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Published : October 07, 2012 | Author : tripti
Category : International Law | Total Views : 12679 | Rating :

TRIPTI MALHOTRA Student of Symbiosis Law School, Pune Fifth year

The World Trade Organization (WTO) is the most powerful legislative and judicial body in the world. By promoting the free trade agenda of multinational corporations above the interests of local communities, working families, and the environment, the WTO has systematically undermined democracy around the world. Unlike United Nations treaties, the International Labor Organization conventions, or multilateral environmental agreements, WTO rules can be enforced through sanctions. This gives the WTO more power than any other international body. The WTO's authority even eclipses national governments. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTO’s current work comes from the 1986–94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the ‘Doha Development Agenda’ launched in 2001.

In the years 2008 and 2009, the WTO witnessed increased economic uncertainty. Its main function is to ensure the smooth and free flow of global trade. The WTO administers agreements, handles trade disputes and monitors country-specific trade policies while training and cooperating with developing nations and other international organizations .

1. The WTO has not only enhanced the value and quantity of trade but has also helped in eradicated trade and non - trade barriers. WTO has also broadened the trade governance scope to trade in investment, services and intellectual property.

2. It has emerged as a greater institution than GATT and expanded the agenda by including developmental policies which further helped in settlement of disputes and improved monitoring by introducing the Trade Policy Review and the World Trade Report as well as increased transparency by removing green room negotiations.

3. WTO also encouraged sustainable trade developments. As trade expands in volume, in the numbers of products traded, and in the numbers of countries and companies trading, there is a greater a chance that disputes will arise. The WTO system helps resolve these disputes peacefully and constructively - in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world, it rather reflects the closer economic ties throughout the world, the GATT/WTO’s expanding membership and the fact that countries have faith in the system to solve their differences.

4. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.

5. WTO members are now reducing the subsidies and the trade barriers which give consumers more choices, and a broader range of qualities to choose from.

6. The system shields governments from narrow interests the GATT-WTO system which evolved in the second half of the 20th Century helps governments take a more balanced view of trade policy. Governments are better placed to defend themselves against lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone in the economy.

7. The World Trade Organization is the single most effective international agency. With the pending inclusion of China, governments that represent 85 percent of the world’s population and about 95 percent of world trade have chosen to bind themselves to the WTO’s rules and dispute settlement procedures.

8. The WTO has been so successful that numerous groups have petitioned to use the WTO to enforce a range of nontrade rules affecting labor, the enivronment, and competition policy.

9. The WTO is the world’s only international organization that supervises 95% of the world’s global trade.The WTO agreements include numerous provisions giving developing and least-developed countries special rights or extra leniency — “special and differential treatment”. Among these are provisions that allow developed countries to treat developing countries more favourably than other WTO members. The General Agreement on Tariffs and Trade (GATT, which deals with trade in goods) has a special section (Part 4) on Trade and Development which includes provisions on the concept of non-reciprocity in trade negotiations between developed and developing countries — when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return.

10. Both GATT and the General Agreement on Trade in Services (GATS) allow developing countries some preferential treatment. Other measures concerning developing countries in the WTO agreements include:
i. extra time for developing countries to fulfil their commitments (in many of the WTO agreements).
ii. provisions designed to increase developing countries’ trading opportunities through greater market access (e.g. in textiles, services,technical barriers to trade)
iii. provisions requiring WTO members to safeguard the interests of developing countries when adopting some domestic or international measures (e.g. in anti-dumping, safeguards, technical barriers to trade)
iv. provisions for various means of helping developing countries (e.g. to deal with commitments on animal and plant health standards, technical standards, and in strengthening their domestic telecommunications sectors).

