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Read the article: Understanding the World Trade Organization. Posted in Blackboard.

1. Describe how the GATT and WTO have helped to free international trade. Also, what has been the mechanism to accomplish that objective?

2. Explain how a multilateral trading system can help to create a stable and predictable environment and why this is important.

3. Explain the factors in favor of an open trading system based on multilaterally agreed rules.

4. What are the successes and challenges that the General Agreement of Tariffs and Trade (GATT) faced during its existence?

5. What are the temptations or possible reasons to impose protective barriers with the idea of preventing the challenge of competitive imports?

Understanding

the WTO

3rd edition
Previously published as “Trading into the Future”

September 2003, revised October 2005

Fact file
The WTO

Location: Geneva, Switzerland
Established: 1 January 199

Created by: Uruguay Round negotiations (1986–94)

Membership: 148 countries (since 13 October 2004)
Budget: 169 million Swiss francs for

2005

Secretariat staff: 6

Head: Pascal Lamy (director-general)

Functions:
• Administering WTO trade

agreements

• Forum for trade

negotiations

• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing
countries
• Cooperation with other international organizations

Third edition
Previously published as “Trading into the Future”

Written and published by the
World Trade Organization
Information and Media Relations Division
© WTO 1995, 2000, 2001, 2003, 2005

An up-to-date version of this text also appears on the WTO website
(http://www.wto.org, click on “the WTO”), where it is
regularly updated to reflect developments in the WTO.

Contact the WTO Information Division
rue de Lausanne 154, CH–1211 Genève 21, Switzerland
Tel: (41–22) 739 5007/5190 Fax: (41–22) 739 54

e-mail: enquiries@wto.org

Contact WTO Publications
rue de Lausanne 154, CH–1211 Genève 21, Switzerland
Tel: (41–22) 739 5208/5308 Fax: (41–22) 739 57

e-mail: publications@wto.org

Printed: October 2005 — 14 000 copies

The first step is to talk. Essentially, the WTO is a place

where member governments go, to try to sort out the

trade problems they face with each other.

At its heart are WTO agreements, negotiated and signed

by the bulk of the world’s trading nations.

But the WTO is not just about liberalizing trade, and in

some circumstances its rules support maintaining

trade

barriers — for example to protect consumers or prevent

the spread of disease.

Abbreviations

Some of the abbreviations and acronyms used in the WTO:

ACP African, Caribbean and Pacific Group (Lomé Convention)

AD, A-D Anti-dumping measures

AFTA ASEAN Free Trade Area

AMS Aggregate measurement of support (agriculture)

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

ATC Agreement on Textiles and Clothing

CBD Convention on Biological Diversity

CCC (former) Customs Co-operation Council (now WCO)

CER [Australia New Zealand] Closer Economic Relations
[Trade Agreement] (also ANCERTA)

COMESA Common Market for Eastern and Southern Africa

CTD Committee on Trade and Development

CTE Committee on Trade and Environment

CVD Countervailing duty (subsidies)

DDA Doha Development Agenda

DSB Dispute Settlement

Body

DSU Dispute Settlement Understanding

EC European Communities

EFTA European Free Trade Association

EU European Union (officially European Communities in
WTO)

FAO Food and Agriculture Organization

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GSP Generalized System of Preferences

HS Harmonized Commodity Description and Coding System

ICITO Interim Commission for the International Trade
Organization

ILO International Labour Organization

IMF International Monetary Fund

ITC International Trade Centre

ITO International Trade Organization

MEA Multilateral environmental agreement

MERCOSUR Southern Common Market

MFA Multifibre Arrangement (replaced by ATC)

MFN Most-favoured-nation

MTN Multilateral trade negotiations

NAFTA North American Free Trade Agreement

PSE Producer subsidy equivalent (agriculture)

PSI Pre-shipment inspection

S&D, SDT Special and differential treatment (for developing
countries)

SAARC South Asian Association for Regional Cooperation

SDR Special Drawing Rights (IMF)

SELA Latin American Economic System

SPS Sanitary and

phytosanitary measures

TBT

Technical barriers to trade

TMB Textiles Monitoring Body

TNC

Trade Negotiations

Committee

TPRB Trade Policy Review Body

TPRM Trade Policy Review Mechanism

TRIMs Trade-related investment measures

TRIPS Trade-related aspects of intellectual property rights

UN United Nations

UNCTAD UN Conference on Trade and Development

UNDP UN Development Programme

UNEP UN Environment Programme

UPOV International Union for the Protection of New Varieties of
Plants

UR Uruguay Round

VER Voluntary export restraint

VRA Voluntary restraint agreement

WCO World Customs Organization

WIPO World Intellectual Property Organization

WTO World Trade Organization

For a comprehensive list of abbreviations and glossary of terms used in international trade, see, for example:
Walter Goode, Dictionary of Trade Policy Terms, 4th Edition, WTO/Cambridge University Press, 2003.

This and many other publications on the WTO and trade are available from:
WTO Publications, World Trade Organization, Centre William Rappard, Rue de Lausanne 154, CH–1211 Geneva,
Switzerland.
Tel (+41–22) 739 5208 / 739 5308. Fax: (+41–22) 739 5792
e-mail: publications@wto.org

ON THE WEBSITE

You can find more information on WTO activities and issues on the WTO website. The site is created around
“gateways” leading to various subjects — for example, the “trade topics” gateway or the “Doha Development
Agenda” gateway. Each gateway provides links to all material on its subject.

References in this text show you where to find the material. This is in the form of a path through gateways, starting
with one of the navigation links in the top right of the homepage or any other page on the site. For example, to find
material on the agriculture negotiations, you go through this series of gateways and links:
www.wto.org > trade topics > goods >

agriculture > agriculture negotiations

You can follow this path, either by clicking directly on the links, or via drop-down menus that will appear in most
browsers when you place your cursor over the “trade topics” link at the top of any web page on the site.

A word of caution: the fine print

While every effort has been made to ensure the accuracy of the text in this booklet, it cannot be taken as an official legal
interpretation of the agreements.

In addition, some simplifications are used in order to keep the text simple and clear.

In particular, the words “country” and “nation” are frequently used to describe WTO members, whereas a few members are
officially “customs territories”, and not necessarily countries in the usual sense of the word (see list of members). The same
applies when participants in trade negotiations are called “countries” or “nations”.

Where there is little risk of misunderstanding, the word “member” is dropped from “member countries (nations,
governments)”, for example in the descriptions of the WTO agreements. Naturally, the agreements and commitments do not
apply to non-members.

In some parts of the text, GATT is described as an “international organization”. The phrase reflects GATT’s de facto role before
the WTO was created, and it is used simplistically here to help readers understand that role. As the text points out, this role
was always ad hoc, without a proper legal foundation. International law did not recognize GATT as an organization.

For simplicity, the text uses the term “GATT members”. Officially, since GATT was a treaty and not a legally-established
organization, GATT signatories were “contracting parties”.

And, for easier reading, article numbers in GATT and GATS have been translated from Roman numbers into European digits.

Contents
Chapter 1 …………………………………………………………………………………………

Basics …………………………………………………………………………………………….. 9

1. What is the World Trade Organization? ………………………………………………. 9
Is it a bird, is it a plane? ……………………………………………………………………………9
Born in 1995, but not so young …………………………………………………………………

2. Principles of the trading system ………………………………………………………..

Trade without discrimination …………………………………………………………………….11
Freer trade: gradually, through negotiation …………………………………………………..

Predictability: through binding and transparency…………………………………………….12
Promoting fair competition ……………………………………………………………………….

Encouraging development and economic reform …………………………………………….13

3. The case for open trade ……………………………………………………………………

4. The GATT years: from Havana to Marrakesh ………………………………………..

GATT: ‘provisional’ for almost half a century………………………………………………….16
The Tokyo Round: a first try to reform the system ………………………………………….1

Did GATT succeed? ………………………………………………………………………………..

5. The Uruguay Round …………………………………………………………………………

A round to end all rounds? ……………………………………………………………………….20
What happened to GATT?…………………………………………………………………………

The post-Uruguay Round built-in agenda ……………………………………………………..

Chapter 2 ……………………………………………………………………………………….

The agreements ……………………………………………………………………………… 23

1. Overview: a navigational guide …………………………………………………………23
Six-part broad outline……………………………………………………………………………..23
Additional agreements …………………………………………………………………………….

Further changes on the horizon, the Doha Agenda ………………………………………….24

2. Tariffs: more bindings and closer to zero…………………………………………….

Tariff cuts ……………………………………………………………………………………………25
More bindings……………………………………………………………………………………….25
And agriculture … ………………………………………………………………………………….

3. Agriculture: fairer markets for farmers ………………………………………………

The Agriculture Agreement: new rules and commitments ………………………………….27
The least-developed and those depending on food imports………………………………..30

4. Standards and safety……………………………………………………………………….

Food, animal and plant products: how safe is safe? …………………………………………31
Technical regulations and standards ……………………………………………………………

5. Textiles: back in the mainstream……………………………………………………….

Integration: returning products gradually to GATT rules……………………………………33

6. Services: rules for growth and investment ………………………………………….

GATS explained …………………………………………………………………………………….36
Current work ………………………………………………………………………………………..

7. Intellectual property: protection and enforcement ……………………………….

Origins: into the rule-based trade system …………………………………………………….42
Basic principles: national treatment, MFN, and balanced protection ……………………..

How to protect intellectual property: common ground-rules……………………………….43
Enforcement: tough but fair ……………………………………………………………………..

Technology transfer ……………………………………………………………………………….46
Transition arrangements: 1, 5 or 11 years or more …………………………………………

8. Anti-dumping, subsidies, safeguards: contingencies, etc……………………….

Anti-dumping actions ……………………………………………………………………………..48
Subsidies and

countervailing measures

………………………………………………………..

Safeguards: emergency protection from imports…………………………………………….

9. Non-tariff barriers: red tape, etc ……………………………………………………….

Import licensing: keeping procedures clear …………………………………………………..53
Rules for the valuation of goods at customs ………………………………………………….53
Preshipment inspection: a further check on imports ………………………………………..

Rules of origin: made in … where?……………………………………………………………..54
Investment measures: reducing trade distortions……………………………………………

10. Plurilaterals: of minority interest …………………………………………………….

Fair trade in civil aircraft ………………………………………………………………………….56
Government procurement: opening up for competition …………………………………….56
Dairy and bovine meat agreements: ended in 1997…………………………………………

11. Trade policy reviews: ensuring transparency …………………………………….58
Chapter 3 ……………………………………………………………………………………….

Settling disputes …………………………………………………………………………….. 59

1. A unique contribution ………………………………………………………………………59
Principles: equitable, fast, effective, mutually acceptable ………………………………….59
How are disputes settled? ………………………………………………………………………..

Appeals ………………………………………………………………………………………………

The case has been decided: what next? ……………………………………………………….61

2. The panel process……………………………………………………………………………

3. Case study: the timetable in practice………………………………………………….

Chapter 4 ……………………………………………………………………………………….

Cross-cutting and new issues …………………………………………………………… 66

1. Regionalism: friends or rivals? ………………………………………………………….

Regional trading arrangements ………………………………………………………………….67

2. The environment: a specific concern ………………………………………………….69

The committee: broad-based responsibility …………………………………………………..

WTO and environmental agreements: how are they related? ……………………………..69
Disputes: where should they be handled? …………………………………………………….

A WTO dispute: The ‘shrimp-turtle’ case ………………………………………………………

A GATT dispute: The tuna-dolphin dispute…………………………………………………….

Eco-labelling: good, if it doesn’t discriminate …………………………………………………

Transparency: information without too much paperwork …………………………………..74
Domestically prohibited goods: dangerous chemicals, etc………………………………….

Liberalization and sustainable development: good for each other ………………………..75
Intellectual property, services: some scope for study……………………………………….75

3. Investment, competition, procurement, simpler procedures ………………….

Investment and competition: what role for the WTO? ………………………………………76
Transparency in government purchases: towards multilateral rules ……………………..

Trade facilitation: a new high profile……………………………………………………………77

4. Electronic commerce ……………………………………………………………………….

5. Labour standards: highly controversial ………………………………………………

Trade and labour rights: deferred to the ILO …………………………………………………79
Chapter 5 ……………………………………………………………………………………….

The Doha agenda ……………………………………………………………………………. 80

Implementation-related issues and concerns (par 12)………………………………………80
Agriculture (par 13, 14) ………………………………………………………………………….

Services (par 15) …………………………………………………………………………………..

Market access for non-agricultural products (par 16) ……………………………………….

Trade-related aspects of intellectual property rights (TRIPS) (pars 17–19) …………….

Relationship between trade and investment (pars 20–22) …………………………………

Interaction between trade and competition policy (pars 23–25) ………………………….

Transparency in government procurement (par 26)…………………………………………

Trade facilitation (par 27) ………………………………………………………………………..89
WTO rules: anti-dumping and subsidies (par 28) ……………………………………………

WTO rules: regional trade agreements (par 29) ……………………………………………..90
Dispute Settlement Understanding (par 30)…………………………………………………..

Trade and environment (pars 31–33) ………………………………………………………….91
Electronic commerce (par 34)……………………………………………………………………

Small economies (par 35) ………………………………………………………………………..93
Trade, debt and finance (par 36) ……………………………………………………………….93
Trade and technology transfer (par 37) ……………………………………………………….93
Technical cooperation and capacity building (pars 38–41) …………………………………

Least-developed countries (pars 42, 43) ………………………………………………………

Special and differential treatment (par 44) ……………………………………………………95
Cancún 2003, Hong Kong 2005 …………………………………………………………………

Chapter 6 ……………………………………………………………………………………….

Developing countries ………………………………………………………………………. 97

1. Overview ……………………………………………………………………………………….97
In the agreements: more time, better terms …………………………………………………97
Legal assistance: a Secretariat service…………………………………………………………

Least-developed countries: special focus………………………………………………………98
A ‘maison’ in Geneva: being present is important, but not easy for all ………………….98

2. Committees ………………………………………………………………………………….

100

Trade and Development Committee …………………………………………………………. 100
Subcommittee on Least-Developed Countries ……………………………………………… 100
The Doha agenda committees ………………………………………………………………… 100

3. WTO technical cooperation ……………………………………………………………..

101

Training, seminars and workshops …………………………………………………………… 101

4. Some issues raised ………………………………………………………………………..

102

Participation in the system: opportunities and concerns …………………………………. 102
Erosion of preferences …………………………………………………………………………..

103

The ability to adapt: the supply-side…………………………………………………………. 103

Chapter 7 ……………………………………………………………………………………..

104

The Organization ………………………………………………………………………….. 104

1. Whose WTO is it anyway?……………………………………………………………….104
Highest authority: the Ministerial Conference………………………………………………. 104
Second level:

General Council

in three guises ………………………………………………

105

Third level: councils for each broad area of trade, and more…………………………….

107

Fourth level: down to the nitty-gritty………………………………………………………… 107
‘HODs’ and other bods: the need for informality…………………………………………… 107

2. Membership, alliances and bureaucracy ……………………………………………

109

How to join the WTO: the accession process……………………………………………….. 109
Representing us ………………………………………………………………………………….

110

Representing groups of countries … …………………………………………………………. 110
The WTO Secretariat and budget ……………………………………………………………..

111

3. The Secretariat ……………………………………………………………………………..

112

4. Special policies ……………………………………………………………………………..

113

Assisting developing and transition economies …………………………………………….. 113
Specialized help for exporting: the International Trade Centre …………………………. 113
The WTO in global economic policy-making …………………………………………………

114

Transparency (1): keeping the WTO informed …………………………………………….. 114
Transparency (2): keeping the public informed ……………………………………………. 114

Chapter 1

Basics

The WTO was born out of negotiations;

everything the WTO does is the result of

negotiations

1. What is the World Trade Organization?

Simply put: the World Trade Organization (WTO) deals with the
rules of trade between nations at a global or near-global level. But
there is more to it than that.

Is it a bird, is it a plane?

There are a number of ways of looking at the WTO. It’s an
organization for liberalizing trade. It’s a forum for governments to
negotiate trade agreements. It’s a place for them to settle trade
disputes. It operates a system of trade rules. (But it’s not
Superman, just in case anyone thought it could solve — or cause —
all the world’s problems!)

Above all, it’s a negotiating forum … Essentially, the WTO is
a place where member governments go, to try to sort out the trade
problems they face with each other. The first step is to talk. The
WTO was born out of negotiations, and everything the WTO does is
the result of negotiations. The bulk of the WTO’s current work
comes from the 1986–94 negotiations called the Uruguay Round
and earlier negotiations under the General Agreement on Tariffs and
Trade (GATT). The WTO is currently the host to new negotiations,
under the “Doha Development Agenda” launched in 2001.

Where countries have faced trade barriers and wanted them
lowered, the negotiations have helped to liberalize trade. But the
WTO is not just about liberalizing trade, and in some circumstances
its rules support maintaining trade barriers — for example to
protect consumers or prevent the spread of disease.

It’s a set of rules … At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading nations.
These documents provide the legal ground-rules for international
commerce. They are essentially contracts, binding governments to
keep their trade policies within agreed limits. Although negotiated
and signed by governments, the goal is to help producers of goods
and services, exporters, and importers conduct their business, while
allowing governments to meet social and environmental objectives.

The system’s overriding purpose is to help trade flow as freely as
possible — so long as there are no undesirable side-effects. That
partly means removing obstacles. It also means ensuring that
individuals, companies and governments know what the trade rules
are around the world, and giving them the confidence that there will
be no sudden changes of policy. In other words, the rules have to
be “transparent” and predictable.

‘Multilateral’ trading system …

… i.e. the system operated by the WTO.
Most nations — including almost all the
main trading nations — are members of
the system. But some are not, so
“multilateral” is used to describe the
system instead of “global” or “world”.

In WTO affairs, “multilateral” also
contrasts with actions taken regionally or
by other smaller groups of countries.
(This is different from the word’s use in
other areas of international relations
where, for example, a “multilateral”
security arrangement can be regional.)

… OR IS IT A TABLE?

Participants in a recent radio

discussion on the WTO were full of

ideas. The WTO should do this, the

WTO should do that, they said.

One of them finally interjected: “Wait

a minute. The WTO is a table. People

sit round the table and negotiate.

What do you expect the table to do?”

And it helps to settle disputes … This is a third important
side to the WTO’s work. Trade relations often involve conflicting
interests. Agreements, including those painstakingly negotiated in
the WTO system, often need interpreting. The most harmonious
way to settle these differences is through some neutral procedure
based on an agreed legal foundation. That is the purpose behind the
dispute settlement process written into the WTO agreements.

Born in 1995, but not so young

The WTO began life on 1 January 1995, but its trading system is
half a century older. Since 1948, the General Agreement on Tariffs
and Trade (GATT) had provided the rules for the system. (The
second WTO ministerial meeting, held in Geneva in May 1998,
included a celebration of the 50th anniversary of the system.)

It did not take long for the General Agreement to give birth to an
unofficial, de facto international organization, also known informally
as GATT. Over the years GATT evolved through several rounds of
negotiations.

The last and largest GATT round, was the Uruguay Round which
lasted from 1986 to 1994 and led to the WTO’s creation. Whereas
GATT had mainly dealt with trade in goods, the WTO and its
agreements now cover trade in services, and in traded inventions,
creations and designs (intellectual property).

2. Principles of the trading system

The WTO agreements are lengthy and complex because they are
legal texts covering a wide range of activities. They deal with:
agriculture, textiles and clothing, banking, telecommunications,
government purchases, industrial standards and product safety,
food sanitation regulations, intellectual property, and much more.
But a number of simple, fundamental principles run throughout all
of these documents. These principles are the foundation of the
multilateral trading system.

A closer look at these principles:

Trade without discrimination

1. Most-favoured-nation (MFN): treating other people
equally Under the WTO agreements, countries cannot normally
discriminate between their trading partners. Grant someone a
special favour (such as a lower customs duty rate for one of their
products) and you have to do the same for all other WTO members.

This principle is known as most-favoured-nation (MFN) treatment
(see box). It is so important that it is the first article of the General
Agreement on Tariffs and Trade (GATT), which governs trade in
goods. MFN is also a priority in the General Agreement on Trade in
Services (GATS) (Article 2) and the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) (Article 4), although
in each agreement the principle is handled slightly differently.
Together, those three agreements cover all three main areas of
trade handled by the WTO.

Some exceptions are allowed. For example, countries can set up a
free trade agreement that applies only to goods traded within the
group — discriminating against goods from outside. Or they can
give developing countries special access to their markets. Or a
country can raise barriers against products that are considered to
be traded unfairly from specific countries. And in services, countries
are allowed, in limited circumstances, to discriminate. But the
agreements only permit these exceptions under strict conditions. In
general, MFN means that every time a country lowers a trade barrier or
opens up a market, it has to do so for the same goods or services from
all its trading partners — whether rich or poor, weak or strong.

2. National treatment: Treating foreigners and locals
equally Imported and locally-produced goods should be treated
equally — at least after the foreign goods have entered the market.
The same should apply to foreign and domestic services, and to
foreign and local trademarks, copyrights and patents. This principle
of “national treatment” (giving others the same treatment as one’s
own nationals) is also found in all the three main WTO agreements
(Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS),
although once again the principle is handled slightly differently in
each of these.

National treatment only applies once a product, service or item of
intellectual property has entered the market. Therefore, charging
customs duty on an import is not a violation of national treatment
even if locally-produced products are not charged an equivalent tax.

Why ‘most-favoured’?

This sounds like a contradiction. It
suggests special treatment, but in the
WTO it actually means non-discrimination
— treating virtually everyone equally.

This is what happens. Each member
treats all the other members equally as
“most-favoured” trading partners. If a
country improves the benefits that it
gives to one trading partner, it has to
give the same “best” treatment to all the
other WTO members so that they all
remain “most-favoured”.

Most-favoured nation (MFN) status did
not always mean equal treatment. The
first bilateral MFN treaties set up
exclusive clubs among a country’s “most-
favoured” trading partners. Under GATT
and now the WTO, the MFN club is no
longer exclusive. The MFN principle
ensures that each country treats its over-
140 fellow-members equally.

But there are some exceptions …

The principles

The trading system should be …

• without discrimination — a country
should not discriminate between its
trading partners (giving them equally
“most-favoured-nation” or MFN status);
and it should not discriminate between its
own and foreign products, services or
nationals (giving them “national
treatment”);

• freer — barriers coming down through
negotiation;

• predictable — foreign companies,
investors and governments should be
confident that trade barriers (including
tariffs and non-tariff barriers) should not
be raised arbitrarily; tariff rates and
market-opening commitments are
“bound” in the WTO;

• more competitive — discouraging
“unfair” practices such as export subsidies
and dumping products at below cost to
gain market share;

• more beneficial for less developed
countries — giving them more time to
adjust, greater flexibility, and special
privileges.

Freer trade: gradually, through negotiation

Lowering trade barriers is one of the most obvious means of
encouraging trade. The barriers concerned include customs duties
(or tariffs) and measures such as import bans or quotas that restrict
quantities selectively. From time to time other issues such as red
tape and exchange rate policies have also been discussed.

Since GATT’s creation in 1947–48 there have been eight rounds of
trade negotiations. A ninth round, under the Doha Development
Agenda, is now underway. At first these focused on lowering tariffs
(customs duties) on imported goods. As a result of the negotiations,
by the mid-1990s industrial countries’ tariff rates on industrial
goods had fallen steadily to less than 4%.

But by the 1980s, the negotiations had expanded to cover non-tariff
barriers on goods, and to the new areas such as services and
intellectual property.

Opening markets can be beneficial, but it also requires adjustment.
The WTO agreements allow countries to introduce changes
gradually, through “progressive liberalization”.

Developing countries

are usually given longer to fulfil their obligations.

Predictability: through binding and transparency

Sometimes, promising not to raise a trade barrier can be as
important as lowering one, because the promise gives businesses a
clearer view of their future opportunities. With stability and
predictability, investment is encouraged, jobs are created and
consumers can fully enjoy the benefits of competition — choice and
lower prices. The multilateral trading system is an attempt by
governments to make the business environment stable and
predictable.

In the WTO, when countries agree to open their markets for goods
or services, they “bind” their commitments. For goods, these
bindings amount to ceilings on customs tariff rates. Sometimes
countries tax imports at rates that are lower than the bound rates.
Frequently this is the case in developing countries. In developed
countries the rates actually charged and the bound rates tend to be
the same.

A country can change its bindings, but only after negotiating with its
trading partners, which could mean compensating them for loss of
trade. One of the achievements of the Uruguay Round of
multilateral trade talks was to increase the amount of trade under
binding commitments (see table). In agriculture, 100% of products
now have bound tariffs. The result of all this: a substantially higher
degree of market security for traders and investors.

The system tries to improve predictability and stability in other
ways as well. One way is to discourage the use of quotas and other
measures used to set limits on quantities of imports —
administering quotas can lead to more red-tape and accusations of
unfair play. Another is to make countries’ trade rules as clear and
public (“transparent”) as possible. Many WTO agreements require
governments to disclose their policies and practices publicly within
the country or by notifying the WTO. The regular surveillance of

national trade policies through the Trade Policy Review Mechanism
provides a further means of encouraging transparency both
domestically and at the multilateral level.

Promoting fair competition

The WTO is sometimes described as a “free trade” institution, but
that is not entirely accurate. The system does allow tariffs and, in
limited circumstances, other forms of protection. More accurately, it
is a system of rules dedicated to open, fair and undistorted
competition.

The rules on non-discrimination — MFN and national treatment —
are designed to secure fair conditions of trade. So too are those on
dumping (exporting at below cost to gain market share) and
subsidies. The issues are complex, and the rules try to establish
what is fair or unfair, and how governments can respond, in
particular by charging additional import duties calculated to
compensate for damage caused by unfair trade.

Many of the other WTO agreements aim to support fair competition:
in agriculture, intellectual property, services, for example. The
agreement on government procurement (a “plurilateral” agreement
because it is signed by only a few WTO members) extends
competition rules to purchases by thousands of government entities
in many countries. And so on.

Encouraging development and economic reform

The WTO system contributes to development. On the other hand,
developing countries need flexibility in the time they take to
implement the system’s agreements. And the agreements
themselves inherit the earlier provisions of GATT that allow for
special assistance and trade concessions for developing countries.

Over three quarters of WTO members are developing countries and
countries in transition to market economies. During the seven and a
half years of the Uruguay Round, over 60 of these countries
implemented trade liberalization programmes autonomously. At the
same time, developing countries and transition economies were
much more active and influential in the Uruguay Round negotiations
than in any previous round, and they are even more so in the
current Doha Development Agenda.

At the end of the Uruguay Round, developing countries were
prepared to take on most of the obligations that are required of
developed countries. But the agreements did give them transition
periods to adjust to the more unfamiliar and, perhaps, difficult WTO
provisions — particularly so for the poorest, “least-developed”
countries. A ministerial decision adopted at the end of the round
says better-off countries should accelerate implementing market
access commitments on goods exported by the least-developed
countries, and it seeks increased technical assistance for them.
More recently, developed countries have started to allow duty-free
and quota-free imports for almost all products from least-developed
countries. On all of this, the WTO and its members are still going
through a learning process. The current Doha Development Agenda
includes developing countries’ concerns about the difficulties they
face in implementing the Uruguay Round agreements.

The Uruguay Round
increased bindings

Percentages of tariffs bound before and
after the 1986–94 talks

Before After
Developed countries 78

Developing countries 21 73
Transition economies 73 98

(These are tariff lines, so percentages are
not weighted according to trade volume
or value)

3. The case for open trade

The economic case for an open trading system based on
multilaterally agreed rules is simple enough and rests largely on
commercial common sense. But it is also supported by evidence:
the experience of world trade and economic growth since the
Second World War. Tariffs on industrial products have fallen steeply
and now average less than 5% in industrial countries. During the
first 25 years after the war, world economic growth averaged about
5% per year, a high rate that was partly the result of lower trade
barriers. World trade grew even faster, averaging about 8% during
the period.

The data show a definite statistical link between freer trade and
economic growth. Economic theory points to strong reasons for the
link. All countries, including the poorest, have assets — human,
industrial, natural, financial — which they can employ to produce
goods and services for their domestic markets or to compete
overseas. Economics tells us that we can benefit when these goods
and services are traded. Simply put, the principle of “comparative
advantage” says that countries prosper first by taking advantage of
their assets in order to concentrate on what they can produce best,
and then by trading these products for products that other countries
produce best.

In other words, liberal trade policies — policies that allow the
unrestricted flow of goods and services — sharpen competition,
motivate innovation and breed success. They multiply the rewards
that result from producing the best products, with the best design,
at the best price.

But success in trade is not static. The ability to compete well in
particular products can shift from company to company when the
market changes or new technologies make cheaper and better
products possible. Producers are encouraged to adapt gradually and
in a relatively painless way. They can focus on new products, find a
new “niche” in their current area or expand into new areas.

Experience shows that competitiveness can also shift between
whole countries. A country that may have enjoyed an advantage
because of lower labour costs or because it had good supplies of
some natural resources, could also become uncompetitive in some
goods or services as its economy develops. However, with the
stimulus of an open economy, the country can move on to become
competitive in some other goods or services. This is normally a
gradual process.

Nevertheless, the temptation to ward off the challenge of
competitive imports is always present. And richer governments are
more likely to yield to the siren call of protectionism, for short term
political gain — through subsidies, complicated red tape, and hiding
behind legitimate policy objectives such as environmental
preservation or consumer protection as an excuse to protect
producers.

Protection ultimately leads to bloated, inefficient producers
supplying consumers with outdated, unattractive products. In the
end, factories close and jobs are lost despite the protection and
subsidies. If other governments around the world pursue the same
policies, markets contract and world economic activity is reduced.
One of the objectives that governments bring to WTO negotiations
is to prevent such a self-defeating and destructive drift into
protectionism.

TRUE AND NON-TRIVIAL?

Nobel laureate Paul Samuelson was

once challenged by the

mathematician Stanislaw Ulam to

“name me one proposition in all of

the social sciences which is both true

and non-trivial.”

Samuelson’s answer? Comparative

advantage.

“That it is logically true need not be

argued before a mathematician; that

it is not trivial is attested by the

thousands of important and

intelligent men who have never been

able to grasp the doctrine for

themselves or to believe it after it

was explained to them.”

World trade and production have
accelerated

Both trade and GDP fell in the late 1920s,
before bottoming out in 1932. After World
War II, both have risen exponentially,
most of the time with trade outpacing
GDP.
(1950 = 100. Trade and GDP: log scale)

2000

1000

200

100

1929/32 38 48 60 70 80 90 1995
50

GATT
created

WTO
created

GDP

Merchandise trade

MORE ON THE WEBSITE:
www.wto.org > resources > WTO research and analysis

Comparative advantage

This is arguably the single most
powerful insight into economics.

Suppose country A is better than
country B at making automobiles,
and country B is better than
country A at making bread. It is
obvious (the academics would say
“trivial”) that both would benefit if
A specialized in automobiles, B
specialized in bread and they
traded their products. That is a
case of absolute advantage.

But what if a country is bad at
making everything? Will trade drive
all producers out of business? The
answer, according to Ricardo, is no.
The reason is the principle of
comparative advantage.

