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Our staff of freelance writers includes over 120 experts proficient in WTO, therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your WTO paper at affordable prices with cheap essay writing service! The WTO
Location Geneva, Switzerland
Established 1 January 15
Created by Uruguay Round negotiations (186�4)
Cheap Custom Essays on WTO
Membership 146 countries (as of April 00)
Budget 155 million Swiss francs for 00
Secretariat staff 560
Head Director-General, Supachai Panitchpakdi
Functions
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing countries
• Cooperation with other international organizations
Understanding
the WTO
rd edition
Previously published as "Trading into the Future"
August 00
Fact file
The WTO
Location Geneva, Switzerland
Established 1 January 15
Created by Uruguay Round negotiations (186�4)
Membership 146 countries (on 4 April 00)
Budget 154 million Swiss francs for 00
Secretariat staff 550
Head Supachai Panitchpakdi (director-general)
Functions
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing
countries
• Cooperation with other international organizations
Third edition
Previously published as "Trading into the Future"
Written and published by the
World Trade Organization
Information and Media Relations Division
� WTO 15, 000, 001, 00
An up-to-date version of this text also appears on the WTO website
(http//www.wto.org, click on "the WTO"), where it is
regularly updated to reflect developments in the WTO.
Contact the WTO Information Division
rue de Lausanne 154, CH�111 Genève 1, Switzerland
Tel (41�) 7 5007/510 Fax (41�) 7 5458
e-mail enquiries@wto.org
Contact WTO Publications
rue de Lausanne 154, CH�111 Genève 1, Switzerland
Tel (41�) 7 508/508 Fax (41�) 7 57
e-mail publications@wto.org
August 00 � 10 000 copies
Abbreviations
Some of the abbreviations and acronyms used in the WTO
ACP African, Caribbean and Pacific Group (Lom� Convention)
AD, A-D Anti-dumping measures
AFTA ASEAN Free Trade Area
AMS Aggregate measurement of support (agriculture)
APEC Asia-Pacific Economic Cooperation
ASEAN Association of Southeast Asian Nations
ATC Agreement on Textiles and Clothing
CBD Convention on Biological Diversity
CCC (former) Customs Co-operation Council (now WCO)
CER [Australia New Zealand] Closer Economic Relations
[Trade Agreement] (also ANCERTA)
COMESA Common Market for Eastern and Southern Africa
CTD Committee on Trade and Development
CTE Committee on Trade and Environment
CVD Countervailing duty (subsidies)
DDA Doha Development Agenda
DSB Dispute Settlement Body
DSU Dispute Settlement Understanding
EC European Communities
EFTA European Free Trade Association
EU European Union (officially European Communities in
WTO)
FAO Food and Agriculture Organization
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GSP Generalized System of Preferences
HS Harmonized Commodity Description and Coding System
ICITO Interim Commission for the International Trade
Organization
ILO International Labour Organization
IMF International Monetary Fund
ITC International Trade Centre
ITO International Trade Organization
MEA Multilateral environmental agreement
MERCOSUR Southern Common Market
MFA Multifibre Arrangement (replaced by ATC)
MFN Most-favoured-nation
MTN Multilateral trade negotiations
NAFTA North American Free Trade Agreement
PSE Producer subsidy equivalent (agriculture)
PSI Pre-shipment inspection
S&D Special and differential treatment ( for developing
countries)
SAARC South Asian Association for Regional Cooperation
SDR Special Drawing Rights (IMF)
SELA Latin American Economic System
SPS Sanitary and phytosanitary measures
TBT Technical barriers to trade
TMB Textiles Monitoring Body
TNC Trade Negotiations Committee
TPRB Trade Policy Review Body
TPRM Trade Policy Review Mechanism
TRIMs Trade-related investment measures
TRIPS Trade-related aspects of intellectual property rights
UN United Nations
4
UNCTAD UN Conference on Trade and Development
UNDP UN Development Programme
UNEP UN Environment Programme
UPOV International Union for the Protection of New Varieties of
Plants
UR Uruguay Round
VER Voluntary export restraint
VRA Voluntary restraint agreement
WCO World Customs Organization
WIPO World Intellectual Property Organization
WTO World Trade Organization
For a comprehensive list of abbreviations and glossary of terms used in international trade, see, for example
Walter Goode, Dictionary of Trade Policy Terms, 4th Edition, Cambridge University Press, 00.
This and many other publications on the WTO and trade are available from
WTO Publications, World Trade Organization, Centre William Rappard, Rue de Lausanne 154, CH�111 Geneva,
Switzerland.
Tel (+41�) 7 508 / 7 508. Fax (+41�) 7 57
e-mail publications@wto.org
ON THE WEBSITE
You can find more information on WTO activities and issues on the WTO website. The site is created around
"gateways" leading to various subjects � for example, the "trade topics" gateway or the "Doha Development
Agenda" gateway. Each gateway provides links to all material on its subject.
References in this text show you where to find the material. This is in the form of a path through gateways, starting
with one of the navigation links in the top right of the homepage or any other page on the site. For example, to find
material on the agriculture negotiations, you go through this series of gateways and links
www.wto.org trade topics goods agriculture agriculture negotiations
You can follow this path, either by clicking directly on the links, or via drop-down menus that will appear in most
browsers when you place your cursor over the "trade topics" link at the top of any web page on the site.
A word of caution the fine print
While every effort has been made to ensure the accuracy of the text in this booklet, it cannot be taken as an official legal
interpretation of the agreements.
In addition, some simplifications are used in order to keep the text simple and clear.
In particular, the words "country" and "nation" are frequently used to describe WTO members, whereas a few members are
officially "customs territories", and not necessarily countries in the usual sense of the word (see list of members). The same
applies when participants in trade negotiations are called "countries" or "nations".
