UNIT 1

The Birth of the GATT and the WTO

Bretton Woods And The ITO
• After the founding of the UN in 1945, negotiations for an
international trade organisation began
• The idea was put forward in 1944 at a conference in New
Hamphshire.
• The negotiations were held in 3 places;
 New york 1947
 Geneva 1947
 Havana 1948
.
• The Geneva negotiations were pivitol as 3 objectives
were reached
1. Draft the International Trade Organization Charter
2. Prepare schedules of tariff reductions
3. Prepare a multilateral treaty containing general principles
of trade. The General Agreement on Tariffs and Trade
(GATT)
.
• In 1948, Havana Conference
• countries completed work on the ITO Charter but it never
came into force because it lacked the support of the USA.

• Why was this a problem?

.
• Unfortunatley work on Tariff reductions and GATT had
been completed but the ITO was held off thus problems
arose.

• Solution?
 To adopt a protocol of a provisional application to apply
the GATT and its Tariff schedules that could be revised to
be consistent to the charter.
What now?
• The GATT becomes an international organization
• The 3 pillar Bertton Woods economic structure was
unsuccessful
• GATT contracting parties held annual meetings and new
contracting parties were added
• The interim commission for the ITO formed the secretariet
Goals and main provisions of the GATT
Goals in the Preamble:
• To raise standards of living
• Ensure full employment
• Steadily growing volume of real income and effective demand
• “developing the full use of the resources of the world and
expanding the production and exchange of goods”

This can be achieved by:

• Reduction of tariffs and trade barriers
• Elimination of discriminatory treatment in international commerce
The GATT and its Birth Defects
• Prof Jackson said the GATT suffered from birth defects, inherent
weaknesses that handicapped its operation.
1. The Charter did not grant the GATT legal personality and
establish its procedures and organizational structure.
2. GATT had ‘provisional’ application.
3. The protocol of provisional application contained provisons
enabling contracting parties to maintain legislation that was
inconsistent with the GATT and those that existed before its
accession.
4. Ambiguity existed around the GATTs authority, decision making
ability and legal status.
GATT’s Success
• The GATT, despite it’s birth defects was successful in;
1. Reducing tariffs and other trade barriers
2. It served as a basis for 8 rounds of multilateral
negotiations
3. the Uruguay round was primary in reducing non-tariff
barriers
4. The final act of the round transformed the GATT into a
new international oprganisation called the World Trade
Organisation.
 Tariff Negotiation Rounds
• Geneva 1947
• Annecy 1949
• Torquay 1950
• Geneva 1956
• Dillon 1960 -1961
• Kennedy 1962 - 1967
• Tokyo 1973 – 1979
• Uruguay 1986 – 1994
– The establishment of the WTO
– removed tariffs in developed countries on tropical products
• Doha 2001 - ??
 Doha Agreement
• Agreement's purpose was to boost the economic growth
of developing countries.
• It centered on reducing subsidies for developed countries’
agricultural industries. That would allow developing
countries to export food, something they were
already good at producing.
• In return, the developing countries would open up their
market to services, particularly banking. That would
provide new markets to the developed countries’ service
industries. It would also modernize these markets for
developing countries.
 THE WTO
• The requirement for better institutional mechanisms and a
better system for resolving disputes led to discussions on
the WTO.
• Questions on its enforcability were cardinal as to not
repeat what occured at the Topkyo round were several
side agreements were only binding to those that accepted
them.
• The idea of nthe WTO was taken up in the FOGS
negotiation (Function of the GATT system)
• In April 1994, Marrakesh Morocco, the package of the
agreement that brought the WTO were given for
.
• Established to cure the birth defects of the GATT, and create an
effective dispute settlement mechanism: Dispute Settlement
Understanding (DSU)
• Required members to accept ALL agreements – therefore all
agreements became binding on ALL parties as a single body of
law
• The various agreements which make up the Marrakesh
Agreement combine as an indivisible whole; no entity can be
party to any one agreement without being party to them all
• Came into effect on 1 January 1995
• Currently we have 164 member states
 Some of these agreements:
1. Agreement on Agriculture
2. General Agreement on Trade in Services (GATS)
3. Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS)
4. Agreement on Textiles and Clothing
5. Agreement on Technical Barriers to Trade (TBT)
6. Agreement on Trade Related Investment Measures
7. Antidumping Agreement
8. Agreement on Subsidies and Countervailing Measures
9. Agreement on Safeguards
10. Agreement on Government Procurement
11. The Dispute Settlement Understanding (DSU)
 Objectives of WTO

Important objectives of WTO are mentioned below:

