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Introduction to the WTO

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 Module 6
Review

Main features of the WTO Cross-cutting issues

Monitoring and Surveillance in the WTO
Basic principles of the WTO The WTO Dispute Settlement System
Most-favoured treatment (MFN) Trade and Environment
National Treatment Principle Capacity Building for Developing Members
More open and predictable trade
Transparency
Development Dimension

Main exceptions to the Basic Principles

General Exceptions
Regional Trade Agreements
Enabling Clause
Trade Remedies
Waivers

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 Main features of the WTO

What is it?

• The WTO is the only international organization dealing with multilateral rules of trade. Trade liberalization is
the main approach that WTO Members have adopted to promote economic growth and development. The
aim of the WTO is to improve the welfare of the people of its Members by expanding production of and trade
in goods and services.

What it does?

• The WTO provides a framework for Members to negotiate multilateral rules to govern their international trade
relations. The result of trade negotiations among WTO Members are contained in the WTO Agreements. The
Agreements provide the legal ground-rules for international trade in goods, trade in services and trade-related
aspects of intellectual property rights. The WTO facilitates the administration and operation of the WTO
Agreements through its various bodies and organs composed by representatives of its Member governments.
It also provides a forum for Members to settle their trade disputes.

How it works?

• The WTO is an inter-governmental organization. All decisions in the WTO are taken by its Member
governments. The Ministerial Conference, which meets once every two years is the topmost decision making
body. The second tier is the General Council, which meets regularly in Geneva and carries out the day-to-day
work. Both bodies are composed by representatives of all WTO Members. The WTO has other organs and
subsidiary bodies, which are in charge of specific WTO subjects.

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 How it works?

• The decision making at the WTO is based on consensus, but when consensus is not possible, the WTO
Agreements allow for voting. When voting is applied, decisions taken by the Ministerial Conference and the
General Council shall be taken by a majority of the votes, unless otherwise provided and on the basis of one
country-one vote.

• The WTO has almost a global Membership. More than 160 governments are Members of the WTO. Any
government wishing to become a Member of the WTO has to go through an accession process, which involves
negotiating with the WTO Members. The accession process is one of learning and preparation for WTO
Membership. Each accession is unique and negotiated on a case-by-case basis, taking into account the particular
situation of the acceding country.

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 In sum, the WTO:

facilitates the
administration provides
is a system of serves as a
and operation technical
multilateral has an forum for
of the WTO assistance to cooperates
trade rules institutional Members to
Agreements developing and with other
serves as a (rights and structure of its settle their
through its LDC countries international
forum for obligations) own integrated trade disputes
bodies and to help them organizations
Member resulting from by various according to
organs participate to achieve
governments negotiations bodies and the rules and
(composed by more greater
to negotiate among its organs procedures set
all Members), effectively in coherence in
multilateral Members, composed by forth in the
which are in the WTO and global
trade rules which are representatives Dispute
charge of take full economic
contained in of its Member Settlement
monitoring the advantage of policy-making
the WTO governments Understanding
implementatio trade
Agreements (DSU)
n of the liberalization
Agreements

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 Basic principles of the WTO

The WTO facilitates the smooth flow of global trade

through the administration and monitoring of a rules-
based system. These rules are contained in the WTO Most- More open
favoured and Development
Agreements, which consist of several legal documents treatment predictable Dimension
covering a wide range of trade-related issues. (MFN) trade

The WTO Agreements can be seen as a set of rights and National

obligations that apply to the Members of the Treatment Transparency
organization. The Agreements are based on a number of Principle
basic principles, which constitute the foundation of the
MTS and have been the main focus of this course.

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 The main principles of the WTO are:

Principle General Description Legal Basis Goods Legal Basis Legal Basis
Services TRIPS
Most-favoured Nation Members are not allowed to Art. I GATT Art. II Article 4
(MFN) discriminate between their trading GATS TRIPS Agreement
partners.

National Treatment Members cannot discriminate Art. III GATT Art. XVII GATS Art. 3
between domestic and foreign like TRIPS
products, services or nationals. Agreement

More open and Requires the elimination or Main provisions (GATT): Art. XVI and ----------
predictable trade reduction of obstacles to trade. • [Link].1 (tariff bindings and Art. XX of GATS
Measures affecting trade shall not Schedules)
be applied arbitrarily. • [Link] (prohibition
quantitative restrictions)
• Other provisions contained in
the Multilateral Agreements
on Trade in Goods (see
below)

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 Principle General Description Legal Basis Legal Basis Legal Basis
Goods Services TRIPS

Transparency Requires Members to inform • Art. X GATT Art. III GATS Art. 63 of TRIPS
about their trade regulations as to • Other provisions contained in Agreement
allow other Members and traders the Multilateral Agreements
to know what are the trade rules on Trade in Goods

Special treatment for Aims at helping developing and Main provisions: Art. IV GATS Arts. 65, 66 and
less-developed LDC Members to better • Part V GATT 67 of TRIPS
Members participate in the WTO and • Enabling Clause Agreement
benefit from trade liberalization • Other provisions contained in
the Multilateral Agreements
on Trade in Goods

Note: Under GATS, Members decide in which sectors they would like to accept commitments.