Where there is little risk of misunderstanding, the word "member" is dropped from "member countries (nations,
governments)", for example in the descriptions of the WTO agreements. Naturally, the agreements and commitments do not
apply to non-members.
In some parts of the text, GATT is described as an "international organization". The phrase reflects GATT's de facto role
before the WTO was created, and it is used simplistically here to help readers understand that role. As the text points out,
this role was always ad hoc, without a proper legal foundation. International law did not recognize GATT as an organization.
For simplicity, the text uses the term "GATT members". Officially, since GATT was a treaty and not a legally-established
organization, GATT signatories were "contracting parties".
And, for easier reading, article numbers in GATT and GATS have been translated from Roman numbers into European digits.
5
Contents
Chapter 1 .................................................................................. 7
Basics ....................................................................................... 7
1. What is the World Trade Organization? ..................................... 7
Is it a bird, is it a plane? .............................................................7
Born in 15, but not so young ....................................................8
. Principles of the trading system ...............................................
Trade without discrimination........................................................
Freer trade gradually, through negotiation ................................. 10
Predictability through binding and transparency .......................... 10
Promoting fair competition ........................................................ 11
Encouraging development and economic reform ........................... 11
. The case for open trade ........................................................ 1
4. The GATT years from Havana to Marrakesh............................ 14
GATT "provisional' for almost half a century ................................ 14
The Tokyo Round a first try to reform the system........................ 15
Did GATT succeed?................................................................... 16
5. The Uruguay Round .............................................................. 18
A round to end all rounds?......................................................... 18
What happened to GATT? .......................................................... 1
The post-Uruguay Round built-in agenda..................................... 0
Chapter ................................................................................ 1
The agreements ...................................................................... 1
1. Overview a navigational guide .............................................. 1
Six-part broad outline............................................................... 1
Additional agreements ..............................................................
Further changes on the horizon, the Doha Agenda ........................
. Tariffs more bindings and closer to zero.................................
Tariff cuts ...............................................................................
More bindings..........................................................................
And agriculture ... .................................................................... 4
. Agriculture fairer markets for farmers.................................... 5
The Agriculture Agreement new rules and commitments .............. 5
The least-developed and those depending on food imports............. 8
4. Standards and safety ............................................................
Food, animal and plant products how safe is safe?.......................
Technical regulations and standards ........................................... 0
5. Textiles back in the mainstream............................................ 1
Integration returning products gradually to GATT rules ................ 1
6. Services rules for growth and investment...............................
GATS explained .......................................................................
Current work ........................................................................... 6
7. Intellectual property protection and enforcement ....................
Origins into the rule-based trade system....................................
Basic principles national treatment, MFN, and balanced protection. 40
How to protect intellectual property common ground-rules ........... 40
Enforcement tough but fair....................................................... 4
Technology transfer.................................................................. 4
Transition arrangements 1, 5 or 11 years or more ....................... 44
8. Anti-dumping, subsidies, safeguards contingencies, etc ........... 45
Anti-dumping actions................................................................ 45
Subsidies and countervailing measures ....................................... 46
Safeguards emergency protection from imports .......................... 48
. Non-tariff barriers red tape, etc ............................................ 50
Import licensing keeping procedures clear.................................. 50
Rules for the valuation of goods at customs ................................. 50
Preshipment inspection a further check on imports ...................... 51
Rules of origin made in ... where? ............................................. 51
Investment measures reducing trade distortions ......................... 5
10. Plurilaterals of minority interest .......................................... 5
Fair trade in civil aircraft ........................................................... 5
Government procurement opening up for competition .................. 5
Dairy and bovine meat agreements ended in 17 ...................... 54
11. Trade policy reviews ensuring transparency.......................... 55
Chapter ................................................................................ 56
Settling disputes ..................................................................... 56
1. A unique contribution............................................................ 56
Principles equitable, fast, effective, mutually acceptable............... 56
How are disputes settled? ......................................................... 57
Appeals .................................................................................. 58
The case has been decided what next? ...................................... 58
. The panel process ................................................................ 60
. Case study the timetable in practice ...................................... 61
Chapter 4 ................................................................................ 6
Cross-cutting and new issues.................................................. 6
1. Regionalism friends or rivals? ............................................... 64
Regional trading arrangements .................................................. 64
. The environment a new high profile....................................... 66
The committee broad-based responsibility.................................. 66
6
WTO and environmental agreements how are they related?.......... 66
Disputes where should they be handled?.................................... 67
A WTO dispute The "shrimp-turtle' case...................................... 68
A GATT dispute The tuna-dolphin dispute ................................... 70
Eco-labelling good, if it doesn't discriminate ............................... 71
Transparency information without too much paperwork................ 71
Domestically prohibited goods dangerous chemicals, etc .............. 7
Liberalization and sustainable development good for each other .... 7
Intellectual property, services some scope for study .................... 7
. Investment, competition, procurement, simpler procedures....... 7
Investment and competition what role for the WTO?.................... 7
Transparency in government purchases towards multilateral rules. 74
Trade facilitation a new high profile ........................................... 74
4. Electronic commerce............................................................. 75
5. Labour standards highly controversial.................................... 76
Trade and labour rights deferred to the ILO................................ 76
Chapter 5 ................................................................................ 77
The Doha agenda .................................................................... 77
Implementation-related issues and concerns (par 1) ................... 77
Agriculture (par 1, 14) ........................................................... 80
Services (par 15) ..................................................................... 81
Market access for non-agricultural products (par 16)..................... 8
Trade-related aspects of intellectual property rights (TRIPS)
(pars 17�1) ........................................................................... 8
Relationship between trade and investment (pars 0�).............. 84
Interaction between trade and competition policy (pars �5)...... 85
Transparency in government procurement (par 6) ...................... 85
Trade facilitation (par 7) ......................................................... 86
WTO rules anti-dumping and subsidies (par 8) .......................... 86
WTO rules regional trade agreements (par ) ........................... 87
Dispute Settlement Understanding (par 0) ................................. 87
Trade and environment (pars 1�).......................................... 88
Electronic commerce (par 4) .................................................... 8
Small economies (par 5) ......................................................... 0
Trade, debt and finance (par 6)................................................ 0
Trade and technology transfer (par 7) ....................................... 0
Technical cooperation and capacity building (pars 8�41).............. 0
Least-developed countries (pars 4, 4) ..................................... 1
Special and differential treatment (par 44) ..................................
