THE LEGAL
STRUCTURE OF THE
WTO SYSTEM
The Legal Structure of the WTO
System
Pertinent questions

Describe the treaty structure of the
WTO

What are the decision-making
structures and processes of the WTO?
The Legal Structure of the WTO
System
Pertinent questions – cont’d

To what extent are the values of
democracy, transparency and
accountability accommodated in the
institutional structure and processes of
the WTO?

What would you describe as the strengths
and weaknesses of the institutional
structures and processes of the WTO?
The Legal Structure of the WTO
System
Pertinent questions (cont’d)

What are the requirements and
processes for the attainment of WTO
membership?

How are decisions made in the WTO?

How does the concept of ‘negative
consensus’ work in the WTO?
Introduction
•
The Uruguay Round of multilateral trade
negotiations (MTNs) – which took place
between 1986-1994 - brought about the
end of the GATT System.
The so-called GATT system consisted of:
(a) The General Agreement on Tarifs and Trade
(GATT) as a multilateral TREATY governing
trade in goods; and
(b) The GATT (as an international ORGANISATION
– which is now the predecessor of the WTO).
•
Multilateral Rounds of Trade Negotiations
UFH-2007
1. 1947: Geneva (23 countries)
2. 1949: Annecy (29 countries)
3. 1951: Torquay (32 countries)
4. 1956: Geneva (33 countries)
5. 1960-61: Dillon (39 countries)
6. 1963-67: Kennedy (74 ==)
7. 1973-79: Tokyo (99 countries)
8. 1986-94 Uruguay (128 ==)
9. 2001-Present: Doha Round
Introduction

The Uruguay Round of MTNs
created ADDITIONAL
(regulatory) systems/
frameworks (additional to the
already existing GATT
framework for trade in goods),
namely:
Introduction
(1) The General Agreement on Trade in
Services (GATS);
(2) The Agreement on Trade-Related
Aspects of Intellectual Property Rights
(TRIPS); and
(3) The WTO Charter
QUERY: What are the practical implications?
TREATY STRUCTURE OF THE
WTO

WTO Treaty structure comprises of:

The WTO Charter – 15 articles;

Annex 1 – A, B, C (Multilateral Agreements);

Annex 2 (Dispute Settlement Understanding DSU)

Annex 3: Trade Policy Review Mechanism (TPRM)
Annex 4: Plurilateral Trade Agreements

WTO Charter: An international agreement
Marrakech
Agreement
establishing the
World Trade
Organization
Signed in Marrakech on 15
April 1994
Ratified following national
procedures
Entered into force on 1st
January 1995
UFH-2007
(legally binding international
instrument engaging the
responsibility of States)
WTO: Trade Rules and Disciplines
WTO
WTO
Agreement
1A
1B
1C
2
3
4
Multilateral
agreements on
trade in goods
GATS
TRIPS
Dispute
Settlement
Understanding
Trade Policy
Review
Mecanism
Plurilateral
trade
agreements
UFH-2007
Marrakech Agreement establishing the WTO
WTO: Trade Rules and Disciplines
Annex 1A
Multilateral agreements on trade in Goods
GATT 1994 (General Agreement on Tariffs and Trade)
1A
Multilateral
trade
agreement on
trade in goods
UFH-2007
Goods
Agreements on:
Agriculture
Antidumping
Sanitary and phytosanitary
measures
Customs valuation
Textiles and clothing
Rules of origin
Technical barriers to trade
Import licensing
Trade-related investment
measures (TRIMS)
Preshipment inspection
Subsidies and countervailing
measures
Safeguards
LEGAL STATUS
•
The WTO enjoys LEGAL PERSONALITY
under international law.
•
It is “CAPABLE of POSSESSING rights and
duties under international law and having
capacity to maintain its rights by bringing
international claims.”
•
ICJ Advisory opinion in Reparation for
Injuries suferee in the service of Unitee
Nations ICJ Rep. 1949, 174.
LEGAL STATUS
Article VIII – WTO Charter
1.
The WTO shall have legal personality, and shall
be accorded by each of its members such legal
capacity as may be necessary for the exercise of
its functions.
4.
The privileges and immunities to be accorded
by a member to the WTO, its ofcials, etc shall be
similar to the privileges and immunities stipulated
in the Convention on the Privileges and
Immunities of the Specialised Agencies, approved
by the General Assembly of the United Nations on
21 November 1947.
POLICY GOALS OF THE WTO

