Business Law

World Trade Organization (WTO)

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Thursday, March 31st 2016

Business Law Summary: World Trade Organization

The World Trade Organization (WTO) is an intergovernmental organization which regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. In one hand, The WTO regulates the trade between participating countries by providing a framework for negotiating 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 WTO is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on developing countries. As of June 2012, the future of the Doha Round remained uncertain: the work program lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. Even though the stalemate condition is an appropriate way to view the latest progress of the Doha Development round; the work is still trying to make the new resolutions regarding to the controversies of the Industrial economic world (developed countries) and the agricultural economic world (developing countries). The WTO's current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in Geneva, Switzerland. A trade facilitation agreement known as the Bali Package was reached by all members on 7 December 2013, the first comprehensive agreement in the organization's history.

History

The notable people of WTO such as the economists Harry White (left) and John Maynard Keynes at the Bretton Woods Conference. Both had been strong advocates of a central-controlled 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).

Source: google.com, wto.org, en. wikipedia.org

Source: google.com, wto.org, en. wikipedia.org

Source: google.com, wto.org, en. wikipedia.org

Notable People of WTO

WTO Round – Bali Package

WTO Symbol

The main building of the WTO Headquarter known as the Centre William Rappard, was constructed on an estate which was gradually formed by the union of a number of plots of land between 1755 and 1893. In 1785, construction began on the Villa Rappard, the house that still stands next to the main WTO building and today houses a Montessori school. In 1921, the Swiss Confederation acquired the estate and offered it to the League of Nations, which designated the site for construction of a headquarters for the International Labor Office.

Both bodies had been created in 1919 with the signing of the Treaty of Versailles, which formally ended World War II. The GATT (General Agreement on Tariffs and Trade) came into being in 1947 as a result of the Bretton Woods Agreement, which also created the World Bank and the International Monetary Fund.

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. ITO was built as a previous world-wide trade organization to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade which includes employment, investment, restrictive business practices, and commodity agreements. In the other hand, 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.

GATT rounds of negotiations

The GATT was the only multilateral instrument governing international trade from 1946 until the WTO was established on 1 January 1995. Despite attempts in the mid-1950s and 1960s to create some form of institutional mechanism for international trade, the GATT continued to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.

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

Source: wto.org, en. wikipedia.org

Source: google.com, wto.org, en. wikipedia.org

Treaty of Versailles

Headquarter of WTO

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.

Uruguay Round

During the Doha Round, the US government blamed Brazil and India for being inflexible and the EU for impeding agricultural imports. The then-President of Brazil, Luiz Inácio Lula da Silva (above right), responded to the criticisms by arguing that progress would only be achieved if the richest countries (especially the US and countries in the EU) made deeper cuts in agricultural subsidies and further opened their markets for agricultural goods.

Before the 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 15 April 1994, during the ministerial meeting at Marrakesh, 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:

Source: en. wikipedia.org Source: en. wikipedia.org

Source: google.com

Source: en. wikipedia.org

Source: google.com

GATT 1994 - Uruguay Round

GATT 1994 – Marrakesh Agreement

GATT Logo

Doha Round – Notable Person

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 (GATS)

Intellectual property – the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

Dispute settlement (DSU) Reviews of governments' trade policies (TPRM)

The highest 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.

The inaugural ministerial conference (1996) was held in Singapore.

The second ministerial conference (1998) was held in Geneva in Switzerland.

The third conference (1999) in Seattle, Washington . The fourth ministerial conference (2001) was held in Doha in

the Persian Gulf nation of Qatar; The conference also approved the joining of China, which became the 143rd member to join.

The fifth ministerial conference (2003) was held in Cancún, Mexico, aiming at forging agreement on the Doha round.

The sixth WTO ministerial conference (2005) was held in Hong Kong; tariff lines exempted.

Doha Round (Doha Agenda)

The Doha Development Round started in 2001 is at an impasse.

The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in 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 World Trade Organization Ministerial Conference of 1998, in the Palace of Nations (Geneva, Switzerland).

