WTO:
W.T.O. stands for “World Trade Organization”. The “World Trade Organization” (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commence on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariff and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries. It provides a framework for negotiating and formalizing trade agreement, and a dispute resolution process aimed at enforcing participants. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986-1994).

The organization is currently endeavouring to persist with a trade negotiation called the Doha Development Agenda or (Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world’s population. However, the negotiation has been dogged by disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a “special safeguard measure” to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain.

Objectives of W.T.O:-
In its preamble, the Agreement establishing the World Trade Organization reiterates the objective of GATT. These are:-
? Raising standards of living and incomes ensuring full employment;
? Expanding production and trade;
? Allowing for the optimal use of the world’s resources.

The preamble extends these objectives:-
(I) To trade in services;
(II) To the need to promote ‘Sustainable Development’ and to protect and preserve the environment in a manner consistent with various levels of national economic development.
(III) To the need for positive efforts to ensure that developing countries and especially the least developed among them, secure better share of the growth in international trade.

Functions of the W.T.O:-
The Agreement establishing W.T.O provides that it should perform the following four functions:-
(1) It shall facilitate the implementation, administration and operation of the Uruguay Round legal instruments and of any new agreements that may be negotiated in the future.
(2) It shall provide a forum for further negotiations among member countries on matters covered by the Agreements, on new issues falling within its mandate and on further liberalization of trade.
(3) It shall be responsible for the settlement of differences and disputes among its member countries.
(4) It shall be responsible for carrying out periodic reviews of the trade policies of its member countries.

Structure of the W.T.O:-

The apex W.T.O body responsible for decision-making is the Ministerial conference, which meets every two years. Since the establishment of W.T.O, Two Ministerial conferences have been held: - the first in Singapore in December, 1996 and the second in Geneva in May, 1998. The third is to be held in Seattle from 30 November to 3 December, 1999.

During the two years between meetings, the functions of the conference are performed by the General council.

The General Council meets as a Dispute Settlement Body when it considers complaints and takes necessary steps to settle disputes between member countries.

It is also responsible for carrying out reviews of the trade policies of individual countries on the basis of the reports prepared by the W.T.O Secretariat.

The General Council is assisted in its work by the:-
? Council for Grade in Goods, which oversees the implementation and operation of GATT, 1994 and its associate Agreements;

? Council for Trade in services, which oversees the implementation and operation of GATTS; and

? Council for TRIPS, which oversees the operation of the Agreement on TRIPS.

Decision – Making process:-
The Agreement stipulates that W.T.O shall continue the GATT practice of decision-making by consensus. Consensus is deemed to have been reached when; at the time a decision is being taken not a single member country voices opposition to its adoption.

When a consensus is not possible, the W.T.O Agreement provides for decision by majority vote, with each country having one vote.

Despite these provisions, decisions on all important policy matters are expected to continue to be taken by consensus.

There are, however, a few cases where “Special Voting requirements” are prescribed. “Special Voting Requirements” are as follows:-

? The interpretation of the provisions of any of the agreements requires a three – fourths majority. [W.T.O Agreement, Article IX: 2]

? Amendments generally require a two – thirds majority. However, amendments to:-

? The provisions in the W.T.O Agreement on amendments and decision – making, and

? MFN provisions in GATT, 1994 GATTS and the TRIPS Agreement

Will take effect only upon acceptance by all members. [W.T.O Agreement, Article X: 1, 2]

? Requests for a temporary waiver by any member country from its W.T.O obligations require a three-fourths majority. [W.T.O Agreement, Article IX :2]

The W.T.O Secretariat:-
W.T.O is located at Geneva, Switzerland. IT is headed by a Director–General, who is assisted by three Deputy Directors-General. They are appointed by the Director- General. They are appointed by the Director-General in consultation with member countries.