According to the Preamble of the WTO
Charter, in entering into the Uruguay
Round Agreements:
(a) the Parties recognise that trade and
economic relations SHOULD be conducted
with a view to ENSURING, inter alia, FULL
employment and EXPANDING the
production of and trade in goods and
services while allowing for the optimal
use of the world’s resources; and
POLICY GOALS OF THE WTO
(b) the Parties were desirous of contributing
to the objectives spelt out in the Preamble
– by entering into RECIPROCAL and
MUTUALLY ADVANTAGEOUS
ARRANGEMENTS DIRECTED TO - the
substantial REDUCTION OF TARIFFS
and other BARRIERS TO TRADE and
to the ELIMINATION of
DISCRIMINATORY treatment in
international trade relations.
POLICY GOALS OF THE WTO
Accordingly, the three primary policy goals of the
WTO are:
(1) The conduct of trade and economic relations in a
manner that ensures full employment and
expansion of both production and trade in goods &
services.

(2) The SUBSTANTIAL reduction of tarifs and
other trade barriers.
(3) The ELIMINATION of DISCRIMINATORY
treatment in international trade.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Article III.1

“The WTO shall facilitate the
implementation, administration and
operation, and further the objectives, of
this Agreement and of the Multilateral
Trade Agreements, and shall also provide
the framework for the implementation,
administration and operation of the
Plurilateral Trade Agreements.”
FUNCTIONS OF THE WTO –
Art. III of the Charter
Function #1

To PURSUE the OBJECTIVES and
FACILITATE the
IMPLEMENTATION, administration
and operation of the trade
agreements falling within the
ambit of the WTO treaty
structure.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Article III.2
 “The WTO shall provide the forum for negotiations
among its members concerning their multilateral
trade relations in matters dealt with under the
agreements in the annexes to this Agreement.

The WTO may also provide a forum for further
negotiations among its members concerning their
multilateral trade relations and a framework for
the implementation of the results of such
negotiations, as may be decided by the Ministerial
Conference.”
FUNCTIONS OF THE WTO –
Art. III of the Charter
Function #2

Provide a FORUM for
NEGOTIATIONS among its
member states regarding their
ECONOMIC RELATIONS covered by
the agreements falling within the
organisation’s treaty structure.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Article III.3

“The WTO shall administer the
Understanding on Rules and
Procedures Governing the Settlement
of Disputes (hereinafter referred to
as the “Dispute Settlement
Understanding” or “DSU”) in Annex 2
to this Agreement”.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Function #3
Administer the DISPUTE
resolution/ settlement (judicial)
processes/system of the WTO with
a view to ensuring PEACEFUL and
BINDING resolution of trade

disputes between the members of the
organisation.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Article III.4

“The WTO shall administer the
Trade Policy Review Mechanism
(hereinafter referred to as the
“TPRM”) provided for in Annex 3
to this Agreement.
FUNCTIONS OF THE WTO –
Art. III of the Charter
Function #4
Administer the implementation of
the WTO’s trade policy review
mechanism - with a view to
ensuring the consistent
ALIGNMENT of NATIONAL trade
LAWS and policies with the
requirements of the (WTO’S)
multilateral trade agreements.
Institutional Structure of the
World Trade Organisation

Query #1: Representivity – How
representative is the WTO?

Query #2: Transparency – How
transparent is the WTO?

Query #3: Efectiveness – How efective
is the WTO’s decision-making process?
Query #4: Democracy – How democratic
is the WTO’s decision-making process?

Institutional Structure of the
World Trade Organisation
27

Organisational structure - Art. IV, WTO Charter

A total of 70 bodies are involved in the
organization’s decision-making processes.

34 of those bodies are STANDING bodies. The
others (36) are AD-HOC.