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 Most-favoured treatment (MFN)

The MFN principle ensures non-discrimination between It should be noted that the MFN principle is subject to
trading partners. If a WTO Member grants to a country an some important exceptions.
advantage, it has to give such advantage to all WTO
Members. The MFN principles ensures that every time a
WTO Member lowers a trade barrier or opens up a Trade in goods
market, it has to do so for the like goods or services from
all WTO Members – without regard of the Members' For trade in goods, any advantage, favour or privilege
economic size or level of development. granted by any Member to any product originated in or
destined for any other country shall be accorded
It is important to note that: immediately and unconditionally to the "like product"
originating in or destined for all other Members. The MFN
principle covers a broad range of measures in relation to
 The MFN principle requires to accord to all WTO exportation and importation of goods, as well as internal
Members any advantage given to any other country measures.
(Member or not of the WTO);
 A WTO Member could give an advantage to other
The object and purpose of the MFN principle is to prohibit
WTO Members, without having to accord advantage
discrimination among "like products" originating in or
to non- Members (only WTO Members benefit from
destined for different countries (products which are not
the most favourable treatment).
"like products" may be treated differently). GATT/WTO
case law has set up four criteria that should be considered
For developing countries and others with little bargaining in determining whether the imported and domestic
power, the MFN principle ensures that they are able to products are "like products".
benefit from the best trading conditions resulting from
the negotiations. It also reduces transaction costs
associated with market access.

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 Trade in services TRIPS

For trade in services, the GATS requires WTO Members to The MFN principle requires that, with regard to the
extend immediately and unconditionally to services and protection of IP, any advantage, favour, privilege or
services suppliers of any other Member treatment no less immunity given by a Member to the nationals of any
favourable than that accorded to "like services and other Members shall be accorded immediately and
services suppliers" of any other country. unconditionally to the "nationals" (natural and juridical
persons) of all other Members. This principle is common
to all categories of intellectual property covered by the
The MFN principle is applicable to any measure -- as
TRIPS Agreement.
defined in Article I of the GATS -- that affects trade in
services in any sector falling under the Agreement,
whether specific commitments have been undertaken or
not.

WTO Members were allowed to maintain measures

inconsistent with the MFN principle if these were
inscribed in a List of Article II-Exemptions annexed to their
Schedules of specific commitments in services.

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 GATT GATS TRIPS

Subject goods services and services providers nationals

Main elements • any advantage, favour or privilege • treatment no less favourable than • any advantage given to any country
granted to any country that accorded to any country • shall be accorded immediately and
• shall be accorded immediately • shall be accorded immediately and unconditionally
and unconditionally unconditionally • to the nationals of all other
• to the "like products" of all other • to "like services and services Members
Members suppliers" of all other Members

Coverage applies to all goods applies to any measure - except where applies to all categories of intellectual
a departure is allowed by the GATS (*) - property covered by the TRIPS
that affects trade in services in any Agreement
sector falling under the Agreement

(*) Note: The GATS excludes services provided in the exercise of governmental authority and measures affecting air traffic rights.

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 National Treatment Principle

While the MFN principle seeks to ensure that a WTO Internal taxation
Member does not discriminate between WTO Members,
the national treatment principle ensures non-
discrimination between domestic and foreign products, Article II: 2, applicable to internal taxation contains two
services or nationals. levels of obligations regarding internal taxation depending
on whether imported and domestic products can be
considered:
Trade in goods
 Like products (first sentence), or
For trade in goods, the national treatment principle  Directly competitive or substitutable products.
prohibits a WTO Member from favouring its domestic
products over the imported like products of other
The term "like products" is considered as a subset of
Members. The national treatment applies to internal
"directly competitive or substitutable products". The
measure, as opposed to border measures (e.g. tariffs). It
same criteria for determining likeness under the MFN
covers:
principle are relevant for determining whether the
imported and domestic products are "like products" in
 Internal taxation (e.g. sales, value added tax), and the context of the national treatment principle.
 Internal laws, regulations and requirements affecting
the internal sale, transportation, distribution or use Instead, the determination of whether the imported and
of products. domestic products are directly competitive or
substitutable involves analysing the competitive
Goods that can enter a Member's customs territory conditions in the relevant market.
thanks to reduced border barriers should not be put in an
uncompetitive position because of the application of
internal measures.