It says, countries A and B still
stand to benefit from trading with
each other even if A is better than
B at making everything. If A is
much more superior at making
automobiles and only slightly

superior at making bread, then A
should still invest resources in
what it does best — producing
automobiles — and export the
product to B. B should still invest
in what it does best — making
bread — and export that product
to A, even if it is not as efficient
as A. Both would still benefit from
the trade. A country does not
have to be best at anything to
gain from trade. That is
comparative advantage.

The theory dates back to classical
economist David Ricardo. It is one
of the most widely accepted
among economists. It is also one
of the most misunderstood among
non-economists because it is
confused with absolute
advantage.

It is often claimed, for example,
that some countries have no
comparative advantage in
anything. That is virtually
impossible.

Think about it …

4. The GATT years: from Havana to Marrakesh

The WTO’s creation on 1 January 1995 marked the biggest reform
of international trade since after the Second World War. It also
brought to reality — in an updated form — the failed attempt in
1948 to create an International Trade Organization.

Much of the history of those 47 years was written in Geneva. But it
also traces a journey that spanned the continents, from that
hesitant start in 1948 in Havana (Cuba), via Annecy (France),
Torquay (UK), Tokyo (Japan), Punta del Este (Uruguay), Montreal
(Canada), Brussels (Belgium) and finally to Marrakesh (Morocco) in
1994. During that period, the trading system came under GATT,
salvaged from the aborted attempt to create the ITO. GATT helped
establish a strong and prosperous multilateral trading system that
became more and more liberal through rounds of trade
negotiations. But by the 1980s the system needed a thorough
overhaul. This led to the Uruguay Round, and ultimately to the
WTO.

GATT: ‘provisional’ for almost half a century

From 1948 to 1994, the General Agreement on Tariffs and Trade
(GATT) provided the rules for much of world trade and presided
over periods that saw some of the highest growth rates in
international commerce. It seemed well-established, but throughout
those 47 years, it was a provisional agreement and organization.

The original intention was to create a third institution to handle the
trade side of international economic cooperation, joining the two
“Bretton Woods” institutions, the World Bank and the International
Monetary Fund. Over 50 countries participated in negotiations to
create an International Trade Organization (ITO) as a specialized
agency of the United Nations. The draft ITO Charter was ambitious.
It extended beyond world trade disciplines, to include rules on
employment, commodity agreements, restrictive business practices,
international investment, and services. The aim was to create the
ITO at a UN Conference on Trade and Employment in Havana, Cuba
in 1947.

Meanwhile, 15 countries had begun talks in December 1945 to
reduce and bind customs tariffs. With the Second World War only
recently ended, they wanted to give an early boost to trade
liberalization, and to begin to correct the legacy of protectionist
measures which remained in place from the early 1930s.

This first round of negotiations resulted in a package of trade rules
and 45,000 tariff concessions affecting $10 billion of trade, about
one fifth of the world’s total. The group had expanded to 23 by the
time the deal was signed on 30 October 1947. The tariff concessions
came into effect by 30 June 1948 through a “Protocol of Provisional
Application”. And so the new General Agreement on Tariffs and
Trade was born, with 23 founding members (officially “contracting
parties”).

The 23 were also part of the larger group negotiating the ITO
Charter. One of the provisions of GATT says that they should accept
some of the trade rules of the draft. This, they believed, should be
done swiftly and “provisionally” in order to protect the value of the

The trade chiefs

The directors-general of GATT and WTO

• Sir Eric Wyndham White (UK) 1948–

• Olivier Long (Switzerland) 1968–80

• Arthur Dunkel (Switzerland) 1980–93

• Peter Sutherland (Ireland)
GATT 1993–94; WTO 1995

• Renato Ruggiero (Italy) 1995–

1999

• Mike Moore (New Zealand) 1999–

2002

• Supachai Panitchpakdi (Thailand) 2002–
2005

• Pascal Lamy (France) 2005–

tariff concessions they had negotiated. They spelt out how they
envisaged the relationship between GATT and the ITO Charter, but
they also allowed for the possibility that the ITO might not be
created. They were right.

The Havana conference began on 21 November 1947, less than a
month after GATT was signed. The ITO Charter was finally agreed in
Havana in March 1948, but ratification in some national legislatures
proved impossible. The most serious opposition was in the US
Congress, even though the US government had been one of the
driving forces. In 1950, the United States government announced
that it would not seek Congressional ratification of the Havana
Charter, and the ITO was effectively dead. So, the GATT became
the only multilateral instrument governing international trade from
1948 until the WTO was established in 1995.

For almost half a century, the GATT’s basic legal principles remained
much as they were in 1948. There were additions in the form of a
section on development added in the 1960s and “plurilateral”
agreements (i.e. with voluntary membership) in the 1970s, and
efforts to reduce tariffs further continued. Much of this was achieved
through a series of multilateral negotiations known as “trade
rounds” — the biggest leaps forward in international trade
liberalization have come through these rounds which were held
under GATT’s auspices.

In the early years, the 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
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. The eighth, the Uruguay Round
of 1986–94, was the last and most extensive of all. It led to the
WTO and a new set of agreements.

The GATT trade rounds

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” agreements 102
1986–1994 Geneva (Uruguay Round) Tariffs, non-tariff measures, rules, services, intellectual

property, dispute settlement, textiles, agriculture, creation of
WTO, etc

123

The Tokyo Round: a first try to reform the system

The Tokyo Round lasted from 1973 to 1979, with 102 countries
participating. It continued GATT’s efforts to progressively reduce
tariffs. The results included an average one-third cut in customs
duties in the world’s nine major industrial markets, bringing the
average tariff on industrial products down to 4.7%. The tariff
reductions, phased in over a period of eight years, involved an
element of “harmonization” — the higher the tariff, the larger the
cut, proportionally.

In other issues, the Tokyo Round had mixed results. It failed to
come to grips with the fundamental problems affecting farm trade
and also stopped short of providing a modified agreement on
“safeguards” (emergency import measures). Nevertheless, a series
of agreements on non-tariff barriers did emerge from the
negotiations, in some cases interpreting existing GATT rules, in
others breaking entirely new ground. In most cases, only a
relatively small number of (mainly industrialized) GATT members
subscribed to these agreements and arrangements. Because they
were not accepted by the full GATT membership, they were often
informally called “codes”.

They were not multilateral, but they were a beginning. Several
codes were eventually amended in the Uruguay Round and turned
into multilateral commitments accepted by all WTO members. Only
four remained “plurilateral” — those on government procurement,
bovine meat, civil aircraft and dairy products. In 1997 WTO
members agreed to terminate the bovine meat and dairy
agreements, leaving only two.

Did GATT succeed?

GATT was provisional with a limited field of action, but its success
over 47 years in promoting and securing the liberalization of much
of world trade is incontestable. Continual reductions in tariffs alone
helped spur very high rates of world trade growth during the 1950s
and 1960s — around 8% a year on average. And the momentum of
trade liberalization helped ensure that trade growth consistently
out-paced production growth throughout the GATT era, a measure
of countries’ increasing ability to trade with each other and to reap
the benefits of trade. The rush of new members during the Uruguay
Round demonstrated that the multilateral trading system was
recognized as an anchor for development and an instrument of
economic and trade reform.

But all was not well. As time passed new problems arose. The Tokyo
Round in the 1970s was an attempt to tackle some of these but its
achievements were limited. This was a sign of difficult times to
come.

GATT’s success in reducing tariffs to such a low level, combined with
a series of economic recessions in the 1970s and early 1980s, drove
governments to devise other forms of protection for sectors facing
increased foreign competition. High rates of unemployment and
constant factory closures led governments in Western Europe and
North America to seek bilateral market-sharing arrangements with
competitors and to embark on a subsidies race to maintain their
holds on agricultural trade. Both these changes undermined GATT’s
credibility and effectiveness.

The problem was not just a deteriorating trade policy environment.
By the early 1980s the General Agreement was clearly no longer as
relevant to the realities of world trade as it had been in the 1940s.
For a start, world trade had become far more complex and
important than 40 years before: the globalization of the world
economy was underway, trade in services — not covered by GATT
rules — was of major interest to more and more countries, and
international investment had expanded. The expansion of services
trade was also closely tied to further increases in world merchandise
trade. In other respects, GATT had been found wanting. For

The Tokyo Round ‘codes’

•

Subsidies and countervailing measures

— interpreting Articles 6, 16 and 23 of
GATT

• Technical barriers to trade — sometimes
called the Standards Code

• Import licensing procedures

• Government

procurement

• Customs valuation — interpreting
Article 7

• Anti-dumping — interpreting Article 6,
replacing the Kennedy Round code

• Bovine Meat Arrangement

• International Dairy Arrangement

• Trade in Civil Aircraft

instance, in agriculture, loopholes in the multilateral system were
heavily exploited, and efforts at liberalizing agricultural trade met
with little success. In the textiles and clothing sector, an exception
to GATT’s normal disciplines was negotiated in the 1960s and early
1970s, leading to the Multifibre Arrangement. Even GATT’s
institutional structure and its dispute settlement system were
causing concern.

These and other factors convinced GATT members that a new effort
to reinforce and extend the multilateral system should be
attempted. That effort resulted in the Uruguay Round, the
Marrakesh Declaration, and the creation of the WTO.

Trade rounds: progress by package

They are often lengthy — the Uruguay Round took seven and a half years — but trade
rounds can have an advantage. They offer a package approach to trade negotiations that
can sometimes be more fruitful than negotiations on a single issue.

• The size of the package can mean more benefits because participants can seek and
secure advantages across a wide range of issues.

• Agreement can be easier to reach, through trade-offs — somewhere in the package
there should be something for everyone.

This has political as well as economic implications. A government may want to make a
concession, perhaps in one sector, because of the economic benefits. But politically, it
could find the concession difficult to defend. A package would contain politically and
economically attractive benefits in other sectors that could be used as compensation.

So, reform in politically-sensitive sectors of world trade can be more feasible as part of
a global package — a good example is the agreement to reform agricultural trade in
the Uruguay Round.

• Developing countries and other less powerful participants have a greater chance of
influencing the multilateral system in a trade round than in bilateral relationships with
major trading nations.

But the size of a trade round can be both a strength and a weakness. From time to time, the
question is asked: wouldn’t it be simpler to concentrate negotiations on a single sector?
Recent history is inconclusive. At some stages, the Uruguay Round seemed so cumbersome
that it seemed impossible that all participants could agree on every subject. Then the round
did end successfully in 1993–94. This was followed by two years of failure to reach
agreement in the single-sector talks on maritime transport.

Did this mean that trade rounds were the only route to success? No. In 1997, single-sector
talks were concluded successfully in basic telecommunications, information technology
equipment and financial services.

The debate continues. Whatever the answer, the reasons are not straightforward. Perhaps
success depends on using the right type of negotiation for the particular time and context.

5. The Uruguay Round

It took seven and a half years, almost twice the original schedule.
By the end, 123 countries were taking part. It covered almost all
trade, from toothbrushes to pleasure boats, from banking to
telecommunications, from the genes of wild rice to AIDS
treatments. It was quite simply the largest trade negotiation ever,
and most probably the largest negotiation of any kind in history.

At times it seemed doomed to fail. But in the end, the Uruguay
Round brought about the biggest reform of the world’s trading
system since GATT was created at the end of the Second World
War. And yet, despite its troubled progress, the Uruguay Round did
see some early results. Within only two years, participants had
agreed on a package of cuts in import duties on tropical products —
which are mainly exported by developing countries. They had also
revised the rules for settling disputes, with some measures
implemented on the spot. And they called for regular reports on
GATT members’ trade policies, a move considered important for
making trade regimes transparent around the world.

A round to end all rounds?

The seeds of the Uruguay Round were sown in November 1982 at a
ministerial meeting of GATT members in Geneva. Although the
ministers intended to launch a major new negotiation, the
conference stalled on agriculture and was widely regarded as a
failure. In fact, the work programme that the ministers agreed
formed the basis for what was to become the Uruguay Round
negotiating agenda.

Nevertheless, it took four more years of exploring, clarifying issues
and painstaking consensus-building, before ministers agreed to
launch the new round. They did so in September 1986, in Punta del
Este, Uruguay. They eventually accepted a negotiating agenda that
covered virtually every outstanding trade policy issue. 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. It was the biggest
negotiating mandate on trade ever agreed, and the ministers gave
themselves four years to complete it.

Two years later, in December 1988, ministers met again in
Montreal, Canada, for what was supposed to be an assessment of
progress at the round’s half-way point. The purpose was to clarify
the agenda for the remaining two years, but the talks ended in a
deadlock that was not resolved until officials met more quietly in
Geneva the following April.

Despite the difficulty, during the Montreal meeting, ministers did
agree a package of early results. These included some concessions
on market access for tropical products — aimed at assisting
developing countries — as well as a streamlined dispute settlement
system, and the Trade Policy Review Mechanism which provided for
the first comprehensive, systematic and regular reviews of national
trade policies and practices of GATT members. The round was
supposed to end when ministers met once more in Brussels, in
December 1990. But they disagreed on how to reform agricultural

The 1986 agenda
The 15 original Uruguay Round
subjects

Tariffs
Non-tariff barriers
Natural resource products

Textiles and clothing

Agriculture

Tropical products
GATT articles
Tokyo Round codes
Anti-dumping
Subsidies
Intellectual property
Investment measures
Dispute settlement
The GATT system
Services

The Uruguay Round — Key dates

Sep 86 Punta del Este: launch

Dec 88 Montreal: ministerial mid-term
review

Apr 89 Geneva: mid-term review
completed

Dec 90 Brussels: “closing” ministerial
meeting ends in deadlock

Dec 91 Geneva: first draft of Final Act
completed

Nov 92

Washington

: US and EC achieve
“Blair House” breakthrough on agriculture

Jul 93 Tokyo: Quad achieve market
access breakthrough at G7 summit

Dec 93 Geneva: most negotiations end
(some market access talks remain)

Apr 94 Marrakesh: agreements signed

Jan 95 Geneva: WTO created,
agreements take effect

trade and decided to extend the talks. The Uruguay Round entered
its bleakest period.

Despite the poor political outlook, a considerable amount of
technical work continued, leading to the first draft of a final legal
agreement. This draft “Final Act” was compiled by the then GATT
director-general, Arthur Dunkel, who chaired the negotiations at
officials’ level. It was put on the table in Geneva in December 1991.
The text fulfilled every part of the Punta del Este mandate, with one
exception — it did not contain the participating countries’ lists of
commitments for cutting import duties and opening their services
markets. The draft became the basis for the final agreement.

Over the following two years, the negotiations lurched between
impending failure, to predictions of imminent success. Several
deadlines came and went. New points of major conflict emerged to
join agriculture: services, market access, anti-dumping rules, and
the proposed creation of a new institution. Differences between the
United States and European Union became central to hopes for a
final, successful conclusion.

In November 1992, the US and EU settled most of their differences
on agriculture in a deal known informally as the “Blair House
accord”. By July 1993 the “Quad” (US, EU, Japan and Canada)
announced significant progress in negotiations on tariffs and related
subjects (“market access”). It took until 15 December 1993 for
every issue to be finally resolved and for negotiations on market
access for goods and services to be concluded (although some final
touches were completed in talks on market access a few weeks
later). On 15 April 1994, the deal was signed by ministers from
most of the 123 participating governments at a meeting in
Marrakesh, Morocco.

The delay had some merits. It allowed some negotiations to
progress further than would have been possible in 1990: for
example some aspects of services and intellectual property, and the
creation of the WTO itself. But the task had been immense, and
negotiation-fatigue was felt in trade bureaucracies around the
world. The difficulty of reaching agreement on a complete package
containing almost the entire range of current trade issues led some
to conclude that a negotiation on this scale would never again be
possible. Yet, the Uruguay Round agreements contain timetables for
new negotiations on a number of topics. And by 1996, some
countries were openly calling for a new round early in the next
century. The response was mixed; but the Marrakesh agreement did
already include commitments to reopen negotiations on agriculture
and services at the turn of the century. These began in early

2000

and were incorporated into the Doha Development Agenda in late
2001.

What happened to GATT?

The WTO replaced GATT as an international organization, but the
General Agreement still exists as the WTO’s umbrella treaty for
trade in goods, updated as a result of the Uruguay Round
negotiations. Trade lawyers distinguish between GATT 1994, the
updated parts of GATT, and GATT 1947, the original agreement
which is still the heart of GATT 1994. Confusing? For most of us, it’s
enough to refer simply to “GATT”.

The post-Uruguay Round built-in agenda

Many of the Uruguay Round agreements set timetables for future
work. Part of this “built-in agenda” started almost immediately. In
some areas, it included new or further negotiations. In other areas,
it included assessments or reviews of the situation at specified
times. Some negotiations were quickly completed, notably in basic
telecommunications, financial services. (Member governments also
swiftly agreed a deal for freer trade in information technology
products, an issue outside the “built-in agenda”.)

The agenda originally built into the Uruguay Round agreements has
seen additions and modifications. A number of items are now part of
the Doha Agenda, some of them updated.

There were well over 30 items in the original built-in agenda. This is
a selection of highlights:

1996

• Maritime services: market access negotiations to end (30 June 1996,
suspended to 2000, now part of Doha Development Agenda)

• Services and environment: deadline for working party report
(ministerial conference, December 1996)

• Government procurement of services: negotiations start

1997

• Basic telecoms: negotiations end (15 February)

• Financial services: negotiations end (30 December)

• Intellectual property, creating a multilateral system of notification
and registration of geographical indications for wines: negotiations
start, now part of Doha Development Agenda

1998

• Textiles and clothing: new phase begins 1 January

• Services (emergency safeguards): results of negotiations on
emergency safeguards to take effect (by 1 January 1998, deadline
now March 2004)

• Rules of origin: Work programme on harmonization of rules of origin
to be completed (20 July 1998)

• Government procurement: further negotiations start, for improving
rules and procedures (by end of 1998)

• Dispute settlement: full review of rules and procedures (to start by
end of 1998)

1999

• Intellectual property: certain exceptions to patentability and
protection of plant varieties: review starts

2000

• Agriculture: negotiations start, now part of Doha Development
Agenda

• Services: new round of negotiations start, now part of Doha
Development Agenda

• Tariff bindings: review of definition of “principle supplier” having
negotiating rights under GATT Art 28 on modifying bindings

• Intellectual property: first of two-yearly reviews of the
implementation of the agreement

2002
• Textiles and clothing: new phase begins 1 January
2005

• Textiles and clothing: full integration into GATT and agreement
expires 1 January

Chapter 2

The agreements

The WTO is ‘rules-based’;

its rules are negotiated agreements

1. Overview: a navigational guide

The WTO agreements cover goods, services and intellectual
property. They spell out the principles of liberalization, and the
permitted exceptions. They include individual countries’
commitments to lower customs tariffs and other trade barriers, and
to open and keep open services markets. They set procedures for
settling disputes. They prescribe special treatment for developing
countries. They 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.

These agreements are often called the WTO’s trade rules, and the
WTO is often described as “rules-based”, a system based on rules.
But it’s important to remember that the rules are actually
agreements that governments negotiated.

This chapter focuses on the Uruguay Round agreements, which are
the basis of the present WTO system. Additional work is also now
underway in the WTO. This is the result of decisions taken at
Ministerial Conferences, in particular the meeting in Doha,
November 2001, when new negotiations and other work were
launched. (More on the Doha Agenda, later.)

Six-part broad outline

The table of contents of “The Results of the Uruguay Round of
Multilateral Trade Negotiations: The Legal Texts” is a daunting list of
about 60 agreements, annexes, decisions and understandings. In
fact, the agreements fall into a simple structure with six main parts:
an umbrella agreement (the Agreement Establishing the WTO);
agreements for each of the three broad areas of trade that the WTO
covers (goods, services and intellectual property); dispute
settlement; and reviews of governments’ trade policies.

The agreements for the two largest areas — goods and services —
share a common three-part outline, even though the detail is
sometimes quite different.

• They start with broad principles: the General Agreement on
Tariffs and Trade (GATT) (for goods), and the General
Agreement on Trade in Services (GATS). (The third area, Trade-
Related Aspects of Intellectual Property Rights (TRIPS), also falls
into this category although at present it has no additional parts.)

• Then come extra agreements and annexes dealing with the
special requirements of specific sectors or issues.

• Finally, there are the detailed and lengthy schedules (or lists)
of commitments made by individual countries allowing specific
foreign products or service-providers access to their markets.

The ‘additional details’

These agreements and annexes deal with
the following specific sectors or issues:

For goods (under GATT)

• Agriculture
• Health regulations for farm products
(SPS)
• Textiles and clothing
• Product standards (TBT)
• Investment measures
• Anti-dumping measures
• Customs valuation methods
• Preshipment inspection
•

Rules of origin

• Import licensing
• Subsidies and counter-measures
• Safeguards

For services (the GATS annexes)

• Movement of natural persons
• Air transport
• Financial services
• Shipping
• Telecommunications

For GATT, these take the form of binding commitments on tariffs
for goods in general, and combinations of tariffs and quotas for
some agricultural goods. For GATS, the commitments state how
much access foreign service providers are allowed for specific
sectors, and they include lists of types of services where
individual countries say they are not applying the “most-
favoured-nation” principle of non-discrimination.

Underpinning these are dispute settlement, which is based on the
agreements and commitments, and trade policy reviews, an
exercise in transparency.

Much of the Uruguay Round dealt with the first two parts: general
principles and principles for specific sectors. At the same time,
market access negotiations were possible for industrial goods. Once
the principles had been worked out, negotiations could proceed on
the commitments for sectors such as agriculture and services.

In a nutshell

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

Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPS

Additional details Other goods
agreements and
annexes

Services annexes

Market access
commitments

Countries’ schedules
of commitments

Countries’ schedules
of commitments
(and MFN
exemptions)

Dispute settlement DISPUTE SETTLEMENT

Transparency TRADE POLICY REVIEWS

Additional agreements

Another group of agreements not included in the diagram is also
important: the two “plurilateral” agreements not signed by all
members: civil aircraft and government procurement.

Further changes on the horizon, the Doha Agenda

These agreements are not static; they are renegotiated from time
to time and new agreements can be added to the package. Many
are now being negotiated under the Doha Development Agenda,
launched by WTO trade ministers in Doha, Qatar, in
November 2001.

2. Tariffs: more bindings and closer to zero

The bulkiest results of Uruguay Round are the 22,500 pages listing
individual countries’ commitments on specific categories of goods
and services. These include commitments to cut and “bind” their
customs duty rates on imports of goods. In some cases, tariffs are
being cut to zero. There is also a significant increase in the number
of “bound” tariffs — duty rates that are committed in the WTO and
are difficult to raise.

ON THE WEBSITE:
www.wto.org > trade topics > goods > goods schedules

www.wto.org > trade topics > services > services schedules

Tariff cuts

Developed countries’ tariff cuts were for the most
part phased in over five years from 1 January 1995.
The result is a 40% cut in their tariffs on industrial
products, from an average of 6.3% to 3.8%. The
value of imported industrial products that receive
duty-free treatment in developed countries will jump
from 20% to 44%.

There will also be fewer products charged high duty
rates. The proportion of imports into developed
countries from all sources facing tariffs rates of more
than 15% will decline from 7% to 5%. The
proportion of developing country exports facing
tariffs above 15% in industrial countries will fall from
9% to 5%.

The Uruguay Round package has been improved. On
26 March 1997, 40 countries accounting for more
than 92% of world trade in information technology
products, agreed to eliminate import duties and
other charges on these products by 2000 (by 2005 in
a handful of cases). As with other tariff
commitments, each participating country is applying
its commitments equally to exports from all WTO
members (i.e. on a most-favoured-nation basis),
even from members that did not make
commitments.

More bindings

Developed countries increased the number of imports whose tariff
rates are “bound” (committed and difficult to increase) from 78% of
product lines to 99%. For developing countries, the increase was
considerable: from 21% to 73%. Economies in transition from
central planning increased their bindings from 73% to 98%. This all
means a substantially higher degree of market security for traders
and investors.

ON THE WEBSITE:
www.wto.org > trade topics > market access

‘Binding’ tariffs

The market access schedules are not
simply announcements of tariff rates.
They represent commitments not to
increase tariffs above the listed rates —
the rates are “bound”. For developed
countries, the bound rates are generally
the rates actually charged. Most
developing countries have bound the
rates somewhat higher than the actual
rates charged, so the bound rates serve
as ceilings.

Countries can break a commitment (i.e.
raise a tariff above the bound rate), but
only with difficulty. To do so they have to
negotiate with the countries most
concerned and that could result in
compensation for trading partners’ loss of
trade.

What is this
agreement called?
There is no legally
binding agreement
that sets out the
targets for tariff
reductions (e.g. by
what percentage they
were to be cut as a
result of the Uruguay
Round).

Instead, individual
countries listed their
commitments in
schedules annexed to
Marrakesh Protocol to
the General
Agreement on Tariffs
and Trade 1994. This
is the legally binding
agreement for the
reduced tariff rates.
Since then, additional
commitments were
made under the 1997
Information
Technology
Agreement.

> See also Doha Agenda negotiations

And agriculture …

Tariffs on all agricultural products are now bound. Almost all import
restrictions that did not take the form of tariffs, such as quotas,
have been converted to tariffs — a process known as “tariffication”.
This has made markets substantially more predictable for
agriculture. Previously more than 30% of agricultural produce had
faced quotas or import restrictions. The first step in “tariffication”
was to replace these restrictions with tariffs that represented about
the same level of protection. Then, over six years from 1995–2000,
these tariffs were gradually reduced (the reduction period for
developing countries ends in 2005). The market access
commitments on agriculture also eliminate previous import bans on
certain products.

In addition, the lists include countries’ commitments to reduce
domestic support and export subsidies for agricultural products.
(See section on agriculture.)

3. Agriculture: fairer markets for farmers

The original GATT did apply to agricultural trade, but it contained
loopholes. For example, it allowed countries to use some non-tariff
measures such as import quotas, and to subsidize. Agricultural
trade became highly distorted, especially with the use of export
subsidies which would not normally have been allowed for industrial
products. The Uruguay Round produced the first multilateral
agreement dedicated to the sector. It was a significant first step
towards order, fair competition and a less distorted sector. It was
implemented over a six year period (and is still being implemented
by developing countries under their 10-year period), that began in
1995. The Uruguay Round agreement included a commitment to
continue the reform through new negotiations. These were launched
in 2000, as required by the Agriculture Agreement.

> See also Doha Agenda negotiations

The Agriculture Agreement: new rules and
commitments

The objective of the Agriculture Agreement is to reform trade in
the sector and to make policies more market-oriented. This would
improve predictability and security for importing and exporting
countries alike.

The new rules and commitments apply to:

• market access — various trade
restrictions confronting imports

• domestic support — subsidies and other
programmes, including those that raise or
guarantee farmgate prices and farmers’
incomes

• export subsidies and other methods
used to make exports artificially
competitive.

The agreement does allow governments to
support their rural economies, but preferably
through policies that cause less distortion to
trade. It also allows some flexibility in the
way commitments are implemented.
Developing countries do not have to cut their
subsidies or lower their tariffs as much as
developed countries, and they are given extra
time to complete their obligations. Least-
developed countries don’t have to do this at
all. Special provisions deal with the interests
of countries that rely on imports for their food
supplies, and the concerns of least-developed
economies.

“Peace” provisions within the agreement aim
to reduce the likelihood of disputes or
challenges on agricultural subsidies over a
period of nine years, until the end of 2003.

What is ‘distortion’?

This a key issue. Trade is distorted if
prices are higher or lower than normal,
and if quantities produced, bought, and
sold are also higher or lower than normal
— i.e. than the levels that would usually
exist in a competitive market.

For example, import barriers and
domestic subsidies can make crops more
expensive on a country’s internal market.
The higher prices can encourage over-
production. If the surplus is to be sold on
world markets, where prices are lower,
then export subsidies are needed. As a
result, the subsidizing countries can be
producing and exporting considerably
more than they normally would.

Governments usually give three reasons
for supporting and protecting their
farmers, even if this distorts agricultural
trade:

• to make sure that enough food is
produced to meet the country’s needs

• to shield farmers from the effects of the
weather and swings in world prices

• to preserve rural society.

But the policies have often been
expensive, and they have created gluts
leading to export subsidy wars. Countries
with less money for subsidies have
suffered. The debate in the negotiations is
whether these objectives can be met
without distorting trade.

What is this
agreement called?
Most provisions:
Agreement on
Agriculture.

Commitments on
tariffs, tariff quotas,
domestic supports,
export subsidies: in
schedules annexed to
the Marrakesh
Protocol to the
General Agreement on
Tariffs and Trade
1994.

Also: [Ministerial]
Decision on Measures
Concerning the
Possible Negative
Effects of the Reform
Programme on Least-
Developed and Net
Food-Importing
Developing Countries.

(See also: “Modalities
for the

establishment

of specific binding
commitments under
the reform
programme”,
MTN.GNG/MA/W/24.)

A tariff-quota

This is what a tariff-quota might look like

Charged

10%

Charged

80%

Quota limit

1,000 tons Import quantity

Tariff rate

80%
10%

Out-of-quota

In-quota

Imports entering under the tariff-quota (up to 1,000 tons)
are generally charged 10%. Imports entering outside the
tariff-quota are charged 80%. Under the Uruguay Round
agreement, the 1,000 tons would be based on actual
imports in the base period or an agreed “minimum access”
formula.

Tariff quotas are also called “tariff-rate quotas”.

Numerical targets for agriculture

The reductions in agricultural subsidies and protection
agreed in the Uruguay Round. Only the figures for cutting
export subsidies appear in the agreement.

Developed
countries

6 years:
1995–2000

Developing
countries
10 years:

1995–2004

Tariffs

average cut for all
agricultural products

–36% –24%

minimum cut per product –15% –10%

Domestic support

total AMS cuts for sector
(base period: 1986–88)

–20% –13%

Exports

value of subsidies –36% –24%

subsidized quantities
(base period: 1986–90)

–21% –14%

Least developed countries do not have to make
commitments to reduce tariffs or subsidies.

The base level for tariff cuts was the bound rate before
1 January 1995; or, for unbound tariffs, the actual rate
charged in September 1986 when the Uruguay Round
began.

The other figures were targets used to calculate countries’
legally-binding “schedules” of commitments.

Market access: ‘tariffs only’, please

The new rule for market access in agricultural products
is “tariffs only”. Before the Uruguay Round, some
agricultural imports were restricted by quotas and other
non-tariff measures. These have been replaced by tariffs
that provide more-or-less equivalent levels of protection
— if the previous policy meant domestic prices were
75% higher than world prices, then the new tariff could
be around 75%. (Converting the quotas and other types
of measures to tariffs in this way was called
“tariffication”.)

The tariffication package contained more. It ensured that
quantities imported before the agreement took effect could
continue to be imported, and it guaranteed that some new
quantities were charged duty rates that were not
prohibitive. This was achieved by a system of “tariff-quotas”
— lower tariff rates for specified quantities, higher
(sometimes much higher) rates for quantities that exceed
the quota.

