Abstract
The World Trade Organization was established in the year 1995 so as to control international trade. This paper shall discuss the history of contemporary international law, the World Trade Organization (WTO) and the legal aspects that control world trade and the WTO.
History of Contemporary International Trade Law
The genesis of contemporary international trade law can be traced back to the year 1947 when the signing of General Agreements on Tariffs and Trade (GATT) was done (Macrory et al., 2005). Since then, GATT was the only multilateral trade agreement and trade organization until the year 1995, when the world trade organization took up GATT’s functions.
According to Macrory et al. (2005), the Second World War, the great depression and the trade protectionist measures of 1930 formed the basis for the development of GATT. In the year 1944, the United States and the United Kingdom recommended the establishment of a post-World War II plan that would aid in reconstruction and economic development. The development of three economic and financial institutions was proposed at the Bretton Woods conference in the year 1944. This led to the establishment of the World Bank which was also known as the International Bank for Reconstruction and Development and the International Monetary Fund (Macrory et al., 2005).
In September 1946, the United States introduced a draft charter that was discussed by the Havana charter preparatory committee, in the first meeting. However the national legislature left the approval of the Havana charter pending, and this resulted in international negotiation on the reduction of tariffs (Macrory et al., 1948). The approval of GATT followed with effect from 1st January 1948.
The World Trade Organization
The World Trade Organization (WTO) was established in 1995 under the Marrakech Agreement. It’s headquartered in Geneva, Switzerland. It regulates trade between member countries by providing a framework for the negotiation and dispute resolution process. According to World Trade Organization (2011), WTO replaced GATT which was formed in the year 1948.
The WTO Agreement
The WTO has about sixty agreements that exist as international legal texts (Chaisse & Balmelli, 2008). On accession, it is compulsory that a member signs and ratifies all the WTO agreements (World Trade Organization, 2011).
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The five major agreements include the Marrakech Agreement which established the WTO; Understanding on Rules and Procedures governing the settlement of disputes ( DSU); GATT which designs the customs valuations to be followed by members; Agreement on Technical Barriers to Trade(TBT) which ensures that negotiations, standards and certification procedures do not create barriers to trade and Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) which enables the WTO to set constraints relating to food safety on member policies.
Some of the other agreements include Agreement on Agriculture which deals with domestic support, export subsidiaries and market access; General Agreement on Trade in Services and Agreement on Trade-Related Aspects of Intellectual Property Rights (IPRs) which specifies the minimum standards for different forms of intellectual property regulation.
Membership of the WTO
Currently, the WTO has over 140 members (World Trade Organization, 2011). The process of becoming a WTO member is subject to the country’s level of development and trade policies (Chaisse & Balmelli, 2008). The process of membership takes a minimum of five years, but it can extend in the event that the country is not politically stable (Cottier & Oesch, 2006). Accession is usually given after the parties involved agree.
Accession
The process of accession involves four key stages. First, a country wishing to join WTO writes an application to the General Counsel. In the application, the country seeking membership has to give a lengthy description of all the aspects of its trade and economic policies.
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The second stage involves the submission of the application to the WTO in a memorandum. The application is critically examined by a working party dealing with the country. The working party is usually open to all WTO members. Jovanovic (2011) explains that for large countries, several countries take part in the process while for smaller countries, the neighboring nations together with the European Union, Canada and the United States are mostly involved. A memorandum unfolding the applicant’s policies on the economy, foreign trade, intellectual property and international trade is then handed into the working party. To confirm this information, the working party presents written questions to the applicant paying keen interest to the country’s government transparency and degree of privatization.
The third stage involves discussions by the working party on the similarities and differences between the applicant’s trade policies and laws and WTO rules. These discussions are meant to determine the entry criteria into the WTO for the applicant nation. Jovanovic (2011) notes that in case of any discrepancies, the working party may give transitional periods for compliance with the WTO rules.
The final stage involves negotiations about commitments on rules and market access between the nation that is seeking membership and working party members. On concluding these negotiations, the working party sends a summary of all the working party meetings and commitments of the applicant nation to the General Council (World Trade Organization, 2011). Before the provisions of accession are officiated, the applicant’s government must endorse the procedures of accession.
Structure of WTO
The WTO is organized into four-member bodies; the Ministerial Conference, the General Council, Area Specific Councils and Agreement Specific Committees.
The Ministerial Conference is the highest authority that dominates the structure of the WTO. It holds meetings twice a year and it has the mandate to take decisions on any multilateral trade agreement.
The General Council deals with the daily coordination of WTO activities (Jovanovic, 2011). It is mainly composed of ambassadors and heads of delegation from Geneva. The General Council acts for the Ministerial Conference. The other roles of the General Council lie in the Dispute Settlement Body and in the Trade Policy Review Body.
The Area Specific Councils consist of Trade-Related Aspects of Intellectual Property, Trade in Goods and Trade in Services (Nsour, 2010). These Councils report to the General Counsel. They perform tasks delegated by the General Council and the WTO agreements.
The agreement–specific committees report to the Area Specific Councils. Steger (2010) explains that “most WTO agreements establish committees to facilitate implementation of the particular agreement” (p. 230). The SPS committee established under the SPS Agreement and the TBT Agreement is the most significant committee.
Decision Making within the WTO
Every member of the WTO can participate in the decision-making process as participation in WTO bodies is usually open to all members (Petersmann & Pollack, 2003). Therefore, even subordinate bodies’ decisions carry substantial weight. Decisions are arrived at by consensus of the entire body. The key benefit of decision-making by consensus is that it results in the most widely acceptable decisions. On the other hand, arriving at a consensus decision takes a lot of time and involves many rounds of negotiations. Banerjee et al. (2006) also note that the process of consensus results in agreements that are stated using ambiguous statements. This makes the future interpretation of these agreements very hectic.