11. The least-developed countries receive extra attention in the WTO. All the WTO agreements recognize that they must benefit from the greatest possible flexibility, and better-off members must make extra efforts to lower import barriers on least-developed countries’ exports. Since the Uruguay Round agreements were signed in 1994, several decisions in favour of least-developed countries have been taken. In 2002, the WTO adopted a work programme for least-developed countries. It contains several broad elements: improved market access; more technical assistance; support for agencies working on the diversification of least-developed countries’ economies; help in following the work of the WTO; and a speedier membership process for least-developed countries negotiating to join the WTO.

The phases of development of the special treatment of the third world countries can be studied in the form of four phases. The first phase starts from the forming of the GATT in 1948 till the beginning of the Tokyo Round in 1973. The second phase refers to the Tokyo Round itself, from 1973 to 1979. The third phase dates from the end of the Tokyo Round to the end of the Uruguay Round, that is from 1979 to 1995. The fourth phase starts from the end of the Uruguay Round until the present. The analysis that follows distinguishes five arguments that have been advanced for Special &Differential treatment. The five categories are stated as follows:
i. Special and differential treatment is an acquired political right.
ii. Developing countries ought to enjoy privileged access to the markets of their trading partners, particularly the developed countries.
iii. Developing countries ought to have the right to restrict imports to a greater degree than developed countries.
iv. Developing countries ought to be allowed additional freedom in order to subsidize exports.
v. Developing countries ought to be allowed flexibility in lieu of the application of certain WTO rules, or in order to postpone the application of rules as stated by WTO.

13. Though it is a multilateral institution, the GATT/WTO has adopted a bilateral approach to multilateral bargaining according to which reciprocal negotiations occur on a voluntary basis through time between pairs of countries or among small numbers of countries, with the results of these bilateral negotiations then multilateralized to the full GATT/WTO membership by a non-discrimination requirement that tariffs abide by the most-favored nation (MFN) principle.

14. MFN Treatment: Non- discrimination between countries – the Most Favoured Nation principle is one of the most fundamental principles of the WTO. It requires member states to accord the most favourable tariff and regulatory treatment given to the product of any one member and/or non member at the time of export or import of “like products” to all other WTO members. Under the Most Favoured Nation rule, should WTO member state A agree in negotiation with state B, which needs not to be a WTO member, to reduce the tariff on the same product X to five percent, this same tariff rate must apply to all other WTO members as well. In other words, if a country gives favourable treatment to one country regarding a particular issue, it must handle all members equally regarding the same issue.

MFN and national treatment are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.

15. The WTO agreements, which were the outcome of the 1986-94 Uruguay Round of trade negotiations, provide numerous opportunities for developing countries to make gains. Further liberalization through the Doha Agenda negotiations aims to improve the opportunities. Among the gains are export opportunities. They include:

i. fundamental reforms in agricultural trade.
ii. phasing out quotas on developing countries’ exports of textiles and clothing.
iii. reductions in customs duties on industrial products.
iv. expanding the number of products whose customs duty rates are “bound” under the WTO, making the rates difficult to raise.
v. phasing out bilateral agreements to restrict traded quantities of certain goods — these “grey area” measures (the so-called voluntary export restraints) are not really recognized under GATT-WTO.

16. In addition, liberalization under the WTO boosts global GDP and stimulates world demand for developing countries’ exports.

Critique / Failures:
The foremost failure of WTO is its failure to uphold the principle of democracy. WTO is fundamentally undemocratic. The policies of the WTO impact all aspects of society and the planet, but it is not a democratic, transparent institution. The WTO rules are written by and for corporations with inside access to the negotiations. The lack of transparency is often seen as a problem for democracy. Politicians can negotiate for regulations that would not be possible or accepted in a democratic process in their own nations. "Some countries push for certain regulatory standards in international bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism."[16] This is often referred to as Policy Laundering.
WTO is highly biased towards the developed and rich nations, instances of which are as follows:
i. Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing);

ii. The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries;

iii. The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets;

iv. Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and

v. The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).