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 Internal regulations

Article II: 4, applicable to internal regulations, requires treating imported products no less favourable than domestic "like
products".

The National Treatment Principle - Trade in Goods

National Treatment Article II: 2 Article II: 2 Article II:4
First sentence Second sentence
Coverage Internal taxation Internal taxation Internal regulations

To apply, Like products Directly competitive or Like products

imported and substitutable products
domestic products (broader than like products)
shall be:
Other elements Imported products cannot be Dissimilar taxation is Imported products are
taxed "in excess of" the domestic applied "so as to afford treated "less favourably"
products (the smallest amount of protection" to domestic than domestic products
excessive taxing would constitute production
an infringement

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 Trade in services TRIPS

In the area of services, the national treatment principle The TRIPS Agreement requires each Member to accord to
refers to non-discrimination between, on the one hand, the nationals of other Members, treatment no less
domestically produced services or domestic service favourable than it accords to its nationals with regard to
providers and, on the other hand, imported services or the protection of intellectual property.
foreign services providers. The national treatment
principle applies in the context of trade in services only to The exceptions to the national treatment principle
the extent that WTO Members have made explicit allowed under the four pre-existing World Intellectual
commitments. Property Organization (WIPO) Conventions (Paris, Berne
Rome and IPIC*) are also allowed under the TRIPS
The GATS requires that, in scheduled sectors, services and Agreement.
service suppliers of any other Member are granted no less
favourable competitive opportunities than those (*) Note: Treaty on Intellectual Property in Respect of Integrated
accorded to a Member's own "like services and services Circuits.
suppliers". Any departure would need to be inscribed as a
limitation on national treatment in the Schedule of
specific commitments of the Member concerned.

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 More open and predictable trade

Lowering trade barriers is one of the most obvious means THE PROGRESSIVE REDUCTION AND BINDING
of encouraging trade. These trade barriers include OF TARIFFS
customs duties ("tariffs"), as well as import bans or
quotas. However, there are also several other measures Under the GATT/WTO, the use of tariffs is not prohibited;
that could restrict or even impede market access for however, Members have committed to carry out
goods and services. multilateral negotiations periodically with a view to
substantially reducing the general level of tariffs and
WTO Members have recognized that the substantial other charges on imports and exports.
reduction of tariffs and other barriers to trade constitutes,
together with the non-discrimination principle, a key Tariff negotiations should be conducted on a reciprocal
instrument to achieve the objectives of the WTO. and mutually advantageous basis. This requirement,
however, has been adapted to take into consideration the
principle of special and differential treatment. This
Trade in goods implies requiring from developing country and LDC
Members lesser liberalization than from developed
The main WTO provisions on market access for trade in Members.
goods cover:
WTO Members had also agreed to bind their tariffs at the
 The progressive reduction and binding of tariffs; reduced levels and to record such tariff bindings, together
 The general elimination of quantitative restrictions; with other concessions, in their WTO Schedules of
 The reduction of other barriers to trade. concessions.

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 Members may apply a tariff which is lower than the bound (while quantitative restrictions impose absolute limits on
level; however, they cannot exceed the bound levels imports, tariffs do not). It is important to distinguish
specified in their Schedules of concessions. If a Member between quantitative restrictions and tariff-rate-quotas,
applies a lower tariff, it has to grant that benefit on an MFN which are permitted.
basis.
Despite the general rule prohibiting quantitative
Tariff bindings provide predictability and security for restrictions, there are some specific exceptions which
market access for goods mainly through their inclusion in allow their imposition in certain circumstances. In this
the Schedules, which are not easily changed. In order to regard, quantitative restrictions must be applied on a
modify their tariff concessions, a Member has to negotiate non-discriminatory basis, according to Article XIII of the
with Members holding special rights. GATT. This requirement applies equally to the allocation
of tariff-rate-quotas.

THE GENERAL ELIMINATION OF QUANTITATIVE THE REDUCTION OF OTHER BARRIERS TO

RESTRICTIONS TRADE

WTO Members cannot, as a general rules, apply With the progressive reduction of tariffs, it was perceived
quantitative restrictions (e.g. bans or quotas) on the goods that governments were gradually shifting to other forms
imported from or exported to another Member. of measures to restrict market access for goods and
protect their domestic industries.
Whereas tariffs are allowed as long as they do not exceed
the scheduled bound levels and are applied on an MFN In the WTO, a number of Agreements on trade in goods
basis, quantitative restrictions are generally prohibited set out specific disciplines on non-tariff measures (all
measures other than tariffs that may restrict trade).