Source: en.wikipedia.org

Source: google.com

Source: en.wikipedia.org

WTO Ministerial Conference - Hong Kong

WTO Ministerial Conference - Doha

FUNCTION

The World Trade Organization is also known as WTO. The main functions of the WTO are

To oversee the implementation, administration and operation of covered agreement and also to provide forum for negotiations and also for settling disputes.

Review and propagate the national trade policies which means that they have an obligation to help advertise the national trade policies. The WTO also have an obligation to assist developing the least-developed and low income country that is trying to adjust to the rules of WTO. They are obliged to do this by providing technical cooperation and also to provide training.

In addition to these functions, there is also another set of function which is called the additional functions. These additional function consists of:

The WTO must facilitate the implementation, administration and operation and further the objectives this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Multilateral Trade Agreement.

The WTO is also obligated to provide the forum for negotiations among its member state concerning multilateral trade relations in matter that dealt under the Agreement in the Annexes to this Agreement.

The WTO shall administer the Understanding on Rules and Procedure Governing the Settlement of Disputes

The WTO shall administer Trade Policy Review Mechanism

With a view to achieving greater coherence in global economic policy making, the WTO shall cooperate, as appropriate, with the International Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliate agency

The WTO also functions as a center for economic research and analysis for regular assessments of the global trade picture in its annual publication and research reports on specific topics are produced by the organization. And last but not least the WTO cooperates with the Bretton Woods system which consists of the IMF and the World Bank.

WTO Countries –(Green and Blue)

Source: en.wikipedia.org

PRINCIPLE

The WTO establishes a framework for trade policies; it does not define or specify outcome. It is concerned with setting the rules of the trade policy games. The five principle of WTO are:

1. Non-discrimination: Non-discrimination is divided into two major components which is

the Most Favored Nation (MFN) and also the national treatment policy. The difference between these two is that the MFN rule requires WTO member must apply the same condition on all trade with WTO member. On the other hand National Treatment means that imported goods should be treated no less favorably than domestically produced 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. Transparency: Members of WTO is required to publish their trade regulations, to

maintain a facility for reviewing decision making that will affect trade, to respond to information by other nation and notify if there is any changes in trade policies by WTO

4. 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.

5. Safety Valves: Safety valves. In specific circumstances, governments are able to restrict

trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.

Organizational Structure and Decision Making

The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.

When WTO rules impose disciplines on countries’ policies that is the outcome of negotiations among WTO members. The rules are enforced by the members themselves under agreed procedures that they negotiated, including the possibility of trade sanctions. But those sanctions are imposed by member countries, and authorized by the membership as a whole. There are four stages of the decision making hierarchy the first is and the highest authority is The Ministerial Conference.

The Ministerial Conference has to meet at least once every two years. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.

The second is General Council in three guises. Day-to-day work in between the ministerial conferences is handled by three bodies:

- The General Council - The Dispute Settlement Body - The Trade Policy Review Body

All three are in fact the same — the Agreement Establishing the WTO states they are all the General Council, although they meet under different terms of reference. Again, all three consist of all WTO members. They report to the Ministerial Conference.

The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It meets as the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures for settling disputes between members and to analyze members’ trade policies.

The third is Councils for each broad area of trade, and more. Three more councils, each handling a different broad area of trade, report to the General Council:

- The Council for Trade in Goods (Goods Council) - The Council for Trade in Services (Services Council) - The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)

As their names indicate, the three are responsible for the workings of the WTO agreements dealing with their respective areas of trade. Again they consist of all WTO members. The three also have subsidiary bodies. The scope of their coverage is smaller, so they are “committees”. But they still consist of all WTO members. They cover issues such as trade and development, the environment, regional trading arrangements, and administrative issues. The Singapore Ministerial Conference in December 1996 decided to create new working groups to look at investment and competition policy, transparency in government procurement, and trade facilitation.

The Fourth level are the committees that make up the subsidiary of the councils above. The Goods Council has 11 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so on). Again, these consist of all member countries. Also reporting to the Goods Council is the Textiles Monitoring Body, which consists of a chairman and 10 members acting in their personal capacities, and groups dealing with notifications (governments informing the WTO about current and new policies or measures) and state trading enterprises.

The Services Council’s subsidiary bodies deal with financial services, domestic regulations, GATS rules and specific commitments.

