Rorde Wilkinson-Multilateralism and The World Trade Organisation - The Architecture and Extension of International Trade Regulation (Routledge Advances in International Political Economy) (2001)

Multilateralism and the
World Trade Organisation
The demonstrations that accompanied the World Trade Organisation’s (WTO’s)

Third Ministerial Meeting in Seattle in late 1999 offered many the first glimpse
of this organisation. Yet they also drew attention to a growing tide of criticism
directed towards the WTO, comprising, among other things, a perceived lack of
environmental and developmental sensitivity as well as a disregard for the rights
of workers.
This book aims to contribute to a growing body of literature on the WTO. It
explores the significance of the establishment of the WTO, as well as some of
the issues brought into sharper focus by the Seattle demonstrations. Located
within the broader study of global governance, Multilateralism and the World Trade
Organisation offers a critical examination of the legal framework of the WTO. It
begins with an exploration of the evolution of international trade regulation,
tracing the historical background of the WTO from its beginnings in the post-
war settlement and the designs for an International Trade Organisation, through
further efforts to formalise trade regulation in the 1950s, to the completion of
the Uruguay Round.
Rorden Wilkinson then goes on to employ a conception of multilateralism as
a prism through which to explore the WTO’s legal framework. In so doing,
Multilateralism and the World Trade Organisation examines the way in which the
principles of most-favoured-nation, reciprocity and dispute settlement are oper-
ationalised. It argues that the employment of a conception of multilateralism
reveals a series of discriminatory practices embedded in the WTO’s legal
framework which, if utilised in a particular manner, serve to disadvantage
smaller, less able, developing and transitional states.
Rorden Wilkinson is Lecturer in International Relations and International

Political Economy at the University of Manchester. His most recent edited
collection is Culture, Ethnicity and Human Rights in International Relations (1997).
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7 Multilateralism and the World Trade Organisation

The architecture and extension of international trade regulation
Rorden Wilkinson
Multilateralism and the
The architecture and extension of
international trade regulation
Rorden Wilkinson
London and New York

For George, Elsie, Harold and Rose-Ethel
First published 2000

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© 2000 Rorden Wilkinson
All rights reserved. No part of this book may be reprinted or
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British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Wilkinson, Rorden, 1970–
Multilateralism and the World Trade Organisation:
the architecture and extension of international
trade regulation / Rorden Wilkinson.
(Routledge advances in international political economy)
1. Foreign trade regulation. 2. Environmental policy.
3. Labour policy. 4. World Trade Organization.
I. Title. II. Series.
K3943 .W536 2000
341.7'54–dc21 00-058259
ISBN 0–415–22171–4 (Print Edition)

ISBN 0-203-18786-5 Master e-book ISBN
ISBN 0-203-18909-4 (Glassbook Format)
Contents
List of illustrations vi
Acknowledgements vii
List of abbreviations ix
Introduction 1
PART I
The architecture of multilateralism 9
1 The institutional evolution of international trade
regulation 11
2 Multilateralism: the architecture of international trade
regulation 31
PART II
The extension of multilateralism 53
3 The WTO 55
4 Non-discrimination and the WTO 80
5 Trade barrier reduction and the WTO 100
6 Dispute settlement and the WTO 115
7 Multilateralism and the WTO: extending the
parameters of trade regulation? 137
Bibliography 146
Index 158
Illustrations
Figures
3.1 The organisational structure of the WTO 68
6.1 The dispute settlement procedure 121
Tables
3.1 The legal framework of the WTO 60
3.2 Uruguay provisions for interorganisational co-operation 72
4.1 Qualifications to the principle of MFN 85
4.2 Provisions for lesser and least developed countries in the
WTO’s legal framework 98
Acknowledgements
In its writing, this book has taken many paths, some more fruitful than others. It
started life as a doctoral thesis written while I was at the Department of Political
Studies at the University of Auckland, New Zealand, between 1995 and 1997. It
has since been written and rewritten – an endeavour which at times appeared to
have no discernible end – to such an extent that it is quite different from that
initial project. I am grateful to the resources and kind assistance of the library
staff at the University of Auckland, the British Library, the British Library of
Political and Economic Science at the London School of Economics, the
University of Sussex, the University of Kent at Canterbury, the Australian
National University, and the John Rylands Library at the University of
Manchester. I am also grateful to the Research School of Pacific and Asian
Studies at the Australian National University, and in particular to Stephanie
Lawson, for the use of its resources between September and October 1996 while
in residence as a visiting member of staff.
While I was at the Australian National University part of the original thesis
was presented as a paper at the 1996 Australasian Political Studies Association
Annual Conference held in Perth at the University of Western Australia. I am
grateful to Campbell Sharman and Samina Yasmeen for their kind comments
and their part in the decision to award the paper the prize for the best graduate
paper at that conference. I am also grateful to Lorraine Elliott, Graeme
Cheeseman and Sam Makinda for their contributions and support in both
Canberra and Perth as well as thereafter.
For their comments on drafts of what follows as well as on some of the ideas
contained herein I am grateful to Lucy James, Paul Cammack, Terhi Saunby,
Roisin McLaughlin, Nigel Haworth and Andrew Sharp. I also owe a debt of
thanks to Kevin Cuddy; as well as to Stephen Chan, Norman Geras, Amanda
Layne, Simon Bulmer, Inderjeet Parmar, Steve de Wijze, Véronique Pin-Fat,
Andrew Russell and Seamus Simpson. Perhaps my largest intellectual debt is owed
to my long-standing collaborator Steve Hughes who patiently read, discussed and
listened to much of what follows and consistently and selflessly offered his support
throughout this and its previous incarnations.
Finally, I owe much for the support and encouragement of Randeep Kaur,
Elsie and George Wilkinson, Jacqueline Wilkinson, Ivan Wilkinson, Vicky Singler
viii Acknowledgements
and Graham Wilkinson, and the inspiration provided by Elizabeth Singler.
Nevertheless, what follows must stand on its own, for which none of the above
can bear any responsibility.
Rorden Wilkinson
Manchester
April 2000
Abbreviations
ACP African, Caribbean and Pacific states

AD Anti-Dumping
AIC Advanced Industrial Country
AMS Aggregate Measure of Support
APEC Asia Pacific Economic Co-operation forum
ASEAN Association of South East Asian Nations
CAP Common Agricultural Policy
CBERA Caribbean Basin Economic Recovery Act (US)
CDP UN Committee for Development Planning
CET Common External Tariff
CTE Committee on Trade and Environment
CTG Council for Trade in Goods
CTRIPs Council for Trade-Related aspects of Intellectual Property
rights
CTS Council for Trade in Services
DSB Dispute Settlement Body
DSM Dispute Settlement Mechanism
DSU Dispute Settlement Understanding
EC European Community
ECLA UN Economic Commission on Latin America
ECOSOC Economic and Social Council of the United Nations
ECU European Currency Unit
EEC European Economic Community
EU European Union
FDI Foreign Direct Investment
G7 Group of Seven leading industrial states
G77 Group of 77 developing countries
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GNP Gross National Product
IBRD International Bank for Reconstruction and Development
(World Bank)
x Abbreviations
ICC International Chamber of Commerce
ICFTU International Confederation of Free Trade Unions
ICJ International Court of Justice
ILO International Labour Organisation
IMF International Monetary Fund
ITC International Trade Centre
ITO International Trade Organisation
LDC Less/Least Developed Country
MAI Multilateral Agreement on Investment
MFA MultiFibre Agreement
MFN Most Favoured Nation
MTN Multilateral Trade Negotiation
MTO Multilateral Trade Organisation
NAFTA North American Free Trade Agreement
NAM Non-Aligned Movement
NATO North Atlantic Treaty Organisation
NGO Non-Governmental Organisation
NIC Newly Industrialised Country
NIEO New International Economic Order
NTB Non-Tariff Barrier
OECD Organisation for Economic Co-operation and Development
OEEC Organisation for European Economic Co-operation
OIE Office International de Epizooties (World Organisation for
Animal Health)
OPEC Organisation of Petroleum Exporting Countries
OTC Organisation for Trade Co-operation
PGE Permanent Group of Experts
PMEU Permanent Monitoring and Enforcement Unit (US)
PRC People’s Republic of China
RTAA Reciprocal Trade Agreement Act 1934 (US)
TBT Technical Barriers to Trade
TMB Textile Monitoring Body
TPRB Trade Policy Review Body
TPRM Trade Policy Review Mechanism
TRIMs Trade-Related Investment Measures
TRIPs Trade-Related aspects of Intellectual Property rights
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
USTR United States Trade Representative
WIPO World Intellectual Property Organisation
WTO World Trade Organisation
Introduction
Since its establishment on 1 January 1995 the World Trade Organisation (WTO)
has attracted considerable interest from scholars, practitioners, governments,
non-governmental organisations and grassroots movements. Perhaps the
pinnacle of this attention was witnessed in late November, early December 1999
at the WTO’s Third Ministerial Meeting in Seattle. The mass demonstrations
that accompanied the Ministerial Meeting, not only in Seattle but also in many
major cities across the globe, ensured that the Meeting and the WTO became
the subject of much media attention and speculation. Yet the demonstrations
and the media attention reflected, not a spontaneous outburst of popular
protest, but rather one dimension, albeit the most spectacular, of a growing
process of opposition to a global economic agenda seemingly devoid of social,
environmental and developmental sensitivity.
For their part, the demonstrations contributed to the failure of the Seattle
Meeting to result in its intended goal: to launch a new round of trade negotia-
tions – dubbed the ‘Millennium Round’ – designed to bring certain commercial
and related sectors, both outstanding and new, into line with WTO rules. The
extent of the failure of the Meeting led the WTO to resort to more familiar
methods of attempting to reach agreement: by holding discussions at its
headquarters in Geneva and throughout a variety of formal and informal venues
safely closeted away from unwanted public attention. Somewhat ironically, it had
been this very lack of transparency that was among the concerns raised by the
protestors.
Yet the failure of the Seattle Meeting does not represent the beginning of the
end for the WTO, nor does it reflect a general weakening in the commitment of
member states to operate within and strengthen the WTO, as some have
suggested. The history of the WTO is much longer than its short years suggest,
and it is much more robust than many of its critics believe. The Seattle Meeting
did highlight a number of issues and concerns which the WTO must address,
and brought many others into sharp relief. But it can only be with the benefit of
a degree of hindsight far greater than this work can provide that the significance
of the Seattle Meeting can be gauged.
That said, the establishment of the WTO represents the culmination, though
not the end, of a political process stretching back to the wartime negotiations
2 Introduction
seeking to provide an organisational focal point for a liberal trade regime. What
was intended to be the WTO’s forerunner, the International Trade Organisation
(ITO), was itself to form one-third of a set of organisations conceived during the
Second World War with the purpose of coherently managing the global
economy. These, in turn, were the product of a culture of organisation building
nurtured by an earlier, though not altogether successful, post-First-World-War
effort to create a series of international organisations designed to govern key
aspects of global life manifest in the form of the League of Nations and the
International Labour Organisation (ILO). When set against this backdrop the
WTO represents both the latest in a line of attempts to create an organisational
focal point for a liberal trade regime, and one aspect of a series of endeavours to
consolidate a global organisational structure designed to govern, to some degree,
world affairs.
The WTO’s situation in an historical process that has attempted to create
various organisational foci for the regulation of international trade is often
understated (with the notable exceptions of Hudec, 1990; Petersmann, 1997;
Jackson, 1998a; Graz, 1999). Yet, the WTO owes much to the ill-fated wartime
and post-war energies directed towards the creation of the ITO; it is intrinsically
related to its immediate predecessor, the General Agreement on Tariffs and
Trade (GATT); and it shares a lineage with another failed attempt at organisa-
tional formality in the form of the Organisation for Trade Co-operation (OTC).
More intimately, the WTO embodies a core organisational structure directly
inherited from its predecessors.
However, although the WTO is the latest in a series of organisational projects
and as such shares many of the characteristics of its predecessors, its creation
also represents what Bulmer and Burch have, in another context, termed a
critical juncture (Bulmer and Burch, 1998: 601–28). In this sense, the creation of
the WTO marks a qualitative change in the way in which international trade is
regulated – a change which, to use their words, ‘while not wholly breaking with
the past, [is] sufficiently novel to be considered as significant’ (Bulmer and Burch,
1998: 605). It represents the first successful attempt at creating a formal
organisational focus for the regulation of international trade; it embodies in its
legal framework a consolidated set of rules governing existing areas of
international trade; it also comprises a body of rules which serve to extend the
arena of economic activity subjected to the WTO’s regulatory specifications
beyond a traditional focus on trade in goods, to include trade in services; it has,
with the notable exception of labour and to a lesser extent the environment,
moved into the regulation of trade-related areas such as intellectual property
rights and investment measures (Wilkinson, 1999a: 165–91); it has begun the
process of drawing under its regulatory umbrella the contentious areas of
agriculture, and textiles and clothing; and it has a Membership which far
outstrips – both in number and geopolitical significance – that of its predecessor.
The establishment of the WTO, then, has at one and the same time anchored,
formalised, deepened and widened the trade regime. As such, it represents a
qualitative shift in the regulation of international trade.
Introduction 3
The family resemblance that the WTO shares with its predecessors ensures
that much can be learnt about the contours of international trade regulation
from studying the background to the WTO. Much of the work on the GATT
carried out throughout its 47-year reign as the principal legal basis for
international trade remains extremely relevant. But the critical juncture
represented by the establishment of the WTO is such that its impact has yet to
be fully assessed. Significant work has been and is being done on specific aspects
of the WTO and its legal framework, such as that on trade in services (Drake
and Nicolaïdis, 1992; Kostecki, 1999), intellectual property rights (Bronkers,
1994), investment (Ariff, 1989), dispute settlement (Petersmann, 1997; Hudec,
1998), development (Awuku, 1994; Das, 1998), the environment (Brack, 1995,
1999) and labour standards (Haworth and Hughes, 1997; Hughes and
Wilkinson, 1998; Wilkinson and Hughes 2000). Furthermore, a growing, but still
small, body of literature is emerging surveying the WTO as a whole (Hoekman
and Kostecki, 1995; Qureshi, 1996; Krueger, 1998; Jackson, 1998a). Yet there
remains much to be done, particularly relating to new and increasingly
significant aspects of the WTO’s remit, the regime that it supports, as well as the
relationship between the WTO, national systems and civil society.
This book seeks to add to that growing body of literature on the WTO. It
locates the study of the WTO within a broader framework of evolving global
governance – by which is meant those organisations, institutions, specialised
agencies and private bodies that embody procedures and practices designed for
the ‘management of [global] political, economic and social affairs’ (Cox, 1997:
xvi). Beyond this, it conceives of the WTO as the latest, though qualitatively
different, organisational foci in the post-war evolution of international trade
regulation. It argues that, though best understood as one aspect of an evolving
global institutional framework, the WTO reflects a specific organisational form:
that of multilateralism. And it is by conceiving of the WTO as an instance of
multilateralism that we can best understand the qualitative shift in international
trade regulation that its creation has heralded. Following the work of John
Ruggie (1993a, 1993b, 1998), among others, multilateralism is conceived
hereafter as an organisational practice which serves to arrange, through a set of
constitutive and authoritative rules, the relations of participants in accordance
with certain generalised principles of conduct. These principles are identified as
indivisibility, diffuse reciprocity and dispute settlement.
Conceiving of the WTO as a specific instance of a distinct organisational
form provides the conceptual framework with which to understand the
qualitative change in international trade regulation that its creation represents.
This is achieved by exploring the practices prescribed by the legal framework of
the WTO as they arise from a particular utilisation of the generalised principles
of conduct. More specifically, in understanding the qualitative shift that has
occurred in trade regulation this work pursues answers to three questions: in
what way does the WTO operationalise the principle of indivisibility; in what
manner is the principle of diffuse reciprocity employed; and what provisions are
made for the settlement of disputes arising among participants? Beyond this, the
4 Introduction
conclusion concerns itself with the findings arising from an application of this
particular conception of multilateralism, as well as those barriers that may
present themselves in such a way as to inhibit the further extension of the
parameters of trade regulation. But, with regard to the latter, rather than
surveying those factors that are usually put forward as representative of the
greatest challenges to international trade, such as periodic tensions between the
principal trading powers, it explores the interrelationship between, and tensions
thrown up by, the more recent challenge from civil society and an older source of
confrontation, that of development.
However, before we proceed it is important to clarify once again the purpose
of this book. The book is primarily concerned with the development of a more
comprehensive understanding of the legal framework of the WTO and the
practices that it embodies which, taken together, amount to a qualitative shift in
the nature of trade regulation. Such a study is, in turn, intended to contribute to
a more complete understanding of the evolving institutional framework of
global governance. In this sense, it does not seek to conduct a critical examina-
tion of the trade policies of particular states – though at times these will be
important – nor does it aim to be the definitive text on the WTO or interna-
tional trade regulation.
The organisation of the book

The book is organised in the following manner. Chapter 1 explores the orga-
nisational development of international trade regulation by examining the
historical movement from the ITO to the GATT, through a second attempt at
formalisation under the auspices of the OTC, the challenge of the United Nations
Conference on Trade and Development (UNCTAD), and finally to the WTO.
Once the historical evolution of the WTO has been established, Chapter 2
directs its attention towards developing the conceptual framework that enables us
to understand something of the qualitative shift that has occurred in trade
regulation, and, by extension, provides the anchor for the remainder of the
book. It argues that, although a distinct preference for multilateralism as a
specific form of international organisation can be identified across the range of
literature, few scholars have sought to probe into its structural dynamics. But,
building on those that have begun to think seriously about the architecture of
multilateralism – what is often referred to as its anatomy – it extracts a
conception which conceives such forms as comprising a set of rules which
organise relations among three or more states in accordance with three
generalised principles of conduct: indivisibility, diffuse reciprocity and dispute
settlement. It then explores the architectural shape of international trade
regulation arising from a particular operationalisation of these principles prior to
the establishment of the WTO.
Chapter 3 explores the key characteristics of the WTO; the manner in which
its legal framework is organised; its role in contemporary global governance; and
the more significant events of the initial years of its operations. Building upon
Introduction 5
this foundation, Chapters 4, 5 and 6 explore the organisational and regulatory
form of the WTO, and, by extension, something of the nature of the qualitative
shift that it represents. Chapter 4 examines how the WTO organises trade
relations in accordance with the principle of indivisibility. This is achieved by
exploring the format and function of the principle of most-favoured-nation as a
central component of the WTO’s legal framework. Chapter 5 does the same for
the principle of diffuse reciprocity by exploring the manner in which a
commitment to trade negotiations forms an intrinsic part of the legal commit-
ments administered by the WTO. Chapter 6, through an examination of the
WTO’s Dispute Settlement Mechanism (DSM), concerns itself with WTO
procedures for ensuring that the rules embodied in its legal framework are
followed. The book draws to a close in Chapter 7 by mentioning something of
the utility of employing a conception of multilateralism, as well as exploring
those issues that pose a significant challenge to the further extension of
international trade regulation.
But before we proceed it is first necessary to define several terms used fre-
quently in this study that have a specific meaning. The first of these is the term
‘trade regulation’. Throughout this book, the WTO is conceived as the principal
source of international trade regulation, by which is meant that the WTO,
through the decision-making capacity of the Ministerial Conference, determines
which practices, congruent with its aims, are to be enshrined in international
trade law. In this sense, then, the rules and procedures determined by the WTO
regulate international trade in that they give rise to a particular kind of
commercial behaviour.
The use of the term regulation in conjunction with a body that seeks as its
primary goal the establishment of a system of free trade wherein few commer-
cial barriers are intended to exist seems to be something of a contradiction. This
is not, however, the case. A system conceived around the free movement of
goods and services, and an accompanying commitment to the free movement of
capital, requires mechanisms to ensure that restrictive barriers are not put into
place. These mechanisms may be rules or norms of behaviour that evolve
through an adherence to an implicit set of rules; nonetheless, their function is
the same – to regulate behaviour in such a way so as to ensure that the free
movement of goods, services and capital is not compromised. That said, the
regulatory nature of the WTO and its predecessors is such that it has actively
sought to introduce a different kind of regulation in international commerce to
that which existed prior to its initiation. In this sense, then, the introduction of a
different kind of regulation in international trade is perhaps more correctly
termed re-regulation. This more elaborate term intimates something of the
regulative history, political processes and ideological influences behind
contemporary commercial regulation. However, for the sake of clarity, and to
resist an injection of awkwardness into what follows, the term regulation is used
throughout, albeit mindful of this distinction.
This is not, however, to suggest that the WTO is the only source of interna-
tional trade regulation. Rather, the WTO lies at the centre of a complex web of
6 Introduction
regulatory systems comprising other global as well as regional and national
bodies. In this sense, then, the WTO is the principal, though not the only, source
of regulative authority in the governance of international trade.
Second, the term ‘regime’ is used in places to refer to the particular commer-
cial environment given rise to by the regulatory disciplines of the WTO and its
predecessors. Here, the WTO is understood, in conjunction with its predeces-
sors, as having given rise to an arena wherein a particular kind of commercial
behaviour ensues – behaviour which is determined by the core architectural
principles embodied in its regulatory framework. The term regime is not, then,
employed in its more rigorous, analytical sense (see, among others, Krasner,
1983; Lipson, 1983; Finlayson and Zacher, 1983; Haggard and Simmons, 1987;
Hasenclever et al., 1997; Haworth and Hughes, 2000). Rather, its meaning
remains purposefully elastic.
Nevertheless, this imprecision does not hide the symbiotic relationship
between the trade regime and the principal regulatory focus of that regime.
Building on the evolution of a set of historical practices, WTO rules specify the
parameters within which national governments are able to affect trade flows and
related factors as they transcend their national boundaries. These rules, in turn,
nurture a particular kind of behaviour that, once established, defines the
parameters of the trade regime. However, the relationship does not end there.
National governments through their participation in the decision-making
processes of the WTO are themselves to greater or lesser degrees the authors of
that regime. It is then the collective activities of governments in the decision-
making process that determine the nature of the legal basis of the regime, and
thus gives rise to particular kinds of behaviour.
It is important to note, however, that the collective participation of national
governments in the decision-making process does not ensure that all participate
equally in that process, or that the outcome of that process will be of roughly
equal benefit to all, as this and other studies demonstrate. Rather, the outcome of
that decision-making can give rise to a series of practices which enable some to
benefit more than others. Furthermore, the evolution of a regime can be such
that it differs in kind from that which was initially intended. As a consequence,
the nature of the legal foundation of international trade regulation is such that it
can give, and has given, rise to a trade regime which is uneven in character,
favouring the powerful over those less able to influence the decision-making
process whether they are member states, observers or affected parties (such as
organised and unorganised labour, grassroots movements and non-governmental
organisations).
The symbiotic relationship between the trade regime and its regulatory
anchor ensures that it is difficult to divorce the two, even for the convenience of
scholarly enquiry. That said, this book is primarily about the WTO, its legal
framework and the practices arising from that collection of rules. In this sense,
then, it is not specifically about the trade regime, though of course the two are
highly interrelated and at times a significant degree of overlap exists.
Third, the term ‘architecture’ is used throughout to refer to the particular
Introduction 7
organisational structure arising from the core principles embodied in the
regulative framework of the WTO. Put another way, it refers to a specific
regulatory form that gives rise to particular modes of behaviour. More
specifically, the term architecture is used as a descriptive term to refer to the
three generalised principles of conduct that have been consistent features of the
evolution of international trade regulation, and have provided the organisational
centre for the various institutional expressions that have sought to provide an
anchor for that regime.
Fourth, the terms ‘institution’ and ‘organisation’ are used on occasion in a
way which may appear as if they are being treated as interchangeable. This is
not, however, the case. The term organisation is used to refer to those intergov-
ernmental and non-governmental bodies that have a formal legal presence,
accompanying secretariats, offices and known procedures. The WTO is
conceived in this way. The term institution is used to refer to more intangible
bodies which may or many not be intergovernmental in character, but that do
not have the formal legal qualities of an organisation, though they may be
treated as if they had. Such an interpretation has the capacity to include the
GATT (though, as will be shown hereafter, the GATT evolved a quasi-
organisational character) as well as a host of other bodies ranging through to
private associations. That said, at times the term institution is used to refer to all
of those bodies that have sought to regulate, in some way, international trade.
This is done in recognition of the legally provisional status of the GATT prior to
the establishment of the WTO, and, therefore, serves more as a collective term.
Finally, the terms ‘global economic governance’ and ‘economic governance’
are used to refer to those aspects of evolving global governance that seek through
a variety of means to manage the global economy. The use of this term does
not, however, imply that economic governance can be divorced from wider
political processes. Rather, the term is used for convenience of mind, conscious
of the interrelated nature of global socio-economic, political and ecological
processes. Furthermore, it encompasses not only those organisations which
comprise its heartland, such as the WTO, IMF and World Bank; it also
encompasses a host of other intergovernmental bodies (such as the World
Intellectual Property Organisation – WIPO; and the Economic and Social
Council of the United Nations – ECOSOC); quasi-formal bodies such as the
Group of Seven leading industrial states (G7); and a range of private institutions
such as the International Chamber of Commerce (ICC).
Summarily, then, this book seeks to develop a more complete understanding
of the regulatory character of the WTO and the qualitative shift in international
trade regulation brought about by its establishment. It pursues this task through
the application of a conception of multilateralism as a specific organisational
form. And in doing so, it aims to contribute to the growing bodies of literature
on the WTO and the nature of evolving global governance.
Part I
The architecture of
multilateralism
1 The institutional evolution
of international trade
regulation
The establishment of the WTO on 1 January 1995 marks, in many ways, a new
era in international trade regulation. It symbolises the successful completion of a
protracted and periodically fraught Uruguay Round of Multilateral Trade
Negotiations (MTNs) – a round that seemed to many destined to failure (see, for
instance, Finger, 1991). It also represents the completion of a significant step
towards the creation of a coherent system of global economic governance,
centred around the WTO and acting in concert with its older siblings, the IMF
and the World Bank, as well as with a host of like-minded global and regional
bodies.
The WTO is the successor to the GATT as the regulative body overseeing the
governance of international trade. The GATT provided the legal framework
regulating international trade for 47 years, in which time it evolved a quasi-
organisational character with an appropriate managerial and administrative
structure. And although the GATT has been heralded, by its supporters at least,
as a qualified success, it was an agreement born with a number of defects.
Periodic negotiations were held during the GATT’s tenure, yet these were
directed more at pushing forward the trade liberalisation agenda than at
addressing the General Agreement’s shortcomings. This lack of attention was
heightened by the memory of previously unsuccessful attempts at altering
international trade rules and creating a formal body to oversee international
commerce.
The GATT itself was the benefactor of post-war attempts to create an
International Trade Organisation (ITO), and the survivor of a second attempt
this time to establish an Organisation for Trade Co-operation (OTC). The
absence of a further attempt to create a formal organisation designed to regulate
international trade was, however, rectified when four years into the Uruguay
Round a consensus emerged to take forward and strengthen the existing
framework of international trade regulation. Initially the subject of some debate,
particularly in the context of a seemingly never-ending Uruguay Round, the
decision was made to extend the regulative framework governing international
commerce, and it was out of this decision that the WTO emerged.
The story behind the creation of the WTO is thus more than just about the
enormous effort put into rescuing and completing a protracted, and at times
12 The architecture of multilateralism
wayward, Uruguay Round of GATT negotiations, though of course that had an
important hand in shaping the WTO. Rather, in order to understand
comprehensively how the WTO came about, the form that it has taken, and its
role in governing the contemporary global economy, it is necessary to explore a
longer and richer history. This chapter begins that story, by exploring the
institutional history behind the creation of the WTO. It then moves on, in the
following chapter, to explore its regulative heart – what is termed here, the
architectural core – embodied in its predecessors and rendered visible through
the development of a conception of multilateralism. Beyond this, Chapters 3, 4,
5 and 6 direct attention towards the WTO and specific aspects of its legal
framework in the pursuit of a more coherent and accessible understanding of
the WTO.
The post-war settlement and the ITO

As we noted at the outset, the WTO owes much to wartime and post-Second-
World-War efforts to create an ITO charged with the task of administering a
series of rules governing international trade and its related areas. But the ITO
itself was intended to be one part of a wider plan to create a series of global
economic institutions designed to manage the global economy. These institutions
were themselves intended to form part of an even broader institutional
framework designed to govern large tracts of global social, economic, political
and cultural life under the auspices of the United Nations Organisation.
The idea of an integrated system of economic management of which a trade
body would be the central component was not, however, an innovation of the
wartime planners. As early as 1920, John Maynard Keynes, as part of his
critique of the post-First-World-War Paris Peace Accords, put forward a
suggestion for the establishment of a Free Trade Union. The proposal envisaged
that such a union would operate under the auspices of the League of Nations in
concert with a large rehabilitation loan directed at reconstructing Europe, and a
‘Guarantee Fund’ to assist in the restoration of currency stability (Keynes, 1920:
248–52, 265–70). The primary purpose of the Union was to mitigate the
imposition of tariffs as part of a wider reconstruction strategy, but also to retrieve
‘some part of the loss of organisation and economic efficiency … which must
otherwise result from the innumerable new political frontiers now created
between greedy, jealous, immature, and economically incomplete, nationalist
States’ (Keynes, 1920: 249). While this was one of many suggestions that the
League of Nations extend, in some way, its jurisdiction into the field of trade
beyond the minimalist references in Articles 16 and 23 of the organisation’s
Covenant, it was among the more significant.
The importance of Keynes’ ideas lies in the system of economic governance
he envisaged. The establishment of a Free Trade Union was only to be
undertaken in tandem with a means by which the economic fortunes of defeated
states could be rectified through some kind of lending facility, coupled with a
mechanism for promoting currency stability. While Keynes’ ideas did not bear
Institutional evolution of trade regulation 13
fruit initially, they set out the concept of a ‘trinity’ of institutions designed to
promote domestic well-being through international means. These formative
ideas proved to be of particular importance to the complexion of the system of
economic governance that was to emerge in the aftermath of the Second World
War. As one contemporary remarked, it ‘is interesting to note that [Keynes]
should have been leader of the British Delegation at the Bretton Woods
Conference negotiating [the] self-same questions’ – and, one might add, creating
the same kind of institutions (Guinness, 1944: 502).
The idea of a highly interrelated trinity of institutions was given purchase by
the experience of the interwar period. The hiatus between the First and the
Second World Wars had been an era of severe economic, social and political
malaise. The reparations that Keynes had so strongly warned against (Keynes,
1920; also Markwell, 1995: 190–5) crippled the German economy, and
contributed to hyperinflation, the rise of extreme forms of nationalism and
ultimately Nazism. Political tensions again arose in Europe as the defeated
powers sought to rectify what they perceived to be the injustices of the Paris
Peace Accords. The Wall Street Crash of 1929 heralded the start of a series of
financial crises among the major capitalist powers (Helleiner, 1993: 21–6;
Germain, 1997: 58–72). As depression spread throughout a highly interdepend-
ent and largely uninhibited world economy, governments began moving away
from their previously liberal policies, to the retraction of their external linkages
and the embarkation upon economically nationalist policies. This economic
nationalism became characterised by the imposition of tariff barriers and capital
controls as states sought to protect themselves from the contagious effects of
participation in the global economy. Yet this added fuel to the rising cause of
political nationalism. By 1939 the political ramifications of the interwar period
had come to a head when Europe again went to war.
The economic hardship of the interwar period, and its role in facilitating a
return to belligerence, strengthened contemporary perceptions that any new
international order must, as part of a wider strategy to abate a further general
outbreak of war, comprise a coherent system of global economic governance
directed at enhancing national economic betterment. It was against this
backdrop that the wartime allied planners began thinking about the shape of the
post-war world order.
In the first of several attempts to define their post-war objectives, the US and
the UK convened the Atlantic Conference in August 1941. It was at this meeting
that Churchill and Roosevelt laid the foundations for the post-war economic
order. Albeit couched in the vaguest of language, the Atlantic Charter that was
the outcome of the Conference resurrected the idea of an integrated set of
economic institutions, at the heart of which would be a global trade body. For
them, the key to the post-war order was:
with due respect for their existing obligations, to further the enjoyment of all
States, great or small, victor or vanquished, of access, on equal terms, to the
trade and to the raw materials of the world which are needed for their
economic prosperity … [to] bring about the fullest collaboration between all
nations in the economic field with the object of securing, for all, improved
labour standards, economic advancement and social security.
(Atlantic Charter, 1941: paragraphs 4, 5)
The commitments outlined in the Atlantic Charter, and in particular the

centrality of a trade body to plans for the post-war world order, were furthered
by the February 1942 Lend–Lease Agreement between the UK and the US.
Article 7 of the Agreement provided the mandate for discussions to commence
between the two powers on the issue of liberalising international trade. Yet from
the outset, it was clear that unabated laissez-faire trade policies were not an
option. The lack of stability engendered by the previous liberal international
order had left too many scars. This is not to suggest, however, that the general
ethos of liberalisation did not continue to hold influence, as to varying degrees it
did; rather that the necessity of a degree of domestic intervention had gathered
salience in key political and economic circles. As Richard Gardner puts it,
‘[a]fter the havoc wrought by two world wars and the Great Depression the
reconstruction of a liberal world economy was bound to require widespread
government intervention’ (1956: 2–3; also Ruggie, 1982). As such, the prelimi-
nary discussions that were to result in the drafting of the Havana Charter for an
ITO stated clearly that post-war commerce must marry the general principle of
free trade with a recognition of, and need for, mechanisms designed to enable a
degree of state intervention at the national level. Such a commercial order, then,
had to reflect this marriage as did the institutions charged with the task of its
management.
This view was not, however, shared by all. Differences were to remain as to
the symmetry of the blend between commercial internationalism and national
interventionism – differences which ultimately contributed to the still-birth of the
ITO project (Diebold, 1952; Penrose, 1953; Gardner, 1956; Woods, 1990; Schild,
1995; Graz, 1999). Article 7 of the Lend–Lease Agreement reads:
To that end [the promotion of mutually advantageous economic relations]

they shall include provision for agreed action by the United States of
America and the United Kingdom, open to participation by all other coun-
tries of like mind, directed to the expansion, by appropriate international
and domestic measures, of production, employment, and the exchange and
consumption of goods, which are the material foundations of the liberty
and welfare of all peoples; to the elimination of all forms of discriminatory
treatment in international commerce, and to the reduction of tariffs and
other trade barriers; and, in general, to the attainment of all economic
objectives set forth in the [Atlantic Charter].
(Lend–Lease Agreement, 1942: Article 7)
The project that was to emerge from the wartime discussions envisaged an
economic order governed by three key institutions, each of which was to have
jurisdiction over its own field of operations, though ultimately they were to be
mutually complementary. Once agreement had been reached on the broad post-
war agenda, internal discussions and negotiations between US and UK officials
effectively separated out into two streams. The first centred on the financial
issues thrown up by the designs for the post-war order culminating in the July
1944 Bretton Woods Conference and the subsequent establishment of the IMF
and World Bank. The second stream dealt with making provisions for the
establishment of a quasi-liberal international trading order, the eventual product
of which was the Havana Charter for an ITO. Yet, while the negotiations
diverged, the key to the success of the overall project was the high level of
coherence between the two streams. The mechanisms devised for stabilising
balance of payments situations were to have no effect unless subsequent progress
was made in reducing, and ultimately eroding, trade barriers, and increases in
productive capacity as a prerequisite for accruing the supposed benefits of freer
trade could only be achieved in some cases through capital provision for
reconstruction.
The Havana Charter and the ITO