Membership:-
W.T.O had 134 members as at 31st May, 1999.
Countries that are at present not members can become members of WTO by negotiating for accession. In such negotiations, they have to agree to take steps to bring their national legislation in conformity with the rules of the multilateral Agreements. In addition, they have to make commitments to reduce tariffs and modify their regulations so as to provide improved access for foreign goods and services. These commitments are often referred to as the price of the “entry ticket”. 30 countries are currently negotiating for accession.

The Basic Principles of W.T.O:-
The WTO establishes a framework for trade policies. It does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.

The Basic principles of WTO are contained in original GATT Act, 1947. These are still operative in the form of GATT, 1994 which updates GATT, 1947. They are nine in numbers. These are as follows:-
(1) Transparency
(2) MFN Treatment
(3) National Treatment
(4) The Free Trade Principle
(5) Dismantling Trade Barrier
(6) Rule Based Trading System
(7) Special and Differential Treatment for LDCs
(8) The Competition Principle
(9) Environment Protection

Transparency:-
WTO aims at achieving transparency in international trade relations by obligating Members to notify changes in their trade regulations, technical and phyto - sanitary standards well in advance. This helps exporters plan their business and safeguards them against unnecessary harassment.

Further, WTO conducts periodic trade policy review of member countries to promote transparency in their trade policies.

A WTO Member is required to publish promptly laws, regulations, judicial decisions and administrative ruling of general application pertaining to the classification or valuation of products for customs, rates of duty, taxes or other charges etc, affecting sale, distribution, transportation, insurance warehousing inspection etc. With the objective of enabling governments and traders to become acquainted with them Agreements affecting international trade policy which are in force, between the Government or a Governmental agency of any Member and the Government or Governmental agency of any other Member have also to be published. A WTO member is, however, not under obligation to disclose confidential information which can impede law enforcement or otherwise be contrary to the public interest or can prejudice the legitimate commercial interest of particular enterprises, both public and private.

Before publication, no measure of general application affecting increase in a rate of duty or other charges on imports can’t be enforced. For prompt review and of correction of administrative action relating to customs, judicial, arbitral or administrative tribunals or procedures have to be instituted. Such tribunals or procedures have to be independent of the agencies entrusted with administrative enforcement. Unless such decisions are appealed they shall be implemented by enforcement agencies.

MFN Treatment: Non- discrimination between countries:-
The most- favoured nation treatment obligation, widely known as the MFN treatment obligation requires WTO members not to discriminate between products originating in or destined for different countries. In simple terms, country ‘A’ should, for example, treat equally or not discriminate between a product originating in country ‘B’ and a ‘like’ product originating in country ‘c’.

Article I: 1 of the GATT, 1994 deals with this aspect as follows:-
“With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports.

Any advantage, favour, privilege or immunity granted by any [Member] to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other [Member].”

Objective:-
The object of the MFN treatment obligation is to ensure equality of opportunity to import from or to export to all WTO Members.

Violation of MFN Treatment:-

Article I: 1 of the GATT, 1994 sets out a three- tier test. These are as follows:-
(1) Does the measure at issue confer an “advantage” upon the products originating in or destined for the territories of all other members?
(2) Are the products concerned “like”?
(3) Was the advantage at issue granted “immediately and unconditionally” to all like products concerned?

National Treatment: Non- discrimination within a country:-
The national treatment obligation, commonly referred to as the “NT obligation”, requires WTO Members not to discriminate against imported products once the imported products have entered the domestic market. In other words, country ‘A’ should not treat products imported from country ‘b’ or ‘c’ less favourably than its own “like” domestic products.

Purpose:-
Article III of the GATT 1994 prohibits discrimination between domestic and like imported products through the use of various internal measure enumerated in Article III: 1, namely,

Internal taxes and other internal charges and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions...........

In other words, the purpose of Article III: 1 is to ensure that such internal measures should not be applied to imported or domestic products so as to afford protection to domestic production

(Article III: 1).
The Free Trade Principle: Optimal Utilisation of World Resources:-

Lowering trade barrier is one of the most obvious means of encouraging trade. The barriers concerned include mainly customs duties (or tariffs) and measures such as quantitative restrictions like import bans or quotas that restrict quantities selectively.

