MODULE

The World Trade Organization

ESTIMATED TIME: 2.5 hours

OBJECTIVES OF MODULE 1

 Present a synopsis of the historical background of the WTO;

 Present the objectives and some new key WTO principles;

 Explain the function and organizational structure of the WTO; and

 Present the negotiations launched in the Doha Development Agenda.

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I. INTRODUCTION TO THE WTO
This module explains what the WTO is, elucidating the objectives and function of the WTO. In addition, it
refers to various WTO agreements, as well as to GATT, Uruguay Round, and the Doha Development Agenda of
trade negotiations. These terms are explained throughout the course.

I.A. WHAT IS THE WTO?

IN BRIEF

WTO is the acronym of the World Trade Organization.

The WTO is the only global international organization dealing with the rules of international trade between
nations. At its heart are the many agreements, which were negotiated and signed by governments and
ratified in their parliaments.

IN DETAIL

The WTO came into being in 1995, and though legally distinct from the "GATT", they are interrelated. The WTO
was created after the culmination of long, intense negotiations, which took place under the auspices of the
"GATT" and are known as the "Uruguay Round" of negotiations.

"GATT" means General Agreement on Tariffs and Trade. Formally, the GATT (1947-1994) was not an
international organization but simply an international agreement, concluded in 1947. It contained rules and
obligations that governed the trade in goods for almost fifty years between the Member nations party to the
agreement (called "The Contracting Parties"). However, the Secretariat of the GATT took up many
responsibilities throughout the years, which lead to the GATT being called a de facto international organization.

So while the WTO is still young, the multilateral trading system that was originally set up under GATT is well
over 50 years old.

I.B. HISTORICAL BACKGROUND OF THE WTO

IN BRIEF

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of
world trade. Although it appeared well established, for those 47 years it was a provisional agreement
serviced by only a de facto organization.

The GATT helped to establish a multilateral trading system that became progressively liberal through
successive rounds of trade negotiations. GATT Negotiations at the Uruguay Round ultimately led to the
creation of the World Trade Organization (WTO) in 1995.

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 Rounds of trade negotiations

Year Place/name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-1961 Geneva, Dillon Round Tariffs 26

1964-1967 Geneva, Kennedy Round Tariffs and anti-dumping measures 62

1973-1979 Geneva, Tokyo Round Tariffs, non-tariff measures, "framework" 102

agreements

1986-1994 Geneva, Uruguay Round Tariffs, non-tariff measures, rules, 123

services, intellectual property, dispute
settlement, textiles, agriculture, creation of
WTO, etc.

Table 1: GATT Rounds of negotiations

IN DETAIL

The project to establish a multilateral trading system to negotiate lower customs duties and the reduction or
elimination of other trade barriers and to stimulate the expansion of world trade originated in the 1940s.

It was supposed to go ahead on two tracks:

 the creation of the International Trade Organization (ITO); and

 the launching of multilateral tariff negotiations that involved the drafting of binding legal provisions
relating to the tariffs under a "General Agreement on Tariffs and Trade" (GATT)

The GATT was drafted, but the ITO was never created. However, the Interim Commission for the International
Trade Organization (ICITO) was established and served as a de facto Secretariat to the GATT Contracting
Parties.

From 1947 to 1994, Contracting Parties organized eight rounds of negotiations. The major ones were:

The Kennedy Round (1964-1967):

 substantial reduction of tariff barriers.

The Tokyo Round (1973-1979):

 first negotiations on non-tariff barriers;

 plurilateral codes; and

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  the enabling clause (the first major decision on differential treatment and non-reciprocity for
developing countries).

The Uruguay Round (1986-1994):

 creation of the WTO;

 transformation of Tokyo Round plurilateral codes into multilateral agreements;

 strengthened dispute settlement system; and

 incorporation of the new agreements on trade in services and trade-related aspects of intellectual
property rights which considerably broadened the scope of the multilateral trade system.

Participants in the Uruguay Round of Multilateral Trade Negotiations concluded the Round by adopting the
"Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" (the Final Act). The
Final Act included the "Marrakesh Agreement Establishing the World Trade Organization" (the
WTO Agreement).

The WTO Agreement established a new organizational body, the World Trade Organization ("the WTO"), to
administer the Uruguay Round agreements.