What was to become the ITO emerged from a plan for a Commercial Union
drafted by the Economic Section of the UK War Cabinet and Members of the
Board of Trade, and designs for a Multilateral Convention on Commercial
Policy doing the rounds in equivalent US circles. Both the outline for the
Commercial Union and that for the Multilateral Convention envisaged, to
greater or lesser degrees, the establishment of a permanent body which would
administer a series of rules designed to promote non-discrimination in
international commerce; have the legal authority to interpret such rules; and
provide a mechanism for settling any disputes arising among member states.
Intrinsic to these designs was the inclusion of certain safeguards allowing
member states to enact discriminatory trade practices in times of balance of
payments crisis, thus reflecting the domestic focus underpinning the project
(Penrose, 1953: 95) and underlining the institution’s intended congruity with its
financial counterparts.
In September 1943, a UK delegation arrived in Washington for talks with
their US counterparts on the issue of international commerce. The talks were
primarily intended to be exploratory, more of a ‘university seminar’ rather than
formal negotiations (Gardner, 1956: 104). Yet, despite continuing disagreement
as to how to tackle the issue of tariff reductions, the talks resulted in a broad
consensus on the need for some kind of international commercial policy,
supplemented by an international trade organisation with dispute settlement
powers (Penrose, 1953: 97–104; Gardner, 1956: 104). Furthermore, the
discussions explored the possibility of weaving into a convention certain issues
related to commerce, in particular employment, investment, commodity
agreements and cartels.
In spite of the degree of agreement that had been reached between US and
UK officials on post-war trade policy, talks between the two powers did not
recommence until early 1945. From here on, negotiations on the complexion of
the post-war trading order were discussed more vigorously both independently as
well as during talks surrounding the US loan for UK reconstruction in the
aftermath of the end of the Lend–Lease Agreement (Penrose, 1953: 104–15).
Yet, while there was much agreement on the inseparability of trade and
employment policy, the issue of the UK’s imperial preference system and the
way in which US officials favoured approaching the issue of tariff reduction
remained key points of contention (see Parmar, 1995: 161–4). Ultimately, UK
insistence on the issue of its imperial preference ensured that the procedural
approach to tariff reduction – wherein tariff levels are negotiated bilaterally as
had become the norm under the 1934 US Reciprocal Trade Agreement Act
(RTAA) – favoured by the US largely prevailed.
The success of the Bretton Woods Conference in establishing the IMF and
World Bank increased the pressure for the completion of the ITO project. In
December 1945 the US took the lead by preparing and sending out for
discussion a draft charter of the ITO. This was followed, in February 1946, by
the passing of a resolution by the Economic and Social Council of the newly
created United Nations calling for an international conference on trade and
employment to be convened (Fawcett, 1951: 269). The resolution, in turn,
established a Preparatory Committee to discuss the creation of the ITO.
Nineteen states were involved in the subsequent discussions that took place when
the Preparatory Committee met to discuss the suggested charter in London in
Autumn 1946, though the bulk of the negotiations remained between the UK
and the US (Viner, 1947: 612; Brown, 1950: 67–134; Gardner, 1956: 269–70).
Two provisions in particular emerged as a result of discussions in London –
though they were the product of hard-fought negotiation rather than the
emergence of a consensus. These related to the issues of employment and
quantitative restrictions. On the issue of employment, the UK government was
intent on endorsing measures designed to promote full employment, in part, to
assist in the dispersion of social pressure resulting from mass demobilisation,
whereas within the US, where such pressure was less evident, there was some
reluctance to commit domestic employment policies to an international body.
The UK delegation was largely successful in pushing through its intention, and
the issue of full employment became a central feature of the charter. Similarly,
the US was relatively successful in pursuing the issue of quantitative restrictions.
Yet, in spite of the apparent compromise on the issues of full employment and
quantitative restrictions, significant tensions remained over the detail of the
international trade body. The resulting ‘London Charter’ that was the outcome
of the Anglo-American discussions reflected these tensions. Nevertheless, it
provided the prelude for what was to become the ITO Charter developed, first,
at the Preparatory Committee’s second session in Geneva in April 1947, and
second at the 1948 Havana Conference on Trade and Employment itself.
As an addendum to the work on the ITO, the Preparatory Committee
negotiated the GATT. The initial purposes of the GATT, at least at that moment
in time, were generally deemed to be two-fold: first, to ‘give contractual force to
the tariff concessions negotiated at that [Geneva] meeting between 23
governments’ (Fawcett, 1951: 270; Evans, 1968: 73–4) and thus to get the process
of tariff liberalisation underway; and second, and by extension, to act as a
bridging agreement between the previous international economic order and the
rules-based system encapsulated in the legal framework of the ITO. As such, it
was not intended to provide anything more than a lock on the progress that had
been achieved on tariff liberalisation, injecting an additional degree of
momentum into the larger task at hand, and thus paving the way for the full
provisions of the ITO. The format of the GATT was largely derived from
Chapter IV of what was to become the Havana Charter. This ensured that once
established, the GATT would be relatively easily subsumed into the legal
framework of the ITO (see Article XXIX of the GATT 1947).
The successful conclusion of the GATT aside, disagreements between the two
main players continued to plague designs for the ITO, and ultimately proved
irreconcilable as each sought to ‘incorporate in the Charter a detailed statement
of their favourite economic doctrines’ (Gardner, 1956: 379). Cast within a post-
war political and economic climate markedly different from that envisaged by the
wartime planners, the possibility of a successful completion of the ITO project
began to look bleak. The end of the war witnessed an increasingly difficult
economic situation in the UK wherein support for the ITO began to wane. On
the other side of the Atlantic, the US polity became increasingly preoccupied
with the growing tensions between itself and the Soviet Union. In addition,
serious concerns were being raised about the content of the Charter itself.
The Havana discussions themselves witnessed much disagreement. This was
most pronounced on the issue of economic development, particularly with
regard to commitments relating to tariff reduction negotiations, the establish-
ment of new preferential systems, the ability to impose import quotas, and the
employment of other trade restrictions without prior notice (Wilcox, 1949a: 48–
9). These disagreements were not, however, confined to Anglo-American
negotiations. In commenting on the Havana Conference, Herbert Feis noted
that:
[a]lmost every one – [was] trying to re-write important sections of the

[Charter], in the service of its special necessities, ideas, wishes or prejudices.
The number of suggested amendments runs into hundreds. Most assertive
of all seem to be the smaller countries which have little industry and small
variety of natural resources; they seem carried away by the hope of rapid
development.
(Feis, 1948: 51)
The disagreements that had emerged between the UK and the US early on in
the wartime commercial negotiations, as well as those that emerged at the
Havana Conference, were reflected in the final Charter, ensuring that it was a
weighty and contradictory document. As one recent commentator has noted,
‘[t]here were too many loopholes, far too much government intervention for free
traders, and too much free trade for protectionists’ (Ostry, 1997: 64).
The content of the Charter was not the only problem facing the ITO. The
political intensities of the Cold War had begun to crystallise, diverting attention
away from the project. Tensions between the US and the Soviet Union were
exacerbated by an increasing sympathy for socialism in Western Europe.
Furthermore, the sheer length of time that the project had taken, coupled with
the frustration that many of the negotiators felt at the number of compromises
that had been negotiated, had quelled much of the planners’ enthusiasm. And
although 53 countries signed the Havana Charter, only two (Australia and
Liberia) sought its ratification (Williams, 1991: 21). The relatively small number
of participants seeking ratification of the Charter reflected a widely held
perception that the US, as the leading industrial nation and guardian of the ITO
project, should be the first to ratify its Charter. Once this had occurred a general
process of ratification would take place among the other participants (Ostry,
1997: 63). However, the emerging politics of the Cold War in conjunction with
diminishing support for the ITO ensured that the US did not seek ratification of
the Havana Charter, thus ensuring the still-birth of the ITO (Diebold, 1952: 1–
6; Gardner, 1956: 378–80). Fearing a repeat of the League of Nations fiasco
(where the US, despite putting much effort into its creation, omitted to join), the
thought of an ITO without the US was inconceivable, and the notion of an
organisation designed to administer a series of trade rules fell into the back-
ground as did hopes of completing a coherent system of global economic
governance – for the interim at least.
In spite of its demise, it is worth considering briefly the form that the ITO
would have taken had it emerged from a successful ratification process.
Compared with the Establishing Agreement of the WTO, the Havana Charter is
massive. It deals in minute detail with tariff levels, preferences, discriminatory
taxation regimes and regulations, customs procedures, quota systems, state
subsidies and trading, cartels, commodity agreements, economic development,
investment, and of course the relationship between domestic stability and
international commerce. Reflecting the sheer size of the task undertaken by its
architects, the Charter comprises nine chapters: (i) purposes and objectives; (ii)
employment and economic activity; (iii) economic development and recon-
struction; (iv) commercial policy; (v) restrictive business practices; (vi)
intergovernmental commodity agreements; (vii) the composition and structure
of the Organisation; (viii) the settlement of differences; and (ix) general
provisions. The intended purpose of the provisions contained within these
chapters was to limit the ability of governments to privilege domestic produce
over competitor products, while at the same time providing a legal acknow-
ledgement of the importance of domestic industrial stability, full employment
and effective demand in the success of a liberal trade regime (Wilcox, 1949b:
489, 491).
To assist in the realisation of its aims, the Charter envisaged an organisational
structure composed of an Executive Board, a Conference and a series of
Commissions to be established at the discretion of the Executive Board. The
Executive Board of the ITO was intended to be a council of leadership
comprising 18 members of the ITO elected by the Conference on the basis of a
two-thirds’ majority. The structure of the Executive Board reflected prevailing
ideas at the time. Membership of the Board was to include eight states of ‘chief
economic importance’ and 10 others, the sum of which was to reflect varying
levels of economic development as well as geographic distribution – though of
course the requirement that the Board include eight states of chief economic
importance ensured that both the US and the UK would continue to have a
large degree of influence in the workings of the ITO. The Board was to be
responsible for the execution of the policies of the ITO, to supervise the
activities of the Conference, and to make recommendations to the Conference
as well as to other intergovernmental organisations. The Conference, the main
body of the ITO, comprised of all of the ITO’s members. It was to have the
authority to determine trade policy, or empower an individual member to forgo
a particular obligation (dependent on a two-thirds’ majority), as well as approve
the budget and other related matters. And the functioning of the ITO was to be
administered by a permanent staff, headed by a Director-General appointed
upon the recommendation of the Executive Board.
More importantly, the Havana Charter contained a series of provisions
which defined the nature of the system of economic governance that would
have emerged had the ITO succeeded in being established. First and foremost,
the Charter established the constitution for the creation of a new specialised
agency operating under the UN umbrella. Beyond this, it determined with
which other organisations the ITO was intended to work, as well as the purpose
of that work. These linkages separated out into two levels – primary and
secondary – reflecting the relative importance attributed to partner organisa-
tions in the governance of the global economy (Wilkinson, 1999b: 6–11; 2001).
At the primary level, co-operation was deemed most appropriate with the IMF,
whereas secondary-level commitments endorsed co-operation with (in
recognition of the centrality of employment to the Charter) the ILO, as well as
the World Bank. Furthermore, these provisions served to embed the ITO, and
by extension the organic system of economic management to which it was the
central party, within the wider system of global governance centred around the
UN. Provisions were also made for the possible extension of this system of
governance to include regional bodies and non-governmental organisations.
The system encapsulated in the ITO’s legal framework thus represented the
first formal articulation of the Keynesian trinity, although the failure to ratify the
Havana Charter halted its realisation. Indeed, the effective functioning of the
Bretton Woods system (by which I am including the ITO) was premised on the
creation of, and adherence to, the body of rules administered by the ITO
(Diebold, 1952: 2). The failure to establish the ITO added to the difficulties that
were to be encountered by the IMF and World Bank in fulfilling their mandate,
though, of course, their experiences owe much to a wider set of factors beyond
the scope of this study.
The rise of the GATT
Somewhat surprisingly, the failure of the ITO project did not seal the fate of the
wartime attempts to establish a liberal trading regime supported by some kind of
regulatory authority. First, the still-birth of the ITO paved the way for the
elevation of the GATT. The Preparatory Committee’s negotiation of the GATT
as the gatekeeper of the already-agreed post-war tariff cuts had lent the General
Agreement a large degree of support. In contrast to the patchwork nature of the
ITO, the GATT appeared narrow and focused, albeit without the organisational
structure or comprehensive provisions of its larger relation, though, of course,
some of the ITO’s provisions lived on in the GATT. Second, aspects of, and
cross-references to, the Havana Charter survived the demise of the ITO. Residue
of the ITO Charter was to be found in, among others, the Code of Liberalisation of
Trade of the Organisation for European Economic Co-operation (OEEC, the
foreshadower of the OECD), as well as in the anti-dumping provisions of the
Schuman Plan (Diebold, 1952: 25–6). Furthermore, as will be demonstrated
throughout this book, much of the legacy of the ITO can be found in the WTO,
though, as we have already noted, there are significant differences between the
two organisations.
Somewhat by default, then, the hopes of the wartime planners for a liberal
trading regime rested on the residue of the ITO generally, but more particularly
on the fledgling GATT. Originally intended to lock into place the initial progress
made in tariff liberalisation, as well as to act as the bridge between the old order
and that to be established around the disciplines of the ITO, the GATT
comprised a series of provisions directed at liberalising international trade in
goods by putting into place a mechanism for conducting that liberalisation
through periodic negotiations.
Although the GATT was signed on 30 October 1947 by the 23 participating
states, its initial status was the subject of some contention. Originally intended to
enter into force for only three years, it was extended for a further period when it
became clear that the ITO was likely to flounder. Yet, even in spite of the failure
of the ITO, the longevity of the GATT was not guaranteed. In both the UK and
the US commitment to the General Agreement was at best envisaged to be
temporary, and at worst short lived. Signatories to the Agreement were referred
to merely as ‘contracting parties’ rather than the more formal title of ‘members’,
and at the outset it was only required that the content of the GATT be accepted
provisionally – though this was to change in 1965. Indeed, the GATT’s status was
to remain largely provisional until the establishment of the WTO (Jackson,
1998a: 39–41).
That said, a large degree of effort had been expended in the ITO project,
and any floundering of the GATT would have resulted in a fruitless waste of
political energy. Furthermore, the provisions of the GATT reflected the spirit of
the commercial components of the Havana Charter, though they were perceived
to be much less constraining than the disciplines of the ITO. The General
Agreement did not formally commit its contracting parties to the maintenance of
full employment, though its desirability remained a feature of the GATT’s
preamble, nor did it encompass the contentious investment rules. Consequently,
the GATT was generally perceived to be less of a threat to those, particularly
within influential positions in the US, who feared a dilution of sovereignty
through participation in the ITO (Hudec, 1990: 57). Its qualification and
exception clauses were comparably few and relatively straightforward, and in
spite of the minimalist provisions of the GATT, it embodied the flavour of the
ITO as replicated in the General Agreement’s preamble:
Recognizing that their relations in the field of trade and economic endeav-
our should be conducted with a view to raising standards of living, ensuring
full employment and a large and steadily growing volume of real income
and effective demand, developing the full use of the resources of the world
and expanding the production and exchange of goods … Being desirous of
contributing to these objectives 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 treat-
ment in international commerce [agree to the provisions as set out in the
Agreement].
(GATT 1947 Preamble)
The similarity between the GATT and the ITO, however, did not extend to the
full breadth of the commercial provisions of the formal ITO. Rather, the focus of
the GATT was much narrower than that of the ITO. It restricted the area of
commercial activity subject to regulation to the field of trade in goods,
accompanied by a much watered-down version of the ITO’s dispute settlement
procedures. The aim of the GATT was to promote freer international trade by
requesting that contracting parties conduct their commercial relations in
accordance with the principle of most-favoured-nation, and to complement the
free movement of goods by putting into place a mechanism for periodic
negotiations directed at the general erosion of barriers to trade. Provisions were
also made for the GATT to fulfil the ITO’s role in co-ordinating activities with
other organisations, primarily the IMF, in the pursuit of a coherent system of
management of the global economy – though these provisions, like the rest of
the Agreement, were not nearly as comprehensive as those envisaged for the
ITO.
In spite of the progress that had been made in tariff liberalisation at the
Geneva meeting of the Preparatory Committee, and its rise from the ashes of
the ITO, in the first years of operation the GATT, as well as the IMF and World
Bank, took a back seat to the reconstruction programme underway in Europe.
The trade liberalisation programme of the OEEC effectively crowded out that of
the GATT until the early to mid-1950s. As a consequence, the GATT’s initial
success at liberalising trade was relatively modest. Yet, this was soon to change.
With the end of Marshall Aid in sight, and the prevailing notion that the
European currencies would move towards full convertibility within a relatively
short space of time, the role of the GATT became the subject of renewed
attention. As a result, a substantial review of the GATT was undertaken under
the auspices of the Ninth Session of the Contracting Parties in Geneva between
October 1954 and March 1955. It was at this meeting that the future of the
GATT was secured as the contracting parties sought to amend the Agreement
‘rather than scrap it and start again’ (Goodwin, 1956: 145–6).
There were, however, several areas that required attention if the GATT was
to continue successfully. The GATT’s main problem was its lack of an
organisational structure. Its role as a bridging agreement to the ITO meant that
in its drafting, provisions had not been made for the creation of a formal
institutional and administrative structure. That said, the General Agreement’s body
of rules did prove sufficient to give international trade regulation an operational
framework. In order to overcome the lack of organisational formality, the GATT
improvised by using Article XXV (Joint Action by the Contracting Parties) as the
basis upon which to build a series of functions that approximated those of a
formal organisation (Curzon and Curzon, 1974: 300). In the absence of a formal
assembly, Article XXV enabled the contracting parties to act as if they were such
a body, designating them as ‘Contracting Parties’ (paragraph 1). From this
evolved a quasi-organisational structure, which added to its ranks a permanent
secretariat (that was to occupy the old ILO building in Geneva), a council to
oversee GATT activities between the meetings of the Contracting Parties, and
the development of a series of committees and working groups concerned with
various aspects of international commerce.
Perhaps unsurprisingly, then, the decision to persevere with the GATT, and
the ad hoc nature with which it operationalised its functions, led to renewed calls
in the mid-1950s for the establishment of a formal organisation to oversee the
workings of the Agreement. This came in the form of a discussion on the
relative merits of creating an OTC. The idea of an OTC mirrored, in many
ways, the designs that had been put forward for the ITO – though the OTC was
only intended to administer commerce in goods, and not the elaborate and much
more extensive provisions of the ITO. Like the ITO it was to comprise an
Assembly (the ITO’s Conference), an Executive Committee of 17 elected
members (this time five of which were to be of ‘chief economic importance’,
and the body as a whole was to reflect the geographic and developmental
distributions of its members) and a Secretariat (see Goodwin, 1956). In reality,
the proposed OTC differed little from the GATT. It was, for some, merely a case
of semantics (The Economist (1955): 1101–2). Yet the OTC befell the same fate of
the ITO, defeated by the very forces that had been instrumental in the
floundering of the first attempt at formalisation (Gardner, 1969: xxxiv; Curzon
and Curzon, 1974: 300) – a defeat which some feared would see an end to the
GATT itself (Goodwin, 1956: 248).
The fate of the OTC did not, however, damage the GATT. Indeed, for some
the relative success of the GATT vis-à-vis the OTC, and for that matter the ITO,
was in large part due to the ad hoc nature in which it had developed. For
Goodwin, the GATT’s intended role as a bridging agreement to the ITO
remained a fortunate one: ‘The lack of elaborate rules and organisational
structure encouraged flexibility and experiment and freed it from the follies of
empire-building which [had] beset so many international institutions’ (Goodwin,
1956: 248). It was this flexibility that was to prove central to the functioning of
the GATT for the following period, though, as Ostry has noted, this flexibility
also led to a large number of escape clauses (Ostry, 1997: 71).
The GATT in operation

As had been the intended case for the ITO, the GATT sought to organise the
activities of its Contracting Parties in accordance with the general aim of non-
discrimination. To do this, it required that the Contracting Parties organise their
commercial relations in accordance with the principles of most-favoured-nation
(MFN) and national treatment (Articles I and III of the GATT respectively). The
principle of MFN (about which much more is said in Chapters 2 and 4) was to
be, with certain exceptions relating to balance of payments difficulties, the
establishment of customs unions and free-trade areas, dumping, and the
accession of new members, applied in its unconditional form (see Viner, 1931) –
thus requiring that Contracting Parties in all instances, other than those when
they are empowered to do so, procure previously negotiated trade concessions
without restriction to all other Contracting Parties. Acting in tandem with MFN
was the principle of national treatment. This principle required that Contracting
Parties alter their domestic taxation and regulation regimes such that foreign and
nationally produced products receive equal treatment.
The principles of MFN and national treatment in themselves did not encour-
age trade liberalisation; rather they were merely intended to equalise commercial
treatment. Operating in conjunction with the principles of MFN and national
treatment was a commitment to engage in periodic negotiations to reduce the
general incidence of tariffs, with the exception of particularly sensitive sectors
such as agriculture. These negotiations (which are the focus of a more detailed
discussion in Chapters 2 and 5) were conducted in accordance with a particular
interpretation of the principle of reciprocity (Article XXVIIIbis), wherein the
offer of a given tariff reduction was to be met with an offer of roughly
equivalent value. Once tariff reductions had been negotiated, the principles of
MFN and national treatment were intended to lock into place these reductions
and ensure their near universal application.
In the pursuit of this task, eight rounds of MTNs were held: Geneva (1947);
Annecy (1949); Torquay (1951); Geneva (1956); Geneva (the so-called Dillon
Round 1960–1); Geneva (the so-called Kennedy Round 1964–7); Tokyo (1973–
9); and Uruguay (1986–94). Each round of negotiations took longer than the
last, owing to the relatively rapid increase in the number of Contracting Parties,
the expansion in product coverage, and hard-fought negotiations over sectors
where tariffs had already been significantly reduced.
During the early years of the GATT, trade liberalisation appeared to thrive.
Up to the mid-1970s progressive rounds of trade negotiations ensured a certain
degree of success. Between 1950 and 1975 the merchandise trade of the
industrial countries grew at an average rate of 8 per cent (Cline, 1980: 188).
During the Dillon Round over 4,000 concessions were exchanged; and at the
Kennedy Round barriers to trade fell at an unprecedented rate – 35 per cent
over a total of 60,000 products (Gilpin, 1987: 192).
Yet, relatively early on into the life of the GATT, the broad overview of tariff
reductions obscured a more negative trend. Up until the 1956 Geneva Round,
much headway had been made in lowering the general incidence of tariffs.
However, beyond this point the ability of the Contracting Parties to agree on
mutually acceptable tariff cuts became increasingly difficult. This, in the main, is
attributable to the degree by which tariffs were cut in the early rounds. The
relatively high base from which tariffs were cut exaggerated the degree by which
barriers to trade had been eroded. But, as the general level of tariffs decreased,
so too did the ability of the Contracting Parties to agree further reductions.
Furthermore, this creeping inertia was accompanied by an increase in the
growth of other forms of protectionism in the form of non-tariff barriers
(NTBs).
Beyond the mid-1970s, the general level of tariff cuts began to stagnate. The
severity of this stagnation was worsened by the ever-increasing use of NTBs.
Many of the industrial countries had implemented elements of overt and covert
protectionism (such as the adoption of quotas, licences, overzealous health and
safety checks, lengthy administration procedures, and voluntary export
constraints on supplier countries) in an attempt to find substitutes to replace the
loss of protection that had occurred as a result of tariff reductions (Cline, 1983:
5–7). This ensured that, rather than liberalising trade, those gains that had been
made by tariff reductions were offset by the growth of NTBs. The relative
stagnation caused by NTBs was not, however, system wide. Much of the growth
in NTBs affected those very countries whose specific problems had been
unsatisfactorily addressed by the GATT – namely, those of the developing world.
During the late 1960s developing countries accounted for 16 per cent of imports
to the industrial world, yet their products faced 21 per cent of all NTBs (Page,
1994: 54–5). Similarly, the severity of NTBs was most prevalent in those products
that developing countries were most likely to export – low-technology goods
(Strange, 1985: 246). Much of this growth in NTBs, and their uneven distribu-
tion, was due to the relative decline in the economic power of the advanced
industrial countries (AICs) in contrast with their developing counterparts.
However, in spite of the realisation of the problems associated with NTBs, and
attempts to counter this tendency at the Tokyo Round, it soon became apparent
that the GATT was ill-equipped to deal with this kind of protectionism.
The centrality of the principle of reciprocity as the basis for the GATT’s
exchange of trade barrier concessions during MTNs was also threatened,
coming under increasing pressure from the differing interpretations of the
principle by the Contracting Parties (Curzon and Curzon, 1976: 156–7). Some
interpreted the principle to entail sector-for-sector exchange, while others held
that the value of reciprocity was to be calculated in the aggregate. Furthermore,
bickering broke out among the Contracting Parties as to the relative value of
concessions exchanged. As negotiations became increasingly tense, the time it
took to complete negotiation rounds extended, and the outcome was often
perceived to be inadequate.
The external economic climate also began to have a negative impact on the
GATT. The movement away from the exchange rate stability of the Bretton
Woods regime in the late 1960s and early 1970s (formalised at the 1976 meeting
of the IMF in Jamaica) exerted a large degree of pressure on the GATT’s
balance of payments rules – rules that had been designed for a commercial
system underpinned by fixed, rather than floating, exchange rates (Van
Whitman, 1977: 33–4). Furthermore, the very heart of the Agreement was
threatened by the increasingly selective implementation of the principle of
MFN. To many, it seemed that the trade regime had begun to stall.
The sensitivity of agriculture, too, contributed to the general attack on the
foundations of the GATT. On the insistence, first of the US, then the European
Economic Community (EEC), agriculture had been exempt from the GATT’s
rules on domestic support systems. And although the adverse effects of these
domestic agricultural support programmes were the subject of some discussion
at both the Kennedy and Tokyo Rounds, neither resulted in a comprehensive
solution. In large part, the inability of the GATT to regulate trade in agriculture
was primary due to the nature of the Agreement itself (Hathaway, 1983: 443).
Few sovereign countries were willing to put their domestic food and fibre policies
forward as candidates for outside negotiation and determination:
[I]t would [have been] political suicide for the European Community, Japan,
or the United States to do so, yet it is the domestic agricultural policies of
these trading partners that [have been] the root cause of the continuing
agricultural trade problems.
(Hathaway, 1983: 443–4)
The development of certain internal practices also contributed to the GATT’s

inability to regulate trade in agriculture. Eckart Guth and Tonia Pankopf have
argued that although much of the inefficiency of the GATT’s agricultural
provisions was caused by US actions during the 1940s and 1950s, three norms of
practice developed in the GATT that accentuated the problem: (i) GATT rules
were often not applied because derogations had been applied for by the
Contracting Parties; (ii) the Agreement lacked clear guidelines for the settlement
of disputes; and (iii) agricultural rules were often circumvented by state trading
boards and grey-area measures (Guth and Pankopf, 1994: 250–1).
Development, the GATT and the threat of

