The World Trade Organization

The 8-module training on International Trade Law and Policy is hosted by  Earth Council Geneva, United States Assistance For International Development (USAID),Swiss Agency For Development and Cooperation,  Institute For Agriculture and Trade Policy, Department of Trade and Industry Philippines.

Contrary, to the common perception, the rules of law in the World Trade Organization ( WTO, Uruguay GATT, 1995), superseding the General Agreement on Tariff and Trade (GATT, 1947), are not in principle multilateral but bilateral. This is evident by the way the WTO negotiations are conducted. WTO negotiations can be thought of as an experiment in that WTO members had to conduct the negotiations through a set of controlled conditions explicitly define by the Final Act on the 28 free-trade agreements or FTAs (Uruguay, GATT, 1995). To ensure that the FTAs are meet, WTO is authorize to oversee trade practices and adjudicate trade disputes refereed to it by member states. Ideally, so long as the rules are strictly followed, free trade supervenes but that materializes only if WTO members agree on the procedure of enforcing them. Once agreement is reach as a “single undertaking” (majority of votes of members on all negotiations completed), will WTO members to fully abandon tariff, domestic support and subsidy in agriculture, and other trade-distorting practices.

New FTAs however include new but costly WTO provisions on standardization of customs procedures; sanitary and phytosanitary requirements; government procurement; trade and investment; and trade-related intellectual property rights, etc., (a big IF for developing countries to comply with in the shorter term). It is the expectation that a consensus on enforcing WTO rules would allow WTO members enjoy “equal trading rights” and “greater market access” worldwide and raise annual World GDP by US $ 2.8 trillion by 2015.

That however remains moot as the series of WTO negotiations foundered on reaching a consensus beginning from the “collapse” of the Uruguay Round (1986-1994), followed by the aborted rounds in Seattle USA (1999) and deadlock over farm subsidies in Cancun Mexico (2003), and two years later, the “impasse” of the Doha Round (2005). It seems that getting WTO members agree there should be free trade was a lot easy but agreeing on how the FTAs be enforced was Gordian knot. Suffice to say, what seems simple, credible, and enticing about free trade doest not mean everything is easy. As the cliché rightly puts it “ it is easier said than done.” The temporization of the Doha Round however provide WTO members time to put their talking points in order as they wish to put the Doha Round back on track

WTO-Members Trade Positions

Thus far, WTO members failed to reach a consensus in most of the 28 free-trade agreements and split them into two opposing quarters. Agreement in agriculture remain a disputed issue whereby developing countries were reluctant to the consistent cut in tariff schedule and insisted on special differential treatment and the “aid for trade” commitments by developed countries. Developed countries like the US and the European Union (EU) were reticent upon cuts in domestic support and subsidies in agriculture. Developed countries proposed for a deeper cuts in tariff on their industrial goods while developing countries were not supportive of the proposal as the heavy burden would be shouldered by them. In terms of trade in services, developed countries wanted for far-reaching market access without however equally offering the same access into their own domestic markets. In the area of emergency safeguard mechanism, developing countries favored for such safeguard mechanism against developed countries’ imports believed could negatively affect biodiversity and human resources while developed countries questioned the need for such mechanism.

While developed countries insisted on the inclusion of trade facilitation specifically in the improvement of customs and releases of goods but developing countries opposed it as it only add major investments and infrastructures and hailed it as argument for financial assistance by developed countries. On the other, developed countries opposed the concessions on special differential treatment (SDT) and stressed that SDT should not apply equally to “developing countries” and argued that developing countries with higher level of economic development as in the case of China, should not be accorded with the same treatment. On trade and environment, developed countries insisted upon developing countries’ commitment in the protection of the environment while developing countries argued on its costly implementation and hailed it as argument for financial assistance by developed countries.

On the Trade Related aspects of Intellectual Property Rights (TRIPS), developing countries wanted to maintain their biological diversity and traditional knowledge and argued on patent application to include : (a) prior consent by the resource/knowledge owner owning country, (b) disclosure of biological resources and traditional knowledge used in invention, (c) provision for benefit-sharing patent. Albeit, in this area, WTO achieved a major breakthrough in reaching argument in the issue of patent protection and access to affordable medicines by developing countries.