Dismantling Trade Barriers: Removal of QRs, Tariff Bindings:-
? Quantitative Restrictions:-
Quantitative Restrictions (QRs) are measures which prohibit or restrict the quantity of a product that may be imported. A typical example of quantitative restrictions would be a measure allowing the importation of 10,000 widgets only. This quantitative restriction is also referred to as a quota.

? General Prohibition of Quantitative Restrictions:-
The GATT 1994 sets out a general prohibition of quantitative restrictions. Article XI: 1 of the GATT provides:-

“No prohibition or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any member on the importation of any product of the territory of any other [Member] or on the exportation or sale for export of any product destined for the territory of any other [Member].”

? Exception:-
Quantitative Restriction may be temporarily applied to prevent critical shortages of foodstuffs, to apply standards for commodities or to any agricultural or fisheries products.

? Tariff Bindings:-
The Marrakesh Protocol is the legal instrument by which each WTO member’s commitments in the Uruguay Round to eliminate or reduce tariff rates and non-tariff measures applicable to trade in goods became an integral part of the GATT, 1994.

The Schedules are divided into four parts as below:-
(1) Part I
? Section I-A:-
Agricultural products: Tariff concessions on an MFN basis.

? Section I-B:-
Agricultural products: Tariff quotas.

? Section II:-
Tariff concessions on an MFN basis on other products.

(2) Part II:-
Preferential Tariff – (if applicable).

(3) Part III:-
Concessions on non-tariff measures (generally on Non-Agricultural products)

(4) Part IV :-
Agricultural products: - commitments limiting subsidisation.

? Section I:-
Domestic support: - Total AMS commitments.

? Section II:-
Export Subsidies: - Budgetary outlay and quantity reduction commitments.

? Section III:-
Commitment limiting the scope of export subsidies.

Rule Based Trading System: certainly and predictability:-
The WTO stands for rule based trading system. Towards this end, WTO set and enforces rues necessary for conducting world trade fairly through its automatic and speedier dispute settlement mechanism. WTO adjudicates in disputes between members and in case of non-compliance with DSB recommendations by the losing side; grants authorization for imposing sanctions to the complainant.

The core principle of non-discrimination goes a long way towards meeting this objective of rule-based trading system under WTO.

Special and Differential Treatment for Developing and Least Developed Countries (LDC’s): Help for poor countries:-

The WTO recognizes the need for positive policy efforts to help developing countries especially LDCs reap the full benefit of trade liberalization. The preamble to the WTO Agreements sets out this objective.

Para 7 of Article IV dealing with structure of the WTO directs the “Ministerial conference to establish a committee on trade and development”. The committee shall periodically review the special provisions in the Multilateral Trade Agreement in favour of the least developed country Members and report to the General Council for appropriate action.

The competition Principle: Restricting Monopolies and Promoting consumer Interests:-
The WTO aims to promote consumer interest by promoting competition in market. To this end, the tariff reduction and elimination exercises go hand in hand with measures to reduce or eliminate subsidies. The “Level Playing Field” between foreign and local goods encourages and fosters competition with the corresponding positive effect on efficiency and consumer welfare.

In fact, the Singapore Ministerial Conference in 1996 set up a working Group on Trade and competition policy. The working Group has the mandate to study issues raised by Members relating to interaction between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further consideration in the WTO framework.

Environment Protection: Improving quality of Life:-
The issue of trade and environment was not on the agenda for negotiations in the Uruguay Round. Nevertheless, certain environmental concerns were addressed in the results of the negotiations.

The Preamble to the WTO Agreement includes direct references to the objective of sustainable development and to the need to protect and preserve the environment.

A Committee on Trade and Environment (CTE) was set up at the very first meeting of the WTO General Council consequent to the Ministerial decision adopted at Marrakesh on 15 April, 1994. The committee has the mandate to identify the relationship between trade measures and environment measures, in order to promote sustainable development and to make appropriate recommendations on whether any modifications of the provisions of the multilateral trading system are required.