3. The WTO Tramples Labor and Human Rights, it’s rules put the “rights” of corporations to profit over human and labor rights. The WTO encourages a ‘race to the bottom’ in wages by pitting workers against each other rather than promoting internationally recognized labor standards. The WTO has also ruled that it is illegal for a government to ban a product based on the way it is produced, such as with child labor. It has also ruled that governments cannot take into account “non commercial values” such as human rights, or the behavior of companies that do business with vicious dictatorships such as Burma when making purchasing decisions.

4. WTO is seeking to privatize essential public services such as education, health care, energy and water. Privatization means the selling off of public assets - such as radio airwaves or schools - to private (usually foreign) corporations, to run for profit rather than the public good. The WTO’s General Agreement on Trade in Services, or GATS, includes a list of about 160 threatened services including elder and child care, sewage, garbage, park maintenance, telecommunications, construction, banking, insurance, transportation, shipping, postal services, and tourism. In some countries, privatization is already occurring. Those least able to pay for vital services - working class communities and communities of color - are the ones who suffer the most.

5. The WTO is also destroying the Environment to a great extent – The organization is being used by corporations to dismantle national environmental protections, which are attacked as “barriers to trade.” The very first WTO panel ruled that a provision of the US Clean Air Act, requiring both domestic and foreign producers alike to produce cleaner gasoline, was illegal. The WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device allowing endangered sea turtles to escape. The WTO is attempting to deregulate industries including logging, fishing, water utilities, and energy distribution, which will lead to further exploitation of these natural resources.

The “free trade agreements” threaten to erode many of the advances in global environmental protection, endangering our planet and the natural resources necessary to support life. The North American Free Trade Agreement (NAFTA) and certain agreements of the World Trade Organization (WTO) were written to prioritize rights for corporations over protections for our shared environment. But rather than being repealed, corporate interests are negotiating the expansion of these corporate rights. The U.S.-Dominican Republic-Central American Free Trade Agreement (CAFTA), soon to go before Congress, and the proposed Free Trade Area of the Americas (FTAA), currently in negotiations, are modeled on NAFTA. In addition, negotiations are proceeding within the WTO to expand many of its policies.

These new agreements threaten global biodiversity, would accelerate the spread of genetically engineered (GE) crops, increase natural resource exploitation, further degrade some of the most critical environmental regions on the planet, and erode the public’s ability to protect our planet for future generations.

Corporate interests are also negotiating the expansion of the WTO through an agreement on Non-Agricultural Market Access, or NAMA. Primarily involving industrial manufactured goods, NAMA also includes trade in natural resources such as forest products, gems and minerals, and fishing and fish products. NAMA aims to reduce tariffs as well as decreasing or eliminating so-called Non-Tariff Barriers (NTBs), which can include measures for environmental protection and community development.

Eliminating tariffs in natural resources would dramatically increase their exploitation. The World Forum of Fish-harvesters and Fish-workers has warned of the devastation to fish conservation posed by NAMA. Even the U.S. Trade Representative has acknowledged that eliminating tariffs on wood products would dramatically increase logging, exacerbating deforestation in some of the world’s most sensitive forests.

The WTO has already identified a wide range of environmental policy tools as potential ‘barriers to trade’: the certification of sustainably-harvested wood and fish products; restrictions on trade in harmful chemicals; and packaging, marketing and labeling requirements such as organic and Fair Trade labeling.

8. The WTO’s fierce defense of ‘Trade Related Intellectual Property’ rights (TRIPs)—patents, copyrights and trademarks—comes at the expense of health and human lives. WTO has protected for pharmaceutical companies’ ‘right to profit’ against governments seeking to protect their people’s health by providing lifesaving medicines in countries in areas like sub-saharan Africa, where thousands die every day from HIV/AIDS. Developing countries won an important victory in 2001 when they affirmed the right to produce generic drugs (or import them if they lacked production capacity), so that they could provide essential lifesaving medicines to their populations less expensively. Unfortunately, in September 2003, many new conditions were agreed to that will make it more difficult for countries to produce those drugs. Once again, the WTO demonstrates that it favors corporate profit over saving human lives. Trade-Related Aspects of Intellectual Property Rights (TRIPS) rules are more restrictive than liberalizing.