In the case of anti-dumping measures, developing countries felt that the provision is invoked against their imports while developed countries pushed for more stricter criteria for applying anti-dumping measures. On dispute settlement procedure, developing countries insisted on the provision of SDT that allows them longer implementation of their commitments and compensation for legal costs if proven not in violation of the provision. On the other hand, developed countries specially EU wanted further clarification on the implementation of the provision with emphasis in increasing promptness of the process and greater transparency of the procedures.

Legal Confusion on WTO Obligations

The breakdown of the WTO negotiations stems in large part from the legal confusion of the trade obligations of member states that could had been misconstrued as multilateral in nature. There are three underlying features of WTO negotiations on the WTO multilateral trade rules that had been in fact negotiated bilaterally and not multilaterally.. Along this line, distinction between bilateral and multilateral obligations is absolutely necessary. In the first place, WTO rules are different from the Geneva International Treaty on Genocide, Human rights, and Environment whereby the breach of treaty essentially affects all members including non-members.

Breach of this treaty knows no border, hence, for a country to effectively protect its citizens is to cooperate with other countries. Respect for human rights, condemnation of genocide and protection of environment had to be “internationalized” because of the “values” they protect and their causal effects domestically and internationally had to be avoided. On the other hand, the effects breach of the WTO rules are “trade-related” that apply only to two or more states engaged in trade amongst themselves individually and does not necessarily have effects on all the other WTO members collectively. The legal consequences of such breach therefore are bilateral not multilateral.

Albeit, the rights and obligations arising from WTO treaty are aimed at ensuring market access for goods of one country into another, and in effect give similar access to all WTO members through “Most-Favored-Nation Clause (MFN) clause,” and consequently result to an increased economic interdependence such that the effects of breach can might as well spread to all other WTO members. But this is not the same as saying that the breach of WTO rules necessarily affect the rights of all other WTO members, the way for example human rights and certain environmental law does. Albeit trade is inherently international but that does not inherently negate the bilateral nature of trade obligations.

Second, trade is not sought for the achievement of some “ global common” concerns where its benefits equate equally to all individual member countries. Trade is not a matter of “value” but merely an “instrument” to increase welfare which depends exclusively on what member-states decides to do with their welfare, not as a direct consequence of the WTO rules. Unlike the, the Geneva treaty which has all-embracing application domestically and internationally, WTO deals with “trade-related” matters whose damage directly affect only the trading parties involved.

Third, the way WTO obligations are enforced is exclusively for state-to-state relationship (bilateral). This is evident by the fact that WTO’s dispute settlement mechanism does not litigate breach per se, but merely on the nullification of benefits accruing to trading nations in-between themselves. That is, if one defendant country does not comply with WTO rules the complainant country on the other end is authorized by WTO to engage in state-to-state countermeasures. This modality of trade negotiations is evidently bilateral

Though trade obligations are inherently bilateral does not make WTO as a forum for multilateral trade negotiations irrelevant. In fact, exclusive of the outcomes of WTO trade negotiations, the new global market is fast becoming more sensitive to global flows of investment, trade in goods and services, and domestic policies. As it has been expected, absence of an effective multilateral trade system could possibly result to adversarial effects such as : shocks in the global financial markets, global unemployment and inflation. These drawbacks could cause substantial losses accruing mostly to developing countries while losses of developed countries are expected to be relatively small.

There are however valid justifications for developing countries’ slow-paced commitments to WTO obligations. In the shorter term, market efficiency of developing countries may not be realized because it takes time. The relative underdevelopment of these countries constrain them from competing. But inspite of this, they still commit to liberalize trade but first within their regional blocs say ASEAN as in the case of the Philippines. Why ? These countries know their constraints and by joining free trade within the regional bloc will accelerate their development through closer economic cooperation with other members. In the longer term, these countries will be capable of responding to a broader and deeper integration in the global liberalized trade.

Suffice to say, the conduct of WTO negotiations modus vevindi should refocus on “non-reciprocity” whereby concessions made by developed countries should not demand equal concessions by developing countries. This takes in the form of longer time of commitments, while at the same time allow developing countries to make bilateral or regional trade arrangements for the time being. This kind of trade agenda could set the Doha Round in motion.

Albeit, the benefits of this agenda could be small relatively for developed countries while greater benefits can be expected for developing countries. This is however more constructive than all member-states suffer because of the breakdown of the WTO talks. The agenda for WTO members should begin with the question What can I do to your domestic policy reforms so that I can do mine for both of us to make business ? Certainly this is a bilateral frame of questioning.

