the procedure does resemble a court or tribunal, the
preferred solution is for the countries concerned to discuss their problems
and settle the dispute by themselves. The first stage is therefore
consultations between the governments concerned, and even when the case
has progressed to other stages, consultation and mediation are still always
possible.

How are disputes settled?

Settling disputes is the responsibility of the Dispute Settlement Body (the
General Council in another guise), which consists of all WTO members. The
Dispute Settlement Body has the sole authority to establish panels of
experts to consider the case, and to accept or reject the panels findings or
the results of an appeal. It monitors the implementation of the rulings and
recommendations, and has the power to authorize retaliation when a country
does not comply with a ruling.
First stage: consultation (up to 60 days). Before taking any other actions
the countries in dispute have to talk to each other to see if they can settle
their differences by themselves. If that fails, they can also ask the WTO
director-general to mediate or try to help in any other way.

Second stage: the panel (up to 45 days for a panel to be appointed, plus
6 months for the panel to conclude). If consultations fail, the complaining
country can ask for a panel to be appointed. The country in the dock can
block the creation of a panel once, but when the Dispute Settlement Body
meets for a second time, the appointment can no longer be blocked (unless
there is a consensus against appointing the panel).
Officially, the panel is helping the Dispute Settlement Body make rulings or
recommendations. But because the panels report can only be rejected by
consensus in the Dispute Settlement Body, its conclusions are difficult to
overturn. The panels findings have to be based on the agreements cited.
The panels final report should normally be given to the parties to the dispute
within six months. In cases of urgency, including those concerning perishable
goods, the deadline is shortened to three months.
The agreement describes in some detail how the panels are to work. The
main stages are:
Before the first hearing: each side in the dispute presents its case in
writing to the panel.
First

hearing:

the

case

for

the

complaining

country

and

defence: the complaining country (or countries), the responding country,

and those that have announced they have an interest in the dispute, make
their case at the panels first hearing.

Rebuttals: the countries involved submit written rebuttals and present

oral arguments at the panels second meeting.
Experts: if one side raises scientific or other technical matters, the panel
may consult experts or appoint an expert review group to prepare an
advisory report.
First draft: the panel submits the descriptive (factual and argument)
sections of its report to the two sides, giving them two weeks to comment.
This report does not include findings and conclusions.
Interim report: The panel then submits an interim report, including its
findings and conclusions, to the two sides, giving them one week to ask for a
review.
Review: The period of review must not exceed two weeks. During that
time, the panel may hold additional meetings with the two sides.
Final report: A final report is submitted to the two sides and three weeks
later, it is circulated to all WTO members. If the panel decides that the
disputed trade measure does break a WTO agreement or an obligation, it
recommends that the measure be made to conform with WTO rules. The
panel may suggest how this could be done.
The

report becomes a ruling: The report becomes the Dispute

Settlement Bodys ruling or recommendation within 60 days unless a

consensus rejects it. Both sides can appeal the report (and in some cases
both sides do).

SUMMARY
The World Trade Organization (WTO) is among the
most powerful, and one of the most secretive international bodies on earth. It
is rapidly assuming the role of global government, as 149 nation-states,
including the U.S., have ceded to its vast authority and powers. The WTO
represents the rules-based regime of the policy of economic globalization.
The central operating principal of the WTO is that commercial interests
should supersede all others. Any obstacles in the path of operations and
expansion of global business enterprise must be subordinated. In practice
these "obstacles" are usually policies or democratic processes that act on
behalf of working people, labor rights, environmental protection, human
rights, consumer rights, social justice, local culture,
For the WTO Ministerial in Cancun, Mexico (10-14
September 2003), the IFG hosted a two-day, Teach-In that helped unite a
robust movement. Our event helped to identify and provided analyses of the
critical issues and how they affect communities and impact the work of
existing movements; the event also provided capacity to plan joint strategies
and programs. Foremost among the events was a focus on Alternatives to
Globalization [A Better World Is Possible], our report released November
2002, that provides a framework and principles for an alternative agenda to

the current global economic model. The report helped form the basis for
discussion and action in Cancun and national sovereignty.
The dispute settlement mechanism played a key role in the
WTO'S 1999 Ministerial in Settle, and focused its efforts throughout most of
1999 on the WTO and its relation to the larger issue of economic
globalization.