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 In general, they impose disciplines on the application and administration of these measures so that they would not
constitute unnecessary barriers to international trade.

Agreement Objective

Agreement on the The SPS Agreement recognizes Members' right to apply measures to protect human, animal and plant life
Application of Sanitary and or health from sanitary and phytosanitary risks, while minimizing any negative and unnecessary effects on
Phytosanitary Measures trade. Members may adopt SPS measures provided these measures are applied only to the extent
(SPS Agreement) necessary to protect health and are based on science. In addition, they shall not arbitrarily or unjustifiably
discriminate between Members or be applied in a manner which would constitute a disguised restriction on
international trade.

Agreement on Technical The TBT Agreement recognizes Members’ right to adopt technical regulations and standards to fulfil a
Barriers to Trade (TBT legitimate objective, as long as these measures do not constitute unnecessary obstacles to trade and do
Agreement) not discriminate against Members. The TBT Agreement does not cover SPS measures as defined in the SPS
Agreement.

Article V of the GATT The objective of Article V is to allow freedom of transit through the territory of each Member for transport
to or from the territory of other Members. It requires Members not to hinder traffic in transit by imposing
unnecessary delays, restrictions or unreasonable charges, and to accord MFN treatment to transiting goods
of all Members.

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 Agreement Objective

Article VII of the GATT and The Agreement on Customs Valuation aims for a fair, uniform and neutral system for the valuation of goods
the Agreement on Customs for customs purposes — a system that conforms to commercial realities, and which outlaws the use of
Valuation arbitrary or fictitious customs values.

Article VIII of the GATT on Article VIII includes specific obligations applicable to fees and charges imposed on or in connection with
Customs Fees and Formalities importation (or exportation). It recognizes the need to reduce the number and complexity of such fees and
formalities and to lower transaction costs for traders.

Agreement on Rules of Origin The Agreement on Rules of Origin aims at the harmonization of non-preferential rules of origin and at
ensuring that such rules do not themselves create unnecessary obstacles to trade. It ensures that such rules
do not have restricting or distorting effects on international trade and that they are administered in a
consistent, impartial and reasonable manner.

Agreement on Import The Agreement on Import Licensing Procedures establishes disciplines on users of import licensing systems
Licensing Procedures with the objective of ensuring that procedures applied for granting import licences do not in themselves
restrict trade. It aims to simplify, clarify and minimize the administrative requirements necessary to obtain
import licences.

Agreement on Trade-Related The TRIMS Agreement sets out rules on certain investment measures that have a distorting effect on trade in
Investment Measures goods. The disciplines of the TRIMS Agreement focus on discriminatory treatment of imported and exported
(TRIMS) products and do not govern the issue of entry and treatment of foreign investment.

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 Agriculture in the WTO Trade in services

Agricultural trade remains an important part of overall As with Members' Schedules of tariff concessions for
economic activity in many WTO Members. Furthermore, goods, each WTO Member is required under the GATS to
agriculture plays an important role in the development of submit a Schedule for trade in services.
many Members.
By scheduling commitments, a Member guarantees other
The Agreement on Agriculture allows governments to Members minimum conditions of access on an MFN
support their rural economies, but preferably through basis, comparable to a tariff binding under the GATT.
policies that are less "trade-distorting". The Agreement Since these are ceiling bindings, Members are not
covers "agricultural products" as defined in Annex 1 of the prevented from being more 'generous' (or less
Agreement. It allowed some flexibility in the way discriminatory) in practice.
commitments were implemented by developing
countries, which did not have to cut their subsidies or The GATS does not prescribe the sector scope or level of
lower their tariffs as much as developed countries, and liberalization. It is up to each Member to decide which
had extra time to implement their obligations. Least sector it wishes to commit, as well as any corresponding
Developed Countries were exempted from such reduction limitations on market access. WTO Members may also
commitments. The Agreement has three pillars: choose to undertake additional commitments on issues
not falling under market access or national treatment
 Market Access; provisions of the GATS.
 Domestic support;
 Export competition. Schedules may vary widely in their sector scope and the
levels of commitments implied, reflecting Members'
national policy objectives and constraints. Similarly to the
Schedules on tariff concessions for goods, commitments
can only be withdrawn or modified after negotiations and
agreement on any compensatory adjustment with
affected Members.