9. Free trade is not working for the majority of the world. During the most recent period of rapid growth in global trade and investment (1960 to 1998) inequality worsened both internationally and within countries. WTO rules have hastened these trends by opening up countries to foreign investment and thereby making it easier for production to go where the labor is cheapest and most easily exploited and environmental costs are low .

10. In developing countries, as many as four out of every five people make their living from the land. But the leading principle in the WTO’s Agreement on Agriculture is that market forces should control agricultural policies-rather than a national commitment to guarantee food security and maintain decent family farmer incomes. WTO policies have allowed dumping of heavily subsidized industrially produced food into poor countries, undermining local production and increasing hunger.

11. WTO supposedly operates on a consensus basis, with equal decision-making power for all. Involvement of the poor countries is less in the decision making process and they have less bargaining power. Many countries do not even have enough trade personnel to participate in all the negotiations or to even have a permanent representative at the WTO.

12. The WTO’s “Most Favored Nation” provision requires all WTO member countries to treat each other equally and to treat all corporations from these countries equally regardless of their track record. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal under the WTO. Developing countries are prohibited from creating local laws that developed countries once pursued, such as protecting new, domestic industries until they can be internationally competitive.

13. WTO takes too long to arbitrate and settle disputes - it can take over five years from the initial receipt of a complaint from one member to the final panel ruling. Despite the WTO operating as a multilateral organisation, many member countries and trading blocs favour bilateral discussions with partners or competitors. This is because bilateral negotiations can be fully focussed and relatively quick to complete. The result is that many countries prefer to bypass the WTO process, and deal directly with other countries. The failure of the most recent round of WTO negotiations, the Doha round, is widely regarded as evidence of the inherent problems of multilateral discussions.

When the WTO met in 2001, the Trade negotiators were unable meet their goals of expanding the WTO’s reach. In Cancún, Mexico and Hong Kong, China, the WTO met thousands of activists in protest, scoring a major victory for democracy. Developing countries refused to give in to the rich countries’ agenda of WTO expansion - and caused the talks to collapse.

The talks collapsed for a number of reasons. Significantly, while the US and EU failed to agree reductions in agricultural support, many developing countries refused to agree new investment rules which would make it easier for multinationals to invest in their countries. Since the collapse, the USA and EU have returned to bilateral agreements with favoured nations, rather than entering into multilateral agreements. This highlights a major limitation of the WTO in not gaining a complete consensus that multilateral negotiations should be the method of choice of its members.

The failure of the Doha round means that the rich countries of the world still protect themselves from goods produced by the poor nations. By 2005, average agricultural tariffs imposed by the USA and EU were 60%, against average industrial tariffs of only 5%*.

14. For over 30 years, developed countries ignored GATT principles and restricted developing-country exports of textiles and clothing. WTO rules on dumping, safeguards and subsidies have been misused. Liberalization of trade in services has achieved little so far.

15. The slow processes of intergovernmental negotiation, and the need for consensus agreement, mean that the WTO can rarely make rapid or controversial decisions. Nevertheless, interest in the WTO, and in particular in this week's Hong Kong meeting, remains high. There are several reasons for this:

i. Few people really doubt that trade liberalization can have some impact on the economy, whether that impact is welcome or not.

ii. If the Doha round cannot resolve problems of agricultural subsidies and other measures contrary to the rules, members will resort increasingly to the WTO's effective dispute-settlement procedures, with results that are more disruptive than negotiated solutions.

iii. In past negotiations, developing countries were generally more onlookers than participants. The Doha Round is the biggest test yet of whether the WTO can focus effectively on their needs.

Whatever the outcome in Hong Kong, concern about the Doha round itself is justified. Failure could be a serious blow to international business confidence and economic prospects for the developing countries. It would also encourage further fragmentation of the trading system.

