Principles of wto

The WTO agreements are lengthy and complex because they are legal texts covering a wide
range of activities. They deal with: agriculture, textiles and clothing, banking,
telecommunications, government purchases, industrial standards and product safety, food
sanitation regulations, intellectual property, and much more. But a number of simple,
fundamental principles run throughout all of these documents. These principles are the
foundation of the multilateral trading system.
Trade without discrimination
1. Most-favoured-nation (MFN): treating other people equally  Under the WTO agreements,
countries cannot normally discriminate between their trading partners. Grant someone a
special favour (such as a lower customs duty rate for one of their products) and you have to
do the same for all other WTO members.
This principle is known as most-favoured-nation (MFN) treatment (see box). It is so
important that it is the first article of the General Agreement on Tariffs and Trade (GATT),
which governs trade in goods. MFN is also a priority in the General Agreement on Trade in
Services (GATS) (Article 2) and the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled
slightly differently. Together, those three agreements cover all three main areas of trade
handled by the WTO.
Some exceptions are allowed. For example, countries can set up a free trade agreement that
applies only to goods traded within the group —   discriminating against goods from outside.
Or they can give developing countries special access to their markets. Or a country can raise
barriers against products that are considered to be traded unfairly from specific countries.
And in services, countries are allowed, in limited circumstances, to discriminate. But the
agreements only permit these exceptions under strict conditions. In general, MFN means that
every time a country lowers a trade barrier or opens up a market, it has to do so for the same
goods or services from all its trading partners — whether rich or poor, weak or strong.
2. National treatment: Treating foreigners and locals equally  Imported and locally-produced
goods should be treated equally — at least after the foreign goods have entered the market.
The same should apply to foreign and domestic services, and to foreign and local trademarks,
copyrights and patents. This principle of “national treatment” (giving others the same
treatment as one’s own nationals) is also found in all the three main WTO agreements
(Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the
principle is handled slightly differently in each of these.
National treatment only applies once a product, service or item of intellectual property has
entered the market. Therefore, charging customs duty on an import is not a violation of
national treatment even if locally-produced products are not charged an equivalent tax.
Quantitative Restrictions Article XI of the GATT generally prohibits quantitative restrictions
on the importation or the exportation of any product, by stating “[n]o prohibitions or
restrictions other than duties, taxes or other charges shall be instituted or maintained by any
Member...” One reason for this prohibition is that quantitative restrictions are considered to
have a greater protective effect than tariff measures and are more likely to distort free trade.
When a trading partner uses tariffs to restrict imports, it is still possible to increase exports as
long as foreign products become price competitive enough to overcome the barriers created
by the tariff. When a trading partner uses quantitative restrictions, however, it is impossible
to export in excess of the quota no matter how price competitive foreign products may be.
Thus, quantitative restrictions are considered to have such a distortional effect on trade that
their prohibition is one of the fundamental principles of the GATT. However, the GATT
provides exceptions to this fundamental principle. These exceptions permit the imposition of
quantitative measures under limited conditions and only if they are taken on policy grounds
justifiable under the GATT such as critical shortages of foodstuffs (Article XI:2) and balance
of payment problems (Article XVIII:B). As long as these exceptions are invoked formally in
accordance with GATT provisions, they cannot be criticized as unfair trade measures.

Types of tariffs
Quantitative restriction
Environment exception
Security exception
Function
Ancient history
Free trade good or not
Third world
Dispute settlement body
Complaint
Retaliation
Kicking away the leader
Structure of WTO
Principles
All exceptions
Dumping
Subsidies
Sanitary phytosanitary
Agriculture

The WTO’s overriding objective is to help trade flow smoothly, freely and predictably. It
does this by:

 administering trade agreements

 acting as a forum for trade negotiations
 settling trade disputes
  reviewing national trade policies
 building the trade capacity of developing economies
 cooperating with other international organizations

Structure
The WTO has 164 members, accounting for 98% of world trade. A total of 25 countries are
negotiating membership.
Decisions are made by the entire membership. This is typically by consensus. A majority vote
is also possible but it has never been used in the WTO, and was extremely rare under the
WTO’s predecessor, the GATT. The WTO’s agreements have been ratified in all members’
parliaments.
The WTO’s top level decision- making body is the Ministerial Conference, which meets
usually every two years.
Below this is the General Council (normally ambassadors and heads of delegation based in
Geneva but sometimes officials sent from members’ capitals) which meets several times a
year in the Geneva headquarters. The General Council also meets as the Trade Policy Review
Body and the Dispute Settlement Body.
At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS)
Council report to the General Council.
Numerous specialized committees, working groups and working parties deal with the
individual agreements and other areas, such as the environment, development, membership
applications and regional trade agreements.