The newly committed tariffs and tariff quotas, covering
all agricultural products, took effect in 1995. Uruguay
Round participants agreed that developed countries
would cut the tariffs (the higher out-of-quota rates in the
case of tariff-quotas) by an average of 36%, in equal
steps over six years. Developing countries would make
24% cuts over 10 years. Several developing countries
also used the option of offering ceiling tariff rates in
cases where duties were not “bound” (i.e. committed
under GATT or WTO regulations) before the Uruguay
Round. Least-developed countries do not have to cut
their tariffs. (These figures do not actually appear in the
Agriculture Agreement. Participants used them to
prepare their schedules — i.e. lists of commitments. It is
the commitments listed in the schedules that are legally
binding.)

For products whose non-tariff restrictions have been
converted to tariffs, governments are allowed to take
special emergency actions (“special safeguards”) in
order to prevent swiftly falling prices or surges in
imports from hurting their farmers. But the agreement
specifies when and how those emergency actions can be
introduced (for example, they cannot be used on imports
within a tariff-quota).

Four countries used “special treatment” provisions to
restrict imports of particularly sensitive products (mainly
rice) during the implementation period (to 2000 for
developed countries, to 2004 for developing nations),
but subject to strictly defined conditions, including
minimum access for overseas suppliers. The four were:
Japan, Rep. of Korea, and the Philippines for rice; and
Israel for sheepmeat, wholemilk powder and certain
cheeses. Japan and Israel have now given up this right, but Rep. of
Korea and the Philippines have extended their special treatment for
rice. A new member, Chinese Taipei, gave special treatment to rice
in its first year of membership, 2002.

Domestic support: some you can, some you can’t

The main complaint about policies which support domestic prices, or
subsidize production in some other way, is that they encourage
over-production. This squeezes out imports or leads to export
subsidies and low-priced dumping on world markets. The Agriculture
Agreement distinguishes between support programmes that
stimulate production directly, and those that are considered to have
no direct effect.

Domestic policies that do have a direct effect on production and
trade have to be cut back. WTO members calculated how much
support of this kind they were providing per year for the agricultural
sector (using calculations known as “total aggregate measurement
of support” or “Total AMS”) in the base years of 1986–88.
Developed countries agreed to reduce these figures by 20% over six
years starting in 1995. Developing countries agreed to make 13%
cuts over 10 years. Least-developed countries do not need to make
any cuts. (This category of domestic support is sometimes called
the “amber box”, a reference to the amber colour of traffic lights,
which means “slow down”.)

Measures with minimal impact on trade can be used freely — they
are in a “green box” (“green” as in traffic lights). They include
government services such as research, disease control,
infrastructure and food security. They also include payments made
directly to farmers that do not stimulate production, such as certain
forms of direct income support, assistance to help farmers
restructure agriculture, and direct payments under environmental
and regional assistance programmes.

Also permitted, are certain direct payments to farmers where the
farmers are required to limit production (sometimes called “blue
box” measures), certain government assistance programmes to
encourage agricultural and rural development in developing
countries, and other support on a small scale (“de minimis”) when
compared with the total value of the product or products supported
(5% or less in the case of developed countries and 10% or less for
developing countries).

Export subsidies: limits on spending and quantities

The Agriculture Agreement prohibits export subsidies on agricultural
products unless the subsidies are specified in a member’s lists of
commitments. Where they are listed, the agreement requires WTO
members to cut both the amount of money they spend on export
subsidies and the quantities of exports that receive subsidies.
Taking averages for 1986–90 as the base level, developed countries
agreed to cut the value of export subsidies by 36% over the six
years starting in 1995 (24% over 10 years for developing
countries). Developed countries also agreed to reduce the quantities
of subsidized exports by 21% over the six years (14% over
10 years for developing countries). Least-developed countries do
not need to make any cuts.

During the six-year implementation period, developing countries are
allowed under certain conditions to use subsidies to reduce the
costs of marketing and transporting exports.

The least-developed and those depending on food
imports

Under the Agriculture Agreement, WTO members have to reduce
their subsidized exports. But some importing countries depend on
supplies of cheap, subsidized food from the major industrialized
nations. They include some of the poorest countries, and although
their farming sectors might receive a boost from higher prices
caused by reduced export subsidies, they might need temporary
assistance to make the necessary adjustments to deal with higher
priced imports, and eventually to export. A special ministerial
decision sets out objectives, and certain measures, for the provision
of food aid and aid for agricultural development. It also refers to the
possibility of assistance from the International Monetary Fund and
the World Bank to finance commercial food imports.

ON THE WEBSITE:
www.wto.org > trade topics > goods > agriculture

4. Standards and safety

Article 20 of the

General Agreement on Tariffs and Trade (GATT)

allows governments to act on trade in order to protect human,
animal or plant life or health, provided they do not discriminate or
use this as disguised protectionism. In addition, there are two
specific WTO agreements dealing with food safety and animal and
plant health and safety, and with product standards.

Food, animal and plant products: how safe is safe?

Problem: How do you ensure that your country’s consumers are
being supplied with food that is safe to eat — “safe” by the
standards you consider appropriate? And at the same time, how can
you ensure that strict health and safety regulations are not being
used as an excuse for protecting domestic producers?

A separate agreement on food safety and animal and plant health
standards (the Sanitary and Phytosanitary Measures
Agreement or SPS) sets out the basic rules.

It allows countries to set their own standards. But it also says
regulations must be based on science. They should be applied only
to the extent necessary to protect human, animal or plant life or
health. And they should not arbitrarily or unjustifiably discriminate
between countries where identical or similar conditions prevail.

Member countries are encouraged to use international standards,
guidelines and recommendations where they exist. However,
members may use measures which result in higher standards if
there is scientific justification. They can also set higher standards
based on appropriate assessment of risks so long as the approach is
consistent, not arbitrary. And they can to some extent apply the
“precautionary principle”, a kind of “safety first” approach to deal
with scientific uncertainty. Article 5.7 of the SPS Agreement allows
temporary “precautionary” measures.

The agreement still allows countries to use different standards and
different methods of inspecting products. So how can an exporting
country be sure the practices it applies to its products are
acceptable in an importing country? If an exporting country can
demonstrate that the measures it applies to its exports achieve the
same level of health protection as in the importing country, then the
importing country is expected to accept the exporting country’s
standards and methods.

The agreement includes provisions on control, inspection and
approval procedures. Governments must provide advance notice of
new or changed sanitary and phytosanitary regulations, and
establish a national enquiry point to provide information. The
agreement complements that on technical barriers to trade.

ON THE WEBSITE:
www.wto.org > trade topics > goods > sanitary and

phytosanitary measures

Whose international standards?

An annex to the Sanitary and
Phytosanitary Measures Agreement
names:

• the FAO/WHO Codex Alimentarius
Commission: for food

• the International Animal Health
Organization (Office International des
Epizooties): for animal health

• the FAO’s Secretariat of the
International Plant Protection Convention:
for plant health.

Governments can add any other
international organizations or agreements
whose membership is open to all WTO
members.

Technical regulations and standards

Technical regulations and industrial standards are important, but
they vary from country to country. Having too many different
standards makes life difficult for producers and exporters. If the
standards are set arbitrarily, they could be used as an excuse for
protectionism. Standards can become obstacles to trade.

The Technical Barriers to Trade Agreement (TBT) tries to
ensure that regulations, standards, testing and certification
procedures do not create unnecessary obstacles.

The agreement recognizes countries’ rights to adopt the standards
they consider appropriate — for example, for human, animal or
plant life or health, for the protection of the environment or to meet
other consumer interests. Moreover, members are not prevented
from taking measures necessary to ensure their standards are met.
In order to prevent too much diversity, the agreement encourages
countries to use international standards where these are
appropriate, but it does not require them to change their levels of
protection as a result.

The agreement sets out a code of good practice for the preparation,
adoption and application of standards by central government
bodies. It also includes provisions describing how local government
and non-governmental bodies should apply their own regulations —
normally they should use the same principles as apply to central
governments.

The agreement says the procedures used to decide whether a
product conforms with national standards have to be fair and
equitable. It discourages any methods that would give domestically
produced goods an unfair advantage. The agreement also
encourages countries to recognize each other’s testing procedures.
That way, a product can be assessed to see if it meets the importing
country’s standards through testing in the country where it is made.

Manufacturers and exporters need to know what the latest
standards are in their prospective markets. To help ensure that this
information is made available conveniently, all WTO member
governments are required to establish national enquiry points.

ON THE WEBSITE:
www.wto.org > trade topics > goods > technical barriers to

trade

5. Textiles: back in the mainstream

Textiles, like agriculture, was one of the hardest-fought issues in
the WTO, as it was in the former GATT system. It has now
completed fundamental change under a 10-year schedule agreed in
the Uruguay Round. The system of import quotas that dominated
the trade since the early 1960s have now been phased out.

From 1974 until the end of the Uruguay Round, the trade was
governed by the Multifibre Arrangement (MFA). This was a
framework for bilateral agreements or unilateral actions that
established quotas limiting imports into countries whose domestic
industries were facing serious damage from rapidly increasing
imports.

The quotas were the most visible feature. They conflicted with
GATT’s general preference for customs tariffs instead of measures
that restrict quantities. They were also exceptions to the GATT
principle of treating all trading partners equally because they
specified how much the importing country was going to accept from
individual exporting countries.

Since 1995, the WTO’s Agreement on Textiles and Clothing
(ATC) took over from the Mulltifibre Arrangement. By
1 January 2005, the sector was fully integrated into normal GATT
rules. In particular, the quotas came to an end, and importing
countries are no longer able to discriminate between exporters. The
Agreement on Textiles and Clothing no longer exists: it’s the only
WTO agreement that had self-destruction built in.

Integration: returning products gradually to GATT
rules

Textiles and clothing products were returned to GATT rules over the
10-year period. This happened gradually, in four steps, to allow
time for both importers and exporters to adjust to the new
situation. Some of these products were previously under quotas.
Any quotas that were in place on 31 December 1994 were carried
over into the new agreement. For products that had quotas, the
result of integration into GATT was the removal of these quotas.

The agreement stated the percentage of products that had to be
brought under GATT rules at each step. If any of these products
came under quotas, then the quotas had to be removed at the same
time. The percentages were applied to the importing country’s
textiles and clothing trade levels in 1990. The agreement also said
the quantities of imports permitted under the quotas had to grow
annually, and that the rate of expansion had to increase at each
stage. How fast that expansion would be was set out in a formula
based on the growth rate that existed under the old Multifibre
Arrangement (see table).

Products brought under GATT rules at each of the first three stages
had to cover the four main types of textiles and clothing: tops and
yarns; fabrics; made-up textile products; and clothing. Any other
restrictions that did not come under the Multifibre Arrangement and
did not conform with regular WTO agreements by 1996 had to be
made to conform or be phased out by 2005.

Four steps over 10 years

The schedule for freeing textiles and garments products from import quotas (and
returning them to GATT rules), and how fast remaining quotas had to be
expanded.

The example is based on the commonly-used 6% annual expansion rate of the old
Multifibre Arrangement. In practice, the rates used under the MFA varied from
product to product.

Step Percentage of products
to be brought under

GATT (including
removal of any quotas)

How fast remaining
quotas should open
up, if 1994 rate was

Step 1: 1 Jan 1995
(to 31 Dec 1997)

16%
(minimum, taking 1990

imports as base)

6.96%
per year

Step 2: 1 Jan 1998
(to 31 Dec 2001)

17% 8.7%
per year

Step 3: 1 Jan 2002
(to 31 Dec 2004)

18% 11.05%
per year

Step 4: 1 Jan 2005
Full integration into
GATT (and final
elimination of quotas).
Agreement on Textiles
and Clothing
terminates.

49%
(maximum)

No quotas left

The actual formula for import growth under quotas was: by 0.1 x pre-1995 growth

rate in the first step; 0.25 x Step 1 growth rate in the second step; and
0.27 x Step 2 growth rate in the third step.

If further cases of damage to the industry arose during the
transition, the agreement allowed additional restrictions to be
imposed temporarily under strict conditions. These “transitional
safeguards” were not the same as the safeguard measures normally
allowed under GATT because they can be applied on imports from
specific exporting countries. But the importing country had to show
that its domestic industry was suffering serious damage or was
threatened with serious damage. And it had to show that the
damage was the result of two things: increased imports of the
product in question from all sources, and a sharp and substantial
increase from the specific exporting country. The safeguard
restriction could be implemented either by mutual agreement
following consultations, or unilaterally. It was subject to review by
the Textiles Monitoring Body.

In any system where quotas are set for individual exporting
countries, exporters might try to get around the quotas by shipping
products through third countries or making false declarations about
the products’ country of origin. The agreement included provisions
to cope with these cases.

The agreement envisaged special treatment for certain categories of
countries — for example, new market entrants, small suppliers, and
least-developed countries.

A Textiles Monitoring Body (TMB) supervised the agreement’s
implementation. It consisted of a chairman and 10 members acting
in their personal capacity. It monitored actions taken under the
agreement to ensure that they were consistent, and it reported to
the Goods Council which reviewed the operation of the agreement
before each new step of the integration process. The Textiles
Monitoring Body also dealt with disputes under the Agreement on
Textiles and Clothing. If they remained unresolved, the disputes

could be brought to the WTO’s regular Dispute Settlement Body.
When the Textiles and Clothing Agreement expired on 1 January
2005, the Textiles Monitoring Body also ceased to exist.

ON THE WEBSITE:
www.wto.org > trade topics > goods > textiles

6. Services: rules for growth and investment

The General Agreement on Trade in Services (GATS) is the first and
only set of multilateral rules governing international trade in
services. Negotiated in the Uruguay Round, it was developed in
response to the huge growth of the services economy over the past
30 years and the greater potential for trading services brought
about by the communications revolution.

Services represent the fastest growing sector of the global economy
and account for two thirds of global output, one third of global
employment and nearly 20% of global trade.

When the idea of bringing rules on services into the multilateral
trading system was floated in the early to mid 1980s, a number of
countries were sceptical and even opposed. They believed such an
agreement could undermine governments’ ability to pursue national
policy objectives and constrain their regulatory powers. The
agreement that was developed, however, allows a high degree of
flexibility, both within the framework of rules and also in terms of
the market access commitments.

GATS explained

The General Agreement on Trade in Services has three
elements: the main text containing general obligations and
disciplines; annexes dealing with rules for specific sectors; and
individual countries’ specific commitments to provide access to their
markets, including indications of where countries are temporarily
not applying the “most-favoured-nation” principle of non-
discrimination.

General obligations and disciplines

Total coverage The agreement covers all internationally-traded
services — for example, banking, telecommunications, tourism,
professional services, etc. It also defines four ways (or “modes”) of
trading services:

• services supplied from one country to another (e.g.
international telephone calls), officially known as “cross-
border supply” (in WTO jargon, “mode 1”)

• consumers or firms making use of a service in another country
(e.g. tourism), officially “consumption abroad” (“mode 2”)

• a foreign company setting up subsidiaries or branches to
provide services in another country (e.g. foreign banks setting
up operations in a country), officially “commercial presence”
(“mode 3”)

• individuals travelling from their own country to supply services
in another (e.g. fashion models or consultants), officially
“presence of natural persons” (“mode 4”)

Most-favoured-nation (MFN) treatment Favour one, favour
all. MFN means treating one’s trading partners equally on the
principle of non-discrimination. Under GATS, if a country allows
foreign competition in a sector, equal opportunities in that sector
should be given to service providers from all other WTO members.
(This applies even if the country has made no specific commitment
to provide foreign companies access to its markets under the WTO.)

Basic principles

• All services are covered by GATS

• Most-favoured-nation treatment applies
to all services, except the one-off
temporary exemptions

• National treatment applies in the areas
where commitments are made

• Transparency in regulations, inquiry
points

• Regulations have to be objective and
reasonable

• International payments: normally
unrestricted

• Individual countries’ commitments:
negotiated and bound

• Progressive liberalization: through
further negotiations

MFN applies to all services, but some special temporary exemptions
have been allowed. When GATS came into force, a number of
countries already had preferential agreements in services that they
had signed with trading partners, either bilaterally or in small
groups. WTO members felt it was necessary to maintain these
preferences temporarily. They gave themselves the right to
continue giving more favourable treatment to particular countries in
particular services activities by listing “MFN exemptions” alongside
their first sets of commitments. In order to protect the general MFN
principle, the exemptions could only be made once; nothing can be
added to the lists. They are currently being reviewed as mandated,
and will normally last no more than ten years.

Commitments on market access and national treatment
Individual countries’ commitments to open markets in specific
sectors — and how open those markets will be — are the outcome
of negotiations. The commitments appear in “schedules” that list
the sectors being opened, the extent of market access being given
in those sectors (e.g. whether there are any restrictions on foreign
ownership), and any limitations on national treatment (whether
some rights granted to local companies will not be granted to
foreign companies). So, for example, if a government commits itself
to allow foreign banks to operate in its domestic market, that is a
market-access commitment. And if the government limits the
number of licences it will issue, then that is a market-access
limitation. If it also says foreign banks are only allowed one branch
while domestic banks are allowed numerous branches, that is an
exception to the national treatment principle.

These clearly defined commitments are “bound”: like bound tariffs
for trade in goods, they can only be modified after negotiations with
affected countries. Because “unbinding” is difficult, the
commitments are virtually guaranteed conditions for foreign
exporters and importers of services and investors in the sector to do
business.

Governmental services are explicitly carved out of the agreement
and there is nothing in GATS that forces a government to privatize
service industries. In fact the word “privatize” does not even appear
in GATS. Nor does it outlaw government or even private
monopolies.

The carve-out is an explicit commitment by WTO governments to
allow publicly funded services in core areas of their responsibility.
Governmental services are defined in the agreement as those that
are not supplied commercially and do not compete with other
suppliers. These services are not subject to any GATS disciplines,
they are not covered by the negotiations, and commitments on
market access and national treatment (treating foreign and
domestic companies equally) do not apply to them.

GATS’ approach to making commitments means that members are
not obliged to do so on the whole universe of services sectors. A
government may not want to make a commitment on the level of
foreign competition in a given sector, because it considers the
sector to be a core governmental function or indeed for any other
reason. In this case, the government’s only obligations are minimal,
for example to be transparent in regulating the sector, and not to
discriminate between foreign suppliers.

Transparency GATS says governments must publish all
relevant laws and regulations, and set up enquiry points within their

bureaucracies. Foreign companies and governments can then use
these inquiry points to obtain information about regulations in any
service sector. And they have to notify the WTO of any changes in
regulations that apply to the services that come under specific
commitments.

Regulations: objective and reasonable Since domestic
regulations are the most significant means of exercising influence or
control over services trade, the agreement says

governments

should regulate services reasonably, objectively and impartially.
When a government makes an administrative decision that affects a
service, it should also provide an impartial means for reviewing the
decision (for example a tribunal).

GATS does not require any service to be deregulated. Commitments
to liberalize do not affect governments’ right to set levels of quality,
safety, or price, or to introduce regulations to pursue any other
policy objective they see fit. A commitment to national treatment,
for example, would only mean that the same regulations would
apply to foreign suppliers as to nationals. Governments naturally
retain their right to set qualification requirements for doctors or
lawyers, and to set standards to ensure consumer health and
safety.

Recognition When two (or more) governments have
agreements recognizing each other’s qualifications (for example, the
licensing or certification of service suppliers), GATS says other
members must also be given a chance to negotiate comparable
pacts. The recognition of other countries’ qualifications must not be
discriminatory, and it must not amount to protectionism in disguise.
These recognition agreements have to be notified to the WTO.

International payments and transfers Once a government
has made a commitment to open a service sector to foreign
competition, it must not normally restrict money being transferred
out of the country as payment for services supplied (“current
transactions”) in that sector. The only exception is when there are
balance-of-payments difficulties, and even then the restrictions
must be temporary and subject to other limits and conditions.

Progressive liberalization The Uruguay Round was only the
beginning. GATS requires more negotiations, which began in early
2000 and are now part of the Doha Development Agenda. The goal
is to take the liberalization process further by increasing the level of
commitments in schedules.

The annexes: services are not all the same

International trade in goods is a relatively simple idea to grasp: a
product is transported from one country to another. Trade in
services is much more diverse. Telephone companies, banks,
airlines and accountancy firms provide their services in quite
different ways. The GATS annexes reflect some of the diversity.

Movement of natural persons This annex deals with
negotiations on individuals’ rights to stay temporarily in a country
for the purpose of providing a service. It specifies that the
agreement does not apply to people seeking permanent
employment or to conditions for obtaining citizenship, permanent
residence or permanent employment.

Financial services Instability in the banking system affects the
whole economy. The financial services annex gives governments
very wide latitude to take prudential measures, such as those for
the protection of investors, depositors and insurance policy holders,
and to ensure the integrity and stability of the financial system. The
annex also excludes from the agreement services provided when a
government is exercising its authority over the financial system, for
example central banks’ services.

Telecommunications The telecommunications sector has a
dual role: it is a distinct sector of economic activity; and it is an
underlying means of supplying other economic activities (for
example electronic money transfers). The annex says governments
must ensure that foreign service suppliers are given access to the
public telecommunications networks without discrimination.

Air transport services Under this annex, traffic rights and
directly related activities are excluded from GATS’s coverage. They
are handled by other bilateral agreements. However, the annex
establishes that the GATS will apply to aircraft repair and
maintenance services, marketing of air transport services and
computer-reservation services. Members are currently reviewing the
annex.

Current work

GATS sets a heavy work programme covering a wide range of
subjects. Work on some of the subjects started in 1995, as
required, soon after GATS came into force in January 1995.
Negotiations to further liberalize international trade in services
started in 2000, along with other work involving study and review.

Negotiations (Article 19) Negotiations to further liberalize
international trade in services started in early 2000 as mandated by
GATS (Article 19).

The first phase of the negotiations ended successfully in March 2001
when members agreed on the guidelines and procedures for the
negotiations, a key element in the negotiating mandate. By
agreeing these guidelines, members set the objectives, scope and
method for the negotiations in a clear and balanced manner.

They also unequivocally endorsed some of GATS’ fundamental
principles — i.e. members’ right to regulate and to introduce new
regulations on the supply of services in pursuit of national policy
objectives; their right to specify which services they wish to open to
foreign suppliers and under which conditions; and the overarching
principle of flexibility for developing and least-developed countries.
The guidelines are therefore sensitive to public policy concerns in
important sectors such as health-care, public education and cultural
industries, while stressing the importance of liberalization in
general, and ensuring foreign service providers have effective
access to domestic markets.

The 2001 Doha Ministerial Declaration incorporated these
negotiations into the “single undertaking” of the Doha Development
Agenda Since July 2002, a process of bilateral negotiations on
market access has been underway.

Work on GATS rules (Articles 10, 13, and 15) Negotiations
started in 1995 and are continuing on the development of possible
disciplines that are not yet included in GATS: rules on emergency
safeguard measures, government procurement and subsidies. Work
so far has concentrated on safeguards. These are temporary
limitations on market access to deal with market disruption, and the
negotiations aim to set up procedures and disciplines for
governments using these. Several deadlines have been missed. The
current aim is for the results to come into effect at the same time
as those of the current services negotiations.

Work on domestic regulations (Article 4.4) Work started in
1995 to establish disciplines on domestic regulations — i.e. the
requirements foreign service suppliers have to meet in order to
operate in a market. The focus is on qualification requirements and
procedures, technical standards and licensing requirements. By
December 1998, members had agreed disciplines on domestic
regulations for the accountancy sector. Since then, members have
been engaged in developing general disciplines for all professional
services and, where necessary, additional sectoral disciplines. All
the agreed disciplines will be integrated into GATS and become
legally binding by the end of the current services negotiations.

MFN exemptions (Annex on Article 2) Work on this subject
started in 2000. When GATS came into force in 1995, members
were allowed a once-only opportunity to take an exemption from
the MFN principle of non-discrimination between a member’s trading
partners. The measure for which the exemption was taken is
described in a member’s MFN exemption list, indicating to which
member the more favourable treatment applies, and specifying its
duration. In principle, these exemptions should not last for more
than ten years. As mandated by GATS, all these exemptions are
currently being reviewed to examine whether the conditions which
created the need for these exemptions in the first place still exist.
And in any case, they are part of the current services negotiations.

Taking account of “autonomous” liberalization (Article
19) Countries that have liberalized on their own initiative since
the last multilateral negotiations want that to be taken into account
when they negotiate market access in services. The negotiating
guidelines and procedures that members agreed in March 2001 for
the GATS negotiations also call for criteria for taking this
“autonomous” or unilateral liberalization into account. These were
agreed on 6 March 2003.

Special treatment for least-developed countries
(Article 19) GATS mandates members to establish how to give
special treatment to least-developed countries during the
negotiations. (These “modalities” cover both the scope of the
special treatment, and the methods to be used.) The least-
developed countries began the discussions in March 2002. As a
result of subsequent discussions, Members agreed the modalities on
3 September 2003.

Assessment of trade in services (Article 19) Preparatory
work on this subject started in early 1999. GATS mandates that
members assess trade in services, including the GATS objective of
increasing the developing countries’ participation in services trade.
The negotiating guidelines reiterate this, requiring the negotiations
to be adjusted in response to the assessment. Members generally
acknowledge that the shortage of statistical information and other
methodological problems make it impossible to conduct an

assessment based on full data. However, they are continuing their
discussions with the assistance of several papers produced by the
Secretariat.

Air transport services At present, most of the air transport
sector — traffic rights and services directly related to traffic rights
— is excluded from GATS’ coverage. However, GATS mandates a
review by members of this situation. The purpose of the review,
which started in early 2000, is to decide whether additional air
transport services should be covered by GATS. The review could
develop into a negotiation in its own right, resulting in an
amendment of GATS itself by adding new services to its coverage
and by adding specific commitments on these new services to
national schedules.

ON THE WEBSITE:
www.wto.org > trade topics > services

> See also Doha Agenda negotiations

7. Intellectual property: protection and
enforcement

The WTO’s Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), negotiated in the 1986–94
Uruguay Round, introduced intellectual property rules into the
multilateral trading system for the first time.

Origins: into the rule-based trade system

Ideas and knowledge are an increasingly important part of trade.
Most of the value of new medicines and other high technology
products lies in the amount of invention, innovation, research,
design and testing involved. Films, music recordings, books,
computer software and on-line services are bought and sold
because of the information and creativity they contain, not usually
because of the plastic, metal or paper used to make them. Many
products that used to be traded as low-technology goods or
commodities now contain a higher proportion of invention and
design in their value — for example brandnamed clothing or new
varieties of plants.

Creators can be given the right to prevent others from using their
inventions, designs or other creations — and to use that right to
negotiate payment in return for others using them. These are
“intellectual property rights”. They take a number of forms. For
example books, paintings and films come under copyright;
inventions can be patented; brandnames and product logos can be
registered as trademarks; and so on. Governments and parliaments
have given creators these rights as an incentive to produce ideas
that will benefit society as a whole.

The extent of protection and enforcement of these rights varied
widely around the world; and as intellectual property became more
important in trade, these differences became a source of tension in
international economic relations. New internationally-agreed trade
rules for intellectual property rights were seen as a way to introduce
more order and predictability, and for disputes to be settled more
systematically.

The Uruguay Round achieved that. The WTO’s TRIPS Agreement is
an attempt to narrow the gaps in the way these rights are protected
around the world, and to bring them under common international
rules. It establishes minimum levels of protection that each
government has to give to the intellectual property of fellow WTO
members. In doing so, it strikes a balance between the long term
benefits and possible short term costs to society. Society benefits in
the long term when intellectual property protection encourages
creation and invention, especially when the period of protection
expires and the creations and inventions enter the public domain.
Governments are allowed to reduce any short term costs through
various exceptions, for example to tackle public health problems.
And, when there are trade disputes over intellectual property rights,
the WTO’s dispute settlement system is now available.

The agreement covers five broad issues:

• how basic principles of the trading system and other
international intellectual property agreements should be applied

Types of intellectual property
The areas covered by the TRIPS
Agreement

• Copyright and related rights

• Trademarks, including service marks

•

Geographical indications

•

Industrial designs

•

Patents

• Layout-designs (topographies) of
integrated circuits

• Undisclosed information, including
trade secrets

• how to give adequate protection to intellectual property rights
• how countries should enforce those rights adequately in their

own territories
• how to settle disputes on intellectual property between

members of the WTO
• special transitional arrangements during the period when

the new system is being introduced.

Basic principles: national treatment, MFN, and
balanced protection

As in GATT and GATS, the starting point of the intellectual property
agreement is basic principles. And as in the two other agreements,
non-discrimination features prominently: national treatment
(treating one’s own nationals and foreigners equally), and most-
favoured-nation treatment (equal treatment for nationals of all
trading partners in the WTO). National treatment is also a key
principle in other intellectual property agreements outside the WTO.

The TRIPS Agreement has an additional important principle:
intellectual property protection should contribute to technical
innovation and the transfer of technology. Both producers and users
should benefit, and economic and social welfare should be
enhanced, the agreement says.

How to protect intellectual property: common ground-
rules

The second part of the TRIPS agreement looks at different kinds of
intellectual property rights and how to protect them. The purpose is
to ensure that adequate standards of protection exist in all member
countries. Here the starting point is the obligations of the main
international agreements of the World Intellectual Property
Organization (WIPO) that already existed before the WTO was
created:

• the Paris Convention for the Protection of Industrial Property
(patents, industrial designs, etc)

• the Berne Convention for the Protection of Literary and Artistic
Works (copyright).

Some areas are not covered by these conventions. In some cases,
the standards of protection prescribed were thought inadequate. So
the TRIPS agreement adds a significant number of new or higher
standards.

The TRIPS agreement ensures that computer programs will be
protected as literary works under the Berne Convention and outlines
how databases should be protected.

It also expands international copyright rules to cover rental rights.
Authors of computer programs and producers of sound recordings
must have the right to prohibit the commercial rental of their works
to the public. A similar exclusive right applies to films where
commercial rental has led to widespread copying, affecting
copyright-owners’ potential earnings from their films.

What’s the difference?

Copyrights, patents, trademarks, etc
apply to different types of creations or
inventions. They are also treated
differently.

Patents, industrial designs, integrated
circuit designs, geographical indications
and trademarks have to be registered in
order to receive protection. The
registration includes a description of what
is being protected — the invention,
design, brandname, logo, etc — and this
description is public information.

Copyright and trade secrets are protected
automatically according to specified
conditions. They do not have to be
registered, and therefore there is no need
to disclose, for example, how copyrighted
computer software is constructed.

Other conditions may also differ, for
example the length of time that each type
of protection remains in force.

The agreement says performers must also have the right to prevent
unauthorized recording, reproduction and broadcast of live
performances (bootlegging) for no less than 50 years. Producers of
sound recordings must have the right to prevent the unauthorized
reproduction of recordings for a period of 50 years.

Trademarks

The agreement defines what types of signs must be eligible for
protection as trademarks, and what the minimum rights conferred
on their owners must be. It says that service marks must be
protected in the same way as trademarks used for goods. Marks
that have become well-known in a particular country enjoy
additional protection.

Geographical indications

A place name is sometimes used to identify a product. This
“geographical indication” does not only say where the product was
made. More importantly, it identifies the product’s special
characteristics, which are the result of the product’s origins.

Well-known examples include “Champagne”, “Scotch”, “Tequila”,
and “Roquefort” cheese. Wine and spirits makers are particularly
concerned about the use of place-names to identify products, and
the TRIPS Agreement contains special provisions for these products.
But the issue is also important for other types of goods.