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II. OBJECTIVES OF THE WTO

IN BRIEF

In the preamble to the Marrakesh Agreement establishing the WTO, the parties to the Agreement recognize
certain objectives they wish to attain through the multilateral trading system:

 raise living standards;

 ensure full employment;

 ensure a large and steadily growing volume of real income and effective demand; and

 expand the production of and trade in, goods and services, while allowing for the optimal use of the
world's resources in accordance with the objective of sustainable development.

The Agreement also recognizes the need for "positive efforts to ensure that developing countries, and
especially the least-developed among them, secure a share in the growth in international trade
commensurate with … their economic development".

IN DETAIL

The Preamble to the Marrakesh Agreement sets forth these objectives as follows:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic endeavour should be conducted with a
view to raising standards of living, ensuring full employment and a large and steadily growing volume of real
income and effective demand, and expanding the production of and trade in goods and services, while
allowing for the optimal use of the world's resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance the means for doing so
in a manner consistent with their respective needs and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and
especially the least developed among them, secure a share in the growth in international trade
commensurate with the needs of their economic development. Being desirous of contributing to these
objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial
reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in
international trade relations...

The objectives of the WTO are not fundamentally different from the objectives contained in the preamble of the
GATT 1947. However, it is important to note the following two points:

Although the WTO's objectives do not mention trade liberalization or free-trade as such, "substantial reduction
of tariffs and other barriers to trade and the elimination of discriminatory treatment in international trade
relations" are identified as among the means to achieve these objectives.

A second means to achieve the noted objectives is the practice of Members of "entering into reciprocal and
mutually advantageous arrangements" as mentioned in the text of the GATT 1947.

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Accordingly, the WTO adds three new dimensions to the objectives in the preamble of the GATT 1947. They
include:

 the expansion of "the production of and trade in goods and services" to take into consideration the
extension of the coverage of the WTO subject matters. That is, while the GATT covered trade in
goods, under the WTO, coverage was expanded to another subject area – trade in services (see the
GATS Agreement);

 "the objective of sustainable development, seeking both to protect and preserve the environment
and to enhance the means for doing so …;"

 the "development dimension" aiming at helping "…developing countries, and especially the least
developed among them, secure a share in the growth in international trade commensurate with the
needs of their economic development".

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III. FUNCTIONS OF THE WTO

IN BRIEF

The WTO fulfils its objective by:

 administering trade agreements between its Members;

 serving as a forum for trade negotiations;

 settling trade disputes;

 reviewing Members trade policies;

 assisting developing countries in trade policy issues, through technical assistance and training
programmes; and

 cooperating with other international organizations.

IN DETAIL

Article III of the WTO Agreement expounds the functions of the WTO. They include:

(1) "The WTO shall facilitate the implementation, administration and operation, and further the objectives
of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for
the implementation, administration and operation of the Plurilateral Trade Agreements."

(2) "The WTO shall provide the forum for negotiations among its Members concerning their multilateral
trade relations in matters dealt with under the agreements in the Annexes to this Agreement …"

(3) "… The WTO may also provide a forum for further negotiations among its Members concerning their
multilateral trade relations, and a framework for the implementation of the results for such
negotiations, as may be decided by the Ministerial Conference."

The preceding three functions refer to the role of the WTO of providing a permanent institutional forum for
trade negotiations among its Members. These negotiations may be on subjects already covered under WTO
agreements or in respect of "new issues" to be disciplined by WTO agreements.

(4) "The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU) in Annex 2 to this Agreement."

The fourth function refers to the role of the WTO as a forum for the settlement of disputes between its
Members in accordance with the disciplines and procedures elaborated in the Dispute Settlement
Understanding ("the DSU" in Annex 2 to the WTO Agreement). When Members are unable to reach a mutually
acceptable solution to a dispute arising under one of the agreements covered by the DSU, they may have
recourse to the Dispute Settlement Procedure.

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 (5) "The WTO shall administer the Trade Policy Review Mechanism (TPRM) provided for in Annex 3 to this
Agreement."

The fifth function underscores the role of the WTO in the transparency mechanism designed by Members
during the Uruguay Round. The Trade Policy Review Mechanism (TPRM) was one of the few elements of the
WTO Agreement that formed part of the "Early Harvest" realized before the Uruguay Round ended.