What is WTO’s Appellate Body?

 About:
o WTO was established to provide a platform for negotiations for
liberating trade and creating rules, as well as to monitor and
administer multilateral trades.
o One of the key objectives was also to address the grievances
between its members by acting as a court for global trade.
o The Appellate Body, set up in 1995, is a standing committee of
seven members with a limited four-year term that presides over
appeals against judgments passed in trade-related disputes brought
by WTO members.
o Disputes arise when a member country observes that another
member government is breaching a commitment, or a trade
agreement made at the WTO.
 Structure:
o The Appellate Body is composed of seven Members who are appointed by
the Dispute Settlement Body (DSB) to serve for four-year terms.
  The DSB has authority to establish dispute settlement panels,
refer matters to arbitration, adopt panel, Appellate Body and
arbitration reports, maintain surveillance over the implementation
of recommendations and rulings contained in such reports, and
authorize suspension of concessions in the event of non-
compliance with those recommendations and rulings.
o Each person may be reappointed for another four-year term.

Stage 1: Consultations (Article 4 of the DSU)

Before referring any dispute to mediation or taking any other actions, both the WTO member
countries shall affirm to resolve their disputes through consultation. If a WTO member
requests for consultation with another Member concerning measures affecting the operations
of the former member, the latter member must accept such request within a period 10 days
after the date of receipt of such request and shall enter into consultation within 30 days. 

If the consultation fails to provide a satisfactory solution to the problem within 60 days after
the date of receipt of the request for consultation, then the complaining party may request for
construction of the panel. All such requests for consultation and construction shall be notified
in writing including reasons for such requests to the Dispute Settlement Body by the
complaining member.

Stage 2: Establishment of Panels (Articles 6, 8 and 11 of the DSU)

If no satisfactory solution is reached through consultation between the member countries, the
complaining member may request for the establishment of panels in writing to the Dispute
Settlement Body including a summary of the case and issues involved. The panel is
established at the second meeting of DSB at which request appears as an agenda item of the
meeting.

The function of the Panel is to aid the Dispute Settlement Body in resolving the matter in
dispute. The panel assesses the entire dispute, including the facts of the case and issues
involved therein and examines whether it conforms with the covered agreement between the
member countries. The Panel shall provide its final report to the parties within 6 months from
the date when panel procedures start.

Stage 3: Selection of panellists (Article 8 of the DSU)

After the establishment of the panel, the next step is to select panellists. The panellists are
selected by the WTO Secretariat. The parties cannot oppose the selection unless they state
reasons satisfactory to the Secretariat. The panel shall consist of three panellists. The parties
can agree to have five panellists on board if they consider necessary within 10 days from the
establishment of the panel. 
The WTO Secretariat assists the parties in the selection of panellists by creating a list of all
governmental and non-governmental individuals having certain qualifications from which
panellists may be chosen by the parties. 

Members may, at any reasonable time, make an addition to the list of individuals by
suggesting the name of individuals who can assist the parties by providing any information
related to international trade law or any of the matter as covered in the agreement because of
which dispute arose in the first place. The addition to the list can be made only after the
approval of the Dispute Settlement Body.

If panellists are not selected within 20 days after the date of establishment of the panel, the
Director-General, in consultation with the Chairman of Dispute Settlement Body and
Chairman of relevant Council or Committee appoint panellists which they consider
appropriate. The chairman of the Dispute Settlement Body, then informs the members of the
composition of the panel within 10 days. 

Stage 4: Procedure of Panel (Articles 10 and 12 of the DSU)

The panellists shall, within one week after the composition of the panel fix a timetable for the
panel process. After this, the panel decides a deadline for written submission to be made by
each party. Each party has to submit its submissions with the secretariat which shall transfer
each submission to the panel and submission made by one party shall be sent to the other
party as well. At the first substantive meeting of the panel, the complaining party shall be the
first to present their case ahead of the responding party. 

The third parties who have notified the Dispute Settlement Body having substantial interest in
the subject matter of the dispute are also asked to present their views during the same
meeting. Any rebuttals between the parties shall be made at the subsequent meeting of the
panel. Here, the responding party shall be the first to respond against the complaining party.
The parties, before that meeting, have to submit their written rebuttals to the panel. The
panel, if they consider necessary, put any questions before the parties to be answered in the
duration of that meeting.

Where after the examination, a solution has been reached between the parties, the panel shall
submit a written report to the Dispute Settlement Body which shall have a brief description of
the case along with the solution which has been reached. Where the solution has not been
found, the panel shall send a written report to the Dispute Settlement Body mentioning its
findings of the case and recommendations, if any, it makes. 