QUERY – practical/ operational implications?
Institutional Structure of the
World Trade Organisation

Ministerial Conference (MC) - Art IV: 1,
WTO Charter


Article IV:1 states as follows:
“There shall be a Ministerial Conference
composed of representatives of all
members, which shall meet at least
once every two years. The Ministerial
Conference shall carry out the functions
of the WTO and take actions necessary
to this efect....”
Institutional Structure of the
World Trade Organisation

Article IV:1 further states that:

“The Ministerial Conference shall have
the authority to take DECISIONS on
ALL MATTERS under ANY of the
Multilateral Trade Agreements, if so
requested by a Member, in accordance with
the specifc requirements for decisionmaking in this Agreement and in the
relevant Multilateral Trade Agreement.”
Institutional Structure of the
World Trade Organisation
Competence/powers of the MC


The MC is empowered to make the
fnal decisions on ALL matters.
Accordingly, it is the supreme
(decision-making) body of the
WTO.
Institutional Structure of the
World Trade Organisation
Composition

The MC comprises of Trade Ministers (or
their representatives) from ALL member
countries - QUERY – REPRESENTIVITY?
Yes?
Frequency of meetings

The MC meets every 2 yrs
Institutional Structure of the
World Trade Organisation
2) General Council (GC)
Art. IV:2, WTO Charter states as follows:
 “There shall be a General Council composed
of representatives of all the Members, which
shall meet as appropriate. In the intervals
between meetings of the Ministerial
Conference, its functions shall be conducted
by the General Council. The General Council
shall also carry out the functions assigned
to it by this Agreement.”
Institutional Structure of the
World Trade Organisation
Competence of the GC

The GC is responsible for the ‘DAY
TO DAY’ management of the WTO
and its many activities.

In between sessions of the MC, the
GC exercises all the powers of the
MC.
Institutional Structure of the
World Trade Organisation
Composition of the GC

The GC is composed of ambassador-level
diplomats from ALL WTO members and
meets every two months (bi-monthly).

Practical implication: Every member has to
have Geneva-based trade representatives
IN ORDER TO BE EFFECTIVE.

WHAT ABOUT LDC’s/poor countries?
Institutional Structure of the
World Trade Organisation
Processes of the GC – TRANSPARENCY?

The GC meets behind closed doors;

Its meetings are only open to
representatives of Members; and

Distribution of minutes of its
meetings is restricted.
Institutional Structure of the
World Trade Organisation
(3) Dispute Settlement Body (DSB) and
Trade Policy Review Body (TPRB) – Art. IV,
WTO Charter

The GC, DSB and TPRB are in fact
one body.

The DSB deals with dispute
settlement, while the TPRB is a trade
policy review organ of the WTO.
Institutional Structure of the
World Trade Organisation
Queries TO REMEMBER/KEEP IN MIND
Transparency and democracy – How
transparent AND/OR democratic is
the WTO?

Why should this be an issue,
especially for developing countries?

Institutional Structure of the
World Trade Organisation
38
4) Specialised Councils (Art IV:5) include:




Council for Trade in Goods (CTG);
Council for Trade in Services (CTS); and
Council for TRIPS.
These merely oversee the operation/
implementation of relevant agreements
but DO NOT take any decisions. In other
words, they have no decision-making powers.
Institutional Structure of the
World Trade Organisation
Specialised Councils – cont’d

Membership of the specialised
councils SHALL BE OPEN to
representatives OF ALL members.

The councils shall meet as
necessary to carry out their
functions.
Institutional Structure of the
World Trade Organisation
5) Committees and Working parties (Art. IV:7)

They assist the GC and the MC in performing their
functions. Membership in the committees SHALL
BE OPEN to representatives OF ALL members.

The committees include:
(a) Committee on Trade and Environment;
(b) Committee on Regional Trade Agreements;
(c) Trade Negotiations Committee
(d) Committee on Trade and Development
(e) Committee on Balance-of-Payments Restrictions
Institutional Structure of the
World Trade Organisation
Trade Negotiations Committee (TNC)

Established by the MC at its Doha session
in November 2001. It supervises the
overall conduct of the multilateral trade
negotiations (MTNs) under the authority
of the GC.

