The Course –
Contents, Sources and Facts
 The grading:
 Closed-book examination after the course
 Mixture of multiple choice questions and essays
 The Textbook:
 van den Bossche, P, The law and policy of the World
Trade Organization : text, cases and materials (2. ed.,
2008).
 The venue:
 Tuesday, 14:00 – 15:30 and Wednesday 13:00 -14:30 in
the lecture hall of the Europa-Institut (3rd floor)
WTO Law
Int. Business Transactions
WTO
GATT
TBT / SPS
GATS
Trade & Environment
TRIPS
Trade Remedies
Dispute
Settlement
Antidumping
SubsidiesCMA
Intellectual and industrial property
•
 Introduction, History
 Legal Order (1-74)
 Institution (75-167)
 Dispute Settlement (DS) (168 – 319)
 Market Access (401 – 506)
 Non-Discrimination (320 – 400)
 Trade Remedies ((507 – 613)
 Exceptions (615 – 739)
 GATS, TRIPS
 Harmonization (740 – 891)
 Jackson, J.H. et al., Legal problems of international





economic relations : cases, materials, and text on the
national and international regulation of transnational
economic relations (5th. Aufl., 2008)
Matsushita, M. et al., The world trade organization : law,
practice, and policy (2nd. Aufl., 2006)
Cottier, T. et al., International trade regulation : law and
policy in the WTO, the European Union, and Switzerland :
cases, materials, and comments (2005)
Hilf, M./Oeter, S., WTO-Recht, Rechtsordnung des
Welthandels (1. Aufl. Aufl., 2005)
Stoll, P.-T./Schorkopf, F., WTO - Welthandelsordnung und
Welthandelsrecht (2002)
Guzman, A./ Pauwelyn, J., International Trade Law (2009=
 The WTO Website
 http://www.wto.org/index.htm
 Legal Texts
 http://www.wto.org/english/docs_e/legal_e/legal_e.ht
m
 Information on key substantive issues by the WTO
 http://www.wto.org/english/tratop_e/tratop_e.htm
 „What is the WTO ?“
 http://www.wto.org/english/thewto_e/whatis_e/whatis_e.h
tm
 WTO in brief
 http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/i
nbr00_e.htm
 Understanding the WTO
 http://www.wto.org/english/thewto_e/whatis_e/tif_e/tif_e.
htm
 Decisions
 http://www.wto.org/english/tratop_e/dispu_e/dispu_e.
htm
 One-page summaries
 http://www.wto.org/english/res_e/booksp_e/dispu_su
mmary06_e.pdf
 After that with every case in its web presentation
 Newest book edition hardcopy
(http://onlinebookshop.wto.org/shop/article_details.a
sp?Id_Article=721&lang=EN )
 Abridged selected decisions
 http://www.law.georgetown.edu/iiel/students/material
s/reports.html
 http://www.worldtradelaw.net/dsc/main.htm
 Most valuable secondary sources
 http://www.worldtradelaw.net/
 http://www.tradelawguide.com/index.asp?toc=content
&id=88&autologin=n
 http://www.tradelawguide.com
 Teaching Materials in the Internet
 J.H.H. Weiler, S. Cho and I. Feichtner 2007, The Law of
the World Trade Organization Through the Cases
 http://www.jeanmonnetprogram.org/wto/Units/ind
ex.html
 Weekly information
 Bridges etc (ICTSD)
 http://ictsd.org/news/
 WTO Training Package
 http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
 „Researching international and foreign Law“