Chapter 6 ................................................................................
Developing countries ..............................................................
1. Overview.............................................................................
In the agreements more time, better terms................................
Legal assistance a Secretariat service........................................ 4
Least-developed countries special focus ..................................... 4
A "maison' in Geneva being present is important,
but not easy for all ................................................................... 4
. Committees ......................................................................... 6
Trade and Development Committee............................................ 6
Subcommittee on Least-Developed Countries............................... 6
The Doha agenda committees.................................................... 6
. WTO technical cooperation .................................................... 7
Training, seminars and workshops.............................................. 7
4. Some issues raised............................................................... 8
Participation in the system opportunities and concerns................. 8
Erosion of preferences ..............................................................
The ability to adapt the supply-side...........................................
Chapter 7 .............................................................................. 100
The Organization................................................................... 100
1. Whose WTO is it anyway?.................................................... 100
Highest authority the Ministerial Conference............................. 100
Second level General Council in three guises ............................ 101
Third level councils for each broad area of trade, and more ........ 10
Fourth level down to the nitty-gritty ........................................ 10
"HODs' and other bods the need for informality ......................... 10
. Membership, alliances and bureaucracy................................. 105
How to join the WTO the accession process .............................. 105
Representing us ... ................................................................. 106
Representing groups of countries ... ......................................... 106
The WTO Secretariat and budget.............................................. 107
. The Secretariat .................................................................. 108
4. Special policies................................................................... 10
Assisting developing and transition economies ........................... 10
Specialized help for exporting the International Trade Centre...... 10
The WTO in global economic policy-making................................ 110
Transparency (1) keeping the WTO informed ............................ 110
Transparency () keeping the public informed .......................... 110
List of Members ..................................................................... 11
7
Chapter 1
Basics
The WTO was born out of negotiations;
everything the WTO does is the result of
negotiations
1. What is the World Trade Organization?
Simply put the World Trade Organization (WTO) deals with the
rules of trade between nations at a global or near-global level. But
there is more to it than that.
Is it a bird, is it a plane?
There are a number of ways of looking at the WTO. It's an
organization for liberalizing trade. 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. (But it's not
Superman, just in case anyone thought it could solve � or cause �
all the world's problems!)
Above all, it's a negotiating forum … Essentially, the WTO is
a place where member governments go, to try to sort out the trade
problems they face with each other. The first step is to talk. The
WTO was born out of negotiations, and everything the WTO does is
the result of negotiations. The bulk of the WTO's current work
comes from the 186�4 negotiations called the Uruguay Round
and earlier negotiations under the General Agreement on Tariffs and
Trade (GATT). The WTO is currently the host to new negotiations,
under the "Doha Development Agenda" launched in 001.
Where countries have faced trade barriers and wanted them
lowered, the negotiations have helped to liberalize trade. But the
WTO is not just about liberalizing trade, and in some circumstances
its rules support maintaining trade barriers � for example to protect
consumers or prevent the spread of disease.
It's a set of rules … At its heart are the WTO agreements,
negotiated and signed by the bulk of the world's trading nations.
These documents provide the legal ground-rules for international
commerce. They are essentially contracts, binding governments to
keep their trade policies within agreed limits. Although negotiated
and signed by governments, the goal is to help producers of goods
and services, exporters, and importers conduct their business, while
allowing governments to meet social and environmental objectives.
The system's overriding purpose is to help trade flow as freely as
possible � so long as there are no undesirable side-effects. That
partly means removing obstacles. It also means ensuring that
individuals, companies and governments know what the trade rules
are around the world, and giving them the confidence that there will
be no sudden changes of policy. In other words, the rules have to
be "transparent" and predictable.
"Multilateral' trading system ...
... i.e. the system operated by the WTO.
Most nations � including almost all the
main trading nations � are members of
the system. But some are not, so
"multilateral" is used to describe the
system instead of "global" or "world".
In WTO affairs, "multilateral" also
contrasts with actions taken regionally or
by other smaller groups of countries.
(This is different from the word's use in
other areas of international relations
where, for example, a "multilateral"
security arrangement can be regional.)
... OR IS IT A TABLE?
Participants in a recent radio
discussion on the WTO were full of
ideas. The WTO should do this, the
WTO should do that, they said.
One of them finally interjected
"Wait a minute. The WTO is a table.
People sit round the table and
negotiate. What do you expect the
table to do?"
8
And it helps to settle disputes … This is a third important side
to the WTO's work. Trade relations often involve conflicting
interests. Agreements, including those painstakingly negotiated in
the WTO system, often need interpreting. The most harmonious way
to settle these differences is through some neutral procedure based
on an agreed legal foundation. That is the purpose behind the
dispute settlement process written into the WTO agreements.
Born in 15, but not so young
The WTO began life on 1 January 15, but its trading system is
half a century older. Since 148, the General Agreement on Tariffs
and Trade (GATT) had provided the rules for the system. (The
second WTO ministerial meeting, held in Geneva in May 18,
included a celebration of the 50th anniversary of the system.)
