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CUTS Institute for Regulation & Competition
Training Programme on Commercial and Economic Diplomacy
09-12January, 2008
Chokhi Dhani, Jaipur
Session 4: Multilateral Trading System
Institution and Actors
A Presentation
By
B. K. Zutshi
January 09, 2008
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The International (Multilateral) Trading System
Institution and Actors
OUTLINE
•Introduction : From GATT to the WTO
• Marrakesh Agreement Establishing the World Trade Organization
 Institution and Actors
What does the animal look like?
 How is it structured to function?
 What are these Functions?
 What is the GATT/WTO Paradigm?
 WTO as a Sui Generis Organization.
 What are the basic principles and rules of the system?
 Critique of the actual working of the System;
 Relations with other Organizations;
• Developing countries & the Multilateral Trading System
• Regional Trade Agreements.
B. K. Zutshi
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The International (Multilateral) Trading System
Institution and Actors
INTRODUCTION : From GATT to the WTO
•Eight Rounds of Multilateral Trade Negotiations, the Ninth
(DOHA) Round Underway ;
• The Genesis of the setting up of the WTO:
 Increasing Importance of Services in National Economies
and in International Trade;
 Shifts in Comparative Advantage;
 Explosive Growth in Information Technology;
 Increasing Tradability of Services;
 Increasing Importance of Intellectual Property Goods in
Trade due to Technological Developments;
Fragmentation of the Multilateral Trading System.
B. K. Zutshi
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The International (Multilateral) Trading System
Institution and Actors
Marrakesh Agreement Establishing the World Trade Organization
•Its Distinguishing Features from GATT
 Unlike GATT, WTO an Institution.
Third Leg of the International Economic Order Conceived at
Bretton Woods.
 Much Larger Coverage by Inclusion of Services and TRIPS.
Single Undertaking- a Halt to the Fragmentation of the
International (Multilateral)Trading System.
 A common Dispute Settlement and Enforcement Mechanism With Possibilities for Cross-retaliations, Subject to some
Disciplines.
 A Forum for Continuous Negotiations.
 Trade Policy Review Mechanism (TPRM).
B. K. Zutshi
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WTO STRUCTURE
Marrakesh Agreement Contd.
Ministerial Conference
(Every two years)
DISPUTE
SETTLEMENT BODY
GENERAL
COUNCIL
COMMITTEES ON
• Trade and
Development
COUNCIL FOR
TRADE IN
GOODS
• Balance of
Payments
•Budget
•Trade and
Environment
COMMITTEES
ON VARIOUS
AGREEMENTS
IN GOODS
COUNCIL FOR
TRADE-RELATED
ASPECTS OF
INTELLECTUAL
PROPERTY RIGHTS
TRADE POLICY
REVIEW BODY
COUNCIL FOR
TRADE IN
SERVICES
SECTORAL COMMITTEES
AND WORKING PARTIES
ON DOMESTIC
REGULATIONS AND GATS
RULES
All WTO Members my participate in all councils, committees, etc, except Appellate Body,
Dispute Settlement Panels, Textiles Monitoring Body, and plurilateral committees.
B. K. Zutshi
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Marrakesh Agreement Contd.
GATT/WTO PARADIGM
Elements of the Paradigm
• A set of Rules for the Conduct of International Trade
relations among Members, applicable across the board to
all of them, with some exceptions, strictly defined.
• Negotiated schedules of market access commitments of
individual Members, exchanged on reciprocal basis.
Some exceptions for developing countries.
• A mechanism for dispute settlement and enforcement.
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Marrakesh Agreement Contd.
WTO - a Sui Generis Organization
• It is :
 wholly Member-driven and Member-administered
 democratic in character, value of a Member’s vote is the
same irrespective of Trade Share;
• It has:
 a clearly defined remit or competence which is confined to
trade relations among its Members;
 a credible dispute resolution system, the only one of its kind
in any inter-governmental organization;
• Decision making is by consensus, although voting is possible and
provided for;
• Within itself it combines the triple function of governance, i.e.
executive, legislative and judicial.