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 SCHEDULE OF SPECIFIC COMMITMENTS - TRADE IN SERVICES

Each Member's Schedule has a common format of 4 columns:

Limitations on
Sector or Limitations on Additional
national
subsector market access commitments
treatment

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 Transparency

In the WTO, transparency obligations ensure that policies Internal Review of Members’ national trade
and regulations affecting trade are made accessible to transparency: policies through the Trade Policy Review
governments and traders, as to allow them to become keeping the Mechanism (TPRM).
acquainted with them. Transparency has also a systemic WTO informed
importance. It allows the monitoring of Members’ trade Domestic publication of Members’ trade
measures and practices, and of their impact on the MTS. regulations
Notification of Members’ trade
The WTO mechanisms and tools to enhance transparency measures to the WTO
include mainly those directed to keep the WTO
Membership informed about individual Member’s Other transparency mechanisms
policies and practices having an impact on trade (internal (including databases)
transparency - within the WTO). External Initiatives and programmes aimed at
transparency: informing the general public about
There are also a number of initiatives and programmes keeping the WTO’s activities.
directed to inform the general public, including academics public
and civil society, about WTO’s activities (external informed
transparency).
Transparency obligations are spelled out across all WTO
Agreements, including those on trade in goods, the GATS
and the TRIPS Agreement.

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 Development Dimension

Trade plays an important role in promoting economic The WTO deals with the special needs of developing
growth and reducing poverty in the development world. countries and LDCs in the following ways:
More than two thirds of WTO Members are developing
countries and LDCs. The WTO Agreements recognize the  The WTO Agreements contain provisions on special
particular situation of these countries and the link and differential treatment for developing countries and
between trade and development by providing special and LDCs;
differential treatment in favour of developing country and  Capacity building programmes such as Aid for Trade
LDC Members. and WTO trade-related technical assistance (TRTA)
activities;
Special and differential treatment is considered a useful  The Committee on Trade and Development (CTD), it
tool which recognizes the economic and developmental Sub-Committee on LDCs, and its subsidiary bodies, are
asymmetries among countries in order to provide special the focal points for consideration and coordination of
flexibilities or rights to developing countries and LDCs to work related to trade and development in the WTO.
help them benefit from trade liberalization and integrate
into the MTS.

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 S&D provisions

The universe of special and differential treatment (S&D)

provisions consists of more than 145 provisions spread
across the different WTO Agreements (for trade in goods,
services and intellectual property rights), as well as many
decisions. All the provisions applicable to developing
Members apply also to LDCs, but the latter enjoy
additional rights. These provisions can be classified into
different categories according to the objectives they
pursue:

The GATT has a special section on trade and

development, including provisions on the concept of
"non-reciprocity" in trade negotiations (implies requiring
from developing Members "less liberalization" than from
developed Members). This principle has permitted
developing Members, for example, to undertake lower
levels of tariff bindings in multilateral rounds of
negotiations. Another provision is the Enabling Clause,
which constitutes an exception to the MFN principle and
aims at increasing commercial opportunities for
developing and LDC Members (see Exceptions).

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 Main exceptions to the Basic Principles

WTO Members may, in certain circumstances, deviate

from their main obligations and apply trade restrictive
measures, provided that they comply with certain
General Enabling
conditions. Such trade restrictions are considered to serve Waivers
Exceptions Clause
legitimate objectives, such as the protection of health or
the environment. The exceptions provide flexibility for the
Members to meet such policy objectives.
Regional
Trade
Trade
Remedies
Agreements

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 Exception General Description Legal Basis Legal Basis Legal Basis
Goods Services TRIPS

GATT GATS TRIPS

General Members may apply measures which restrict trade if, for Article XX Article XIV No general
Exceptions example, they are necessary to protect human, animal or exceptions as
plant health. Such measures cannot constitute a means of such (*)
arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a
disguised restriction on international trade.

Regional Trade Members are allowed to provide preferential treatment Article XXIV Article V No provision
Agreements to their trading partners within a customs union or a free Understanding on
trade area (goods), or economic integration Article XXIV
arrangements (services), without having to extend such
treatment to all WTO Members, subject to certain
conditions.

Enabling Clause Developed Members may give unilaterally preferential

(S&D provision) treatment to products originating in developing and LDC Paragraph 2(a) of
Members, without having to extend such better the Enabling
treatment to other Members. Clause

Developing Members are allowed to conclude among Paragraph 2(c) of

themselves agreements on trade in goods, subject to the Enabling
more flexible requirements than those contained in Clause
Article XXIV of the GATT.