The committee presented its report to the Ministerial Conference at Singapore. The Ministers appreciated the work done by the committee and directed the committee to carry out its work.

WTO system for the settlement of disputes
Dispute Settlement Body
The WTO Agreement provides a common system of rules and procedures applicable to disputes arising under any of its legal instruments. The main responsibility for administering these rules and procedures lies with the General Council, which acts as the Dispute Settlement Body (DSB).

Importance of consultation and conciliation:-
One of the important principles which these procedures lay down is that a dispute should be brought to DSB by the government of a member country for settlement only after efforts to settle it through consultations on a bilateral basis have failed. The procedures also provide that, in order to reach mutually acceptable solutions, the two parties may request the WTO Director- General or any other person to use his or her good offices to conciliate and mediate between them.

Only when consultations or efforts at conciliation have not produced the desired results within 60 days may the complaining party request DSB formally to commence the Dispute settlement Mechanism by establishing a panel to examine the complaint, in order to, expedite the settlement of disputes and ensure that the establishment of a panel is not delayed by the country against whom a complaint is made, the procedures require DSB to establish the panel, when requested by the complaining country, unless there is a consensus against the establishment of such a panel.

Panels:-
A Panel normally consists of three persons, unless parties to the dispute agree that it should have five persons. The names of the persons to be appointed to the panel are proposed by the WTO Secretariat from the list maintained by it of Governmental and Non-Governmental experts. The persons in the list are well- qualified senior officials of member countries, members of their delegations to WTO, Senior Official who have worked in the secretariat and persons who have taught international trade law or policy.

The membership of the panels is usually settled in consultation with the parties to the dispute. The panels are generally required to submit to DSB within a period of six to nine months reports containing their recommendation after making an objective assessment of the facts of the case and of the conformity of the measures complained about with the relevant provisions of the legal instruments.

Appellate Body:-
The establishment of the Appellate Body as a kind of court of appeal is a new addition to the dispute settlement system. The Body consists of 7 persons of recognized authority, with expertise in law, international trade and the subjects covered by the various Agreements. They must not be affiliated to any government of the seven; only 3 persons are called to serve in any one case. The appeal can be made by any of the parties to the dispute. The report of the Appellate Body, which will be confined to issues of law in the panel report and the legal interpretation developed by it, has to be submitted to DSB within a period of 60 to 90 days.

Consideration of reports by DSB:-
The report of the panel or of the Appellate Body, where one of the parties has appealed against the panel’s report, is submitted to DSB for adoption and appropriate recommendations and rulings. In order to ensure prompt settlement of dispute, it is provided that the period “from the date of the establishment of the panel by the DSB and the date when it considers the panel or appellate report” should not exceed nine months when the panel report is not appealed and 12 months when it is appealed.

Implementation of the reports:-
According to the procedures, the reports of the panels are to be implemented by the parties in the three ways described below:-

(1) Compliance:-
First, the procedures emphasize that the party in breach of obligations must promptly comply with the recommendations of the panel or Appellate Body. If it is not possible for the party to implement the recommendations immediately, DSB may on request grant it a reasonable period for implementation.

(2) Provision of compensation:-
Second, where the party in breach does not comply within a reasonable period, the party that has invoked the dispute settlement procedure may request compensation. Alternatively, the party in breach of the obligation may itself offer to pay compensation.

(3) Authorization of retaliatory action:-
Third, where the party in breach fails to comply and adequate compensation where requested is not provided, the aggrieved party may request DSB to authorize it to take retaliatory action by suspending concession or other obligations under the Agreements.

Conclusion:-
Conclusively, we can say that WTO contributes very actively in establishing a rule based trading system in the world.

Bibliography
# International economic law, S.R.Myneni

Written by: Kumar Karan Agrawal, I Am Student Doing BBA.LLB From Symbiosis Law School