B. K. Zutshi
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Marrakesh Agreement: WTO - a Sui Generis Organization Contd.
• WTO Secretariat : Role and Functions:
 Headed by a Director General with, four Deputy Directors - General
and Divisional Heads, who are mostly professionals;
 The Secretariat has an important supporting role in the functioning
of the system:
 Preparing background papers at the request of members for
decision-making purposes;
 Keeping records of meetings;
 Preparation of annual reports and research based studies.
 The Director General has a facilitating role and specific authority
for offering his/her good offices in mediation and conciliation in
dispute settlement and in appointment of members of dispute
settlement panels in case of disagreement between parties.
 Training,Technical Assistance and Capacity Building Activities.
 Manned by highly competent professionals.
 No decision making authority on substantive issues.
B. K. Zutshi
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Marrakesh Agreement Contd.
Basic Principles and Rules of the System
Simple and Elegant
• Non-discrimination: MFN and National Treatment.
• Prohibition on quantitative restrictions on imports and exports,
(some exceptions).
• Reciprocity - Political Economy of the Multilateral Trading
System ( S & D for Developing Countries).
• Market Access - Tariff and non-Tariff bindings.
•Transparency
 Publication of Laws & Regulations
 Domestic Judicial & Review Systems
 Notification obligations to WTO
 TPRM
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Marrakesh Agreement Contd.
Basic Principles and Rules of the System (Contd.)
• Trade Measures in Condition of :
 Fair Competition:Safeguards;
 Unfair Competition (Contingent Protection):
 Anti-Dumping,
Subsidies and Countervail.
• Dispute Settlement
 Consultation
 Adjudication
 Retaliation
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Critique of the actual working of the system
• Is there any confusion about the purposes and boundaries of the WTO?*
• Is
the consensus mode of decision-making becoming a drag on the
efficiency and effectiveness of the organization and adversely impacting
its credibility?*
•Is it feasible to adopt a “critical mass” approach to decision-making,
leading to a “variable geometry” of rights and obligations among the
members, thereby giving up on the “single undertaking” concept and
reverting to the Tokyo round approach.?*
•In what other ways can the functioning of the system be improved to
make it development- and development-country friendly?*
• How far are the actual working procedures and practices transparent and
participatory in nature?
* The Future of the Multilateral Trade Regime: Which Way Forward?
The Report of the First Warwick Commission, University of Warwick, December 2007
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Critique of the actual working of the system...Contd
•There are two kinds of criticism of the existing procedures and
practices:
 that small and/or least developed countries’ delegates are not
even present, much less participate in meetings that involve
important discussion and/or decisions.
 Small group meetings or the so-called “green room” process is
exclusive, or at least , not inclusive enough
• The absence of some delegates in meetings could be on account of
delegations
 not being present in Geneva;
 being small, and therefore, unable to cover WTO meetings
adequately, and
 not aware of, and much worse still, not invited to attend.
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Critique of the actual working of the system (Contd.)
• The first two have to be addressed by better manpower resource
allocation and capacity building of delegations of such Members;
• Also by ensuring that the daily load of meetings is kept within
reasonable limits.
• Complaints of lack of transparency are not new.
• The challenge is how to make the negotiating processes both
efficient and inclusive.
•This is essentially a leadership issue.
• Some examples from Uruguay Round of good and indifferent
leadership
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External Transparency and Participation by Civil Societies / NGOs
Role of Civil Societies / NGOs
• Article V:2 of the Marrakesh Agreement envisages:
 “ appropriate arrangements [being made] for consultation and
cooperation with Non-Governmental Organizations concerned
with matters related to those of the WTO”
• Under this Mandate Guidelines for Arrangements on Relations
with NGOs have been laid down by the General Council.
• Specific Activities undertaken are:
 NGO dialogues and briefings at the WTO;
 Participation of NGOs in technical seminars organized by the
WTO Secretariat in Geneva;
 NGO-focused website outreach.