(*) Note: However, the TRIPS Agreement allows Members to adopt measures, for example, necessary to protect public health, provided that such
measures are consistent with the TRIPS Agreement.

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 Exception General Description Legal Basis Legal Basis Legal Basis
Goods Services TRIPS

GATT GATS TRIPS

Security Exception Members may apply trade-restrictive measures, which Article XXI Article XIVbis Article 73
may restrict trade in goods, if they are necessary to
protect essential security interests.

Balance of Members may take trade-restrictive measures to Articles XII & Article XII No BOPs
payments safeguard their external financial position and balance of XVIII:B provision
payments, subject to specific conditions.
Understanding on
the BOPs

Trade remedies For trade in goods, Members are allowed to apply trade Articles VI and XIX Negotiations on No provisions
defence mechanisms to remedy a situation of unfair GATT (also emergency
trade practices (anti-dumping and countervailing Agreement on safeguards
measures) or a surge of imports (safeguard measures) Anti-Dumping, (Article X)
when these cause injury to the domestic industry, subject SCM Agreement
to specific requirements. and Agreement on
Safeguards)
Waivers Members have the right to request a temporary
authorization to derogate from any WTO obligation
contained in the Multilateral Trade Agreements, subject Article IX:3 of the Agreement Establishing the WTO
to the approval of the other Members.

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 General Exceptions

The purpose of the general exceptions is to ensure that ANALYSIS UNDER ARTICLE XX OF GATT AND ARTICLE XIV
commitments undertaken by the Members under the OF GATS
WTO Agreements do not hinder the pursuit of legitimate
policy objectives, such as the protection of health or the 1. To identify whether the policy pursued through the measure
environment. falls within the range of policies provided in the sub-paragraphs of
Article XX (GATT) or XVI (GATS) and meets the conditions provided
therein.
The general exceptions allow Members to derogate from
the WTO basic principles, provided that they comply with
(if so)
certain conditions set forth in the Agreements. Article XIV
of the GATS is similar to Article XX of the GATT, although
there are certain differences (*). 2. The measure at issue must not lead to arbitrary discrimination
or unjustifiable discrimination between countries where the same
conditions prevail or a disguised restriction on international trade
There are two steps for the application of the general according to the "chapeau" of such provisions.
exceptions under Article XX of the GATT (goods) and
Article XIV of GATS (services): It is within the authority of each WTO Member to set the
objectives it seeks to achieve and the level of protection it
wants to obtain. However, Members are bound to
implement these objectives through measures consistent
with the requirements provided in the WTO Agreements.

The purpose of the chapeau is the prevention of abuse of

the general exceptions. The chapeau serves to ensure that
(*) Note: Not all exceptions included in Article XX of the GATT are
included in Article XIV of the GATS. Conversely, Article XIV of the Members’ rights to avail themselves of the general
GATS contains some general exceptions which are not listed in exceptions are exercised in good faith to protect interests
Article XX of the GATT. considered legitimate under the GATT and GATS.

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 Regional Trade Agreements

By definition, parties to a regional trade agreement (RTA) The Enabling Clause (paragraph 2c) allows developing
offer each other more favourable treatment in trade Members to conclude among themselves agreements on
matters than to the rest of the world (including WTO trade in goods (South-South agreements) subject to more
Members). As you know, this is contrary to the MFN flexible requirements than those contained in Article XXIV
principle. The number of RTAs involving WTO Members of the GATT.
has increased notably in the recent years. Free trade
areas are more prevalent than customs unions. It is worth noting that the Transparency Mechanism for
RTAs (transparency requirements) applies to all RTAs,
The purpose of a customs union or a free trade area whether notified under the GATT, the GATS or the
should be to facilitate trade among the parties to the RTA Enabling Clause.
and not to raise barriers to the trade with other WTO
Members. RTAs shall be in line with the objectives of the
MTS, and not constitute obstacles to it. Other
requirements comprise provisions on interim agreements
and transition periods and transparency provisions.

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 Enabling Clause

The Enabling Clause constitutes an S&D provision, which As explained in Module 3, the Enabling Clause also allows
aims at increasing the commercial opportunities for developing Members to conclude (reciprocal) trade
developing and LDC Members. agreements on trade in goods among themselves (South -
South agreements), without having to extend such
The Enabling Clause provides the WTO legal basis for the treatment to other WTO Members.
Generalized System of Preferences (GSP). It "enables"
developed Members to give preferential treatment on a
non - reciprocal basis to products originating in
developing Members and LDC Members, without having
to give such better treatment to other Members.
Developing and LDC Members benefiting from such
preferential treatment are not required to open their
markets to the developed Members offering them more
favourable treatment. These arrangements are subject to
the Transparency Mechanism for Preferential Trade
Arrangements (PTAs).

