WORLD TRADE

ORGANIZATION (WTO) (PART I)

Presented by Ms. Le Quynh Trang

LLM International Business Law
 1. A BRIEF HISTORY OF GATT
Negotiations for the rules of International Economy
(After the World War II to 1947)
❏ United States, United Kingdom and other allied
nations engaged in a series of negotiations;
❏ US and UK drafted plans creating organizations that
would provide financial assistance to countries:
- Fixed exchange rates that would be conducive to the
expansion of international trade rather than various
rates floating in the market;
- July 1944, the creation of International Monetary Fund
(IMF) and World Bank (WB) at the UN Monetary and
Financial Conference in Bretton Woods.
❏ From April to October 1947: 23 nations meeting in
Geneva concluded the first tariff negotiations to
reduce tariffs and imperial preferences and:
- A draft Charter for establishing a new institution, the
International Trade Organization (ITO).
- Signed GATT 1947 before the establishment of ITO.
 1. A BRIEF HISTORY OF GATT

Failed to establish ITO but succeeded in giving birth for

GATT 1947

❏ ITO failed due to the lack of support from US

❏ ITO was replaced by a “provisional” mechanism
governing international trade in goods (GATT 1947)
(drafted in one of the negotiations for ITO)
❏ There were 23 founding members which
participated in making the ITO Charter
🡪 This provisional agreement governed the global
trade for nearly 50 years
 1. A BRIEF HISTORY OF GATT

During nearly 50 years its existence, GATT has made great

contributions such as:

► GATT became the only multilateral instrument governing

international trade from 1948

► providing a forum for its members to meet and negotiate

reducing tariffs and non-tariff barriers (hereinafter the
‘NTBs’).

► Promote the facilitation and liberalization of world trade;

► The number of members also increased rapidly;

 2. THE ESTABLISHMENT OF WTO
►09/1986: Trade Ministers of the GATT 1947 members met in the Uruguay Round - the
Eighth Round of Multilateral Trade Negotiations
 2. THE ESTABLISHMENT OF WTO

❏ From 1949 to 1986: 7 rounds of negotiations occurred under

the GATT
- 1949 Second Round at Annecy: the contracting parties exchanged
some 5,000 tariff concessions; the accession of ten more countries.
- 1950 Third Round at Torquay: exchanged some 8,700 tariff
concessions; four more countries acceded to GATT.
- 1956 Fourth Round at Geneva: the GATT commercial policy course
for officials of developing countries was opened.
- 1960 The Dillon Round: large-scale tariff negotiations under Article
XXIV:6 for the establishment of EEC.
- 1964 The Kennedy Round: besides cutting tariffs, separate
agreements were reached on grains, chemical products and a Code
on Anti-Dumping
 2. THE ESTABLISHMENT OF WTO
- 1973 The Tokyo Round: agreements covering both tariff and non-tariff matter;
agreements were reached in the following areas: subsidies and countervailing
measures, technical barriers to trade, government procurement, a revised anti-
dumping code,...
- 1986 The Uruguay Round: the most ambitious round of multilateral trade
negotiations. The first time in history, negotiation covered the trade in services.
Aimed to establish a new international organization – World Trade Organization
(WTO) – the need of more “sophisticated” institutional framework

❏ In 1994, The Agreement of establishing WTO was signed at Marrakesh,

Morroco
- Marrakesh Agreement establishing the WTO (WTO Agreement) is the Charter of the
Organization.
- The WTO Agreement entered into force on 1 January 1995
- "GATT 1994" is the updated version of GATT 1947 and takes into account the
substantive changes negotiated in the Uruguay Round.
2. THE ESTABLISHMENT OF WTO

"GATT 1994" is the updated

version of GATT 1947 and takes
into account the substantive
changes negotiated in the
Uruguay Round.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

● WTO is an international organization dealing with the

trade rules among nations. At its heart are the WTO
agreements, negotiated and signed by some of world’s
trading nations and ratified in their parliaments. The
goal is to help producers of goods and services,
exporters and importers conduct their business. It
replaced the General Agreement on Tariffs and Trade
(GATT 1947)
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

● 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
● Essentially, the WTO is a place where member
governments try to sort out the trade problems
they face with each other
→ Its main function is to ensure that trade flows as
smoothly, predictably and freely as possible.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