Using the place name when the product was made elsewhere or
when it does not have the usual characteristics can mislead
consumers, and it can lead to unfair competition. The TRIPS
Agreement says countries have to prevent this misuse of place
names.

For wines and spirits, the agreement provides higher levels of
protection, i.e. even where there is no danger of the public being
misled.

Some exceptions are allowed, for example if the name is already
protected as a trademark or if it has become a generic term. For
example, “cheddar” now refers to a particular type of cheese not
necessarily made in Cheddar, in the UK. But any country wanting to
make an exception for these reasons must be willing to negotiate
with the country which wants to protect the geographical indication
in question.

The agreement provides for further negotiations in the WTO to
establish a multilateral system of notification and registration of
geographical indications for wines. These are now part of the Doha
Development Agenda and they include spirits. Also debated in the
WTO is whether to negotiate extending this higher level of
protection beyond wines and spirits.

Industrial designs

Under the TRIPS Agreement, industrial designs must be protected
for at least 10 years. Owners of protected designs must be able to
prevent the manufacture, sale or importation of articles bearing or
embodying a design which is a copy of the protected design.

Patents

The agreement says patent protection must be available for
inventions for at least 20 years. Patent protection must be available
for both products and processes, in almost all fields of technology.
Governments can refuse to issue a patent for an invention if its
commercial exploitation is prohibited for reasons of public order or
morality. They can also exclude diagnostic, therapeutic and surgical
methods, plants and animals (other than microorganisms), and
biological processes for the production of plants or animals (other
than microbiological processes).

Plant varieties, however, must be protectable by patents or by a
special system (such as the breeder’s rights provided in the
conventions of UPOV — the International Union for the Protection of
New Varieties of Plants).

The agreement describes the minimum rights that a patent owner
must enjoy. But it also allows certain exceptions. A patent owner
could abuse his rights, for example by failing to supply the product
on the market. To deal with that possibility, the agreement says
governments can issue “compulsory licences”, allowing a competitor
to produce the product or use the process under licence. But this
can only be done under certain conditions aimed at safeguarding
the legitimate interests of the patent-holder.

If a patent is issued for a production process, then the rights must
extend to the product directly obtained from the process. Under
certain conditions alleged infringers may be ordered by a court to
prove that they have not used the patented process.

An issue that has arisen recently is how to ensure patent protection
for pharmaceutical products does not prevent people in poor
countries from having access to medicines — while at the same time
maintaining the patent system’s role in providing incentives for
research and development into new medicines. Flexibilities such as
compulsory licensing are written into the TRIPS Agreement, but
some governments were unsure of how these would be interpreted,
and how far their right to use them would be respected.

A large part of this was settled when WTO ministers issued a special
declaration at the Doha Ministerial Conference in November 2001.
They agreed that the TRIPS Agreement does not and should not
prevent members from taking measures to protect public health.
They underscored countries’ ability to use the flexibilities that are
built into the TRIPS Agreement. And they agreed to extend
exemptions on pharmaceutical patent protection for least-developed
countries until 2016. On one remaining question, they assigned
further work to the TRIPS Council — to sort out how to provide
extra flexibility, so that countries unable to produce
pharmaceuticals domestically can import patented drugs made
under compulsory licensing. A waiver providing this flexibility was
agreed on 30 August 2003.

Integrated circuits layout designs

The basis for protecting integrated circuit designs (“topographies”)
in the TRIPS agreement is the Washington Treaty on Intellectual
Property in Respect of Integrated Circuits, which comes under the
World Intellectual Property Organization. This was adopted in 1989
but has not yet entered into force. The TRIPS agreement adds a

number of provisions: for example, protection must be available for
at least 10 years.

Undisclosed information and trade secrets

Trade secrets and other types of “undisclosed information” which
have commercial value must be protected against breach of
confidence and other acts contrary to honest commercial practices.
But reasonable steps must have been taken to keep the information
secret. Test data submitted to governments in order to obtain
marketing approval for new pharmaceutical or agricultural
chemicals must also be protected against unfair commercial use.

Curbing anti-competitive licensing contracts

The owner of a copyright, patent or other form of intellectual
property right can issue a licence for someone else to produce or
copy the protected trademark, work, invention, design, etc. The
agreement recognizes that the terms of a licensing contract could
restrict competition or impede technology transfer. It says that
under certain conditions, governments have the right to take action
to prevent anti-competitive licensing that abuses intellectual
property rights. It also says governments must be prepared to
consult each other on controlling anti-competitive licensing.

Enforcement: tough but fair

Having intellectual property laws is not enough. They have to be
enforced. This is covered in Part 3 of TRIPS. The agreement says
governments have to ensure that intellectual property rights can be
enforced under their laws, and that the penalties for infringement
are tough enough to deter further violations. The procedures must
be fair and equitable, and not unnecessarily complicated or costly.
They should not entail unreasonable time-limits or unwarranted
delays. People involved should be able to ask a court to review an
administrative decision or to appeal a lower court’s ruling.

The agreement describes in some detail how enforcement should be
handled, including rules for obtaining evidence, provisional
measures, injunctions, damages and other penalties. It says courts
should have the right, under certain conditions, to order the
disposal or destruction of pirated or counterfeit goods. Wilful
trademark counterfeiting or copyright piracy on a commercial scale
should be criminal offences. Governments should make sure that
intellectual property rights owners can receive the assistance of
customs authorities to prevent imports of counterfeit and pirated
goods.

Technology transfer

Developing countries in particular, see technology transfer as part
of the bargain in which they have agreed to protect intellectual
property rights. The TRIPS Agreement includes a number of
provisions on this. For example, it requires developed-country
governments to provide incentives for their companies to transfer
technology to least-developed countries.

Transition arrangements: 1, 5 or 11 years or more

When the WTO agreements took effect on 1 January 1995,
developed countries were given one year to ensure that their laws
and practices conform with the TRIPS agreement. Developing
countries and (under certain conditions) transition economies were
given five years, until 2000. Least-developed countries have 11
years, until 2006 — now extended to 2016 for pharmaceutical
patents.

If a developing country did not provide product patent protection in
a particular area of technology when the TRIPS Agreement came
into force (1 January 1995), it had up to 10 years to introduce the
protection. But for pharmaceutical and agricultural chemical
products, the country had to accept the filing of patent applications
from the beginning of the transitional period, though the patent did
not need to be granted until the end of this period. If the
government allowed the relevant pharmaceutical or agricultural
chemical to be marketed during the transition period, it had to —
subject to certain conditions — provide an exclusive marketing right
for the product for five years, or until a product patent was granted,
whichever was shorter.

Subject to certain exceptions, the general rule is that obligations in
the agreement apply to intellectual property rights that existed at
the end of a country’s transition period as well as to new ones.

ON THE WEBSITE:
www.wto.org > trade topics > intellectual property

> See also Doha Development Agenda

What is this
agreement called?
Agreement on the
implementation of
Article VI [i.e 6]of the
General Agreement on
Tariffs and Trade 1994

8. Anti-dumping, subsidies, safeguards:
contingencies, etc

Binding tariffs, and applying them equally to all trading partners
(most-favoured-nation treatment, or MFN) are key to the smooth
flow of trade in goods. The WTO agreements uphold the principles,
but they also allow exceptions — in some circumstances. Three of
these issues are:

• actions taken against dumping (selling at an unfairly low price)
• subsidies and special “countervailing” duties to offset the subsidies
• emergency measures to limit imports temporarily, designed to

“safeguard” domestic industries.

Anti-dumping actions

If a company exports a product at a price lower than
the price it normally charges on its own home
market, it is said to be “dumping” the product. Is
this unfair competition? Opinions differ, but many
governments take action against dumping in order to
defend their domestic industries. The WTO
agreement does not pass judgement. Its focus is on
how governments can or cannot react to dumping — it disciplines
anti-dumping actions, and it is often called the “Anti-Dumping
Agreement”. (This focus only on the reaction to dumping contrasts
with the approach of the Subsidies and Countervailing Measures
Agreement.)

The legal definitions are more precise, but broadly speaking the
WTO agreement allows governments to act against dumping where
there is genuine (“material”) injury to the competing domestic
industry. In order to do that the government has to be able to show
that dumping is taking place, calculate the extent of dumping (how
much lower the export price is compared to the exporter’s home
market price), and show that the dumping is causing injury or
threatening to do so.

GATT (Article 6) allows countries to take action against dumping.
The Anti-Dumping Agreement clarifies and expands Article 6, and
the two operate together. They allow countries to act in a way that
would normally break the GATT principles of binding a tariff and not
discriminating between trading partners — typically anti-dumping
action means charging extra import duty on the particular product
from the particular exporting country in order to bring its price
closer to the “normal value” or to remove the injury to domestic
industry in the importing country.

There are many different ways of calculating whether a particular
product is being dumped heavily or only lightly. The agreement
narrows down the range of possible options. It provides three
methods to calculate a product’s “normal value”. The main one is
based on the price in the exporter’s domestic market. When this
cannot be used, two alternatives are available — the price charged
by the exporter in another country, or a calculation based on the
combination of the exporter’s production costs, other expenses and
normal profit margins. And the agreement also specifies how a fair
comparison can be made between the export price and what would
be a normal price.

What is this
agreement called?
Agreement on
Subsidies and
Countervailing
Measures

Calculating the extent of dumping on a product is not enough. Anti-
dumping measures can only be applied if the dumping is hurting the
industry in the importing country. Therefore, a detailed
investigation has to be conducted according to specified rules first.
The investigation must evaluate all relevant economic factors that
have a bearing on the state of the industry in question. If the
investigation shows dumping is taking place and domestic industry
is being hurt, the exporting company can undertake to raise its
price to an agreed level in order to avoid anti-dumping import duty.

Detailed procedures are set out on how anti-dumping cases are to
be initiated, how the investigations are to be conducted, and the
conditions for ensuring that all interested parties are given an
opportunity to present evidence. Anti-dumping measures must
expire five years after the date of imposition, unless an
investigation shows that ending the measure would lead to injury.

Anti-dumping investigations are to end immediately in cases where
the authorities determine that the margin of dumping is
insignificantly small (defined as less than 2% of the export price of
the product). Other conditions are also set. For example, the
investigations also have to end if the volume of dumped imports is
negligible (i.e. if the volume from one country is less than 3% of
total imports of that product — although investigations can proceed
if several countries, each supplying less than 3% of the imports,
together account for 7% or more of total imports).

The agreement says member countries must inform the Committee
on Anti-Dumping Practices about all preliminary and final anti-
dumping actions, promptly and in detail. They must also report on
all investigations twice a year. When differences arise, members are
encouraged to consult each other. They can also use the WTO’s
dispute settlement procedure.

ON THE WEBSITE:
www.wto.org > trade topics > goods > antidumping

> See also Doha Agenda negotiations
Subsidies and countervailing measures

This agreement does two things: it disciplines the use of subsidies,
and it regulates the actions countries can take to counter the effects
of subsidies. It says a country can use the WTO’s dispute settlement
procedure to seek the withdrawal of the subsidy or the removal of
its adverse effects. Or the country can launch its own investigation
and ultimately charge extra duty (known as “countervailing duty”)
on subsidized imports that are found to be hurting domestic
producers.

The agreement contains a definition of subsidy. It
also introduces the concept of a “specific” subsidy —
i.e. a subsidy available only to an enterprise,
industry, group of enterprises, or group of industries
in the country (or state, etc) that gives the subsidy.
The disciplines set out in the agreement only apply
to specific subsidies. They can be domestic or export
subsidies.

‘AD-CVD’?

People sometimes refer to the two
together — “AD-CVD” — but there are
fundamental differences

Dumping and subsidies — together with
anti-dumping (AD) measures and
countervailing duties (CVD) — share a
number of similarities. Many countries
handle the two under a single law, apply
a similar process to deal with them and
give a single authority responsibility for
investigations. Occasionally, the two WTO
committees responsible for these issues
meet jointly.

The reaction to dumping and subsidies is
often a special offsetting import tax
(countervailing duty in the case of a
subsidy). This is charged on products
from specific countries and therefore it
breaks the GATT principles of binding a
tariff and treating trading partners
equally (MFN). The agreements provide
an escape clause, but they both also say
that before imposing a duty, the
importing country must conduct a
detailed investigation that shows properly
that domestic industry is hurt.

But there are also fundamental
differences, and these are reflected in the
agreements.

Dumping is an action by a company. With
subsidies, it is the government or a
government agency that acts, either by
paying out subsidies directly or by
requiring companies to subsidize certain
customers.

But the WTO is an organization of
countries and their governments. The
WTO does not deal with companies and
cannot regulate companies’ actions such
as dumping. Therefore the Anti-Dumping
Agreement only concerns the actions
governments may take against dumping.
With subsidies, governments act on both
sides: they subsidize and they act against
each others’ subsidies. Therefore the
subsidies agreement disciplines both the
subsidies and the reactions.

The agreement defines two categories of subsidies: prohibited and
actionable. It originally contained a third category: non-actionable
subsidies. This category existed for five years, ending on
31 December 1999, and was not extended. The agreement applies
to agricultural goods as well as industrial products, except when the
subsidies are exempt under the Agriculture Agreement’s “peace
clause”, due to expire at the end of 2003.

• Prohibited subsidies: subsidies that require recipients to meet
certain export targets, or to use domestic goods instead of
imported goods. They are prohibited because they are
specifically designed to distort international trade, and are
therefore likely to hurt other countries’ trade. They can be
challenged in the WTO dispute settlement procedure where they
are handled under an accelerated timetable. If the dispute
settlement procedure confirms that the subsidy is prohibited, it
must be withdrawn immediately. Otherwise, the complaining
country can take counter measures. If domestic producers are
hurt by imports of subsidized products, countervailing duty can
be imposed.

• Actionable subsidies: in this category the complaining country
has to show that the subsidy has an adverse effect on its
interests. Otherwise the subsidy is permitted. The agreement
defines three types of damage they can cause. One country’s
subsidies can hurt a domestic industry in an importing country.
They can hurt rival exporters from another country when the two
compete in third markets. And domestic subsidies in one country
can hurt exporters trying to compete in the subsidizing country’s
domestic market. If the Dispute Settlement Body rules that the
subsidy does have an adverse effect, the subsidy must be
withdrawn or its adverse effect must be removed. Again, if
domestic producers are hurt by imports of subsidized products,
countervailing duty can be imposed.

Some of the disciplines are similar to those of the Anti-Dumping
Agreement. Countervailing duty (the parallel of anti-dumping duty)
can only be charged after the importing country has conducted a
detailed investigation similar to that required for anti-dumping
action. There are detailed rules for deciding whether a product is
being subsidized (not always an easy calculation), criteria for
determining whether imports of subsidized products are hurting
(“causing injury to”) domestic industry, procedures for initiating and
conducting investigations, and rules on the implementation and
duration (normally five years) of countervailing measures. The
subsidized exporter can also agree to raise its export prices as an
alternative to its exports being charged countervailing duty.

Subsidies may play an important role in developing countries and in
the transformation of centrally-planned economies to market
economies. Least-developed countries and developing countries
with less than $1,000 per capita GNP are exempted from disciplines
on prohibited export subsidies. Other developing countries are given
until 2003 to get rid of their export subsidies. Least-developed
countries must eliminate import-substitution subsidies (i.e.
subsidies designed to help domestic production and avoid
importing) by 2003 — for other developing countries the deadline
was 2000. Developing countries also receive preferential treatment
if their exports are subject to countervailing duty investigations. For
transition economies, prohibited subsidies had to be phased out by
2002.

ON THE WEBSITE:
www.wto.org > trade topics > goods > subsidies and

countervailing measures

What is this
agreement called?
Agreement on
Safeguards

> See also Doha Agenda negotiations

Safeguards: emergency protection from imports

A WTO member may restrict imports of a product temporarily (take
“safeguard” actions) if its domestic industry is injured or threatened
with injury caused by a surge in imports. Here, the injury has to be
serious. Safeguard measures were always available under GATT (Article
19). However, they were infrequently used, some governments
preferring to protect their domestic industries through “grey area”
measures — using bilateral negotiations outside GATT’s auspices, they
persuaded exporting countries to restrain exports “voluntarily” or to
agree to other means of sharing markets. Agreements of this kind were
reached for a wide range of products: automobiles, steel, and
semiconductors, for example.

The WTO agreement broke new ground. It prohibits “grey-area”
measures, and it sets time limits (a “sunset clause”) on all
safeguard actions. The agreement says members must not seek,
take or maintain any voluntary export restraints, orderly marketing
arrangements or any other similar measures on the export or the
import side. The bilateral measures that were not modified to
conform with the agreement were phased out at the end of 1998.
Countries were allowed to keep one of these
measures an extra year (until the end of 1999), but
only the European Union — for restrictions on
imports of cars from Japan — made use of this
provision.

An import “surge” justifying safeguard action can be a real increase
in imports (an absolute increase); or it can be an increase in the
imports’ share of a shrinking market, even if the import quantity
has not increased (relative increase).

Industries or companies may request safeguard action by their
government. The WTO agreement sets out requirements for
safeguard investigations by national authorities. The emphasis is on
transparency and on following established rules and practices —
avoiding arbitrary methods. The authorities conducting
investigations have to announce publicly when hearings are to take
place and provide other appropriate means for interested parties to
present evidence. The evidence must include arguments on whether
a measure is in the public interest.

The agreement sets out criteria for assessing whether “serious
injury” is being caused or threatened, and the factors which must
be considered in determining the impact of imports on the domestic
industry. When imposed, a safeguard measure should be applied
only to the extent necessary to prevent or remedy serious injury
and to help the industry concerned to adjust. Where quantitative
restrictions (quotas) are imposed, they normally should not reduce
the quantities of imports below the annual average for the last three
representative years for which statistics are available, unless clear
justification is given that a different level is necessary to prevent or
remedy serious injury.

In principle, safeguard measures cannot be targeted at imports
from a particular country. However, the agreement does describe
how quotas can be allocated among supplying countries, including
in the exceptional circumstance where imports from certain

countries have increased disproportionately quickly. A safeguard
measure should not last more than four years, although this can be
extended up to eight years, subject to a determination by
competent national authorities that the measure is needed and that
there is evidence the industry is adjusting. Measures imposed for
more than a year must be progressively liberalized.

When a country restricts imports in order to safeguard its domestic
producers, in principle it must give something in return. The
agreement says the exporting country (or exporting countries) can
seek compensation through consultations. If no agreement is
reached the exporting country can retaliate by taking equivalent
action — for instance, it can raise tariffs on exports from the
country that is enforcing the safeguard measure. In some
circumstances, the exporting country has to wait for three years
after the safeguard measure was introduced before it can retaliate
in this way — i.e. if the measure conforms with the provisions of the
agreement and if it is taken as a result of an increase in the
quantity of imports from the exporting country.

To some extent developing countries’ exports are shielded from
safeguard actions. An importing country can only apply a safeguard
measure to a product from a developing country if the developing
country is supplying more than 3% of the imports of that product,
or if developing country members with less than 3% import share
collectively account for more than 9% of total imports of the
product concerned.

The WTO’s Safeguards Committee oversees the operation of the
agreement and is responsible for the surveillance of members’
commitments. Governments have to report each phase of a
safeguard investigation and related decision-making, and the
committee reviews these reports.

ON THE WEBSITE:
www.wto.org > trade topics > goods > safeguards

What is this
agreement called?
Agreement on
Implementation of
Article VII (i.e. 7) of
the General
Agreement on Tariffs
and Trade 1994; and
related ministerial
decisions: “Decision
Regarding Cases
Where Customs
Administrations Have
Reasons to Doubt the
Truth or Accuracy of
the Declared Value”
and “Decisions on
Texts Relating to
Minimum Values and
Imports by Sole
Agents, Sole
Distributors and Sole
Concessionaires”.

9. Non-tariff barriers: red tape, etc

A number of agreements deal with various bureaucratic or legal
issues that could involve hindrances to trade.

• import licensing
• rules for the valuation of goods at customs
• preshipment inspection: further checks on imports
• rules of origin: made in … where?
• investment measures

Import licensing: keeping procedures clear

Although less widely used now than in the past, import licensing
systems are subject to disciplines in the WTO. The Agreement on
Import Licensing Procedures says import licensing should be
simple, transparent and predictable. For example, the agreement
requires governments to publish sufficient information for traders to
know how and why the licences are granted. It also describes how
countries should notify the WTO when they introduce new import
licensing procedures or change existing procedures. The agreement
offers guidance on how governments should assess applications for
licences.

Some licences are issued automatically if certain conditions are met.
The agreement sets criteria for automatic licensing so that the
procedures used do not restrict trade.

Other licences are not issued automatically. Here, the agreement
tries to minimize the importers’ burden in applying for licences, so
that the administrative work does not in itself restrict or distort
imports. The agreement says the agencies handling licensing should
not normally take more than 30 days to deal with an application —
60 days when all applications are considered at the same time.

ON THE WEBSITE:
www.wto.org > trade topics > goods > import licensing

Rules for the valuation of goods at
customs

For importers, the process of estimating the value of
a product at customs presents problems that can be
just as serious as the actual duty rate charged. The
WTO agreement on customs valuation aims for a
fair, uniform and neutral system for the valuation of
goods for customs purposes — a system that
conforms to commercial realities, and which outlaws
the use of arbitrary or fictitious customs values. The
agreement provides a set of valuation rules,
expanding and giving greater precision to the
provisions on customs valuation in the original
GATT.

A related Uruguay Round ministerial decision gives
customs administrations the right to request further
information in cases where they have reason to
doubt the accuracy of the declared value of imported

goods. If the administration maintains a reasonable doubt, despite
any additional information, it may be deemed that the customs
value of the imported goods cannot be determined on the basis of
the declared value.

ON THE WEBSITE:
www.wto.org > trade topics > goods > customs valuation

Preshipment inspection: a further check on imports

Preshipment inspection is the practice of employing specialized
private companies (or “independent entities”) to check shipment
details — essentially price, quantity and quality — of goods ordered
overseas. Used by governments of developing countries, the
purpose is to safeguard national financial interests (preventing
capital flight, commercial fraud, and customs duty evasion, for
instance) and to compensate for inadequacies in administrative
infrastructures.

The Preshipment Inspection Agreement recognizes that GATT
principles and obligations apply to the activities of preshipment
inspection agencies mandated by governments. The obligations
placed on governments which use preshipment inspections include
non-discrimination, transparency, protection of confidential business
information, avoiding unreasonable delay, the use of specific
guidelines for conducting price verification and avoiding conflicts of
interest by the inspection agencies. The obligations of exporting
members towards countries using preshipment inspection include
non-discrimination in the application of domestic laws and
regulations, prompt publication of those laws and regulations and
the provision of technical assistance where requested.

The agreement establishes an independent review procedure. This
is administered jointly by the International Federation of Inspection
Agencies (IFIA), representing inspection agencies, and the
International Chamber of Commerce (ICC), representing exporters.
Its purpose is to resolve disputes between an exporter and an
inspection agency.

Rules of origin: made in … where?

“Rules of origin” are the criteria used to define where a product was
made. They are an essential part of trade rules because a number
of policies discriminate between exporting countries: quotas,
preferential tariffs, anti-dumping actions, countervailing duty
(charged to counter export subsidies), and more. Rules of origin are
also used to compile trade statistics, and for “made in …” labels
that are attached to products. This is complicated by globalization
and the way a product can be processed in several countries before
it is ready for the market.

The Rules of Origin Agreement requires WTO members to ensure
that their rules of origin are transparent; that they do not have
restricting, distorting or disruptive effects on international trade;
that they are administered in a consistent, uniform, impartial and
reasonable manner; and that they are based on a positive standard
(in other words, they should state what does confer origin rather
than what does not).

For the longer term, the agreement aims for common
(“harmonized”) rules of origin among all WTO members, except in
some kinds of preferential trade — for example, countries setting up
a free trade area are allowed to use different rules of origin for
products traded under their free trade agreement. The agreement
establishes a harmonization work programme, based upon a set of
principles, including making rules of origin objective,
understandable and predictable. The work was due to end in
July 1998, but several deadlines have been missed. It is being
conducted by a Committee on Rules of Origin in the WTO and a
Technical Committee under the auspices of the World Customs
Organization in Brussels. The outcome will be a single set of rules of
origin to be applied under non-preferential trading conditions by all
WTO members in all circumstances.

An annex to the agreement sets out a “common declaration” dealing
with the operation of rules of origin on goods which qualify for
preferential treatment.

ON THE WEBSITE:
www.wto.org > trade topics > goods > rules of origin

Investment measures: reducing trade distortions

The Trade-Related Investment Measures (TRIMs) Agreement
applies only to measures that affect trade in goods. It recognizes
that certain measures can restrict and distort trade, and states that
no member shall apply any measure that discriminates against
foreigners or foreign products (i.e. violates “national treatment”
principles in GATT). It also outlaws investment measures that lead
to restrictions in quantities (violating another principle in GATT). An
illustrative list of TRIMs agreed to be inconsistent with these GATT
articles is appended to the agreement. The list includes measures
which require particular levels of local procurement by an enterprise
(“local content requirements”). It also discourages measures which
limit a company’s imports or set targets for the company to export
(“trade balancing requirements”).

Under the agreement, countries must inform fellow-members
through the WTO of all investment measures that do not conform
with the agreement. Developed countries had to eliminate these in
two years (by the end of 1996); developing countries had five years
(to the end of 1999); and least-developed countries seven. In
July 2001, the Goods Council agreed to extend this transition period
for a number of requesting developing countries.

The agreement establishes a Committee on TRIMs to monitor the
implementation of these commitments. The agreement also says
that WTO members should consider, by 1 January 2000, whether
there should also be provisions on investment policy and
competition policy. This discussion is now part of the Doha
Development Agenda.

ON THE WEBSITE:
www.wto.org > trade topics > investment

10. Plurilaterals: of minority interest

For the most part, all WTO members subscribe to all WTO
agreements. After the Uruguay Round, however, there remained
four agreements, originally negotiated in the Tokyo Round, which
had a narrower group of signatories and are known as “plurilateral
agreements”. All other Tokyo Round agreements became
multilateral obligations (i.e. obligations for all WTO members) when
the World Trade Organization was established in 1995. The four
were:

• trade in civil aircraft
• government procurement
• dairy products
• bovine meat.

The bovine meat and dairy agreements were terminated in 1997.

Fair trade in civil aircraft

The Agreement on Trade in Civil Aircraft entered into force on
1 January 1980. It now has 30 signatories. The agreement
eliminates import duties on all aircraft, other than military aircraft,
as well as on all other products covered by the agreement — civil
aircraft engines and their parts and components, all components
and sub-assemblies of civil aircraft, and flight simulators and their
parts and components. It contains disciplines on government-
directed procurement of civil aircraft and inducements to purchase,
as well as on government financial support for the civil aircraft
sector.

ON THE WEBSITE:
www.wto.org > trade topics > goods > civil aircraft

Government procurement: opening up for competition

In most countries the government, and the agencies it controls, are
together the biggest purchasers of goods of all kinds, ranging from
basic commodities to high-technology equipment. At the same time,
the political pressure to favour domestic suppliers over their foreign
competitors can be very strong.

An Agreement on Government Procurement was first
negotiated during the Tokyo Round and entered into force on 1
January 1981. Its purpose is to open up as much of this business as
possible to international competition. It is designed to make laws,
regulations, procedures and practices regarding government
procurement more transparent and to ensure they do not protect
domestic products or suppliers, or discriminate against foreign
products or suppliers.

The agreement has 28 members. It has two elements — general
rules and obligations, and schedules of national entities in each
member country whose procurement is subject to the agreement. A
large part of the general rules and obligations concern tendering
procedures.

The present agreement and commitments were negotiated in the
Uruguay Round. These negotiations achieved a 10-fold expansion of
coverage, extending international competition to include national
and local government entities whose collective purchases are worth
several hundred billion dollars each year. The new agreement also
extends coverage to services (including construction services),
procurement at the sub-central level (for example, states,
provinces, departments and prefectures), and procurement by
public utilities. The new agreement took effect on 1 January 1996.

It also reinforces rules guaranteeing fair and non-discriminatory
conditions of international competition. For example, governments
will be required to put in place domestic procedures by which
aggrieved private bidders can challenge procurement decisions and
obtain redress in the event such decisions were made inconsistently
with the rules of the agreement.

The agreement applies to contracts worth more than specified
threshold values. For central government purchases of goods and
services, the threshold is SDR 130,000 (some $185,000 in June
2003). For purchases of goods and services by sub-central
government entities the threshold varies but is generally in the
region of SDR 200,000. For utilities, thresholds for goods and
services is generally in the area of SDR 400,000 and for
construction contracts, in general the threshold value is
SDR 5,000,000.

ON THE WEBSITE:
www.wto.org > trade topics > goods > government

procurement

Dairy and bovine meat agreements: ended in 1997

The International Dairy Agreement and International Bovine
Meat Agreement were scrapped at the end of 1997. Countries that
had signed the agreements decided that the sectors were better
handled under the Agriculture and Sanitary and Phytosanitary
agreements. Some aspects of their work had been handicapped by
the small number of signatories. For example, some major
exporters of dairy products did not sign the Dairy Agreement, and
the attempt to cooperate on minimum prices therefore failed —
minimum pricing was suspended in 1995.

What is this
agreement called?
Trade Policy Review
Mechanism

11. Trade policy reviews: ensuring
transparency

Individuals and companies involved in trade have to know as much
as possible about the conditions of trade. It is therefore
fundamentally important that regulations and
policies are transparent. In the WTO, this is
achieved in two ways: governments have to inform
the WTO and fellow-members of specific measures,
policies or laws through regular “notifications”; and
the WTO conducts regular reviews of individual
countries’ trade policies — the trade policy reviews. These reviews
are part of the Uruguay Round agreement, but they began several
years before the round ended — they were an early result of the
negotiations. Participants agreed to set up the reviews at the
December 1988 ministerial meeting that was intended to be the
midway assessment of the Uruguay Round. The first review took
place the following year. Initially they operated under GATT and,
like GATT, they focused on goods trade. With the creation of the
WTO in 1995, their scope was extended, like the WTO, to include
services and intellectual property.

The importance countries attach to the process is reflected in the
seniority of the Trade Policy Review Body — it is the WTO General
Council in another guise.

The objectives are:

• to increase the transparency and understanding of countries’
trade policies and practices, through regular monitoring

• to improve the quality of public and intergovernmental debate
on the issues

• to enable a multilateral assessment of the effects of policies on
the world trading system.

The reviews focus on members’ own trade policies and practices.
But they also take into account the countries’ wider economic and
developmental needs, their policies and objectives, and the external
economic environment that they face. These “peer reviews” by
other WTO members encourage governments to follow more closely
the WTO rules and disciplines and to fulfil their commitments. In
practice the reviews have two broad results: they enable outsiders
to understand a country’s policies and circumstances, and they
provide feedback to the reviewed country on its performance in the
system.

Over a period of time, all WTO members are to come under
scrutiny. The frequency of the reviews depends on the country’s
size:

• The four biggest traders — the European Union, the United
States, Japan and Canada (the “Quad”) — are examined
approximately once every two years.