It did not take long for the General Agreement to give birth to an
unofficial, de facto international organization, also known informally
as GATT. Over the years GATT evolved through several rounds of
negotiations.
The last and largest GATT round, was the Uruguay Round which
lasted from 186 to 14 and led to the WTO's creation. Whereas
GATT had mainly dealt with trade in goods, the WTO and its
agreements now cover trade in services, and in traded inventions,
creations and designs (intellectual property).
. Principles of the trading system
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.
A closer look at these principles
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 ) 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.
. 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 of GATT, Article 17 of GATS and Article 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.
Why "most-favoured'?
This sounds like a contradiction. It
suggests special treatment, but in the
WTO it actually means non-discrimination
� treating virtually everyone equally.
This is what happens. Each member
treats all the other members equally as
"most-favoured" trading partners. If a
country improves the benefits that it
gives to one trading partner, it has to
give the same "best" treatment to all the
other WTO members so that they all
remain "most-favoured".
Most-favoured nation (MFN) status did
not always mean equal treatment. The
first bilateral MFN treaties set up
exclusive clubs among a country's "most-
favoured" trading partners. Under GATT
and now the WTO, the MFN club is no
longer exclusive. The MFN principle
ensures that each country treats its over-
140 fellow-members equally.
But there are some exceptions ...
The principles
The trading system should be ...
• without discrimination � a country
should not discriminate between its
trading partners (giving them equally
"most-favoured-nation" or MFN status);
and it should not discriminate between its
own and foreign products, services or
nationals (giving them "national
treatment");
• freer � barriers coming down through
negotiation;
• predictable � foreign companies,
investors and governments should be
confident that trade barriers (including
tariffs and non-tariff barriers) should not
be raised arbitrarily; tariff rates and
market-opening commitments are
"bound" in the WTO;
• more competitive � discouraging
"unfair" practices such as export
subsidies and dumping products at below
cost to gain market share;
• more beneficial for less developed
countries � giving them more time to
adjust, greater flexibility, and special
privileges.
10
Freer trade gradually, through negotiation
Lowering trade barriers is one of the most obvious means of
encouraging trade. The barriers concerned include customs duties
(or tariffs) and measures such as import bans or quotas that restrict
quantities selectively. From time to time other issues such as red
tape and exchange rate policies have also been discussed.
Since GATT's creation in 147�48 there have been eight rounds of
trade negotiations. A ninth round, under the Doha Development
Agenda, is now underway. At first these focused on lowering tariffs
(customs duties) on imported goods. As a result of the negotiations,
by the mid-10s industrial countries' tariff rates on industrial goods
had fallen steadily to less than 4%.
But by the 180s, the negotiations had expanded to cover non-tariff
barriers on goods, and to the new areas such as services and
intellectual property.
Opening markets can be beneficial, but it also requires adjustment.
The WTO agreements allow countries to introduce changes
gradually, through "progressive liberalization". Developing countries
are usually given longer to fulfil their obligations.
Predictability through binding and transparency
Sometimes, promising not to raise a trade barrier can be as
important as lowering one, because the promise gives businesses a
clearer view of their future opportunities. With stability and
predictability, investment is encouraged, jobs are created and
consumers can fully enjoy the benefits of competition � choice and
lower prices. The multilateral trading system is an attempt by
governments to make the business environment stable and
predictable.
In the WTO, when countries agree to open their markets for goods
or services, they "bind" their commitments. For goods, these
bindings amount to ceilings on customs tariff rates. Sometimes
countries tax imports at rates that are lower than the bound rates.
Frequently this is the case in developing countries. In developed
countries the rates actually charged and the bound rates tend to be
the same.
A country can change its bindings, but only after negotiating with its
trading partners, which could mean compensating them for loss of
trade. One of the achievements of the Uruguay Round of
multilateral trade talks was to increase the amount of trade under
binding commitments (see table). In agriculture, 100% of products
now have bound tariffs. The result of all this a substantially higher
degree of market security for traders and investors.
The system tries to improve predictability and stability in other ways
as well. One way is to discourage the use of quotas and other
measures used to set limits on quantities of imports �
administering quotas can lead to more red-tape and accusations of
unfair play. Another is to make countries' trade rules as clear and
public ("transparent") as possible. Many WTO agreements require
governments to disclose their policies and practices publicly within
the country or by notifying the WTO. The regular surveillance of
11
national trade policies through the Trade Policy Review Mechanism
provides a further means of encouraging transparency both
domestically and at the multilateral level.
Promoting fair competition
The WTO is sometimes described as a "free trade" institution, but
that is not entirely accurate. The system does allow tariffs and, in
limited circumstances, other forms of protection. More accurately, it
is a system of rules dedicated to open, fair and undistorted
competition.
The rules on non-discrimination � MFN and national treatment �
are designed to secure fair conditions of trade. So too are those on
dumping (exporting at below cost to gain market share) and
subsidies. The issues are complex, and the rules try to establish
what is fair or unfair, and how governments can respond, in
particular by charging additional import duties calculated to
compensate for damage caused by unfair trade.
Many of the other WTO agreements aim to support fair competition
in agriculture, intellectual property, services, for example. The
agreement on government procurement (a "plurilateral" agreement
because it is signed by only a few WTO members) extends
competition rules to purchases by thousands of government entities
in many countries. And so on.
Encouraging development and economic reform
The WTO system contributes to development. On the other hand,
developing countries need flexibility in the time they take to
implement the system's agreements. And the agreements
themselves inherit the earlier provisions of GATT that allow for
special assistance and trade concessions for developing countries.