Resolve Trade Problems

● In 2012, China lodged a complaint against the US
over the tariff measures with the WTO. The US had
hit China with extra import duties, claiming those
goods were being dumped on the US market to help
Chinese companies win market share. A WTO
dispute panel supported the Chinese complaint
against these tariffs imposed on a range of products
including paper, steel, tires, magnets…
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

Resolve Trade Problems

● The WTO after the US challenged New Delhi’s
incentive schemes has ruled that India violated
global trade rules by providing up to $7billion in
annual export subsidies to its companies in sectors
such as pharmaceuticals, textiles, steel and
technology products. The WTO urged India to
withdraw the export subsidy schemes within six
months. If it fails to comply, it could eventually
face punitive tariffs from Washington.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION
a. Objectives

Four ultimate objectives of the WTO:

✔ To increase the standard of living of people in

member states;

✔ To ensure full employment;

✔ To increase the real income and actual demand;

✔ To enlarge the production of, and trade in, goods

and services.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

b. Functions (Article III of WTO Agreement)

(1) The WTO shall facilitate the

implementation, administration, operation,
and other objectives of WTO Agreement and of
all the Multilateral Trade Agreements, and shall
also provide the framework for the
implementation, administration and operation of
the Plurilateral Trade Agreements.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

b. Functions (Article III of WTO Agreement)

(2) The WTO shall:

- Provide the forum for negotiations among its members

concerning multilateral trade relations within the framework of
the WTO rules,

- Povide a forum for further negotiations among its members

- Provide a framework for the implementation of the results of

such negotiations, or for the implementation of the decisions
made by the Ministerial Conference.
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

b. Functions (Article III of WTO Agreement)

(3) The WTO shall administer the

Understanding on Rules and Procedures
Governing the Settlement of Disputes
(hereinafter the ‘Dispute Settlement
Understanding’ or ‘DSU’) to resolve
commercial disputes between WTO’s
members
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

b. Functions (Article III of WTO Agreement)

(4) The WTO shall administer the Trade

Policy Review Mechanism (hereinafter

referred to as the ‘TPRM’) (in Annex 3 of

WTO Agreement)
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

b. Functions (Article III of WTO Agreement)

(5) To achieve greater coherence in

global economic policy-making, the
WTO shall cooperate, when necessary,
with the International Monetary Fund
(IMF) and with the World Bank and its
affiliated agencies.
 3. THE WTO AS AN INTERNATIONAL ORGANIZATION
c. Membership

✔ Until 2022: 164 members, including countries

(United States, Vietnam ...) or autonomous
territories for foreign trade relations (EU, Taiwan,
Hong Kong, Macao).

✔ January 11, 2007: Vietnam officially

became a member of the WTO
3. THE WTO AS AN INTERNATIONAL ORGANIZATION

Growth of trade
among WTO members
and the decline of
tariffs, 1946 - 2001
3. THE WTO AS AN INTERNATIONAL ORGANIZATION
WTO members until 2022

Members
Observer
3. THE WTO AS AN INTERNATIONAL ORGANIZATION
d. Institutional Structure

Trade Policy
Review Body
2. THE WTO AS AN INTERNATIONAL ORGANIZATION
d. Institutional Structure

(3) Councils;
Committees;
Working groups

(1) Ministerial Conference

(2) General
Council
(4) Secretariat
d. Institutional Structure

Including
representatives of
all members

Ministerial
Conference

Meetings every two

years to make
important decisions
d. Institutional Structure

Carrying out the functions of

Including
representatives of the Ministerial Conference
all members between the two conferences
General of this agency
Council

The functions
If necessary, the General Council will
be convened to assume the
responsibility of the Dispute
Settlement Body and the Trade
Policy Review Body
d. Institutional Structure

Council for Trade in Goods,

Council of Trade in Services,
Trade-related Intellectual Property Issues;
Committees and working groups

Councils;
Committees;
The agencies established to support the
Working groups
activities of the General Council in each
area;
All WTO members can nominate
representatives to join these bodies.
d. Institutional Structure

The General Director of the WTO

Members

03 Deputy General Directors

Secretariat
The Departments, the Assistant
Committees with about 500
Functions employees
 d. Institutional Structure
To supply technical and professional support for the
various
councils and committees;
To provide technical assistance for developing countries;

To monitor and analyse developments in world trade;

Functions of
Secretariat
To provide information to the public and the media and to
organize the ministerial conferences;

To provide some forms of legal assistance in the dispute

settlement process;

To provide some forms of legal assistance in the dispute

settlement process;
3. DECISION MAKING IN THE WTO

a. Consensus mechanism
Only when no country votes against, can a
decision or regulation be considered to be passed.

b. Special voting mechanism

(no consensus principle is applied)
Applicable in the following 03 cases:

• Explain the terms of the Agreements;

• Temporarily waive WTO obligations to a member;

• Amendments of Agreements (GATT, GATS, TRIPS, ect.)