"Early Harvest" is an expression used to describe the agreement by GATT contracting parties at the "Mid-Term
Review" Ministerial Meeting of the Uruguay Round negotiations, in Montreal in 1988, that certain results of the
negotiations, on which a clear consensus already existed, would enter into force immediately, although on a
provisional basis. That is, some of the fruits (of the negotiations) would be harvested early.

(6) "With a view to achieving greater coherence in global economic policy-making, the WTO shall
cooperate, as appropriate, with the International Monetary Fund and with the International Bank for
Reconstruction and Development and its affiliated agencies."

The final function underscores the interconnectedness and complementarity of the functions of the WTO with
those of the IMF and the World Bank in establishing global trade, financial and economic frameworks. This
coherence function is implemented through permanent inter-institutional contacts, mutual observerships and
similar arrangements, and co-operation on an ad hoc basis on particular issues. This quote also harks back to
the period in which the original GATT was negotiated (the Havana Conference) when it was envisaged that the
three so-called "Bretton Woods Institutions" (an International Trade Organization - which never came into
existence, the IMF, and the World Bank) would function as sister organizations under a single umbrella to
shape international economic relations in the post-war reconstruction period.

EXERCISES:

1. What is the main objective of the WTO?

2. What are the main functions of the WTO?

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IV. ORGANIZATIONAL STRUCTURE OF THE WTO
The WTO Agreement contains provisions that organize the work of the WTO. Members take their consensus-
based decisions through various bodies, which are open to all Members. In particular, WTO Members
established a working structure for the WTO to allow them to monitor the implementation of the dense network
of legal provisions and procedures that govern their trade transactions, and to further develop the WTO. This
"legal structure" is shown in the diagram below. (Note that the General Council also meets as the Trade Policy
Review Body and as the Dispute Settlement Body. The negotiations mandated by the Doha Declaration take
place in the Trade Negotiations Committee ("TNC") and its subsidiaries. This also includes the negotiations on
agriculture and services begun in early 2000. The TNC operates under the authority of the General Council.)

Figure 1: WTO organization chart

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IV.A. THE MINISTERIAL CONFERENCE

The Ministerial Conference is the highest authority in the WTO. Its sessions must take place at least once every
two years. The Ministerial Conference can take decisions on all matters under all multilateral trade agreements.

IV.B. THE GENERAL COUNCIL

The General Council constitutes the second tier in the WTO Structure. It comprises representatives from all
Member countries, usually Ambassadors/Permanent Representatives based in Geneva. It meets regularly
(approximately once a month) to adopt decisions, mostly on behalf of the Ministerial Conference when the
Conference is not in session, in which capacity it is empowered to act in respect of all WTO matters during the
periods between Ministerial Conferences.

The General Council also meets as:

The Trade Policy Review Body (TPRB), with a different Chairperson, to carry out trade policy reviews as
mandated by the Decision on the Trade Policy Review Mechanism.

The Dispute Settlement Body (DSB), with a different Chairperson to administer the rules in the Understanding
on Rules and Procedures Governing the Settlement of Disputes (DSU). The DSB has the authority to establish
panels, adopt Panel and Appellate Body Reports, oversee the implementation of rulings and recommendations,
and authorize the suspension of concessions and other obligations under the agreements for which disputes
can be settled by the DSU - the "covered agreements".

The DSB establishes Panels on an ad hoc basis, at the request of a Member (or Members) usually with the
following terms of reference:

...to "examine, in the light of the relevant provisions in the respective covered agreements, the matter
referred to the DSB by the complaining Member and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided in that/those agreement(s)".

The DSB also appoints persons to serve on the Appellate Body. The Appellate Body makes recommendations to
the DSB. Where adopted by the DSB, Appellate Body Reports and the Panel Reports (as upheld, amended or
reversed by the Appellate Body) become binding on the disputing Members.

IV.C. THE COUNCILS

The Councils can be described as subsidiary bodies to the General Council. There are three Councils:

 The Council for Trade in Goods (the Goods Council) oversees all the issues related to the Agreements
on trade in goods.

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  The Council for Trade in Services (the GATS Council) oversees all issues related to the GATS
Agreement.

 The Council for Trade-Related Aspects of Intellectual Property Rights (the TRIPS Council) oversees
issues related to the TRIPS Agreement.