The report has to be sent within six months of its examination. In case of urgency, including
the case of perishable goods, the report has to be sent within three months. The maximum
period during which the report has to send is nine months from the establishment of the
panel. 

Stage 5: Interim report (Article 15 of the DSU)

Following the oral arguments and rebuttal that has been performed and examination has been
made, the panel shall issue a draft report to the parties. The parties have to submit their
comments in writing after receiving the draft report within the period set by the panel.

After the expiration of the said period for receiving the comments from the parties, the panel
shall issue an interim report, including its findings in the draft report and its new findings and
conclusion. Both the parties, within the time given the panel may submit its written request to
revise its interim report accordingly. 

At the request made by the parties, the panel shall call for a further meeting to discuss the
comments made by the parties to the dispute. If both the parties are satisfied with the solution
reached, then such a revised interim report shall be the final panel report and is circulated
among the members.

In case, the parties are not satisfied with the outcome of the report reached then any
objections of the members shall be considered at the meeting of the Dispute Settlement Body.
Such objections have to be reported at least 10 days before the meeting of the Dispute
Settlement Body. 

The final report shall be adopted by the Dispute Settlement Body within 60 days from the
date panel report is circulated to the members unless any party to the dispute is unsatisfied
with such report and notifies its decision of appeal to Dispute Settlement Body or the Dispute
Settlement Body unanimously decides not to adopt such report, as the case may be. In case of
an appeal, the report shall deem to be invalid for adoption by the Dispute Settlement Body
unless the Standing Appellate Body provides its Appellate Body Report. 

Stage 6: Appeal (Article 17 of the DSU)

Either of the parties unsatisfied with the ruling of the panel report can appeal to the Standing
Appellate Body established by the Dispute Settlement Body. Only parties to the dispute can
appeal to a panel report and not the third parties. Third parties can be allowed to be heard
only in case such third party has notified in writing to the Dispute Settlement Body of its
substantial interest in such dispute.

The proceeding of the Appellate Body shall not exceed 60 days from the date a party to the
dispute notifies its intention of appealing to the Appellate Body to the Dispute Settlement
Body. In case of delay, the maximum period granted to the Appellate Body is 90 days. The
Appellate Body has to submit in writing to the Dispute Settlement Body its reasons for the
delay together with the period within which the final decision is notified. 

The Appellate Body will not re-examine any shreds of evidence, issues or previous
arguments but its examination shall be limited to laws covered in the panel report or legal
interpretation evolved by the panellists. The Appellate Body has the power to uphold, modify
or reverse the panel report and provide a conclusive report. 
Stage 7: Acceptance of report by Dispute Settlement Body (Article 30 of the DSU)

The Dispute Settlement Body has to either accept the Appellate Body report or reject it
within a maximum period of 30 days after receiving such a report. The report can only be
rejected unanimously.

Time framework for Dispute Settlement

STAGE PERIOD

Consultation 60 days

Establishment of panel and selection of Panellists 45 days

Panel report to parties 6 months

Final panel report to WTO members 3 weeks

Dispute settlement body adopts report (without appeal 60 days

Total time (without appeal) 1 year

Appellate body report (if an appeal is made) 60-90 days

Dispute settlement body adopts appellate body report 30 days

Total time (with the appeal) 1 year 3 months

he first, and by far, the most common complaint is the so-called “violation complaint”
pursuant to Article XXIII:1(a) of GATT 1994. This complaint requires “nullification or
impairment of a benefit” as a result of the “the failure of another [Member] to carry out its
obligations” under GATT 1994. This “failure to carry out obligations” is just a different way
of referring to a legal inconsistency with, or violation of, the GATT 1994. There also needs to
be “nullification or impairment” as a result of the alleged legal inconsistency.
The second type of complaint is the so-called “non-violation complaint” pursuant to Article
XXIII:1(b) of GATT 1994. A non-violation complaint may be used to challenge any measure
applied by another Member, even if it does not conflict with GATT 1994, provided that it
results in “nullification or impairment of a benefit”. There have been a few such complaints
both under GATT 1947 and in the WTO.
The third type of complaint is the so-called “situation complaint” pursuant to Article
XXIII:1(c) of GATT 1994. Literally understood, it could cover any situation whatsoever, as
long as it results in “nullification or impairment”. However, although a few such situation
complaints have been raised under the old GATT, none of them has ever resulted in a panel
report. In the WTO, Article XXIII:1(c) of GATT 1994 has not so far been invoked by any
complainant.