Over three quarters of WTO members are developing countries and
countries in transition to market economies. During the seven and a
half years of the Uruguay Round, over 60 of these countries
implemented trade liberalization programmes autonomously. At the
same time, developing countries and transition economies were
much more active and influential in the Uruguay Round negotiations
than in any previous round, and they are even more so in the
current Doha Development Agenda.
At the end of the Uruguay Round, developing countries were
prepared to take on most of the obligations that are required of
developed countries. But the agreements did give them transition
periods to adjust to the more unfamiliar and, perhaps, difficult WTO
provisions � particularly so for the poorest, "least-developed"
countries. A ministerial decision adopted at the end of the round
says better-off countries should accelerate implementing market
access commitments on goods exported by the least-developed
countries, and it seeks increased technical assistance for them.
More recently, developed countries have started to allow duty-free
and quota-free imports for almost all products from least-developed
countries. On all of this, the WTO and its members are still going
through a learning process. The current Doha Development Agenda
includes developing countries' concerns about the difficulties they
face in implementing the Uruguay Round agreements.
The Uruguay Round
increased bindings
Percentages of tariffs bound before and
after the 186�4 talks
Before After
Developed countries 78
Developing countries 1 7
Transition economies 7 8
(These are tariff lines, so percentages are
not weighted according to trade volume
or value)
1
. The case for open trade
The economic case for an open trading system based on
multilaterally agreed rules is simple enough and rests largely on
commercial common sense. But it is also supported by evidence
the experience of world trade and economic growth since the
Second World War. Tariffs on industrial products have fallen steeply
and now average less than 5% in industrial countries. During the
first 5 years after the war, world economic growth averaged about
5% per year, a high rate that was partly the result of lower trade
barriers. World trade grew even faster, averaging about 8% during
the period.
The data show a definite statistical link between freer trade and
economic growth. Economic theory points to strong reasons for the
link. All countries, including the poorest, have assets � human,
industrial, natural, financial � which they can employ to produce
goods and services for their domestic markets or to compete
overseas. Economics tells us that we can benefit when these goods
and services are traded. Simply put, the principle of "comparative
advantage" says that countries prosper first by taking advantage of
their assets in order to concentrate on what they can produce best,
and then by trading these products for products that other countries
produce best.
In other words, liberal trade policies � policies that allow the
unrestricted flow of goods and services � sharpen competition,
motivate innovation and breed success. They multiply the rewards
that result from producing the best products, with the best design,
at the best price.
But success in trade is not static. The ability to compete well in
particular products can shift from company to company when the
market changes or new technologies make cheaper and better
products possible. Producers are encouraged to adapt gradually and
in a relatively painless way. They can focus on new products, find a
new "niche" in their current area or expand into new areas.
Experience shows that competitiveness can also shift between whole
countries. A country that may have enjoyed an advantage because
of lower labour costs or because it had good supplies of some
natural resources, could also become uncompetitive in some goods
or services as its economy develops. However, with the stimulus of
an open economy, the country can move on to become competitive
in some other goods or services. This is normally a gradual process.
Nevertheless, the temptation to ward off the challenge of
competitive imports is always present. And richer governments are
more likely to yield to the siren call of protectionism, for short term
political gain � through subsidies, complicated red tape, and hiding
behind legitimate policy objectives such as environmental
preservation or consumer protection as an excuse to protect
producers.
Protection ultimately leads to bloated, inefficient producers
supplying consumers with outdated, unattractive products. In the
end, factories close and jobs are lost despite the protection and
subsidies. If other governments around the world pursue the same
policies, markets contract and world economic activity is reduced.
One of the objectives that governments bring to WTO negotiations
is to prevent such a self-defeating and destructive drift into
protectionism.
MORE ON THE WEBSITE
www.wto.org resources WTO research and analysis
TRUE AND NON-TRIVIAL?
Nobel laureate Paul Samuelson was
once challenged by the
mathematician Stanislaw Ulam to
"name me one proposition in all of
the social sciences which is both true
and non-trivial."
It took Samuelson several years to
find the answer � comparative
advantage.
"That it is logically true need not be
argued before a mathematician; that
it is not trivial is attested by the
thousands of important and
intelligent men who have never been
able to grasp the doctrine for
themselves or to believe it after it
was explained to them."
World trade and production have
accelerated
Both trade and GDP fell in the late 10s,
before bottoming out in 1. After
World War II, both have risen
exponentially, most of the time with
trade outpacing GDP.
(150 = 100. Trade and GDP log scale)
000
1000
00
100
1/ 8 48 60 70 80 0 15
50
GATT
created
WTO
created
GDP
Merchandise trade
1
Comparative advantage
This is arguably the single most
powerful insight into economics.
Suppose country A is better than
country B at making automobiles,
and country B is better than
country A at making bread. It is
obvious (the academics would say
"trivial") that both would benefit if
A specialized in automobiles, B
specialized in bread and they
traded their products. That is a
case of absolute advantage.
But what if a country is bad at
making everything? Will trade
drive all producers out of business?
The answer, according to Ricardo,
is no. The reason is the principle of
comparative advantage.
It says, countries A and B still
stand to benefit from trading with
each other even if A is better than
B at making everything. If A is
much more superior at making
automobiles and only slightly
superior at making bread, then A
should still invest resources in
what it does best � producing
automobiles � and export the
product to B. B should still invest
in what it does best � making
bread � and export that product
to A, even if it is not as efficient
as A. Both would still benefit from
the trade. A country does not
have to be best at anything to
gain from trade. That is
comparative advantage.
The theory dates back to classical
economist David Ricardo. It is
one of the most widely accepted
among economists. It is also one
of the most misunderstood
among non-economists because it
is confused with absolute
advantage.
It is often claimed, for example,
that some countries have no
comparative advantage in
anything. That is virtually
impossible.