These Councils are composed of all WTO Members and have subsidiary bodies (see below).

Several other bodies, which focus on specific issues, report to the General Council. They are usually called
Committees, Working Groups or Working Parties; they are:

 Committee on Trade and Development (CTD);

 Committee on Trade and Environment (CTE);

 Committee on Regional Trade Agreements (CRTA);

 Committee on Balance-of-Payment Restrictions (BOP Committee); and

 Committee on Budget, Finance and Administration.

 Working Parties on Accession;

 Working Group on Trade, Debt and Finance; and

 Working Group on Trade and Technology Transfer.

The Trade Negotiations Committee ("TNC") also reports to the General Council. The TNC was set up by the
Doha Ministerial Declaration, which directed the TNC to establish subsidiary negotiating bodies to take up the
specific negotiating mandates that were agreed in a number of areas (rules, services, non-agricultural market
access, agriculture, etc.).

The subsidiary bodies include certain Negotiating Groups (e.g., the Negotiating Group on Rules), and some
Special Sessions of standing bodies (e.g., the Special Sessions of the Committee on Agriculture). The Special
Sessions (like the various Negotiating Groups) report to the TNC, and have different chairs from the regular
sessions of the standing bodies, which report to the Council for Trade in Goods.

IV.D. THE SUBSIDIARY BODIES

The three Councils (for Goods, Services and TRIPS) have subsidiary bodies.

The Goods Council has 11 committees working on specific subjects (such as agriculture, market access,
subsidies, and anti-dumping measures). These committees are composed of all Members.

The subsidiary bodies of the Services Council's deal with financial services, domestic regulations, GATS rules
and specific commitments. The Council does not have a permanently fixed number of subsidiary bodies. For
example, the Negotiating Group on Basic Telecommunications was dissolved in February 1997 when its work
ended.

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EXERCISES:

3. Please arrange the following WTO bodies in hierarchical order:

- General Council;

- Committee on Agriculture;

- Council for Trade in Goods;

- Ministerial Conference.

4. Please state the function of the following WTO bodies:

(a) General Council;

(b) Committee on Agriculture;

(c) Council for Trade in Goods;

(d) Ministerial Conference.

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IV.E. DECISION-MAKING AT THE WTO

CONSENSUS VERSUS...

The WTO is a Member-driven, consensus-based organization.

Consensus is defined as a situation in which no Member, present at a meeting where a decision is taken,
formally objects to the proposed decision. The definition is contained in Footnote 1 to Article IX of the
WTO Agreement:

"The Body concerned shall be deemed to have decided by consensus on a matter submitted for its
consideration, if no Member present at the meeting when the decision is taken, formally objects to the
proposed decision."

Consensus allows all Members to ensure their interests are properly considered.

...VOTING

Where consensus is not possible, the WTO agreement permits voting — a vote being won by a tally of the
majority of votes cast, and based on the principle "one Member, one vote".

The WTO Agreement envisages voting whenever a decision cannot be arrived at by consensus. Nevertheless,
voting has rather been exercised in the following four specific kinds of situations:

 a three-quarters majority of WTO Members in the Ministerial Conference or the General Council can
adopt an interpretation of any of the multilateral trade agreements;

 the Ministerial Conference, by a three-quarters majority, can waive an obligation imposed on a Member
by a multilateral agreement;

 all Members or a two-thirds majority (depending on the provision of the agreement) can take a decision
to amend provisions of the multilateral agreements;

 a two-thirds majority in the Ministerial Conference or the General Council in between conferences, can
take a decision to admit a new Member.

FORMALS AND INFORMALS

Important breakthroughs occur infrequently in formal meetings of subsidiary bodies or of higher level Councils.
Rather, since decisions are generally made by consensus, without voting, informal consultations among
Members as well as informal meetings of the various bodies play a vital role in bringing the diverse
Membership to agreement, before an issue is submitted to a formal meeting for decision.

One tier below formal meetings are informal plenary meetings. Because no minutes are kept of informal
meetings, discussions in this format tend to be more open and exploratory than at formal meetings, where
delegations wish to state their positions for the record. Sometimes, particularly for complex issues,

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Chairpersons also find it useful to convene smaller groups, often working with coalitions of Members, to try to
find compromise solutions that could be accepted by all Members.

