WTO agreement

KEY POINTS

Final act embodying the results of the Uruguay Round of multilateral trade negotiations

• Through this decision, the Council of the European Union adopted, on behalf of the European Community, the results of the Uruguay Round of negotiations embodied in the Marrakesh Final Act signed in 1994 in Morocco by the representatives of the Community and its Member States.
• The Marrakesh Final Act includes a list of multilateral and plurilateral agreements and ministerial decisions and declarations that clarify rules of certain agreements. The multilateral trade agreements and the associated legal instruments are binding for all WTO members. As far as the plurilateral agreements are concerned, although they form part of WTO law, they do not create obligations or rights for WTO members that have not accepted them.
• The agreement establishing the WTO incorporates several annexes containing the specific agreements.
• Annex 1A relates to the multilateral agreements on trade in goods. These are:
  • the General Agreement on Tariffs and Trade 1994 (GATT 1994), which included the GATT 1947;
  • the Agreement on Agriculture;
  • the Agreement on the Application of Sanitary and Phytosanitary Measures;
  • the Agreement on Textiles and Clothing;
  • the Agreement on Technical Barriers to Trade;
  • the Agreement on Trade-Related Investment Measures;
  • the Agreement on Anti-Dumping Measures;
  • the Agreement on Customs Valuation;
  • the Agreement on Preshipment Inspection;
  • the Agreement on Rules of Origin;
  • the Agreement on Import Licensing Procedures;
  • the Agreement on Subsidies and Countervailing Measures;
  • the Agreement on Safeguards;
  • the Agreement on Trade Facilitation.
• Annex 1B contains the General Agreement on Trade in Services (GATS).
• Annex 1C consists of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including trade in counterfeit goods.
• Annex 2 incorporates the Understanding on rules and procedures governing the settlement of disputes.
• Annex 3 relates to the Trade Policy Review Mechanism (TPRM) of WTO members.
• Annex 4 deals with the plurilateral trade agreements. These are:
  • the Agreement on Trade in Civil Aircraft;
  • the Agreement on Government Procurement (revised in 2012);
  • the International Dairy Agreement (terminated in 1997);
  • the International Bovine Meat Agreement (terminated in 1997).

Agreement establishing the World Trade Organization

• This agreement creates a permanent institutional framework for the specific agreements listed above.
• The WTO is a permanent organisation that has a legal personality. All members of the GATT became funding members of the WTO on 1 January 1995. Since then, applicants wishing to join have followed the accession procedure set out in the agreement establishing the WTO.
• The WTO members have set the following objectives for the organisation:
  • raising standards of living;
  • ensuring full employment and a growing volume of real income and effective demand;
  • expanding the production of and trade in goods and services;
  • sustainable development and protection of the environment;
  • taking account of the needs of developing countries.
• The functions of the WTO are to:
  • facilitate the implementation, administration and operation of the various trade agreements;
  • provide a forum for multilateral trade negotiations;
  • resolve trade disputes through the Dispute Settlement Body (DSB);
  • review the national trade policies of its members;
  • cooperate with other international organisations in order to ensure greater coherence in global economic policymaking.

Structure

• The Ministerial Conference is the highest decision-making body of the WTO. It is composed of representatives of all the member countries and meets at least once every 2 years.
• Between these meetings, the General Council, also made up of representatives of all the members, takes decisions relating to the functioning of the WTO and supervises the agreements and ministerial decisions. The General Council also meets to discharge the responsibilities of the DSB and the Trade Policy Review Body (TPRB) provided for in the Trade Policy Review Mechanism (TPRM, see below).
• The General Council has three subsidiary bodies: the Council for Trade in Goods, the Council for Trade in Services and the Council for Trade-Related Aspects of Intellectual Property Rights.
• In addition, there are several committees directly attached to the General Council. These include the committees on Trade and Development, Trade and Environment and Regional Trade Agreements. Lastly, two committees are responsible for managing the plurilateral agreements on trade in civil aircraft and government procurement.
• The General Council appoints a director-general who is responsible for heading the Secretariat of the WTO.
• In principle, the WTO takes its decisions by consensus. When a decision cannot be reached, decisions are determined by a majority of votes, with each WTO member having one vote. The EU, which is a full member of the WTO, has a number of votes equal to the number of EU Member States that are members of the WTO.
• Each member of the WTO may submit proposals to the Ministerial Conference to amend provisions of the WTO’s various multilateral trade agreements.