alternative trade structures
Yet one issue above all threatened the foundations of the GATT: development.
By as early as 1954 it had become apparent that the gap between the fortunes of
the industrial world and its developing counterparts was on the increase. In 1958
the Haberler Report concluded that, although no evidence of a general
tendency towards specific discrimination in trading relations with the developing
world was found, factors did exist that were detrimental to the terms of trade of
less developed countries (LDCs) (GATT, 1958). The Report concluded that the
high incidence of trade barriers faced by LDCs, coupled with unfavourable price
trends, had significantly affected the terms of trade performance of developing
countries. In recognition of these findings the Report recommended that in the
first instance a programme of ‘maintaining and expanding the export earnings
of the less developed countries’ should be undertaken (Evans, 1968: 84). As a
means of fulfilling this goal, the Contracting Parties committed themselves to
fact-finding, co-ordinating the development of plans for trade opportunities,
analysing market factors, providing technical assistance for officials of LDCs,
and actively reducing those barriers to trade that directly affected the fortunes of
the less developed.
In 1966 GATT attempts to address the problems faced by the developing
world culminated in the incorporation of a textual addition to the General
Agreement under the heading of ‘Part IV’ – though its provisions were at best half
hearted. Part IV requested that developed contracting parties merely consider
adopting certain measures to assist in the trade and development of their less
developed counterparts. There was not to be any compunction.
Unsurprisingly Part IV had little effect. The growth rate of manufactures
exported by developing countries was alarmingly slow. In 1970 LDC manufac-
turers accounted for only 7 per cent of total world exports. By 1990 this share
had risen to 17.1 per cent, an average growth rate of 0.5 percentage points per
year (Page, 1994: 9). Yet even these figures cloaked a more worrying trend, as the
rate of growth across the developing world proved to be particularly uneven.
Much of the increase was due to the export performance of Asia, and in
particular the fortunes of the newly industrialised countries (NICs) of East Asia.
Africa during this period experienced a negative growth rate in the export
performance of its manufactures, and Latin American fortunes proved to be
little better, stagnating over the same period.
The incongruity of GATT rules with the needs of developing countries was
not the only dimension of the development issue to confront the General
Agreement. The GATT was also seen by a large portion of developing states as, at
the least, an outmoded institution, and, at worst, one representation of the
continuation of colonial exploitation through different means. Aside from the
arguments as to the lack of a developmentalism in GATT rules, three main
political criticisms were levelled at the General Agreement. First, neither the GATT
nor the ITO had been negotiated among equals – though both purported to
embody the general principle of non-discrimination and equality in interna-
tional commerce – as both had taken place prior to the mass post-war rounds of
decolonisation. As such, the interests of these states could not be represented
adequately. And while some Contracting Parties purported to represent the
interest of these states during the initial negotiations (in particular the colonial
powers), this in itself served to compound the problem. The very suggestion that
a colonial power could benevolently represent the interests of its subordinates
was perceived, at the very least, to be politically insensitive.
Second, the mass representations made by the UK and the other former
colonial powers on behalf of their colonies ensured that GATT rules were
imposed on many with little or no prior consultation. This perceived intrusion on
the sovereign integrity of the newly independent states was seen as an insult, the
impression of which would last for a long time. A sense of the frustrations felt by
many of the developing countries at their effective marginalisation during the
formative stages of the ITO and GATT negotiations can be ascertained, as we
have already noted, from the high degree of energy exerted by the ‘smaller
countries’ directed at altering particular rules during the Havana Conference on
Trade and Employment. Though those states that had attained independence
and were represented at the Conference did not purport to represent their pre-
independence counterparts, they embodied a sense of the frustration developing
countries were all to feel, to varying degrees, at being locked out of these seminal
negotiations (see Feis, 1948: 51).
Third, until the adoption of Part IV, the only development-sensitive provision
within the GATT was Article XVIII – empowering Contracting Parties to
suspend, in part or whole, their procurement of MFN by imposing quantitative
restrictions to rectify an adverse balance of payments situation. The main
problem with this Article, however, was that prior to its implementation, the
consent of the Contracting Parties writ large had to be ascertained. But, as Sidney
Wells explains, the difficulties with Article XVIII were that the Contracting
Parties had the ability to modify the level and type of safeguards introduced by a
troubled state, and that the developing countries had to ‘go “cap in hand” to
their richer fellow Contracting Parties, requesting permission to impose [such]
restrictions’ (Wells, 1969: 65). This perception of begging, particularly to
Contracting Parties who invariably comprised a state’s former colonial master(s),
contributed further to a growing level of resentment among many developing
countries.
Not only, then, were the economic provisions of the GATT challenged by the
issue of development, the perceived political insensitivities surrounding the
Agreement were also the subject of much antagonism. These perceptions
contributed to a broader anti-imperial backlash, which, in turn, fuelled a
growing militancy among post-independence developing nations. The system of
global economic governance came in for increasing criticism, and ideas and
designs for alternative forms of governance began to appear. It is from these
ideas that emerged the biggest potential threat to the future of the GATT.
As early as the Havana Conference the developing countries could be
identified as a specific interest group lobbying for an equitable say in the post-
war economic order. In particular, they argued for a more proactive approach to
the issue of trade promotion, advocating such policies as technological
exchange, the use of import quotas as a means of promoting industrialisation,
and the implementation of mechanisms designed to nurture the establishment
and growth of infant industries (Williams, 1991: 21). The lack of success at
negotiating what was perceived as a fair trading system served to breed
developing opposition to the GATT. This was added to by the mass decolonisa-
tion rounds in the 1950s and early 1960s. Criticism of the GATT increased as by
1964 the number of developing countries among the Contracting Parties had
grown to outnumber the industrial states by nearly two to one (Williams, 1991:
24). Fuelled by these factors and the relatively poor economic performance of
many developing countries in the aftermath of decolonisation, ideas about an
alternative global economic order, and more particularly regarding a new
international trade body, gained increasing salience (see Murphy, 1997: 201–12).
Further weight was thrown behind these ideas when the Soviet Union declared
that a new international trade organisation should be created which would not
only address the problems of development, but also incorporate the state-trading
activities of the Soviet Union and the people’s democracies of Eastern Europe
(Goodwin, 1965: 4; Robertson, 1969: 265).
A critical mass was thus emerging among the developing countries for a more
development-centred approach to international trade. In response, the UN
declared the 1960s a development decade. In order to add some substance to the
UN declaration, as well as to capitalise on the growing solidarity among
developing countries that had evolved since the 1955 Bandung Conference and
the 1961 Belgrade Conference out of which had emerged the Non-Aligned
Movement (NAM), the first UN Conference on Trade and Development
(UNCTAD) was convened in Geneva between March and June 1964. The
Conference was attended by 122 nations, out of which emerged a coherent bloc
of 77 developing countries (the G77). It marked, for some, a new era in
international relations, as global conflict moved away from security issues and
the East/West stand-off, to North and South and the economic tension between
developed and developing. Even the make-up of the Secretariat overseeing the
Conference reflected this tone. Raul Prebisch, who had been most noted for his
association with the UN Economic Commission on Latin America (ECLA) and
for his work on development, was appointed Secretary-General. As the
Conference loomed, increasing pressure was exerted on the GATT. It was in
response to this pressure that the Contracting Parties agreed to Part IV, which
was subsequently annexed to the General Agreement (Gosovic, 1972: 57; Williams,
1991: 26). While this took some of the heat out of the barrage directed towards
the GATT, the more militant among the developing countries continued to press
for an alternative trade framework.
The first meeting of UNCTAD was successful on two counts, and partially so
on a third. First, it served to bring into clearer focus the problems of develop-
ment – though it also served to sharpen the divide between North and South.
Second, it provided further adhesive to the growing negotiating coherence
among the developing world in the form of the G77. Third, and much less
successfully, it succeeded in establishing a formal presence in the field of
international trade – though it failed to replace, or even seriously challenge, the
GATT as the corner-stone of international trade regulation.
In spite of several further attempts to make the international trade regulation
more development friendly, most prolifically in the aftermath of the apparent
reorientation of the global balance of power as a result of the Organisation of
Petroleum Exporting Countries (OPEC) price rises in the early 1970s coupled
with the UN declaration on the establishment of a New International Economic
Order (NIEO) in 1974, the relatively powerful position of the developing world
was to diminish significantly from the late 1970s on. The resurgence of the Cold
War, the growing indebtedness of many developing countries, and the erosion of
Third World solidarity in the wake of the performance of the NICs of East Asia
pushed the notion of an alternative forum into the background. The GATT had
survived what had been its most difficult challenge.
Towards Uruguay
In spite of the relative failure of the development issue to unseat the GATT, it
refused to disappear, as did the increasingly thorny issues of NTBs and
agriculture. Moreover, the increasingly lacklustre enforcement capabilities of the
GATT’s dispute settlement procedures came in for growing criticism. By the
mid-1980s, it had become apparent that the inadequacies of the GATT required
some kind of attention. In 1983 the US and Japan issued a joint statement in
Tokyo outlining their perceived need for a new round of MTNs. The European
Community (EC) was, at the time, less convinced of the need for a new round,
and perhaps more importantly, within the EC there was a great deal of
apprehension about the possibility that a new round would focus on the
liberalisation of agriculture. Resistance was also apparent among many of the
developing Contracting Parties. The GATT had failed to deal with the needs of
developing countries adequately, and it was unlikely that a new round would
address this imbalance. Indeed, it was widely held that the new round was likely
to deal with issues that were not crucial to the economic performance of the
developing world, and there was a fear that developing countries would be the
main target for the extraction of concessions (Das, 1998: 1). Nevertheless, after
much politicking the Contracting Parties agreed to launch the eighth (and final)
round of MTNs to be held under the auspices of the GATT at Punta Del Este,
Uruguay, in September 1986.
The Uruguay Round proved to be qualitatively different from previous
GATT MTNs. Whereas previous rounds had concentrated on negotiating
commercial concessions, for the first time since the ITO discussions Uruguay
witnessed negotiations on the more fundamental issue of trade rules (Finger,
1991: 22). Yet, in contrast to the ITO discussions, the Uruguay Round proved
more successful, ultimately culminating in the creation of the WTO. That said,
the creation of a formal organisation to oversee the conduct of world trade was
not the intended outcome of the Uruguay Round. The idea of a formal
organisation arose four years into the Round, when in 1990 Canada put forward
a suggestion for a World Trade Organisation to consolidate and supersede the
GATT (Jackson, 1990a, 1990b, 1993). This organisation was intended to provide
a centralised institution that would not only incorporate and build upon the
GATT, but also encapsulate its recently negotiated sibling Agreements.
Furthermore, it was hoped that the creation of a formal organisation would
better address those areas of international commerce that the GATT had dealt
with so ineffectually.
The EC, though wanting the title of the organisation to be changed to the
Multilateral Trade Organisation (MTO), offered its support to the Canadian
proposal (Jackson, 1998a: 45). The proposed MTO was not, however, without
opposition. The US Congress voiced strong concerns about the proposed MTO,
asserting that any relinquishment of its sovereign authority to such an organisa-
tion was inconceivable. It seemed to many that the fate of the ITO might indeed
also be that of the MTO. Yet, disaster was avoided when, after further
negotiation, the US Congress stated that it was satisfied that the establishment of
an MTO would not challenge the sovereign status of the US as most of the
institutional aspects of the MTO already existed under the GATT (Hoekman
and Kostecki, 1995: 36). After a reversion back to the original name of the
proposed organisation, the Final Act Establishing the World Trade Organisation was
agreed in Marrakech on 15 April 1994, and the WTO formally commenced
operations on 1 January 1995.
The Uruguay Round decision to establish the WTO thus represented the
culmination of half a century’s effort to create an institutional foundation for
international trade regulation. It also owes much to ideas of liberal internation-
alists like Keynes who envisaged a need for a formal trade body at the centre of
a system of global economic governance. But, in order to explore more
comprehensively the function, role and meaning of the WTO, it is first necessary
to tease out the architectural core that has remained the central feature of the
evolution of international trade regulation, and has been significantly extended
by the creation of the WTO. This is achieved through the development of a
conception of multilateralism, the task of the next chapter. Beyond that, we
return to the WTO, first to explore the major features of, and developments in,
the WTO as they have taken place since its establishment; and, second, to the
extension of the scope of trade regulation by examining the practices prescribed
by its legal framework as it seeks to organise international trade in accordance
with its architectural form.
2 Multilateralism
The architecture of international
trade regulation
Tracing the historical evolution of the institutional basis of international trade

regulation and its role in the governance of the global economy provides only a
partial account of story behind the WTO. Central to that evolution has been a
distinct organisational practice arising from the employment of a particular set
of principles – principles which taken together comprise and define the
organisational practice of this particular expression of trade regulation as well as
the family resemblance it shares with its predecessors. These core principles have
been in evidence since the first attempt to establish a formal trade body and have
become synonymous with the term ‘multilateralism’. The ITO, GATT, OTC and
WTO have all embodied the same core set of principles around which other
provisions and mechanisms have been grafted. This core set of principles does
not, however, refer to the organisation of a particular institutional hierarchy
associated with the day-to-day functioning of each organisation, such as a
ministerial conference, general council or secretariat – though here too there is a
degree of historical residue. Rather, it refers to the core principles around which
international trade is organised and thus regulated. In this sense, then, the core
principles define the architecture of trade regulation. It follows that, to develop a
more complete understanding of the legal framework of the latest institutional
expression of trade regulation, we must first understand more completely what
we mean by the organisational practice of multilateralism, the core principles
central to its expression, and, by extension, the conceptual parameters within
which to analyse that framework.
That said, we are hindered at the outset by the relative dearth of scholarly
enquiry into the qualitative dimensions of multilateralism (see Keohane, 1990:
731–2; Cox, 1992: 161–3; Ruggie, 1993b: 3–6). Scholars, practitioners and
states people (as well as the GATT/WTO and a plethora of other interna-
tional bodies) have all utilised the language of multilateralism. Yet the
specificities of this form of international organisation are seldom presented
beyond a notion of three or more states acting in concert. Rather, they are
taken as given.
The first task of this chapter, then, is to use the scholarly literature as a means
of teasing out a conception of multilateralism which is, in turn, utilised as the
prism through which the legal framework of the WTO can be laid open. This
involves, first, surveying those works that provide a useful, though at times
tangential, insight into the phenomenon of multilateralism; and second, building
upon and taking forward those few works that have sought to delve more deeply
into the architecture of multilateralism. The second task of this chapter is to
revisit the institutional evolution of the trade regulation as a means of rendering
visible the core architectural principles that have remained central to that
evolution and thus set the foundation for the examination of the WTO’s legal
framework in the subsequent chapters.
Multilateralism: a preliminary exploration

Much of the existing literature on multilateralism seeks to delineate it from other
types of international action. This is done by referring to its quantitative
dimensions. In this sense, multilateralism is deemed to be distinct from
unilateralism and bilateralism. Unilateralism describes an action or mode of
behaviour undertaken by a single actor; bilateralism refers to the interaction of
two parties. Multilateralism, however, is commonly understood as an expression
referring to the action of groups of international actors, nearly always states,
comprising three or more acting in concert. John Jackson interprets multilateral-
ism in this manner. For him, multilateralism ‘is an approach … that recognizes
and values the interaction of a number – often a large number – of nation-
states’ (Jackson, 1998a: 158).
That multilateralism has any qualitative dimensions rarely figures in the
literature. When such a reference is made, it is done so more in passing and takes
the form of a value judgement about the attributes of multilateralism in contrast
with these other forms of international organisation. Jackson again provides us
with an example of this. He asserts that multilateralism is an approach that
recognises the ‘dangers of organizing relations with foreign nations on bilateral
grounds, dealing with them one by one’ (Jackson, 1998a: 158; also Keohane and
Nye, 1977: 11). Indeed, in that literature which does allude to its qualitative
dimensions, multilateralism is often contrasted with other forms of organisation
that are deemed to be somehow sinister and less desirable. Unilateralism, for
instance, is commonly equated with an aggressive self-serving mode of
behaviour (see Bhagwati and Patrick, 1990; Nogues, 1990). Similarly, bilateralism
is deemed to be inherently unequal, and at its extreme refers to an absolute
preponderance of one over another, something that is more characteristic of
imperialism.
We can see this more prominently in those early works on international aid
procurement that sought to ascertain something of the qualitative dimensions of
multilateralism. Much of the early discourse sought to determine the relative
merits of bilateral and multilateral aid regimes – wherein multilateralism was
commonly defined as ‘harmonized or coordinated policies, programs, and
projects’ undertaken by international agencies of an intergovernmental nature
(Coffin, 1968: 272). The ‘aid debate’ resulted in four commonly acknowledged
differences between bilateral and multilateral procurement – differences which
Multilateralism 33
were largely deemed responsible for the preference attached to multilateralism.
First, it was surmised that the relative size of contributions going to recipients
was greater when an expanded number of states were involved in the procure-
ment process, than under the auspices of a bilateral regime. Second, multilateral
aid procurement was perceived as reducing the opportunity for the duplication
of effort, and the neglect of particular sectors often associated with a series of
independently orchestrated (bilateral) projects. Third, and perhaps most
importantly, multilateral aid procurement was deemed to be politically more
acceptable to recipients as levels of conditionality tended to be less constraining
and overtly self-interested than aid procured bilaterally. And fourth, multilateral
procurement was deemed to be more inclusive as less opportunity existed for
overt discrimination against a particular recipient (see Asher, 1962: 697–719;
Feldman, 1967: 219–35). More recent studies in this area have reiterated this
preference for multilateral procurement, though these have come with the caveat
that a clear distinction is made between, on the one hand, the UN and its
specialised agencies, and on the other hand, the IMF and World Bank (see, for
instance, The Nordic UN Project, 1990: 17–19).
Without pursuing too deeply the mechanics of what a multilateral arrange-
ment may entail, the near-hallowed status attributed to multilateralism proved
more than pervasive in ensuring that such organisational forms were to find
themselves in the prescriptions of even the most critical of social commentators.
Commenting during the height of the post-war rounds of decolonisation,
Kwame Nkrumah, Ghana’s first post-independence leader, asserted that if the
nations of Africa were to break the chains of colonialism they must be allowed
to engage in multilateral, rather than bilateral, aid regimes (Nkrumah, 1965: xv).
Bilateral arrangements, argued Nkrumah, allowed the continuation of colonial
exploitation through other means. For Nkrumah, multilateral arrangements
diluted, to some extent, the negative effects of aid procurement and enabled
newly independent states to pursue relatively less perverted development
strategies. Though Nkrumah failed to elaborate on why he deemed multilateral-
ism to be so desirable, his preference was clear.
Others have since echoed Nkrumah’s sentiments. Fred Halliday, for instance,
in his discussion of various aspects of the relationship between Western and
Islamist states exudes a similar preference for multilateralism. It is his assertion
that:
the principle of sovereignty outside Western Europe raises a similar set of

alternatives: those who say that ‘we’ should not interfere and should ‘mind
our own business’ are allowing the sovereignty of states … and of peoples
… to be denied. Imperialist domination is not a legitimate policy for the end
of the twentieth century; a firm, multilateral, always self-critical insistence
on universal codes of political practice, as embodied in the conventions and
documents of the UN to which all member states supposedly subscribe,
definitely is.
(Halliday, 1996: 131)
Robert Cox, in discussing the future possibilities of global governance, offers a
dichotic interpretation of multilateralism. For Cox, future global governance has
at least two possible forms: first, a world government or empire ‘conceived as
having a hierarchical form of coordination, whether centralised (unitary) or
decentralised (federal)’; and second, a form of non-hierarchical co-ordination
which he terms ‘multilateral’. As he puts it, ‘[m]ultilateral governance establishes
rules and procedures for interaction among the various forces that become
involved in world (or regional) political issues. I am using the term “political”
here in a broadly inclusive sense meaning any contest of power’ (Cox, 1997: xvi).
But Cox introduces an important caveat into our thinking on multilateralism – a
caveat which, as is demonstrated in the conclusion to this book, has implications
for the study of the WTO conducted herein. He argues that ‘[m]ultilateralism in
form is non-hierarchical but in reality cloaks and obscures the reality of
dominant-subordinate relationships. Nevertheless, the form has importance,
being a possible criterion of protest against abuse of hierarchical power’ (Cox,
1997: xvi).
Emeka Anyaoku, in discussing the changing role of the Commonwealth, is
more elaborate in his description of the virtues of multilateralism. For him,
multilateralism requires ‘a soul; a set of principles; universal values, if you will,
that … anchor it firmly within a moral perspective’ (Anyaoku, 1994). It is this
commitment to a sense of morality that, for Anyaoku, differentiates multilateral-
ism from other forms of international organisation. Speaking with reference to
the tragedies of Bosnia and Rwanda during the mid-1990s, he elaborates:
The inability of the global community to respond with equal concern to

these various conflicts is often explained on a number of grounds. It may be
because there is little clarity in what multilateral response should be. Or,
because it is not easy to mobilise the necessary human, material and finan-
cial resources. The point, however, is that no matter what reason is adduced
for an inadequate response to particular conflict situations, there is perhaps
a deeper explanation for these failures. For true multilateralism to prevail, it
needs a soul … Otherwise, it remains mere rhetoric, spoken but not pur-
sued. And it will not be dependable. For it will be accepted by some when it
suits them; and will be rejected by others when it does not.
(Anyaoku, 1994)
Yet although these commentaries exude a clear preference for the qualitative
dimensions of a group of states comprising three or more acting in concert, they
say little about the content of a multilateral arrangement that is supposed to give
rise to these qualities. We find in the work of liberal political economists a
slightly different approach to multilateralism – an approach that has proved
particularly influential to contemporary international trade regulation – that
takes us a little further. Here too we find a comparable preference for multilater-
alism, though its form centres on a different set of organisational principles to
those implicit in more critical commentaries.
Multilateralism 35
For many economists the term multilateralism is merely a synonym for a
specific form of economic organisation associated with the arrangement of
international commerce in accordance with the principle of MFN applied in its
unconditional form (see, for instance, Jackson, 1998a: 158; Winters, 1990: 1289;
Curzon and Curzon, 1989: 481; Snape, 1988: 1–2). Under the auspices of
unconditional MFN, states are understood to be better able to utilise their
comparative advantages and thus maximise their economic welfare through the
conveyance to third parties of any preferential commercial treatment accorded
to another. This is in contrast with conditional MFN, wherein only the two
parties involved benefit from the conveyance of preferential treatment – a form
of organisation more commonly associated with bilateralism (see Diebold, 1988).
The consequence of these contrasting styles of economic organisation is that
unconditional MFN is commonly understood to rest on a notion of non-
discrimination, whereas conditional MFN relies on active discrimination against
third parties.
Richard Gardner, in commenting on the post-war settlement, offers the
following insights into the practice of multilateralism as manifest in the field of
trade. He suggests that the wartime case for multilateralism closely approxi-
mated an institutionalisation of the case for free trade. He posits that the
creation of a trading system based upon non-discriminatory commercial
treatment and a process of trade barrier reduction was deemed to enable trade
flows to occur in accordance with relative price considerations. This, in turn,
enabled purchases to be made in low-cost markets, and sales to be made in those
markets wherein the returns are highest. Such activities would, themselves,
promote the development of an international division of labour corresponding
more closely with the greatest comparative advantage enjoyed by a particular
state (Gardner, 1956: 13).
The effects of such a system Gardner deemed to be two-fold. First, the
realisation of an international division of labour based on the pursuit of a state’s
greatest comparative advantage was understood as enabling a more effective use
of ‘the world’s existing natural resources’ at any given time. And second, such a
system was perceived as promoting the flow of capital to those areas wherein it
could make the most significant contribution to productivity. Taken together,
these effects would serve to increase over time the world stock of resources, as
well as the level of competition among producers. As Gardner puts it, in ‘this
way multilateralism will tend to maximize the real income of the world as a
whole’ (Gardner, 1956: 13–14). However, as Gardner further explains, this
increase in real world income was deemed possible only if the world’s natural
resources were exploited in the most efficient manner, as any lack of efficiency
and underemployment might mitigate that increase. For Gardner, multilateralism
in this sense would only ‘maximize real income … in conditions of economic
expansion’ (Gardner, 1956: 14). That said, Gardner argues, in recognition of the
potential unevenness which may result from the distribution of any increases in
world income, the multilateralism envisaged by the wartime planners also sought
to incorporate various procedures to distribute more evenly the rewards of an
increase in the volume and value of trade among and within states – though he
omits to identify just what these procedures were.
Jagdish Bhagwati notes the primacy of two characteristics associated with the
GATT’s specific expression of multilateralism: first, the principle of non-
discrimination in the form of unconditional MFN as the guiding principle of
international commerce; and second, the exchange of balanced, mutual
reciprocal concessions as the method for moving towards free trade (Bhagwati,
1990: 1304). But Bhagwati goes further. He argues that these two characteristics
ensure that multilateralism rules out ‘the aggressive use of power to extract
either unrequited trade concessions or acceptance of new disciplines, therefore
shielding the weak against the strong who would otherwise, in bilateral one-to-
one confrontations, have an advantage constrained by altruism or conscience’
(Bhagwati, 1990: 1304; also see Jackson, 1998a: 158; Wiener, 1995: 234–5;
Strange, 1985: 256; Curzon and Curzon, 1976: 147–67; Curzon, 1965: 57–107).
So where does this take us? From the discussion so far it would seem that
something of a consensus exists in the literature, albeit rather limited, which
perceives multilateralism as, at best, an ideal form of international organisation,
and, at worst, a means of dissipating the abusive use of vast asymmetries in
power. Furthermore, we see a differentiation between, on the one hand, the idea
of multilateralism, and on the other, actual expressions. This is most evident in
the work of Cox, and in the differentiation between the aid programmes
administered by the UN and those overseen by the IMF and the World Bank.
However, these accounts do not provide us with an insight into how multilateral-
ism, so arranged, gives rise to these outcomes. We see a synonymity with the
principle of MFN and a centrality attributed to the role of reciprocity in tariff
negotiations. But we must be clear that this synonymity does not necessarily
mean that multilateralism must be premised on a collective commitment to
unconditional MFN. It is equally as feasible to suppose that other principles may
be utilised in such a way as to act as an intervening variable giving rise to an
equality of outcomes. Beyond this, however, further precision is absent. So how
does this help us in developing a better understanding of the legal framework of
the WTO? The answer is reasonably modest though of central importance to
the following analysis: it reveals a preference for a particular kind of organisation
that is generally held to be of benefit to all involved. It is this preference,
articulated by its architects, that has underpinned the system of trade regulation
as it has evolved. Yet we still need to determine what exactly it is that is said to
give multilateralism this particular quality. It is with this in mind that we turn to
the work of Robert Keohane and John Ruggie.
Multilateralism: towards a conceptual framework?

Both Keohane and Ruggie have sought to develop more precise understandings
of the architectural dynamics of multilateralism. Keohane has done so within
the confines of an already-existing research programme into international
institutions (Keohane, 1984, 1989), whereas Ruggie, though ultimately relying on
Multilateralism 37
Keohane’s work, has sought to develop a differentiated understanding of
multilateralism (Ruggie, 1993a, 1993b, 1998). Both are candid about what they
perceive to be the limitations of their offerings. Their aim is not so much to
develop the definitive interpretation of multilateralism, but rather to offer a
series of conceptual insights which go some way towards determining the ideal
type of multilateralism, which they deem sufficiently interesting to be the basis
for further research. In both cases they take issue with the restrictive numeric-
only definitions of multilateralism and seek to determine something of its
qualitative dimensions, though they too continue to exude the preference for this
kind of international organisation evident in other works. Ruggie best puts this
in his assertion that multilateralism is the doctrine, practice or principle which
requires that activities ought to be, or are best, organised on a many-sided basis
for a ‘relevant’ group. For him, multilateralism is the belief in an ‘architectural
form’, a deep organising principle that ‘coordinates relations among three or
more states in accordance with certain principles’ (Ruggie, 1993a: 568; also
Caporaso, 1993a: 603).
Keohane’s contribution has been to build a framework from which to start
thinking about multilateralism. He suggests that multilateralism can be defined
as ‘the practice of co-ordinating national policies in groups of three or more
states, through ad hoc arrangements or by means of institutions’ (see also Cerny,
1993: 33). Yet he is purposefully limiting in his definition of multilateralism.
First, while Keohane acknowledges that transnational actors are important in
world politics, he argues that the range of contemporary and historical instances
wherein three or more actors have converged is so vast that to broaden the
definition beyond those involving states would prove counterproductive in the
search for an appropriate starting point from which to begin thinking about
multilateralism. Second, he differentiates multilateral institutions, which he defines
as ‘persistent and connected sets of rules, formal and informal, that prescribe
behavioural roles, constrain activity, and shape expectations’, from other forms of
multilateralism, such as ‘ad hoc meetings and short term arrangements’ directed
to solving specific problems (Keohane, 1990: 732).
Third, Keohane suggests that multilateral institutions, the principal source of
his interest, can take the form of regimes or bureaucratic organisations – though
he notes the symbiotic relationship that often witnesses organisations accompa-
nying regimes (Keohane, 1990: 732–3). And finally, he differentiates between
three specific forms of multilateralism according to the size of their member-
ship: (i) restricted institutions – those bodies whose purpose prohibits universal
membership, such as NATO or the EU; (ii) conditionally open institutions –
those organisations that have the potentiality to be open to a universal
membership, but whose numbers are presently below that level such as the
GATT; and (iii) open institutions – those bodies that have a membership open to
all sovereign states such as the UN (Keohane, 1990: 750–1).
Keohane further argues that each of these three instances of multilateralism,
though related, have a specific character which ensures that they fall almost
equidistantly along a line of effectuality, with the caveat that all forms ‘are
doubtless constructed to help powerful states achieve their interests’ (Keohane,
1990: 751). Restricted institutions are constructed either to enable one group of
states to gain disproportionately over another, or (indeed as well as) to nurture a
sense of identity. Conditionally open institutions exist to limit the extent of non-
members benefiting without incurring any of the costs of membership – in other
words, to act as a brake on free-riding. Open institutions, however, serve merely
as forums for dialogue and the exchange of opinions as they often encounter
difficulties in enforcing rules or ensuring reciprocity and, by extension, are
unlikely to prove very effective (Keohane, 1990: 751–2).
Keohane’s offerings suggest that we can identify an instance of multilateral-
ism by observing ‘persistent and connect sets of rules, formal and informal, that
prescribe behavioural roles, constrain activity, and shape expectations’ that serve
to co-ordinate ‘national policies in groups of three or more states’. But though
useful, as Ruggie has noted, this tells us little other than that certain sets of rules
constitute a multilateral form. Conversely, it may actually inject a degree of
confusion into the pursuit for a more precise understanding of multilateralism.
For instance, Ruggie argues that according to these criteria both the Bismarckian
alliance system and the League of the Three Emperors would qualify as
instances of multilateralism (Ruggie, 1993b: 6). However, in each case, although
three or more states are involved, the nature of the relationships encapsulated in
both these organisational expressions is qualitatively different from that which we
would normally deem to be multilateral. Rather, they are perhaps more correctly
described as bilateral (or complexly bilateral when they involve a series of
bilateral relationships).
This qualitative distinction can be illustrated further by contrasting briefly the
characteristics of the two regional organisations confronting one another during
the Cold War: NATO and the Warsaw Treaty Organisation (Warsaw Pact).
NATO, in both its pre- and post-Cold-War guises, has as its foundation an
agreement among its members that an infringement upon the sovereign integrity
of one will be met with a collective response. In this sense, NATO is an
agreement among all. Conversely, the Warsaw Pact was at its root an agreement
between the Soviet Union and each of its satellite states wherein an infringement
on the sovereign integrity of one of the latter would be met with a response from
the Soviet Union. As such, though both are/were regional organisations
comprising three or more members engaged in what can broadly be understood
as collective defence in accordance with a particular set of rules of engagement,
the nature of that defence is/was qualitatively different.
This leads Ruggie to assert that Keohane’s limitation of the definition of
multilateralism to the co-ordination of policy among three or more states is too
imprecise, and serves to obscure the qualitative dimensions of this form. As a
result, Ruggie suggests, we need to seek further precision in our understanding of
multilateralism. In pursuit of this task, he argues that although multilateralism
has become more prevalent since the end of the Second World War, as a generic
feature of the system of states since at least its modern formation, ‘its principled
meanings can be recovered from historical practice’ (Ruggie, 1993b: ix). By
Multilateralism 39
exploring the character of specific organisational forms in particular historical
moments, Ruggie puts forward this claim: that multilateralism is better
understood as the practice of organising activities among such a group in
accordance with certain ‘generalized principles of conduct’ (Ruggie, 1993a: 568).
As he puts it,
what is distinctive about multilateralism is not merely that it coordinates

national policies in groups of three or more states, which is something that
other organizational forms also do, but that it does so on the basis of certain
principles of ordering relations among those states.
(Ruggie, 1998: 106)
To support his claim, Ruggie compares the organisational structures of the