Contrary to the common perception, the rules of law in the World Trade Organization ( WTO, Uruguay GATT, 1995), superseding the General Agreement on Tariff and Trade (GATT, 1947), are not in principle multilateral but bilateral. This is evident by the way the WTO negotiations are conducted. WTO negotiations can be thought of as an experiment in that WTO members had to conduct the negotiations through a set of controlled conditions explicitly define by the Final Act on the 28 free-trade agreements or FTAs (Uruguay, GATT, 1995). To ensure that the FTAs are meet, WTO is authorize to oversee trade practices and adjudicate trade disputes refereed to it by member states. Ideally, so long as the rules are strictly followed, free trade supervenes but that materializes only if WTO members agree on the procedure of enforcing them. Once agreement is reach as a “single undertaking” (majority of votes of members on all negotiations completed), will WTO members to fully abandon tariff, domestic support and subsidy in agriculture, and other trade-distorting practices. New FTAs however include new but costly WTO provisions on standardization of customs procedures; sanitary and phytosanitary requirements; government procurement; trade and investment; and trade-related intellectual property rights, etc., (a big IF for developing countries to comply with in the shorter term). It is the expectation that a consensus on enforcing WTO rules would allow WTO members enjoy “equal trading rights” and “greater market access” worldwide and raise annual World GDP by US $ 2.8 trillion by 2015. That however remains moot as the series of WTO negotiations foundered on reaching a consensus beginning from the “collapse” of the Uruguay Round (1986-1994), followed by the aborted rounds in Seattle USA (1999) and deadlock over farm subsidies in Cancun Mexico (2003), and two years later, the “impasse” of the Doha Round (2005). It seems that getting WTO members agree there should be free trade was a lot easy but agreeing on how the FTAs be enforced was Gordian knot. Suffice to say, what seems simple, credible, and enticing about free trade doest not mean everything is easy. As the cliché rightly puts it “ it is easier said than done.” The temporization of the Doha Round however provide WTO members time to put their talking points in order as they wish to put the Doha Round back on track

WTO-Members Trade Positions

Thus far, WTO members failed to reach a consensus in most of the 28 free-trade agreements and split them into two opposing quarters. Agreement in agriculture remain a disputed issue whereby developing countries were reluctant to the consistent cut in tariff schedule and insisted on special differential treatment and the “aid for trade” commitments by developed countries. Developed countries like the US and the European Union (EU) were reticent upon cuts in domestic support and subsidies in agriculture. Developed countries proposed for a deeper cuts in tariff on their industrial goods while developing countries were not supportive of the proposal as the heavy burden would be shouldered by them. In terms of trade in services, developed countries wanted for far-reaching market access without however equally offering the same access into their own domestic markets. In the area of emergency safeguard mechanism, developing countries favored for such safeguard mechanism against developed countries’ imports believed could negatively affect biodiversity and human resources while developed countries questioned the need for such mechanism.

While developed countries insisted on the inclusion of trade facilitation specifically in the improvement of customs and releases of goods but developing countries opposed it as it only add major investments and infrastructures and hailed it as argument for financial assistance by developed countries. On the other, developed countries opposed the concessions on special differential treatment (SDT) and stressed that SDT should not apply equally to “developing countries” and argued that developing countries with higher level of economic development as in the case of China, should not be accorded with the same treatment. On trade and environment, developed countries insisted upon developing countries’ commitment in the protection of the environment while developing countries argued on its costly implementation and hailed it as argument for financial assistance by developed countries.

On the Trade Related aspects of Intellectual Property Rights (TRIPS), developing countries wanted to maintain their biological diversity and traditional knowledge and argued on patent application to include : (a) prior consent by the resource/knowledge owner owning country, (b) disclosure of biological resources and traditional knowledge used in invention, (c) provision for benefit-sharing patent. Albeit, in this area, WTO achieved a major breakthrough in reaching argument in the issue of patent protection and access to affordable medicines by developing countries. In the case of anti-dumping measures, developing countries felt that the provision is invoked against their imports while developed countries pushed for more stricter criteria for applying anti-dumping measures. On dispute settlement procedure, developing countries insisted on the provision of SDT that allows them longer implementation of their commitments and compensation for legal costs if proven not in violation of the provision. On the other hand, developed countries specially EU wanted further clarification on the implementation of the provision with emphasis in increasing promptness of the process and greater transparency of the procedures.