At the General Council level, the Dispute Settlement Body also has two subsidiaries: the dispute settlement “panels” of experts appointed to adjudicate on unresolved disputes, and the Appellate Body that deals with appeals.

Accession and Membership

ACCESSION

Article XII of the WTO Agreement states that accession to the WTO will be “on terms to be agreed” between the acceding government and the WTO. Accession to the WTO is essentially a process of negotiation — quite different from the process of accession to other international entities, like the IMF, which is largely an automatic process.

Because each accession Working Party takes decisions by consensus, all interested WTO Members must be in agreement that their individual concerns have been met and that outstanding issues have been resolved in the course of their bilateral and multilateral negotiations.

All documentation examined by the accession Working Party during the process of negotiation remains restricted until completion of the process.

Who can apply

“Any state or customs territory having full autonomy in the conduct of its trade policies is eligible to accede to the WTO on terms agreed between it and WTO Members”. (Article XII of the WTO Agreement).

The request for accession

The accession process commences with the submission of a formal written request for accession by the applicant government. This request is considered by the General Council which establishes a Working Party to examine the accession request and, ultimately, to submit the findings of the Working Party to the General Council for approval. The Working Party is open to all Members of the WTO.

Submission of a memorandum on the foreign trade regime

The applicant government presents a memorandum covering all aspects of its trade and legal regime to the Working Party. This memorandum forms the basis for detailed fact finding by the Working Party

Subsequent Working Party meetings will see the examination of questions posed by WTO Members based on the information provided in the memorandum and the replies provided by the applicant government.

Conditions of entry

After examining all aspects of the existing trade and legal regimes of the acceding government the Working Party goes into the substantive part of the multilateral negotiations involved in accessions. This determines the terms and conditions of entry for the applicant government. Terms and conditions include commitments to observe WTO rules and disciplines upon accession and transitional periods required to make any legislative or structural changes where necessary to implement these commitments.

Bilateral negotiations

At the same time, the applicant government engages in bilateral negotiations with interested Working Party members on concessions and commitments on market access

for goods and services. The results of these bilateral negotiations are consolidated into a document which is part of the final “accession package.

The final accession package

The “accession package” consists of three documents which represent the results of both the multilateral and bilateral phases outlined above. These are:

a Report of the Working Party containing a summary of proceedings and conditions of entry and a Protocol of Accession.

Schedules of market access commitments in goods and services agreed between the acceding government and WTO Members.

Approval of the accession package

Once both the Working Party's Draft Report and Protocol of Accession and the market access commitments in goods and services are completed to the satisfaction of members of the Working Party, the “accession package” is adopted at a final formal meeting of the Working Party.

The documents are then presented to the General Council or the Ministerial Conference for adoption. Once approved by the General Council or the Ministerial Conference, the accessions package is redistributed as a non-restricted document.

Two final documents will be issued:

The Decision of the General Council The Protocol of Accession of the new entrant a Protocol of Accession annexed to

the Report which states that the country accedes to the WTO Agreement, defines the Schedules and outlines final provisions for timing of acceptance of the Protocol and full membership of the WTO.

Becoming a full member

Once approved by the General Council of Ministerial Conference, the applicant is then free to sign the Protocol of Accession stating that it accepts the approved “accessions package” subject to ratification in its national parliament. Normally three months is given from signature of the Protocol of Accession for this to take place.

Thirty days after the applicant government notifies the WTO Secretariat that it has completed its ratification procedures, the applicant government becomes a full Member of the WTO.

Dispute Settlements and Agreements

A. Importance of the WTO dispute settlement system

The best international agreement is not worth very much if its obligations cannot be enforced when one of the signatories fails to comply with such obligations. An effective mechanism to settle disputes thus increases the practical value of the commitments the signatories undertake in an international agreement. The fact that the Members of the (WTO) established the current dispute settlement system during the Uruguay Round of Multilateral Trade Negotiations underscores the high importance they attach to compliance by all Members with their obligations under the WTO Agreement.