B. K. Zutshi
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Role of Civil Societies / NGOs Contd.
• This is not considered enough by some NGOs;
• They demand participation in the WTO processes;
• Basically three issues are involved in such participation:
 Availability of WTO documents;
 Access to dispute settlement processes and right to file
amicus briefs; and
 Participation, through presence as observes, in the
deliberations of various WTO bodies.
• Proliferation and variety in NGOs ranging from anti-globalization
fringe elements to serious research-based organizations.
• Asymmetry in resources and influence between NGOs from the
North and the South: Implications at the Multilateral level.
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Relations with other Organizations
• Article V:1 envisages
“ appropriate arrangements [being made] for effective
cooperation with other intergovernmental organizations
that have responsibilities related to those of the WTO”.
• Policy Coherence and Coordination is a concern, which is
sought to be addressed through cooperative arrangements
with other intergovernmental organizations;
•Such Cooperative arrangements have been worked out by
the WTO with UNCTAD, The World Bank, The IMF, and
other specialized agencies like WIPO, WHO, ITU etc.
B. K. Zutshi
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Developing countries & the Multilateral Trading System
•
Developing countries efforts in reforming the legal
framework of the MTS in pursuit of the twin objectives of
1. adequate freedom for themselves in employing
commercial policy instruments to foster their industrial
and economic development; and
2. enlargement of access in world markets for
manufactured goods of export interest to them under the
GATT, and, for both goods and services of export
interest to them under the WTO
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Developing countries & the Multilateral Trading System Contd…
• In the GATT legal framework
 Differential and More Favourable Treatment
 GATT – Part IV Provisions
 Non Reciprocity: the Enabling Clause*
i. non-discriminatory and non-reciprocal generalize system
of preferences
ii. negotiation of preferential bindings in GATT between
the developed and developing countries; and
iii. sub-regional, regional, inter regional and global
preferences between the developing countries
 Graduation
* The full title of the Decision is ‘Differential and More Favourable
Treatment, Reciprocity and Fuller Participation of Developing countries’-Decision by the Contracting Parties on 28th November 1997
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Developing countries & the Multilateral Trading System Contd…
• In Marrakesh Agreement establishing the WTO
 Provisions Concerning Developing Country Members in
Agreements
 Recognition of general interest
 Fewer Obligations or Differing Rules
 Longer time frame for implementation
 Technical Assistance
 Decision on Measures in favour of Least-Developed
Countries
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Regional Integration Agreements (RIA’s)
•Exception to the principles of MFN.
•Permissible, subject to conditions and disciplines
with relaxation for developing countries under
special and differential treatment ( S & D).
•Provision for examination of RIA’s by Members.
•Available both in goods and services trade.
B. K. Zutshi
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INTEGRATION MODELS
Free Trade Area/Preferential Trade Area :
Trade restrictions among member countries
removed, but each country retains its tariff
structure against outsiders.
Customs Union: Free Trade Area with
common external trade policies including
tariffs.
Common Market: A Customs Union that
allows free movement of Capital and Labour
ASEAN/SADC/NAFTA
SACU
COMESA
Economic Union/Monetary Union
A Customs Union with some degree of harmonization of national
economic policies - the ultimate being adoption of a common currency
ASEAN
SADC
NAFTA
SACU
COMESA
EU
EU
- Association Of South East Asian Nations
- South African Development Community
- North America Free Trade Area
- Southern African Customs Union
- Common Market For Eastern & Southern Africa
- European Union
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Motivation for Regional Integration Agreements
• Considerations of national security and foreign policy.
• Subset of like-minded countries able to move much further,
more quickly in liberalising trade flows than in the larger setting
of multilateral trade negotiations.
• A way to enhance market power, while taking advantage of the
MFN exception.
• Lock-in liberalisation or regulatory reform.
• Guaranteed access to markets.
• These are not mutually exclusive.
Regional Integration:Trade-creating or Tradediverting?
Globalisation and Regional Integration: A Paradox?
B. K. Zutshi