However, the method of decision-making by consensus has been largely criticized because it allows power-based bargaining which favors Europe and the United States (Steger, 2010).
Legal Aspects of World Trade and the WTO
The major legal aspects include market access, labor standards, regional integration, trade on environment and DSU, GATS and TRIPs.
To start with, market access divides developed and developing countries (Nsour, 2010). This is because most reductions in tariffs are usually made in areas that are of less significance to developing countries. Conversely, tariffs remain high in areas such as agriculture and textile, which are the major areas of economic interest for developing nations. According to Steger (2010) applying quota restrictions and tariff quotas to areas that are of interest to developing nations limits them in trade.
Secondly, labor standards are another aspect that divides the developing and developed countries. Steger (2010) states that “during the ministerial conference in Singapore the members agreed to reject the use of labor standards for protectionist purposes in view that economic growth that occurred due to increased trade promoted the standards”( p. 167). Nsour (2010) argues that several member countries are pressing for the establishment of a link between free trade and labor standards under the patronage of WTO.
Thirdly, anti-dumping is another aspect that has been debated by US and Japan for a long time. According to Steger (2010), anti-dumping rules impose tariffs on imports which cost low prices using a predetermined formula. However, in practice, these rules should protect the producer from unfair competition that may arise as a result of imports.
Fourthly, regional integration goes on to feature in the agenda countries like Europe, North America, Asia, Africa and Latin America. According to Nsour (2010), regional integration should be exempted from the MFN rule under article XXIV of GATT. However, some members regard it as a basis for multilateral trade and a compliment as opposed to a global trading system.
Consequently, trade and environment are other legal aspect of WTO. Although WTO is not an environmental agency, most of its provisions contain environmental concerns. Among the objectives of its charter are sustainable development and environmental protection (Jovanovic, 2011). The treatment of environmental considerations by WTO has raised several questions, particularly the relationship between WTO and Multilateral Environmental Agreements (MEAs). Several actions that affect trade have faced challenges before the WTO dispute settlement mechanism and under the GATT. However, none of these challenges has ever involved actions taken under MEA.
Finally, DSU, GATs and TRIPs are other legal aspects of world trade. According to Jovanovic (2011), the presence of a credible dispute settlement mechanism is vital for the establishment of a fair and workable multilateral system of trade. This ensures that business enterprises from different member countries experience favorable conditions of trade. Hence, the existence of DSU is one of the major achievements of the Uruguay round. The DSU gets rid of some of the weaknesses of the dispute settlement mechanisms that were used by GATT and especially, with regard to the rule of consensus.
Together with the DSU the Uruguay round also came up with the General Agreement on Trade in Services (GATs) and the agreement on Trade-Related Aspects of Intellectual Property Right (TRIPs) (Steger, 2011). As mentioned earlier, TRIP seeks to encourage creativity and use technology so as to give adequate and effective protection to Intellectual Property Rights (IPRs). TRIPs set standards and procedures for the protection of IPRs as well as remedies for their execution. Failure to do so would encourage the distribution of counterfeits and pirated goods. However, most developing countries dissent on the high cost of TRIPs and the limited ability to ensure the protection of TRIPs.
In conclusion, GATT was the only multilateral trade agreement and trade organization until the year 1995, when the world trade organization took up GATT’s functions. The World Trade Organization (WTO) was established in 1995 under the Marrakech Agreement. It regulates trade between member countries by providing a framework for the negotiation and dispute resolution process. Currently, the WTO has over 140 members (World Trade Organization, 2011). The process of becoming a WTO member is subject to the country’s level of development and trade policies. The process of accession involves four key stages. First, a country wishing to join WTO writes an application to the General Counsel. Second, the application is submitted to the WTO. Third, the working party discusses the application and finally, accession is approved. The process of membership takes a minimum of five years, but it can extend in the event that the country is not politically stable (Cottier & Oesch, 2006). Accession is usually given after consensus is reached among the parties involved.
The WTO has about sixty agreements that exist as international legal texts (Chaisse & Balmelli, 2008). On accession, it is mandatory for each member country to sign and ratify all the WTO agreements. The five major agreements include the Marrakech Agreement which established the WTO; Understanding on Rules and Procedures governing the settlement of disputes ( DSU); GATT which designs the customs valuations to be followed by members; Agreement on Technical Barriers to Trade(TBT) which ensures that negotiations, standards and certification procedures do not create barriers to trade and Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) which enables the WTO to set constraints relating to food safety on member policies.
The WTO is organized into four-member bodies; the Ministerial Conference, the General Council, Area Specific Councils and Agreement Specific Committees. The Ministerial Conference is the highest authority that dominates the structure of the WTO. The General Council deals with the daily coordination of WTO activities. The Area Specific Councils consist of Trade-Related Aspects of Intellectual Property, Trade in Goods and Trade in Services (Nsour, 2010). The agreement–specific committees report to the Area Specific Councils.
Every member of the WTO can participate in the decision-making process as participation in WTO bodies is usually open to all members (Petersmann & Pollack, 2003). Decisions are arrived at by consensus of the entire body. The key benefit of decision-making by consensus is that it results in the most widely acceptable decisions. Finally, the major legal aspects include market access, labor standards, and regional integration, trade on environment and DSU, GATS and TRIPs.
References
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Cottier, T., & Oesch, M. (2006). International Trade Regulation. New York: Oxford University Press.
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