Settling disputes in a timely and structured manner is important. It helps to prevent the detrimental effects of unresolved international trade conflicts and to mitigate the imbalances between stronger and weaker players by having their disputes settled on the basis of rules rather than having power determine the outcome. Most people consider the WTO dispute settlement system to be one of the major results of the Uruguay Round. After the entry into force of the WTO Agreement in 1995, the dispute settlement system soon gained practical importance as Members frequently resorted to using this system.

B. The Dispute Settlement Understanding

The current dispute settlement system was created as part of the WTO Agreement during the Uruguay Round. It is embodied in the Understanding on Rules and Procedures Governing the Settlement of Disputes, commonly referred to as the Dispute Settlement Understanding and abbreviated “DSU” (referred to as such in this guide). The DSU, which constitutes Annex 2 of the WTO Agreement, sets out the procedures and rules that define today’s dispute settlement system. It should however be noted that, to a large degree, the current dispute settlement system is the result of the evolution of rules, procedures and practices developed over almost half a century under the GATT 1947.

C. Functions, objectives and key features of the dispute settlement system

Providing security and predictability to the multilateral trading system

A central objective of the (WTO) dispute settlement system is to provide security and predictability to the multilateral trading system (Article 3.2 of the DSU). Although international trade is understood in the WTO as the flow of goods and services between Members, such trade is typically not conducted by States, but rather by private economic operators. These market participants need stability and predictability in the government laws, rules and regulations applying to their commercial activity, especially when they conduct trade on the basis of long-term transactions. In light of this, the DSU aims to provide a fast, efficient, dependable and rule-oriented system to resolve disputes about the application of the provisions of the WTO Agreement. By reinforcing the rule of law, the dispute settlement system makes the trading system more secure and predictable. Where non-compliance with the WTO Agreement has been alleged by a WTO Member, the dispute settlement system provides for a relatively rapid resolution of the matter through an independent ruling that must be implemented promptly, or the non-implementing Member will face possible trade sanctions.

Preserving the rights and obligations of WTO Members

Typically, a dispute arises when one WTO Member adopts a trade policy measure that one or more other Members consider to be inconsistent with the obligations set out in the WTO

Agreement. In such a case, any Member that feels aggrieved is entitled to invoke the procedures and provisions of the dispute settlement system in order to challenge that measure.

If the parties to the dispute do not manage to reach a mutually agreed solution, the complainant is guaranteed a rules-based procedure in which the merits of its claims will be examined by an independent body (panels and the Appellate Body). If the complainant prevails, the desired outcome is to secure the withdrawal of the measure found to be inconsistent with the WTO Agreement. Compensation and countermeasures (the suspension of obligations) are available only as secondary and temporary responses to a contravention of the WTO Agreement (Article 3.7 of the DSU).

Thus, the dispute settlement system provides a mechanism through which WTO Members can ensure that their rights under the WTO Agreement can be enforced. This system is equally important from the perspective of the respondent whose measure is under challenge, since it provides a forum for the respondent to defend itself if it disagrees with the claims raised by the complainant. In this way, the dispute settlement system serves to preserve the Members’ rights and obligations under the WTO Agreement (Article 3.2 of the DSU). The rulings of the bodies involved (the DSB the Appellate Body, panels and arbitrations1) are intended to reflect and correctly apply the rights and obligations as they are set out in the WTO Agreement. They must not change the WTO law that is applicable between the parties or, in the words of the DSU, add to or diminish the rights and obligations provided in the WTO Agreements (Articles 3.2 and 19.2 of the DSU).

Clarification of rights and obligations through interpretation

The precise scope of the rights and obligations contained in the WTO Agreement is not always evident from a mere reading of the legal texts. Legal provisions are often drafted in general terms so as to be of general applicability and to cover a multitude of individual cases, not all of which can be specifically regulated. Whether the existence of a certain set of facts gives rise to a violation of a legal requirement contained in a particular provision is, therefore, a question that is not always easy to answer. In most cases, the answer can be found only after interpreting the legal terms contained in the provision at issue.

In addition, legal provisions in international agreements often lack clarity because they are compromise formulations resulting from multilateral negotiations. The various participants in a negotiating process often reconcile their diverging positions by agreeing to a text that can be understood in more than one way so as to satisfy the demands of different domestic constituents. The negotiators may thus understand a particular provision in different and opposing ways.