Understanding on rules and procedures governing the settlement of disputes

• The WTO’s dispute settlement system is an important element of the multilateral trading order. It is based on Articles XXII and XXIII of the GATT 1994 and on the rules and procedures subsequently drawn up and set out in the understanding on rules and procedures governing the settlement of disputes incorporated into the agreement establishing the WTO.
• The dispute settlement system covers all of the multilateral trade agreements. In fact, it applies to trade in goods, trade in services and intellectual property issues covered by the Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS agreement). It also applies to disputes under the plurilateral Agreement on Government Procurement. Some of these agreements contain rules concerning the settlement of disputes that only apply to disputes under the agreement in question and that may supplement or modify the rules of the understanding.
• The dispute settlement system is administered by the DSB. All WTO members may attend the DSB meetings. However, where the DSB regulates the rules that relate to the settlement of disputes concerning a plurilateral trade agreement, only the members that are party to the agreement can participate in decisions or actions taken by the DSB with respect to disputes under that agreement.
• The dispute settlement process is launched when one member submits to another a request for consultations on a specific issue. These consultations must begin within 30 days of the request. If the consultations fail to settle a dispute, a member may call on the DSB to set up a panel, usually consisting of three independent experts, in order to deal with the issue. In addition, the parties may voluntarily agree to make use of other dispute settlement methods, including good offices, conciliation and mediation.
• After listening to the parties, the panel submits a report to the DSB. The panel must complete its work within 6 months or, in cases of urgency, within 3 months. The panel report is considered for adoption by the DSB 20 days after it has been circulated to members. It is adopted within 60 days of the date of circulation, unless the DSB decides by consensus not to adopt the report (opposite or negative consensus) or if one of the parties notifies its decision to appeal.
• The WTO’s dispute settlement procedure enables all parties to appeal a panel report. The appeal is, however, limited to issues of law covered in the panel report and legal interpretations developed by the panel. The appeal is examined by a standing Appellate Body composed of seven members appointed by the DSB for a 4-year term. Three of the members serve on any one case. The Appellate Body’s report must be accepted unconditionally by the parties of the dispute and adopted by the DSB unless there is a negative consensus, i.e. a decision by consensus not to adopt the report.
• The DSB monitors the implementation of adopted recommendations or decisions and all pending matters remain on the agenda of its meetings until they are resolved. Deadlines are also set for the implementation of recommendations set out in panel reports. When a party is unable to implement these recommendations within a reasonable period of time, it must enter into negotiations with the complaining party with a view to developing mutually acceptable compensation. If these negotiations are unsuccessful, the DSB may authorise the complaining party to suspend the application of concessions or obligations to the member concerned. Compensation and the suspension of concessions are, however, only temporary measures that may be applied until the DSB’s recommendations are implemented by the member concerned.
• In all cases, WTO members agree that they will not themselves determine whether there has been a violation of the obligations laid down within the framework of the WTO, nor will they suspend concessions. They must apply the rules and procedures for the settlement of disputes set out in the understanding.
• Furthermore, the understanding on rules and procedures governing the settlement of disputes recognises the special situation of the WTO’s developing country members and least-developed country members. Developing countries may opt for an accelerated procedure and request extended deadlines or additional legal aid. WTO members are encouraged to give particular consideration to the situation of developing country members.

Trade Policy Review Mechanism

• The TPRM was set up as a temporary measure under the GATT in 1989, following the mid-term review of the Uruguay Round. This mechanism is now an integral part of the WTO system and encompasses all the fields covered by the WTO agreements (goods, services and intellectual property questions).
• The TPRM particularly aims to achieve greater transparency in, and an understanding of, the trade policies and practices of WTO members, to encourage members to adhere to the rules in force in the multilateral trading system, and thus to promote the smooth functioning of the system.
• Within the framework of the TPRM, all WTO members are subject to review. This review is held every 2 years for the members with the largest share of world trade (currently China, the EU, Japan and the United States), every 4 years for the next 16 members and every 6 years for the other members. A longer period may be set for least-developed countries. In practice, a certain degree of flexibility has been introduced to the rate of reviews (up to a 6-month interval). In 1996, it was agreed that every second review of each of the first four trading powers would be an interim review.
• The review is carried out by the TPRB based on a general policy declaration submitted by the member concerned and on a report drawn up by the WTO Secretariat. In drawing up its report, the Secretariat seeks the support of the member concerned but retains full responsibility for the facts presented and views expressed. The Secretariat’s report and the member’s declaration are published following the review meeting, together with the minutes of the meeting and the text of the final comments made by the chairman of the TPRB at the end of the meeting.