Because of this failed record, opposition has grown worldwide to the WTO model of globalization which as been driven by a narrow slice of corporate elites to suit their interests. The collapse of the Doha Round WTO expansion talks offers an extraordinary opportunity for a fundamental re-think of the direction of the global economy .

1. Growth and the rate of poverty reduction have slowed in most parts of the world since implementation of the WTO’s policies imposed on many developing countries by the International Monetary Fund and World Bank.

2. The concept of such special and differential treatment - certain laws applicable to all nations may have an element of exploitation and anti-development. By relaxing such laws when the country under question is a developing country, unfair treatment is doled out to other countries which do not have the privileged tag of being ‘developing’. There also exists a lapse in the system vis-à-vis the criteria that a country must meet in order to be eligible for privileges. As per the current system, a country may decide its own status as either developing or developed. This may lead to paradoxical situations where a country which may not require certain privileges may be put at a discriminatory advantage over other countries by the grant of these privileges. Moreover, if there are laws which have the tendency of being exploitive or harsh, they should be removed as a whole. Furthermore, there needs to be a clear understanding of the distinction between laws which may be negotiable and those which must be binding on all the countries.

3. While the weaknesses in the capacities of developing countries forms the basic reason for the continuous of such differential treatment, such benefits should only be made available to the countries which are ‘low income’ countries and those which may need help to become integrated into the international trade system, or in other words, which are in dire need for trade opportunities.

4. Although the introduction of special provisions for developing countries in the WTO policies would benefit the developing countries without affecting the developed countries too much, the counter argument to this lenient treatment is that the opportunity cost that the implementation of these provisions pose to other nations. Many countries are of the opinion that while developmentally these might be desirable, but the opportunity cost to the trade system is massive as compared to the insignificant contribution some of these least developed and developing countries would make to the international trading system. If one was to subscribe to this view, then it would be of more desirable outcome to introduce these provisions at a later stage when the country is in a position to contribute to the international trade system more significantly in return and in the meantime find better avenues which promise greater returns with regard to the attention, finance and human resources that are required for implementation of the special benefits.

The WTO faces considerable challenges as listed below:
i. Decision-making within the organization.
ii. Streamline reforms related to its dispute settlement system.
iii. Implement development-oriented policies in an effective manner.
iv. Facilitate global trade liberalization in agriculture and textiles.
v. Encourage Non Governmental Organizations or NGOs to become an important part of world trade governance.
vi. Devise ways to increase staff and resources to ensure effective regulation.

Currently, the WTO trumps all other international agreements. The WTO must be scaled back so that the human rights, environmental, labor and other multilaterally agreed public interest standards already enshrined in various international treaties can serve as a floor of conduct for corporations seeking the benefits of global trade rules. For instance, the International Labor Organization provides core labor standards; there are more than 200 multilateral environmental treaties covering toxics, air pollution, biodiversity and waste dumping; and the World Health Organization and the U.N. Charter on Human Rights provide many standards on access to medicine and food security.