bilateralist Nazi Schacht Plan with the multilateralist GATT. In doing so, he
observes that under the auspices of the Schacht Plan, interstate economic
relations were organised on a bilateral ‘case-by-case and product-by-product’
basis, whereas under the GATT, all contracting parties were extended MFN. The
primary difference between these organisational structures is that under the
auspices of the Schacht Plan third parties were consciously excluded from the
benefits of association, whereas under the GATT interstate activities were
arranged in a more inclusive manner wherein third parties were accorded the
same commercial treatment as all other Contracting Parties. Therefore, whereas
Schacht relations were based on a system of discrimination, GATT relations
were non-discriminatory (Ruggie, 1998: 108).
To take his point further, Ruggie makes similar observations about interstate
security arrangements. He suggests that, under the auspices of a collective
security arrangement, each member is pledged to come to the aid of all parties
to that agreement should the need arise. This ensures that if any member of the
group is attacked by a non-member, the organisation responds as a collective.
And, as all members are privy to the benefits of collective security, it is
commonly held that the relations of such an organisation are arranged in a non-
discriminatory manner. This is different from that which occurs within bilateral
security alliances. Such alliances only ensure that A comes to the aid of B in the
event of an attack by C. They do not ensure that C receives similar assistance
from A in the event of an attack from B. Hence, such an arrangement
discriminates against C. By organising relations in such a manner bilateral
security alliances are discriminatory in the same way as their commercial
counterparts (Ruggie, 1998: 109).
The apparent non-discriminatory manner in which both expressions of
multilateralism are organised leads Ruggie to suggest that multilateral organisa-
tion occurs when there exists a perceived ‘indivisibility’, an instance wherein the
interests of participating states have converged to such an extent that they
cannot be separated. Under the auspices of the GATT, this indivisibility is
manifest in the form of non-discriminatory commercial treatment through
application of the principle of MFN. In the case of a collective security
arrangement, the desire for peace to prevail is treated as indivisible. Ruggie
stresses, however, that this notion of indivisibility is a social construct, rather than
a ‘technical condition’. The adherence to unconditional MFN by parties to a
commercial agreement ensures that preferential treatment is conveyed to all as if
it were indivisible; in the same way, members of a collective security arrange-
ment behave as if peace were indivisible (Ruggie, 1993a: 570–1, 1998: 110). It is
this perceived indivisibility that, for Ruggie, is the first generalised principle of
multilateralism.
The identification of the principle of indivisibility is not, however, the full
extent of Ruggie’s perception of the qualitative dimensions of multilateralism.
He argues further that expressions of multilateralism ‘appear to generate
expectations of diffuse reciprocity’ (Ruggie, 1998: 110) – expectations that
participants in such arrangements will yield a ‘rough equivalence of benefits in
the aggregate and over time … Bilateralism, in contrast, is premised on specific
reciprocity, the simultaneous balancing of specific quid pro quos by each party
with every other at all times’ (Ruggie, 1993a: 11). Like his interpretation of
indivisibility, we can suppose that Ruggie also deems diffuse reciprocity to be
socially constructed – constructed in the sense that participants perceive and
expect reciprocal balancing to occur in the aggregate and over time. That said,
Ruggie is brief on exactly what he means by the principle of diffuse reciprocity.
Nevertheless, we can extract something of the substance of his inference by
exploring the work of Keohane and others upon whom he draws.
Reciprocity is itself an ambiguous term that finds expression across a range of
scholarly disciplines (see Axelrod, 1984; Sugden, 1984; Axelrod and Keohane,
1985; Becker, 1986; Schüßler, 1986; Curzon and Curzon, 1989; Rhodes, 1989).
Indeed, like multilateralism its specificities are often taken as given. In spite of its
ambiguity, reciprocity is at its root a principle of exchange. It requires that like be
exchanged for like, wherein the value of that which is exchanged is perceived by
participants to be of roughly equivalent value (Becker, 1986: 73). There are two
dimensions to this form of exchange: contingency and equivalence. Contingency
refers to the expectation that an initial offer is contingent on a rewarding
reaction; equivalence refers to the expectation that the rewarding action will be
of roughly equivalent, though not exactly the same, value – an expectation
which is itself notoriously imprecise (Keohane, 1989: 135).
Keohane differentiates between the two types of reciprocity Ruggie uses in his
work: specific and diffuse (Keohane, 1989; 132–57). Each type of reciprocity
relates to a particular way in which the action of exchange is ordered. In
instances of specific reciprocity, the action of exchange takes place between
actors in a limited sequence. Here, each partner is known to the other or others;
the initial part of the transaction is known to all; and the value of that which is
returned is gauged accordingly. Conversely, diffuse reciprocity is less precise. As
Keohane explains,
one’s partners may be viewed as a group rather than as particular actors,

and the sequence of events is less narrowly bounded … Participants typi-
Multilateralism 41
cally view diffuse reciprocity as an ongoing series of sequential actions
which may continue indefinitely, never balancing but continuing to entail
mutual concessions within the context of shared commitments and values.
(Keohane, 1989: 134)
It is Keohane’s claim that because of specificities of each kind of reciprocity,

specific reciprocity is more characteristic of bilateral relationships, whereas
diffuse reciprocity is more akin to multilateral arrangements.
The distinction between specific and diffuse reciprocity can be made more
clearly by referring back to our examples. Under the auspices of a collective
security arrangement all parties are expected to contribute a portion of their
military capability. The sum of these contributions is intended to provide the
necessary degree of force with which to deter or repel an attack. Each party’s
return for such a contribution lies in the knowledge that should they be attacked
or threatened at some point in time, a collective response would ensue. Similarly,
parties to a trade agreement convey preferential commercial provisions
contingent on the expectation that they will receive roughly equivalent benefit
from the sum of concessions which they are able to act upon over time.
Here we can begin to see the interrelationship between the principles of
indivisibility and diffuse reciprocity. The very existence of a principle which is
perceived to bring about a good which is deemed indivisible gives rise to the
conditions necessary for diffuse reciprocity. By extension, the absence of a
perceived indivisibility renders the possibility of co-operation among actors, and
thus the acceptance that returns will be accrued in the aggregate and through
time, null and void. As James Caporaso notes in addressing this very point
(though his reading of Ruggie is slightly different to that presented here), ‘these
… properties [indivisibility and diffuse reciprocity] should be treated as a
coherent ensemble which is itself indivisible, rather than as additive, detachable
indicators of multilateralism’ (Caporaso, 1993b: 53).
Ruggie’s final move is to marry the principles of indivisibility and diffuse
reciprocity with more conventional liberal thinking on institutions. He asserts
that multilateralism is a particular type of institution which is qualitatively
different from other institutional forms (Ruggie, 1993b: 11). Nevertheless, it
shares those characteristics that are common to all institutions – a kind of a
family resemblance. This leads Ruggie, following Keohane, to assert that
multilateralism is best conceived of as ‘persistent and connected sets of rules,
formal or informal, that prescribe behavioural roles, constrain activity, and shape
expectations’ (Keohane, 1990: 732), in accordance with the principle of
indivisibility and its corollary diffuse reciprocity (Ruggie, 1994: 556, 1998: 109).
Ruggie does not, however, seek the kind of numeric differentiation that
Keohane attempts, but instead settles for a degree of imprecision by pursuing a
more generic understanding of multilateralism. In doing so, he states simply that
multilateralism, as a generic feature of the international system, can occur at
three levels: as an international (world) order, regime and organisation.
While this generic understanding of multilateralism is useful and provides the
bulk of the conceptual framework utilised hereafter, in order to provide the
means by which to examine the legal framework of the WTO we need to seek
further precision in our understanding of multilateral organisations. More
precisely, there exists a third generalised principle of conduct to which both
Keohane and Ruggie allude, but which requires further elaboration here.
As we have already noted, both Ruggie and Keohane assert that at its root
multilateralism is best conceived as an institution. In this sense, we are to think of
multilateralism as a set or sets of rules which organise participant behaviour in
the particular manner. Furthermore, both argue, to varying degrees, that
institutions are highly demanding in that their formation is dependent on the
presence of a particular set of conditions. The absence of the particular
conditions which give rise to an institution mitigates against its formation. But
once formed, Ruggie argues, multilateral institutions have a tendency towards
longevity (Ruggie, 1993b: 31–6). This tendency towards longevity, Ruggie argues,
is primarily due to the qualitative characteristics of multilateralism, but, we
might add, it is also due to the embodiment of a mechanism through which the
rules of an institution are monitored and enforced. This may be achieved
through a process of self-monitoring by participants, as is likely to be the case in
more informal arrangements, or through the creation of a formal enforcement
body established by the participants but operated independently by the
administrative capacity of an organisation. What follows, then, is that multilater-
alism has a third generalised principle of conduct: a commitment to rule
following which is enforced by some means of ensuring that a particular mode of
behaviour is given rise to. This we can term a principle of dispute settlement.
This, in turn, enables participants to act as if there were a perceived indivisibility
and, by extension, to expect that returns will occur (and accept that they will
occur) on a diffusely reciprocal basis based on the knowledge that if they are not,
the contravening actions of others will be the subject of a process of scrutiny.
Summarily, then, in the work of Keohane and Ruggie we find an interpreta-
tion that suggests multilateralism is premised on a particular set of constitutive
rules that organise relations among three or more states in accordance with a set
of generalised principles of conduct: indivisibility, diffuse reciprocity and dispute
settlement. How, then, and to bring us full circle, does this conception relate to
the preference for multilateralism identified at the outset? It is Ruggie’s assertion
that these generalised principles of conduct are ‘principles which specify
appropriate conduct for a class of actions, without regard to the particularistic
interests of the parties or the strategic exigencies that may exist in any specific
occurrence’ (Ruggie, 1993a: 571). In this sense, then, multilateralism mediates
outcomes. Ruggie is more explicit on this point in a later version of his original
piece on multilateralism (1998: 102–30). He suggests that the ability of
multilateralism to mediate outcomes in a particular manner ensures that ‘where
ex ante uncertainty is high, multilateral principles offer a degree of risk
insurance against losses – which, presumably, is why smaller countries are more
uniformly in favor of such principles’ (Ruggie, 1998: 128). While Ruggie is not
making a claim here for the infallibility of multilateralism, he is saying that in
Multilateralism 43
instances where the motives of others are unknown, or uncertainty exists, the
principles of multilateralism act to protect smaller, less powerful states. This
point is highly contentious and requires much more empirical work. Neverthe-
less, implicit in Ruggie’s assertion is a normative preference for multilateralism
comparable with that demonstrated at the outset of this chapter.
We are now in a position to elucidate our framework for the analysis of the
WTO in the subsequent chapters. The preceding exploration enables us to
extract an ideal type – a model of multilateralism – which can provide the means
for laying open and thus making sense of the intricacies of the WTO’s legal
framework. This model perceives multilateralism as a set of constitutive rules
which organise the relations of participants in accordance with the principles of
indivisibility and diffuse reciprocity. These rules, in turn, authorise participants to
act within a given behavioural range conducive with these core principles. As
such, they regulate the behaviour of parties to the rules (Ruggie has since termed
these rules ‘regulative’, though here they are deemed ‘authoritative’ for the above
reason – see Ruggie, 1998: 22–5; cf. Wilkinson, 1997). But as a necessary
corollary, to ensure that such behaviour is given rise to – that it is regulated in the
intended manner – multilateralism also entails an adherence to the principle of
dispute settlement.
Both Keohane and Ruggie note that as an ideal type, however, it is unlikely
that specific or actual expressions of multilateralism will demonstrate anything
other than a general propensity to adhere to these characteristics. Nonetheless, it
gives us a basis upon which we can observe the differences between the ideal
type and an actual expression. Furthermore, we can understand the manner in
which a particular expression deviates from the ideal type and the impact that
this may have on the way in which relations are ordered among participants. But
before we can utilise this conception of multilateralism as a means of exploring
the WTO’s legal framework, it is first necessary to demonstrate how these
generalised principles of conduct have manifested themselves in international
trade regulation, and have remained central features of its evolution.
Multilateralism and the post-war evolution of trade

regulation
Now that we have a conceptual framework with which to explore the contours of
the legal framework of the WTO, we can begin to tease out the core principles of
multilateralism – indivisibility, diffuse reciprocity and dispute settlement – as they
have found expression in previous attempts to provide an organisational focus for
international trade regulation. This, in turn, enables us to understand more
comprehensively the relationship between the WTO and the historical lineage to
which it owes so much, as well as, by extension, to go some way towards complet-
ing the story started in Chapter 1. It should be noted at the outset, however, that
although the principles of indivisibility, diffuse reciprocity and dispute settlement
find expression in a particular way, this does not mean that these expressions
constitute the only way in which multilateralism may be configured.
As we have already noted, the architectural core of the ITO was to encapsu-
late an institutional expression of free trade, wherein barriers to trade would be
actively reduced, and signatories would operate non-discriminatory commercial
practices. In addition, procedures were to be put into place to facilitate the
settlement of disputes between and among participants as a further attempt to
dissipate potentially conflictual tensions. The ITO took as its central organisa-
tional form a commitment to these principles. Paragraphs 3, 4, 5 and 6 of
Article 1 of the Havana Charter committed the ITO, in the pursuit of its
objectives:
To further the enjoyment by all countries, on equal terms, of access to the

markets, products and productive facilities which are needed for their eco-
nomic prosperity and development … To promote a reciprocal and mutu-
ally advantageous basis [for] the reduction of tariffs and other barriers to
trade and the elimination of discriminatory treatment in international
commerce … [and to] facilitate through the promotion of mutual under-
standing, consultation and co-operation the solution of problems relating to
international trade in the fields of employment, economic development,
commercial policy, business practices and commodity policy.
(Havana Charter 1948, Article 1, paragraphs 3–6)
Yet, while the principles embodied in these commitments were to form the
architectural core of the trade regime, the Havana Charter emphasised from the
outset the substance of the compromise that had been reached between the drive
for commercial internationalism and the necessity of national economic stability,
as well as the provisions designed to promote economic development and
reconstruction (see Havana Charter 1948, Chapters 2–3). It was not until the
commercial provisions of Chapter 4 of the Charter that the first two principles
of the ITO’s architectural core were to be found. It is here that we find the ITO’s
perceived indivisibility manifest in the form of a commitment to MFN, and a
process of trade barrier reduction governed by a particular interpretation of the
principle of reciprocity. Let us deal first with the principle of indivisibility.
Multilateralism, indivisibility and MFN

The commitment to MFN as one of the core architectural principles of the body
of rules administered by the ITO draws upon a long history of the use of this
clause in international commercial agreements stretching back to as early as the
1417 Treaty for Mercantile Intercourse between England and Flanders (UNCTAD,
1999: 13), though it was not until 1860 and the Cobden–Chevalier Treaty that
the principle became a staple of commercial agreements (Curzon, 1965: 58;
O’Brien and Pigman, 1992: 100–1). That said, the particular interpretation of
MFN enshrined in the legal framework of the ITO owes much to the Economic
Committee of the League of Nations, and in particular its attempts to develop a
more coherent interpretation of the MFN clause prior to the ITO negotiations
Multilateralism 45
(see League of Nations, 1933) – a debt which further illustrates the interrelated-
ness of the way in which international organisation as a broad process has
evolved.
Prompted by a worsening international economic climate following the
immediate post-First-World-War boom, the Economic Committee of the League
of Nations sought to bring some coherence to the principle of MFN by
attempting to determine its general characteristics, bolster its rather weak
commitment to the principle in its own Covenant, while at the same time
differentiating these characteristics from those of the more discriminatory,
conditional interpretations of MFN that were, at the time, the staple of many
commercial agreements. The Economic Committee’s purpose was to develop an
internationally agreed-upon understanding of non-discrimination, around which
future commercial relations could be organised, so that MFN ‘should be either
the central principle or the normal outcome of every commercial negotiation’
(League of Nations, 1933: 3). This, it was hoped, would provide the basis for a
liberal, transparent and equitable international trade regime, and, by extension,
the catalyst for a peaceable international order. In the words of the Economic
Committee, ‘the most-favoured-nation clause must speedily bring about the re-
establishment of regular currents of trade, which will no longer have to contend
with a policy of protectionism and isolation’ (League of Nations, 1933: 3).
For the Economic Committee, MFN was deemed to have two objectives: (i)
‘to secure to the country enjoying its benefits a total of advantages represented
by all the Customs concessions and privileges granted to third countries and by
all the concessions made by autonomous act’, and (ii) ‘to ensure absolute equity
of treatment by guaranteeing to all countries which enjoy its benefits equal terms
in all matters covered by commercial treaties and, as a result, the free develop-
ment of their economic aspects’ (League of Nations, 1933: 11). MFN, then, was
to act as a guarantee of equity in commerce by prohibiting discrimination in
customs procedures and commercial agreements. It was not to be the practice of
conveying trade concessions only to those parties that offered compensation in
return (Viner, 1931: 94). In this sense, MFN was deemed to comprise two central
components: unconditional application to all parties involved; and unrestricted
application across the full range of products comprising international trade. Yet,
even though the Economic Committee’s purpose was to codify an international
understanding of MFN – an understanding in which restrictions on the general
dictates of the principle were to be avoided – in doing so, certain exceptions
were endorsed, most notably relating to customs unions and frontier traffic.
Although the League of Nations proved ineffectual both in securing its own
survival and in extending its foray into international commerce, it did, as we
have seen, provide lessons for the post-war global institutional structure. This was
most certainly the case with regard to the MFN clause encapsulated in the
Havana Charter. Though differing slightly from the clause worked out by the
Economic Committee, Article 16 of the Havana Charter committed its
Members to a version of what has become the standard MFN clause around
which post-war international trade regulation has evolved. Article 16 states that:
With respect to customs duties and charges of any kind imposed on or in
connection with importation and exportation or imposed on the interna-
tional transfer of payments for imports and exports, and with respect to the
method of levying such duties and charges, and with respect to all rules and
formalities in connection with importation and exportation … any advan-
tage, favour, privilege or immunity granted to any Member to any product
originating in or destined for any other country shall be accorded immedi-
ately and unconditionally to the like product originating in or destined for
all other Member countries.
(Havana Charter 1948, Article 16, paragraph 1)
MFN was not, however, simply to be defined as a positive commitment, in the

sense that all advantages, favours and privileges were to be accorded to all
unconditionally and without restriction. MFN was also to be defined in the
negative under the Quantitative Restrictions Articles of the ITO (Article 20)
(also see League of Nations, 1933: 20). In this sense, MFN was intended to
ensure that any restrictive practices, such as they were allowed to exist under
both agreements, were also to be applied in a non-discriminatory manner. With
a series of qualifications, for the ITO this entailed that:
No prohibition or restriction other than duties, taxes or other charges,

whether made effective through quotas, import or export licences or other
measures, shall be instituted or maintained by any Member on the importa-
tion of any product of any other Member country or on the exportation or
sale for export of any product destined for any other Member country.
Similarly, the commitment to MFN was to be complemented by a comparable

commitment to ‘national treatment’ (Article 18), requiring that all parties to the
agreements apply equal treatment in terms of taxation and regulation to imports
in a manner consistent with that which is applied to domestically produced or
supplied goods. Its purpose is to eliminate the imposition of discriminatory
commercial practices cloaked as internal taxation or regulation procedures and
thus cover all areas wherein protectionism may masquerade as a legitimate
procedure. As Article 18 states:
The products of any Member country imported into any other Member
country shall be accorded treatment no less favourable than that accorded to
like products of national origin in respect of all laws, regulations, and re-
quirements affecting their internal sale, offering for sale, purchase, trans-
portation, distribution or use.
What we find in the Havana Charter, then, are the foundations of what has
become the perceived indivisibility of this particular expression of multilateral-
Multilateralism 47
ism. An adherence to the non-discriminatory treatment deemed to be encapsu-
lated in the principle of MFN, and complemented by the quantitative restriction
and national treatment clauses created a sense that the benefits of membership
were indivisible, and that the more states subject to these disciplines, the larger
the potential gain.
In spite of the still-birth of the ITO, the centrality of the principle of MFN
and its corollaries to its surrogate the GATT ensured that a culture of familiarity
of conducting commercial relations in accordance with these principles was
nurtured, which, in turn, served to deepen further the perceived synonymity
between this particular kind of international trade regulation and multilateral-
ism. The importance of this development should not be overlooked. For 47 years
a de facto international body managed to regulate international trade in
accordance with this particular principle; as such it became a norm of
international trading relations. Beyond this, the familiarity with a particular style
of trade management ensured that the movement from de facto regulation under
the GATT to formalised trading relations under the WTO was relatively easy.
Furthermore, the familiarity with this style of commercial management ensured
that MFN would not only have a central role within the WTO’s legal framework,
but provide the model for a new series of trade agreements to be incorporated
under its legal umbrella thus spreading the principle’s disciplines beyond the
GATT’s traditional focus on trade in goods.
The GATT did not, however, strictly adhere to the legal formulations of the
ITO. The quantitative restriction clause of the GATT, for instance, prohibited
the use of such restrictions unless the ‘importation of the like product of all third
countries or the exportation of the like product to all third countries is similarly
prohibited or restricted’ (GATT 1947, Article XIII, paragraph 1) – though in
reality their use remained a notable feature of international commerce.
Nonetheless, the GATT’s envisaged role as a bridging agreement between the
previous fractious commercial order and that envisaged by the wartime architects
ensured that large portions of the Havana Charter found themselves replicated,
with the odd modification, in the General Agreement. This was the case with both
the MFN and national treatment provisions.
Reciprocity and the pursuit of liberalisation

That said, the principle of MFN and its corollary national treatment were but
one-third of the architectural core of the envisaged trade regime. The second
component of this core was a commitment to trade barrier reduction through
the application of the principle of reciprocity. The necessity for this second
architectural principle was derived from the need to utilise fully the ‘benefits’ of
the principle of MFN. Alone the principle of MFN does not promote trade
liberalisation. As Viner puts it, MFN ‘grants nothing in return except equality,
i.e., that [which could entail] equally bad treatment’ (Viner, 1931: 100). And,
although MFN plays a central role in the liberalisation process, in that it conveys
to all parties the value of negotiated concessions, it is only in conjunction with a
commitment to the erosion of existing barriers to trade that its benefits are
understood to come about.
Yet, this commitment to trade barrier reduction itself requires a mechanism
for achieving its goal. Again, building upon a long commercial history, the
mechanism that was first embedded in the Havana Charter in pursuit of a
reduction in barriers to trade, and that which survives to this day in the WTO’s
legal framework, is through an adherence to a process of reciprocal exchange of
commercial concessions. Participating states are required to make commercial
concessions in return for similar privileges. The product of this exchange is then
conveyed to all other participants in accordance with the principle of MFN.
Reflecting the perceived inseparability of MFN and reciprocity as the method
by which barriers to trade were to be reduced, Article 17 of the Havana Charter
fell equidistant between the MFN clause and that of national treatment and
quantitative restrictions. More specifically, Article 17 set out an elaborate set of
rules governing trade barrier reduction that later found their way, albeit much
watered down, into the GATT. Members of the ITO were to embark on
negotiations with other Members in accordance with the five rules:
a) Negotiations were to be carried out on a product-by-product basis ‘to take

into account the needs of individual countries and individual industries’.
Members were not, however, compelled to grant concessions on particular
products, and they could bind concessions at a specific level or undertake
not to raise them above a specified level;
b) Concessions were only to be made in return for comparable treatment (that
is, there was no compunction to liberalise unilaterally);
c) (i) When reductions were made to the MFN rate, such a reduction must
automatically reduce or eliminate the ‘margin of preference’ applicable to
that product; (ii) in reductions relating only to the preferential rate, an
automatic reduction in the rate of MFN must occur; (iii) in reductions to
both MFN and preferential rates, the size of the reduction must be agreed
by the parties to the negotiations; and (iv) the margin of preferential treat-
ment for any product or range of products shall not be increased;
d) The binding of low or duty free treatment was to be recognised as
equivalent in value to the ‘substantial reduction of high duties or the elimi-
nation of tariff preferences’; and
e) That previous commercial commitments made between or among
participating states were not to frustrate the commitment to enter into trade
barrier reducing negotiations.
(Havana Charter 1948, paragraphs 1–2)
In essence, then, the rules governing trade barrier reduction fell some way short
of the idea of diffuse reciprocity. Members were first to negotiate bilaterally;
only then was the product of that negotiating to be conveyed, in accordance with
the commitment to MFN and its corollaries, to the membership in its entirety.
The logic, however, was that the sum total of all of the bilateral negotiations
Multilateralism 49
entered into by the membership would bring about a rough equivalence in
returns (this point is explored in more detail in Chapter 5).
Beyond the rules dictating the format of trade negotiations, Article 17
mapped out the relationship between the larger ITO and the GATT. Here,
Members were asked to become Contracting Parties to the GATT within two
years of entry into force of the Havana Charter, to ensure the continued benefits
of MFN unless previously agreed by a majority of the Membership (Havana
Charter 1948, Article 17, paragraph 4(b)).
Again, however, the demise of the ITO did little to unhinge the principle of
tariff barrier reduction as an evolving norm of international commercial
relations. As with many of the similarities between the ITO and the GATT, the
latter’s provisions for the reduction of trade barriers were slightly diluted, though
in essence they remained the same. To operationalise this principle, the GATT
relied on Article XXVIIIbis – an Article which, as is demonstrated in Chapter 5
of this book, ensured that the format of trade negotiations was very much open
to interpretation (also see Curzon and Curzon, 1976: 156–7). For the GATT,
negotiations directed towards a significant reduction in the general incidence of
barriers to trade were also to be undertaken. Similarly, these negotiations were to
be carried out on a ‘product-by-product’ basis, or (more interestingly) ‘by
application of such multilateral procedures as may be accepted by the
contracting parties concerned’ (GATT 1947, Article XXVIIbis, paragraph 2(a)).
However, the ITO’s more specific rules on the format of negotiations were
absent, replaced instead by three guidelines asking that Contracting Parties take
into account (i) the individual needs of Contracting Parties and industries; (ii) the
need for flexibility in tariff schedules of less developed countries; and (iii) (rather
ambiguously) the specific needs of Contracting Parties in ‘fiscal, development
and strategic’ areas (GATT 1947, Article XXVIIbis, paragraph 3(c)).
The format for negotiations specified by the GATT was at best vague – a
vagueness which perhaps contributed to the perception of flexibility and thus
relative warmth in which the GATT was received. Nonetheless, the General
Agreement’s provisions for reciprocal negotiations to be entered into served as the
particular expression of the second generalised principle of conduct embodied
in the core of international trade regulation.
Dispute settlement
The third and final architectural principle of the trade regime is a commitment
to a process of dispute settlement. This commitment arose, in part, from a
prevailing wartime notion that a process of commercial dispute settlement
overseen by an independent body (albeit one made up of the respective
participants) would assist in dissipating conflict among and between states and
thus contribute to the promotion of world peace. This commitment also arose
for more pragmatic reasons. As with any legal system, there will exist, from time
to time, differences of interpretation. The capacity to settle disputes arising from
a legal framework governing international trade was deemed to be an essential
principle around which international commercial relations ought to be
organised. But the commitment to the principle of dispute settlement was to
have a third function. It was to act as a restraint on the ability of states to pursue
unilateral action in contravention of the rules of the regime, and thus contribute
to the maintenance of commercial benefit for all.
The commitment to the principle of dispute settlement was implicit in the
Lend–Lease Agreement between the UK and the US that preceded the ITO
negotiations, but found its formal expression in the Havana Charter. With the
exception of Article 66 of the Havana Charter, relating to the settlement of
disputes arising from intergovernmental commodity control agreements, the
‘settlement of differences’ provisions of the ITO’s legal framework were to be
found in Chapter VIII, Articles 92–7. Chapter VIII binds Members to adhere to
dispute settlement provisions directed at settling any commercial differences, and
prohibits the use of unilateral action. These provisions set out an extensive set of
procedures directed at settling disputes.
In the first instance, any Member with a grievance against another relating to
a perceived nullification or impairment of previous conveyed preferential
treatment is empowered to put in writing the nature of the grievance and receive
‘sympathetic consideration’ thereof from the offending party, as well as notify the
ITO of such action. If these bilateral procedures do not produce a satisfactory
settlement, disputes could be referred to the Executive Board – the ITO’s council
of leadership comprising eight states of chief economic importance and 10
others (see Chapter 1). The Executive Board, in considering a dispute, had five
options open to it: first, to refrain from taking any action; second, to recommend
that further consultation take place with the Members concerned; third, to seek a
process of arbitration agreed upon by the Board and the disputing parties;
fourth, to request that a Member at fault take any necessary action to conform
with the specifications of the Havana Charter; and fifth, to make recommenda-
tions for action that would ‘best assist the Members concerned and contribute to
a satisfactory adjustment’ (Havana Charter 1947, Article 94, paragraph 2). If
these options did not result in a satisfactory resolution of the dispute, the Board
was empowered to authorise a degree of punitive action by allowing a Member
to suspend its procurement of trade concessions vis-à-vis the offending party.
In the event that reference to the Executive Board proved unsuccessful in
finding a satisfactory resolution, the case could be referred to the Membership at
large in the form of the Conference. In such cases, if the Conference could not
bring an end to the dispute by adopting the same procedures as those under-
taken by the Board, two options remained. First, the Conference could authorise
the suspension of preferential treatment vis-à-vis the offending party; and second,
it could ask an offending Member to leave the ITO. In an attempt to ensure
impartiality in commercial disputes, either party, as well as the ITO, could seek
advice from the International Court of Justice (ICJ). In such cases, the ITO was
to consider itself bound by any decision from the ICJ.
Elaborate as they were, rather than establishing an independent body to
oversee the settlement of disputes, the ITO’s provisions relied on already-existing
Multilateralism 51
bodies within the ITO supported by the legal expertise of one aspect of the UN
system in which it was located. Nonetheless, what is important is the embodi-
ment of a principle of dispute settlement as a fundamental pillar of the intended
regulatory framework.
While its provisions were much less extensive, the GATT also embodied the
principle of dispute settlement – though in keeping with the nature of the General
Agreement they were rather ad hoc. Furthermore, rather than going by the more
formal title of ‘settlement of disputes’ the GATT relied largely upon two
provisions: ‘consultation’ (Article XXI) and ‘nullification and impairment’
(Article XXIII) as a truncated version of the ITO’s dispute settlement proce-
dures – a reliance which suited the informal and flexible character of the General
Agreement. The first of these provisions – consultation – merely empowered
Contracting Parties to consult with one another. The bulk of the GATT’s dispute
settlement procedures lay in its nullification and impairment provisions. These
were largely composed of a slightly rewritten and précised versions of Articles
93 and 94 of the Havana Charter.
Article XXIII of the GATT set out the conditions (of nullification and
impairment) under which a Contracting Party may enter into a procedure
designed to settle a dispute. As with the ITO, the first step was to enter into
bilateral negations. Beyond this, the case could be referred to the Contracting
Parties (the equivalent of the ITO Conference) for investigation which had the
power either to empower an injured party to suspend preferential treatment in
relations with the offending party(ies) or to request that an offending party
withdraw from the General Agreement.
The manner in which the Contracting Parties dealt with disputes evolved
through time. At the outset, disputes were brought before a biannual meeting of
the Contracting Parties. This, however, evolved through a committee comprised
of the Contracting Parties and a later delegated working party, to the use of a
panel of experts as the means of mediating disputes – a practice that has much
bearing on the way in which disputes are handled in the WTO (see Chapter 6).
Multilateralism and the evolution of international

trade regulation
For our purposes, the utilisation of a conception of multilateralism enables us to
identify the core architectural principles that have remained a constant feature of
international trade regulation as they have evolved in the post-war era. We have
determined that a conception of multilateralism has as its primary constituent a
body of rules. These rules serve to organise the relations of participants in
accordance with three generalised principles of conduct: indivisibility, diffuse
reciprocity and dispute settlement. These principles, taken together, serve as
intervening variables in the production of outcomes – outcomes which Ruggie
claims offer a degree of risk insurance for smaller countries.
These three architectural principles found expression in the ITO and pro-
vided the skeleton upon which other provisions were grafted. However, their
place in the regulation of international trade was not adversely affected by the
failure to ratify the Havana Charter. Rather, they remained central to the
truncated form of trade regulation that served as the principal source of
commercial legislation under the auspices of the GATT. However, although we
know that the principles of MFN, reciprocity and dispute settlement have made
up the architectural core of the trade regime, as yet we know little about the
specific form they have taken. More specifically, we know little about the way in
which these principles are manifest in the latest mutation of trade regulation –
the WTO. Accordingly, it is to the legal framework of the WTO that the
remainder of this book now turns. First, Chapter 3 familiarises us with the
character of the WTO. Second, Chapter 4 explores the function and role of the
principle of MFN under WTO rules. Third, Chapter 5 explores the principle of
reciprocity in the reduction of trade barriers, and in particular the way in which
negotiations are conducted. And finally, Chapter 6 examines the way in which
the WTO provides for the settlement of disputes. In the latter three chapters,
emphasis is placed on understanding the specificities of the WTO’s legal
framework by comparing its utilisation of these principles with the ideal type of
multilateralism outlined above.
Part II
The extension of
multilateralism
3 The WTO
The Uruguay Round of trade negotiations finally reached completion in