For those reasons, as in any legal setting, individual cases often require an interpretation of the pertinent provisions. One might think that such an interpretation cannot occur in (WTO) dispute settlement proceedings because Article IX:2 of the WTO Agreement provides that the Ministerial Conference and the General Council of the WTO have the “exclusive authority to adopt interpretations” of the WTO Agreement. However, the DSU expressly states that the dispute settlement system is intended to clarify the provisions of the WTO Agreement “in accordance with customary rules of interpretation of public international law”

The DSU, therefore, recognizes the need to clarify WTO rules and mandates that this clarification take place pursuant to customary rules of interpretation. In addition, Article 17.6 of the DSU implicitly recognizes that panels may develop legal interpretations. The “exclusive authority” of the WTO Agreement must therefore be understood as the possibility to adopt “authoritative” interpretations that are of general validity for all WTO Members — unlike interpretations by panels and the Appellate Body, which are applicable only to the parties and to the subject matter of a specific dispute. Accordingly, the DSU mandate to clarify WTO rules is

without prejudice to the rights of Members to seek authoritative interpretations under Article IX:2 of the WTO Agreement .

As regards the methods of interpretation, the DSU refers to the “customary rules of interpretation of public international law” (Article 3.2 of the DSU). While customary international law is normally unwritten, there is an international convention that has codified some of these customary rules of treaty interpretation. Notably, Articles 31, 32 and 33 of the Vienna Convention on the Law of Treaties embody many of the customary rules of interpretation of public international law. While the reference in Article 3.2 of the DSU does not refer directly to these Articles, the Appellate Body has ruled that they can serve as a point of reference for discerning the applicable customary rules1.The three Articles read as follows

“Mutually Agreed Solutions” as “Preferred Solution” - Although the dispute settlement system

is intended to uphold the rights of aggrieved Members and to clarify the scope of the rights and obligations, which gradually achieves higher levels of security and predictability, the primary objective of the system is not to make rulings or to develop jurisprudence. Rather, like other judicial systems, the priority is to settle disputes, preferably through a mutually agreed solution that is consistent with the WTO Agreement (Article 3.7 of the DSU). Adjudication is to be used only when the parties cannot work out a mutually agreed solution. By requiring formal consultations as the first stage of any dispute, the DSU provides a framework in which the parties to a dispute must always at least attempt to negotiate a settlement. Even when the case has progressed to the stage of adjudication, a bilateral settlement always remains possible, and the parties are always encouraged to make efforts in that direction (Articles 3.7 and 11 of the DSU). Prompt settlement of disputes - The DSU emphasizes that prompt settlement of disputes is

essential if the (WTO) is to function effectively and the balance of rights and obligations between the Members is to be maintained .It is well known that, to be achieved, justice must not only provide an equitable outcome but also be swift. Accordingly, the DSU sets out in considerable detail the procedures and corresponding deadlines to be followed in resolving disputes. The detailed procedures are designed to achieve efficiency, including the right of a complainant to move forward with a complaint even in the absence of agreement by the respondent. If a case is adjudicated, it should normally take no more than one year for a panel ruling and no more than 16 months if the case is appealed. If the complainant deems the case urgent, consideration of the case should take even less time. These time-frames might still appear long, considering that time for implementation will have to be added after the ruling. Also, for the entire duration of the dispute, the complainant may still suffer economic harm from the challenged measure; and even after prevailing in dispute settlement, the complainant will receive no compensation for the harm suffered before the time by which the respondent must implement the ruling.

However, one must take into account that disputes in the WTO are usually very complex in both factual and legal terms. Parties generally submit a considerable amount of data and documentation relating to the challenged measure, and they also put forward very detailed legal arguments. The parties need time to prepare these factual and legal arguments and to respond to the arguments put forward by the opponent. The panel (and the Appellate Body) assigned to deal with the matter needs to consider all the evidence and arguments, possibly hear experts, and provide detailed reasoning in support of its conclusions. Considering all these aspects, the dispute settlement system of the WTO functions relatively fast and, in any event, much faster than many domestic judicial systems or other international systems of adjudication.