1. "Rethinking Liberalization and Reforming The WTO", by Martin Khor.
2. "The WTO's Doha Negotiations And Impasse: a Development Perspective", by Martin Khor.
3. "Reshaping the WTO" by Jagdish Bhagwati.
4. Charnovitz, Steve (1999-11-01). "Addressing Environmental and Labor Issues in the World Trade Organization". Trade and Global Markets: World Trade Organization. Progressive Policy Institute.
5. Kennedy, Kevin C. (2006). "The World Trade Organization: Ultimate Arbiter of International Sanitary and Phytosanitary Standards?"
6. "From Seattle to Hong Kong" by Jagdish Bhagwati.
7. Blackhurst, Richard (August 2000). "Reforming WTO Decision Making: Lessons from Singapore and Seattle"(PDF). Center for Research on Economic Development and Policy Reform (Working Paper No 63)
8. Schott, Jeffrey J.; Watal, Jayashree (March 2000)."Decision-Making in the WTO".
9. "Transparency, Participation and Legitimacy Of the WTO". Third World Network. March 1999. Retrieved 2007-03-23.
10. "Reform of the World Trade Organization and International Financial Organizations". Global Economic Governance.
11. Davey, William J., 2001, Letter of June 3, 1997, to Beverley M. Carl, ‘Qualification as a Developing Country’ in Trade and the Developing World in the 21st Century, Transnational Publishers, New York
# Development Gateway available http://topics.developmentgateway.org/trade/rc/BrowseContent.do~source=RCContentUser~folderId=3364 as seen on 26/12/08
# Dhar, B.; Majumdar, A., The India-EC GSP Dispute: The Issues and the Process available at: http://www.ictsd.org/dlogue/2006-01-25/Dhar.pdf as seen on 27/12/08
# Harvard International Review, ‘Not Just Small Change’ in International Trade, Vol. 26 (2) – 2004 available at: http://hir.harvard.edu/articles/1240. as seen on 23/12/08
# Hoekman B., Michalopoulos C., Winters L.A.; Most Favorable and Differential Treatment of Developing Countries: Towards A New Approach in WTO, World Bank Policy Research Paper 3107 available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=636470 as seen on 29/12/08
# International Institute for Sustainable Development, 2003 ‘Special and Differential Treatment’ at http://www.iisd.org/pdf/2003/investment_sdc_may_2003_2.pdf as seen on 29/12/08
# Keck, Alexander and Low, Patrick,Special and Differential Treatment in the WTO: Why, When and How?(January 2004). WTO Staff Working Paper No. ERSD-2004-03. Available at SSRN: http://ssrn.com/abstract=901629
# Lipsey, R.G. & Chrystal K.A., 1999, ‘Growth in Developing Countries’ in ‘Principles of Economics’ 9th Ed., Oxford University Press, New York
# Pratap, Ravindra, WTO AND TARIFF PREFERENCES,VOL.39, Pg-1788
# Priyadarshani,Shishir,2002. Reforming trade in agriculture:a developing country perspective. Trade,environment, and development project 2.
# Ricardo Melendez-Ortiz , sustainable development and environment policy objectives:a case for updating special and differential treatment at WTO.Joint group on trade and competition, The role of “ special and differential treatment” at the trade,competition and development interface, at http://www.oecd.org/dataoecd/49/37/2072318.pdf. as seen on 27/12/08
# SPS AGREEMENT TRAINING MODULE: CHAPTER 6 http://www.wto.int/english/tratop_e/sps_e/sps_agreement_cbt_e/c6s3p1_e.htm AS SEEN ON 22/12/08
# The World Trade Organization, Understanding the WTO: Developing Countries available at:http://www.wto.org/english/thewto_e/whatis_e/tif_e/dev1_e.htm as seen on 16/12/08
#  The Battle Against the World Trade Organization and Corporate Rule, By Kevin Danaher
# "Rethinking Liberalization And Reforming The WTO", BY Martin Khor.
# Building On The WTO’S Success, by William A. Niskanen, Cato Journal, Vol. 19, No. 3 (Winter 2000)
# World Trade Organisation (WTO), by: EconomyWatch Date: 30 June 2010
# http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm
# http://www.globalexchange.org/resources/wto/environment
# Blackhurst, Richard (August 2000). "Reforming WTO Decision Making: Lessons from Singapore and Seattle"(PDF). Center for Research on Economic Development and Policy Reform (Working Paper No 63)
# The Battle Against the World Trade Organization and Corporate Rule, By Kevin Danaher
# Why the WTO Doha Round Talks Have Collapsed and a Path Forward, by Lori Wallach and Deborah James, Monday, August 14, 2006.
# Schott, Jeffrey J.; Watal, Jayashree (March 2000) "Decision-Making in the WTO".

Authors contact info - articles The  author can be reached at: tripti@legalserviceindia.com

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