WTO, the system, decision making and history


The WTO

The WTO is a member based international treaty system, whereby each member is bound by the WTO agreement, and the agreements in its annexes.

These treaties are binding on each party, since each decision is come to by consensus, giving them force in international law (you are only bound by that which you agree to).

Breach of the requirements of these treaties may lead (if a case is brought by a member) to dispute resolution under the Dispute Settlement Understanding, which can penalise breaches.

Whilst the WTO may seem homogenous, since each party is bound by all agreements, it does have some elements of a variable geometry (according to Joost Pauwelyn):

  • developing and LDC nations are bound with differently to developed countries (in terms of extent of bindings, and time to apply them)
  • each nation’s accession treaty binds them to rules which do not affect others (most significantly, so far, are China’s additional bindings)
  • plurilateral treaties enforceable under the WTO (registered under Annex 4, e.g. Agreement in Government Procurement)

The goals of the WTO are to create and enforce a stable system for international trade: with liberal economic ideals such as lowering barriers to trade to reduce deadweight loss on the international economy. These are done with the aim of increasing the welfare of member countries.

The System

The WTO Agreement, replacing the GATT agreement of ’47, creates the WTO body. All of the other agreements discussed are annexed to the WTO Agreement.

The Structure

It is organised as follows:

  • The WTO agreement establishes the WTO and encompasses rules for all agreements (including the all important requirement for consensus, described in footnote 1 [part of Art. 9])
    • Annex 1 includes the Agreements on specific sectors
      • Annex 1A is on Trade in Goods, including:
        • the GATT ’94Agreement
          • Further, (under Art. 1) this agreement includes all of GATT ’47, and all of the Decisions of the DSB between ’47 and ’94
        • the AgricultureAgreement
        • the SPSAgreement
        • the TBTAgreement
        • the Agreement on subsidies and countervailing measures(SCM)
        • the Agreement on Safeguards
      • Annex 1B is on Trade in Services (GATS)
      • Annex 1C is on intellectual property (TRIPS – Trade-Related aspects of Intellectual Property Rights)
    • Annex 2 is the Dispute Settlement Understanding
    • Annex 4 includes plurilateral treaties within the WTO system

The Pillars

The central pillars of the WTO, present since Gatt ’47

  • MFN treatmentMost favoured nation
    • the best treatment a country gives to another must be given to all member countries
  • Tariff bindings
    • Tariff ceilings (maximum values) are bound in each round of negotiations – currently, industrial goods have an average rate of only 4%, having dropped dramatically since the first round of reductions in ’47
  • National treatment
    • Within the country, domestic and imported goods must be treated equally
  • No quantitative restrictions
    • No quantitative restrictions (e.g. quotas, trade bans) are allowed (though each quota has an identical tariff, which may still be levied)
      • This is often gotten around via Article XX exceptions, SPS or TBT exceptions

Decision Making

Decision making is set out in Article IX of the Marrakech Agreement.

  • Decision making is done by consensus (Art. IX:1)
    • Consensus is deemed when there are no formal objections (Footnote 1)
    • Joost Pauwelyn suggests that the ISO definition of consensus (as a process of addressing disagreeing parties, where consensus is only broken where there is a substantial disagreement of an involved party) rather than the deeming clause in footnote 1, could possibly used for negotiations binding in a plurilateral, rather than multilateral
  • Whilst Art. IX states that, in lieu of consensus, voting may be used, this is, in practice, not used, because it would fracture the organisation’s authority under international law

This differs from other international bodies, like the EU. In the EU, sovereignty is transferred and the organisation has power to make a decision on behalf of the member state. In the WTO, sovereignty is not transferred, and each member state has to agree to be bound.

History

  • GATT ’47 —> WTO with the Marrakech agreement (’94)
  • Post-war environment
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