Prohibition against unilateral determinations

WTO Members have agreed to use the multilateral system for settling their WTO trade disputes rather than resorting to unilateral action (Article 23 of the DSU). That means abiding by the agreed procedures and respecting the rulings once they are issued — and not taking the law into their own hands.

If Members were to act unilaterally, this would have obvious disadvantages that are well known from the history of the multilateral trading system. Imagine that one Member accuses another Member of breaking WTO rules. As a unilateral response, the accusing Member could decide to take a countermeasure, i.e. to infringe WTO obligations with regard to the other Member (by erecting trade barriers). Under traditional international law, that Member could argue that it has acted lawfully because its own violation is justified as a countermeasure in response to the other Member’s violation that had occurred first. If, however, the accused Member disagrees on whether its measure truly infringes WTO obligations, it will not accept the argument of a justified countermeasure. On the contrary, it may assert that the countermeasure is illegal and, on that basis, it may feel justified in taking a countermeasure against the first countermeasure. The original complainant, based on its legal view on the matter, is likely to disagree and to consider that second countermeasure illegal. In response, it may adopt a further countermeasure. This shows that, if the views differ, unilateral actions are not able to settle disputes harmoniously. Things may spiral out of control and, unless one of the parties backs down, there is a risk of escalation of mutual trade restrictions, which may result in a “trade war”.

To prevent such downward spirals, the DSU mandates the use of a multilateral system of dispute settlement to which WTO Members must have recourse when they seek redress against another Member under the WTO Agreement (Article 23.1 of the DSU). This applies to situations in which a Member believes that another Member violates the WTO Agreement or otherwise nullifies or impairs benefits under the WTO Agreements or impedes the attainment of an objective of one of the agreements.1

In such cases, a Member cannot take action based on unilateral determinations that any of these situations exist, but may only act after recourse to dispute settlement under the rules and procedures of the DSU. Whatever actions the complaining Member takes, it may only take them based on the findings of an adopted panel or Appellate Body report or arbitration award (Article 23.2(a) of the DSU). The Member concerned must also respect the procedures foreseen in the

DSU for the determination of the time and impose countermeasures only on the basis of an

authorization by the DSB (Article 23.2(b) and (c) of the DSU). This excludes unilateral actions such as those described above.

Exclusive jurisdiction- By mandating recourse to the multilateral system of the WTO for the settlement of disputes, Article 23 of the DSU not only excludes unilateral action, it also precludes the use of other fora for the resolution of a WTO-related dispute.

Compulsory nature- The dispute settlement system is compulsory. All WTO Members are subject to it, as they have all signed and ratified the WTO Agreement as a single undertaking 2, of which the DSU is a part. The DSU subjects all WTO Members to the dispute settlement system for all disputes arising under the WTO Agreement. Therefore, unlike other systems of international dispute resolution, there is no need for the parties to a dispute to accept the jurisdiction of the WTO dispute settlement system in a separate declaration or agreement. This consent to accept the jurisdiction of the WTO dispute settlement system is already contained in a Member’s accession to the WTO. As a result, every Member enjoys assured access to the dispute settlement system and no responding Member may escape that jurisdiction.

Criticism 1. WTO benefits for developed countries than developing countries, hurts poor countries

The aim of World Trade Organization (WTO) is to ensure that the trade flows as smoothly, predictably, and freely as possible. However, WTO does not claim to be a free market organization. The implementation usually does allow tariffs and protection. The WTO itself actually give more benefits toward developed countries than developing countries. The domination of international trade by rich countries in order to fulfil their individual interest. It is argued that the developing countries need some trade protection to be able to develop the new industries. In addition, it has been argued that the WTO being unfair

and ignoring the needs of developing countries as the developing countries that need to diversify into another sector, as they more specialize in the primary product such as agricultural products, need some tariff protection for at least short term period.

There are some of suggestion regarding the criticism of WTO in giving more benefits towards developed countries rather than developing countries. The increase of non-tariff barriers such as anti-dumping measures allowed actually against the developing countries. The rich countries are able to maintain high import duties and quotas in certain products, while blocking the imports from developing countries. In addition, The Agreement on Trade-Related Aspects of Intellectual Property Rights, limits the developing countries from utilizing some technology that originates from abroad in their local systems.