It reports on the progress of the MTNs to
each regular session of the GC (bimonthly).
Institutional Structure of the
World Trade Organisation
42
6) WTO Secretariat:

Based in Geneva and headed by a
Director-General appointed by the MC
(Usually a very contentious
appointment);

The current DG is Roberto Azevedo of
Brazil who took ofce on 1 Sept. 2014.
Institutional Structure of the
World Trade Organisation
The role (functions) of the DG includes:
(a) Provide technical and professional
support to the various WTO bodies;
(b) Provide technical assistance to
developing country members – WHY?; and
(c) Monitor and analyse developments in
world trade – WHY?
Institutional Structure of the
World Trade Organisation

The role of DG (continued):
(d) Provide information to the public
NOTE
 The DG cannot initiate any proposal for
action or reform.

Must refrain from providing
interpretation of WTO law (a honest
broker, facilitator only)
Institutional Structure of the
World Trade Organisation
Special note:
WTO is a member-driven
organisation; Unlike the IMF and the
World Bank, the management has
little power.
QUERY: What are the implications
for democracy and operational
fairness in the WTO?
Income of the WTO
46

Based on the old GATT system (1947)

Assessed contribution:

Calculated on the basis of each member’s share
of total (global) trade, reported on a three-year
average.

If the member’s share is less than 0.12% (of
total global trade), then the minimum
contribution is assessed.
Income of the WTO
Voluntary contributions

Voluntary contributions are often made by
industrialised economies to support specifc
goals such as the provision of technical
training and capacity building for developing
country ofcials/ professionals/citizens as well
as technological cooperation.

This has been in response to the developing
countries’ problems in participating fully in the
multilateral trading system. IMPLICATION(S) ?
Income of the WTO

At Doha, members also created
the special Doha Development
Agenda Trust Fund (DDAGTF)

QUERY: Funding for AID FOR
TRADE?
Membership of the WTO
(Articles XI & XII)
49
Current situation in re WTO membership

By November 2007 there were 151 members of the WTO
representing 92% of the global population and
95% of world Trade.

Currently, there are 164 members.

Amongst countries that have recently gone through the
membership admission process are Afghanistan and
Liberia. QUERIES: MEANING/IMPLICATIONS?
Membership of the WTO
(Articles XI & XII)
(1) Original Membership – Article XI

Open only to Contracting Parties to the GATT
1947 (as of 01 January 1995).

Article XI specifcally states as follows:

“The contracting parties to GATT 1947 ...
which accept this Agreement and the
Multilateral Trade Agreements and for which
schedules of concessions and commitments are
annexed to GATT 1994 and for which schedules of
specifc commitments are annexed to GATS shall
become ORIGINAL MEMBERS of the WTO”.
Membership of the WTO
(Articles XI & XII)
Requirements for original membership
(a) Acceptance of/submission to the WTO
Charter
(b) Acceptance of the multilateral trade
agreements (GATT, GATS, TRIPS, etc).

REMEMBER: This requirement excludes
the so-called plurilateral agreements.
Membership of the WTO
(Articles XI & XII)
Requirements for original membership
(cont’d)
(c) Submission to a SCHEDULE of
tarifs, concessions and commitments
ANNEXED to the GATT of 1994; and
(d) Submission to a SCHEDULE of
specifc commitments ANNEXED to
the GATS of 1994.
Membership of the WTO
(Arts XI & XII)
53
(2) Membership by accession – Art. XII

Membership is open to:
(a) all states (countries/nations); and
(b) separate customs territories having
full responsibility for their external
commercial relations. Eg Chinese
Taipei; Hong Kong; etc
Membership of the WTO
(Articles XI & XII)
Membership by accession (cont’d)

5-stage procedure:
(1) Applicant state sends a request to
the DG of the WTO who establishes
a working party (WP) to examine
the application
Membership of the WTO
(Articles XI & XII)

Membership by accession (cont’d)
(2) Submission of a detailed
memorandum by the applicant
describing its trade regime (tarifs,
domestic regulations, etc)
Query: What is a trade regime?
Membership of the WTO
(Articles XI & XII)
(3) Negotiation between the applicant
state/entity and current members
interested in extending their (export)
markets into the applicant’s territory;

As part of this stage, the applicant
negotiates new tarif concessions in
respect of trade in goods and specifc
commitments on trade in services
Membership of the WTO (Articles XI
& XII)
57
(4) Report of the WP is forwarded to the GC

The GC makes a decision on the
application (which must be approved
by 2/3 majority of existing members)
5) If the GC decision is favourable, issuance
of a Protocol of Accession (by the WTO
Secretariat) will follow.
Membership of the WTO
(Articles XI & XII)
Note:
 Accession is asymmetric (unequal):
New members cannot demand more
than what is contained in the WTO
agreements (as they are)

However, WTO members can!
QUERY: Democratic? Fairness/equity?
Membership of the WTO
(Articles XI & XII)

QUERIES:

Why would an applicant be keen
on WTO membership?