These smaller group meetings of course have to be handled sensitively. The keys to this are transparency and
inclusiveness. That is, all Members need to be kept informed even if they are not in a particular consultation or
meeting, and all must have opportunities to provide input into the process.

Market access negotiations also involve small groups, but for a completely different reason. The outcome is a
multilateral package of individual countries' commitments, which are the result of numerous informal bilateral
bargaining sessions, and in the interest of individual countries, (examples are the tariff, and market access
negotiations on trade in services).

Informal consultations of subsidiary bodies (whether involving all Members or smaller groups) play a vital role
in facilitating consensus, but they do not appear in organizational charts because they are informal. Informal
consultations feed into formal meetings, and are necessary to develop the formal decisions that will be
submitted to Committees and Councils for action. Some informal, smaller group meetings are known as
"Green Room" meetings. This name originated from the informal name of the GATT Director-General's
conference room, which at the time was green. The Director-General often works in a Green Room format,
meeting with smaller, varying groups of delegations on particular issues, to try to make progress or generate
ideas that can then be taken to all Members for further consideration.

The frequent use of informal consultations and meetings, in varying configurations, does not mean that formal
meetings are unimportant or unnecessary. To the contrary, these meetings are where the binding decisions of
the Members are taken, and they are as well fora for exchanging views and putting delegations' statements of
views on the record.

IV.F. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT

AGENDA

At the Ministerial Conference in Doha, Qatar in November 2001, Members launched a round of negotiations,
adopting the Doha Development Agenda and its accompanying work programme.

The Doha Ministerial Declaration, which sets the negotiating mandate, required WTO Members to set up a
Trade Negotiations Committee (TNC). The TNC then established Negotiating Groups and other negotiating
mechanisms, and supervises the on-going negotiations, under the authority of the General Council.

Negotiations are taking place:

 In new Negotiating Groups, on:

 Market access;

 WTO rules (anti-dumping, subsidies - including fisheries subsidies, regional trade

agreements); and

 Trade Facilitation.

 In existing bodies, on:

 Agriculture: in Special Sessions of the Committee on Agriculture;

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  Services: in Special Sessions of the Services Council;

 Geographical Indications (a multilateral registration system): in Special Sessions of the Council

for Trade-Related Aspects of Intellectual Property Rights (TRIPS). Other TRIPS issues are
addressed in regular TRIPS Council meetings;

 Dispute Settlement Understanding: in Special Sessions of the Dispute Settlement Body;

 Trade and Environment: in Special Sessions of the Trade and Environment Committee; and

 Negotiations on outstanding implementation issues are being undertaken in relevant bodies

according to paragraph 12 of the Doha Ministerial Declaration. In particular, where the issues
are subject to a specific negotiating mandate, these issues are referred to the body charged with
that negotiation (outstanding implementation issues on anti-dumping, for example, were referred
to the Negotiating Group on Rules). Where there is no specific negotiating mandate in an area
where there are outstanding implementation issues, those issues are referred to the standing
body in that area (outstanding implementation issues on safeguards, for example, were referred
to the Committee on Safeguards).

In keeping with its title as the Doha Development Agenda, considerable emphasis is placed throughout the
negotiations on special and differential treatment for developing countries (S&D) as an integral part of the WTO
Agreements. In addition, pursuant to paragraph 44 of the Doha Ministerial Declaration, and to the Decision on
Implementation-Related Issues and Concerns, all S&D provisions are to be reviewed to make them more
precise, effective and operational. These reviews are carried out in special sessions of the Trade and
Development Committee.

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V. THE WTO AGREEMENTS
You have seen reference made above to the WTO agreements. What are these agreements?

IN BRIEF

Most of the WTO agreements are the result of the 1986–94 Uruguay Round negotiations, signed at the
Marrakesh Ministerial Meeting in April 1994. There are about 60 Agreements and Decisions totalling
550 pages. It also included a major revision of the original GATT text. (Negotiations since then have
produced additional legal texts such as the Information Technology Agreement, Services and Accession
Protocols).