Martin Khor argues that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. To build real global security, we need international agreements that respect people’s rights to democracy and trade systems that promote global justice.

2. WTO tends to be more undemocratic

World Trade Organization (WTO) is criticized for being fundamentally undemocratic. The lack of transparency is often seen as a problem for democracy. Politicians can negotiate for regulations that would not be possible or accepted in a democratic process in their own nations. The policy of WTO genuinely give impacts toward all aspect of society. However, in reality, the rules are written by and only for corporation who can make access to the negotiations. The citizen input does not get attention or even consistently ignored. The structure enables the richer country to win what their interest or desire. It seems to be more private or exclusive for the rich countries.

3. WTO destroying the environment

Free trade has often ignored environmental considerations. e.g. Free trade has enabled imports to be made from countries with the least environmental protection. The WTO is being used by corporations to dismantle hard-won local and national environmental protections, which are attacked as “barriers to trade.” The WTO is attempting to deregulate industries including logging, fishing, water utilities, and energy distribution, which will lead to further exploitation of these natural resources. The WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device allowing endangered sea turtles to escape. In the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs. Labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer

4. Decision Making

WTO requires all countries to treat each other and treat all corporation equally. Developing countries are prohibited to create local laws that developed countries once pursued, such as protecting new, domestic industries until they can be internationally

competitive. As mentioned before that WTO supposed to operate on consensus basis, with equal decision-making power for all. However, practically many important decisions are not involving the poor countries and they did not even know were being discusses. Many countries not even have enough trade personnel to participate in all the negotiations or to even have a permanent representative at the WTO meeting. It would give disadvantages to the poor countries as they are unable to give or present their interest.

Dr Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasons:

It does not resolve the problem of "informal meetings" whereby industrialized countries negotiate the most important decisions;

It does not reduce the de facto inequality which exists between countries with regards to an effective and efficient participation to all activities within all WTO bodies;

It does not rectify the multiple violations of the general principles of law which affect the dispute settlement mechanism

Office of WTO and the Influential General Director

Peter Sunterland (First WTO General-Director)

In 1993, he became Director General of the General Agreement on Tariffs and Trade (now the World Trade Organisation). Later Mickey Kantor, the US Trade Minister, credited him with being the father of globalization and said that without him there would have been no WTO. The Uruguay round of global trade talks, concluded in December 1993 with Sutherland as chair of GATT, produced a "comprehensive", rules-based and global trade regime,which was the biggest trade agreement in history and established the World Trade Organisation. His integral role in the successful conclusion of these negotiations has been cited as "indispensable".Chairing the Uruguay Round, Sutherland "employed tactics the likes of which had never been seen before in GATT. He worked to create the sense of unstoppable momentum" by mobilising the press and media and instigating "a more aggressive public relations than the staid GATT had ever before seen".

Roberto Azevêdo (Current WTO General-Director)

In May 2013 Azevêdo was announced to be the sixth Director-General of the WTO. During his time as Director-General, Ambassador Azevêdo has overseen two successful WTO Ministerial Conferences – in Bali in 2013 and Nairobi in 2015 – which delivered a series of significant outcomes in support of growth and development. The package of outcomes delivered in Bali contained a range of decisions on agriculture issues, support for least developed countries and the Trade Facilitation Agreement, which was the first multilateral agreement delivered by the WTO.

During his tenure Ambassador Azevêdo has prioritised efforts to increase the trading capacity of developing and least-developed countries. Along with advances in negotiations, he hosted the 5th Global Review of Aid for Trade in 2015, supported the renewal of the Enhanced Integrated Framework into its second phase, which began in January 2016, and created the Trade Facilitation Agreement Facility to ensure that developing and least-developed countries can access the support they need to implement the Agreement. As Director-General, Ambassador Azevêdo has also overseen the expansion of the WTO membership, with the accessions of Yemen, Seychelles, Kazakhstan, Liberia and Afghanistan. In addition, he has taken steps to strengthen the WTO Secretariat, putting in place a range of reforms to improve the service provided for WTO Members (while also meeting budgetary goals set by Members), including by increasing resources in the dispute settlement system.