Think about it ...
14
4. The GATT years from Havana to Marrakesh
The WTO's creation on 1 January 15 marked the biggest reform
of international trade since after the Second World War. It also
brought to reality � in an updated form � the failed attempt in
148 to create an International Trade Organization.
Much of the history of those 47 years was written in Geneva. But it
also traces a journey that spanned the continents, from that
hesitant start in 148 in Havana (Cuba), via Annecy (France),
Torquay (UK), Tokyo (Japan), Punta del Este (Uruguay), Montreal
(Canada), Brussels (Belgium) and finally to Marrakesh (Morocco) in
14. During that period, the trading system came under GATT,
salvaged from the aborted attempt to create the ITO. GATT helped
establish a strong and prosperous multilateral trading system that
became more and more liberal through rounds of trade negotiations.
But by the 180s the system needed a thorough overhaul. This led
to the Uruguay Round, and ultimately to the WTO.
GATT "provisional' for almost half a century
From 148 to 14, the General Agreement on Tariffs and Trade
(GATT) provided the rules for much of world trade and presided
over periods that saw some of the highest growth rates in
international commerce. It seemed well-established, but throughout
those 47 years, it was a provisional agreement and organization.
The original intention was to create a third institution to handle the
trade side of international economic co-operation, joining the two
"Bretton Woods" institutions, the World Bank and the International
Monetary Fund. Over 50 countries participated in negotiations to
create an International Trade Organization (ITO) as a specialized
agency of the United Nations. The draft ITO Charter was ambitious.
It extended beyond world trade disciplines, to include rules on
employment, commodity agreements, restrictive business practices,
international investment, and services.
Even before the talks concluded, of the 50 participants decided in
146 to negotiate to reduce and bind customs tariffs. With the
Second World War only recently ended, they wanted to give an early
boost to trade liberalization, and to begin to correct the legacy of
protectionist measures which remained in place from the early
10s.
This first round of negotiations resulted in 45,000 tariff concessions
affecting $10 billion of trade, about one fifth of the world's total. The
also agreed that they should accept some of the trade rules of
the draft ITO Charter. This, they believed, should be done swiftly
and "provisionally" in order to protect the value of the tariff
concessions they had negotiated. The combined package of trade
rules and tariff concessions became known as the General
Agreement on Tariffs and Trade. It entered into force in January
148, while the ITO Charter was still being negotiated. The
became founding GATT members (officially, "contracting parties").
Although the ITO Charter was finally agreed at a UN Conference on
Trade and Employment in Havana in March 148, ratification in
some national legislatures proved impossible. The most serious
opposition was in the US Congress, even though the US government
The trade chiefs
The directors-general of GATT and WTO
• Sir Eric Wyndham White (UK) 148�68
• Olivier Long (Switzerland) 168�80
• Arthur Dunkel (Switzerland) 180�
• Peter Sutherland (Ireland)
GATT 1�4; WTO 15
• Renato Ruggiero (Italy) 15�1
• Mike Moore (New Zealand) 1�00
• Supachai Panitchpakdi (Thailand)
00�
15
had been one of the driving forces. In 150, the United States
government announced that it would not seek Congressional
ratification of the Havana Charter, and the ITO was effectively dead.
Even though it was provisional, the GATT remained the only
multilateral instrument governing international trade from 148 until
the WTO was established in 15.
For almost half a century, the GATT's basic legal principles remained
much as they were in 148. There were additions in the form of a
section on development added in the 160s and "plurilateral"
agreements (i.e. with voluntary membership) in the 170s, and
efforts to reduce tariffs further continued. Much of this was achieved
through a series of multilateral negotiations known as "trade
rounds" � the biggest leaps forward in international trade
liberalization have come through these rounds which were held
under GATT's auspices.
In the early years, the GATT trade rounds concentrated on further
reducing tariffs. Then, the Kennedy Round in the mid-sixties
brought about a GATT Anti-Dumping Agreement and a section on
development. The Tokyo Round during the seventies was the first
major attempt to tackle trade barriers that do not take the form of
tariffs, and to improve the system. The eighth, the Uruguay Round
of 186�4, was the last and most extensive of all. It led to the
WTO and a new set of agreements.
The GATT trade rounds
Year Place/ name Subjects covered Countries
147 Geneva Tariffs
14 Annecy Tariffs 1
151 Torquay Tariffs 8
156 Geneva Tariffs 6
160�161 Geneva (Dillon Round) Tariffs 6
164�167 Geneva (Kennedy Round) Tariffs and anti-dumping measures 6
17�17 Geneva (Tokyo Round) Tariffs, non-tariff measures, "framework" agreements 10
186�14 Geneva (Uruguay Round) Tariffs, non-tariff measures, rules, services, intellectual
property, dispute settlement, textiles, agriculture, creation of
WTO, etc
1
The Tokyo Round a first try to reform the system
The Tokyo Round lasted from 17 to 17, with 10 countries
participating. It continued GATT's efforts to progressively reduce
tariffs. The results included an average one-third cut in customs
duties in the world's nine major industrial markets, bringing the
average tariff on industrial products down to 4.7%. The tariff
reductions, phased in over a period of eight years, involved an
element of "harmonization" � the higher the tariff, the larger the
cut, proportionally.