http://www.llrx.com/international_law.html
 IIEL Research websites

http://www.ll.georgetown.edu/intl/iiel/home.htm
 Research guide from GATT to WTO
http://www.ll.georgetown.edu/research/browse_topic.cfm?109
 One of the pillars of an international economic
order
 Monetary: IMF and World Bank
 Trade: WTO
 Investment? No MAI. No inclusion in the WTO Law
 Particularly developed legal order
 Mandatory and exclusive dispute settlement with two
levels (instances) of jurisprudence
 But: no lawmaking power
 Zone of reduced barriers to trade
 No common market structures
 But second best: reduction of the Trade
 Institutional features
 „Member driven“
 „consensus driven“
 Legal order and institution common to big and
small, rich and poor states
 Influence
 „Green room talks“
 Formation of interest groups
 Capacity problems
 Representation
 Sophistication of a legal order
 Diversification of the developing world
 Economic Advantage of Foreign /
International Trade
 Historical Development
 Particular features of International
Trade Law / WTO Law
 Opening of larger markets
 Economies of scale
 Division of Labor (Adam Smith!)
 Better supply
 Better allocation of resources
 Comparative Advantage (David Riccardo)
 http://internationalecon.com/index.html
 „It is not from the benevolence of the butcher, the
brewer, or the baker that we expect our dinner,
but from their regard to their own interest.
 ...by directing that industry in such a manner as its
produce may be of the greatest value, he intends
only his own gain, and he is in this...led by an
invisible hand to promote an end which was no
part of his intention.“
 View: Wealth of Nations, chapter IV.2
 David Ricardo (1772-1823), On the principles of
political economy and taxation (1817)
 See:
 the text:
(http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ri
cardo/Principles.pdf)
 a brief summary:
(http://www.systemics.com/docs/ricardo/david.html )
Country
Wine
Wheat
Cost Per Unit In Man Hours
Cost Per Unit In Man Hours
England
15
30
Portugal
10 (33 % -)
15 (50 % -)
 Protection of young and still weak industries
through tariffs or NTBs
 Practised in the US in the first half of the 19th
century as well as in Europe
 New example: Airbus
 Problem:
 Dangers of retaliation
 No urge for the protected industries to face the steering
forces of the market
 Dangers of perpetuation beyond need
 Dangers of abuse
 Particular position of a country on the market
 Raising tariffs leads to higher import prices
 Higher prices lead to less demand
 Less demand lowers the prices
 The country will be better off: higher income and
lower prices
 Only if the country is a dominant demander
 And if there is no potential for retaliation
 Because it is an exploitative intervention
 Trade barriers for protection domestic enterprises
 Since they can produce more they can cut cost
(economies of scale)
 They may be able to undercut the prices of foreign
competitors on foreign markets
 Only if economies of scale are sufficiently high
(like in aircraft, car and semiconductors markets)
 Since the intervention is exploitative, there is a
high risk of retaliation from other states
 Creating self-sufficiency for times of crisis or wars
 Reducing the dependence on foreign goods,
services and commodities
 Cost-Benefit Analysis: higher domestic prices may
be a higher loss than the cost for stockpiling
strategic goods
 1948: world exports of goods 48 million USD, of
services only a minor figure
 2006: Goods 12 trillion USD, services 2,7 trillions
 Shares: North and South America decreasing,
Europe and Asia increasing
 Foreign Direct Investment (FDI)
 1982: 59 mio USD
 2006: 1,3 trillion USD
 Developed countries have a higher share than DCs
 LLDCs: less than 1 % of incoming investment on the
global scale
 Factors:
 Transport and communication
 Free movement of capital: investment where it is most
profitable
 But also
 Social problems by losses on the markets
 Winners and Loosers
 Job losses to cheaper countries
 Restraints of competition
 Loss of regulatory leverage of the states
 Public services?
 Power of multinational companies (MNCs) vs. developing states
 International Trade is improving international
welfare
 But does it also increase the welfare in all the
participating states?
 There are winners and loosers
 Loosers may be compensated by additional
demand from the winners
 So that may be a positive sum game
 But the addressees of the demand will not be the same
than the loosers in the compensated state
 Necessity for a social policy in market economy?
 A milennium goal: reducing poverty in the world by 50 % until 2015
 Real poverty: people live on less than 1 $ a day
 There are improvements, but still almost 1 billion people are really poor
 Increase of the income gap btw. the 20% richest and the 20 % poorest
of the world states:





1820: 3:1
1913: 11:1
1970: 30:1
1990: 60:1
1999: 86:1
 94 % of world income -> 40% of the population
 6 % -> 60%
 Half of them live on 2 $ a day, about a billion on less than 1 $
 Even if world trade is increasing (with some stagnations in newer
times), it does not increase the wealth of the majority of people
 Thus: there would be a need for social policy
 In the states as well as on an international level
 More than transfer of charitable funds
 World Bank
 No trade barriers
 Increase global income by 2.8 trillion USD
 Lift 320 million people out of poverty by 2015
 From the 1.101 billion poor people in 2001
 DCs share is rising (20-30 %)
 South-South trade amounts to more than 10 % with
inceasing tendency
 LLDCs (48) share has decreased (0.5 %)
 LDCs / LDCs – qualification?
 Need to protect feeble agriculture and small
business?
 If free trade is an advantage to every national
economy, why is protectionism then so attractive?
 Market failures (competition, information etc.)
 Opportunism of agents: catering for rent
seekers who are better organised
 Industrial policy
 Infant industry protection
 Safeguards
 Overriding public concerns: environment,
nature, health, culture etc.
 Protection of national interests: security, supply
 Market failures require institutions.
The law is one of the possible
institutions.
 Government (policy) failures also
require legal control
 Competition needs regulation because
of market imperfections
 Lowering prices by lowering security or