3. Accession

• All members join the WTO as a result

of negotiations

• WTO accession is specified in Article

XII of the Marrakesh agreement
establishing the world trade
organization deals with accession.
3. Accession

1. Any State or separate customs territory possessing full autonomy in the

conduct of its external commercial relations and of the other matters
provided for in this Agreement and the Multilateral Trade Agreements may
accede to this Agreement, on terms to be agreed between it and the WTO.

2. Decisions on accession shall be taken by the Ministerial Conference. The

Ministerial Conference shall approve the agreement on the terms of
accession by a two-thirds majority of the Members of the WTO.

3. Accession to a Plurilateral Trade Agreement shall be governed by the

provisions of that Agreement.
3. Accession

In addition, article XVI.1, lays down that:

“Except as otherwise provided under
this Agreement or the Multilateral
Trade Agreements, the WTO shall be
guided by the decisions, procedures and
customary practices followed by the
CONTRACTING PARTIES to GATT 1947
and the bodies established in the
framework of GATT 1947”
3. Accession

Any country or customs territory that has complete autonomy in the

implementation of its trade policies can become a member of ("accession")
to the WTO. However, all WTO members must agree on the terms. This is
done through the establishment of a working committee of WTO members
and through the negotiation process.

The acceding government must accept the "terms of accession" - through

signature or ratification - and become an official member of the WTO 30
days after it announced its acceptance of the Protocol sent to the Director-
General of WTO.
Summary of Vietnam's WTO accession process.

1996: Negotiating a 12/2001: Signed the

Bilateral Trade BTA with the United 10-2004: End
1/1995: application to the bilateral
join the WTO. Agreement with the States and the BTA
United States (BTA) took effect negotiations
with the EU -
the largest
partner.
2002 - 2006:
2 milestones:
05/2006: End
11/2006: WTO
of bilateral
convenes a special
11/01/2007: Vietnam negotiations
session of the General 10/2006: The Working
officially became a with the
Assembly in Geneva to Party officially approved
member of WTO. United States.
formally admit all of Vietnam's WTO
Vietnam to the WTO. accession dossier.
 Question

Are the following statements true or false? Explain ?

1. "All members of the WTO can join all bodies of the WTO"

2. "Inheriting the way of decision-making in the GATT 1947,

the WTO decision-adoption mechanism is in all cases the
consensus mechanism.”
3. "Decisions of WTO can only be adopted by the Ministerial
Conference."
 ANSWER

1. "All members of the WTO can join all bodies of the WTO"

INCORRECT
WTO is an intergovernmental organization with members being
governments of countries and territories. All members participate in the
general operating mechanism of the organization. The WTO does not
have anybody consisting of only a fixed group of members with the
authority to decide on organizational matters.
All WTO members may participate in all councils, committees, etc.
except Appellate Body, Dispute Settlement Panels, Textiles monitoring
Body, and plurilateral committees
 ANSWER
2. "Inheriting the way of decision-making in the GATT 1947, the WTO
decision-adoption mechanism is in all cases the consensus mechanism.”

INCORRECT
Ordinarily, decisions are made by consensus, a consensus is reached if
no member formally objects to a decision. However, in special cases,
WTO decisions are adopted by voting mechanisms (consensus principle is
not applied)
Explain the terms of the Agreements, passed if 3/4 of votes are in favor;
Temporary suspension of WTO obligations for a member, passed if 3/4
of votes are in favor;
Amendment of the Agreements, passed if 2/3 of votes are in favor.
 ANSWER

3. "Decisions of WTO can only be adopted by the Ministerial

Conference."

INCORRECT
The General Assembly is the highest decision-making body of the WTO in
Geneva, and is convened regularly. The General Assembly/Council is
composed of representatives (usually ambassadors or equivalent) of all
member states and has the authority to decide on behalf of a conference of
ministers (which meets only once every two years) on all WTO affairs.
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