Why the stringent membership
requirements?
Membership of the WTO
(Articles XI & XII)
Queries - membership requirements I
(a) Coverage of the WTO (in terms of
geographical extent and trade sectors)
has become far reaching; as a result,
WTO membership comes with signifcant
(market access) benefts.

Those benefts could be substantial
depending on the size of the applicant
state’s production capacity, etc – QUERY:
China? Russia?
Membership of the WTO
(Articles XI & XII)
61
Queries - membership requirements II
(b) Accession to the WTO is perceived
as a major step towards integration
into the global economy.

Thus there is a tendency for current
members to demand more than
what is required by WTO law.
Membership of the WTO
(Articles XI & XII)
Queries - membership requirements III

For example there may be:
(i) a demand for democratisation
of governmental institutions;
(ii) Privatization of state-owned
frms/ entities (Russia);
Membership of the WTO
(Articles XI & XII)
Membership requirements
(cont’d)
(iii) Abolition of subsidies on
agricultural products; etc.

QUERY: Agree or disagree?
Membership of the WTO
(Articles XI & XII)
Accession to the WTO: Russian Experience


Accession negotiations took about 12
years.
The major stumbling block was the
low energy prices in Russia. The EC
(EU) considered these (low) prices to be
the result of an unfair state subsidy
which distorts global competition.
Membership of the WTO
(Articles XI & XII)

Accession to the WTO: Russian
Experience – cont’d

Out of frustration, President
Putin declared in June 2007 that
the WTO was ‘archaic,
undemocratic and infexible’.
Membership of the WTO
(arts XI & XII)
Accession to the WTO: Chinese Experience
The accession negotiations lasted for
approx 15 years and resulted in a legal text
of approx 900 pages.

In order to join in 2001, China agreed:

(1) To make a series of important MARKET
ACCESS commitments and concessions;
Membership of the WTO
(Articles XI & XII)
Chinese Experience (continued)
(2) To provide a more predictable
environment for TRADE and foreign
investment in accordance with WTO
rules;
(3) To eliminate or considerably reduce
many of the RESTRICTIONS on foreign
companies.
Membership of the WTO
(Articles XI & XII)
Chinese Experience (continued)
 Additional term (of accession):

During a 12-year period, a special
TRANSITIONAL safeguard mechanism
applies.

This mechanism allows other WTO members to
restrict imports of Chinese products that cause
or threaten to cause market disruption to their
domestic producers/industry.
Decision-Making in the WTO
69

The decision- making procedure of the
WTO is set out in Article IX: 1 of the
WTO Charter. It states that:
“The WTO shall continue the practice of
decision-making by consensus followed
under the GATT 1947. Except as otherwise
provided, where a decision cannot be
arrived at by consensus, the matter at
issue shall be decided by voting.
Decision-Making in the WTO
Article IX: 1 of the WTO Agreement (cont’d)

“At meetings of the Ministerial Conference
and the General Council, each member of
the WTO shall have one vote…Decisions of
the Ministerial Conference and General
Council shall be taken by a majority of the
votes cast, unless otherwise provided in
this agreement or in a relevant
Multilateral Trade Agreement.”
Decision-Making in the
WTO
71

Practical implications
(1) Decision making by Consensus: Members
must frst try and take ANY/EVERY decision
by consensus (in re the MC and the GC).

Implication: Decision making by consensus
efectively gives all members veto power.

QUERY: Is this GOOD OR BAD?
Decision-Making in the WTO
Evaluation of decision making by Consensus

Prima facie, decision making by
consensus is highly democratic and
legitimate in that only matters that
are unopposed get approved.

QUERY: But is it efective /realistic/
plausible?
Decision-Making in the WTO
(2) Decision-making by majority voting

If consensus fails, the relevant
decision should be taken (by majority
voting) on the basis of one country
one vote.