December 1993. Its Final Act as well as the Marrakech Agreement Establishing the
World Trade Organisation (hereafter the Establishing Agreement) were signed at the last
Ministerial Meeting of the GATT in Marrakech in April 1994, paving the way
for the WTO to formally commence operations on 1 January 1995.
Great claims were made for the results of the Uruguay Round, as well as for
the new WTO. The architects lauded the creation of the WTO as the beginning
of a new era in world trade. The WTO was to provide a legal and institutional
base for international trade which had been previously absent under the GATT;
a contractual framework within which governments could formulate domestic
trade policy; and the platform upon which trading relations among countries
could evolve ‘through collective debate, negotiation and adjudication’ (WTO,
1995a: 1). Official estimates suggested that by 2005 world income would have
risen by over US$500 billion, and that the growth rate of global trade would be
as much as 25 per cent higher than it would have been had the Uruguay
provisions not been agreed (WTO Focus (1995) No. 1: 4). Irrespective of these
claims, in light of the history of attempts to establish a formal organisational
presence to regulate international trade, the establishment of the WTO was a
significant step forward.
However, the short history of the WTO has so far has been mixed. The pace
of activities in the initial three years after its establishment were, to its support-
ers, impressive and, to its opponents, worrying. The WTO’s First Ministerial
Meeting in Singapore in December 1996 proved to be relatively comfortable, in
spite of the re-emergence of the particularly thorny issue of labour standards
(about which more is said later in this chapter). On 15 February 1997, the WTO
successfully concluded three years of negotiations culminating in the Agreement on
Basic Telecommunications. World trade continued to expand in spite of the financial
turmoil suffered to varying degrees by parts of East Asia, the former republics of
the Soviet Union, and Latin America, and good progress was made on
timetabling and negotiating outstanding issues and agreements.
Yet, almost as soon as it had been created the WTO began encountering
problems. Its Second Ministerial Meeting in Geneva in May 1998 witnessed
public demonstrations illustrating a level of civic dissatisfaction with the global
56 The extension of multilateralism
trade agenda that had previously been suppressed, and in some cases had not
existed. This civic dissatisfaction was thrown into sharper relief by the mass
protests that accompanied the Third Ministerial Meeting of the WTO in Seattle
in late November/early December 1999. The demonstrations aside, tensions
arose among the principal trading powers over trade in cars, alcoholic beverages,
photographic film, bananas, magazines, hormonally modified beef and foreign
sales corporations. And the tenure of Renato Ruggiero, the first Director-
General of the WTO, was overshadowed by the long delay in appointing a
successor; an overshadowing which resulted in the election of two candidates –
Mike Moore of New Zealand and Supachai Panitchapakdi of Thailand – for
successive three-year terms as an untidy compromise. The awkward resolution of
Ruggiero’s successor was complicated further by the criticisms surrounding Mike
Moore’s leadership over the failure of the Seattle Ministerial Meeting to result in
the launch of a new trade round.
The purpose of this chapter is to complete the story of the evolution of
international trade regulation started in Chapter 1, and begin to tie in the core
architectural principles of multilateralism detailed in Chapter 2, thus completing
the foundation for the examination of the WTO’s legal framework in the
following chapters. More specifically, the task of this chapter is to explore the
principal features of the WTO and survey the major developments that have
occurred since its establishment. In doing so, it details the organisational and
legal structure of the WTO; it explores the WTO’s role in global economic
governance; it examines the major developments that have taken place since the
WTO’s establishment as well as the outcome of the first three Ministerial
Meetings; it outlines the impact of civic concerns on the WTO; and it discusses
the WTO’s first, tentative engagement with non-governmental organisations – its
understanding of the constituents of civil society.
The WTO
After 47 years of de facto trade regulation under the GATT and two unsuccessful
attempts at creating an international trade organisation, the WTO represents the
culmination of a long process directed at establishing a formal trade body.
Unsurprisingly, then, the WTO embodies many of the key themes of that
process. And while the WTO exists in a global economic climate markedly
different from its predecessors, it embodies the same architectural core as that of
the ITO, OTC and GATT.
The stated objectives of the WTO remain those of its predecessors: first, non-
discriminatory treatment in international commerce; second, the pursuit of a
reduction and possible elimination of barriers to trade; and third, the pacific
settlement of disputes through a generalised adherence to a dispute settlement
mechanism. To this end, MFN and its corollary national treatment remain the
key principles of international trade regulation and are embedded throughout
the Agreements administered by the WTO (see Chapter 4); the principle
governing trade negotiations is that of reciprocity (see Chapter 5); and the
The WTO 57
dispute settlement mechanism of the GATT has been modified to make it more
rigorous, inclusive and binding (see Chapter 6).
Much of the literature on the WTO celebrates the establishment of a formal
legal presence in international trade (Ruttley et al., 1998; Krueger, 1998). While
this has been a significant feature of the creation of the WTO, its contribution to
international trade regulation has been to inject more than just a degree of
formality. Whereas the GATT was concerned solely with trade in goods, the
legal framework administered by the WTO has deepened the coverage of its
architectural principles with the inclusion of regulations pertaining to trade in
services (under the General Agreement on Trade in Services – GATS). The WTO has
also incorporated an agreement on the much embittered area of agriculture; an
attempt has been made to move away from the protectionism associated with the
MultiFibre Agreement (MFA) by bringing textiles and clothing under the
umbrella of the WTO rules; and two of the selective ‘Plurilateral’ Agreements
negotiated under the auspices of the GATT have been phased out in an effort to
create a more coherent, all-encompassing rules-based system.
But the WTO’s impact on the nature of trade regulation has been more than
just a deepening of the scope of its commercial coverage. It has also widened the
parameters of international trade regulation. The negotiation of the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPs) and the Agreement on Trade-
Related Investment Measures (TRIMs) has taken this regulation beyond the
traditional parameters of trade into areas deemed to be ‘trade related’ – areas
which, though not bearing tradable commodities, are deemed essential to the
production process. Furthermore, the very nature of these Agreements differs
from that of the GATT as well as the other commercial Agreements adminis-
tered by the WTO. The TRIPs seeks to endorse and safeguard intellectual
property ownership, and the TRIMs aims to go some way towards liberalising
global investment flows. Consequently, neither Agreement seeks to bring about a
direct expansion in commercial activity. Rather, their aim is to contribute to the
creation of an environment that is perceived to be conducive to an expansion in
the volume and value of trade. Nevertheless, both encapsulate the core
architectural principles of trade regulation and serve to consolidate further the
all-encompassing rules-based nature of the trade regime.
There is, however, a further dimension to this extension in regulative cover-
age. Although the WTO has moved into the regulation of trade-related areas, it
has done so selectively (Wilkinson, 1999a: 166–79). No attempt has been made
to extend to labour, also a trade-related area (cf. G15, 1999: paragraph 20), a
comparable degree of protection as that offered to intellectual property –
perhaps because of its perceived incongruity with the WTO’s core architectural
principles (Hughes and Wilkinson, 1998: 382–8). Precedent for such an extension
exists in the legal framework of one of the WTO’s predecessors, the ITO.
Chapter 2 of the Havana Charter required members to ‘take fully into account
the rights of workers under inter-governmental declarations, conventions and
agreements’ (Havana Charter 1948, Article 7). In pursuit of this, a series of
provisions were drafted in an effort to strengthen the relationship between trade
and full employment as well as to maintain a minimum level of labour standards
(see Articles 2–7 of the Havana Charter). This is different from the WTO which
asks merely that its Members conduct their commercial relations ‘with a view to
raising standards of living, ensuring full employment and a large and steadily
growing volume of real income and effective demand’ (Establishing Agreement
1994, Preamble, paragraph 1, emphasis added). Little effort has been made to
add legal substance to this commitment.
Similarly, though without comparable precedent, the WTO has not extended
its regulative safeguards to the environment, again perhaps because of its
perceived incongruity with the WTO’s core architectural principles. And
although the environment has been dealt with in a relatively more comprehen-
sive manner than labour, beyond the general exceptions clauses of the GATT
and GATS (Articles XX and XIV respectively) the inclusion of the language of
‘sustainable development’ in the preamble to the Establishing Agreement and the
creation of a Committee on Trade and Environment (CTE) designed to identify
the relationship between ‘trade measures and environmental measures’, the level
of environmental protection in the Agreements administered by the WTO is
more rhetorical than substantive (LeQuesne, 1996: 75–84). What remains, then,
is an organisation which oversees a series of legal Agreements (29 at the
completion of the Uruguay Round and growing) that extends the coverage of
the core architectural principles of trade regulation across a wide range of
commercial activities coupled with a number of complementary provisions
which act to safeguard intellectual property ownership and liberalise investment
flows, but which do not offer labour, and to a lesser degree the environment,
comparable safeguards.
The deepening and widening of the WTO’s regulative parameters has been
accompanied by a significant extension in its actual and potential geopolitical
boundaries. GATT Membership at 31 December 1994 – the last day prior to its
replacement – stood at 128. By November 1999, WTO Membership stood at
135. In addition, 31 states had lodged Membership applications (all of which
now hold observer status) and a further five were registered as observer
governments but which had yet to submit an application. These figures, while
seeming to demonstrate only a reasonably modest increase in the geopolitical
area subject to WTO regulations, hide a more significant picture. Whereas the
boundaries of the GATT were, in part, fixed by the structural dynamics of the
Cold War, the WTO has extended the coverage of the core architectural
principles of international trade regulation to include states formerly outside the
Western sphere of influence. Most of the 15 republics of the former Soviet
Union have, in one form or another, lodged Membership applications. Of these
Estonia, Kyrgyzstan and Latvia have so far successfully acceded to the ranks of
the WTO, with applications from Armenia, Azerbaijan, Georgia, Kazakhstan,
Lithuania, the Russia Federation, Ukraine and Uzbekistan pending.
Similarly, much progress has been made on the seemingly intractable acces-
sion of the People’s Republic of China (PRC). China was one of the 23 original
contracting parties to the GATT in 1948. However, after the establishment of
The WTO 59
the People’s Republic in 1949, the Kuomintang government (which relocated to
Taiwan (Chinese Taipei)) notified the organisation of its withdrawal with effect
from 5 May 1950. And although China has held observer status since 1982 and
its accession working party was established on 4 March 1987, it is only recently
that significant progress has been made paving the way for its membership.
Furthermore, though in principle autonomous, the return of first Hong Kong
and then Macau (both founding Members of the WTO) to the People’s
Republic has ensured a Chinese presence in the WTO – though this should not
be overstated. More contentiously, Taiwan has also applied for WTO
Membership.
The legal framework

The WTO regulates international trade through a body of rules constructed
around its architectural principles encompassed by its extensive legal framework.
These rules are arranged into a series of Agreements each of which subjects one
aspect of commercial activity and its related areas to the disciplines of MFN and
reciprocity while also empowering Members to settle differences over rule
interpretation through a process of dispute settlement. The legal framework
itself is organised into six sections, all of which are annexed to the Establishing
Agreement: (i) trade in goods; (ii) trade in services; (iii) trade-related aspects of
intellectual property rights; (iv) dispute settlement procedures; (v) trade policy
review; and (vi) plurilateral trade agreements. Complementing these Agreements
are a series of Ministerial Decisions and Declarations which serve to add weight
to the interpretation of various provisions within the legal framework; lay down
intentions as to the function and future direction of the WTO; as well as set out
its central role in the governance of the global economy.
Trade in goods
The first section, trade in goods, comprises a series of Agreements which build
upon and enhance the work of the GATT. These include disciplines on a range
of areas previously not subjected to GATT rules as well as the General Agreement’s
evolution into the GATT 1994. Within this first section (see Table 3.1 on p. 60)
are three Agreements of particular significance: the Agreement on Agriculture; the
Agreement on Textiles and Clothing; and the TRIMs. Each Agreement can be
understood as an issue-specific extension of the rules embodied in the General
Agreement as they related to a particular sector.
Agriculture
The primary purpose of the Agreement on Agriculture is to introduce a series of
provisions designed to remove the trade-distorting effects of non-tariff measures,
export subsidies and domestic support systems, and to move towards the
organisation of trade in this sector in accordance with the WTO’s architectural
Table 3.1 The legal framework of the WTO
Final Act of the Uruguay Round of Multilateral Trade Negotiations
Marrakech Agreement Establishing the WTO
Multilateral Agreements on Trade in Goods:
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the GATT 1994
Agreement on Implementation of Article VII of the GATT 1994
Agreement on Preshipment Inspection
Agreement on Rules of Origin
Agreement on Import Licensing Procedures
Agreement on Subsidies and Countervailing Measures
Agreement on Safeguards
General Agreement on Trade in Services
Agreement on Trade-Related Aspects of Intellectual Property Rights
Understanding on Rules and Procedures Governing the Settlement of Disputes
Plurilateral Trade Agreements:
Agreement on Trade in Civil Aircraft
Agreement on Government Procurement
International Dairy Agreement
International Bovine Meat Agreement
Ministerial Decisions and Declarations
principles. In approaching the problem of non-tariff measures new rules on

market access introduce a process of ‘tariffication’. This process requires that
existing non-tariff measures be converted into more visible tariff barriers at the
date of entry into force of the WTO. Once converted, tariff levels are to be
applied in accordance with the principle of MFN, and reduced by 36 per cent
for developed countries over a period of six years, and 24 per cent for developing
countries over a period of 10 years. That said, developing countries are exempt
from the tariffication process for those products that are deemed to be the
primary staples of a traditional diet, on the understanding that imports of these
products must reach a consumption figure of 4 per cent by 2005.
Export subsidies are dealt with in a comparable manner to the tariffication
provisions. Developed Members are required to reduce export subsidies by 36
per cent in value terms in the first six years of exposure to WTO rules, whereas
developing countries are required to pursue a 24 per cent reduction over 10
years. Furthermore, Members are required to reduce, from a base period average
calculated on 1986–90 figures, the volume of goods eligible for export subsidies
by 21 per cent (Hoekman and Kostecki, 1995: 205–6).
The WTO 61
The perceived disruption caused by domestic support systems has also been
addressed, albeit partially, by requiring that each Member of the WTO have its
total Aggregate Measure of Support (AMS) calculated. Once this has been
achieved, developed Members are bound to reduce this figure by 20 per cent
over six years. Developing Members are required to reduce their AMS figure by
13 per cent over a 10-year period. Nevertheless, this area remains the source of
much contention, particularly regarding the subsidy systems in place in the EU
and US.
Textiles and clothing

The Agreement on Agriculture has not been the only area of commercial contention
in which the WTO has sought to extend its core architectural principles. The
first section dealing with trade in goods also contains the Agreement on Textiles and
Clothing. The significance of this Agreement lies in its attempt to draw into the
WTO the second-largest commercial sector previously exempt from GATT rules
(the largest being agriculture), and to phase out the highly contentious
Arrangement for the International Trade in Textiles and Clothing – more commonly
known as the MultiFibre Agreement (MFA).
The history of the MFA is entwined with the growth of protectionism
throughout the post-war evolution of the trade regime. Alarmed by what was
perceived to be a flood of cheap textile imports from the developing world, the
industrial countries (most notably the UK and the US) sought the introduction of
measures to protect domestic textile production in the early 1950s. In the first
instance this involved the UK and the US exercising their political influence over
Japan, Hong Kong, Pakistan and India to extract a series of voluntary quotas
limiting the volume of textile exports. However, as such measures were contrary
to GATT rules, the developed countries sought to codify the adoption of these
quantitative restrictions. The first step towards this codification was the
negotiation of a Short-Term Agreement on Cotton Textiles during the Dillon Round of
GATT negotiations. This Agreement, in turn, evolved into the Long-Term
Agreement Regarding Trade in Cotton Textiles, and subsequently, in 1974, into the
highly contentious MFA. Put simply, the MFA enabled developed countries to
offset a decline in competitiveness in the production of textiles and clothing vis-à-
vis their developing counterparts by putting into place a system of regulation
predicated on Contracting Parties negotiating bilateral quantitative restrictions
or by unilaterally imposing import constraints. The MFA proceeded through
four incantations, each time becoming progressively more discriminatory (as well
as unpopular) (see Das, 1998: 68–9; Jackson, 1998a: 207–9; Hoekman and
Kostecki, 1995: 207–8).
In an attempt to reverse this discrimination, the Agreement on Textiles and Clothing
sets out the provisions for the transition from the MFA to full exposure to GATT
1994 rules (Agreement on Textiles and Clothing 1994, Article 1) and thus the WTO’s
architectural principles. The Agreement requires that all restrictive arrangements
in operation under the terms of the MFA be terminated by 2005 whereupon the
normal regulative conditions of the WTO apply. That said, prior to this date a
process of liberalisation has been put into place. As of 1 January 1995, 1998 and
2002 respectively, importing Members are required to liberalise restrictions on
particular products by a percentage of trade in textile produce as specified in the
schedules annexed to the Agreement. A Textile Monitoring Body (TMB) has
been established to oversee the implementation of the Agreement and to
examine any disputes arising between participants.
TRIMs
The exposure of agriculture and textiles and clothing to WTO rules illustrates a
deepening of the parameters of commercial activity traditionally subjected to
multilateral trade regulation. However, also under this first section dealing with
trade in goods is the Agreement on Trade-Related Investment Measures – an Agreement
which, as we noted at the outset, widens the regulative parameters of the WTO’s
core architectural principles by introducing disciplines in the related area of
investment. The purpose of the TRIMs is to remove domestic policies which
place restrictions on inward investment. The aim of this liberalisation procedure
is to contribute to an increase in the global incidence of foreign direct investment
(FDI), and thus contribute to an increase in the volume and value of goods and
services for trade.
Unsurprisingly, the discussion surrounding investment was the source of
much controversy during the Uruguay Round, as indeed it had been during
previous attempts to table the investment issue within the GATT (see Ariff,
1989). The controversy rested on a dichotic understanding of the role of a trade
body in the regulation of investment flows. On the one hand, supporters of an
extension of GATT activities into this area (most notably the UK and US, but
also the EU and Japan) suggested that there is an interdependent relationship
between trade and investment, and as such it would be a natural extension of the
work of the GATT/WTO. On the other hand, opponents argued that
investment issues lie outside of the jurisdiction of the GATT and should remain
as such, and that any move to liberalise investment flows within such a forum
would be of disproportionately greater benefit to the capital-rich North than to
the capital-scarce South. In spite of this opposition, the TRIMs was successfully
negotiated and now forms a central component of the Multilateral Agreements
on Trade in Goods, complementing the disciplines of the GATT 1994, and
falling in line with the principles of MFN, national treatment and reciprocity.
Trade in services
Providing the second pillar of the WTO’s legal framework is the General Agreement
on Trade in Services. The GATS was seen as a natural outcome of the Uruguay
Round, particularly as, by one estimate at least, services accounted for 70 per
cent of GDP in the developed world and about 50 per cent in LDCs (Drake and
Nicolaïdis, 1996: 37). Moreover, the share of trade in services as a percentage of
The WTO 63
total world trade had significantly increased in the run-up to the Uruguay Round
negotiations. In 1980 trade in services stood at 18.8 per cent of the total value of
world trade. By 1993 this figure had risen to 22.2 per cent. Between 1982 and
1992 the average annual growth rate for trade in goods was 7.1 per cent,
whereas trade in services grew at the rate of 9.5 per cent per annum (Hoekman,
1994: 86).
Trade in services is generally deemed to be qualitatively different from trade
in goods. Services are invisible entities and are procured through a range of
relationships between supplier(s) and purchaser(s). In recognition of this, the
GATS covers all services in all sectors, except those supplied ‘in the exercise of
governmental functions’ (Hoekman, 1994: 87). The GATS identifies four types
of relationship to which its regulations pertain:
(a) from the territory of one Member into the territory of any other Member;
(b) in the territory of one Member to the service consumer of any other
Member;
(c) by a service supplier of one Member, through commercial presence in the
territory of any other Member;
(d) by a service supplier of one Member, through presence of natural persons
of a Member in the territory of any other Member.
(GATS 1994, Article 1, paragraph 2)
The GATS comprises two elements: the first a set of rules that apply to all WTO
Members; and the second a schedule of specific commitments. In keeping with
the structure of the contemporary trade regulation, GATS disciplines are
organised in accordance with the architecture principles of MFN, national
treatment and reciprocity. However, unlike the specifications of the GATT, the
GATS specifies that any Member may refrain from MFN implementation if the
service for which the restraint is to be applied has previously been listed in the
Annex to the Agreement (GATS 1994, Article 2, paragraph 2). This is the so-
called ‘negative list’. Exemptions to the Agreement can be made while
negotiating to accede to the WTO. Further exemptions can only be made by
requesting an MFN waiver from the Ministerial Conference.
The negative list ensures that the regulative coverage of the GATS is less
encompassing than the GATT. During the negotiating process a large number of
Members expressed a wish to lodge exemptions. Such was the demand that by
mid-1994 over 60 GATS members had lodged requests for exemptions. These
numbers were so large that in the final days of the Uruguay Round negotiations
were restarted in an effort to reduce the number of proposed exemptions for
financial services, basic telecommunications and maritime transport (Hoekman
and Kostecki, 1995: 131–2).
Though not completed by the end of the Uruguay Round, the conclusion of
the Agreement on Trade in Financial Services was deemed to be vital to the GATS, and
more generally the WTO, as trade in this sector accounts for the majority of the
total volume of trade in services. The Agreement was finally concluded in July
1995 with 29 Members (with the 15 Members of the EU counting as one)
signing a protocol stating their intention to implement trade liberalisation
measures in this sector. However, the conclusion of the Agreement was marred
by the abstinence of the US – a result deemed second best by the then WTO
Director-General Renato Ruggiero (WTO Focus (1995) August–September: 6).
The US action stemmed from a 1993 announcement of dissatisfaction with the
negotiations and their projected results. It was hoped that an extension in the
negotiations would bring the US back into the fray. However, by the end of June
1995 the US had reiterated its position, announcing that it would take MFN
exemption on some aspects of financial services, but would only convey MFN
treatment to those who opened up their markets on a bilateral basis.
TRIPs
The third, and perhaps most contentious, pillar of the WTO’s legal framework is
the Agreement on Trade-Related Aspects of Intellectual Property Rights. Not only does the
TRIPs have equal status to the GATT and GATS, it takes to another level the
regulative impact of a trade body on national legislation. Moreover, the inclusion
of the TRIPs, and its status as one of the key pillars of the WTO’s legal
framework, is remarkable considering at the start of the Uruguay Round
intellectual property featured as little more than ‘a footnote on a crowded
agenda’ (Bronkers, 1994: 1245).
The primary function of the TRIPs is to harmonise international standards
on intellectual property. For the purposes of the Agreement, intellectual property
is defined as a trademark referring to:
any sign, or combination of signs, capable of distinguishing the goods or

services of one undertaking from those of other undertakings … [More-
over] such signs, in particular words including personal names, letters,
numerals, figurative elements and combinations of colours as well as any
combination of such signs, shall be eligible for registration as trademarks.
(TRIPs 1995, Article 15, paragraph 1)
To this end, the Agreement sets out specific criteria pertaining to the usage of
trademarks, their registration, requirements of use and licensing arrangements.
Special consideration has been made for wines and spirits, and integrated
circuits.
In the pursuit of this international harmonisation, the Agreement requires
that the Members of the WTO abide by the Paris Convention (1967), the Berne
Convention (1971), the Rome Convention (1961) and the Treaty on Intellectual Property in
Respect of Integrated Circuits as if they were party to those Agreements. As with the
range of Agreements administered by the WTO, the principles of MFN,
national treatment and reciprocity apply. Domestic parties are not to be
accorded special preferences, nor is any Member to be denied ‘any advantage,
favour, privilege or immunity’ granted by another in respect of intellectual
The WTO 65
property protection (Articles 3 and 4). In addition, Members are not required to
implement any law procuring ‘more protection than is required by this
Agreement’. However, this harmonisation is not so stringent as to constrain
national autonomy as Members are left ‘to determine the appropriate method of
implementing the provisions of this Agreement within their own legal system
and practice’ (TRIPs 1994, Article 1, paragraph 1).
The move to incorporate intellectual property regulation into the WTO
framework was undertaken in direct response to the growing incidence of
intellectual property piracy in unregulated areas (particularly LDCs). This
caused much debate during the Uruguay Round as negotiations polarised
between two camps – essentially North and South. This polarisation resulted
from a conflict between the perceived benefits of intellectual property piracy and
those associated with the attraction of FDI. Many considered intellectual
property piracy to be an important, if not vital, source of income for many
LDCs. As such, any movement towards the eradication of intellectual property
piracy was deemed by opponents as potentially harmful to these countries. These
arguments were countered by the assertion that intellectual property piracy
deters FDI, as investors cannot be guaranteed patent or copyright security. The
promise of inward investment served to weaken the resolve of many, though it
did not put an end to the opposition.
Few among those opposing a move into this area saw any reason why intel-
lectual property should be incorporated into a trade agreement. The WTO, it was
pointed out, is an organisation designed to facilitate freer trade, whereas the
incorporation of harmonised national standards on intellectual property requires
the introduction rather than removal of legislation. As Hoekman notes, the
TRIPs ‘obliges governments to take positive action to protect intellectual rights’
as opposed to the more ‘normal’ GATT requirements of legislative reduction
(Hoekman, 1994: 100; also Capling, 1999: 84–5, 87–8). Furthermore, the
developing countries argued that the industrial countries were not subjected to
intellectual property legislation during their developmental drives, so such
legislation should not apply to them (Bronkers, 1994: 1247). Instead, the
developing world favoured the World Intellectual Property Organisation (WIPO,
a Geneva-based UN body), as the body in which the harmonisation of
intellectual property legislation could be conducted.
The purpose of TRIPs, then, is not to embark on the road towards freer
trade like its siblings the GATT and GATS, but more to ensure a minimum
level of protection for intellectual property through institutional regulation –
albeit with the acknowledgement that intellectual property rights should not
in themselves constitute barriers to trade. Furthermore, whereas the GATS is
clearly modelled on its older sibling the GATT, the TRIPs has taken a
slightly different form. The main difference is that the primary function of
the TRIPs is to harmonise national intellectual property protection standards,
whereas under the GATS the harmonisation of national policy is not
pursued. That said, the TRIPs embodies the WTO’s core architectural
principles.
Dispute settlement
The WTO’s dispute settlement procedures form the fourth pillar of its legal
framework. The Dispute Settlement Mechanism (DSM) drawn up during the
Uruguay Round builds upon those of the GATT 1947 (Articles XXII and
XXIII), though substantial modifications have been made. Its stated aim is to
provide security and predictability in international trade by offering Members a
mechanism for recourse against perceived unfair trading practices, and to seek
positive solutions among parties in dispute (Dispute Settlement Understanding 1994,
Article 3, paragraphs 2–7).
The Dispute Settlement Understanding (DSU) lays out a series of procedures
for Members to follow if they are in dispute. These procedures are the subject of
a much lengthier discussion in Chapter 6. In brief, however, they are as follows.
In the first instance, upon lodging a complaint with the Dispute Settlement Body
(DSB) a complainant must follow a procedure of consultation as specified by
Articles 4, 5, 6 and 7, of Annex 2 of the Establishing Agreement. This procedure
requires that in the first instance disputing parties attempt to settle their
differences within the confines of bilateral consultations. Should the dispute fail
to reach conclusion through bilateral means, the complainant can ask the WTO
to establish a Panel to mediate the dispute. If the outcome of the Panel proves
unsatisfactory to either of the parties in dispute, each has the right of appeal.
Appeals are referred to the DSB’s Appellate Body, which in turn reassesses the
dispute, and rules accordingly. The Agreement requires that parties to a dispute
promptly implement the recommendations or rulings of either the DSB Panel or
Appellate Body. Should a Member fail to implement the rulings or recommen-
dations of either the DSB or the Appellate Body ‘within a reasonable period of
time’, then Article 22 of Annex 2 of the Establishing Agreement empowers injured
parties to suspend WTO concessions in relations with the offender, or entitles
them to request compensation from the offending party. It is only at this final
stage that the DSB empowers a Member to engage in punitive action.
Trade policy review

The fifth pillar of the WTO’s legal framework relates to the workings of the
Trade Policy Review Mechanism (TPRM). The provisions for the Trade Policy
Review Body (TPRB) were first discussed at the 1988 Montreal mid-term
Ministerial Meeting, though its roots precede the 1986 Ministerial Declaration
that set the tone of the Uruguay Round (Qureshi, 1996: 108–9). The primary
function of the TPRB is to promote understanding of the provisions of the
Establishing Agreement among the Members by ‘regular collective appreciation and
evaluation of the full range of individual Members’ trade policies and practices
and their impact on the functioning of the multilateral trading system’ (TPRM
1994, Article A, paragraph 1). The TPRB also provides for the periodic
assessment of the WTO, and the activities of the Members in the interests of
promoting an increase in transparency among participants. Assessment of the
multilateral trading system is outlined in the context of the wider economic
The WTO 67
environment, taking into account the performance of the WTO’s least
developed Members, as well as the impact the WTO has on sustainable
development.
The Agreement sets out a hierarchy for the timing of reviews. The largest
trading countries, referred to as the ‘first four’ (the EU, Japan, Canada and the
US), are subject to periodic review every two years. The next 16 most significant
trading nations are reviewed every four years, others every six, and special
arrangements are available for least developed members. Each review produces a
report on its findings. Additionally, the TPRB provides annual reports on those
general developments ‘which [have] an impact on the multilateral trading
system’ (TPRM 1994, Article G). This yearly report, produced in conjunction
with the Director-General, constitutes the WTO’s official analysis of the
international trading system.
Plurilateral Agreements
The sixth and final pillar of the WTO’s legal framework comprises a set of four
Plurilateral Agreements negotiated under the auspices of the GATT during the
Tokyo Round. These four Agreements relate to Trade in Civil Aircraft, Government
Procurement, the International Dairy Agreement and the International Agreement on Bovine
Meat. The Agreements are plurilateral, as opposed to multilateral, in character,
in that they constitute formal agreements adhered to by a group of WTO
members, but they are not the source of regulation for the Membership in its
entirety. Signatories to these Agreements are obliged to abide by the conditions
of the Plurilateral Agreements in the same way that they abide by the rest of the
Agreements administered by the WTO. In addition, the Plurilateral Agreements
play an important role in the work of the TPRB (Establishing Agreement 1994,
Article IV, paragraph 8).
That said, since the establishment of the WTO two of these Agreements have
been phased out and the commercial areas which they have previously sought to
govern have been brought under more general WTO rules. The International
Agreement on Bovine Meat and the International Dairy Agreement only functioned under
WTO auspices for the first two years of its existence (up to 31 December 1997;
see WTO, 1997a), whereupon they were terminated. Nonetheless, the two other
Agreements remain notable features of contemporary trade regulation, and
those that have been phased out form an important part of its recent history.
The Agreement on Trade in Civil Aircraft requires the elimination of import duties
on all civil aircraft, engines, parts and other components, as well as flight
simulators and their respective parts and components among its signatories. The
Agreement came into force on 1 January 1980 and was signed by 21 countries.
Like the Agreement on Civil Aircraft, both the International Agreement on Bovine Meat and
the International Dairy Agreement also came into force on the first day of 1980.
However, unlike the Civil Aircraft Agreement, they did not allow for the complete
elimination of barriers to trade, but rather they sought to ‘promote the expansion,
liberalization and stability of international trade’ in these commodities (WTO,
1995a: 32–3). Noteworthy was the International Dairy Agreement’s legislation
on minimum price which dictated, until the suspension of this clause effective
from 18 October 1995, minimum export prices for international trade in various
dairy products (see WTO, 1995c).
The Agreement on Government Procurement seeks to open government tenders to
outside competition. The Agreement is designed to make the procurement of
government tenders more transparent, and to ensure that domestic producers
and/or suppliers do not enjoy positive discrimination vis-à-vis their foreign
counterparts. The Agreement is separated into two parts. The first deals with
those rules of conduct that are the concern of the Agreement; and the second is
concerned with the schedules of national entities in each Member country
whose procurement is subject to the Agreement. The Agreement has nine
Members (with the EU counting as one) and came into force on 1 January 1981.
The Agreement was substantially revised during the Uruguay Round and has
now been extended to cover construction services, procurement of contracts at
the regional (local) level and procurement by public utilities, as well as other
governmental services.
Figure 3.1 The organisational structure of the WTO
The organisational structure