• The next 16 countries (in terms of their share of world trade) are
reviewed every four years.

• The remaining countries are reviewed every six years, with the
possibility of a longer interim period for the least-developed
countries.

For each review, two documents are prepared: a policy statement
by the government under review, and a detailed report written
independently by the WTO Secretariat. These two reports, together
with the proceedings of the Trade Policy Review Body’s meetings
are published shortly afterwards.

ON THE WEBSITE:
www.wto.org > trade topics > trade policy reviews

What is this
agreement called?
Understanding on
Rules and Procedures
Governing the
Settlement of Disputes

Chapter 3

Settling disputes

The priority is to settle disputes, not to pass

judgement.

1. A unique contribution

Dispute settlement is the central pillar of the multilateral trading
system, and the WTO’s unique contribution to the stability of the
global economy. Without a means of settling disputes, the rules-
based system would be less effective because the rules could not be
enforced. The WTO’s procedure underscores the rule of law, and it
makes the trading system more secure and predictable. The system
is based on clearly-defined rules, with timetables for completing a
case. First rulings are made by a panel and endorsed (or rejected)
by the WTO’s full membership. Appeals based on points of law are
possible.

However, the point is not to pass judgement. The
priority is to settle disputes, through consultations if
possible. By July 2005, only about 130 of the
332 cases had reached the full panel process. Most
of the rest have either been notified as settled “out
of court” or remain in a prolonged consultation
phase — some since 1995.

Principles: equitable, fast, effective, mutually
acceptable

Disputes in the WTO are essentially about broken promises. WTO
members have agreed that if they believe fellow-members are
violating trade rules, they will use the multilateral system of settling
disputes instead of taking action unilaterally. That means abiding by
the agreed procedures, and respecting judgements.

A dispute arises when one country adopts a trade policy measure or
takes some action that one or more fellow-WTO members considers
to be breaking the WTO agreements, or to be a failure to live up to
obligations. A third group of countries can declare that they have an
interest in the case and enjoy some rights.

A procedure for settling disputes existed under the old GATT, but it
had no fixed timetables, rulings were easier to block, and many
cases dragged on for a long time inconclusively. The Uruguay Round
agreement introduced a more structured process with more clearly
defined stages in the procedure. It introduced greater discipline for
the length of time a case should take to be settled, with flexible
deadlines set in various stages of the procedure. The agreement
emphasizes that prompt settlement is essential if the WTO is to
function effectively. It sets out in considerable detail the procedures
and the timetable to be followed in resolving disputes. If a case runs
its full course to a first ruling, it should not normally take more than
about one year — 15 months if the case is appealed. The agreed
time limits are flexible, and if the case is considered urgent (e.g. if

More cases can be good news

If the courts find themselves handling an
increasing number of criminal cases, does
that mean law and order is breaking
down? Not necessarily. Sometimes it
means that people have more faith in the
courts and the rule of law. They are
turning to the courts instead of taking the
law into their own hands.

For the most part, that is what is
happening in the WTO. No one likes to
see countries quarrel. But if there are
going to be trade disputes anyway, it is
healthier that the cases are handled
according to internationally agreed rules.
There are strong grounds for arguing that
the increasing number of disputes is
simply the result of expanding world
trade and the stricter rules negotiated in
the Uruguay Round; and that the fact
that more are coming to the WTO reflects
a growing faith in the system.

Panels

Panels are like tribunals. But unlike in a
normal tribunal, the panellists are usually
chosen in consultation with the countries
in dispute. Only if the two sides cannot
agree does the WTO director-general
appoint them.

Panels consist of three (possibly five)
experts from different countries who
examine the evidence and decide who is
right and who is wrong. The panel’s
report is passed to the Dispute
Settlement Body, which can only reject
the report by consensus.

Panellists for each case can be chosen
from a permanent list of well-qualified
candidates, or from elsewhere. They
serve in their individual capacities. They
cannot receive instructions from any
government.

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)

perishable goods are involved), it is accelerated as much as
possible.

The Uruguay Round agreement also made it impossible for the
country losing a case to block the adoption of the ruling. Under the
previous GATT procedure, rulings could only be adopted by
consensus, meaning that a single objection could block the ruling.
Now, rulings are automatically adopted unless there is a consensus
to reject a ruling — any country wanting to block a ruling has to
persuade all other WTO members (including its adversary in the
case) to share its view.

Although much of the procedure does resemble a court or tribunal,
the preferred solution is for the countries concerned to discuss their
problems and settle the dispute by themselves. The first stage is
therefore consultations between the governments concerned, and
even when the case has progressed to other stages, consultation
and mediation are still always possible.

How are disputes settled?

Settling disputes is the responsibility of the Dispute Settlement
Body (the General Council in another guise), which consists of all
WTO members. The Dispute Settlement Body has the sole authority
to establish “panels” of experts to consider the case, and to accept
or reject the panels’ findings or the results of an appeal. It monitors
the implementation of the rulings and recommendations, and has
the power to authorize retaliation when a country does not comply
with a ruling.

• First stage: consultation (up to 60 days). Before taking any
other actions the countries in dispute have to talk to each other
to see if they can settle their differences by themselves. If that
fails, they can also ask the WTO director-general to mediate or
try to help in any other way.

• Second stage: the panel (up to 45 days for a panel to be
appointed, plus 6 months for the panel to conclude). If
consultations fail, the complaining country can ask for a panel to
be appointed. The country “in the dock” can block the creation of
a panel once, but when the Dispute Settlement Body meets for a
second time, the appointment can no
longer be blocked (unless there is a
consensus against appointing the panel).

Officially, the panel is helping the Dispute
Settlement Body make rulings or
recommendations. But because the panel’s
report can only be rejected by consensus in
the Dispute Settlement Body, its conclusions
are difficult to overturn. The panel’s findings
have to be based on the agreements cited.

The panel’s final report should normally be
given to the parties to the dispute within six
months. In cases of urgency, including those
concerning perishable goods, the deadline is
shortened to three months.

The agreement describes in some detail how the panels are to work.
The main stages are:

• Before the first hearing: each side in the dispute presents its case
in writing to the panel.

• First hearing: the case for the complaining country and
defence: the complaining country (or countries), the responding
country, and those that have announced they have an interest in
the dispute, make their case at the panel’s first hearing.

• Rebuttals: the countries involved submit written rebuttals and
present oral arguments at the panel’s second meeting.

• Experts: if one side raises scientific or other technical matters,
the panel may consult experts or appoint an expert review group
to prepare an advisory report.

• First draft: the panel submits the descriptive (factual and
argument) sections of its report to the two sides, giving them
two weeks to comment. This report does not include findings
and conclusions.

• Interim report: The panel then submits an interim report,
including its findings and conclusions, to the two sides, giving
them one week to ask for a review.

• Review: The period of review must not exceed two weeks.
During that time, the panel may hold additional meetings with
the two sides.

• Final report: A final report is submitted to the two sides and
three weeks later, it is circulated to all WTO members. If the
panel decides that the disputed trade measure does break a
WTO agreement or an obligation, it recommends that the
measure be made to conform with WTO rules. The panel may
suggest how this could be done.

• The report becomes a ruling: The report becomes the Dispute
Settlement Body’s ruling or recommendation within

60 days

unless a consensus rejects it. Both sides can appeal the report
(and in some cases both sides do).

Appeals

Either side can appeal a panel’s ruling. Sometimes both sides do so.
Appeals have to be based on points of law such as legal
interpretation — they cannot reexamine existing evidence or
examine new issues.

Each appeal is heard by three members of a permanent seven-
member Appellate Body set up by the Dispute Settlement Body and
broadly representing the range of WTO membership. Members of
the Appellate Body have four-year terms. They have to be
individuals with recognized standing in the field of law and
international trade, not affiliated with any government.

The appeal can uphold, modify or reverse the panel’s legal findings
and conclusions. Normally appeals should not last more than 60
days, with an absolute maximum of 90 days.

The Dispute Settlement Body has to accept or reject the appeals
report within 30 days — and rejection is only possible by consensus.

The case has been decided: what next?

Go directly to jail. Do not pass Go, do not collect … . Well, not
exactly. But the sentiments apply. If a country has done something
wrong, it should swiftly correct its fault. And if it continues to break

an agreement, it should offer compensation or suffer a suitable
penalty that has some bite.

Even once the case has been decided, there is more to do before
trade sanctions (the conventional form of penalty) are imposed. The
priority at this stage is for the losing “defendant” to bring its policy
into line with the ruling or recommendations. The dispute
settlement agreement stresses that “prompt compliance with
recommendations or rulings of the DSB [Dispute Settlement Body]
is essential in order to ensure effective resolution of disputes to the
benefit of all Members”.

If the country that is the target of the complaint loses, it must follow the
recommendations of the panel report or the appeals report. It must
state its intention to do so at a Dispute Settlement Body meeting held
within 30 days of the report’s adoption. If complying with the
recommendation immediately proves impractical, the member will be
given a “reasonable period of time” to do so. If it fails to act within this
period, it has to enter into negotiations with the complaining country (or
countries) in order to determine mutually-acceptable compensation —
for instance, tariff reductions in areas of particular interest to the
complaining side.

If after 20 days, no satisfactory compensation is agreed, the
complaining side may ask the Dispute Settlement Body for permission
to impose limited trade sanctions (“suspend concessions or obligations”)
against the other side. The Dispute Settlement Body must grant this
authorization within 30 days of the expiry of the “reasonable period of
time” unless there is a consensus against the request.

In principle, the sanctions should be imposed in the same sector as the
dispute. If this is not practical or if it would not be effective, the
sanctions can be imposed in a different sector of the same agreement.
In turn, if this is not effective or practicable and if the circumstances are
serious enough, the action can be taken under another agreement. The
objective is to minimize the chances of actions spilling over into
unrelated sectors while at the same time allowing the actions to be
effective.

In any case, the Dispute Settlement Body monitors how adopted
rulings are implemented. Any outstanding case remains on its
agenda until the issue is resolved.

> See also Doha Agenda negotiations

2. The panel process

The various stages a dispute can go through in the WTO. At all stages, countries in dispute are encouraged to consult
each other in order to settle “out of court”. At all stages, the WTO director-general is available to offer his good
offices, to mediate or to help achieve a conciliation.

Note: some specified times are maximums, some are minimums, some binding, some not

Consultations
(Art. 4)

Panel established
by Dispute Settlement Body (DSB)

(Art. 6)

Terms of reference (Art. 7)
Composition (Art. 8)

Panel examination
Normally 2 meetings with parties (Art. 12),

1 meeting with third parties (Art. 10)

Interim review stage
Descriptive part of report

sent to parties for comment (Art. 15.1)
Interim report sent to parties for comment (Art 15.2)

Panel report issued to parties
(Art. 12.8; Appendix 3 par 12(j))

Panel report issued to DSB
(Art. 12.9; Appendix 3 par 12(k))

DSB adopts panel/appellate report(s)
including any changes to panel report made by appellate

report (Art. 16.1, 16.4 and 17.14)

Implementation
report by losing party of proposed implementation

within ‘reasonable period of time’ (Art. 21.3)

In cases of non-implementation
parties negotiate compensation pending full

implementation (Art. 22.2)

Retaliation
If no agreement on compensation, DSB authorizes

retaliation pending full implementation
(Art. 22)

Cross-retaliation:
same sector, other sectors, other agreements

(Art. 22.3)

During all stages
good offices, conciliation,

or mediation (Art. 5)

Expert review group
(Art. 13; Appendix 4)

NOTE: a panel
can be
‘composed’ (i.e.
panellists
chosen) up to
about 30 days
after its
‘establishment’
(i.e. after DSB’s
decision to have
a panel

Review meeting
with panel

upon request
(Art. 15.2)

Appellate review
(Art. 16.4 and 17)

TOTAL FOR
REPORT
ADOPTION:
Usually up to
9 months (no
appeal), or
12 months (with
appeal) from
establishment of
panel to adoption
of report (Art.20)

max

90 days

… 30 days for
appellate report

90 days

Dispute over
implementation:

Proceedings possible,
including referral to initial
panel on implementation

(Art. 21.5)

Possibility of arbitration
on level of suspension

procedures and principles
of retaliation

(Art. 22.6 and 22.7)

60 days

by 2nd DSB
meeting

0–20 days

20 days (+10 if
Director-General asked

to pick panel)

6 months from panel’s
composition,

3 months if urgent

up to 9 months
from panel’s

establishment

60 days for panel
report unless

appealed …

‘REASONABLE
PERIOD OF

TIME’:
determined by:

member
proposes, DSB

agrees; or parties
in dispute agree;

or arbitrator
(approx 15

months if by
arbitrator)

30 days after
‘reasonable

period’ expires

3. Case study: the timetable in practice

On 23 January 1995, Venezuela complained to the Dispute
Settlement Body that the United States was applying rules that
discriminated against gasoline imports, and formally requested
consultations with the United States. Just over a year later (on 29
January 1996) the dispute panel completed its final report. (By
then, Brazil had joined the case, lodging its own complaint in April
1996. The same panel considered both complaints.) The United
States appealed. The Appellate Body completed its report, and the
Dispute Settlement Body adopted the report on 20 May 1996, one
year and four months after the complaint was first lodged.

The United States and Venezuela then took six and a half months to
agree on what the United States should do. The agreed period for
implementing the solution was 15 months from the date the appeal
was concluded (20 May 1996 to 20 August 1997).

The case arose because the United States applied stricter rules on
the chemical characteristics of imported gasoline than it did for
domestically-refined gasoline. Venezuela (and later Brazil) said this
was unfair because US gasoline did not have to meet the same
standards — it violated the “national treatment” principle and could
not be justified under exceptions to normal WTO rules for health
and environmental conservation measures. The dispute panel
agreed with Venezuela and Brazil. The appeal report upheld the
panel’s conclusions (making some changes to the panel’s legal
interpretation). The United States agreed with Venezuela that it
would amend its regulations within 15 months and on 26 August
1997 it reported to the Dispute Settlement Body that a new
regulation had been signed on 19 August.

Time
(0 = start
of case)

Target/
actual period

Date Action

–5 years 1990 US Clean Air Act amended
–4 months September 1994 US restricts gasoline imports under

Clean Air Act
0

“60 days”
23 January 1995 Venezuela complains to Dispute

Settlement Body, asks for
consultation with US

+1 month 24 February 1995 Consultations take place. Fail.
+2 months 25 March 1995 Venezuela asks Dispute Settlement

Body for a panel
+2½ months

“30 days”

10 April 1995 Dispute Settlement Body agrees to
appoint panel. US does not block.
(Brazil starts complaint, requests
consultation with US.)

+3 months 28 April 1995 Panel appointed. (31 May, panel
assigned to Brazilian complaint as
well)

+6 months 9 months
(target is 6–9)

10–12 July and
13–15 July 1995

Panel meets

+11 months 11 December 1995 Panel gives interim report to US,
Venezuela and Brazil for comment

+1 year 29 January 1996 Panel circulates final report to
Dispute Settlement Body

+1 year, 1 month 21 February 1996 US appeals
+1 year, 3 months “60 days” 29 April 1996 Appellate Body submits report
+1 year, 4 months “30 days” 20 May 1996 Dispute Settlement Body adopts

panel and appeal reports
+1 year, 10½ months 3 December 1996 US and Venezuela agree on what

US should do (implementation
period is 15 months from 20 May)

+1 year, 11½ months 9 January 1997 US makes first of monthly reports
to Dispute Settlement Body on
status of implementation

+2 years, 7 months 19-20 August 1997 US signs new regulation (19th).
End of agreed implementation
period (20th)

ON THE WEBSITE:
www.wto.org > trade topics > dispute settlement

Chapter 4

Cross-cutting and
new issues

Subjects that cut across the agreements,

and some newer agenda items

The WTO’s work is not confined to specific agreements with specific
obligations. Member governments also discuss a range of other
issues, usually in special committees or working groups. Some are
old, some are new to the GATT-WTO system. Some are issues in
their own right, some cut across several WTO topics. Some could
lead to negotiations.

They include:

• regional economic groupings
• trade and the environment
• trade and investment
• competition policy
• transparency in government procurement
• trade “facilitation” (simplifying trade procedures, making trade

flow more smoothly through means that go beyond the removal
of tariff and non-tariff barriers)

• electronic commerce

One other topic has been discussed a lot in the WTO from time to
time. It is:

• trade and labour rights

This is not on the WTO’s work agenda, but because it has received a
lot of attention, it is included here to clarify the situation.

1. Regionalism: friends or rivals?

The European Union, the North American Free Trade Agreement,
the Association of Southeast Asian Nations, the South Asian
Association for Regional Cooperation, the Common Market of the
South (MERCOSUR), the Australia-New Zealand Closer Economic
Relations Agreement, and so on.

By July 2005, only one WTO member — Mongolia — was not party
to a regional trade agreement. The surge in these agreements has
continued unabated since the early 1990s. By July 2005, a total of
330 had been notified to the WTO (and its predecessor, GATT). Of
these: 206 were notified after the WTO was created in January
1995; 180 are currently in force; several others are believed to be
operational although not yet notified.

One of the most frequently asked questions is whether these
regional groups help or hinder the WTO’s multilateral trading
system. A committee is keeping an eye on developments.

Regional trading arrangements

They seem to be contraditory, but often regional trade agreements
can actually support the WTO’s multilateral trading system.
Regional agreements have allowed groups of countries to negotiate
rules and commitments that go beyond what was possible at the
time multilaterally. In turn, some of these rules have paved the way
for agreement in the WTO. Services, intellectual property,
environmental standards, investment and competition policies are
all issues that were raised in regional negotiations and later
developed into agreements or topics of discussion in the WTO.

The groupings that are important for the WTO are those that abolish or
reduce barriers on trade within the group. The WTO agreements
recognize that regional arrangements and closer economic integration
can benefit countries. It also recognizes that under some circumstances
regional trading arrangements could hurt the trade interests of other
countries. Normally, setting up a customs union or free trade area
would violate the WTO’s principle of equal treatment for all trading
partners (“most-favoured-nation”). But GATT’s Article 24 allows
regional trading arrangements to be set up as a special exception,
provided certain strict criteria are met.

In particular, the arrangements should help trade flow more freely
among the countries in the group without barriers being raised on trade
with the outside world. In other words, regional integration should
complement the multilateral trading system and not threaten it.

Article 24 says if a free trade area or customs union is created,
duties and other trade barriers should be reduced or removed on
substantially all sectors of trade in the group. Non-members should
not find trade with the group any more restrictive than before the
group was set up.

Similarly, Article 5 of the General Agreement on Trade in Services
provides for economic integration agreements in services. Other
provisions in the WTO agreements allow developing countries to
enter into regional or global agreements that include the reduction
or elimination of tariffs and non-tariff barriers on trade among
themselves.

On 6 February 1996, the WTO General Council created the
Regional Trade Agreements Committee. Its purpose is to
examine regional groups and to assess whether they are consistent
with WTO rules. The committee is also examining how regional
arrangements might affect the multilateral trading system, and
what the relationship between regional and multilateral
arrangements might be.

ON THE WEBSITE:
www.wto.org > trade topics > goods > regional trade

agreements
> See also Doha Agenda negotiations

2. The environment: a specific concern

The WTO has no specific agreement dealing with the environment.
However, a number of the WTO agreements include provisions
dealing with environmental concerns. The objectives of sustainable
development and environmental protection are stated in the
preamble to the Agreement Establishing the WTO.

The increased emphasis on environmental policies is relatively
recent. At the end of the Uruguay Round in 1994, trade ministers
from participating countries decided to begin a comprehensive work
programme on trade and environment in the WTO. They created the
Trade and Environment Committee. This has brought
environmental and sustainable development issues into the
mainstream of WTO work.

The committee: broad-based responsibility

The committee has a broad-based responsibility covering all areas
of the multilateral trading system — goods, services and intellectual
property. Its duties are to study the relationship between trade and
the environment, and to make recommendations about any changes
that might be needed in the trade agreements.

The committee’s work is based on two important principles:

• The WTO is only competent to deal with trade. In other words, in
environmental issues its only task is to study questions that
arise when environmental policies have a significant impact on
trade. The WTO is not an environmental agency. Its members do
not want it to intervene in national or international
environmental policies or to set environmental standards. Other
agencies that specialize in environmental issues are better
qualified to undertake those tasks.

• If the committee does identify problems, its solutions must
continue to uphold the principles of the WTO trading system.

More generally WTO members are convinced that an open,
equitable and non-discriminatory multilateral trading system has a
key contribution to make to national and international efforts to
better protect and conserve environmental resources and promote
sustainable development. This was recognized in the results of the
1992 UN Conference on Environment and Development in Rio (the
“Earth Summit”) and its 2002 successor, the World Summit on
Sustainable Development in Johannesburg.

The committee’s work programme focuses on 10 areas. Its agenda
is driven by proposals from individual WTO members on issues of
importance to them. The following sections outline some of the
issues, and what the committee has concluded so far:

WTO and environmental agreements: how are they
related?

How do the WTO trading system and “green” trade measures relate
to each other? What is the relationship between the WTO
agreements and various international environmental agreements
and conventions?

‘Green’ provisions

Examples of provisions in the WTO
agreements dealing with environmental
issues

• GATT Article 20: policies affecting trade
in goods for protecting human, animal or
plant life or health are exempt from
normal GATT disciplines under certain
conditions.

• Technical Barriers to Trade (i.e.
product and industrial standards), and
Sanitary and Phytosanitary Measures
(animal and plant health and hygiene):
explicit recognition of environmental
objectives.

• Agriculture: environmental
programmes exempt from cuts in
subsidies

• Subsidies and Countervail: allows
subsidies, up to 20% of firms’ costs, for
adapting to new environmental laws.

• Intellectual property: governments
can refuse to issue patents that threaten
human, animal or plant life or health, or
risk serious damage to the environment
(TRIPS Article 27).

• GATS Article 14: policies affecting trade
in services for protecting human, animal
or plant life or health are exempt from
normal GATS disciplines under certain
conditions.

There are about 200 international agreements (outside the WTO)
dealing with various environmental issues currently in force. They
are called multilateral environmental agreements (MEAs).

About 20 of these include provisions that can affect trade: for
example they ban trade in certain products, or allow countries to
restrict trade in certain circumstances. Among them are the
Montreal Protocol for the protection of the ozone layer, the Basel
Convention on the trade or transportation of hazardous waste
across international borders, and the Convention on International
Trade in Endangered Species (CITES).

Briefly, the WTO’s committee says the basic WTO principles of non-
discrimination and transparency do not conflict with trade measures
needed to protect the environment, including actions taken under
the environmental agreements. It also notes that clauses in the
agreements on goods, services and intellectual property allow
governments to give priority to their domestic environmental
policies.

The WTO’s committee says the most effective way to deal with
international environmental problems is through the environmental
agreements. It says this approach complements the WTO’s work in
seeking internationally agreed solutions for trade problems. In other
words, using the provisions of an international environmental
agreement is better than one country trying on its own to change
other countries’ environmental policies (see shrimp-turtle and
dolphin-tuna case studies).

The committee notes that actions taken to protect the environment
and having an impact on trade can play an important role in some
environmental agreements, particularly when trade is a direct cause
of the environmental problems. But it also points out that trade
restrictions are not the only actions that can be taken, and they are
not necessarily the most effective. Alternatives include: helping
countries acquire environmentally-friendly technology, giving them
financial assistance, providing training, etc.

The problem should not be exaggerated. So far, no action affecting
trade and taken under an international environmental agreement
has been challenged in the GATT-WTO system. There is also a
widely held view that actions taken under an environmental
agreement are unlikely to become a problem in the WTO if the
countries concerned have signed the environmental agreement,
although the question is not settled completely. The Trade and
Environment Committee is more concerned about what happens
when one country invokes an environmental agreement to take
action against another country that has not signed the
environmental agreement.

> See also Doha Agenda negotiations

Disputes: where should they be handled?

Suppose a trade dispute arises because a country has taken action on trade
(for example imposed a tax or restricted imports) under an environmental
agreement outside the WTO and another country objects. Should the
dispute be handled under the WTO or under the other agreement? The
Trade and Environment Committee says that if a dispute arises over a trade
action taken under an environmental agreement, and if both sides to the
dispute have signed that agreement, then they should try to use the

A key question

If one country believes another country’s
trade damages the environment, what
can it do? Can it restrict the other
country’s trade? If it can, under what
circumstances? At the moment, there are
no definitive legal interpretations, largely
because the questions have not yet been
tested in a legal dispute either inside or
outside the WTO. But the combined result
of the WTO’s trade agreements and
environmental agreements outside the
WTO suggest:

1. First, cooperate: The countries
concerned should try to cooperate to
prevent environmental damage.

2. The complaining country can act
(e.g. on imports) to protect its own
domestic environment, but it cannot
discriminate. Under the WTO
agreements, standards, taxes or other
measures applied to imports from the
other country must also apply equally to
the complaining country’s own products
(“national treatment”) and imports from
all other countries (“most-favoured-
nation”).

3. If the other country has also
signed an environment agreement,
then what ever action the complaining
country takes is probably not the WTO’s
concern.

4. What if the other country has not
signed? Here the situation is unclear and
the subject of debate. Some
environmental agreements say countries
that have signed the agreement should
apply the agreement even to goods and
services from countries that have not.
Whether this would break the WTO
agreements remains untested because so
far no dispute of this kind has been
brought to the WTO. One proposed way
to clarify the situation would be to rewrite
the rules to make clear that countries
can, in some circumstances, cite an
environmental agreement when they take
action affecting the trade of a country
that has not signed. Critics say this would
allow some countries to force their
environmental standards on others.

5. When the issue is not covered by
an environmental agreement, WTO
rules apply. The WTO agreements are
interpreted to say two important things.
First, trade restrictions cannot be
imposed on a product purely because of
the way it has been produced. Second,
one country cannot reach out beyond its
own territory to impose its standards on
another country.

environmental agreement to settle the dispute. But if one side in the dispute
has not signed the environment agreement, then the WTO would provide
the only possible forum for settling the dispute. The preference for handling
disputes under the environmental agreements does not mean
environmental issues would be ignored in WTO disputes. The WTO
agreements allow panels examining a dispute to seek expert advice on
environmental issues.

A WTO dispute: The ‘shrimp-turtle’ case

This was a case brought by India, Malaysia, Pakistan and Thailand
against the US. The appellate and panel reports were adopted on 6
November 1998. The official title is “United States — Import
Prohibition of Certain Shrimp and Shrimp Products”, the official WTO
case numbers are 58 and 61.

What was it all about?

Seven species of sea turtles have been identified. They are
distributed around the world in subtropical and tropical areas. They
spend their lives at sea, where they migrate between their foraging
and nesting grounds.

Sea turtles have been adversely affected by human activity, either
directly (their meat, shells and eggs have been exploited), or
indirectly (incidental capture in fisheries, destroyed habitats,
polluted oceans).

In early 1997, India, Malaysia, Pakistan and Thailand brought a
joint complaint against a ban imposed by the US on the importation
of certain shrimp and shrimp products. The protection of sea turtles
was at the heart of the ban.

The US Endangered Species Act of 1973 listed as endangered or
threatened the five species of sea turtles that occur in US waters,
and prohibited their “take” within the US, in its territorial sea and
the high seas. (“Take” means harassment, hunting, capture, killing
or attempting to do any of these.)

Under the act, the US required US shrimp trawlers to use “turtle
excluder devices” (TEDs) in their nets when fishing in areas where
there is a significant likelihood of encountering sea turtles.

Section 609 of US Public Law 101–102, enacted in 1989, dealt with
imports. It said, among other things, that shrimp harvested with
technology that may adversely affect certain sea turtles may not be
imported into the US — unless the harvesting nation was certified to
have a regulatory programme and an incidental take-rate
comparable to that of the US, or that the particular fishing
environment of the harvesting nation did not pose a threat to sea
turtles.

In practice, countries that had any of the five species of sea turtles
within their jurisdiction, and harvested shrimp with mechanical
means, had to impose on their fishermen requirements comparable
to those borne by US shrimpers if they wanted to be certified to
export shrimp products to the US. Essentially this meant the use of
TEDs at all times.

Legally speaking …

The panel considered that the ban
imposed by the US was inconsistent with
GATT Article 11 (which limits the use of
import prohibitions or restrictions), and
could not be justified under GATT Article
20 (which deals with general exceptions
to the rules, including for certain
environmental reasons).

Following an appeal, the Appellate Body
found that the measure at stake did
qualify for provisional justification under
Article 20(g), but failed to meet the
requirements of the chapeau (the
introductory paragraph) of Article 20
(which defines when the general
exceptions can be cited).

The Appellate Body therefore concluded
that the US measure was not justified
under Article 20 of GATT (strictly
speaking, “GATT 1994”, i.e. the current
version of the General Agreement on
Tariffs and Trade as modified by the 1994
Uruguay Round agreement).

At the request of Malaysia, the original
panel in this case considered the
measures taken by the United States to
comply with the recommendations and
rulings of the Dispute Settlement Body.
The panel report for this recourse was
appealed by Malaysia. The Appellate Body
upheld the panel’s findings that the US
measure was now applied in a manner
that met the requirements of Article 20 of
the GATT 1994

WHAT THE APPELLATE BODY

SAID

‘… We have not decided that the

sovereign nations that are members

of the WTO cannot adopt effective

measures to protect endangered

species, such as sea turtles. Clearly,

they can and should. …’

The ruling

In its report, the Appellate Body made clear that under WTO rules,
countries have the right to take trade action to protect the
environment (in particular, human, animal or plant life and health)
and endangered species and exhaustible resources). The WTO does
not have to “allow” them this right.

It also said measures to protect sea turtles would be legitimate
under GATT Article 20 which deals with various exceptions to the
WTO’s trade rules, provided certain criteria such as non-
discrimination were met.

The US lost the case, not because it sought to protect the
environment but because it discriminated between WTO members.
It provided countries in the western hemisphere — mainly in the
Caribbean — technical and financial assistance and longer transition
periods for their fishermen to start using turtle-excluder devices.

It did not give the same advantages, however, to the four Asian
countries (India, Malaysia, Pakistan and Thailand) that filed the
complaint with the WTO.

The ruling also said WTO panels may accept “amicus briefs”
(friends-of-the-court submissions) from NGOs or other interested
parties.

‘What we have not decided …’

This is part of what the Appellate Body said:

“185. In reaching these conclusions, we wish to underscore what
we have not decided in this appeal. We have not decided that the
protection and preservation of the environment is of no significance
to the Members of the WTO. Clearly, it is. We have not decided that
the sovereign nations that are Members of the WTO cannot adopt
effective measures to protect endangered species, such as sea
turtles. Clearly, they can and should. And we have not decided that
sovereign states should not act together bilaterally, plurilaterally or
multilaterally, either within the WTO or in other international fora,
to protect endangered species or to otherwise protect the
environment. Clearly, they should and do.