The Enabling Clause operates as an exception to the MFN

principle, subject to the conditions provided therein. In
this regard, any preferential tariff treatment provided
under the Enabling Clause to developing Members must
be "non-discriminatory".

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 Trade Remedies

WTO Members are allowed to apply trade defense

mechanisms to remedy a situation of unfair trade
practices (anti-dumping and countervailing measures) or
a surge of imports (safeguard measures) when these
cause injury and subject to certain requirements. Even if
these measures are not referred to as exceptions, they
also allow Members to depart - temporarily - from certain
core WTO obligations, for example, to impose tariffs
above the bound levels.

Anti-dumping, countervailing and safeguard measures

have some common features, but also differ in some
aspects. A common feature is that they can be applied
only after conducting a domestic investigation where
certain substantive and procedural requirements provided
in the respective Agreements are met. From the three
mechanisms, anti-dumping and countervailing measures
are more frequently used than safeguard measures.

M6: Review | Main exceptions to the Basic Principles 30

 Anti-dumping Countervailing Safeguard measures
Measures measures
Objective To remedy dumping causing injury to To remedy subsidization causing To remedy serious injury to the
the domestic industry injury to the domestic industry domestic industry caused by a surge
of imports and give time to facilitate
adjustment
Substantive • Dumped imports • Subsidized imports • Increased imports
requirements • Material injury • Material injury • Serious injury
• Causal link • Causal link • Causal link
• The measure must be applied as
a result of unforeseen develop-
ments and of the effect of the
obligations incurred by a
contracting party under the GATT
1994
Recipient Products of enterprises practicing Products of enterprises benefiting Products of enterprises of Members
of the measure dumping from subsidies granted by Members (measure applied, in principle, on an
MFN basis*)
Form of the Anti-dumping duty (may exceed Countervailing duty (may exceed Among others, tariff duty increase
measure bound tariff rate) bound tariff rate) (may exceed bound tariff rate) or
quota

(*) Note: In the context of special and differential treatment, only products coming from developing countries may be excluded under
certain circumstances.

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 Waivers

A WTO Member has the right to request to the other

Members, in exceptional circumstances, an authorization
to derogate temporally from any provision contained in
the WTO Multilateral Agreements. A waiver is normally
used when there are no other exceptions which would
allow a Member to derogate from a WTO provision.

M6: Review | Main exceptions to the Basic Principles 32

 Cross-cutting issues

Monitoring and
Trade and
Surveillance in the
Environment
WTO

Capacity Building
The WTO Dispute
for Developing
Settlement System
Members

M6: Review | Cross-cutting issues 33

 Monitoring and Surveillance in the WTO

What would be the purpose of negotiating detailed trade Notifications Members are required to notify to the WTO
rules, if they were not implemented? It is in this context Secretariat of their laws and regulations
that the so-called “monitoring and surveillance” comes concerned with WTO matters. All WTO councils
into play. Monitoring and surveillance of trade policies is and committees participate in the
implementation of WTO notification
one of the most intense areas of work in the WTO. It
requirements. Notifications allow all WTO
contributes to enhance the transparency and smooth Members to be informed about other Members'
functioning of the MTS. Regular peer review and policies affecting trade.
collective monitoring aim at exploring, understanding and
discussing Members' implementation of their WTO Works of WTO WTO bodies and committees seek to ensure that
obligations. Councils and the WTO Agreements are being properly
committees implemented. Monitoring and surveillance takes
place through reviews of notifications,
Trade Policy The TPRM is a permanent mechanism which questions, examination of individual policies and
Review applies to all WTO Members on a rotary basis other monitoring procedures.
Mechanism and involves a peer-group assessment of each
Member's trade policies and practices and their
impact on the functioning of the MTS. The Transparency The TM for RTAs applies to all RTAs. It includes
TPRM is not intended to evaluate Members' mechanisms - early announcement of RTAs, notification of the
compliance to specific rules. The reviews have TM for RTAs RTA and consideration of the RTA by the WTO
enabled the Membership to understand and PTAs Membership. The mechanism seeks to
Member’s trade policies and practices and, at strengthen the WTO monitoring of RTAs and
the same time, have provided feedback to the enhance understanding of their systemic effects.
reviewed Member. The TM for PTAs applies to preferential
arrangements notified under the Enabling Clause
(which essentially means GSP schemes). It lays
out a procedure similar to the one laid out in the
TM for RTAs.

