WTO – An International Organisation

• WTO Objectives• Scope• Functions• Structure• Decision Making

Establishment

• WTO was established in January 1995• It was the result of efforts of nearly fifty years to

establish an international organisation for the requirements of the international economic community

• World trade was impacted by factors of protection, regionalism and a mutual dependence

• An urgent requirement was thrown open by the ITO of Havana Charter and the weaknesses of GATT

• WTO completed the incomplete agenda of ITO and strengthened GATT

Marrakesh Declaration

• The Marrakesh Declaration established WTO • The Agreement consisted of a Preamble and XVI

Articles, four Annexures and Declarations, Decisions and Understandings

• Annex IA, and GATT 1994 which consists revised GATT 1947 with new understandings, twelve side-Agreements and a large schedule of tariff concessions make up the most of the official treaty text

Side- Agreements

• The Side- Agreements are:• Agreement on Agriculture, Agreement on Application of

Sanitary and Phytosanitary Measures, Agreement on Textiles and Clothing, Agreement on Technical Barriers to Trade, Agreement on Trade-Related Investment Measures, Agreement on Implementation of Article VI of GATT 1994, Agreement on Pre-Shipment Inspection, Agreement on Implementation of Article VII of GATT 1994 Agreement on Rules of Origin , Agreement on Import Licensing Procedures , Agreement on Subsidies and Countervailing Measures, Agreement on Safeguards

Annex IB, Annex II and III

• Annex IB relates to General Agreement on Trade in Services (GATS) and also incorporates the schedules of concessions

• Annex II deals with Dispute Settlement Rules obligatory on all members but also unitary dispute settlement mechanisms covering all the Agreements listed in Annexes I, II and IV

• Annex III deals with Trade Policy Review Mechanism (TPRM) with the aim of reviewing trade policy measures of all WTO members on a periodic and regular basis and submitting a report to the General Council of WTO

Annex IV

• Annex IV has the four optional plurilateral Agreements - Agreement on Trade in Civil Aircraft, Agreements on Government Procedures, Agreement on International Dairy Products, Agreement on Bovine Meat

Objectives

• International Economic Relations should be conducted with a view to raise standards of living, ensure full employment and a large and steadily growing volume of real income and effective demand

• Expanding the production of trade in goods and services

Objectives

• While allowing for the optimal use of the worlds resources in accordance with the objectives of sustainable development, seeking both to preserve the environment and to enhance the means of doing so in a manner consistent with the respective needs and concerns at different levels of economic development

Objectives

• There is recognition of the less advantageous position of less developing and least developed countries in international trade and economic welfare

• There is a need for positive efforts by the international community so as to ensure that they secure a share in the growth of international trade as per their developmental needs

Objectives

• The objectives are to be secured by means of reciprocal and mutually beneficial agreements which will be directed towards the substantial reduction of tariff and non-tariff barriers and elimination of discriminatory treatment in international trade relations

Objectives

• WTO would than develop an integrated, more viable and durable trading system including the GATT 1947, the results of post liberalisation efforts, results of Uruguay Round Multilateral Tariff Negotiations, preserving the basic principles of the earlier negotiations and the objectives underlying multilateral trading systems.

• Members of the Uruguay Round therefore agreed to the establishment of WTO (Article 1 of WTO) and its institutional structure along with commitments as agreed in various WTO Annexes

Objectives

• Preamble reflects the objectives of GATT 1947 and had additional objectives like seeking to preserve and protect environment and sustainable development

• Securing a share of less developing and least developed countries in international trade a per their needs of economic development

• The declared means of achievement of objectives are in tandem with GATT 1947- reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade

• Elimination of discriminatory treatment in international trade

Scope

• Scope of WTO is to provide a a common institutional framework for conduct of trade relations within its members in matters related to the Agreement and associated legal instruments referred as MTA’s, Plurilateral Trade Agreements and GATT 1994

• Regarding environmental issues the preamble recognises a link between trade and environment but only to the extent as recognised in various Agreements covered under WTO or GATT

Scope

• The members have autonomy in regard to environment but they need to respect the requirements of WTO and other agreements having bearing on issues regarding environment

• The cases brought before the Dispute Settlement Mechanisms of WTO in which the preamble was subject to interpretations has reaffirmed the importance of the coherent, universal and international character of WTO to facilitate, administer and operate and further the objectives of Agreements concluded under the WTO and GATT 1994

Functions

• Article III of WTO provides five functions:• The first is, “to facilitate the implementation,

administration and operation, and further the objectives of this Agreement and of the Multilateral Trade Agreements and also to provide framework for the implementation, administration and operation of the Plurilateral Agreements.”

• The members are under a direct obligation regarding the Multilateral Trade Agreements but for Plurilateral Agreements they are subject to the accession of the countries to such Agreements.