The Final Act signed in Marrakesh in 1994 is like a cover note. Everything else is attached to this. Foremost is
the Agreement Establishing the WTO ("the WTO Agreement"), which serves as an umbrella agreement.
Annexed to the Agreement Establishing the WTO are the agreements on Goods, Services and Intellectual
Property, Dispute Settlement, Trade Policy Review Mechanism and the Plurilateral Agreements. The Schedules
of Commitments also form part of the Uruguay Round agreements. These schedules contain the commitments
made by individual WTO members allowing specific foreign products or service-providers access to their
markets. In the print version these schedules comprise about 30,000 pages for all WTO Members.

The ensemble of these agreements are often called the "WTO's Trade Rules", or the "WTO Law".

In other words:

 The agreements include individual countries' commitments to lower customs tariffs and other trade
barriers, to open services markets and keep them open, and to protect intellectual property rights.

 The agreements set out procedures for settling disputes.

 The agreements prescribe special treatment for developing countries.

 The agreements require governments to make their trade policies transparent by notifying the WTO
about laws in force and measures adopted, and through regular reports by the secretariat on countries'
trade policies.

The basic structure of the WTO agreements: how the six main areas fit together — the umbrella WTO
Agreement, goods, services, intellectual property, disputes settlement, trade policy reviews and the plurilateral
agreements.

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 Umbrella Agreement establishing WTO

Goods (Annex 1 A) Services (Annex 1 B) Intellectual Property

(Annex 1 C)

Basic principles GATT GATS TRIPS

2
Additional details Other goods agreements Services annexes
1
and annexes

Market access Countries' schedules of Countries' schedules of

commitments commitments commitments(and MFN
exemptions)

Dispute settlement DISPUTE SETTLEMENT ( Annex 2)

Transparency TRADE POLICY REVIEWS (Annex 3)

Plurilateral Plurilateral Agreements (Annex 4)

commitments

Table 2: Basic structure of the WTO Agreements

TIP

If you click on the hyperlinks, you will be able to read a brief summary about the agreements.

For more information on the GATS, there is a self-training module on the WTO site at the following
address: http://www.wto.org/english/tratop_e/serv_e/cbt_course_e/signin_e.htm

For more information on the DSU, there is a self-training module available on the WTO site at the
following address: http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/signin_e.htm

IN MORE DETAIL

Let us take a closer look at the structure of the WTO Agreement, with a view to better understanding how the
various subsidiary Agreements are integrated into the multilateral legal framework of the WTO.

The Marrakesh Agreement establishing the World Trade Organization (the WTO Agreement) includes provisions
on establishment, scope, functions and structure of the WTO. It defines WTO's relationship with other
organizations, its secretariat, budget and contributions, legal status, and decision-making and amendment
procedures (including special voting procedures). Additionally, it presents information on the definition of

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The agreements that disciplines the trade in Goods, which are contained in Annex 1A, are the: General
Agreement on Tariffs and Trade (GATT 1994); Agreement on Agriculture (AoA); Agreement on the Application
of Sanitary and Phytosanitary Measures (SPS); Agreement on Textiles and Clothing (ATC, terminated on the
1st January 2005); Agreement on Technical Barriers to Trade (TBT); Agreement on Trade Related Investment
Measures (TRIMS); Agreement on Anti-dumping (AA); Agreement on Customs Valuation; Agreement on
Preshipment Inspection; Agreement on Rules of Origin; Agreement on Import Licensing; Agreement on
Subsidies and Countervailing Measures; Agreement on Safeguards.
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The Agreement that disciplines the trade in Services, which is contained in Annex 1B, is the General
Agreement on Trade in Services. This Agreement has several annexes on its own, which are the: Annex on
Article II Exemptions; Annex on Movement of Natural Persons Supplying Services under the Agreement; Annex
on Air Transport Services; Annex on Financial Services and Second Annex on Financial Services; Annex on
Telecommunications and Annex on Negotiations on Basic Telecommunications; Annex on Negotiations on
Maritime Transport Services.

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original Members, accession, non-application, acceptance, entry into force and deposit, denunciation and final
provisions.

The WTO Agreement has four Annexes - Annexes 1, 2, 3 and 4.

Annexes 1, 2, and 3 are termed "Multilateral Trade Agreements".

Annex 4 is termed "Plurilateral Trade Agreements".

Note

Multilateral Agreements are agreements signed by all Members and therefore binding all WTO Members.
Plurilateral Agreements bind only those Members party to the agreement.

