WTO: Overview of the law and policy
No nation or country in the world is economically independent or self-sufficient. There is always the need to trade with other countries to increase the Gross Domestic Product (GDP) of a country and to improve the standard of living of her citizens. Trade can be bilateral, regional, international or global, and each has different rules and regulations. Our focus here is specifically on global trade and getting to know the institution which regulates this trade: the World Trade Organization (WTO).
The essence of this publication is firstly, to raise more public interest in this global organization and shedding light on its law and policy. Secondly, to encourage academic interest in the study and knowledge of this subject, which in my observation, is not commonly listed as a taught course in the curricula of tertiary institutions in the Faculty of Law, under the Department of Public International Law, to which it rightly belongs. Thirdly, in view of its importance in the global economy, full knowledge of this course can possibly lead to an intentional career path or help equip young Nigerians and other interested persons to take advantage of unfolding opportunities available in the WTO for developing and least developed countries in the 21st century, thereby bridging the existing gap for more engagement as urgently needed.
The Emergence of the World Trade Organization
The World Trade Organization is the successor of the General Agreement on Tariffs and Trade (GATT), a multilateral trading system that was set up in 1947 in the aftermath of the World War II economic devastations, to rebuild the world economy through an increase in world trade by reduction of tariffs in goods amongst member countries, thereby encouraging the free flow of goods. Initially, the GATT was for the negotiation of reduction of tariffs in goods only, subsequently, negotiations in other areas of trade including non-tariff measures were included.
Various rounds of trade negotiations were held amongst member countries to achieve this objective, but it was the 1986-1994 round of trade negotiations, “the Uruguay Round”, that became the catalyst for the creation of the World Trade Organization after 123 countries signed the WTO Agreement on 14 April 1994, in Marrakesh. This Agreement entered into force and became effective on 1st January 1995, and the World Trade Organization formally came into being.
The Objectives of WTO
The policy objectives of WTO are ingrained in the Preamble to WTO Agreement, some of which include poverty alleviation and raising the standard of living amongst its members, the steady growth of real income volume and effective demand, expansion of trade in goods and services, sustainable economic development which takes into account environmental and social concerns, (at different levels of economic development), and also to ensure that developing and least developed countries are integrated and have a share in the world trading system. In essence, the principal aim and objective of the WTO are to liberalize and encourage free trade amongst member countries and to allow free flow of goods and services so as to improve the world economy.
The Nature of Agreement under WTO
There are two natures of trade agreements under the WTO. These are multilateral and plurilateral trade agreements and different rules apply to their regulations. They are contained in the Annexes to the WTO and these are:
– Multilateral Agreements on Trade in Goods (Annex 1A)
– General Agreement on Trade in Services, (Annex 1B) and
– Agreement on Trade-Related Aspects of Intellectual Property Rights (Annex 1C).
The agreements in Annexes 1A, 1B and 1C, are generally referred to as multilateral or covered agreements, and they are binding on all WTO members. In fact, membership of the WTO is conditional upon the acceptance of these multilateral agreements.
Plurilateral trade agreements are contained in Annex 4 of the WTO Agreement. These are voluntary agreements between WTO members who choose to be parties to these agreements. Membership of the WTO is not conditional upon the acceptance of these plurilateral agreements. On the other hand, plurilateral trade agreements are binding only on those WTO members who are parties to these agreements.
When the WTO became effective in 1995, initially, there were four plurilateral trade agreements:
(1) Agreement on Trade in Civil Aircraft
(2) Agreement on Government Procurement
(3) Agreement on International Dairy Product
(4) Agreement on International Bovine Meat.
The last two agreements (Dairy products and Bovine Meat) were terminated at the end of 1997, leaving the first two agreements mentioned above – Trade in Civil Aircraft and Government Procurement. As of today, these are the only two plurilateral trade agreements in existence.
Decision making in WTO
Suffice to state that the WTO does not have an executive body or organ, which consists of a few, but the most important, and a selection of other members to make decisions and negotiate on behalf of the entire membership of this Organization, as obtainable in some other international organizations. Decision making in WTO is members-driven and based on consensus, and the negative consensus method adopted by the WTO enables members to reach decisions positively and quickly. Although the WTO Agreement provides for voting, in practice, members have always opted for consensus-based decisions, following the practice under its predecessor, GATT. Where voting is exercised, which is rare, it is an exception, not a norm.
Trade Rules and Settlement of Trade Disputes in WTO
The law of the WTO consists of a complex set of rules regulating global trade. Amongst these rules are the principles of non-discrimination, rules on market access and protection against unfair trade, just to mention a few. These rules are made by the members themselves, therefore high compliance to these rules is expected.
However, disputes may sometimes arise where a member alleges that her respective rights and obligations under the WTO covered agreement have been violated. The WTO provides for the settlement of trade disputes between its members.
Members are not allowed to engage in unilateral conduct towards the settlement of trade disputes, but multilaterally, and this is regulated by the Understanding on Rules and Procedures Governing the Settlement of Disputes, popularly referred to as ‘Disputes Settlement Understanding, (DSU)” contained in Annex 2 of the WTO Agreement. The DSU provides for various means of dispute settlement which include amicable means of consultation or negotiation, good offices, conciliation and mediation, arbitration, or through adjudication by Panels and the Appellate Body.
The dispute settlement system is compulsory in nature under DSU Rules, therefore members disputes are settled internally under the exclusive jurisdiction of the WTO. This settlement system is a central element that provides security and predictability to the multilateral trading system. Prompt settlement of these disputes is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligation of members.
Sometimes, these covered agreements provide for a few special and additional rules and procedures to deal with peculiarities arising from a specific covered agreement, different from the DSU procedures. Nonetheless, they combine with the generally applicable rules and procedures of the DSU to form a comprehensive, integrated dispute settlement system for the WTO covered or multilateral Agreement.
To be continued tomorrow
Barrister Udoh, PhD, studied WTO Law at the University of Edinburgh, United Kingdom.
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