In other issues, the Tokyo Round had mixed results. It failed to
come to grips with the fundamental problems affecting farm trade
and also stopped short of providing a modified agreement on
"safeguards" (emergency import measures). Nevertheless, a series
of agreements on non-tariff barriers did emerge from the
negotiations, in some cases interpreting existing GATT rules, in
others breaking entirely new ground. In most cases, only a
relatively small number of (mainly industrialized) GATT members
subscribed to these agreements and arrangements. Because they
The Tokyo Round "codes'
• Subsidies and countervailing measures
� interpreting Articles 6, 16 and of
GATT
• Technical barriers to trade �
sometimes called the Standards Code
• Import licensing procedures
• Government procurement
• Customs valuation � interpreting
Article 7
• Anti-dumping � interpreting Article 6,
replacing the Kennedy Round code
• Bovine Meat Arrangement
• International Dairy Arrangement
• Trade in Civil Aircraft
16
were not accepted by the full GATT membership, they were often
informally called "codes".
They were not multilateral, but they were a beginning. Several
codes were eventually amended in the Uruguay Round and turned
into multilateral commitments accepted by all WTO members. Only
four remained "plurilateral" � those on government procurement,
bovine meat, civil aircraft and dairy products. In 17 WTO
members agreed to terminate the bovine meat and dairy
agreements, leaving only two.
Did GATT succeed?
GATT was provisional with a limited field of action, but its success
over 47 years in promoting and securing the liberalization of much
of world trade is incontestable. Continual reductions in tariffs alone
helped spur very high rates of world trade growth during the 150s
and 160s � around 8% a year on average. And the momentum of
trade liberalization helped ensure that trade growth consistently
out-paced production growth throughout the GATT era, a measure
of countries' increasing ability to trade with each other and to reap
the benefits of trade. The rush of new members during the Uruguay
Round demonstrated that the multilateral trading system was
recognized as an anchor for development and an instrument of
economic and trade reform.
But all was not well. As time passed new problems arose. The Tokyo
Round in the 170s was an attempt to tackle some of these but its
achievements were limited. This was a sign of difficult times to
come.
GATT's success in reducing tariffs to such a low level, combined with
a series of economic recessions in the 170s and early 180s, drove
governments to devise other forms of protection for sectors facing
increased foreign competition. High rates of unemployment and
constant factory closures led governments in Western Europe and
North America to seek bilateral market-sharing arrangements with
competitors and to embark on a subsidies race to maintain their
holds on agricultural trade. Both these changes undermined GATT's
credibility and effectiveness.
The problem was not just a deteriorating trade policy environment.
By the early 180s the General Agreement was clearly no longer as
relevant to the realities of world trade as it had been in the 140s.
For a start, world trade had become far more complex and
important than 40 years before the globalization of the world
economy was underway, trade in services � not covered by GATT
rules � was of major interest to more and more countries, and
international investment had expanded. The expansion of services
trade was also closely tied to further increases in world merchandise
trade. In other respects, GATT had been found wanting. For
instance, in agriculture, loopholes in the multilateral system were
heavily exploited, and efforts at liberalizing agricultural trade met
with little success. In the textiles and clothing sector, an exception
to GATT's normal disciplines was negotiated in the 160s and early
170s, leading to the Multifibre Arrangement. Even GATT's
institutional structure and its dispute settlement system were
causing concern.
17
These and other factors convinced GATT members that a new effort
to reinforce and extend the multilateral system should be
attempted. That effort resulted in the Uruguay Round, the
Marrakesh Declaration, and the creation of the WTO.
Trade rounds progress by package
They are often lengthy � the Uruguay Round took seven and a half years � but trade
rounds can have an advantage. They offer a package approach to trade negotiations that
can sometimes be more fruitful than negotiations on a single issue.
• The size of the package can mean more benefits because participants can seek and
secure advantages across a wide range of issues.
• Agreement can be easier to reach, through trade-offs � somewhere in the package
there should be something for everyone.
This has political as well as economic implications. A government may want to make a
concession, perhaps in one sector, because of the economic benefits. But politically, it
could find the concession difficult to defend. A package would contain politically and
economically attractive benefits in other sectors that could be used as compensation.
So, reform in politically-sensitive sectors of world trade can be more feasible as part of
a global package � a good example is the agreement to reform agricultural trade in
the Uruguay Round.
• Developing countries and other less powerful participants have a greater chance of
influencing the multilateral system in a trade round than in bilateral relationships with
major trading nations.
But the size of a trade round can be both a strength and a weakness. From time to time,
the question is asked wouldn't it be simpler to concentrate negotiations on a single sector?
Recent history is inconclusive. At some stages, the Uruguay Round seemed so cumbersome
that it seemed impossible that all participants could agree on every subject. Then the round
did end successfully in 1�4. This was followed by two years of failure to reach
agreement in the single-sector talks on maritime transport.
Did this mean that trade rounds were the only route to success? No. In 17, single-sector
talks were concluded successfully in basic telecommunications, information technology
equipment and financial services.
The debate continues. Whatever the answer, the reasons are not straightforward. Perhaps
success depends on using the right type of negotiation for the particular time and context.
18
5. The Uruguay Round
It took seven and a half years, almost twice the original schedule.
By the end, 1 countries were taking part. It covered almost all
trade, from toothbrushes to pleasure boats, from banking to
telecommunications, from the genes of wild rice to AIDS
treatments. It was quite simply the largest trade negotiation ever,
and most probably the largest negotiation of any kind in history.
At times it seemed doomed to fail. But in the end, the Uruguay
Round brought about the biggest reform of the world's trading
system since GATT was created at the end of the Second World
War. And yet, despite its troubled progress, the Uruguay Round did
see some early results. Within only two years, participants had
agreed on a package of cuts in import duties on tropical products �
which are mainly exported by developing countries. They had also
revised the rules for settling disputes, with some measures
implemented on the spot. And they called for regular reports on
GATT members' trade policies, a move considered important for
making trade regimes transparent around the world.
A round to end all rounds?