The Multilateral Trade Agreements (Annex 1, 2, 3) are applicable to all Members and as such have to be
complied with simultaneously, without the possibility, for the Member, of choosing just this or that agreement
to be bound by. This is the "single undertaking" principle, which is further explained below.

WHAT IS THE SINGLE UNDERTAKING?

Agreements related to GATT 1947 were negotiated during negotiating rounds prior to the Uruguay Round. In
particular, some agreements on non-tariff barriers were negotiated during the Tokyo Round. However, these
agreements were not adopted by all GATT Contracting Parties; they applied only to those countries who agreed
to be bound by them. This is what was called "GATT à la carte".

In the Uruguay Round, a different approach was adopted - it was decided that the multilateral agreements
negotiated were to be accepted as a whole. The General Agreement on Tariffs and Trade, the Agreement on
Agriculture, the Agreement on Sanitary and Phytosanitary Measures, the Agreement on Subsidies and
Countervailing Measures, the Agreement on Trade-Related Aspects of Intellectual Property Rights, the General
Agreement on Trade in Services, as well as most of the other agreements negotiated during the Uruguay
Round, are part of this "single undertaking".

However, there are four plurilateral trade agreements (Uruguay Round Agreements) that bind only those
Members who negotiated and accepted to be bound by each agreement. These are the Agreement on Trade in
Civil Aircraft, the Agreement on Government Procurement, the International Dairy Agreement and the
International Bovine Meat Agreement. The latter two were terminated at the end of 1997.

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VI. DISPUTE SETTLEMENT
The task of ensuring that all Members live up to their commitments, and that there is a common understanding
of the nature of those commitments, is a central part of the work of the WTO. It is two-fold and involves:

 the broad multilateral review and transparency aspect; and

 the aspect relating to individual disputes, arising out of diverging interpretations of WTO obligations by
particular Members.

Thus, the dispute settlement not only ensures security and predictability to the multilateral trading system, but
is also concerned with situations where a Member seeks a remedy for (a perceived) damage to its trade
interests caused by the actions/inaction of other Member/s.

To sum up, the system serves to preserve the Members' rights and obligations under the WTO Agreements.

In contrast to the old GATT dispute settlement arrangement, the new rules are more detailed and provide for
deadlines and approval procedures that speed up the dispute settlement process, thereby preventing undue
delays in the settlement of disputes.

Panels and the Appellate Body are in charge of adjudicating disputes between Members. Panels are composed
of three, and exceptionally five, experts selected on an ad hoc basis. The Appellate Body is a permanent group
of seven experts in trade issues and trade law, in charge of reviewing the legal aspects of the reports issued by
panels.

Reports by panels and the Appellate Body must be adopted by the Dispute Settlement Body. Perhaps the most
important difference between the GATT and WTO dispute settlement rules is the change introduced in the
decision-making procedures. Under the GATT, dispute settlement decisions depended on the consensus
agreement of Contracting Parties. If a party to a dispute was unwilling to have a panel established, or objected
to its membership or terms of reference, or did not accept the Panel's conclusions, it could "block" a consensus
being formed on any of those issues. In the absence of consensus, no action could be taken even where a
determination was made in a Contracting Party's favour.

In the DSU the consensus requirement is reversed and a panel report is adopted "unless there is a consensus
not to adopt it", i.e. all Members are against the adoption. This is called the negative consensus rule.

Furthermore, the DSB has the authority to:

 establish panels;

 adopt panel and Appellate Body reports;

 maintain the surveillance of the implementation of rulings and recommendations made by the panels
and the Appellate Body; and

 authorize the suspension of obligations under the covered agreements.

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HOW LONG TO SETTLE A DISPUTE?

These approximate periods for each stage of a dispute settlement procedure are target figures
— the agreement is flexible. In addition, the countries can settle their dispute themselves at
any stage. Totals are also approximate.

60 days Consultations, mediation, etc.