Legal Confusion on WTO Obligations

The breakdown of the WTO negotiations stems in large part from the legal confusion of the trade obligations of member states that could had been misconstrued as multilateral in nature. There are three underlying features of WTO negotiations on the WTO multilateral trade rules that had been in fact negotiated bilaterally and not multilaterally.. Along this line, distinction between bilateral and multilateral obligations is absolutely necessary. In the first place, WTO rules are different from the Geneva International Treaty on Genocide, Human rights, and Environment whereby the breach of treaty essentially affects all members including non-members. Breach of this treaty knows no border, hence, for a country to effectively protect its citizens is to cooperate with other countries. Respect for human rights, condemnation of genocide and protection of environment had to be “internationalized” because of the “values” they protect and their causal effects domestically and internationally had to be avoided. On the other hand, the effects breach of the WTO rules are “trade-related” that apply only to two or more states engaged in trade amongst themselves individually and does not necessarily have effects on all the other WTO members collectively. The legal consequences of such breach therefore are bilateral not multilateral. Albeit, the rights and obligations arising from WTO treaty are aimed at ensuring market access for goods of one country into another, and in effect give similar access to all WTO members through “Most-Favored-Nation Clause (MFN) clause,” and consequently result to an increased economic interdependence such that the effects of breach can might as well spread to all other WTO members. But this is not the same as saying that the breach of WTO rules necessarily affect the rights of all other WTO members, the way for example human rights and certain environmental law does. Albeit trade is inherently international but that does not inherently negate the bilateral nature of trade obligations.

Second, trade is not sought for the achievement of some “ global common” concerns where its benefits equate equally to all individual member countries. Trade is not a matter of “value” but merely an “instrument” to increase welfare which depends exclusively on what member-states decides to do with their welfare, not as a direct consequence of the WTO rules. Unlike the, the Geneva treaty which has all-embracing application domestically and internationally, WTO deals with “trade-related” matters whose damage directly affect only the trading parties involved. Third, the way WTO obligations are enforced is exclusively for state-to-state relationship (bilateral). This is evident by the fact that WTO’s dispute settlement mechanism does not litigate breach per se, but merely on the nullification of benefits accruing to trading nations in-between themselves. That is, if one defendant country does not comply with WTO rules the complainant country on the other end is authorized by WTO to engage in state-to-state countermeasures. This modality of trade negotiations is evidently bilateral

Though trade obligations are inherently bilateral does not make WTO as a forum for multilateral trade negotiations irrelevant. In fact, exclusive of the outcomes of WTO trade negotiations, the new global market is fast becoming more sensitive to global flows of investment, trade in goods and services, and domestic policies. As it has been expected, absence of an effective multilateral trade system could possibly result to adversarial effects such as : shocks in the global financial markets, global unemployment and inflation. These drawbacks could cause substantial losses accruing mostly to developing countries while losses of developed countries are expected to be relatively small. There are however valid justifications for developing countries’ slow-paced commitments to WTO obligations. In the shorter term, market efficiency of developing countries may not be realized because it takes time.

The relative underdevelopment of these countries constrain them from competing. But inspite of this, they still commit to liberalize trade but first within their regional blocs say ASEAN as in the case of the Philippines. Why ? These countries know their constraints and by joining free trade within the regional bloc will accelerate their development through closer economic cooperation with other members. In the longer term, these countries will be capable of responding to a broader and deeper integration in the global liberalized trade.

Suffice it to say, the conduct of WTO negotiations modus vevindi should refocus on “non-reciprocity” whereby concessions made by developed countries should not demand equal concessions by developing countries. This takes in the form of longer time of commitments, while at the same time allow developing countries to make bilateral or regional trade arrangements for the time being. This kind of trade agenda could set the Doha Round in motion. Albeit, the benefits of this agenda could be small relatively for developed countries while greater benefits can be expected for developing countries. This is however more constructive than all member-states suffer because of the breakdown of the WTO talks. The agenda for WTO members should begin with the question What can I do to your domestic policy reforms so that I can do mine for both of us to make business ? Certainly this is a bilateral frame of questioning.