The seeds of the Uruguay Round were sown in November 18 at a
ministerial meeting of GATT members in Geneva. Although the
ministers intended to launch a major new negotiation, the
conference stalled on agriculture and was widely regarded as a
failure. In fact, the work programme that the ministers agreed
formed the basis for what was to become the Uruguay Round
negotiating agenda.
Nevertheless, it took four more years of exploring, clarifying issues
and painstaking consensus-building, before ministers agreed to
launch the new round. They did so in September 186, in Punta del
Este, Uruguay. They eventually accepted a negotiating agenda that
covered virtually every outstanding trade policy issue. The talks
were going to extend the trading system into several new areas,
notably trade in services and intellectual property, and to reform
trade in the sensitive sectors of agriculture and textiles. All the
original GATT articles were up for review. It was the biggest
negotiating mandate on trade ever agreed, and the ministers gave
themselves four years to complete it.
Two years later, in December 188, ministers met again in
Montreal, Canada, for what was supposed to be an assessment of
progress at the round's half-way point. The purpose was to clarify
the agenda for the remaining two years, but the talks ended in a
deadlock that was not resolved until officials met more quietly in
Geneva the following April.
Despite the difficulty, during the Montreal meeting, ministers did
agree a package of early results. These included some concessions
on market access for tropical products � aimed at assisting
developing countries � as well as a streamlined dispute settlement
system, and the Trade Policy Review Mechanism which provided for
the first comprehensive, systematic and regular reviews of national
trade policies and practices of GATT members. The round was
supposed to end when ministers met once more in Brussels, in
December 10. But they disagreed on how to reform agricultural
The 186 agenda
The 15 original Uruguay Round
subjects
Tariffs
Non-tariff barriers
Natural resource products
Textiles and clothing
Agriculture
Tropical products
GATT articles
Tokyo Round codes
Anti-dumping
Subsidies
Intellectual property
Investment measures
Dispute settlement
The GATT system
Services
The Uruguay Round � Key dates
Sep 86 Punta del Este launch
Dec 88 Montreal ministerial mid-term
review
Apr 8 Geneva mid-term review
completed
Dec 0 Brussels "closing" ministerial
meeting ends in deadlock
Dec 1 Geneva first draft of Final Act
completed
Nov Washington US and EC achieve
"Blair House" breakthrough on agriculture
Jul Tokyo Quad achieve market
access breakthrough at G7 summit
Dec Geneva most negotiations end
(some market access talks remain)
Apr 4 Marrakesh agreements signed
Jan 5 Geneva WTO created,
agreements take effect
1
trade and decided to extend the talks. The Uruguay Round entered
its bleakest period.
Despite the poor political outlook, a considerable amount of
technical work continued, leading to the first draft of a final legal
agreement. This draft "Final Act" was compiled by the then GATT
director-general, Arthur Dunkel, who chaired the negotiations at
officials' level. It was put on the table in Geneva in December 11.
The text fulfilled every part of the Punta del Este mandate, with one
exception � it did not contain the participating countries' lists of
commitments for cutting import duties and opening their services
markets. The draft became the basis for the final agreement.
Over the following two years, the negotiations lurched between
impending failure, to predictions of imminent success. Several
deadlines came and went. New points of major conflict emerged to
join agriculture services, market access, anti-dumping rules, and
the proposed creation of a new institution. Differences between the
United States and European Union became central to hopes for a
final, successful conclusion.
In November 1, the US and EU settled most of their differences
on agriculture in a deal known informally as the "Blair House
accord". By July 1 the "Quad" (US, EU, Japan and Canada)
announced significant progress in negotiations on tariffs and related
subjects ("market access"). It took until 15 December 1 for
every issue to be finally resolved and for negotiations on market
access for goods and services to be concluded (although some final
touches were completed in talks on market access a few weeks
later). On 15 April 14, the deal was signed by ministers from
most of the 1 participating governments at a meeting in
Marrakesh, Morocco.
The delay had some merits. It allowed some negotiations to
progress further than would have been possible in 10 for
example some aspects of services and intellectual property, and the
creation of the WTO itself. But the task had been immense, and
negotiation-fatigue was felt in trade bureaucracies around the world.
The difficulty of reaching agreement on a complete package
containing almost the entire range of current trade issues led some
to conclude that a negotiation on this scale would never again be
possible. Yet, the Uruguay Round agreements contain timetables for
new negotiations on a number of topics. And by 16, some
countries were openly calling for a new round early in the next
century. The response was mixed; but the Marrakesh agreement did
already include commitments to reopen negotiations on agriculture
and services at the turn of the century. These began in early 000
and were incorporated into the Doha Development Agenda in late
001.
What happened to GATT?
The WTO replaced GATT as an international organization, but the
General Agreement still exists as the WTO's umbrella treaty for
trade in goods, updated as a result of the Uruguay Round
negotiations. Trade lawyers distinguish between GATT 14, the
updated parts of GATT, and GATT 147, the original agreement
which is still the heart of GATT 14. Confusing? For most of us, it's
enough to refer simply to "GATT".
0
The post-Uruguay Round built-in agenda
Many of the Uruguay Round agreements set timetables for future
work. Part of this "built-in agenda" started almost immediately. In
some areas, it included new or further negotiations. In other areas,
it included assessments or reviews of the situation at specified
times. Some negotiations were quickly completed, notably in basic
telecommunications, financial services. (Member governments also
swiftly agreed a deal for freer trade in information technology
products, an issue outside the "built-in agenda".)
The agenda originally built into the Uruguay Round agreements has
seen additions and modifications. A number of items are now part of
the Doha Agenda, some of them updated.
There were well over 0 items in the original built-in agenda. This is
a selection of highlights
16
• Maritime services market access negotiations to end (0 June 16,
suspended to 000, now part of Doha Development Agenda)
• Services and environment deadline for working party report
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