Supporting the legal framework of the WTO is an organisational structure
(Figure 3.1) consisting of a Ministerial Conference; a General Council; a series
of councils covering each of the three main commercial areas of the WTO’s
activities (trade in goods, services and trade-related aspects of intellectual
property rights); a series of committees dealing with trade and development,
trade and environment, balance of payments restrictions, and budget, finance
and administration; a Director-General; and a Secretariat.
The WTO 69
The highest body of the WTO is the Ministerial Conference. It is composed
of representatives of the various Members usually at the level of trade minister
or equivalent. The Conference meets at least once every two years, and has
jurisdiction over all matters concerning the WTO.
The General Council meets more frequently than the Conference, and is in
effect the overseer of the WTO’s operations. Again, it is composed of represen-
tatives of the Members, though normally at the level of trade official. The
Council acts as the executive for the Conference when that body is not in session.
It also acts to oversee the functioning of the DSB as well as the TPRM.
Under the direct control of the General Council are the Council for Trade in
Goods (CTG), Council for Trade in Services (CTS), and the Council for Trade-
Related Aspects of Intellectual Property Rights (CTRIPs). These Councils
oversee the implementation and administration of the provisions laid down in
the legal framework in their respective areas. The Councils themselves can
establish ancillaries as they deem necessary to facilitate the running of their
various tasks. Also under the direct control of the General Council are the
committees on trade and development; trade and environment; balance of
payments restrictions; and budget, finance and administration. The Plurilateral
Agreements are not, however, under the direct control of the General Council.
Instead, they operate within the general framework of the WTO reporting their
activities to the General Council.
The day-to-day activities of the WTO are handled by the Secretariat, headed
by the Director-General. This body provides technical and logistical support to
the bodies established under Articles IV to VI of the Establishing Agreement
(relating to the structure of the WTO, relations with other organisations, and the
Secretariat). The Secretariat is responsible for the organisation of meetings, the
preparation of documentation, providing assistance with the dispute settlement
process, the provision of legal services, and the publication of studies, research,
trade policy reports, statistics and general information relating to the work of the
WTO.
Decision-making
The majority of decisions made in the WTO are done so, unless specified
otherwise, by consensus. Consensus is taken to mean agreement among all
excluding those representatives of Members who are not present, or have
abstained from participation. Consensus is not understood as unanimity, but
rather agreement in the absence of major opposition. That said, there exist three
other procedures by which decisions can be made. In those cases where changes
to the core principles of the WTO are proposed, such as an amendment to the
procurement of MFN, unanimity is required. In cases relating to the implemen-
tation of the provisions of the WTO Agreement, or in respect of a waiver of a
Member’s obligations, a three-quarters’ majority is required. A two-thirds’
majority is necessary for any amendment to the Final Act in cases relating to
issues other than the core principles of the Agreement.
In cases where decisions are put to the vote, the WTO operates on the basis of
one member one vote. However, Article X of the WTO specifies that Members
are not bound by any amendment that passes a vote they have opposed.
Nonetheless, in such cases, the Ministerial Conference can decide whether to ask
the Member or Members in question to leave, or whether to allow their
continued participation within the WTO without adherence to the amendment
in question.
The WTO’s first decision concerned the granting of waivers for the applica-
tion of MFN under Article I of the GATT 1994. The General Council voted
that the GATT waiver on the trade provisions provided for the Caribbean Basin
by the US under the Caribbean Basin Economic Recovery Act (CBERA) be
renewed, and that similar waivers be extended for Pakistan and Malawi until the
end of 1995 (WTO Focus (1995) October/November: 5). Waivers are only
normally granted for a maximum of 10 years, and are subject to review and
future negotiation after five years.
Accession
So that the Contracting Parties of the GATT were able to accede to the WTO,
the provisions of the GATT co-existed with those of the WTO until the end of
1995, whereupon they became an integral part of the latter’s legal framework.
Under the provisions of Article XII any state or customs territory wishing to
accede to the WTO can do so as long as it has ‘full autonomy in the conduct of
its external commercial relations’ (Establishing Agreement, Article XII). In keeping
with the decision-making criteria laid down by the WTO, states may only accede
in instances where the Ministerial Conference has returned a two-thirds’
majority decision in favour of accession. Accession to the Plurilateral Agree-
ments is governed by the Agreements themselves. The 31 July 1995 witnessed
the General Council adopt measures to allow for the first accession of a new
Member to the WTO following an application by Ecuador.
The WTO and global economic governance

Although much of the legal framework of the WTO deals with the detail of
trade regulation, it also contains important provisions which locate the WTO at
the heart of the system of global economic governance. The still-birth of the
ITO not only put paid to the first attempt at formalising international trade
regulation, it also inhibited the establishment and functioning of a system of
global economic governance. The GATT’s contribution to the development of
such a system was relatively small, providing for co-operation with the IMF in
instances relating to ‘exchange questions within the jurisdiction of the Fund and
questions of quantitative restrictions and other trade measures within the
jurisdiction of the Contracting Parties’ (GATT 1947, Article XV, paragraph 1) –
though of course behind the scenes co-ordination took place with other
organisations. In this respect, the creation of the WTO is more than just about
The WTO 71
the regulation of international trade through a complex set of rules governing
specific areas of commercial activity centred around a core set of architectural
principles. It also has a major role in the governance of the global economy, and,
in many ways, is the most important world economic organisation. In this sense,
it fulfils as well as expands upon the role envisaged for the ITO.
Yet, the nature of the systems of global economic governance encapsulated in
the legal frameworks of the WTO and ITO are vastly different. Whereas the
Havana Charter establishing the ITO contained a complex set of 18 provisions
detailing a bilayered system of global economic governance drawing into the
heart of global decision-making the ILO, the WTO’s legal framework contains
only seven, and focuses on constructing an interinstitutional hub wherein
decision-making power is concentrated among three principal organisations: the
WTO, IMF and World Bank (see Jackson, 1998b: 166–7; Wilkinson, 1999b: 3–6;
cf. Vines, 1998: 60). Like the ITO, the WTO’s provisions envisage a bilayered
system of governance – though here the similarity ends. At the primary level, the
development of a co-operative relationship with the IMF and World Bank is
deemed to be the most important; whereas at the secondary level, provisions are
made for co-operation with those other organisations that share a degree of
complementarity with that of the WTO.
The WTO sets out its blueprint for this system of governance in the Declara-
tion on the Contribution of the World Trade Organisation to Achieving Greater Coherence in
Global Economic Policy Making annexed to the Establishing Agreement. The central
feature of the primary level (see Table 3.2 on p. 72) is the development of
mutually supportive polices and the removal of ‘cross-conditionality’ among the
WTO, IMF and World Bank thus harmonising the conditions under which
Members and prospective Members deal with each organisation, as well as
consolidating the character of global economic governance. The purpose of this
harmonisation is to make national governments more aware of the requirements
of these organisations, though it clearly has the effect of restricting the range of
nationally possible economic behaviour and increases the relative power of these
three global bodies.
At the secondary level, the WTO’s envisaged co-operative linkages can be
further divided into two sub-categories relating to: (i) the work of specific
organisations; and (ii) creating political space for co-operation with other as-yet-
to-be-specified organisations if and when the need arises. The general pattern
here is one of co-operation with specific organisations in given issue areas in
instances when the work of these organisations proves useful to that of the
WTO.
Within the first sub-category only one organisation is mentioned by name –
the WIPO. The purpose of this linkage is to create a mutually supportive
relationship with the WIPO directed at assisting and strengthening the
functioning of the TRIPs. Within the second sub-category the general pattern is
again to develop mutually supportive linkages with other organisations that
support the work of the WTO. It is under these auspices that co-operative
ventures can be established.
Table 3.2 Uruguay provisions for interorganisational co-operation
Level of commitment and corresponding provision Association organisation
Primary:
Article III (paragraph 5) Agreement IMF/World Bank
Establishing the World Trade Organisation
Ministerial Declaration on the Contribution of IMF/World Bank
the World Trade Organisation to Achieving
Greater Coherence in Global Economic
Policymaking
Ministerial Declaration on the Relationship of IMF
the World Trade Organisation with the
International Monetary Fund (building upon
Article XV of the General Agreement on
Tariffs and Trade 1947)
Secondary:
Preamble to the Agreement on Trade-Related WIPO
Aspects of Intellectual Property Rights
Preamble to the Agreement on Trade-Related Unspecified
Aspects of Intellectual Property Rights
Article V of the Agreement Establishing the Unspecified
Article XXVI of the General Agreement on Unspecified
Trade in Services
The provisions contained within the WTO’s legal framework do not consti-
tute the sum total of co-operative commitments into which the WTO has
entered. Since its establishment, the WTO has actively built upon its existing
co-operative provisions in an effort to consolidate the system of global
economic governance. This can be seen at both primary and secondary levels.
At the primary level, the relationship between the WTO and the IMF and
World Bank have been consolidated by the signing of two post-Uruguay
agreements. The purpose of each agreement is three-fold: first, to provide the
foundations for carrying forward the WTO’s commitment to achieving greater
coherence in global economic policy-making; second, to establish formal
channels of communication between the WTO and the IMF and World Bank;
and third, to grant reciprocal observer status to each organisation. These
agreements were further complemented by the release, in October 1998, of a
joint statement by the heads of the IMF, World Bank and WTO committing the
organisations to a further consolidation of the linkages embodied in the
Uruguay Round Agreement and the subsequent co-operative agreements
(WTO, 1998a). This joint statement – essentially a response to fears that the
economic crisis in East Asia would spread to Europe and North America via
Russia and Brazil and aggravate the backlash against these organisations –
reiterated the need for global economic governance among the three
organisations as well as an extension of that system (Joint Statement by the
The WTO 73
Heads of the IMF, World Bank and WTO, 3 October 1998, paragraph 1). The
perceived indivisibility of the relationship between the three bodies was again
reiterated at the Seattle Ministerial Meeting of the WTO (WTO, 1999a, 1999b,
1999c).
Similarly, the WTO has built upon its secondary-level commitments. On 29
September 1995 the WTO and the UN agreed to an ‘exchange of letters’
between their respective heads. One aspect arising from this agreement was a
recognition of ‘the importance of cooperation and collaboration between’ the
Secretariat of the WTO and that of the United Nations Environment
Programme (UNEP) (WTO, 1999d) – though little substantive co-operation
appears to have occurred between the two bodies. On 4 May 1998 the WTO
signed a co-operation agreement with the Office International des Epizooties
(the World Organisation for Animal Health) on issues relating to the WTO’s
Agreement on Sanitary and Phytosanitary Measures; the WTO launched a joint venture
with UNCTAD and the International Trade Centre (ITC) on 28 February 1998;
relations with the WIPO have been enhanced through the launching of a co-
operative programme directed at ‘helping’ developing countries to meet
intellectual property commitments by 2000; a training programme has been
launched with the Joint Vienna Institute; and in the aftermath of the WTO’s
May 1998 Geneva Ministerial Meeting, movements have been made to extend
linkages to non-governmental organisations – a movement to which we return
momentarily.
What is clear is that both within the WTO’s legal framework, as well as in its
post-establishment operations, a formal system of global economic governance
has evolved much beyond that which existed prior to the signing of the Uruguay
Round accords. The WTO perceives that greater coherence in global economic
policy-making is premised on a web of co-operative relations that draws itself in
to closer proximity to the IMF and World Bank. Furthermore, it perceives as a
necessary complement a secondary layer of co-operative relations among a series
of organisations the work of which is deemed to be generally supportive of key
aspects of the WTO’s activities.
The most striking difference between this system and that envisaged by the
wartime planners is that the Establishing Agreement omits any provisions for the
extension of co-operative linkages to the ILO – an organisation that, under
Chapter 2 of the Havana Charter, was deemed to be central to the effective
functioning of the post-war system of governance. As such, this omission ensures
that labour lacks any formal legal representation within this system (see
Wilkinson, 2001). Instead of committing itself to a formal legal linkage, the
WTO has merely voiced its support for the work of the ILO – though this has
not been a voluntary declaration of support, rather a response to the tension
created by the trade–labour standards debate. The extent of the WTO’s
commitment to support the work of the ILO has simply taken the form of the
issuing of a Declaration partially referring to the latter’s work on labour
standards and a side-stepping of the issue in favour of the development of
channels of communication with non-governmental organisations.
Trade and labour standards
During the WTO’s First Ministerial Meeting in Singapore in December 1996 the
WTO addressed the much debated issue of trade and labour standards. This
drew on a long history of the possibility of a linkage between labour issues and
the regulation of international trade (see Van Liemt, 1999, 1989; Hughes and
Wilkinson, 1998; Scherrer, 1998; Haworth and Hughes, 1997; Lee, 1997;
Langille, 1997; Fields, 1995; Charnovitz, 1987; Edgren, 1979). Most succinctly,
the WTO and its predecessor the GATT had been under prolonged pressure
from a number of Members as well as non-governmental organisations and trade
unions to incorporate into its legal framework provisions requiring that the
Membership as a whole adhere to a core set of labour standards – relating to
freedom of association, the right to collective bargaining, restrictions on the usage
of child labour, prohibition of the usage of forced labour, and non-discrimination
in employment – when engaged in the production of goods and services for
trade. To date, the WTO has managed to resist this pressure. In the Ministerial
Declaration that was the outcome of the Singapore Ministerial Meeting, the
WTO articulated its position on this issue. First, it stated that, while the WTO
acknowledges the need to adhere to a core set of labour standards, it perceives
the ILO rather than itself to be the appropriate body to set, deal and administer
these standards; second, the WTO perceives its contribution to the maintenance
of international labour standards to be the facilitation of a greater degree of
liberalisation in the global economy – which it believes will naturally improve the
position of labour – rather than the construction of a more formal relationship
between itself and the ILO; and third, the WTO commits itself only to the
continuance of its ‘existing collaboration’ with the ILO – though the substance of
this collaboration is unspecified (Hughes and Wilkinson, 1998: 375–80).
In spite of the Organisation’s attempts, the Singapore Ministerial Meeting did
not put a satisfactory end to the labour standards issue. Indeed, 18 months later
at the May 1998 Geneva Ministerial Meeting the issue was once again raised.
Again, however, the Organisation refused to acknowledge anything other than a
commitment to support the work of the ILO. In fact, the only concession that the
WTO made was to issue a commitment to establishing channels of communica-
tion with civil society dealing broadly with ‘social issues’, of which labour
representation was to form one part (Ruggiero, 1998; Wilkinson, 1999a: 174–9).
The issue was once again raised at both grassroots and governmental levels at
the Seattle Ministerial Meeting. Yet, while the issue succeeded in raising
awareness about the concerns of workers, it did so at the expense of consider-
able antagonism from opposition governments. What became clear in Seattle
was the reluctance of the WTO to move beyond its commitment to support
(though not co-operate more substantively with) the work of the ILO embodied
in the Singapore Ministerial Declaration (Wilkinson and Hughes, 2000). More
consequentially, the lack of legal provision for the extension of co-operative
linkages to the ILO in conjunction with the WTO’s reluctance to establish
substantive relations with that organisation in the wake of the labour standards
debate has ensured that the labour representation that was an integral part of
The WTO 75
the immediate post-war system of global economic governance is missing from
the current incarnation, and subsequent efforts to redress this omission have so
far failed.
Extending global economic governance: NGOs and

civil society
Efforts to develop a more comprehensive system of global economic governance
do not, however, represent the full extent to which the WTO has fostered
relations with other bodies. Prompted in the main by the sharp increase in the
level of public disquiet at the pace, extension and unevenness of the trade
agenda (of which the call for a generalised adherence to a core set of labour
standards is but one among many), as well as an increase in the number of civic
organisations concerned with the work of international organisations, the WTO
has begun developing communicative linkages with NGOs – its interpretation of
civil society (Wilkinson and Hughes, 2000; Scholte et al., 1999; Williams and
Ford, 1999). Provisions for such an extension do exist in the WTO’s legal
framework, as they did in the Havana Charter for the ITO (Article 87), though
the operationalisation of these provisions only became most pronounced in the
wake of the demonstrations at the Geneva Ministerial Meeting. The Establishing
Agreement empowers the General Council to make ‘appropriate arrangements for
consultation and co-operation with non-governmental organisations concerned
with matters related to those of the WTO’ (Establishing Agreement, Article V,
paragraph 2). This provision does not, however, compel the WTO to develop
such linkages; rather its existence is merely to create legal space for such a
development should the need arise.
The GATT had little to do with NGOs. It did not provide for formal interac-
tion with institutions beyond the IMF, and was, in comparison, relatively hidden
from the kind of grassroots criticism levelled at the Bretton Woods organisations.
This is not to say, however, that the GATT was immune from grassroots
criticism, as this was not the case (cf. Marceau and Pedersen, 1999: 5). Not only
did trade unions consistently lobby the GATT to take account of worker rights,
as well as for a restoration of the Havana Charter (Hughes and Wilkinson, 1998:
375–6), a range of NGOs emerged specifically to oppose the General Agreement.
In response to growing calls for the WTO to increase its level of transparency
as well as pursue strategies to enhance its accountability, on 18 July 1996 the
General Council adopted a series of guidelines on relations with NGOs (WTO,
1996a). The guidelines set out the need for greater transparency in WTO
procedures by increasing access to information, particularly through expanding
the WTO’s publication of derestricted documents on its website. While the
guidelines appeared to be taking a significant step forward, the WTO’s intention
for the fostering of such a relationship became clear. NGOs were deemed to
have an important role in promoting the work of the WTO, and in the
dissemination of information about trade regulation to civic groups more widely.
The relationship was deemed not to be one sided in the sense that a degree of
reciprocity was to exist. NGOs wishing to make available ‘general information
and briefings’ to interested delegates could do so; nevertheless, the balance of
power was to remain firmly with the WTO.
That said, under no circumstances were NGOs to be included in the decision-
making forums of the WTO, or be allowed behind closed doors. Furthermore,
the WTO clearly stated that while it perceives interaction with NGOs as an
albeit laborious necessity, the responsibility for dealing with civil society remains
squarely with national governments, and in those instances when a channel of
communication is to be established between the WTO and an NGO, it is only to
be done with those NGOs that the WTO deems have a legitimate interest in
trade issues. Indeed, this approach, of engaging only with those NGOs that are
deemed suitable, is characteristic of the type of interinstitutional engagement
into which the WTO has entered. As we have seen, significant and intricate
relations with the IMF and World Bank are deemed essential in the pursuit of a
coherent system of global economic governance, as are those nurtured with
other congruous organisations such as the WIPO, yet little is made of how the
WTO might contribute to, or participate in, a global shift towards greater
representation and accountability. The WTO’s contribution to society is deemed
merely to be the economic benefits of freer trade – a contribution for which it
requires a vast amount of political agency. Little effort is made, however, to
recognise the significance of the creation of the WTO, or the system of
economic management of which it forms a central component, to the changing
nature of governance and the socio-political consequences that this change may
have. As the final paragraph of the General Council’s guidelines on relations
with NGOs states:
Members have pointed to the special character of the WTO, which is both a
legally binding intergovernmental treaty of rights and obligations among its
Members and a forum for negotiations. As a result of extensive discussions,
there is currently a broadly held view that it would not be possible for NGOs
to be directly involved in the work of the WTO or its meetings. Closer
consultation and co-operation with NGOs can … be met constructively
through appropriate processes at the national level where lies primary re-
sponsibility for taking into account the different elements of public interest
which are brought to bear on trade policy-making.
(WTO, 1996a: paragraph 6)
These guidelines set the tone of the first formal interaction between the WTO
and NGOs at the Singapore Ministerial Meeting in December 1996. The
significant increase in the exposure of international trade regulation to criticism
from NGOs ensured that a large number expressed an interest in attending the
Ministerial Meeting.
O’Brien characterises the Singapore NGO experience as mixed (O’Brien,
2000). The WTO did, in conjunction with the Singaporean government, provide
good facilities, and the proceedings of the press conference were broadcast in the
The WTO 77
NGO centre. However, delegations were only permitted from those NGOs that
could demonstrate that their interests were directly related to those of the WTO;
access to information suffered from a few logistical teething problems; NGOs
were warned against public demonstrations by the Singaporean government;
and access to national delegates proved difficult (O’Brien, 2000).
The invitation to attend the Singapore Ministerial Meeting was not, how-
ever, intended to set a precedent (Marceau and Pedersen, 1999: 13); rather, in
line with the WTO’s guidelines on co-operation with NGOs, such interaction
was to be
developed through various means such as inter alia the organisation on an ad

hoc basis of symposia on specific WTO-related issues, informal arrangement
to receive the information NGOs may wish to make available … and the
continuation of past practice of responding to requests for general informa-
tion and briefings about the WTO
(WTO, 1996a: paragraph 4)
and not through a formal and institutionalised process. Nevertheless, the

experience of Singapore bred a perception among the more critical Members
of the WTO that this first engagement with civil society was relatively
unthreatening, and as such no objections were raised to further accommodation
of such organisations at the Second Ministerial Meeting (Marceau and
Pedersen, 1999: 17).
The character of the WTO’s interaction with NGOs at the Geneva Ministe-
rial Meeting was, however, qualitatively different from Singapore. The relative
political freedom of Switzerland enabled a series of demonstrations, organised
by a coalition of NGOs, to take place illustrating a level of dissatisfaction with
the WTO that had been absent in Singapore. Though not wanting to appear to
be bowing to this kind of grassroots pressure, the Geneva Ministerial Meeting
resulted in a deepening of the WTO’s engagement with civil society beyond that
which had been expected. Throughout the Ministerial Meeting various
supportive declarations and proposals were aired with a view to increasing,
rhetorically at least, the participation of ‘civil society’ within the WTO. Renato
Ruggiero, in a particularly candid opening address, suggested that the main
challenge facing the WTO was the need to tackle issues of public concern, citing
financial instability, development, marginalisation, the environment, employ-
ment, health and cultural diversity as the major challenges. Such a challenge, he
argued, required that the WTO divert some energy towards strengthening its
relationship with ‘civil society’ (Ruggiero, 1998). While these comments did not
suggest that the WTO was about to reverse its decision not to involve NGOs
directly in the workings of the WTO, Ruggiero’s statement was followed by
comparable supportive declarations from US President Bill Clinton, US Trade
Representative Charlene Barshefsky and EU Trade Commissioner Leon Brittan.
While to some these intentions appeared largely symbolic, they were raised in
conjunction with calls for a new trade round to follow the WTO’s Third
Ministerial Meeting in Seattle in late 1999. And although the relationship
between the WTO and civil society is unlikely to mature, in the near future at
least, to such an extent that the NGOs will be invited into the workings of the
WTO, hopes were raised that the Millennium Round would not only take issues
of development more seriously, as had been promised, but that issues of public
concern would occupy a larger portion of the trade agenda.
The ‘Battle in Seattle’

However, hopes that a more amicable relationship would emerge between the
WTO and its opponents appeared increasingly unlikely in the run-up to the
Third Ministerial Meeting in Seattle in late November/early December 1999.
Indeed, the degree of energy exerted in organising an oppositional coalition to
the Ministerial Meeting prompted some to caricature the forthcoming meeting
as the ‘Battle in Seattle’. They were not disappointed. The Seattle Ministerial
Meeting encountered mass demonstrations, not only in Seattle but in many
major cities across the globe. Images of the US National Guard aboard
armoured vehicles adorned newspapers and television screens across the globe.
Seattle appeared to be a step backwards for the WTO.
The heavy-handedness of the US National Guard in attempting to disperse
the demonstrators served to obscure an equally inhibiting dynamic: inside the
Meeting the impasse among the delegates that had been threatening in the run-
up to Seattle had been realised. Significant divisions emerged over existing as
well as proposed areas of regulation; and the fall-out from the untidy compro-
mise that had been reached in the selection of the WTO’s Director-General
manifested itself in a number of areas. But more significantly, the WTO’s efforts
to abate the fears of many in the ranks of NGOs and grassroots movements
suffered a major setback. In short, the failure of the Seattle Ministerial Meeting
either to launch a new trade round or to result in a more intimate relationship
between the WTO and civil society cast a shadow over the WTO. The long-term
impact of these events, however, has yet to be gauged. We return to this point in
Chapter 7.
Conclusion
The establishment of the WTO, then, represents more than just an injection of
organisational formality into the regulation of international trade. It also
signifies a qualitative change in the nature of trade regulation. The deepening of
those areas of commerce subject to WTO rules, and its widening through the
drawing in of certain related areas, bears testimony to this. The system of global
economic governance envisaged in the WTO’s legal framework too signifies a
qualitative change in the nature of trade regulation, albeit one originally
envisaged by the wartime planners. The location of a body designed to regulate
trade at the heart of a complex system of organisations serves to solidify the
character of that system. Furthermore, it serves to privilege a certain type of
The WTO 79
organisation at the expense of others. But as we have seen, the omission from
that system of organisations such as the ILO as well as certain representative
NGOs has resulted in a considerable backlash, and one that sets the tone of the
challenges facing the WTO for at least the medium term. However, as we have
seen, issues of representation and accountability do not constitute the sum of
complaints levelled at the WTO. Those who have taken time to explore its
complex legal framework point to deficiencies within the framework itself. It is to
that framework, laid open by the conception of multilateralism set out in the
previous chapter, that the following chapters now turn.
4 Non-discrimination and
the WTO
We have so far gleaned something of the institutional evolution of international

trade regulation, the significance of the WTO’s creation, and the WTO’s
location within the contemporary system of global governance. We have seen
that the evolution of international trade regulation has been such that a critical
juncture was reached with the completion of the Uruguay Round. This juncture
brought with it an extension in the operational range of the core architectural
principles beyond the unitary focus on trade in goods under the GATT, to
include, under the WTO, trade in services, agricultural produce as well as textiles
and clothing. We have also noted that the range of these principles has been
extended to include the trade-related areas of investment and intellectual
property. And we have seen how a significant increase in the WTO Membership
has extended the geopolitical boundaries of international trade regulation. But
we have yet to establish how each of the core architectural principles is expressed
within the WTO’s legal framework. This chapter begins that task.
Apart from a general notion that MFN ought to be applied in its uncondi-
tional form, little has yet been said of the particular manner in which this
commitment to non-discrimination is utilised as a means of regulating
international trade. While the WTO has sought to decrease the range of
commercial areas exempt from its core architectural principles, the way in which
MFN is utilised in its legal framework is such that it permits discrimination in
particular instances. This ability to discriminate owes much to the way in which
the principle of MFN has been codified throughout the evolution of interna-
tional trade regulation. Nonetheless, it empowers WTO Members to qualify
their commitment to convey MFN treatment to sections of the WTO Member-
ship under certain circumstances. At one level, then, the WTO regulates
international trade in accordance with an adherence to unconditional MFN. At
a deeper level, however, the WTO permits a number of qualifications to this
principle – qualifications which have a significant impact on the way in which
the trade regime is governed.
This chapter explores the contours of the WTO’s utilisation of the principle
of MFN. By way of procedure it first examines, in more detail, the WTO’s
general commitment to non-discriminatory commercial treatment as it is
expressed across the WTO’s legal framework. Second, it explores each of those
Non-discrimination and the WTO 81
instances wherein the procurement of MFN is qualified. And third, by way of
bringing the chapter to a close, it comments on the impact of the particular way
in which the WTO operationalises this principle of indivisibility.
MFN and the WTO

The WTO’s commitment to MFN runs throughout its legal framework, though
it is only explicitly stated in three of the Agreements administered by the WTO.
Nonetheless, each of these Agreements forms the pillar of a particular section of
that legal framework. These pillars, in turn, serve to anchor the behavioural
prescriptions of the disciplines contained within each section. As we know, the
legal framework of the WTO is divided into six sections, relating to: (i) trade in
goods; (ii) trade in services; (iii) trade-related aspects of intellectual property
rights; (iv) rules and procedures governing dispute settlement; (v) trade policy
review; and (vi) plurilateral trade agreements. Of these six sections only five
apply to the WTO Membership as a whole, with the Plurilateral Agreements
relating to a specific sub-set of Members. The fourth and fifth sections relate to
procedures designed for the settlement of disputes, and for the monitoring of
international trade. As such, only the first three sections deal with the govern-
ance of international commercial behaviour.
Non-discrimination and the GATT

Contained within the three central Agreements to each of these sections – the
GATT, GATS and TRIPs – is a commitment to MFN (Articles I, II and 4 of
each Agreement respectively). In the case of trade in goods, the MFN clause of
the GATT specifies the manner in which commerce in this area is to be
conducted. The 12 remaining Agreements comprising this section then build
upon this commitment as well as deal with the particularities of the areas to
which they relate. Article I of the GATT exemplifies the WTO’s utilisation of
the principle of MFN. It states that:
[A]ny advantage, favour, privilege or immunity granted by any contracting

party to any product originating in or destined for any other country shall be
accorded immediately and unconditionally to the like product originating in
or destined for the territories of all other contracting parties.
(GATT 1994, Article I, paragraph 1)
As was the case with the ITO, this commitment to like treatment in international
commerce is complemented by two further Articles: Article III (National
Treatment on Internal Taxation and Regulation) and Article XIII (Non-
Discriminatory Administration of Quantitative Restrictions). Article III requires
that all Members apply equal treatment in terms of taxation and regulation to
imports in a manner consistent with that which is applied to domestically
produced or supplied goods by requiring that:
The products of the territory of any contracting party imported into the
territory of any other contracting party shall not be subject, directly or
indirectly, to internal taxes or other internal charges of any kind in excess of
those applied, directly or indirectly, to like domestic products.
(GATT 1994, Article III, paragraph 2)
The quantitative restrictions clause takes a slightly different form. Whereas

Article I specifies that ‘any advantage, favour, privilege or immunity granted by
any contracting party … shall be accorded unconditionally’ to all others, Article
XIII defines non-discriminatory commercial treatment in the negative. It
stipulates that the exports of a Member must not be prohibited or encounter
restriction into domestic markets, ‘unless the importation of the like product of
all third countries is similarly prohibited or restricted’ (GATT 1994, Article XIII,
paragraph 1). In this sense, Article XIII consolidates the commitment to MFN
and national treatment by requiring that restrictive practices must also be
applied in a universal fashion.
Non-discrimination and the GATS

The application of MFN in the GATS is slightly different from that relating to
trade in goods, reflecting the particular character of trade in services, though the
general principle remains the same. Article II of the GATS states that:
With respect to any measure covered by this Agreement [GATS], each