M6: Review | Cross-cutting issues 34

 The WTO Dispute Settlement System

What is it? Only WTO Member governments have the right to

participate in the dispute settlement system. The DSU
applies to all disputes brought under the covered
The WTO provides a forum for the settlement of trade Agreements, that is, the majority of the WTO
disputes between WTO Members. Dispute settlement Agreements.
constitutes a mechanism of last resort, where a Member
can enforce its rights if no other action undertaken to
ensure implementation through WTO monitoring The dispute settlement process includes the following
mechanisms has worked out. main stages:

Consultations
Why is it important? (between the (diplomatic stage)
parties)

The WTO dispute settlement system aims at providing a (a third impartial party
Adjudication:
fast, efficient and rule-oriented system to resolve trade Panel Appellate resolves the dispute):
disputes under the WTO covered Agreements. By doing Body panel and, in case of
appeal, Appellate Body
so, it provides security and predictability to the Members
and more particularly private economic operators.
Implementation
How it works?

The DSU sets out rules and procedure to be followed in Approximately, the total time of a dispute is 12 months
resolving disputes. It also contains some provisions on (up to the panel stage) and 1 year and 3 months (if there
special and differential treatment for developing is appeal).
Members.

M6: Review | Cross-cutting issues 35

 Trade and Environment

Sustainable development and protection and In general terms, WTO rules help set the framework for
preservation of the environment are fundamental goals of WTO Members to design and implement measures to
the WTO. These goals go hand in hand with the WTO’s address environmental concerns. The WTO Agreements
objective to reduce trade barriers and eliminate also allow Members to adopt trade-related measures to
discriminatory treatment in international trade relations. protect the environment, which may restrict trade,
subject to certain conditions aimed at balancing the right
The link between trade and environment can be seen of Members to achieve such legitimate objectives and the
from two different angles: the impact of trade on the right of other Members in terms of market access. The
environment and the impact of environmental policies on tension between the two has been reflected in a number
trade. In addressing the link between trade and of trade-related environmental disputes brought before
environment, WTO Members do not operate on the the WTO.
assumption that the WTO itself has the answer to
environmental problems. However, they believe that The WTO contributes to protection and preservation of
trade and environmental policies can complement each the environment through its objective of trade openness,
other. Environmental protection preserves the natural through its rules and enforcement mechanism, through
resource base on which economic growth is premised, work in different WTO bodies. It is considered that trade
and trade liberalization leads to the economic growth liberalization in certain sectors has the potential to yield
needed for adequate environmental protection. To benefits for the MTS, benefits for development and
address this, the WTO's role is to continue to liberalize benefits for the environment (win-win-win situation).
trade, as well as to ensure that environmental policies do
not act as obstacles to trade, and that trade rules do not
stand in the way of adequate domestic environmental
protection.

M6: Review | Cross-cutting issues 36

 Capacity Building for Developing Members

The WTO’s core work is to regulate international trade,  Aid for Trade initiative: this programme aims to help
reduce trade barriers and ensure a level playing field for developing countries, particularly LDCs, develop the
all its Members, developed and developing, big and small. trade-related capacity and infrastructure they need
The objective is to translate more open trade into real, to implement and benefit from trade. It is
recognized that Aid for Trade (AfT) cannot be a
increased and perceived benefits for all. In order to reap substitute for the development benefits that will
the full benefits of these opportunities, market openings result from the successful conclusion of the DDA,
need to be accompanied by capacity building initiatives to particularly on market access. Nevertheless, it can be
help developing and LDC Members bring to market a valuable complement to the DDA.
internationally competitive and tradable goods and
services.  Trade-related technical assistance and training
(TRTA): is directed towards helping government
Many countries do not have the human, institutional and officials from beneficiary countries to better
infrastructural capacity to participate effectively in understand WTO rules so that they can better
exercise their rights of Membership, negotiate more
international trade. Without that, these countries will not effectively with their trading partners and take better
be able to expand the quantity and quality of goods and advantage of market opportunities. The WTO's TRTA
services they can supply to world markets at competitive programmes and capacity building efforts are one of
prices. The programmes and initiatives directed to main components in the Aid for Trade work
enhance trade capacity in developing and LDC Members programme.
include:
 Other initiatives: including the Enhanced Integrated
Framework (EIF) which is directed to LDCs, and the
E-Learning courses:
Standards and Trade Development Facilities (STDF).
• Get a list of all WTO E-Learning courses here:
[Link]

M6: Review | Cross-cutting issues 37