“186. What we have decided in this appeal is simply this:
although the measure of the United States in dispute in this appeal
serves an environmental objective that is recognized as legitimate
under paragraph (g) of Article XX [i.e. 20] of the GATT 1994, this
measure has been applied by the United States in a manner which
constitutes arbitrary and unjustifiable discrimination between
Members of the WTO, contrary to the requirements of the chapeau
of Article XX. For all of the specific reasons outlined in this Report,
this measure does not qualify for the exemption that Article XX of
the GATT 1994 affords to measures which serve certain recognized,
legitimate environmental purposes but which, at the same time, are
not applied in a manner that constitutes a means of arbitrary or
unjustifiable discrimination between countries where the same
conditions prevail or a disguised restriction on international trade.
As we emphasized in United States — Gasoline [adopted 20 May
1996, WT/DS2/AB/R, p. 30], WTO Members are free to adopt their
own policies aimed at protecting the environment as long as, in so
doing, they fulfill their obligations and respect the rights of other
Members under the WTO Agreement.”

A GATT dispute: The tuna-dolphin dispute

This case still attracts a lot of attention because of its implications
for environmental disputes. It was handled under the old GATT
dispute settlement procedure. Key questions are:

• can one country tell another what its environmental regulations
should be? and

• do trade rules permit action to be taken against the method
used to produce goods (rather than the quality of the goods
themselves)?

What was it all about?

In eastern tropical areas of the Pacific Ocean, schools of yellowfin
tuna often swim beneath schools of dolphins. When tuna is
harvested with purse seine nets, dolphins are trapped in the nets.
They often die unless they are released.

The US Marine Mammal Protection Act sets dolphin protection
standards for the domestic American fishing fleet and for countries
whose fishing boats catch yellowfin tuna in that part of the Pacific
Ocean. If a country exporting tuna to the United States cannot
prove to US authorities that it meets the dolphin protection
standards set out in US law, the US government must embargo all
imports of the fish from that country. In this dispute, Mexico was
the exporting country concerned. Its exports of tuna to the US were
banned. Mexico complained in 1991 under the GATT dispute
settlement procedure.

The embargo also applies to “intermediary” countries handling the
tuna en route from Mexico to the United States. Often the tuna is
processed and canned in an one of these countries. In this dispute,
the “intermediary” countries facing the embargo were Costa Rica,
Italy, Japan and Spain, and earlier France, the Netherlands Antilles,
and the United Kingdom. Others, including Canada, Colombia, the
Republic of Korea, and members of the Association of Southeast
Asian Nations (ASEAN), were also named as “intermediaries”.

The panel

Mexico asked for a panel in February 1991. A number of
“intermediary” countries also expressed an interest. The panel
reported to GATT members in September 1991. It concluded:

• that the US could not embargo imports of tuna products from
Mexico simply because Mexican regulations on the way tuna
was produced did not satisfy US regulations. (But the US could
apply its regulations on the quality or content of the tuna
imported.) This has become known as a “product” versus
“process” issue.

• that GATT rules did not allow one country to take trade action
for the purpose of attempting to enforce its own domestic laws
in another country — even to protect animal health or
exhaustible natural resources. The term used here is “extra-
territoriality”.

What was the reasoning behind this ruling? If the US arguments
were accepted, then any country could ban imports of a product

PS. The report was never adopted

Under the present WTO system, if WTO
members (meeting as the Dispute
Settlement Body) do not by consensus
reject a panel report after 60 days, it is
automatically accepted (“adopted”). That
was not the case under the old GATT.
Mexico decided not to pursue the case
and the panel report was never adopted
even though some of the “intermediary”
countries pressed for its adoption. Mexico
and the United States held their own
bilateral consultations aimed at reaching
agreement outside GATT.

In 1992, the European Union lodged its
own complaint. This led to a second panel
report circulated to GATT members in
mid 1994. The report upheld some of the
findings of the first panel and modified
others. Although the European Union and
other countries pressed for the report to
be adopted, the United States told a
series of meetings of the GATT Council
and the final meeting of GATT Contracting
Parties (i.e. members) that it had not had
time to complete its studies of the report.
There was therefore no consensus to
adopt the report, a requirement under the
old GATT system. On 1 January 1995,
GATT made way for the WTO.

from another country merely because the exporting country has
different environmental, health and social policies from its own. This
would create a virtually open-ended route for any country to apply
trade restrictions unilaterally — and to do so not just to enforce its
own laws domestically, but to impose its own standards on other
countries. The door would be opened to a possible flood of
protectionist abuses. This would conflict with the main purpose of
the multilateral trading system — to achieve predictability through
trade rules.

The panel’s task was restricted to examining how GATT rules
applied to the issue. It was not asked whether the policy was
environmentally correct or not. It suggested that the US policy
could be made compatible with GATT rules if members agreed on
amendments or reached a decision to waive the rules specially for
this issue. That way, the members could negotiate the specific
issues, and could set limits that would prevent protectionist abuse.

The panel was also asked to judge the US policy of requiring tuna
products to be labelled “dolphin-safe” (leaving to consumers the
choice of whether or not to buy the product). It concluded that this
did not violate GATT rules because it was designed to prevent
deceptive advertising practices on all tuna products, whether
imported or domestically produced.

Eco-labelling: good, if it doesn’t discriminate

Labelling environmentally-friendly products is an important
environmental policy instrument. For the WTO, the key point is that
labelling requirements and practices should not discriminate —
either between trading partners (most-favoured nation treatment
should apply), or between domestically-produced goods or services
and imports (national treatment).

One area where the Trade and Environment Committee needs
further discussion is how to handle — under the rules of the WTO
Technical Barriers to Trade Agreement — labelling used to describe
whether for the way a product is produced (as distinct from the
product itself) is environmentally-friendly.

Transparency: information without too much
paperwork

Like non-discrimination, this is an important WTO principle. Here,
WTO members should provide as much information as possible
about the environmental policies they have adopted or actions they
may take, when these can have a significant impact on trade. They
should do this by notifying the WTO, but the task should not be
more of a burden than is normally required for other policies
affecting trade.

The Trade and Environment Committee says WTO rules do not need
changing for this purpose. The WTO Secretariat is to compile from
its Central Registry of Notifications all information on trade-related
environmental measures that members have submitted. These are
to be put in a single database which all WTO members can access

Domestically prohibited goods: dangerous chemicals,
etc

This is a concern of a number of developing countries, which are
worried that certain hazardous or toxic products are being exported
to their markets without them being fully informed about the
environmental or public health dangers the products may pose.
Developing countries want to be fully informed so as to be in a
position to decide whether or not to import them.

A number of international agreements now exist (e.g. the Basel
Convention on the Control of Transboundary Movements of
Hazardous Wastes and their Disposal, and the London Guidelines for
Exchange of Information on Chemicals in International Trade). The
WTO’s Trade and Environment Committee does not intend to
duplicate their work but it also notes that the WTO could play a
complementary role.

Liberalization and sustainable development: good for
each other

Does freer trade help or hinder environmental protection? The Trade
and Environment Committee is analysing the relationship between
trade liberalization (including the Uruguay Round commitments) and
the protection of the environment. Members say the removal of
trade restrictions and distortions can yield benefits both for the
multilateral trading system and the environment. Further work is
scheduled.

Intellectual property, services: some scope for study

Discussions in the Trade and Environment Committee on these two
issues have broken new ground since there was very little
understanding of how the rules of the trading system might affect
or be affected by environmental policies in these areas.

On services, the committee says further work is needed to examine
the relationship between the General Agreement on Trade in
Services (GATS) and environmental protection policies in the sector.

The committee says that the Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS) helps countries obtain
environmentally-sound technology and products. More work is
scheduled on this, including on the relationship between the TRIPS
Agreement and the Convention of Biological Diversity.

ON THE WEBSITE:
www.wto.org > trade topics > environment

> See also Doha Agenda negotiations

3. Investment, competition, procurement,
simpler procedures

Ministers from WTO member-countries decided at the 1996
Singapore Ministerial Conference to set up three new working
groups: on trade and investment, on competition policy, and on
transparency in government procurement. They also instructed the
WTO Goods Council to look at possible ways of simplifying trade
procedures, an issue sometimes known as “trade facilitation”.
Because the Singapore conference kicked off work in these four
subjects, they are sometimes called the “Singapore issues”.

These four subjects were originally included on the Doha
Development Agenda. The carefully-negotiated mandate was for
negotiations to start after the 2003 Cancún Ministerial Conference,
“on the basis of a decision to be taken, by explicit consensus, at
that session on modalities of negotiations”. There was no
consensus, and the members agreed on 1 August 2004 to proceed
with negotiations in only one subject, trade facilitation. The other
three were dropped from the Doha agenda.

> See also Doha Development Agenda

Investment and competition: what role for the WTO?

Work in the WTO on investment and competition policy issues
originally took the form of specific responses to specific trade policy
issues, rather than a look at the broad picture.

Decisions reached at the 1996 Ministerial Conference in Singapore
changed the perspective. The ministers decided to set up two
working groups to look more generally at how trade relates to
investment and competition policies.

The working groups’ tasks were analytical and exploratory. They
would not negotiate new rules or commitments without a clear
consensus decision.

The ministers also recognized the work underway in the UN
Conference on Trade and Development (UNCTAD) and other
international organizations. The working groups were to cooperate
with these organizations so as to make best use of available
resources and to ensure that development issues are fully taken
into account.

An indication of how closely trade is linked with investment is the
fact that about one third of the $6.1 trillion total for world trade in
goods and services in 1995 was trade within companies — for
example between subsidiaries in different countries or between a
subsidiary and its headquarters.

The close relationships between trade and investment and
competition policy have long been recognized. One of the
intentions, when GATT was drafted in the late 1940s, was for rules
on investment and competition policy to exist alongside those for
trade in goods. (The other two agreements were not completed
because the attempt to create an International Trade Organization
failed.)

Over the years, GATT and the WTO have increasingly dealt with
specific aspects of the relationships. For example, one type of trade

covered by the General Agreement on Trade in Services (GATS) is
the supply of services by a foreign company setting up operations in
a host country — i.e. through foreign investment. The Trade-
Related Investment Measures Agreement says investors’ right
to use imported goods as inputs should not depend on their export
performance.

The same goes for competition policy. GATT and GATS contain rules
on monopolies and exclusive service suppliers. The principles have
been elaborated considerably in the rules and commitments on
telecommunications. The agreements on intellectual property and
services both recognize governments’ rights to act against anti-
competitive practices, and their rights to work together to limit
these practices.

ON THE WEBSITE:
www.wto.org > trade topics > investment

www.wto.org > trade topics > competition policy

Transparency in government purchases: towards
multilateral rules

The WTO already has an Agreement on Government
Procurement. It is plurilateral — only some WTO members have
signed it so far. The agreement covers such issues as transparency
and non-discrimination.

The decision by WTO ministers at the 1996 Singapore conference
did two things. It set up a working group that was multilateral —
it included all WTO members. And it focused the group’s work on
transparency in government procurement practices. The group did
not look at preferential treatment for local suppliers, so long as the
preferences were not hidden.

The first phase of the group’s work was to study transparency in
government procurement practices, taking into account national
policies. The second phase was to develop elements for inclusion in
an agreement.

ON THE WEBSITE:
www.wto.org > trade topics > government procurement

Trade facilitation: a new high profile

Once formal trade barriers come down, other issues become more
important. For example, companies need to be able to acquire
information on other countries’ importing and exporting regulations
and how customs procedures are handled. Cutting red-tape at the
point where goods enter a country and providing easier access to
this kind of information are two ways of “facilitating” trade.

The 1996 Singapore ministerial conference instructed the WTO
Goods Council to start exploratory and analytical work “on the
simplification of trade procedures in order to assess the scope for
WTO rules in this area”. Negotiations began after the General
Council decision of 1 August 2004.

ON THE WEBSITE:
www.wto.org > trade topics > trade facilitation

4. Electronic commerce

A new area of trade involves goods crossing borders electronically.
Broadly speaking, this is the production, advertising, sale and
distribution of products via telecommunications networks. The most
obvious examples of products distributed electronically are books,
music and videos transmitted down telephone lines or through the
Internet.

The declaration on global electronic commerce adopted by the
Second (Geneva) Ministerial Conference on 20 May 1998 urged the
WTO General Council to establish a comprehensive work
programme to examine all trade-related issues arising from global
electronic commerce. The General Council adopted the plan for this
work programme on 25 September 1998, initiating discussions on
issues of electronic commerce and trade by the Goods, Services and
TRIPS (intellectual property) Councils and the Trade and
Development Committee.

In the meantime, WTO members also agreed to continue their
current practice of not imposing customs duties on electronic
transmissions.

ON THE WEBSITE:
www.wto.org > trade topics > electronic commerce

5. Labour standards: highly controversial

Strictly speaking, this should not be mentioned here at all because
there is no work on the subject in the WTO, and it would be wrong
to assume that it is a subject that “lies ahead”. But it has been
discussed so extensively, that some clarification is needed. The key
phrase is “core labour standards” — essential standards applied to
the way workers are treated. The term covers a wide range of
things: from use of child labour and forced labour, to the right to
organize trade unions and to strike.

Trade and labour rights: deferred to the ILO

Trade and labour standards is a highly controversial issue. At the
1996 Singapore Ministerial Conference, WTO members defined the
organization’s role more clearly, identifying the International Labour
Organization (ILO) as the competent body to deal with labour
standards. There is currently no work on the subject in the WTO.

The debate outside the WTO has raised three broad questions.

• The legal question: should trade action be permitted as a
means of putting pressure on countries considered to be
severely violating core labour rights?

• The analytical question: if a country has lower standards for
labour rights, do its exports gain an unfair advantage?

• The institutional question: is the WTO the proper place to
discuss labour?

All three questions have a political angle: whether trade actions
should be used to impose labour standards, or whether this would
simply be an excuse for protectionism.

The WTO agreements do not deal with any core labour standards.
But some industrial nations believe the issue should be studied by
the WTO as a first step toward bringing the matter of core labour
standards into the organization. WTO rules and disciplines, they
argue, would provide a powerful incentive for member nations to
improve workplace conditions.

Many developing and some developed nations believe the issue has
no place in the WTO framework. These nations argue that efforts to
bring labour standards into the arena of multilateral trade
negotiations are little more than a smokescreen for protectionism.
Many officials in developing countries believe the campaign to bring
labour issues into the WTO is actually a bid by industrial nations to
undermine the comparative advantage of lower wage trading
partners.

In the weeks leading up to the 1996 Singapore Ministerial
Conference, and during the meeting itself, this was a hard-fought
battle. In the end, WTO members said they were committed to
recognized core labour standards, and that these standards should
not be used for protectionism. The economic advantage of low-wage
countries should not be questioned, but the WTO and ILO
secretariats would continue their existing collaboration, the
declaration said. The concluding remarks of the chairman,
Singapore’s trade and industry minister, Mr Yeo Cheow Tong, added
that the declaration does not put labour on the WTO’s agenda. The
countries concerned might continue their pressure for more work to
be done in the WTO, but for the time being there are no committees
or working parties dealing with the issue.

The official answer

What the 1996 Singapore ministerial
declaration says on core labour standards

“We renew our commitment to the
observance of internationally recognized
core labour standards. The International
Labour Organization (ILO) is the
competent body to set and deal with
these standards, and we affirm our
support for its work in promoting them.
We believe that economic growth and
development fostered by increased trade
and further trade liberalization contribute
to the promotion of these standards. We
reject the use of labour standards for
protectionist purposes, and agree that the
comparative advantage of countries,
particularly low-wage developing
countries, must in no way be put into
question. In this regard, we note that the
WTO and ILO Secretariats will continue
their existing collaboration.”

Chapter 5

The Doha agenda

The work programme lists 21 subjects. The

original deadline of 1 January 2005 was missed.

The unofficial target is now the end of 2006.

At the Fourth Ministerial Conference in Doha, Qatar, in November
2001 WTO member governments agreed to launch new
negotiations. They also agreed to work on other issues, in particular
the implementation of the present agreements. The entire package
is called the Doha Development Agenda (DDA).

The negotiations take place in the Trade Negotiations Committee
and its subsidiaries, which are usually, either regular councils and
committees meeting in “special sessions”, or specially-created
negotiating groups. Other work under the work programme takes
place in other WTO councils and committees.

The Fifth Ministerial Conference in Cancún, Mexico, in
September 2003, was intended as a stock-taking meeting where
members would agree on how to complete the rest of the
negotiations. But the meeting was soured by discord on agricultural
issues, including cotton, and ended in deadlock on the “Singapore
issues” (see below). Real progress on the Singapore issues and
agriculture was not evident until the early hours of 1 August 2004
with a set of decisions in the General Council (sometimes called the
July 2004 package). The original 1 January 2005 deadline was
missed. After that, members unofficially aimed to finish the
negotiations by the end of 2006.

ON THE WEBSITE:
www.wto.org > trade topics > Doha Development Agenda

www.wto.org > the WTO > General Council
www.wto.org > trade topics > Doha Development Agenda >

Trade Negotiations Committee

There are 19–21 subjects listed in the Doha Declaration, depending
on whether to count the “rules” subjects as one or three. Most of
them involve negotiations; other work includes actions under
“implementation”, analysis and monitoring. This is an unofficial
explanation of what the declaration mandates (listed with the
declaration’s paragraphs that refer to them):

Implementation-related issues and concerns
(par 12)

“Implementation” is short-hand for developing countries’ problems
in implementing the current WTO Agreements, i.e. the agreements
arising from the Uruguay Round negotiations.

No area of WTO work received more attention or generated more
controversy during nearly three years of hard bargaining before the
Doha Ministerial Conference. Around 100 issues were raised during
that period. The result was a two-pronged approach:

• More than 40 items under 12 headings were settled at or before
the Doha conference, for immediate delivery.

• The vast majority of the remaining items immediately became
the subject of negotiations.

This was spelt out in a separate ministerial decision on
implementation, combined with paragraph 12 of the main Doha
Declaration.

The implementation decision includes the following (detailed
explanations can be seen on the WTO website):

General Agreement on Tariffs and Trade (GATT)

• Balance-of-payments exception: clarifying less stringent
conditions in GATT for developing countries if they restrict
imports in order to protect their balance-of-payments.

• Market-access commitments: clarifying eligibility to negotiate or
be consulted on quota allocation.

Agriculture

• Rural development and food security for developing countries
• Least-developed and net food-importing developing countries
• Export credits, export credit guarantees or insurance

programmes
• Tariff rate quotas

Sanitary and phytosanitary (SPS) measures

• More time for developing countries to comply with other
countries’ new SPS measures

• “Reasonable interval” between publication of a country’s new
SPS measure and its entry into force

• Equivalence: putting into practice the principle that
governments should accept that different measures used by
other governments can be equivalent to their own measures for
providing the same level of health protection for food, animals
and plants.

• Review of the SPS Agreement
• Developing countries’ participation in setting international SPS

standards
• Financial and technical assistance

Textiles and clothing

• “Effective” use of the agreement’s provisions on early
integration of products into normal GATT rules, and elimination
of quotas.

• Restraint in anti-dumping actions.
• The possibility of examining governments’ new rules of origin.
• Members to consider favourable quota treatment for small

suppliers and least-developed countries, and larger quotas in
general.

Technical barriers to trade

• Technical assistance for least-developed countries, and reviews
of technical assistance in general.

• When possible, a six-month “reasonable interval” for developing
countries to adapt to new measures.

• The WTO director-general encouraged to continue efforts to
help developing countries participate in setting international
standards.

Trade-related investment measures (TRIMs)

• The Goods Council is “to consider positively” requests from
least-developed countries to extend the seven-year transition
period for eliminating measures that are inconsistent with the
agreement.

Anti-dumping (GATT Article 6)

• No second anti-dumping investigation within a year unless
circumstances have changed.

• How to put into operation a special provision for developing
countries (Article 15 of the Anti-Dumping Agreement), which
recognizes that developed countries must give “special regard”
to the situation of developing countries when considering
applying anti-dumping measures.

• Clarification sought on the time period for determining whether
the volume of dumped imported products is negligible, and
therefore no anti-dumping action should be taken.

• Annual reviews of the agreement’s implementation to be
improved.

Customs valuation (GATT Article 7)

• Extending the deadline for developing countries to implement
the agreement

• Dealing with fraud: how to cooperate in exchanging
information, including on export values

Rules of origin

• Completing the harmonization of rules of origin among member
governments

• Dealing with interim arrangements in the transition to the new,
harmonized rules of origin.

Subsidies and countervailing measures

• Sorting out how to determine whether some developing
countries meet the test of being below US$1,000 per capita
GNP allowing them to pay subsidies that require the recipient to
export.

• Noting proposed new rules allowing developing countries to
subsidize under programmes that have “legitimate development
goals” without having to face countervailing or other action.

• Review of provisions on countervailing duty investigations.
• Reaffirming that least-developed countries are exempt from the

ban on export subsidies.
• Directing the Subsidies Committee to extend the transition

period for certain developing countries.

Trade-related aspects of intellectual property rights (TRIPS)

• “Non-violation” complaints: the unresolved question of how to
deal with possible TRIPS disputes involving loss of an expected
benefit even if the TRIPS Agreement has not actually been
violated.

• Technology transfer to least-developed countries

Key dates: agriculture

Start: early 2000

“Framework” agreed:
1 August 2004.

Formulas and other
“modalities” for
countries’ commitments:
originally 31 March 2003,
now by 6th Ministerial
Conference, 2005 (in
Hong Kong, China)

Countries’
comprehensive draft
commitments and stock
taking: originally by 5th
Ministerial Conference,
2003 (in Mexico)

Deadline: originally by 1
January 2005, now
unofficially by end of
2006, part of single
undertaking

Cross-cutting issues

• Which special and differential treatment provisions are
mandatory? What are the implications of making mandatory
those that are currently non-binding?

• How can special and differential treatment provisions be made
more effective?

• How can special and differential treatment be incorporated in
the new negotiations?

• Developed countries are urged to grant preferences in a
generalized and non-discriminatory manner, i.e. to all
developing countries rather than to a selected group.

Outstanding implementation issues

• To be handled under paragraph 12 of the main Doha
Declaration.

Final provisions

• The WTO Director-General is to ensure that WTO technical
assistance gives priority to helping developing countries
implement existing WTO obligations, and to increase their
capacity to participate more effectively in future negotiations.

• The WTO Secretariat is to cooperate more closely with other
international organizations so that technical assistance is more
efficient and effective.

The implementation decision is tied into the main Doha
Declaration, where ministers agreed on a future work programme
to deal with unsettled implementation questions. “Negotiations on
outstanding implementation issues shall be an integral part of the
Work Programme” in the coming years, they declared.

In the declaration, the ministers established a two-track approach.
Those issues for which there was an agreed negotiating mandate in
the declaration would be dealt with under the terms of that
mandate.

Those implementation issues where there is no
mandate to negotiate, would be the taken up as “a
matter of priority” by relevant WTO councils and
committees. These bodies were to report on their
progress to the Trade Negotiations Committee by the
end of 2002 for “appropriate action”.

ON THE WEBSITE:
www.wto.org > trade topics > Doha

Development Agenda > Implementation
Decision Explained

Agriculture
(par 13, 14)

Negotiations on agriculture began in early 2000,
under Article 20 of the WTO Agriculture Agreement.
By November 2001 and the Doha Ministerial
Conference, 121 governments had submitted a large
number of negotiating proposals.

These negotiations have continued, but now with the mandate given
by the Doha Declaration, which also includes a series of deadlines.
The declaration builds on the work already undertaken, confirms

Key dates: services

Start: early 2000

Negotiating guidelines and
procedures: March 2001

Initial requests for market
access: by 30 June 2002

Initial offers of market access:
by 31 March 2003

Stock taking: originally 5th
Ministerial Conference, 2003 (in
Mexico)

Revised market-access offers: by
31 May 2005

Deadline: originally by 1 January
2005, now unofficially end of
2006, part of single undertaking

and elaborates the objectives, and sets a timetable. Agriculture is
now part of the single undertaking in which virtually all the linked
negotiations were to end by 1 January 2005, now with the unofficial
target of the end of 2006.

The declaration reconfirms the long-term objective already agreed
in the present WTO Agreement: to establish a fair and market-
oriented trading system through a programme of fundamental
reform. The programme encompasses strengthened rules, and
specific commitments on government support and protection for
agriculture. The purpose is to correct and prevent restrictions and
distortions in world agricultural markets.

Without prejudging the outcome, member governments commit
themselves to comprehensive negotiations aimed at:

• market access: substantial reductions
• exports subsidies: reductions of, with a view to phasing out,

all forms of these (in the 1 August 2004 “framework”
members agreed to eliminate export subsidies by a date to
be negotiated)

• domestic support: substantial reductions for supports that
distort trade (in the 1 August 2004 “framework”, developed
countries pledged to slash trade-distorting domestic
subsidies by 20% from the first day any Doha Agenda
agreement is implemented.

The declaration makes special and differential treatment for
developing countries integral throughout the negotiations, both in
countries’ new commitments and in any relevant new or revised
rules and disciplines. It says the outcome should be effective in
practice and should enable developing countries to meet their
needs, in particular in food security and rural development.

The ministers also take note of the non-trade concerns (such as
environmental protection, food security, rural development, etc)
reflected in the negotiating proposals already submitted. They
confirm that the negotiations will take these into account, as
provided for in the Agriculture Agreement.

A first step along the road to final agreement was reached on
1 August 2004 when members agreed on a “framework” (Annex A
of the General Council decision).

The negotiations take place in “special sessions” of the
Agriculture Committee.

ON THE WEBSITE:
www.wto.org > trade topics > goods >

agriculture > agriculture negotiations

Services
(par 15)

Negotiations on services were already almost two
years old when they were incorporated into the new
Doha agenda.

The WTO General Agreement on Trade in Services
(GATS) commits member governments to undertake
negotiations on specific issues and to enter into
successive rounds of negotiations to progressively
liberalize trade in services. The first round had to
start no later than five years from 1995.

Key dates: market
access

Start: January 2002

Stock taking: 5th
Ministerial
Conference, 2003
(in Mexico)

Deadline: originally by
1 January 2005, now
unofficially by end of
2006, part of single
undertaking

Accordingly, the services negotiations started officially in early 2000
under the Council for Trade in Services. In March 2001, the Services
Council fulfilled a key element in the negotiating mandate by
establishing the negotiating guidelines and procedures.

The Doha Declaration endorses the work already done, reaffirms the
negotiating guidelines and procedures, and establishes some key
elements of the timetable including, most importantly, the deadline
for concluding the negotiations as part of a single undertaking.

The negotiations take place in “special sessions” of the Services
Council and regular meetings of its relevant subsidiary
committees or working parties.

ON THE WEBSITE:
www.wto.org > trade topics > services > services

negotiations

Market access for non-agricultural products
(par 16)

The ministers agreed to launch tariff-cutting
negotiations on all non-agricultural products. The
aim is “to reduce, or as appropriate eliminate tariffs,
including the reduction or elimination of tariff peaks,
high tariffs, and tariff escalation, as well as non-tariff
barriers, in particular on products of export interest
to developing countries”. These negotiations shall
take fully into account the special needs and
interests of developing and least-developed
countries, and recognize that these countries do not
need to match or reciprocate in full tariff-reduction
commitments by other participants.

At the start, participants have to reach agreement
on how (“modalities”) to conduct the tariff-cutting exercise (in the
Tokyo Round, the participants used an agreed mathematical
formula to cut tariffs across the board; in the Uruguay Round,
participants negotiated cuts product by product). The agreed
procedures would include studies and capacity-building measures
that would help least-developed countries participate effectively in
the negotiations. Back in Geneva, negotiators decided that the
“modalities” should be agreed by 31 May 2003. When that date was
missed, members agreed on 1 August 2004 on a new target: the
Hong Kong Ministerial Conference in December 2005.

While average customs duties are now at their lowest levels after
eight GATT Rounds, certain tariffs continue to restrict trade,
especially on exports of developing countries — for instance “tariff
peaks”, which are relatively high tariffs, usually on “sensitive”
products, amidst generally low tariff levels. For industrialized
countries, tariffs of 15% and above are generally recognized as
“tariff peaks”.

Another example is “tariff escalation”, in which higher import duties
are applied on semi-processed products than on raw materials, and
higher still on finished products. This practice protects domestic
processing industries and discourages the development of
processing activity in the countries where raw materials originate.

The negotiations take place in a Market Access Negotiating
Group.

Key dates:
intellectual property

Report to the General
Council — solution on
compulsory licensing
and lack of
pharmaceutical
production capacity:
originally by end of
2002, decision agreed
30 April 2003.

Report to TNC —
action on outstanding
implementation issues
under par 12: by end
of 2002 (missed)

Deadline —
negotiations on
geographical
indications registration
system (wines and
spirits): by 5th
Ministerial
Conference, 2003
(in Mexico) (missed)

Deadline —
negotiations
specifically mandated
in Doha Declaration:
originally by 1 January
2005, now unofficially
by end of 2006

Least-developed
countries to apply
pharmaceutical patent
provisions: 2016

ON THE WEBSITE:
www.wto.org > trade topics > market access > market

access negotiations

Trade-related aspects of intellectual property rights
(TRIPS) (pars 17–19)

TRIPS and public health. In the declaration, ministers stress
that it is important to implement and interpret the TRIPS
Agreement in a way that supports public health — by promoting
both access to existing medicines and the creation of new
medicines. They refer to their separate declaration on this subject.

This separate declaration on TRIPS and public health is designed to
respond to concerns about the possible implications of the TRIPS
Agreement for access to medicines.

It emphasizes that the TRIPS Agreement does not and should not
prevent member governments from acting to protect public health.
It affirms governments’ right to use the agreement’s flexibilities in
order to avoid any reticence the governments may feel.

The separate declaration clarifies some of the forms of flexibility
available, in particular compulsory licensing and parallel importing.
(For an explanation of these issues, go to the main TRIPS pages on
the WTO website)

For the Doha agenda, this separate declaration
sets two specific task. The TRIPS Council has to
find a solution to the problems countries may face
in making use of compulsory licensing if they have
too little or no pharmaceutical manufacturing
capacity, reporting to the General Council on this
by the end of 2002. (this was achieved in August,
2003, see intellectual property section of the
“Agreements” chapter.) The declaration also
extends the deadline for least-developed countries
to apply provisions on pharmaceutical patents
until 1 January 2016.

Geographical indications — the registration
system. Geographical indications are place
names (in some countries also words associated
with a place) used to identify products with
particular characteristics because they come from
specific places. The WTO TRIPS Council has
already started work on a multilateral registration
system for geographical indications for wines and
spirits. The Doha Declaration sets a deadline for
completing the negotiations: the Fifth Ministerial
Conference in 2003.

These negotiations take place in “special
sessions” of the TRIPS Council.

Geographical indications — extending the
“higher level of protection” to other
products. The TRIPS Agreement provides a
higher level of protection to geographical
indications for wines and spirits. This means they
should be protected even if there is no risk of
misleading consumers or unfair competition. A number of countries

Key dates: trade and
investment

Continuing work in working
group with defined agenda:
to 5th Ministerial
Conference, 2003 (in
Mexico)

Negotiations: after 5th
Ministerial Conference, 2003
(in Mexico) subject to
“explicit consensus” on
modalities with deadline: by
1 January 2005, part of
single undertaking. But no
consensus; dropped from
Doha agenda in 1 August
2004 decision

want to negotiate extending this higher level to other products.
Others oppose the move, and the debate in the TRIPS Council has
included the question of whether the relevant provisions of the
TRIPS Agreement provide a mandate for extending coverage
beyond wines and spirits.