health standards
 Insufficient information of the customers
 Markets do not function as theory would like
them to do
 E.g.: no unlimited and totally transparent
information about prices and qualities
 Distortions of competition by private actors as
well as by state intervention
 See also J.M. Keynes
 Because of asymmetric information
 Rational ignorance
 Pressure potential of the loosers in
competition
 opportunism of the agents
 Politicians seeking re-election
 Change in public opinion about open international
trade
 Even in export-dependent states: critical majority fearing the
loss of jobs and their „export“ to other states
 The consumers do not realize their advantage
 Many consumers are also workers that may be threatened
 Particularly NGOs are hinting at
 The absence of a serious development policy in the
international economy
 The relative losses of shares of the poorer DCs and the
LLDCs
 The lack of protection for infant industries and small
farmers
Trade Barriers
 Tariffs
 Non-tariff barriers (NTBs)
Distorting aid to trade or
competitors
 Subsidies
 Payments
 Tax breaks etc.
Tariffs
Income for
state budgets
Additional cost
for imports
 The main conceptual focus of GATT and now the
WTO is
 trade liberalization
 better allocation of economic resources
 integration of the developing countries
 management of the risks of globalization
 securing peace
 Preserve the beneficial effect of comparative advantage
 by choosing a second best solution, i.e. the
tariffication of NTBs and the reduction of tariffs
 Withstand the lobbyism of protectionist rent seekers
 Reducing transaction costs
 Restrain and reduce trade barriers
 Abolish all discrimination
 between domestic and foreign goods and services
 between goods and services from different foreign
countries
 Reducing distortions of competition and policy
failures
 Controlling free-riding and principal-agentproblems
Preamble of the WTO Agreement
• 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
• develop an integrated, more viable and durable
multilateral trading system encompassing the
General Agreement on Tariffs and Trade
• the results of past trade liberalization efforts,
• and all of the results of the Uruguay Round of
Multilateral Trade Negotiations
 Post-war International Economic Order
 Avoiding the fatal errors of the 1920s
 Devaluation race
 Loss of the gold standard
 Improving the competitiveness of national goods
by devaluating the currency
 “Beggar-thy-neighbour“ trade policy
 Protectionism race
 Discouraging international trade
 Reducing world welfare
 Bretton Woods Conference (1944): Ministers of Finance
 Monetary Order
 IMF
 IBRD
 Fixed exchange rates
 Mentioning trade, but leaving it to the next
conference in Havana
 Geneva (1947)/ Havana Conference (1948): Trade
Order
 Comprehensive: trade, competition, tariffs,
NTBs
 ITO (Int. trade organization)
 GATT: Tariff Reduction Treaty –
 Part IV of the ITO Charter, but also
independently meaningful
 Set in force earlier for 23 Member States
 By a "Protocol of Provisional Application"
 Speeding up the tariff reduction
 Without parliamentary procedure (administrative
agreement)
 Therefore formally no international
establishment of working bodies
 But therefore with a "grandfather clause"
 And withdrawal with only 60 days notice
 Relation to the Havana Charter: cf. Art. XXIX GATT
 GATT remained provisional for > 45 years
 Protocol of provisional application was the basis of
accession for most new MS.
 1951: Truman ends the unsuccessful attempt to get
approval of Congress
 1955: OTC attempt unsuccessful
 GATT with ICITO (transferred from Lake Placid)
remained in Geneva (av. de Lausanne)
 International Gouvernemental Organization which
could not be called so, although it was:
 Founded by states
 To work for common goals
 With common bodies
 ICITO became the GATT Secretariat
 CONTRACTING PARTIES as plenary body
 Result of the enlarged membership after decolonization
 More difficulties to change the rules of GATT (Art.
XXV)
 1960s: independence of DCs
 1965 Part IV last change of the GATT text
 But still successful tariff reductions rounds
 From about 47 % to 3.6 %
 Arts. II, XXVIII bis GATT
 Beginning with Kennedy Round (1960): Side
agreements with varying membership
 Several Rounds for Tariff Reduction (Art. XXVIII bis
GATT/XIII WTO)
 Reduction of bound tariffs
 New commitments concerning bindings
 Side agreements (Dumping, Subsidies etc.)
 Rift in the structure: scattered obligation structure
 A la carte principle
 Free rider behaviour
 Particularly in the Tokyo Round (1973-1979)
Year/Place/Name
Subjects covered
Countries

1947 Geneva
Tariffs
23

1949 Annecy
Tariffs
13

1951 Torquay
Tariffs
38

1956 Geneva
Tariffs
26

1960-1961 Geneva
Tariffs
26
Tariffs and antidumping measures
62
1973-1979 Geneva
Tariffs, non-tariff measures,
102
(Tokyo Round)
“framework” agreements
1986-1994 Geneva
tariffs, non-tariff measures,
(Uruguay Round)
rules, services, intellectual property,
(Dillon Round)

1964-1967 Geneva
(Kennedy Round)


dispute settlement, textiles, agriculture,
creation of WTO, etc

Doha – Round
123 +
 Major Reform by the Uruguay Round (1986-1994)
 WTO
 Single undertaking (unitary structure)
 Dispute settlement
 Tariffication in the agricultural sector
 Ending the "grey area agreements" (11 Safeguards
Agreement)
 Clarifying and intensifying the open, unclear and
incomplete rules
 Seattle (1999): unfinished and tumultuous
 The Doha working program (2001)
 Cancun 2003: interruption
 The 2004 July program – resumption of negotiations
 2005 Hongkong – some achievements
 The stop-and-go in 2006 - 2008 with unclear finality?
 2008: unsuccessful attempt to finalize the negotiations
 2009: another resumption
 Major stumbling stones: agriculture and development
 Problem of further rounds
 Consensus rule
 Implementation problem
 Capacity problems
 Scope of the legal order (competition, trade, environment,
investment)
 Complexity of the norms
 Representation in the WTO bodies
 Dispute settlement, but see the „Advisory Centre on WTO – Law “
 Agriculture
 Developing countries