45 days Panel set up and panellists appointed

6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute Settlement Body adopts report (if no appeal)

Total = 1 year (without appeal)

60-90 days Appeals report

30 days Dispute Settlement Body adopts appeals report

Total = 1y 3m (with appeal)

Table 3: WTO dispute settlement timeline

Finally, in the DSU, the priority is to settle disputes through consultations. A majority of disputes so far (about
two-thirds) in the WTO have not proceeded beyond consultations, either because a satisfactory settlement was
found, or because the complainant decided not to pursue the matter further. This shows that consultations are
often an effective means of dispute resolution in the WTO and that Members are cautious about not misusing
the instruments of adjudication and enforcement in the dispute settlement system.

Another important set of principles, appropriately entitled "Strengthening of the Multilateral System", is set out
under Article 23 of the DSU. This prohibits unilateral actions by Members to redress what they see as violations
of obligations, or the nullification or impairment of benefits, under any of the WTO agreements. Members are
required to use the WTO dispute settlement procedures, which includes consultations throughout the whole
process, to settle grievances related to covered agreements.

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VII. SUMMARY

OBJECTIVES OF THE WTO

Improve the welfare of the peoples of the Member countries.

FUNCTIONS OF THE WTO

 Facilitate the implementation, administration and operation, and furthering of the objectives of the
WTO Agreements (including the Plurilateral Agreements);

 Serve as a forum for trade negotiations;

 Administer the Dispute Settlement Understanding (DSU);

 Administer the Trade Policy Review Mechanism (TPRM); and

 Cooperate with the IMF and the IBRD (World Bank) to achieve coherence in global economic
policy/making.

STRUCTURE OF THE WTO

Ministerial Conference
|
General Council (also DSB and TPRB)
|
Councils for Goods, Services, Intellectual Property
|
Committees
|
Sub-Committees

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PROPOSED ANSWERS:

1. What is the main objective of the WTO?

The objective of the WTO is to improve the welfare of the peoples of the Member countries (standard of
living, employment, income, etc.) by expanding the production of, and trade in, goods and services. The
expansion of the production and trade of goods and services is to be achieved through negotiations
leading to trade liberalization.

This objective should be attained in accordance with sustainable development and with due consideration
of the development needs of developing countries.

2. What are the main functions of the WTO?

The main functions of the WTO are to:

 administer trade agreements;

 serve as a forum for trade negotiations;

 settle trade disputes;

 review Member's trade policies;

 assist developing countries with trade policy issues, through technical assistance and training
programmes; and

 cooperate with other international organizations.

3. Please arrange the following WTO bodies in hierarchical order: General Council; Committee on
Agriculture; Council for Trade in Goods; Ministerial Conference.

(a) Ministerial Conference;

(b) General Council;

(c) Council for Trade in Goods;

(d) Committee on Agriculture.

4. Please state the function of the following WTO bodies: (a) General Council; (b) Committee on
Agriculture; (c) Council for Trade in Goods; (d) Ministerial Conference.

The Ministerial Conference is the highest authority of the WTO. It meets at least once every two years.

Below the Ministerial Conference in rank is the General Council. It takes all decisions on behalf of the
Ministerial Conference when the Ministerial Conference is not in session. The General Council meets
regularly (in principle, monthly), usually at the Geneva Headquarters. The General Council reports to the
Ministerial Conference.

Below the General Council is the Council for Trade in Goods (CTG). It oversees the implementation of the
multilateral agreements on trade in goods (Annex 1A of the Marrakesh Agreement), and it reports to the
General Council.

The Committee on Agriculture is one of several subsidiary bodies of the CTG. It is responsible for the
implementation of specific provisions and agreements, such as the Agreement on Agriculture.

All Members participate in the work of all WTO Bodies.

The WTO continues the GATT principle of taking decision by "consensus".

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5. What is the WTO Agreement?

The WTO Agreement is the 1994 Marrakesh Agreement Establishing the WTO. It has four Annexes.

Annex 1 includes the Multilateral Agreements on Trade. It is divided into three sections:

 Annex 1A (the Multilateral Agreements on Trade in Goods);

 Annex 1B (the General Agreement on Trade in Services); and

 Annex 1C (the Agreement on Trade-Related Aspects of Intellectual Property Rights).

Annex 2 contains the Understanding on Rules and Procedures Governing the Settlement of Disputes
(DSU). It is dedicated to rules governing the dispute settlement system in the WTO.

Annex 3 is dedicated to rules governing the Trade Policy Review Mechanism (TPRM) in the WTO.

Annex 4 contains the Plurilateral Trade Agreements.

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