The Doha Declaration notes that the TRIPS Council will handle this
under the declaration’s paragraph 12 (which deals with
implementation issues). Paragraph 12 offers two tracks: “(a) where
we provide a specific negotiating mandate in this Declaration, the
relevant implementation issues shall be addressed under that
mandate; (b) the other outstanding implementation issues shall be
addressed as a matter of priority by the relevant WTO bodies, which
shall report to the Trade Negotiations Committee [TNC], established
under paragraph 46 below, by the end of 2002 for appropriate
action.”

In papers circulated at the Ministerial Conference, member
governments expressed different interpretations of this mandate.

Argentina said it understands “there is no agreement to negotiate
the ‘other outstanding implementation issues’ referred to under (b)
and that, by the end of 2002, consensus will be required in order to
launch any negotiations on these issues”.

Bulgaria, the Czech Republic, EU, Hungary, India, Liechtenstein,
Kenya, Mauritius, Nigeria, Pakistan, the Slovak Republic, Slovenia,
Sri Lanka, Switzerland, Thailand and Turkey argued that there is a
clear mandate to negotiate immediately.

Reviews of TRIPS provisions. Two reviews have been taking
place in the TRIPS Council, as required by the TRIPS Agreement: a
review of Article 27.3(b) which deals with patentability or non-
patentability of plant and animal inventions, and the protection of
plant varieties; and a review of the entire TRIPS Agreement
(required by Article 71.1).

The Doha Declaration says that work in the TRIPS Council on
these reviews or any other implementation issue should also look
at: the relationship between the TRIPS Agreement and the UN
Convention on Biodiversity; the protection of traditional knowledge
and folklore; and other relevant new developments that member
governments raise in the review of the TRIPS Agreement. It adds
that the TRIPS Council’s work on these topics is to be guided by the
TRIPS Agreement’s objectives (Article 7) and principles (Article 8),
and must take development fully into account.

ON THE WEBSITE:
www.wto.org > trade topics > intellectual property

Relationship between trade and
investment
(pars 20–22)

This is a “Singapore issue” i.e. a working
group set up by the 1996 Singapore
Ministerial Conference has been studying it.

In the period up to the 2003 Ministerial
Conference, the declaration instructs the
working group to focus on clarifying the
scope and definition of the issues,
transparency, non-discrimination, ways of
preparing negotiated commitments,
development provisions, exceptions and

The four ‘Singapore’ issues:
no negotiations until …

For trade and investment, trade and
competition policy, transparency in
government procurement and trade
facilitation, the 2001 Doha declaration
does not launch negotiations
immediately. It says “negotiations will
take place after the Fifth Session of the
Ministerial Conference on the basis of a
decision to be taken, by explicit
consensus, at that session on modalities
of negotiations [i.e. how the negotiations
are to be conducted].”

But consensus eluded members on
negotiating the four subjects. Finally
agreement was reached on 1 August
2004 to negotiate trade facilitation
alone. The three other subjects were
dropped from the Doha agenda.

Key dates: trade and
competition policy

Continuing work in working
group with defined agenda:
to 5th Ministerial
Conference, 2003 (in
Mexico)
Negotiations: after 5th
Ministerial Conference, 2003
(in Mexico) subject to
“explicit consensus” on
modalities with deadline: by
1 January 2005, part of
single undertaking. But no
consensus; dropped from
Doha agenda in 1 August
2004 decision

balance-of-payments safeguards, consultation and dispute
settlement. The negotiated commitments would be modelled on
those made in services, which specify where commitments are
being made — “positive lists” — rather than making broad
commitments and listing exceptions.

The declaration also spells out a number of principles such as the
need to balance the interests of countries where foreign investment
originates and where it is invested, countries’ right to regulate
investment, development, public interest and individual countries’
specific circumstances. It also emphasizes support and technical
cooperation for developing and least-developed countries, and
coordination with other international organizations such as the UN
Conference on Trade and Development (UNCTAD).

Since the 1 August 2004 decision, this subject has been dropped
from the Doha agenda.

ON THE WEBSITE:
www.wto.org > trade topics > investment

Interaction between trade and competition policy
(pars 23–25)

This is another “Singapore issue”, with a working group set up in
1996 to study the subject.

In the period up to the 2003 Ministerial
Conference, the declaration instructs the
working group to focus on clarifying:

• core principles including
transparency, non-discrimination
and procedural fairness, and
provisions on “hardcore” cartels
(i.e. cartels that are formally set
up)

• ways of handling voluntary
cooperation on competition policy
among WTO member governments

• support for progressive
reinforcement of competition
institutions in developing countries
through capacity building

The declaration says the work must take full account of
developmental needs. It includes technical cooperation and capacity
building, on such topics as policy analysis and development, so that
developing countries are better placed to evaluate the implications
of closer multilateral cooperation for various developmental
objectives. Cooperation with other organizations such as the UN
Conference on Trade and Development (UNCTAD) is also included.

Since the 1 August 2004 decision, this subject has been dropped
from the Doha agenda.

ON THE WEBSITE:
www.wto.org > trade topics > competition policy

Key dates: trade
facilitation

Continuing work in
Goods Council with
defined agenda: to 5th
Ministerial
Conference, 2003 (in
Mexico)

Negotiations: after
5th Ministerial
Conference, 2003 (in
Mexico) subject to
“explicit consensus” on
modalities, agreed in
1 August 2004
decision.

Deadline: originally by
1 January 2005, now
unofficially end of
2006, part of single
undertaking

Key dates:
government
procurement
(transparency)

Continuing work in
working group with
defined agenda: to 5th
Ministerial
Conference, 2003 (in
Mexico)

Negotiations: after 5th
Ministerial Conference,
2003 (in Mexico)
subject to “explicit
consensus” on
modalities with
deadline: by 1 January
2005, part of single
undertaking. But no
consensus; dropped
from Doha agenda in
1 August 2004
decision

Transparency in government procurement
(par 26)

A third “Singapore issue” that was handled by a
working group set up by the Singapore
Ministerial Conference in 1996.

The Doha Declaration says that the “negotiations
shall be limited to the transparency aspects and
therefore will not restrict the scope for countries
to give preferences to domestic supplies and
suppliers” — it is separate from the plurilateral
Government Procurement Agreement.

The declaration also stresses development
concerns, technical assistance and capacity
building.

Since the 1 August 2004 decision, this subject
has been dropped from the Doha agenda.

ON THE WEBSITE:
www.wto.org > trade topics > government

procurement

Trade facilitation
(par 27)

A fourth “Singapore issue” kicked off by the 1996
Ministerial Conference.

The declaration recognizes the case for “further
expediting the movement, release and clearance
of goods, including goods in transit, and the need
for enhanced technical assistance and capacity
building in this area”.

In the period until the Fifth Ministerial
Conference in 2003, the WTO Goods Council,
which had been working on this subject since
1997, “shall review and as appropriate, clarify
and improve relevant aspects of Articles 5
(‘Freedom of Transit’), 8 (‘Fees and Formalities
Connected with Importation and Exportation’)
and 10 (‘Publication and Administration of Trade
Regulations’) of the General Agreement on
Tariffs and Trade (GATT 1994) and identify the
trade facilitation needs and priorities of
Members, in particular developing and least-
developed countries”.

Those issues were cited in the 1 August 2004 decision that broke
the Cancún deadlock. Members agreed to start negotiations on
trade facilitation, but not the three other Singapore issues.

ON THE WEBSITE:
www.wto.org > trade topics > trade facilitation

Key dates: anti-
dumping, subsidies

Start: January 2002
Stock taking: 5th
Ministerial
Conference, 2003
(in Mexico)
Deadline: originally by
1 January 2005, now
unofficially end of
2006, part of single
undertaking

Key dates: regional
trade

Start: January 2002
Stock taking: 5th
Ministerial
Conference, 2003
(in Mexico)
Deadline: originally by
1 January 2005, now
unofficially end of
2006, part of single
undertaking

WTO rules: anti-dumping and subsidies
(par 28)

The ministers agreed to negotiations on the Anti-
Dumping (GATT Article 6) and Subsidies agreements.
The aim is to clarify and improve disciplines while
preserving the basic, concepts, principles of these
agreements, and taking into account the needs of
developing and least-developed participants.

In overlapping negotiating phases, participants first
indicated which provisions of these two agreements
they think should be the subject of clarification and
improvement in the next phase of negotiations. The
ministers mention specifically fisheries subsidies as
one sector important to developing countries and
where participants should aim to clarify and improve
WTO disciplines.

Negotiations take place in the Rules Negotiating Group.

ON THE WEBSITE:
www.wto.org > trade topics > goods > antidumping

www.wto.org > trade topics > goods > subsidies and
countervailing measures

WTO rules: regional trade agreements
(par 29)

WTO rules say regional trade agreements have to meet certain
conditions. But interpreting the wording of these rules has proved
controversial, and has been a central element in the work of the
Regional Trade Agreements Committee. As a result, since 1995 the
committee has failed to complete its assessments of
whether individual trade agreements conform with
WTO provisions.

This is now an important challenge, particularly
when nearly all member governments are parties to
regional agreements, are negotiating them, or are
considering negotiating them. In the Doha
Declaration, members agreed to negotiate a
solution, giving due regard to the role that these
agreements can play in fostering development.

The declaration mandates negotiations aimed at
“clarifying and improving disciplines and procedures under the
existing WTO provisions applying to regional trade agreements. The
negotiations shall take into account the developmental aspects of
regional trade agreements.”

These negotiations fell into the general timetable established for
virtually all negotiations under the Doha Declaration. The original
deadline of 1 January 2005 was missed and the current unofficial
aim is to finish the talks by the end of 2006. The 2003 Fifth
Ministerial Conference in Mexico was intended to take stock of
progress, provide any necessary political guidance, and take
decisions as necessary.

Negotiations take place in the Rules Negotiating Group.

Key dates:
environment

Committee reports to
ministers: 5th and
6th Ministerial
Conferences, 2003
and 2005, (in Mexico
and Hong Kong,
China)

Negotiations stock
taking: 5th
Ministerial
Conference, 2003
(in Mexico)

Negotiations deadline:
originally by 1 January
2005, now
unofficially end of
2006, part of single
undertaking

Key dates: disputes
understanding

Start: January 2002

Deadline: originally by
May 2003, currently
no deadline, separate
from single
undertaking

ON THE WEBSITE:
www.wto.org > trade topics > goods > regional trade
agreements

Dispute Settlement Understanding
(par 30)

The 1994 Marrakesh

Ministerial Conference

mandated WTO member governments to conduct a
review of the Dispute Settlement Understanding
(DSU, the WTO agreement on dispute settlement)
within four years of the entry into force of the WTO
Agreement (i.e. by 1 January 1999).

The Dispute Settlement Body (DSB) started the
review in late 1997, and held a series of informal
discussions on the basis of proposals and issues that members
identified. Many, if not all, members clearly felt that improvements
should be made to the understanding. However, the DSB could not
reach a consensus on the results of the review.

The Doha Declaration mandates negotiations and states (in par 47)
that these will not be part of the single undertaking — i.e. that they
will not be tied to the overall success or failure of the other
negotiations mandated by the declaration. Originally set to conclude
by May 2003, the negotiations are continuing without a deadline.

Negotiations take place in “special sessions” of the Dispute
Settlement Body.

ON THE WEBSITE:
www.wto.org > trade topics > dispute settlement

Trade and environment
(pars 31–33)

New negotiations

Multilateral environmental agreements. Ministers agreed to
launch negotiations on the relationship between
existing WTO rules and specific trade obligations set
out in multilateral environmental agreements. The
negotiations will address how WTO rules are to apply
to WTO members that are parties to environmental
agreements, in particular to clarify the relationship
between trade measures taken under the
environmental agreements and WTO rules.

So far no measure affecting trade taken under an
environmental agreement has been challenged in the
GATT-WTO system.

Information exchange. Ministers agreed to
negotiate procedures for regular information
exchange between secretariats of multilateral
environmental agreements and the WTO. Currently,
the Trade and Environment Committee holds an
information session with different secretariats of the
multilateral environmental agreements once or twice

a year to discuss the trade-related provisions in these
environmental agreements and also their dispute settlement
mechanisms. The new information exchange procedures may
expand the scope of existing cooperation.

Observer status. Overall, the situation concerning the granting
of observer status in the WTO to other international governmental
organizations is currently blocked for political reasons. The
negotiations aim to develop criteria for observership in WTO.

Trade barriers on environmental goods and services.
Ministers also agreed to negotiations on the reduction or elimination
of tariff and non-tariff barriers to environmental goods and services.
Examples of environmental goods and services are catalytic
converters, air filters or consultancy services on wastewater
management.

Fisheries subsidies. Ministers agreed to clarify and improve
WTO rules that apply to fisheries subsidies. The issue of fisheries
subsidies has been studied in the Trade and Environment
Committee for several years. Some studies demonstrate these
subsidies can be environmentally damaging if they lead to too many
fishermen chasing too few fish.

Negotiations on these issues, including concepts of what are the
relevant environmental goods and services, take place in “special
sessions” of the Trade and Environment Committee.
Negotiations on market access for environmental goods and
services take place in the Market Access Negotiating Group and
Services Council “special sessions”.

Work in the committee

Ministers instructed the Trade and Environment Committee, in
pursuing work on all items on its agenda, to pay particular attention
to the following areas:

• The effect of environmental measures on market access,
especially for developing countries.

• “Win-win-win” situations: when eliminating or reducing trade
restrictions and distortions would benefit trade, the
environment and development.

• Intellectual property. Paragraph 19 of the Ministerial
Declaration mandates the TRIPs Council to continue clarifying
the relationship between the TRIPS Agreement and the
Biological Diversity Convention. Ministers also ask the Trade
and Environment Committee to continue to look at the
relevant provisions of the TRIPS agreement.

• Environmental labelling requirements. The Trade and
Environment Committee is to look at the impact of eco-
labelling on trade and examine whether existing WTO rules
stand in the way of eco-labelling policies. Parallel discussions
are to take place in the Technical Barriers to Trade (TBT)
Committee.

• For all these issues: when working on these (market access,
“win-win-win” situations, intellectual property and
environmental labelling), the Trade and Environment
Committee should identify WTO rules that would need to be
clarified.

• General: ministers recognize the importance of technical
assistance and capacity building programmes for developing
countries in the trade and environment area. They also
encourage members to share expertise and experience on
national environmental reviews.

Key date: electronic
commerce

Report on further
progress: 5th
Ministerial
Conference, 2003
(in Mexico)

Key date: small
economies

Recommendations:
5th and 6th
Ministerial
Conferences, 2003
and 2005 (in Mexico
and Hong Kong,
China)

Key date: debt and
finance

General Council
report: 5th and 6th
Ministerial
Conferences, 2003
and 2005 (in Mexico
and Hong Kong,
China)

Key date:
technology transfer

General Council
report: 5th and 6th
Ministerial
Conferences, 2003
and 2005 (in Mexico
and Hong Kong,
China)

ON THE WEBSITE:
www.wto.org > trade topics > environment

Electronic commerce
(par 34)

The Doha Declaration endorses the work already done on electronic
commerce and instructs the General Council to consider the most
appropriate institutional arrangements for handling the work
programme, and to report on further progress to the Fifth
Ministerial Conference.

The declaration on electronic commerce from the
Second Ministerial Conference in Geneva, 1998, said
that WTO members will continue their practice of not
imposing customs duties on electronic transmissions.
The Doha Declaration states that members will
continue this practice until the Fifth Ministerial
Conference.

ON THE WEBSITE:
www.wto.org > trade topics > electronic commerce

Small economies
(par 35)

Small economies face specific challenges in their
participation in world trade, for example lack of
economy of scale or limited natural resources.

The Doha Declaration mandates the General
Council to examine these problems and to make
recommendations to the next Ministerial Conference
as to what trade-related measures could improve the
integration of small economies.

Trade, debt and finance
(par 36)

Many developing countries face serious external debt
problems and have been through financial crises.
WTO ministers decided in Doha to establish a
Working Group on Trade, Debt and Finance to
look at how trade-related measures can contribute
to find a durable solution to these problems. This
working group will report to the General Council which will in turn
report to the next Ministerial Conference.

Trade and technology transfer
(par 37)

A number of provisions in the WTO agreements
mention the need for a transfer of technology to take
place between developed and developing countries.

However, it is not clear how such a transfer takes

Key dates: technical
cooperation

Technical assistance
funding raised 80%;
Development Agenda
Global Trust Fund set
up: December 2001

Director-General
reports to General
Council: December
2002

Director-General
reports to ministers:
5th and 6th
Ministerial
Conferences, 2003
and 2005 (in Mexico
and Hong Kong,
China)

place in practice and if specific measures might be taken within the
WTO to encourage such flows of technology.

WTO ministers decided in Doha to establish a working group to
examine the issue. The working group will report to the General
Council which itself will report to the next Ministerial Conference.

Technical cooperation and capacity building
(pars 38–41)

Through various paragraphs of the Doha Declaration, WTO member
governments have made new commitments on technical
cooperation and capacity building.

For example, the section on the relationship between trade and
investment includes a call (par 21) for enhanced support for
technical assistance and capacity building in this area.

Within the specific heading “technical cooperation and capacity
building”, paragraph 41 lists all the references to commitments on
technical cooperation within the Doha Declaration: paragraphs 16
(market access for non-agricultural products), 21 (trade and
investment), 24 (trade and competition policy), 26 (transparency in
government procurement), 27 (trade facilitation), 33
(environment), 38-40 (technical cooperation and capacity building),
42 and 43 (least-developed countries). (Paragraph 2 in the
preamble is also cited.)

Under this heading (i.e. pars 38–41), WTO member governments
reaffirm all technical cooperation and capacity building
commitments made throughout the declaration and add general
commitments:

• The Secretariat, in coordination with other
relevant agencies, is to encourage WTO
developing-country members to consider
trade as a main element for reducing poverty
and to include trade measures in their
development strategies.

• The agenda set out in the Doha Declaration
gives priority to small, vulnerable, and
transition economies, as well as to members
and observers that do not have permanent
delegations in Geneva.

• Technical assistance must be delivered by the
WTO and other relevant international
organizations within a coherent policy
framework.

The Director-General reported to the General
Council in December 2002 and to the Fifth
Ministerial Conference on the implementation and
adequacy of these new commitments.

Following the declaration’s instructions to develop a plan ensuring
long-term funding for WTO technical assistance, the General
Council adopted on 20 December 2001 (one month after the Doha
conference) a new budget that increased technical assistance
funding by 80% and established a Doha Development Agenda
Global Trust Fund. The fund now has an annual budget of 24 million
Swiss francs.

Key date: least-
developed countries

Reports to: General
Council, July 2002,
5th and 6th
Ministerial
Conferences, 2003
and 2005 (in Mexico
and Hong Kong,
China)

Key date: special
and differential
treatment

Recommendations to
General Council: July
2002, July 2005

ON THE WEBSITE:
www.wto.org > trade topics > development

> technical

cooperation & training

Least-developed countries
(pars 42, 43)

Many developed countries have now significantly
decreased or actually scrapped tariffs on imports
from least-developed countries (LDCs).

In the Doha declaration, WTO member
governments commit themselves to the objective
of duty-free, quota-free market access for LDCs’
products and to consider additional measures to
improve market access for these exports.

Members also agree to try to ensure that least-
developed countries can negotiate WTO membership faster and
more easily.

Some technical assistance is targeted specifically for least-
developed countries. The Doha Declaration urges WTO member
donors to significantly increase their contributions.

In addition, the Sub-Committee for LDCs (a subsidiary body of
the WTO Committee on Trade and Development) designed a work
programme in February 2002, as instructed by the Doha
Declaration, taking into account the parts of the declaration related
to trade that was issued at the UN LDC Conference.

ON THE WEBSITE:
www.wto.org > trade topics > development

Special and differential treatment
(par 44)

The WTO agreements contain special provisions
which give developing countries special rights. These
special provisions include, for example, longer time
periods for implementing agreements and
commitments or measures to increase trading
opportunities for developing countries.

In the Doha Declaration, member governments agree that all
special and differential treatment provisions should be reviewed
with a view to strengthening them and making them more precise.

More specifically, the declaration (together with the Decision on
Implementation-Related Issues and Concerns) mandates the Trade
and Development Committee to identify which of those special
and differential treatment provisions are mandatory, and to
consider the implications of making mandatory those which are
currently non-binding.

The Decision on Implementation-Related Issues and Concerns
instructed the committee to make its recommendations for the
General Council before July 2002. But because members needed
more time, this was postponed to the end of July 2005.

96
ON THE WEBSITE:
www.wto.org > trade topics > development

Cancún 2003, Hong Kong 2005

The Doha agenda set a number of tasks to be completed before or
at the Fifth Ministerial Conference in Cancún, Mexico, 10–
14 September 2003. On the eve of the conference, on 30 August,
agreement was reached on the TRIPS and public health issue.
However, a number of the deadlines were missed, including
“modalities” for agriculture and the non-agricultural market access
negotiations, reform of the Dispute Settlement Understanding, and
recommendations on special and differential treatment. Nor were
members near to agreement on the multilateral geographical
indications register for wines and spirits, due to be completed in
Cancún.

Although Cancún saw delegations move closer to consensus on a
number of key issues, members remained deeply divided over a
number of issues, including the “Singapore” issues — launching
negotiations on investment, competition policy, transparency in
government procurement, and trade facilitation — and agriculture.

The conference ended without consensus. Ten months later, the
deadlock was broken in Geneva when the General Council agreed on
the “July package” in the early hours of 1 August 2004, which
kicked off negotiations in trade facilitation but not the three other
Singapore issues. The delay meant the 1 January 2005 deadline for
finishing the talks could not be met. Unofficially, members aimed to
complete the next phase of the negotiations at the Hong Kong
Ministerial Conference, 13–18 December 2005, including full
“modalities” in agriculture and market access for non-agricultural
products, and to finish the talks by the end of the following year.

ON THE WEBSITE:
www.wto.org > the wto > decision making >

ministerial conferences

Chapter 6

Developing countries

How the WTO deals with the special needs of an

increasingly important group

1. Overview

About two thirds of the WTO’s around 150 members are developing
countries. They play an increasingly important and active role in the
WTO because of their numbers, because they are becoming more
important in the global economy, and because they increasingly
look to trade as a vital tool in their development efforts. Developing
countries are a highly diverse group often with very different views
and concerns. The WTO deals with the special needs of developing
countries in three ways:

• the WTO agreements contain special provisions on
developing countries

• the Committee on Trade and Development is the main body
focusing on work in this area in the WTO, with some others
dealing with specific topics such as trade and debt, and
technology transfer

• the WTO Secretariat provides technical assistance (mainly
training of various kinds) for developing countries.

In the agreements: more time, better terms

The WTO agreements include numerous provisions giving
developing and least-developed countries special rights or extra
leniency — “special and differential treatment”. Among these are
provisions that allow developed countries to treat developing
countries more favourably than other WTO members.

The General Agreement on Tariffs and Trade (GATT, which deals
with trade in goods) has a special section (Part 4) on Trade and
Development which includes provisions on the concept of non-
reciprocity in trade negotiations between developed and developing
countries — when developed countries grant trade concessions to
developing countries they should not expect the developing
countries to make matching offers in return.

Both GATT and the General Agreement on Trade in Services (GATS)
allow developing countries some preferential treatment.

Other measures concerning developing countries in the WTO
agreements include:

• extra time for developing countries to fulfil their commitments
(in many of the WTO agreements)

• provisions designed to increase developing countries’ trading
opportunities through greater market access (e.g. in textiles,
services, technical barriers to trade)

• provisions requiring WTO members to safeguard the interests
of developing countries when adopting some domestic or
international measures (e.g. in anti-dumping, safeguards,
technical barriers to trade)

• provisions for various means of helping developing countries
(e.g. to deal with commitments on animal and plant health

standards, technical standards, and in strengthening their
domestic telecommunications sectors).

Legal assistance: a Secretariat service

The WTO Secretariat has special legal advisers for assisting
developing countries in any WTO dispute and for giving them legal
counsel. The service is offered by the WTO’s Training and Technical
Cooperation Institute. Developing countries regularly make use of
it.

Furthermore, in 2001, 32 WTO governments set up an Advisory
Centre on WTO law. Its members consist of countries contributing
to the funding, and those receiving legal advice. All least-developed
countries are automatically eligible for advice. Other developing
countries and transition economies have to be fee-paying members
in order to receive advice.

Least-developed countries: special focus

The least-developed countries receive extra attention in the WTO.
All the WTO agreements recognize that they must benefit from the
greatest possible flexibility, and better-off members must make
extra efforts to lower import barriers on least-developed countries’
exports.

Since the Uruguay Round agreements were signed in 1994, several
decisions in favour of least-developed countries have been taken.

Meeting in Singapore in 1996, WTO ministers agreed on a “Plan of
Action for Least-Developed Countries”. This included technical
assistance to enable them to participate better in the multilateral
system and a pledge from developed countries to improved market
access for least-developed countries’ products.

A year later, in October 1997, six international organizations — the
International Monetary Fund, the International Trade Centre, the
United Nations Conference for Trade and Development, the United
Nations Development Programme, the World Bank and the WTO —
launched the “Integrated Framework”, a joint technical assistance
programme exclusively for least-developed countries.

In 2002, the WTO adopted a work programme for least-developed
countries. It contains several broad elements: improved market
access; more technical assistance; support for agencies working on
the diversification of least-developed countries’ economies; help in
following the work of the WTO; and a speedier membership process
for least-developed countries negotiating to join the WTO.

At the same time, more and more member governments have
unilaterally scrapped import duties and import quotas on all exports
from least-developed countries.

A ‘maison’ in Geneva: being present is important, but
not easy for all

The WTO’s official business takes place mainly in Geneva. So do the
unofficial contacts that can be equally important. But having a

permanent office of representatives in Geneva can be expensive.
Only about one third of the 30 or so least-developed countries in
the WTO have permanent offices in Geneva, and they cover all
United Nations activities as well as the WTO.

As a result of the negotiations to locate the WTO headquarters in
Geneva, the Swiss government has agreed to provide subsidized
office space for delegations from least-developed countries.

A number of WTO members also provide financial support for
ministers and accompanying officials from least-developed countries
to help them attend WTO ministerial conferences.

ON THE WEBSITE:
www.wto.org > trade topics > development

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2. Committees

Work specifically on developing countries within the WTO itself can
be divided into two broad areas: (i) work of the WTO committees
(this heading), and (ii) training for government officials (and others)
by the WTO Secretariat as mandated by the committee (next
heading).

Trade and Development Committee

The WTO Committee on Trade and Development has a wide-ranging
mandate. Among the broad areas of topics it has tackled as
priorities are: how provisions favouring developing countries are
being implemented, guidelines for technical cooperation, increased
participation of developing countries in the trading system, and the
position of least-developed countries.

Member-countries also have to inform the WTO about special
programmes involving trade concessions for products from
developing countries, and about regional arrangements among
developing countries. The Trade and Development Committee
handles notifications of:

• Generalized System of Preferences programmes (in which
developed countries lower their trade barriers preferentially for
products from developing countries)

• preferential arrangements among developing countries such as
MERCOSUR (the Southern Common Market in Latin America),
the Common Market for Eastern and Southern Africa (COMESA),
and the ASEAN Free Trade Area (AFTA)

Subcommittee on Least-Developed Countries

The Subcommittee on Least-Developed Countries reports to the
Trade and Development Committee, but it is an important body in
its own right. Its work focuses on two related issues:

• ways of integrating least-developed countries into the
multilateral trading system

• technical cooperation.

The subcommittee also examines periodically how special provisions
favouring least-developed countries in the WTO agreements are
being implemented.

The Doha agenda committees

The Doha Ministerial Conference in November 2001, added new
tasks and some new working groups. The Trade and Development
Committee meets in “special sessions” to handle work under the
Doha Development Agenda. The ministers also set up working
groups on Trade, Debt and Finance, and on Trade and Technology
Transfer. (For details see the chapter on the Doha Agenda.)

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3. WTO technical cooperation

Technical cooperation is an area of WTO work that is devoted
almost entirely to helping developing countries (and countries in
transition from centrally-planned economies) operate successfully in
the multilateral trading system. The objective is to help build the
necessary institutions and to train officials. The subjects covered
deal both with trade policies and with effective negotiation.

Training, seminars and workshops

The WTO holds regular training sessions on trade policy in Geneva.
In addition, it organizes about 500 technical cooperation activities
annually, including seminars and workshops in various countries
and courses in Geneva.

Targeted are developing countries and countries in transition from
former socialist or communist systems, with a special emphasis on
African countries. Seminars have also been organized in Asia, Latin
America, the Caribbean, Middle East and Pacific.

Funding for technical cooperation and training comes from three
sources: the WTO’s regular budget, voluntary contributions from
WTO members, and cost-sharing either by countries involved in an
event or by international organizations.

The present regular WTO budget for technical cooperation and
training is 7 million Swiss francs.

Extra contributions by member countries go into trust funds
administered by the WTO Secretariat or the donor country. In 2004,
contributions to trust funds totalled 24 million Swiss francs.

A WTO Reference Centre programme was initiated in 1997 with the
objective of creating a network of computerized information centres
in least-developed and developing countries. The centres provide
access to WTO information and documents through a print library, a
CD-ROM collection and through the Internet to WTO websites and
databases. The centres are located mainly in trade ministries and in
the headquarters of regional coordination organizations. There are
currently 140 reference centres.

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4. Some issues raised

The Uruguay Round (1986–94) saw a shift in North-South politics in
the GATT-WTO system. Previously, developed and developing
countries had tended to be in opposite groups, although even then
there were exceptions. In the run up to the Uruguay Round, the line
between the two became less rigid, and during the round different
alliances developed, depending on the issues. The trend has
continued since then.

In some issues, the divide still appears clear — in textiles and
clothing, and some of the newer issues debated in the WTO, for
example — and developing countries have organized themselves
into alliances such as the African Group and the Least-Developed
Countries Group.

In many others, the developing countries do not share common
interests and may find themselves on opposite sides of a
negotiation. A number of different coalitions among different groups
of developing countries have emerged for this reason. The
differences can be found in subjects of immense importance to
developing countries, such as agriculture.

This is a summary of some of the points discussed in the WTO.

Participation in the system: opportunities and
concerns

The WTO agreements, which were the outcome of the 1986–94
Uruguay Round of trade negotiations, provide numerous
opportunities for developing countries to make gains. Further
liberalization through the Doha Agenda negotiations aims to
improve the opportunities.

Among the gains are export opportunities. They include:

• fundamental reforms in agricultural trade
• phasing out quotas on developing countries’ exports of textiles

and clothing
• reductions in customs duties on industrial products
• expanding the number of products whose customs duty rates are

“bound” under the WTO, making the rates difficult to raise
• phasing out bilateral agreements to restrict traded quantities of

certain goods — these “grey area” measures (the so-called
voluntary export restraints) are not really recognized under
GATT-WTO.

In addition, liberalization under the WTO boosts global GDP and
stimulates world demand for developing countries’ exports.

But a number of problems remain. Developing countries have
placed on the Doha Agenda a number of problems they face in
implementing the present agreements.