• to implement the new world trade system as visualised in the
Agreement;
• to promote World Trade in a manner that benefits every country;
• to ensure that developing countries secure a better balance in the
sharing of the advantages resulting from the expansion of international
trade corresponding to their developmental needs;
• to demolish all hurdles to an open world trading system and usher in
international economic renaissance because the world trade is an
effective instrument to foster economic growth;
• to enhance competitiveness among all trading partners so as to benefit
consumers and help in global integration;
• to increase the level of production and productivity with a view to
ensuring level of employment in the world;
• to expand and utilize world resources to the best;
• to improve the level of living for the global population and speed up
economic development of the member nations.
Functions of WTO

• The former GATT was not really an organisation;

it was merely a legal arrangement. On the other
hand, the WTO is a new international organisation
set up as a permanent body. It is designed to play
the role of a watchdog in the spheres of trade in
goods, trade in services, foreign investment,
intellectual property rights, etc.

• Article III has set out the general purpose of WTO

being; ‘facilitate the implementation,
administration and operation and further the objec­
tives of the WTO agreements.
Functions of the WTO
Beyond this general purpose the WTO has four tasks:
i. The WTO shall provide the forum for negotiations
among its members both as to current matters and
any future agreements
ii. The WTO shall administer the system of dispute
settlement;
iii. To administer Trade Policy Review Mechanism; and
iv. With a view to achieving greater coherence in global
economic policy making, to cooperate, as needed,
with the International Monetary Fund (IMF) and with
the World Bank, and its affiliated agencies
GOVERNING STRUCTURE
 GOVERNING STRUCTURE

• At The Apex is Ministerial Conference which

meets not less often than every two years.
• The General Council is the chief decision-
making and policy body between meeting of
the Ministerial Conference. It also
discharges the responsibilities of the
Dispute Settlement Body and the Trade
Policy Review Body.
• Specialized Councils and Committees that
report to the General Council do much of
the day-to-day work of the WTO.
ORGANIZATION: MEMBERSHIP, ACCESSION AND WITHDRAWAL

• The original WTO membership consisted of all

GATT contracting parties as of the entry into force
of the WTO Agreement on 1 January 1995 and the
European Community. This provided for under
Article XI.
• Countries may join the WTO only after negotiating
terms of accession (Art XII). In practice, accession
is completed through obtaining consensus of all
WTO Members.
• Any member may withdraw from the WTO
Agreement after giving notice to the Director-
General six months before the date on which it
intends to withdraw.
WTO Membership
 DECISION MAKING
• The WTO rules for decision making are mentioned in
the Articles IX and X of the agreement that set-up the
WTO.
• Generally decisions are made by consensus. If
consensus cannot be reached the matter is decided
by voting with one country one vote principle.
• Decisions can be made by simple majority unless
otherwise provided in the WTO agreement or in the
relevant multilateral Trade Agreements.
• An exception is Article 2.4 of the DSU, according to
which the DSB decides by consensus, with the
notable exception of the reverse consensus
mechanism for the key steps of a dispute settlement
procedure.
 ARTICLE X: AMENDMENTS

• The Ministerial Conference has exclusive

competence to vote on amendments
• Certain provisions can only be amended by
unanimous vote.
• Other provisions can be amended by two-thirds
vote, but such an amendment is binding only on
those Members accepting it.
• The Ministerial Conference by three-quarters vote,
can decide that all members must accept an
amendment, and recalcitrant Members either must
withdraw from the WTO or remain a Member with
the consent of the Ministerial Conference.
LEGAL PERSONALITY AND ORGANIZATIONAL ATTRIBUTES

Unlike GATT, the WTO Charter clearly:

i. establishes an international organization,
ii. endows it with legal personality, and
iii. supports it with the traditional treaty organizational
clauses regarding "privileges and immunities,"
secretariat, director general, budgetary measures, and
explicit authority to develop relations with other inter-
government organizations and, important to some
interests, non-government organizations.
Continuity with the GATT

• Article XVI:1 of GATT 1947 provides that, except as

otherwise provided, the WTO and the Multilateral Trade
Agreements shall be guided by the decisions, procedures
and customary practices followed by GATT 1947. The
Secretariat of the GATT 1947 will generally become the
WTO Secretariat.
• The GATT 1994 and the GATT 1947 are “legally distinct”,
as confirmed by Article II:4 of the WTO Agreement.
• The provisions of the GATT 1947, incorporated into the
GATT 1994, continue to have legal effect as part of the
GATT 1994, itself a component of the WTO Agreement.
• Please note that other parts of the WTO website might not
make the above legal distinctions in all instances, and may
refer to “GATT”, “GATT 1947” and “GATT 1994”
interchangeably.
END