Functions

• The second WTO function relates to the negotiating – a distinction is made for the negotiations for which WTO will provide the forum and for those it may provide the forum.

• WTO providing the forum is exclusively meant for multilateral negotiations on matters in the Annexes to the Agreement, which is on the subjects already covered in the GATT and Uruguay Round.

Functions

• WTO may provide a forum for further negotiations concerning multilateral trade relations as may be decided by the WTO Ministerial Conference

• In case such negotiation takes place than WTO can also provide the framework for putting the results into operation

Functions

• The third and fourth functions of WTO are to administer the arrangements in Annexure II and III for the settlement of disputes that may arise between members and for the review of trade polices

• Annexure II – Understanding on Rules and Procedures Governing the settlement of Disputes

• Annexure III – Trade Policy Review Mechanism

Functions

• WTO is to coordinate with IMF and IBRD for achieving greater coherence in global policy making

• WTO is a forum for trade negotiation and liberalisation on a rule based system having the power to assess the trade policies of its members in accordance with the terms of commitments under WTO

• It has the power to review negotiations, examine world trade developments and address the challenges to world economy

Structure

• WTO has the legal personality and capacity of an international organisation

• There is a Ministerial Conference which is composed of representatives of all WTO Members and meets at least once in two years

• The General Council is the chief decision and policy making body which meets as appropriate and is composed of all WTO Members

Structure

• The Ministerial Conference has the authority to take decisions on all matters under any of the MTA’s in accordance with specific requirements in the Agreements establishing WTO and in the relevant MTA’s

• The General Council oversees the operation of the Agreement and ministerial decisions on a regular basis

• The General Council also discharges functions of Dispute Settlement Body (DSB) and Trade Policy Review Mechanism (TPRM)

Structure

• Specialised Councils and Committees report to the General Council like Council for Trade in Goods, Council for Trade in Services, Council for Trade in Intellectual Property Rights (TRIPS)

• Ministerial Council has established a Committee on Trade and Development, Committee on Balance of Payments, Committee on Budget, Finance and Administration, Committee on Trade and Environment

• Additional Councils and Committees oversee the Plurilateral Trade Agreements who report to the WTO General Council

Structure

• Ministerial Conference has specific powers to appoint a Director General, adopt an authoritative interpretation of the MTA’s, to grant a waiver, to adopt amendments and to grant an accession

• The Ministerial Conference and the General Council have established working parties to carry out its functions- Working Group on :

• Relationship between Trade and Investment• Interaction between Trade and Competition Policy• Transparency in Government Procurement• Accession • Pre-Shipment Inspection

Structure

• General Council acting as Dispute Settlement Body (DSB) discharges the responsibilities of the Undertaking on Dispute Settlement Undertaking ( DSU), including the authority to establish panels, to adopt panel and appellate body reports, to maintain surveillance of implementation of rulings and recommendations and authorise suspension of concessions and other obligations under the covered Agreements

Structure

• The Council for Trade in Goods has the task of looking after the functioning of MTA

• The Council for Trade in Services looks after the functioning of the General Agreement on Trade in Services and has power to make recommendations to parties to economic integration as conceived in the Agreement

• The Council for Trade in Intellectual Property Rights (TRIPS) oversees the functioning of the Agreement of TRIPs

Structure

• WTO secretariat is located in Geneva and is presided over by a Director General appointed by the Ministerial Conference

• The Director General and members of secretariat must act as international officials

• The General Council adopts the financial regulations and the annual budget by a two –thirds majority comprising more than half of the members of the WTO

• Contributions of member shares must be made promptly

Decision Making

• Decision making in WTO is arrived by consensus• When consensus does not take place than the matter is

decided by voting• At the Ministerial Conference and the General Council,

each member has one vote• Decisions of Ministerial Conference and the General

Council are taken by the majority of cast votes unless otherwise provided in the Agreement or the MTA’s

• The decision to adopt an interpretation has to be taken by a three fourth majority of the members

Decision Making

• The obligations created and imposed by the Agreement can be waived on the recommendations of three quarters of the members

• Request for waivers has to be submitted to the Ministerial Conference for consideration pursuant to the decision making by consensus

• Such a request has to be disposed off within ninety days

Decision Making

• When consensus is not achieved, any decision to grant a waiver has to be taken by three quarters of the members

• A request for waiver has to be submitted to the council of MTA’s

• Decisions on Plurilateral Agreements shall be governed by the provisions of those Agreements

Decision Making

• WTO voting process for decision making is democratic and each member is assured one vote

• Hence there is a least possibility of making it a forum of a group of countries or individual members

• The Ministerial Conference and the General Council have exclusive authority to adopt interpretations of the WTO Agreement