And they complain that they still face exceptionally high tariffs on
selected products (“tariff peaks”) in important markets that
continue to obstruct their important exports. Examples include tariff
peaks on textiles, clothing, and fish and fish products. In the
Uruguay Round, on average, industrial countries made slightly
smaller reductions in their tariffs on products which are mainly
exported by developing countries (37%), than on imports from all
countries (40%). At the same time, the potential for developing

‘Peaks’ and ‘escalation’: what are
they?

Tariff peaks: Most import tariffs are now
quite low, particularly in developed
countries. But for a few products that
governments consider to be sensitive —
they want to protect their domestic
producers — tariffs remain high. These
are “tariff peaks”. Some affect exports
from developing countries.

Tariff escalation: If a country wants to
protect its processing or manufacturing
industry, it can set low tariffs on imported
materials used by the industry (cutting
the industry’s costs) and set higher tariffs
on finished products to protect the goods
produced by the industry. This is “tariff
escalation”. When importing countries
escalate their tariffs in this way, they
make it more difficult for countries
producing raw materials to process and
manufacture value-added products for
export. Tariff escalation exists in both
developed and developing countries.
Slowly, it is being reduced.

103

countries to trade with each other is also hampered by the fact that
the highest tariffs are sometimes in developing countries
themselves. But the increased proportion of trade covered by
“bindings” (committed ceilings that are difficult to remove) has
added security to developing country exports.

A related issue is “tariff escalation”, where an importing country
protects its processing or manufacturing industry by setting lower
duties on imports of raw materials and components, and higher
duties on finished products. The situation is improving. Tariff
escalation remains after the Uruguay Round, but it is less severe,
with a number of developed countries eliminating escalation on
selected products. Now, the Doha agenda includes special attention
to be paid to tariff peaks and escalation so that they can be
substantially reduced.

Erosion of preferences

An issue that worries developing countries is the erosion of
preferences — special tariff concessions granted by developed
countries on imports from certain developing countries become less
meaningful if the normal tariff rates are cut because the difference
between the normal and preferential rates is reduced.

Just how valuable these preferences are is a matter of debate.
Unlike regular WTO tariff commitments, they are not “bound” under
WTO agreements and therefore they can be changed easily. They
are often given unilaterally, at the initiative of the importing
country. This makes trade under preferential rates less predictable
than under regular bound rates which cannot be increased easily.
Ultimately countries stand to gain more from regular bound tariff
rates.

But some countries and some companies have benefited from
preferences. The gains vary from product to product, and they also
depend on whether producers can use the opportunity to adjust so
that they remain competitive after the preferences have been
withdrawn.

The ability to adapt: the supply-side

Can developing countries benefit from the changes? Yes, but only if
their economies are capable of responding. This depends on a
combination of actions: from improving policy-making and
macroeconomic management, to boosting training and investment.
The least-developed countries are worst placed to make the
adjustments because of lack of human and physical capital, poorly
developed infrastructures, institutions that don’t function very well,
and in some cases, political instability.

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Chapter 7

The Organization

The WTO is ‘member-driven’, with decisions

taken by consensus among all member

governments

1. Whose WTO is it anyway?

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.

In this respect, the WTO is different from some other international
organizations such as the World Bank and International Monetary
Fund. In the WTO, power is not delegated to a board of directors or
the organization’s head.

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. This is quite different from other
agencies whose bureaucracies can, for example, influence a
country’s policy by threatening to withhold credit.

Reaching decisions by consensus among some 150 members can be
difficult. Its main advantage is that decisions made this way are
more acceptable to all members. And despite the difficulty, some
remarkable agreements have been reached. Nevertheless,
proposals for the creation of a smaller executive body — perhaps
like a board of directors each representing different groups of
countries — are heard periodically. But for now, the WTO is a
member-driven, consensus-based organization.

Highest authority: the Ministerial Conference

So, the WTO belongs to its members. The countries make their
decisions through various councils and committees, whose
membership consists of all WTO members. Topmost is the
ministerial conference which 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.

ON THE WEBSITE:
www.wto.org > the WTO > decision making >

ministerial conferences

ALTERNATIVE VIEW

‘The WTO will likely suffer from slow

and cumbersome policy-making and

management — an organization with

more than 120 member countries

cannot be run by a “committee of the

whole”. Mass management simply

does not lend itself to operational

efficiency or serious policy

discussion.

Both the IMF and the World Bank

have an executive board to direct the

executive officers of the organization,

with permanent participation by the

major industrial countries and

weighted voting. The WTO will

require a comparable structure to

operate efficiently. … [But] the

political orientation of smaller …

members remains strongly opposed.’

Jeffrey J Schott

Institute for International Economics,

Washington

105

Second level: 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.

ON THE WEBSITE:
www.wto.org > the WTO > General Council

106

WTO structure
All WTO members may participate in all councils, committees, etc, except Appellate Body, Dispute Settlement
panels, Textiles Monitoring Body, and plurilateral committees.

Committees on
Market Access
Agriculture
Sanitary and Phytosanitary

Measures
Technical Barriers to Trade
Subsidies and Countervailing

Measures
Anti-Dumping Practices
Customs Valuation
Rules of Origin
Import Licensing
Trade-Related Investment

Measures
Safeguards

Working party on
State-Trading Enterprises

Doha Development Agenda:
TNC and its bodies

Trade Negotiations
Committee

Special Sessions of
Services Council / TRIPS Council / Dispute Settlement

Body / Agriculture Committee / Trade and
Development Committee / Trade and Environment
Committee

Negotiating groups on
Market Access / Rules / Trade Facilitation

General Council meeting as
Dispute Settlement

Body

General Council meeting as
Trade Policy Review

Body
Ministerial Conference

Appellate Body
Dispute Settlement panels

Committees on
Trade and Environment
Trade and Development

Subcommittee on Least-
Developed Countries

Regional Trade Agreements
Balance of Payments

Restrictions
Budget, Finance and

Administration

Working parties on
Accession

Working groups on
Trade, debt and finance
Trade and technology

transfer
(Inactive:
(Relationship between

Trade and Investment
(Interaction between

Trade and Competition
Policy

(Transparency in
Government Procurement)

Council for
Trade in Goods

Council for
Trade-Related Aspects

of Intellectual
Property Rights

Committees on
Trade in Financial Services
Specific Commitments

Working parties on
Domestic Regulation
GATS Rules

Plurilaterals
Trade in Civil Aircraft Committee
Government Procurement Committee

Council for
Trade in Services

Key
Reporting to General Council (or a subsidiary)
Reporting to Dispute Settlement Body
Plurilateral committees inform the General Council or Goods Council of their activities, although these agreements
are not signed by all WTO members
Trade Negotiations Committee reports to General Council

The General Council also meets as the Trade Policy Review Body and Dispute Settlement Body

Plurilateral
Information Technology Agreement

Committee
General Council

107

Third level: 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
(see below).

Six other bodies report to the General Council. 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.

Two more subsidiary bodies dealing with the plurilateral agreements
(which are not signed by all WTO members) keep the General
Council informed of their activities regularly.

Fourth level: down to the nitty-gritty

Each of the higher level councils has subsidiary bodies. 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.

‘HODs’ and other bods: the need for informality

Important breakthroughs are rarely made in formal meetings of
these bodies, least of all in the higher level councils. Since decisions
are made by consensus, without voting, informal consultations
within the WTO play a vital role in bringing a vastly diverse
membership round to an agreement.

Goods Council’s committees

Market access
Agriculture
Sanitary and phytosanitary measures
Textiles Monitoring Body
Technical barriers to trade
Subsidies and countervail
Anti-dumping
Customs valuation
Rules of origin
Import licensing
Investment measures
Safeguards
State trading (working party)

Voting is possible, too

The WTO continues GATT’s tradition of
making decisions not by voting but by
consensus. This allows all members to
ensure their interests are properly
considered even though, on occasion,
they may decide to join a consensus in
the overall interests of the multilateral
trading system.

Where consensus is not possible, the
WTO agreement allows for voting — a
vote being won with a majority of the
votes cast and on the basis of “one
country, one vote”.

The WTO Agreement envisages four
specific situations involving voting:

• An interpretation of any of the
multilateral trade agreements can be
adopted by a majority of three quarters
of WTO members.

• The Ministerial Conference can waive an
obligation imposed on a particular
member by a multilateral agreement, also
through a three-quarters majority.

• Decisions to amend provisions of the
multilateral agreements can be adopted
through approval either by all members
or by a two-thirds majority depending on
the nature of the provision concerned.
But the amendments only take effect for
those WTO members which accept them.

• A decision to admit a new member is
taken by a two-thirds majority in the
Ministerial Conference, or the General
Council in between conferences.

108

One step away from the formal meetings are informal meetings that
still include the full membership, such as those of the Heads of
Delegations (HOD). More difficult issues have to be thrashed out in
smaller groups. A common recent practice is for the chairperson of
a negotiating group to attempt to forge a compromise by holding
consultations with delegations individually, in twos or threes, or in
groups of 20–30 of the most interested delegations.

These smaller meetings have to be handled sensitively. The key is
to ensure that everyone is kept informed about what is going on
(the process must be “transparent”) even if they are not in a
particular consultation or meeting, and that they have an
opportunity to participate or provide input (it must be “inclusive”).

One term has become controversial, but more among some outside
observers than among delegations. The “Green Room” is a phrase
taken from the informal name of the director-general’s conference
room. It is used to refer to meetings of 20–40 delegations. These
meetings can be called by a committee chairperson as well as the
director-general, and can take place elsewhere, such as at
Ministerial Conferences. In the past delegations have sometimes felt
that Green Room meetings could lead to compromises being struck
behind their backs. So, extra efforts are made to ensure that the
process is handled correctly, with regular reports back to the full
membership. In the end, decisions have to be taken by all members
and by consensus. No one has been able to find an alternative way
of achieving consensus on difficult issues, because it is virtually
impossible for members to change their positions voluntarily in
meetings of the full membership.

Market access negotiations also involve small groups, but for a
completely different reason. The final outcome is a multilateral
package of individual countries’ commitments, but those
commitments are the result of numerous bilateral, informal
bargaining sessions, which depend on individual countries’ interests.
(Examples include the traditional tariff negotiations, and market
access talks in services.)

So, informal consultations in various forms play a vital role in
allowing consensus to be reached, but they do not appear in
organization charts, precisely because they are informal.

They are not separate from the formal meetings, however. They are
necessary for making formal decisions in the councils and
committees. Nor are the formal meetings unimportant. They are the
forums for exchanging views, putting countries’ positions on the
record, and ultimately for confirming decisions. The art of achieving
agreement among all WTO members is to strike an appropriate
balance, so that a breakthrough achieved among only a few
countries can be acceptable to the rest of the membership.

Same people, different hats?

No, not exactly.

Formally, all of these councils and
committees consist of the full
membership of the WTO. But that does
not mean they are the same, or that the
distinctions are purely bureaucratic.

In practice the people participating in the
various councils and committees are
different because different levels of
seniority and different areas of expertise
are needed.

Heads of missions in Geneva (usually
ambassadors) normally represent their
countries at the General Council level.
Some of the committees can be highly
specialized and sometimes governments
send expert officials from their capital
cities to participate in these meetings.

Even at the level of the Goods, Services
and TRIPS councils, many delegations
assign different officials to cover the
different meetings.

109

2. Membership, alliances and bureaucracy

All members have joined the system as a result of negotiation and
therefore membership means a balance of rights and obligations.
They enjoy the privileges that other member-countries give to them
and the security that the trading rules provide. In return, they had
to make commitments to open their markets and to abide by the
rules — those commitments were the result of the membership (or
“accession”) negotiations. Countries negotiating membership are
WTO “observers”.

How to join the WTO: the accession process

Any state or customs territory having full autonomy in the conduct
of its trade policies may join (“accede to”) the WTO, but WTO
members must agree on the terms. Broadly speaking the
application goes through four stages:

• First, “tell us about yourself”. The government applying for
membership has to describe all aspects of its trade and
economic policies that have a bearing on WTO agreements. This
is submitted to the WTO in a memorandum which is examined
by the working party dealing with the country’s application.
These working parties are open to all WTO members.

• Second, “work out with us individually what you have to
offer”. When the working party has made sufficient progress on
principles and policies, parallel bilateral talks begin between the
prospective new member and individual countries. They are
bilateral because different countries have different trading
interests. These talks cover tariff rates and specific market
access commitments, and other policies in goods and services.
The new member’s commitments are to apply equally to all WTO
members under normal non-discrimination rules, even though
they are negotiated bilaterally. In other words, the talks
determine the benefits (in the form of export opportunities and
guarantees) other WTO members can expect when the new
member joins. (The talks can be highly complicated. It has been
said that in some cases the negotiations are almost as large as
an entire round of multilateral trade negotiations.)

• Third, “let’s draft membership terms”. Once the working
party has completed its examination of the applicant’s trade
regime, and the parallel bilateral market access negotiations are
complete, the working party finalizes the terms of accession.
These appear in a report, a draft membership treaty (“protocol
of accession”) and lists (“schedules”) of the member-to-be’s
commitments.

• Finally, “the decision”. The final package, consisting of the
report, protocol and lists of commitments, is presented to the
WTO General Council or the Ministerial Conference. If a two-
thirds majority of WTO members vote in favour, the applicant is
free to sign the protocol and to accede to the organization. In
many cases, the country’s own parliament or legislature has to
ratify the agreement before membership is complete.

ON THE WEBSITE:
www.wto.org > the WTO > accessions

110

Representing us …

The work of the WTO is undertaken by representatives of member
governments but its roots lie in the everyday activity of industry
and commerce. Trade policies and negotiating positions are
prepared in capitals, usually taking into account advice from private
firms, business organizations, farmers, consumers and other
interest groups.

Most countries have a diplomatic mission in Geneva, sometimes
headed by a special ambassador to the WTO. Officials from the
missions attend meetings of the many councils, committees,
working parties and negotiating groups at WTO headquarters.
Sometimes expert representatives are sent directly from capitals to
put forward their governments’ views on specific questions.

Representing groups of countries …

Increasingly, countries are getting together to form groups and
alliances in the WTO. In some cases they even speak with one voice
using a single spokesman or negotiating team.

This is partly the natural result of economic integration — more
customs unions, free trade areas and common markets are being
set up around the world. It is also seen as a means for smaller
countries to increase their bargaining power in negotiations with
their larger trading partners. Sometimes when groups of countries
adopt common positions consensus can be reached more easily.
Sometimes the groups are specifically created to compromise and
break a deadlock rather than to stick to a common position. But
there are no hard and fast rules about the impact of groupings in
the WTO.

The largest and most comprehensive group is the European Union
(for legal reasons known officially as the “European
Communities” in WTO business) and its 15 member states. The
EU is a customs union with a single external trade policy and tariff.
While the member states coordinate their position in Brussels and
Geneva, the European Commission alone speaks for the EU at
almost all WTO meetings. The EU is a WTO member in its own right
as are each of its member states.

A lesser degree of economic integration has so far been achieved by
WTO members in the Association of South East Asian Nations
(ASEAN) — Brunei Darussalam, Indonesia, Malaysia, Myanmar,
Philippines, Thailand and Singapore. (The three remaining
members, Cambodia, Laos and Viet Nam, are applying to join the
WTO.) Nevertheless, they have many common trade interests and
are frequently able to coordinate positions and to speak with a
single voice. The role of spokesman rotates among ASEAN members
and can be shared out according to topic. MERCOSUR, the
Southern Common Market (Argentina, Brazil, Paraguay and
Uruguay, with Bolivia and Chile as associate members), has a
similar set-up.

More recent efforts at regional economic integration have not yet
reached the point where their constituents frequently have a single
spokesman on WTO issues. An examples is the North American
Free Trade Agreement: NAFTA (Canada, US and Mexico). Among

European Union or Communities?

For legal reasons, the European Union is
known officially as the European
Communities in WTO business. The EU is
a WTO member in its own right as are
each of its 15 member states — making
16 WTO members.

While the member states coordinate their
position in Brussels and Geneva, the
European Commission alone speaks for
the EU at almost all WTO meetings. For
this reason, in most issues WTO materials
refer to the EU or the more legally-correct
EC.

However, sometimes references are made
to the specific member states, particularly
where their laws differ. This is the case in
some disputes when an EU member’s law
or measure is cited, or in notifications of
EU member countries’ laws, such as in
intellectual property (TRIPS). Sometimes
individuals’ nationalities are identified,
such as for WTO committee chairpersons.

The Quad

Some of the most difficult negotiations
have needed an initial breakthrough in
talks among the four largest members:

• Canada
• European Union
• Japan
• United States
These are the “Quadrilaterals” or the
“Quad”.

111

other groupings which occasionally present unified statements are
the African Group, the least-developed countries, the African,
Caribbean and Pacific Group (ACP) and the Latin American
Economic System (SELA).

A well-known alliance of a different kind is the Cairns Group. It
was set up just before the Uruguay Round began in 1986 to argue
for agricultural trade liberalization. The group became an important
third force in the farm talks and remains in operation. Its members
are diverse, but sharing a common objective — that agriculture has
to be liberalized — and the common view that they lack the
resources to compete with larger countries in domestic and export
subsidies.

The WTO Secretariat and budget

The WTO Secretariat is located in Geneva. It has around 630 staff
and is headed by a director-general. Its responsibilities include:

• Administrative and technical support for WTO delegate bodies
(councils, committees, working parties, negotiating groups) for
negotiations and the implementation of agreements.

• Technical support for developing countries, and especially the
least-developed.

• Trade performance and trade policy analysis by WTO economists
and statisticians.

• Assistance from legal staff in the resolution of trade disputes
involving the interpretation of WTO rules and precedents.

• Dealing with accession negotiations for new members and
providing advice to governments considering membership.

Some of the WTO’s divisions are responsible for supporting
particular committees: the Agriculture Division assists the
committees on agriculture and on sanitary and phytosanitary
measures, for example. Other divisions provide broader support for
WTO activities: technical cooperation, economic analysis, and
information, for example.

The WTO budget is over 160 million Swiss francs with individual
contributions calculated on the basis of shares in the total trade
conducted by WTO members. Part of the WTO budget also goes to
the International Trade Centre.

The Cairns Group

From four continents, members ranging
from OECD countries to the least
developed

Argentina
Australia
Bolivia
Brazil
Canada
Chile
Colombia
Costa Rica
Guatemala
Indonesia
Malaysia
New Zealand
Paraguay
Philippines
South Africa
Thailand
Uruguay

112

3. The Secretariat

The WTO Secretariat is headed by a director-general. Divisions
come directly under the director-general or one of his deputies. This
is the structure since 1 October 2005.

Director-general
Pascal Lamy

Office of the director-general: administrative
support for (disputes) Appellate Body

Council and Trade Negotiations Committee
Division: General Council, Dispute Settlement
Body, Trade Negotiations Committee (DDA), etc

DDA Special Duties Division: Special focus on
development assistance aspects of cotton and
other selected Doha Development Agenda issues

Human Resources Division

Information and Media Relations Division

Deputy director-general
Alejandro Jara

Accessions Division: negotiations to join the
WTO

Economic Research and Statistics Division

Legal Affairs Division: Dispute settlement, etc

Rules Division: anti-dumping, subsidies,
safeguards, state trading, civil aircraft, etc

Deputy director-general
Valentine Rugwabiza

Development Division: trade and development,
least-developed countries

External Relations Division: relations with
intergovernmental and non-governmental
organizations, protocol

Technical Cooperation Audit

Trade and Finance Division: TRIMs; trade,
debt and finance; balance of payments; links with
IMF and World Bank; trade facilitation
(simplification of trade procedures); trade and
investment; etc

Training and Technical Cooperation Institute

Deputy director-general
Harsha Vardhana Singh

Agriculture and Commodities Division:
agriculture, sanitary and phytosanitary measures,
etc

Trade and Environment Division: trade and
environment, technical barriers to trade, etc

Trade in Services Division: GATS etc.

Deputy director-general
Rufus Yerxa

Administration and General Services
Division: budget, finance and administration

Informatics Division

Intellectual Property Division: TRIPS,
competition and government procurement

Language Services and Documentation
Division

Market Access Division: Goods Council, market
access, tariffs, customs valuation, non-tariff
measures, import licensing, rules of origin,
preshipment inspection

Trade Policies Review Division: trade policy
reviews, regional trade agreements

113

4. Special policies

The WTO’s main functions are to do with trade negotiations and the
enforcement of negotiated multilateral trade rules (including dispute
settlement). Special focus is given to four particular policies
supporting these functions:

•

Assisting developing and transition economies

• Specialized help for export promotion
• Cooperation in global economic policy-making
• Routine notification when members introduce new trade

measures or alter old ones.

Assisting developing and transition economies

Developing countries make up about three quarters of the total
WTO membership. Together with countries currently in the process
of “transition” to market-based economies, they play an
increasingly important role in the WTO.

Therefore, much attention is paid to the special needs and problems
of developing and transition economies. The WTO Secretariat’s
Training and Technical Cooperation Institute organizes a number of
programmes to explain how the system works and to help train
government officials and negotiators. Some of the events are in
Geneva, others are held in the countries concerned. A number of
the programmes are organized jointly with other international
organizations. Some take the form of training courses. In other
cases individual assistance might be offered.

The subjects can be anything from help in dealing with negotiations
to join the WTO and implementing WTO commitments to guidance
in participating effectively in multilateral negotiations. Developing
countries, especially the least-developed among them, are helped
with trade and tariff data relating to their own export interests and
to their participation in WTO bodies.

ON THE WEBSITE:
www.wto.org > trade topics > development > WTO Training

Institute

Specialized help for exporting: the International Trade
Centre

The International Trade Centre was established by GATT in 1964 at
the request of the developing countries to help them promote their
exports. It is jointly operated by the WTO and the United Nations,
the latter acting through UNCTAD (the UN Conference on Trade and
Development).

The centre responds to requests from developing countries for
assistance in formulating and implementing export promotion
programmes as well as import operations and techniques. It
provides information and advice on export markets and marketing
techniques. It assists in establishing export promotion and
marketing services, and in training personnel required for these
services. The centre’s help is freely available to the least-developed
countries.

114

The WTO in global economic policy-making

An important aspect of the WTO’s mandate is to cooperate with the
International Monetary Fund, the World Bank and other multilateral
institutions to achieve greater coherence in global economic policy-
making. A separate Ministerial Declaration was adopted at the
Marrakesh Ministerial Meeting in April 1994 to underscore this
objective.

The declaration envisages an increased contribution by the WTO to
achieving greater coherence in global economic policy-making. It
recognizes that different aspects of economic policy are linked, and
it calls on the WTO to develop its cooperation with the international
organizations responsible for monetary and financial matters — the
World Bank and the International Monetary Fund.

The declaration also recognizes the contribution that trade
liberalization makes to the growth and development of national
economies. It says this is an increasingly important component in
the success of the economic adjustment programmes which many
WTO members are undertaking, even though it may often involve
significant social costs during the transition.

Transparency (1): keeping the WTO informed

Often the only way to monitor whether commitments are being
implemented fully is by requiring countries to notify the WTO
promptly when they take relevant actions. Many WTO agreements
say member governments have to notify the WTO Secretariat of
new or modified trade measures. For example, details of any new
anti-dumping or countervailing legislation, new technical standards
affecting trade, changes to regulations affecting trade in services,
and laws or regulations concerning the intellectual property
agreement — they all have to be notified to the appropriate body of
the WTO. Special groups are also established to examine new free-
trade arrangements and the trade policies of countries joining as
new members.

Transparency (2): keeping the public informed

The main public access to the WTO is the website, www.wto.org.
News of the latest developments are published daily. Background
information and explanations of a wide range of issues — including
“Understanding the WTO” — are also available. And those wanting
to follow the nitty-gritty of WTO work can consult or download an
ever-increasing number of official documents, now over 150,000, in
Documents Online.

On 14 May 2002, the General Council decided to make more
documents available to the public as soon as they are circulated. It
also decided that the minority of documents that are restricted
should be made public more quickly — after about two months,
instead of the previous six. This was the second major decision on
transparency. On 18 July 1996, the General Council had agreed to
make more information about WTO activities available publicly and
decided that public information, including derestricted WTO
documents, would be accessible on-line.

115

The objective is to make more information available to the public.
An important channel is through the media, with regular briefings
on all major meetings for journalists in Geneva — and increasingly
by email and other means for journalists around the world.

Meanwhile, over the years, the WTO Secretariat has enhanced its
dialogue with civil society — non-governmental organizations
(NGOs) interested in the WTO, parliamentarians, students,
academics, and other groups.

In the run-up to the Doha Ministerial Conference in 2001, WTO
members proposed and agreed on several new activities involving
NGOs. In 2002, the WTO Secretariat increased the number of
briefings for NGOs on all major WTO meetings and began listing the
briefing schedules on its website. NGOs are also regularly invited to
the WTO to present their recent policy research and analysis directly
to member governments.

A monthly list of NGO position papers received by the Secretariat is
compiled and circulated for the information of member
governments. A monthly electronic news bulletin is also available to
NGOs, enabling access to publicly available WTO information.

ON THE WEBSITE:
www.wto.org > community/forums

116

Current WTO members

148 governments, on February 2005, with date of membership (“g” = the 51 original GATT members who joined
after 1 January 1995; “n” = new members joining the WTO through a working party negotiation):

Albania 8 September 2000 (n)
Angola 1 December 1996 (g)
Antigua and Barbuda 1 January 1995
Argentina 1 January 1995
Armenia 5 February 2003 (n)
Australia 1 January 1995
Austria 1 January 1995
Bahrain 1 January 1995
Bangladesh 1 January 1995
Barbados 1 January 1995
Belgium 1 January 1995
Belize 1 January 1995
Benin 22 February 1996 (g)
Bolivia 13 September 1995 (g)
Botswana 31 May 1995 (g)
Brazil 1 January 1995
Brunei Darussalam 1 January 1995
Bulgaria 1 December 1996 (n)
Burkina Faso 3 June 1995 (g)
Burundi 23 July 1995 (g)
Cambodia 13 October 2004 (n)
Cameroon 13 December 1995 (g)
Canada 1 January 1995
Central African Republic 31 May 1995

(g)
Chad 19 October 1996 (g)
Chile 1 January 1995
China 11 December 2001 (n)
Colombia 30 April 1995 (g)
Congo 27 March 1997 (g)
Costa Rica 1 January 1995
Côte d’Ivoire 1 January 1995
Croatia 30 November 2000 (n)
Cuba 20 April 1995 (g)
Cyprus 30 July 1995 (g)
Czech Republic 1 January 1995
Democratic Republic of the Congo

1 January 1997 (g)
Denmark 1 January 1995
Djibouti 31 May 1995 (g)
Dominica 1 January 1995
Dominican Republic 9 March 1995 (g)
Ecuador 21 January 1996 (n)
Egypt 30 June 1995 (g)
El Salvador 7 May 1995 (g)
Estonia 13 November 1999 (n)
European Union 1 January 1995
Fiji 14 January 1996 (g)
Finland 1 January 1995
Former Yugoslav Republic of

Macedonia 4 April 2003 (n)
France 1 January 1995
Gabon 1 January 1995

Gambia 23 October 1996 (g)
Georgia 14 June 2000 (n)
Germany 1 January 1995
Ghana 1 January 1995
Greece 1 January 1995
Grenada 22 February 1996 (g)
Guatemala 21 July 1995 (g)
Guinea Bissau 31 May 1995 (g)
Guinea 25 October 1995 (g)
Guyana 1 January 1995
Haiti 30 January 1996 (g)
Honduras 1 January 1995
Hong Kong, China 1 January 1995
Hungary 1 January 1995
Iceland 1 January 1995
India 1 January 1995
Indonesia 1January 1995
Ireland 1 January 1995
Israel 21 April 1995 (g)
Italy 1 January 1995
Jamaica 9 March 1995 (g)
Jordan 11 April 2000 (n)
Japan 1 January 1995
Kenya 1 January 1995
Korea 1 January 1995
Kuwait 1 January 1995
Kyrgyz Republic 20 December

1998 (n)
Latvia 10 February 1999 (n)
Lesotho 31 May 1995 (g)
Liechtenstein 1 September 1995 (g)
Lithuania 31 May 2001 (n)
Luxembourg 1 January 1995
Macao, China 1 January 1995
Madagascar 17 November 1995 (g)
Malawi 31 May 1995 (g)
Malaysia 1 January 1995
Maldives 31 May 1995 (g)
Mali 31 May 1995 (g)
Malta 1 January 1995
Mauritania 31 May 1995 (g)
Mauritius 1 January 1995
Mexico 1 January 1995
Moldova 26 July 2001 (n)
Mongolia 29 January 1997 (n)
Morocco 1 January 1995
Mozambique 26 August 1995 (g)
Myanmar 1 January 1995
Namibia 1 January 1995
Nepal 23 April 2004 (n)
Netherlands — including Netherlands

Antilles 1 January 1995
New Zealand 1 January 1995

Nicaragua 3 September 1995 (g)
Niger 13 December 1996 (g)
Nigeria 1 January 1995
Norway 1 January 1995
Oman 9 November 2000 (n)
Pakistan 1 January 1995
Panama 6 September 1997 (n)
Papua New Guinea 9 June 1996 (g)
Paraguay 1 January 1995
Peru 1 January 1995
Philippines 1 January 1995
Poland 1 July 1995 (g)
Portugal 1 January 1995
Qatar 13 January 1996 (g)
Romania 1 January 1995
Rwanda 22 May 1996 (g)
Saint Kitts and Nevis 21 February

1996 (n)
Saint Lucia 1 January 1995
Saint Vincent & the Grenadines

1 January 1995
Senegal 1 January 1995
Sierra Leone 23 July 1995 (g)
Singapore 1 January 1995
Slovak Republic 1 January 1995
Slovenia 30 July 1995 (g)
Solomon Islands 26 July 1996 (g)
South Africa 1 January 1995
Spain 1 January 1995
Sri Lanka 1 January 1995
Suriname 1 January 1995
Swaziland 1 January 1995
Sweden 1 January 1995
Switzerland 1 July 1995 (g)
Chinese Taipei 1 January 2002 (n)
Tanzania 1 January 1995
Thailand 1 January 1995
Togo 31 May 1995 (g)
Trinidad and Tobago 1 March 1995 (g)
Tunisia 29 March 1995 (g)
Turkey 26 March 1995 (g)
Uganda 1 January 1995
United Arab Emirates 10 April

1996 (g)
United Kingdom 1 January 1995
United States 1 January 1995
Uruguay 1 January 1995
Venezuela 1 January 1995
Zambia 1 January 1995
Zimbabwe 3 March 1995 (g)

Observers

Afghanistan
Algeria
Andorra
Azerbaijan
Bahamas
Belarus
Bhutan
Bosnia and Herzegovina
Cape Verde
Equatorial Guinea
Ethiopia

Holy See (Vatican)
Iran
Iraq
Kazakhstan
Lao People’s Democratic Republic
Lebanese Republic
Libya
Montenegro
Russian Federation
Samoa
Sao Tome and Principe

Saudi Arabia
Serbia
Seychelles
Sudan
Tajikistan
Tonga
Ukraine
Uzbekistan
Vanuatu
Viet Nam
Yemen

Note: With the exception of the Holy See, observers must start accession negotiations within five years of becoming
observers

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