Problem/reality

Even in the face of deadlock, it is
exceptional for WTO bodies to vote.
Decision-Making in the WTO
Problem/reality - continued
Consensus negotiation procedures
give weight to the views of countries
that have power in the global trading
system.

HOW? See discussion of ‘green room
meetings’ below

Decision-Making in the WTO
Problem/reality (cont’d)

In 2001, the then DG of the WTO stated that:

“the consensus principle which is at
the heart of the WTO system – and
which is a fundamental democratic
guarantee – is not negotiable.”

WHY? AGREE OR DISAGREE?
Decision-Making in the WTO
(3) Special (decision-making) Procedures
(a) Decision making by the DSB

General rule: Decisions are made by
consensus (normal consensus OR
reverse/negative consensus) (Article
IX of the WTO Charter read together
with Article 2.4 of the DSU)
Decision-Making in the WTO
Decision making by the DSB (cont’d)

Certain decisions (of the DSB), such as the
appointment of members of the Appellate
Body (AB) are taken by normal consensus;

Other decisions, such as the appointment of
a panel or adoption of dispute settlement
reports are taken by reverse/negative
consensus.
Decision-Making in the WTO
Queries in re decision making by the DSB


What are the diferences between ‘normal
consensus’ and ‘negative/reverse consensus’?
What are the practical implications of
‘negative/reverse consensus’ – in terms
of its impact on the efectiveness of the
DSB as a dispute settlement structure of the
WTO?
Decision-Making in the WTO
(b) Interpretations (Art IX:2)

The MC and GC can adopt
interpretations of provisions of the
WTO Charter and of the Multilateral
Trade Agreements.

The decision shall be by 3/4 (75%)
majority of members
Decision-Making in the WTO

Accessions (Article XII:2)

Decisions taken by MC/GC require
2/3 (66 2/3%) majority of WTO
members.

QUERY: Why does the WTO Charter
provide for such a low threshold for
accession-related decisions?
Decision-Making in the WTO
81



Waivers (Art. IX:3)
A (WTO) member unable to meet any of its obligations
may request for a waiver. If not taken by consensus,
then a 3/4 majority is required.
QUERY: Why provide for a higher threshold/ level of support
for decisions on waivers?
Decision-Making in the WTO
Amendments

Decision-making on amendments to any of the
WTO Marakech/Uruguay Round Agreements
involves a 3-stage procedure set out in Art. X:
1:
(a) specialised councils initiate proposal for
amendment and submit it to the MC or GC
Decision-Making in the WTO
Amendments – cont’d
b) Within 90 days MC/GC tries to reach
consensus. If it fails then voting - 2/3
majority of the members is required
c) the proposal is then submitted to
members for acceptance in accordance
with their national Constitutional
requirements
Decision-Making in the WTO
84
Amendments – cont’d

Amendments are only efective as against
members who have accepted it. QUERY

Consequence of non-acceptance

Members who oppose may be asked to
withdraw or be granted a waiver.
Decision-Making in the WTO

So why all the fuss about democracy
and transparency in the WTO?
The ‘Green Room’ meetings

This is the most controversial of WTO
practices aimed at facilitating the
achievement of consensus amongst
members.
Decision-Making in the WTO

Methodology of the ‘green room’ meetings

An inner circle of countries (8-34)
serve as the basic
discussion/negotiating group;

Results (of those discussions/
negotiations) are then shared with a
larger group or with all the other members
– usually with a recommendation.
Decision-Making in the WTO
Justifcation for the ‘green room’ meetings
“The Green Room or inner circle model is the
organisation’s ee facto way of dealing with the fact
that … once the active participation in a
group/committee exceeds a certain number
(say 25 or 30), discussion, debate and
negotiation become increasingly
cumbersome, inefcient, and ultimately
impossible.” QUERY: MEANING WHAT?

Blackhurst & Hartridge, “Improving the capacity of WTO
Institutions to fulfll their mandate” in Petersmann, Reforming
the Worle Traee System (2005)
Decision-Making in the WTO



Queries
In light of the justifcation for the ‘Green
Room’ practice, is there a way to increase
the democratic and transparency credentials
of the WTO decision making process?
Given the sharp diferentials in the extent of
interest in global trade and levels of
development, is it plausible to expect
equality of power and infuence amongst
members of the WTO?