Member shall accord immediately and unconditionally to services and
service suppliers of any other Member treatment no less favourable than
that it accords to like services and service suppliers of any other country.
(GATS 1994, Article II, paragraph 1)
There are, however, two appendages which form important aspects of the
GATS’s definition of MFN. Their effect is to ensure that the regulative coverage
of the GATS is less extensive than that of the GATT, and that, as a result, the
potential liberalisation of services under the auspices of this Agreement is only
partial. First, the GATS embodies a ‘negative list’ comprising a list of specific
products exempt from MFN status lodged prior to the entry into force of the
Agreement for a specific Member (either during the negotiation period running
up to the establishment of the WTO, or during accession procedures thereafter)
(GATS 1994, Annex on Article II Exemptions, paragraphs 1–7; see Chapter 3).
Each exemption is intended to be lodged with an accompanying date after which
it can no longer be exempt from GATS rules. To ensure that this happens, all
services lodged on the negative list are subject to review every five years, and are
not normally exempt for more than 10 years. Additions to the list can only be
made after the date of entry into force of the Agreement (1 January 1995 for
founding Members; the accession date for those that join thereafter) by lodging
an application with the Ministerial Conference for a waiver.
Second, the MFN clause of the GATS empowers Members to convey prefer-
ential treatment to others without subsequent conveyance to all other Members
in instances relating to the provision of services to ‘contiguous frontier zones …
that are both locally produced and consumed’. This empowers producers whose
geographic location is such that they serve markets straddling the borders of two
or more states to operate as if those markets were subject to a single system of
regulation. As such, they can supply services without the restrictions presented by
tariffs and other barriers to trade.
Like the GATT, the GATS’s interpretation of MFN is also complemented by
a national treatment clause – though this clause appears towards the end of the
Agreement rather than in close proximity to that relating to MFN (in the form of
Article XVII). Nonetheless, the content of the GATS’s national treatment clause
largely mirrors that of its older sibling. However, unlike the GATT, the GATS is
without a comparable quantitative restrictions clause.
Non-discrimination and the TRIPs

The application of MFN in the TRIPs is slightly different again from that
found in either the GATT or the GATS. Whereas both the GATT and the
GATS seek to universalise preferential treatment, the TRIPs seeks the
standardisation of intellectual property protection (Hoekman, 1994: 100;
Wilkinson, 1999a: 166–71). As a result, MFN under the TRIPs is defined in the
following manner:
With regard to the protection of intellectual property, any advantage, favour,

privilege or immunity granted by a Member to the nationals of any other
country shall be accorded immediately and unconditionally to the nationals
of all other Members.
(TRIPs 1994, Article 4, paragraph 1)
Like the GATS, the TRIPs also makes certain qualifications to its definition of
MFN. Exempt from this obligation is any advantage, favour, privilege or
immunity accorded by a Member to another Member arising from: (i) ‘inter-
national agreements on juridical assistance or law enforcement of a general
nature and not particularly confined to the protection of intellectual property’;
(ii) the Berne and Rome Conventions (see Chapter 3); (iii) in respect of the rights
of performers, producers of phonograms and broadcasting organisations; or (iv)
international agreements relating to the protection of intellectual property in
force prior to the establishment of the WTO on the condition that the Council
for the TRIPs deems that they do not ‘constitute an arbitrary or unjustified
discrimination against nationals of other Members’ (TRIPs 1994, Article 4,
paragraph 1a–b).
The TRIPs interpretation of MFN is also complemented by a national
treatment clause, though it too omits to include a quantitative restrictions
provision. The omission of a quantitative restrictions clause in either the GATS or
the TRIPs signals, in this latest phase of trade regulation, a commitment to move
away from the discriminatory and trade-distorting effects of such restrictions.
Out of keeping with the more traditional way in which trade agreements are
drafted (exemplified by the style of both the GATT and GATS), the national
treatment clause of the TRIPs falls prior to that relating to MFN (in the form of
Article 3 of the TRIPs). Like its interpretation of the principle of MFN, the
TRIPs’ interpretation of national treatment requires that all Members accord
nationals from other Members comparable intellectual property protection
subject to exceptions consistent with the provision of the Paris, Berne and Rome
Conventions, or in the Treaty on Intellectual Property in Respect of Integrated
Circuits (TRIPs 1994, Article 3, paragraphs 1–2).
What we see in the way in which the principle of MFN and its corollaries are
expressed in the GATT, GATS and TRIPs is the beginning of a pattern. The
style in which international trade has been regulated under the GATT has been
extended to the new commercial areas now administered by the WTO. And
although we see minor alterations in the way in which, particularly, the principles
of MFN and national treatment are utilised in the GATS and TRIPs, we see the
standardisation and consolidation of international trade law around a known
format.
MFN qualification and the principle of indivisibility

This regulatory standardisation is not, however, without anomalies. Across the
legal framework of the WTO there exist eight instances in which Members are
empowered to qualify their procurement of MFN, and thus engage in
discriminatory activity. These instances relate to balance of payments difficulties,
newly acceded Members, general and security exceptions, anti-dumping,
customs unions and free-trade areas, the settlement of disputes, nullification and
impairment, and the establishment of infant industries (see Table 4.1). Each
exception has evolved from provisions made under the GATT, though the
creation of the WTO has augmented their application. These instances, in turn,
have a significant impact on the way in which the WTO organises commercial
relations among its Members. Moreover, to varying degrees, each instance
wherein qualification is permitted affects Members in different ways.
However, it is not just the legal framework that empowers Members to engage
in discriminatory activity. The WTO itself, as well as its predecessors, is based on
a system of discrimination. Members of the WTO are only required to procure
MFN status to other Members, and not to those that lie outside of the WTO
(though Members can of course convey preferential treatment to non-members
through bilateral and other arrangements). The purpose of this exclusive
provision of MFN is generally held to be two-fold: first, to act as a safeguard
against free-riding – the accrual of benefits without corresponding commitment;
and second, to highlight the benefits of participation in the trade regime and
thus make it an attractive option to non-members. In this sense, then, the WTO
remains an exclusive club of traders (see Curzon and Curzon, 1974).
Table 4.1 Qualifications to the principle of MFN
Qualifying provision Purpose for qualification
Article XII (GATT 1994 and GATS) To enable Members to rectify adverse
balance of payments situations
Article XVIII Section B (GATT 1994) Similar to the provisions laid out in Article
XII. Section B of Article XVIII allows
developing countries temporarily to
suspend their provision of MFN
Article XIII Establishing Agreement (Article Allows states to exercise their sovereign
XXXV GATT) autonomy by not procuring MFN to new
Members should they see fit
Articles XX and XXI (GATT 1994), XIV To enable Members to withhold the
and XIVbis (GATS), and Article 73 (TRIPs) provision of MFN under the auspices of
general and security exceptions
Article VI (GATT 1994) To protect Members against ‘material
injury’ arising from instances of dumping
Article XXIV (GATT 1994) To allow Members to operate accelerated
trade liberalisation processes unhindered
by WTO rules, by allowing for the
formation of customs unions and free-
trade areas
Article 22 (Dispute Settlement Understanding) To act as a sanctioning mechanism in the
event of a Member failing to abide by the
recommendations of the Dispute
Settlement Body and/or the Appellate
Body
Article XXIII (GATT 1994) To enable Members, once all other avenues
have been exhausted, to suspend their
procurement of MFN in instances relating
to the nullification or impairment of the
value of previously conferred concessions
Article XVIII Section A (GATT 1994) To offer protection for the establishment of
an industry, or to shelter those industries in
their infancy
Balance of payments
Article XII and Section B of Article XVIII of the GATT and Article XII of the
GATS set out the first of the qualifications of the principle of MFN. Under both
GATT and GATS rules, Article XII allows Members temporarily to enact
restrictive trade practices in order to protect against worsening balance of
payments situations. Section B of Article XVIII makes similar provisions for
developing Members.
Paragraphs 3 to 5 of Article XII set out the preferred course of action for a
Member to pursue should it experience balance of payments difficulties. These
paragraphs temporarily empower Members to implement, and determine, the
incidence and severity of import restrictions necessary to relieve the pressure
caused by such difficulties. They enable Members to undertake such activity so
as to ‘forestall the imminent threat of, or to stop, a serious decline in its monetary
reserves … [or] to achieve a reasonable rate of increase in its reserves’ (GATT
1994, Article XII, paragraphs 2(a)(i) and (ii)). However, such activity must be
conducted with due regard for the economic interests of other Members (GATT
1994, Article XII, paragraph 3(c)(i); GATS 1994, Article XII, paragraph 2).
Moreover, such activity must be conducted in such a way that it does not ‘impair
regular channels of trade … [or] prevent the importations of commercial
samples or … compliance with patent, trade mark, copyright, or similar
procedures’. These restrictions must then be relaxed as the situation eases
(GATT 1994, Article XII, paragraphs 3(c)(ii) and (iii)).
The restrictive practices available under these provisions normally take the
form of quantitative restrictions, such as quotas, import licences or duties. When
implementing such measures, Members are required to consult with both the
WTO and the Member(s) towards which the restrictions are directed, as to the
nature of balance of payments difficulties, and agree a date at which these
measures will be reviewed (GATT 1994, Article XII, paragraphs 4(a) and (b)).
In the event that protracted balance of payments difficulties occur, a troubled
Member may be invited ‘into consultations’ to discuss possible courses of action
to alleviate the situation. Further, in the event of ‘a persistent and widespread
application of import restrictions … [Members] shall initiate discussions to
consider whether other measures might be taken’ either to step up the action
within the troubled state, or to remove the external source of the balance of
payments deficit (GATT 1994, Article XII, paragraph 4(d)). Section B of Article
XVIII B makes available similar provisions for LDCs in the context of a more
relaxed time period. There is, however, a condition to this Article. By undertak-
ing such action Members are required to alter their future domestic economic
policies and strategies to avert a repeat of such an incident. Moreover, such
future refocus must be in the spirit of the WTO’s commitment to the liberalisa-
tion of trade – an action in itself which narrows the range of possibilities open
to a given state (GATT 1994, Article XII, paragraph 3(a)).
Under GATT 1947 rules, if after a predetermined period Members enacting
discriminatory practices under Articles XII and XVIII Section B had not
bettered their balance of payments situation they were invited to enter into
‘discussions’ in the pursuit of a resolution to the situation. If after embarking on
such discussions an observable change had not occurred, and/or the current
course of action had proved to be detrimental to another, as a last resort the
initiating Member could be released from the Agreement (GATT 1947, Article
XII, paragraph 4(d); Section B of Article XVIII, paragraph 12(d)). The
existence of a provision permitting the Contracting Parties to release one of
their number from the GATT was designed to add some weight to the need for a
particular signatory to address its balance of payments problems and revert to
normality – that is, back to GATT rules – as soon as possible. However, release
from the General Agreement was seldom considered as a serious option. This
resulted in quite a problem. In instigating policies designed to counter an adverse
balance of payments situation, Contracting Parties were presented with an
opportunity to renege on their commitments for longer, or to a greater degree,
than ought to be the case, thus enabling them to incur a temporary commercial
advantage. The lack of an adequate enforcement mechanism during the GATT
years served to compound this problem further. What resulted, then, was an
abuse of these provisions by certain states.
The Uruguay Round sought to rectify the ability of Members to gain a
temporary advantage by strengthening the requirements of Articles XII and
Section B of Article XVIII. This involved making provisions for a greater role to
be played by other Members by increasing the frequency of ‘discussions’ as one
means of pressing Members to alter their discriminatory practices as soon as an
adverse balance of payments situation had been rectified. Yet the strengthening
of these requirements by including other Members in the ensuing discussions has
created a further problem. Members experiencing protracted balance of
payments difficulties may be pressured or coerced into implementing policies
that they would not have otherwise embarked upon. Or they may be pressured
into reversing discriminatory practices too soon. That is to say, these provisions
now enable others to exert undue influence in the internal affairs of a Member
during balance of payments discussions – influence which may be detrimental to
the Member in question. As a consequence, then, while seeking to close one
window of opportunity, another may have been inadvertently opened.
Non-application
The opportunity to exercise overt influence in the economic affairs of another
state can also be found in the non-application clause – Article XIII – of the
WTO’s Establishing Agreement. Article XIII relates to the qualification of MFN
with regard to newly acceded Members of the WTO. Paragraph 1 of this Article
states that the
Agreement and the Multilateral Trade Agreements in Annexes 1 and 2

[trade in goods; trade in services; and intellectual property] shall not apply
as between any Member and any other Member if either of the Members,
at the time either becomes a Member, does not consent to such application.
Put another way, Article XIII enables established Members of the WTO to
withhold their application of MFN in relations with new Members should they
see fit to do so. This builds on the non-application clause of the GATT 1947
(Article XXXV).
The non-application clause was not included in the initial drafting of the
GATT. It was only after the Contracting Parties unanimously agreed to make
accession to the General Agreement dependent on a three-quarters’ majority vote,
instead of the previous requirement of unanimity, that its inclusion was sought.
With this change in voting came debate over the status of GATT rules for non-
consenting Contracting Parties and their newly acceded counterparts (Curzon,
1965: 37). Some Contracting Parties were concerned that in the absence of
unanimity, they would have little say on the future composition of its signatories.
By way of pandering to these concerns, a proviso was added to Article XXXIII
(Accession) empowering Contracting Parties to refrain from applying GATT
concessions to newly acceded Contracting Parties to which they had not given
their consent. This later evolved into Article XXXV.
Japan suffered more than most under the provisions of Article XXXV in the
years immediately following its accession. This built upon a history of discrimi-
nation pre-dating Japan’s accession to the General Agreement. Japan was kept out of
the GATT for nearly 10 years while the also defeated Germany was allowed to
participate from the outset. This was in spite of Japan’s membership of the IMF
and World Bank. Even Japan’s request for an observer to attend GATT
negotiations after the signing of the 1951 peace agreements was strongly
opposed. This opposition was based on various perceptions of the way in which
Japanese industry was organised. It was claimed that certain business practices
imbued Japan with an unfair commercial advantage (Patterson, 1966: 276) – a
claim that has continued to be a feature of international discourse between
Japan and its industrial rivals (see Donnelly, 1994: 493–4; Hatch, 2000: 385–6).
The UK led much of the opposition to Japan’s accession to the GATT, with
France, Australia, New Zealand, South Africa, Belgium, Luxembourg and the
Netherlands also voicing strong disapproval (Patterson, 1966: 285–6). In spite of
this opposition, with US backing Japan acceded to the GATT in September
1955. This accession resulted in 40 per cent (then 14 states) of the Contracting
Parties invoking Article XXXV allowing them to refrain from conveying MFN
status to Japan. Japan reacted by reciprocating non-application with regard to
those developing countries instigating the clause (Wang, 1994: 60, 66–7, 71). Yet
it did not seek such reciprocation in relations with its developed counterparts.
The result of this action was that Japan spent a good deal of its time in the
GATT as a nominal participant seeking to negotiate the full range of commer-
cial concessions open to much of the remainder of the Contracting Parties.
Much of the debate relating to the nature of Japanese industry revolved
around the price of its labour, the violation of copyright laws and patent rights,
the use of ‘false marks of origin, and the sudden flooding of markets for the
purpose of destroying competition’ (Patterson, 1966: 274). Many of these
allegations were, however, merely veiled attempts by the industrial countries to
disguise the growing anti-Japanese feeling that had developed in the years
following the Second World War as well as a means by which to offset the rapidly
developing competitiveness of Japan’s industrial base. Japan’s main opponents
argued that, not only was Japanese industry (particularly its manufactures
industries) relatively labour intensive, but the price of its labour was below the
value of its marginal output, a factor which the industrial countries interpreted
to be exploitative. This, it was suggested, was in part due to the lack of
unionisation in Japanese industry (Patterson, 1966: 274–8).
Although the severity of the discrimination suffered by Japan has not been
repeated, the non-application clause was frequently invoked between Contract-
ing Parties during the GATT’s reign as the regulator of international trade. Lei
Wang notes that out of the 112 Contracting Parties in 1993, 79 pairs had at one
time or another invoked Article XXXV, 13 of which were, at that time, still
current. What is more, Wang notes that under WTO auspices the non-
application clause may have actually been strengthened rather than eroded
(Wang, 1994: 70–3). Under GATT 1947 rules, newly acceded Contracting
Parties had the right to reciprocate non-application. However, WTO rules
deprive Members of this right. As Wang explains:
As a result, the acceding party is likely to [be] blackmailed by the threat of

non-application by some Members in cases of dissatisfaction with the con-
cessions made by the acceding party. Therefore, it could be said that the
unilateralism inherent in the non-application [clause] is reinforced by the
WTO provisions, which would put an acceding party in a particularly disad-
vantageous position by its accession negotiation.
(Wang, 1994: 70–1)
Two issues, highlighted by the Japanese case, arise from the non-application
clause which remain pertinent to contemporary international commerce. First,
under the guise of Article XIII prospective Members of the WTO may be urged
to make certain alterations to aspects of their national economy as a prerequisite
for Membership, beyond that which is required by WTO rules. This could witness
some Members inappropriately linking other demands to accession protocols for
WTO Membership. Second, certain Members may threaten others with Article
XIII to extract further (and often unacceptable) concessions from others, thus
imbuing the former with a commercial advantage greater than that which would
normally be deemed fair in the context of accession negotiations. What we have,
then, is a situation wherein the future trade relations of an acceding country can
be arranged in such a way that they are disadvantaged from the outset.
The severity of this problem is compounded by the relative economic position
of those states that are already Members of the WTO and those that are
seeking, or have yet to seek, Membership. Without exception, the WTO’s
Membership comprises the world’s leading industrial states. Those seeking
accession, however, are made up of developing or transitional states. There
already exists a vast difference in the economic fortunes of both of these sets of
states. The non-application clause could be used in such a way that these global
disparities are consolidated rather than eroded.
Caveats do exist to Article XIII, though they do little to modify the conse-
quences of the clause. Paragraph 3 requires that the Ministerial Conference be
notified of such action prior to the approval of terms of accession, and
paragraph 4 allows for the review of non-application by the Ministerial Council
on behalf of a Member. Should the Ministerial Council, upon reviewing the
implementation of Article XIII, find against such activity, it can make a series of
recommendations. Such recommendations, however, cannot be enforced as it is a
Member’s right to invoke non-application.
More widely, the non-application clause illustrates the futility many organisa-
tions suffer in dealing with the need to maintain the sovereign autonomy of their
member states. By respecting the sovereign and equal status of states, the WTO
cannot force Members to procure MFN to new Members if they do not wish to
do so at the time of accession. Nevertheless, to paraphrase Patterson, what is
‘embarrassingly’ clear is that there is little ‘defense to be made of the discrimi-
natory practices’ possible under the non-application clause (Patterson, 1966:
290).
General and security exceptions

The opportunities for Members to implement discriminatory practices under
WTO rules do not end with the balance of payments and non-application
clauses. The three commercial pillars of the WTO’s legal framework also
contain provisions empowering Members to make ‘General Exceptions’ to their
application of MFN. These come in the form of Article XX of the GATT,
Article XIV of the GATS, and the slightly ambiguous Article 17 of the TRIPs.
Article XX of the GATT and Article XIV of the GATS empower Members to
suspend their procurement of MFN if they deem it necessary to protect public
morals; human, animal or plant life or health; in relation to the importation or
exportation of gold or silver; to secure compliance with domestic laws that are
not consistent with the Agreement; relating to the products of prison labour; to
protect national treasures; the conservation of natural resources with regard to
obligations under any intergovernmental commodity agreement; for the needs of
domestic consumption; and for those goods that are identified as in short local
supply (GATT 1994, Article XX, paragraphs (a)–(j); GATS 1994, Article XIV,
paragraphs (a)–(e)). Article 17 of the TRIPs merely specifies that ‘Members may
provide limited exceptions to the rights conferred by a trademark, such as fair
use of descriptive terms, provided that such exceptions take account of the
owner of the trademark and of third parties’.
Further exceptions can be made for security reasons under Article XXI of the
GATT, Article XIVbis of the GATS, and Article 73 of the TRIPs. Article XXI
of the GATT typifies these provisions. It empowers Members to refrain from
conveying MFN status to others to protect sensitive information, to secure
fissionable materials and related structures, to constrain the traffic of arms and
other military or dual purpose hardware, in time of war or other international
crises, and to prevent any other Member seeking to pursue policies contravening
UN obligations under the Charter for the Maintenance of International Peace
and Security (GATT 1994, Article XXI, paragraphs (a)–(c); GATS 1994, Article
XIVbis, paragraphs 1(a)–(c); TRIPs 1994, Article 73, paragraphs (a)–(c)).
These Articles, like Article XIII of the Establishing Agreement (and Article
XXXV of the GATT), exist primarily to preserve the sovereign autonomy of the
WTO’s Members. However, as with Article XIII of the Establishing Agreement, they
are open to abuse. They enable Members to enact import bans or other
restrictions on foreign produce when in fact such restrictions may prove
unjustified. Examples of such behaviour can be found littered throughout the
history of the GATT. For instance, with regard to the general exceptions clause,
prior to the establishment of the WTO the Thai government implemented a ban
on the importation of all cigarettes. This action was justified as part of a general
campaign to control the incidence of smoking among its population. However, a
GATT Panel found that domestic producers were not subjected to the same
restraints as those imposed on foreign producers. As a result, the Thai govern-
ment was found to be in contravention of Article III (national treatment) of the
GATT. Furthermore, the Panel found that the ban was inconsistent with the
general achievement of the government’s stated goal, as it neither applied to
domestically produced cigarettes, nor reduced the level of national consumption.
As a result, Thailand’s policy was deemed to be inconsistent with the enactment
of Article XX, and it was asked to rectify the situation (GATT, 1990: esp. 1–3).
More recently, in the first dispute brought before the WTO resulting in the
operationalisation of the full extent of the WTO’s dispute settlement procedures,
the US unsuccessfully attempted to qualify its provision of MFN under the
general exceptions clause – a case which is explored in more detail in Chapter 6.
Put simply, the US utilised paragraphs (b), (d) and (g) of Article XX of the
GATT to enable it to withhold MFN provision on imports of gasoline from
Venezuela and Brazil. The action was deemed to be justified under the 1994 US
Clean Air Act as a means of protecting the environment. However, both the
DSB Panel established to consider the case and the WTO’s Appellate Body
found that these measures were inconsistent with the stated objective, and
constituted unjustifiable discrimination as it unfairly disadvantaged Venezuelan
and Brazilian gasoline imports. The Appellate Body was, however, at pains to
point out that it did not wish to interfere with a Member’s ability to safeguard its
environment.
What results from the extension of the general and security exceptions clauses
to trade in services and intellectual property is the consolidation of an
opportunity for Members to engage in unjustifiable discriminatory activity. The
line between that which is justifiable and that which is not, is not as clear as is
perhaps the case under the non-application clause. The US gasoline case
illustrates that good reason can be found as the basis upon which to utilise these
provisions, even if the particular manner in which they are utilised is found to be
at odds with the stated aim of such action. The result, as with much of the legal
framework of the WTO, is that each instance where these provisions are enacted
must be carefully monitored.
Anti-dumping
Discriminatory action can also be undertaken by utilising the anti-dumping
provisions of the GATT. However, the line between justifiable and unjustifiable
discrimination is much vaguer here than in the proceeding provisions. Article VI
of the GATT enables Members to modify their procurement of MFN in
instances when dumping occurs. Broadly speaking, dumping is understood as the
selling of products in other markets at prices below that which the product
reaches in domestic markets. In extreme cases dumping refers to the selling of
products in other markets at less than the total cost of production. Dumping
may be undertaken by producers in an effort to reduce stockpiles of perishable
produce in order to gain some return for production, or to reduce the level of
competition in foreign markets. Nevertheless, the effects of dumping are
generally held to be the same. In flooding markets with cheap goods, producers
crowd out foreign competition by consistently undercutting the price of
competitor products. Further, because larger firms can run at a loss for
proportionately longer than smaller firms, and can sell their goods at a price less
than the cost of production in the pursuit of the longer term gains associated
with an increase in market share, producers may be encouraged to engage in
dumping. This can create market instability, and can be detrimental to the
trading practices of small firms, and ultimately small and more sensitive
countries.
Article VI of the GATT defines dumping as a situation wherein the ‘products
of one country are introduced into the commerce of another country at less
than the normal value of the products’. The Agreement differentiates this from
‘hidden dumping’, which is taken to be a situation where goods are sold to an
importer at a price below that corresponding with the ‘price invoiced by an
exporter with whom the importer is associated, and also below the price in the
exporting country’ (GATT 1994, Article VI, paragraph 1). The GATT ascribes
the value of a product as either that which is a comparable price in foreign
currency (with reasonable allowance for exchange rate fluctuations) to that of the
home market equivalent; or, in the absence of a domestic price for comparison
(in instances where products are made solely for export), goods are considered to
be dumped if the price (taxation and other differences affecting sale aside) is
less than the highest comparable price for the like product for export to any
third country in the ordinary course of trade, or the cost of production of
the product in the country of origin plus a reasonable addition for selling
cost and profit.
(GATT 1994, Article VI, paragraphs 1(a) and (b))
Action to counter the effects of dumping can only be undertaken in instances

where it ‘causes or threatens to cause material injury to an established industry in
the territory of a contracting party or materially retards the establishment of a
domestic industry’ (GATT 1994, Article VI, paragraph 1). In this sense,
dumping is not an illegal practice; rather the GATT recognises the negative
effects that such action can have.
In cases where dumping is deemed to cause material injury, states are empow-
ered to introduce a levy on the product in question – known as a countervailing
duty. The value of this levy must not, however, exceed the margin of dumping
(that is, the difference between the dumped price and a subsequently determined
‘real’ price). In order to implement a levy, the enacting Member must be sure
that a product upon which the levy is to be introduced is being dumped,
evidence must be collected, and the WTO notified of such action, unless the
damage caused by this dumping would prove difficult to repair if immediate
action were not undertaken (GATT 1994, Article VI, paragraph 6(c)). In
instances where the material injury associated with dumping is understood to be
immediate, Article VI empowers Members to implement levies without prior
consultation with the WTO, although it must be notified as soon as is possible.
The introduction of a levy does not, however, suspend MFN. Rather, it seeks
the rectification of a ‘normal’ situation. This is because the imposition of a levy
merely reinstates the price which a good would normally have reached in foreign
markets at MFN rates. Put another way, rather than introducing sanctions over
and above the original level for such action, countervailing duties offset the
artificially low price of dumped goods. Entry into foreign markets by goods of a
disproportionately lower price than domestic values, at MFN rates (that is, at the
minimum tariff level) with the addition of a levy, equates to normally priced
goods entering markets under MFN auspices. This is because the value of the
levy cannot be more than the difference between the value of the dumped good
and its normal price. Here the price of the dumped goods minus the benefits
from MFN entry into foreign markets plus the value of the levy is equal to the
normal price of the good in question (that is, the equivalent price the good sells
for in home markets plus the value of entry tariffs taking into account the
benefits of MFN).
This appears to be reasonably straightforward. This, however, is not the case.
The principal problem with the anti-dumping measures lies in the absence of a
comprehensive definition of what constitutes ‘material injury’. It is the absence
of such a definition that presents Members with the opportunity to engage in
discriminatory activity in the pursuit of an unfair commercial advantage. In
order to justify the introduction of a countervailing duty, Members are required
to demonstrate that the practices of another are such that they cause injury to a
particular industry. But the imprecision of the term ‘injury’ is such that it can
vary considerably in its interpretation. It is this variance that presents Members
with an opportunity to engage in discriminatory activity contrary to the
Agreement.
Customs unions and free-trade areas

Among the most debated of qualifications to the procurement of MFN is found
in Article XXIV of the GATT (see, among others, Hanson, 1998; Coleman and
Underhill, 1998; Wilkinson, 1998; Gamble and Payne, 1996; Schultz, 1996;
Siebert et al., 1996; Bowles and Maclean, 1996; Bhagwati, 1990). Article XXIV
is qualitatively different from the provisions that we have so far surveyed.
Whereas the non-application clause, for instance, enables Members to engage in
discriminatory practices, Article XXIV empowers Members to convey extra-
preferential treatment above the previous level of MFN to Members within a
specific geographic location, relating to frontier traffic, customs unions and
free-trade areas. It is because this extra-preferential treatment is not subsequently
conveyed to all Members that Article XXIV is deemed to be discriminatory.
The GATT defines a customs union as
the substitution of a single customs territory [normally a single Member] for

two or more customs territories, so that … duties and other restrictive regu-
lations … are eliminated with respect to substantially all the trade between
the constituent territories of the union or at least with respect to substan-
tially all the trade in products originating in such territories.
(GATT 1994, Article XXIV, paragraph 8(a)(i))
Similarly, though not identical, a free-trade area is defined as a ‘group of two or

more customs territories in which the duties and other restrictive regulations …
are eliminated on substantially all the trade between the constituent territories in
products originating in such territories’ (GATT 1994, Article XXIV, paragraph
8(b)). These differences aside, under WTO rules both groups are to be treated as
if they constitute a single Member – though in doing so, they must not prevent
the procurement of advantages to other Members.
The EU is perhaps the most prolific example of a territory benefiting from
the provisions of Article XXIV and the regional project that has attracted the
most attention. In trading relations among the 15 member states of the EU,
barriers to trade only nominally exist (for example, in regard to those natural
barriers to trade that are associated with the transportation of goods from one
side of the EU to another). However, in relations with other WTO Members
outside of the confines of the EU, each Member operates a common (to all EU
member states) external tariff, and procures MFN accordingly. MFN is qualified
only in that the preferential treatment (over and above that of MFN required by
the WTO) accorded among EU member states is not accorded to all other WTO
Members (which nonetheless receive MFN).
There is an innate logic to Article XXIV. By empowering states to collectivise
and convey to one another extra-preferential treatment, the liberalisation of
trade within that group has the potential to accelerate at a rate above that under
general WTO rules. This accelerated liberalisation may then spill over into the
wider environment and act as a stimulant. In this sense, an increase in the
volume and value of trade is created, first within the subset and then by
extension in the trade regime writ large. But to ensure that customs unions and
free-trade areas meet WTO requirements, each regional grouping is required to
register with the WTO and to conform with its rules.
The ability to offer extra-preferential treatment to a small sub-set of Mem-
bers under the auspices of either a customs union or free-trade area, however,
has come in for significant criticism. Rather than acting as a stimulant to trade,
the collectivisation of certain states is deemed to have a trade-diverting function.
Trade flows may be stimulated within the group as they benefit from extra-
preferential treatment, but this will not have a corresponding spillover effect.
Rather, trade will be diverted away from the region as the goods and services
from outside suffer relative cost disadvantages in the market place from their
competitor products within the group. This, in turn, has the capacity to lead to
an increase in discrimination as customs unions and free-trade areas are played
off against one another, causing, at the extreme, a breakdown in international
commerce (see Salvatore, 1993; Thurow, 1992).
Two reports have produced markedly different findings on the supposed
effects of regional associations and illustrate something of the lack of consensus
on this issue. A 1995 WTO study of more than 100 regional trade agreements
put into operation since the Second World War found, perhaps somewhat
unsurprisingly, that regional arrangements and the multilateral trading system
have acted in broad complement in the pursuit of freer trade (WTO, 1995b). In
contrast, a 1990 UN Committee for Development Planning (CDP) study
concluded that the existence of free-trade areas in Europe, and between the US
and Canada, the US and Israel, and Australia and New Zealand, did in fact
discriminate against third countries, particularly developing states, in this
manner (The CDP Report, 1990: 1–5).
While no attempt is made here to reconcile the differences of interpretation
surrounding Article XXIV, the provisions of this Article can have markedly
different effects. Much of this differentiation results from the relative starting
point – meaning the relative competitiveness of goods originating from different
industrial bases – of states engaged in customs unions and free-trade areas. Put
crudely, the disadvantages faced by goods from developing countries in industrial
markets are compounded further by the extra-preferential treatment within
customs unions and free-trade areas comprising the latter. This is because
products from the industrial states, which already have a competitive advantage,
gain additional benefits from extra-preferential treatment. The converse,
however, is quite different. The extra-preferential treatment accorded to
developing Members engaged in customs unions or free-trade areas does not
serve to disadvantage goods from industrial countries to the same extent, though
it may narrow something of the gap in competitiveness between goods of
different origins. As a result, goods from industrial countries remain competitive
in developing markets in spite of the conveyance of additional benefits to
members of the collective. The consequence is that this qualification of MFN
when operationalised can have vastly different consequences. These conse-
quences, in turn, have the capacity to disadvantage further vulnerable states.
Dispute settlement and MFN

Qualitatively different again are the deviations from MFN provision found in the
Dispute Settlement Understanding (DSU). Rather than presenting Members
with an opportunity to pursue a course of unilateral action designed to bring
about a commercial advantage, the DSU only has the power to authorise the
suspension of MFN vis-à-vis a particular Member once a series of dispute
settlement procedures has been exhausted. Such procedures require that the
suspension of MFN is authorised only in instances when a Member has failed to
adopt – after a period of 60 days – the recommendations of either a DSB Panel
or the Appellate Body (DSU 1994, Article 25). The purpose of this suspension is
two-fold: to protect both the interests of Members in their trading relations with
others; and to act as a safeguard for the system as a whole. However, the
effectiveness of this provision is dependent on the impact that the suspension of
MFN privileges has on the violator.
Article 22 of the DSU stipulates the course of action a Member may wish to
undertake when deliberating over the suspension of its MFN procurement. First,
the injured party is asked to consider suspending only those concessions which
relate to the sector in dispute (DSU 1994, Article 22, paragraph 7(f)(i)–(iii)).
Second, if the suspension of sector-specific concessions fails to rectify the
situation (that is, to deter the violator from further dissent), then the injured party
may suspend ‘concessions or other obligations in other sectors under the same
agreement’ (DSU 1994, Article 22, paragraph 3(d)). In this sense, then, the
qualification of MFN occurs only in instances when it has been previously
withheld or compromised. Furthermore, it was in response to some of the
unilateralism permissible under GATT rules that the dispute settlement
procedures were strengthened. Nevertheless, a key problem remains. The
mechanisms embodied in the DSU are not automatic; rather, they rely upon
Members to instigate such procedures. In this sense, then, unilateral action
arising from a contravention of a given Article or Articles, or through the
improper use of one of the provisions outlined here, can only be countered by
the action of one Member lodging a formal complaint. As such, the DSU
cannot independently attempt to counter all instances wherein Members seek
unfair commercial advantage. The dispute settlement mechanism is the subject
of a more detailed discussion in Chapter 6.
Nullification and impairment

Although the DSU procedures of the WTO now form the bulk of those relating
to dispute settlement, provisions still exist within the GATT relating to
nullification and impairment (the GATT’s dispute settlement provisions) in the
form of Article XXIII. As we noted in Chapter 2, the purpose of this provision
is to empower Members to suspend their procurement of MFN to another
Member or Members if it is deemed that the action of the latter in some way
nullifies or impairs the value of previously negotiated concessions. This
empowerment, however, is a last resort and can only be embarked upon once a
particular procedure has been followed. In reality, all disputes are now handled
by the dispute settlement procedures of the WTO.
Infant industries, development and MFN

Qualitatively different again are those provisions enabling states, particularly
developing states, to engage in discriminatory activity under the auspices of
‘Governmental Assistance to Economic Development’. These provisions are
found in Section A of Article XVIII of the GATT and enable Members to
suspend their procurement of MFN in order to protect the establishment or
development of infant industries. As a result of various amendments to the
GATT, the definition of a ‘developing country’ includes not only those Members
in the early stages of development, but also those Members whose economies
were still disproportionately dependent on the production of primary products
(GATT 1994, Ad Article XVIII, paragraph 2).
Paragraph 2 of Article XVIII states that ‘[Members] should enjoy additional
facilities to enable them … to maintain flexibility in their tariff structure to be
able to grant the tariff protection required for the establishment of a particular
industry’. This enables developing Members to qualify their procurement of
MFN for specific goods which they deem will undermine those produced by
infant industries through excessive competition. Paragraph 4(a) of Article
XVIII allows for less developed Members to deviate from these provisions by
utilising ‘other Articles’ of the Agreement relating to development. Broadly
speaking, these provisions enable developing countries to pursue four different
types of action under WTO rules. First, to reduce their level of obligation
under certain Articles below that required by other Members. Second, to
contribute their best endeavour in particular circumstances. Third, to benefit
from a longer period within which to meet certain WTO obligations. And
fourth, to benefit from technical assistance in given instances. Table 4.2 on
p. 98 provides an overview of the incidence of these provisions across the
WTO’s legal framework.
The provisions of Section A of Article XVIII are privy to the usual
GATT/WTO restraints: that is, if the actions of a Member in the pursuit of
economic development adversely affects the economic fortunes of another, then
the initiating Party must rectify the situation (paragraph 5); and all instances of
MFN qualification are subject to periodic (annual) review by the WTO
(paragraph 6). Further, should LDCs find that the provisions laid down in
Sections A and B (balance of payments – see above) of Article XVIII are
insufficient for promoting domestic economic development, then Sections C and
D may be enacted.
Sections C and D empower developing Members to implement provisions
over and above those specified by Sections A and B of Article XVIII in order to
raise ‘general standard[s] of living [for] its people’, providing that all avenues
contained in Article XVIII have been exhausted. Providing that the WTO is
notified, and after a 30-day period or further consultations with other Members
of the intentions of a Member in difficulty, then Members are free to implement
measures to ‘remedy these difficulties’. However, the WTO requires that
consultations are called between the implementing Member and other Members
if other Members consider it necessary. During these consultations implementing
Members must specify the purpose of the proposed measure(s), any alternative
measures which may exist, and the possible effect ‘of the measure proposed on
the commercial and economic interests of other Contracting Parties’ (GATT
1994, Article XVIII, paragraph 16).
Table 4.2 Provisions made for lesser and least developed countries in the WTO’s legal
framework
Area (Article or Type of Concession
Agreement)
Reduced level of Best Increase in Technical
obligation endeavour implementation period assistance
Agreements:
Establishing – Least Least Least
Agreement
TRIMs LDC LDC and LDC and Least –
Least
TRIPs – LDC LDC and Least LDC and
Least
Agriculture LDC and Least LDC and LDC Least
Least
DSU – LDC and – LDC
Least
Textiles and – Least Least –
clothing
Trade policy LDC and Least – – LDC and
review Least
Sanitary/ – LDC and LDC and Least LDC
phytosanitary Least
Technical barriers LDC LDC LDC and Least LDC and
Least
Import licensing LDC LDC and LDC –
Least
Subsidies/ LDC and Least LDC LDC and Least
countervailing
measures
Safeguards LDC LDC – –
Preshipment – – – LDC
inspection
GATS LDC LDC and LDC and Least LDC and
Least Least
GATT Articles:
Anti-dumping – LDC – –
(Article VI)
Customs LDC LDC LDC LDC
valuation (Article
VII)
Balance of LDC and Least – – Least
payments (Article
XII, also Article
XVIII Section B)
Subsidies (Article LDC and Least LDC LDC and Least –
XVI)
Part IV (Trade and LDC – LDC LDC
Development)
Sources: Hoekman and Kostecki (1995: 285), GATT (1994).
Note: LDC = Less/Lesser developed country; Least = Least developed country.
The impact of this qualification of MFN on the ability of Members writ large
to be privy to that which is deemed to be indivisible (that is, the sum of the
preferential treatment accorded by Members) is negligible. At best, the provisions
of this Article empower developing countries to seek a means of bridging the
gap in competitiveness for particular products. Even then, however, these
measures are temporary. At worst, these provisions will have little impact on the
flow of goods, and may not result in any increase in competitiveness. While it
remains that this provision has the capacity to enable some to pursue an unfair
commercial advantage, the impact of that advantage on the general provisions of
MFN is likely to be minimal.
Trade governance and the qualification of MFN

In exploring the first of the WTO’s core architecture principles we begin to see
an uneven picture emerging. On the one hand, the WTO’s legal framework
requires that Members adhere to unconditional MFN, whereas, on the other,
eight instances exist wherein Members are empowered to qualify this require-
ment. What results is a generalised principle of conduct (in this case MFN)
perceived to be indivisible, yet which can be divided, and more significantly
withheld from others, in particular instances. The way in which MFN is divided
is not, however, uniform. Opportunities for overt discrimination are more
pronounced under the non-application and general and security exception
clauses contained in the legal framework than they are in the other instances,
particularly those relating to the establishment of infant industries – though here
too Members are presented with opportunities to pursue a commercial
advantage. Among these, the non-application clause causes the most problems,
principally because it has the capacity to disadvantage an acceding state from the
outset, thus precluding it from utilising the full value of MFN. Moreover, the
relative economic character of states towards which this Article would be
invoked (that is, developing and transitional states) is such that its impact would
serve to further disadvantage them in global commerce.
What we see at this stage in our exploration of the legal framework of the
WTO, then, is a series of instances wherein Members are empowered to engage
in discriminatory action. But more importantly, we see that the disadvantaging
effects of these provisions are such that they have a greater impact on smaller,
less able, developing, transitional and newly acceded states than on their larger
developed counterparts. What we begin to see is an expression of multilateralism
which, though on the surface appearing to be egalitarian in form, obscures a
series of provisions that, when utilised, can create structural imbalances between
Members. It is with this emerging picture of the legal framework of the WTO in
mind that we turn to the second generalised principle of conduct – that of the
principle of reciprocity in the pursuit of trade barrier reduction.
5 Trade barrier reduction
and the WTO
Our exploration of the legal framework of the WTO has so far led us to
examine the way in which the principle of MFN is operationalised by the
various Agreements administered by the WTO. In this we have seen how the
creation of the WTO has not only extended the parameters of trade regulation
by deepening and widening the coverage of that core architectural principle, but
also extended the range of commercial activity wherein exceptions to the MFN
clause can be taken. The result, as we have seen, is that opportunities exist in the
WTO’s legal framework for discriminatory activity to take place which, if
utilised correctly, can structurally disadvantage certain states. What we have,
then, is an emerging sense of the contours of the WTO’s legal framework in the
procurement of trade preferences and the like.
MFN is not, however, the sole principle around which WTO activities are
organised, nor does it operate in isolation. By itself MFN does little to liberalise
barriers to trade. It is only when utilised in conjunction with a second core
architectural principle – that of reciprocity – that a process of liberalisation can
come about. Our purpose here is to turn our attention towards this second core
architectural principle and explore how the principle of reciprocity is utilised as
the mechanism by which trade barriers are reduced, and ultimately eroded,
during MTNs.
Efforts to reduce barriers to trade have been an intrinsic feature of the
international trade regime since the wartime planners sought to inject a degree
of formality into the field. The GATT, as we noted in Chapter 1, was itself
intended to get the process of trade liberalisation underway by making some
headway in eroding the restrictive barriers put into place during the interwar
period by committing its original 23 Contracting Parties to the exchange of
trade preferences without condition. Once this process of liberalisation had been
set in motion, the GATT’s subsumption into ITO would put into place a more
extensive series of procedures designed to erode further barriers to trade through
periodic negotiation (see Chapter 2). It was only once reductions in trade
barriers had been agreed that the principle of MFN would come into operation
and universalise the preferential treatment accorded during these negotiations to
all other participants.
Trade barrier reduction and the WTO 101
Not only, then, are trade negotiations inseparable from the system of interna-
tional trade regulation, they are also among its most commonly acknowledged
features. Casual observers are familiar with the language of the Uruguay, Tokyo
or Dillon Rounds if not their actual substance. Moreover, the failure of the
Seattle Ministerial Meeting to result in the launch of the much hyped ‘Millen-
nium Round’ has further associated periodic negotiations with international
trade regulation, and, by extension, the WTO.
We have already noted something of the issues at stake during negotiations,
the perceived necessity of addressing both tariff and non-tariff barriers as well
as the specificities of trade in services, trade-related intellectual property rights
and trade-related investment measures, but our interest in this chapter is in the
form that negotiations take, and, in particular, the role of the principle of
reciprocity. We know that the substance of negotiations has been complicated
further by the deepening and widening of the parameters of trade regulation, as
well as the extension of its geopolitical boundaries. But how do they operate? We
need to identify clearly what we are examining here.
The function of negotiations within the WTO is at least three-fold. First,
negotiations are used as the means by which trade rules are determined. Second,
negotiations form an important part of the day-to-day functioning of the WTO,
particularly with regard to states seeking entry into the WTO. Finally, negotia-
tions are the principal means by which trade is liberalised. Although there is, to
varying degrees, overlap between these areas, it is with this last category that we
are primarily concerned in this chapter. More specifically, we are interested in
the way in which trade negotiations approximate an operationalisation of the
principle of diffuse reciprocity. Put differently, we are concerned here with
understanding how, if at all, the expectation that returns accrue to all partici-
pants in the ‘aggregate and over time’ results from the negotiating provisions
embodied in the WTO’s legal framework.
By way of procedure the chapter first explores the provisions within the
Agreements administered by the WTO pertaining to the format of trade
negotiations. This is accomplished by identifying and examining the disciplines
contained in the relevant sections of the legal framework. Second, it explores
those negotiating practices that have arisen during the lifetime of MTNs as a
result of the provisions embodied in the legal framework of the WTO. Finally, it
explores some of the problems associated with MTNs arising from the way in
which they are conducted and the impact that they have on sections of the
Membership.
The format of MTNs

The failure of the ITO to emerge successfully from the ratification process
ensured that international commerce became subject to the GATT’s less
elaborate set of rules governing trade negotiations. Building on the commitment
to enter into ‘reciprocal and mutually advantageous arrangements directed
[towards] the substantial reduction of tariffs and other barriers to trade and to
the elimination of discriminatory treatment in international commerce’
enshrined in its preamble, the GATT utilised Article XXVIIIbis as the means
with which to govern negotiations. Yet this utilisation provided only a guide for
the conduct of negotiations, rather than a strict set of rules. Article XXVIIIbis
merely committed the Contracting Parties to engage in tariff negotiations ‘from
time to time’ (paragraph 1). The provisions did not set out a timeframe within
which negotiations should take place. Moreover, once a round of negotiations
had been agreed upon, Contracting Parties were provided with a set of ‘rules of
thumb’ rather than an elaborate series of procedures. For Article XXVIIIbis:
Negotiations … may be carried out on a selective product-by-product basis

or by the application of such multilateral procedures as may be accepted by
the contracting parties concerned. Such negotiations may be directed to-
wards the reduction of duties, the binding of duties at then existing levels or
undertakings that individual duties or the average duties on specified catego-
ries of products shall not exceed specified levels. The binding against increase
of low duties or of duty-free treatment shall, in principle, be recognized as a
concession equivalent in value to the reduction of high duties.
(GATT 1947, Article XXVIIIbis, paragraphs 1–2)
The lack of a strict set of procedures aside, we can extract some behavioural
guidelines from Article XXVIIIbis which set the broad framework for MTNs.
Negotiations could either take the form of product-by-product exchange where a
reduction in tariff levels or other barriers was sought on specific goods, or be
conducted by means of other ‘multilateral procedures’ most commonly associated
with an aggregate cut in tariff levels across a broad range of goods. The lack of a
clear preference for either form resulted in a large degree of flexibility (as well as
ambiguity) in conducting negotiations. Nonetheless, whichever style of
negotiations was adopted the most important criterion was that they be balanced.
But in order to add some substance to what might be negotiated as well as to
assist in the interpretation of what constitutes ‘balance’, three guiding provisions
were included in Article XXVIIIbis. Negotiations could consist of:
(i) the offer of a reduction in the level of import duty attributed to one or a
range of products;
(ii) the offer that existing tariff levels be bound at their present rate for one or a
range of products; or
(iii) an offer that tariff levels would not exceed a given rate thereafter. Further-
more, in order to enable participants to gauge more accurately the level of
reciprocation – that is, the value of that which is being exchanged – the
binding of tariffs at existing levels, and thus the provision of an assurance
that the level of duty attributed to a particular product would not rise in the
future, was deemed equivalent to a reduction in a high tariff level.
(GATT 1947, Article XXVIIIbis, paragraph 2(a))
Contained within the GATT’s negotiating provisions were also three other broad
guidelines which the Contracting Parties were required to take into account.
First, negotiations had to afford ‘adequate opportunity’ to the specific needs of
individual Contracting Parties as well as to particular industries. Second, account
had to be made for the need to maintain a more flexible tariff structure for
developing countries. And third, Contracting Parties were asked to consider ‘all
other relevant circumstances, including the fiscal, developmental, strategic and
other needs of the contracting parties concerned’ (GATT 1994, Article
XXVIIIbis, paragraph 3(a)–(c)). The inclusion, in 1966, of Part IV of the GATT
added further to the negotiating provisions by modifying the reciprocity
requirement of MTNs by empowering developing countries to refrain from
reciprocating concessions offered. In this regard, Article XXXVI specified that:
The developed contracting parties do not expect reciprocity for commit-

ments made by them in trade negotiations to reduce or remove tariffs and
other barriers to the trade of less-developed contracting parties …. The
phrase ‘do not expect reciprocity’ means … that the less-developed con-
tracting parties should not be expected, in the course of trade negotiations,
to make contributions which are inconsistent with their individual develop-
ment, financial and trade needs, taking into consideration past trade devel-
opments.
(GATT 1994, Article XXXVI, paragraph 8; and
Ad Article XXXVI, paragraph 8)
The creation of the WTO brought with it a small number of additional provisions
which built upon rather than departed from GATT negotiating rules. The norm
has, however, remained flexibility. In this sense, the WTO has not sought to
dictate the form of negotiations; rather, it merely continues to offer a series of
guidelines relating to each commercial area governed by the legal Agreements.
The first and most obvious addition to the negotiating procedures resulting
from the establishment of the WTO has been the provision of a permanent
forum wherein MTNs can be held, as well as the wherewithal to interpret the
results of such negotiations provided by the administrative functions of the
WTO (Establishing Agreement 1994, Article III, paragraph 2). Beyond this, the
additional provisions relating to negotiations can be found in the two other
commercial pillars covered by the WTO’s legal framework (trade in services and
trade-related aspects of intellectual property rights).
GATS negotiating provisions

The provisions included in the GATS differ from those of the GATT in that they
seek to commit Members to a built-in timetable for negotiations. This commit-
ment was included, in part, in response to the range of outstanding issues not
covered by the GATS at the completion of the Uruguay Round (see Ostry, 1997:
175–256). The ‘Progressive Liberalisation’ section of the GATS (Part IV)
requires that by no later than 1 January 2000 (five years after the Agreement’s
date of entry into force) Members enter into successive rounds of negotiations
with the specific purpose of reducing and ultimately eliminating barriers to
market access in services (GATS 1994, Article XIX, paragraph 1). For each
round, the GATS seeks to establish a series of ‘guidelines and procedures’ –
though, as with the GATT, their precise format is unspecified beyond a
commitment to conduct negotiations ‘through bilateral, plurilateral and
multilateral’ means (GATS 1994, Article XIX, paragraph 3). This is comple-
mented by Article XV of the GATS requiring that Members seek to embark on
negotiations directed at removing the trade-distorting effects of subsidies.
Although no specific timetable is specified by Article XV, it does require that a
future work programme determine a timeframe for such negotiations (GATS
1994, Article XV, paragraph 1, note 7). In conducting negotiations, both Articles
specify that a greater degree of flexibility is to be accorded to developing
Members, as well as to the relative development of a particular national sector,
though the content of that flexibility is again left undefined.
Beyond these minor references, the way in which the GATS defines services
by specific sectors also shapes the format of negotiations. As such, negotiations
on air transport, telecommunications, maritime transport, or financial services
occur independently from negotiations in other sectors, though they may take
place under the auspices of a wider round of MTNs.
TRIPs negotiating provisions

Like the GATS, the TRIPs offers little in the way of a set of binding rules
relating to the format of negotiations. Only two additional provisions are
included. These relate to the negotiation of the ‘geographical indicators’ of
wines. Geographical indicators are defined by the TRIPs as those ‘indicators
which identify a good as originating in the territory of a Member, or a region or
locality in that territory, where a given quality, reputation or other characteristic
of the good is essentially attributable to its geographical origin’ (TRIPs 1994,
Article 22, paragraph 1). The first provision is a built-in commitment to embark
upon negotiations to be held under the auspices of the Council for TRIPs and
directed at setting out a system of registration and notification for geographical
indicators of wines (TRIPs 1994, Article 23, paragraph 4) – though no specific
timeframe is endorsed.
The second provision commits Members to enter into negotiations aimed at
increasing the level of protection attributed to individual geographical indicators
(TRIPs 1994, Article 24, paragraph 1). Again, Article 24 does not include a clear
commitment to a specific timeframe. It does, however, come with the caveat that
under no circumstances can prior activity (particularly that relating to instances
wherein goods have been previously branded in a manner that contravenes the
protection of geographical indicators) be used as a means of refusing to enter
into such negotiations, or the means by which to restrict the extension of these
indicators (TRIPs 1994, Article 24, paragraph 1).
The absence of a rigorous set of procedures relating to the format of MTNs
is not the only omission in the WTO’s legal framework. Although the preambles
to the Establishing Agreement of the WTO and the GATT ask that Members enter
into ‘reciprocal and mutually advantageous’ negotiations, the legal framework
omits to offer a definition of reciprocity. This, as we see below, is itself the source
of a range of problems. What we have encapsulated in the legal framework of
the WTO, then, is a set of negotiational provisions that consist of a few broad
guidelines relating to the manner in which negotiations are to be conducted that
vary slightly according to the particularities of a commercial sector (trade in
goods; trade in services; and intellectual property), but which do not specify the
exact procedures in which Members are to engage. This elasticity, in turn,
ensures that the practice of trade negotiations occurs and continues to occur in a
manner closely related to that which has evolved through practice throughout
the GATT years. It is to the evolution of these practices that we now turn.
The practice of MTNs

Part of the reason for not solidifying more substantively the rules governing
trade negotiations can be attributed to the nature of MTNs. MTNs require
negotiators to enter into a series of bartering procedures. A concession in one
area may be exchanged for a concession or concessions in the same or other
areas (the GATS aside). Most simply, negotiators attend MTNs with a predeter-
mined package of nationally acceptable trading concessions, accompanied by
predetermined goals. As with any system of exchange each negotiator attempts
to exchange as little as is necessary for as much as possible. What ensues is a
complex, ever-changing and often laborious process of mediation among the
representative parties until a mutually acceptable solution is reached.
As with most systems of barter, MTNs are imperfect. Hoekman (1989)
outlines three imperfections commonly associated with such systems. First, a
system of barter will only function if the goods in a particular market are of
interest to its participants. A lack of interest in, or demand for, those goods on
offer will result in an absence of trade. Second, a situation may arise wherein a
participant is being offered something as part of an exchange, to which the
participant attributes little or no value. The participant may, however, be
interested in something from a third party. In this case, trade will only take place
if a satisfactory arrangement can be reached among the three (or more) parties
involved. Third, trade can only take place if participants are able to gauge a
rough equivalence of value in the goods exchanged. In the absence of a
predetermined index, or unit of exchange (such as money), this can prove
problematic. This is particularly the case in instances where the value of goods
offered for exchange cannot be divided in such a way as to equate with the value
of that offered in exchange (Hoekman, 1989: 695).
In an effort to overcome some of the problems associated with barter systems,
MTNs are subject to a process of agenda setting prior to their start. This is done
by composing an agenda of issues for discussion that are deemed to be suitably
interesting to the range of participants. This agenda then forms the basis upon
which negotiation groups are created for specific issue areas. It is under the
auspices of these groups that WTO procedures are then utilised and negotiations
proceed.
GATT negotiations
Broadly speaking, two methods of conducting MTNs have largely prevailed
throughout the history of post-war trade regulation: a product-by-product
approach and a linear across-the-board method. The first five rounds of the
GATT witnessed the employment of the product-by-product negotiating
technique (see Curzon, 1965: 70–107), whereas the Kennedy Round saw a
change to an across-the-board approach. This linear approach was again
employed during the following Tokyo Round, though it was done so in
conjunction with a specific tariff-cutting formula – known as a harmonisation
formula – designed to even out some of the inconsistencies associated with
disparities in tariff schedules (Winters, 1990: 1294; Jackson, 1998a: 146).
Objections to the linear approach and the use of a harmonisation formula saw
the Uruguay Round follow a more familiar product-by-product approach with
some sector-for-sector negotiating (Hoekman and Kostecki, 1995: 74–5).
The product-by-product technique employed in the early rounds of the
GATT is reasonably straightforward. In the first instance, Contracting Parties
draw up a list of concessions they would like to see made on particular products.
This is then sent to the Contracting Party from which a concession has been
requested as well as to the GATT Secretariat. The list of requests, in turn, is met
with a list of offers relating to those products that a particular Contracting Party
is willing to make concessions on. This is the so-called ‘request and offer system’
(Curzon, 1965: 72–4; Winters, 1990: 1290–1).
Contracting Parties tend only, however, to request concessions from those
states with which they conduct most of their trade. In this respect, a practice
arose during the early GATT years wherein the ‘principal supplier’ of a
particular product requests concessions on the entry of that product into
another’s market (Winters, 1990: 1290). This request, in turn, is met with an
offer relating to market access for that product put forward in tandem with a
request for concessions on another product. However, the situation is compli-
cated when only one of the Contracting Parties involved is the principal supplier.
In such cases, a rough equivalence of value can be sought by bringing a third
party to the negotiation. Put differently, if Contracting Party A is the principal
supplier of good X to Contracting Party B, but Contracting Party B is not a
principal supplier of goods destined for A, though it is the principal supplier for
good Y on which concessions are sought from Contracting Party C, then the
three parties involved may seek to arrive at a mutually acceptable situation
trilaterally.
Once an exchange of concessions has been agreed upon, all Contracting
Parties are privy to the preferential treatment offered by all others as is required
by the principle of MFN. Hence concessions negotiated between Contracting
Parties A and B on market access for products X and Y would be conveyed to all
other participants. In this sense, the concessions negotiated are ‘multilateralised’
(Rhodes, 1995: 86).
The purpose of conducting negotiations only with those Contracting Parties
deemed to be principal suppliers is intended to limit the value of concessions
given away to third parties during the multilateralisation process, and thus
restrict in some way the level of free-riding. As principal suppliers tend to be the
main participants in a negotiation, it is they that are most likely to incur the
greatest benefit, and, as principal suppliers are required to offer something in
return which has been deemed to be of roughly equivalent value to that on offer,
any value given away to other (third party) Contracting Parties is minimised
(Hoekman and Kostecki, 1995: 70; Keohane, 1988: 35). That said, prior to the
formal completion of the negotiations a process of recalculation takes place – so-
called multilateral balancing – designed to review the content of the negotiations
in light of multilateralisation and, as an intended consequence, minimise further
any free-riding by accruing concessions without an appropriate offer.
The increase in the number of signatories to the GATT, in conjunction with a
corresponding increase in the number of products on which concessions were
sought, however, began to put a strain on the product-by-product negotiating
technique employed during the first rounds. This was compounded further by
the relative success that had been achieved in cutting tariff levels in the early
rounds. With a range of goods subject to reasonably small import duties, the
concessions that Contracting Parties were willing to grant on individual goods
were the product of hard-fought negotiating. Furthermore, negotiators began to
divert their attention towards non-tariff measures as well as the development of
various supplementary Agreements designed to govern trade in specific sectors.
It was such a diversion that resulted in the negotiation of the highly discrimina-
tory Short and Long Term Agreements on Cotton Textiles and the MFA – see Chapter 3.
In response to these changing dynamics, the adoption of a linear across-the-
board approach was proposed and accepted for the majority of tariffs under
negotiation during the Kennedy Round. Under such a system, Contracting
Parties proposed to cut the average level of tariffs by a specified amount. But, in
doing so, they also composed a list of those products they wish to see exempt
from such a reduction. Negotiations then ensue on those products that have been
placed on the exemption list – the numbers of which are intended to be less than
the sum of products which would be subject to a linear reduction thus, in
principle at least, making the negotiations more manageable. The content of
these exemption lists is then negotiated in groups of Contracting Parties, though
on occasion the more contentious among the products are subject to bilateral
procedures.
The linear method was again used during the Tokyo Round, though by this
time support for such an approach had begun to wane. The then EEC argued
that a strictly across-the-board approach required that tariff levels be relatively
even across the range of products. Such evenness was deemed desirable as any
peaks and troughs in tariff schedules would distort the real value of a linear
reduction and, by extension, its ability to act as a stimulant to trade. For instance,
an average cut of 50 per cent would see a tariff of 14 per cent reduced to 7 per
cent. This, in turn, would act to stimulate trade flows into that market. However,
higher tariffs, though cut by 50 per cent, would remain prohibitively high and
result in little or no stimulation of trade. As a result, a tariff of 60 per cent, even
if reduced by 50 per cent to a level of 30 per cent, would still be prohibitively
high and, most likely, would not act to stimulate flows of goods. As such, benefits
would only be accrued in those areas where already-existing tariffs were
reasonably low.
In response, the Contracting Parties sought to arrive upon a commonly
agreed formula that would factor in the relative impact of cuts in various tariff
levels (see Winham, 1986: 63; Jackson, 1998a: 146). High tariff levels would be
reduced by a factor greater than their lower counterparts. Yet, although such a
formula was agreed upon, the problems that had been associated with
determining its substance, coupled with the unevenness of some Members’ tariff
schedules, particular those of the US, ensured that the Uruguay Round
witnessed a reversion to the more traditional product-by-product and sector-by-
sector approaches.
The Uruguay Round

The stated aims of the Uruguay negotiations were four-fold: (i) to take forward
the process of liberalisation; (ii) to strengthen the role of the GATT and the
rules-based nature of international commerce; (iii) to increase the responsiveness
of the GATT to events in the wider global political economy, such as to crisis as
well as to changes in the nature of production; and (iv) to increase the harmoni-
sation of commercial, developmental and monetary policy at national and
international levels (GATT 1986, Part 1, Section A, paragraphs (i)–(iv), 20).
With the benefit of hindsight we can see the extent to which the creation of
the WTO met these objectives. The Uruguay Round not only extended trade in
goods, it also brought into the fray trade in services, trade-related intellectual
property rights and trade-related investment measures. The role of the GATT
has been strengthened by the creation of the WTO and its accompanying
extension of the General Agreement’s core architectural principles, and a movement
towards a rules-based system has been much facilitated by the incorporation of
the new dispute settlement procedures (see Chapter 6). Keeping up with changes
in the nature of production has seen the WTO take an increasing interest in
negotiating agreements on new areas such as financial services. And the desire to
bring about a convergence in policy has begun at a number of levels by
increasing the coherence of economic policy among the WTO, IMF and World
Bank by moving away from cross-conditionality, as well as by requiring that
national governments and regional bodies fall into line with WTO rules.
Accompanying these objectives was a set of seven ‘general principles’ de-
signed to bring some coherence to the conduct of the Uruguay negotiations.
First, they were to be carried out in a transparent manner, in accordance with
the general GATT objectives of mutual benefit and advantage for all partici-
pants. Second, each stage of the negotiations (launch, conduct and implementa-
tion) was to be treated as part of a single undertaking. Third, a balance of
concessions was to be sought within ‘broad trading areas’ in an effort to avoid
‘unwarranted cross-sectoral demands’. Fourth, the need for special and
differential treatment for developing countries was to be a central part of the
negotiations. Fifth, developing countries were not obliged to reciprocate
commitments made by their developed counterparts inconsistent with their
‘development, financial and trade’ capacities. Sixth, developing countries were
expected to take a greater part in trade negotiations as their economic situation
improved. And seventh, special attention was to be given to the economic
situation of least developed Contracting Parties (GATT 1986, Part 1, Section B,
paragraphs (i)–(iv), 20–1).
Allied to these general principles were the specified subjects for negotiation.
The Ministerial Declaration envisaged negotiations on: tariffs, non-tariff
measures, tropical products, natural-resource-based products, textiles and
clothing, agriculture, safeguards, subsidies and countervailing measures, dispute
settlement, intellectual property and trade-related investment measures (GATT
1986, Part 1, Section D, paragraphs (i)–(iv), 23–6). And the logistics of the
negotiations were to be organised in accordance with a set of guidelines
entitled ‘Organization of the Negotiations’ – though little in the way of
substance was outlined relating to the manner in which the negotiations were
to be conducted.
As we know the Uruguay Round was successful in concluding negotiations on
services, intellectual property, trade-related investment measures, as well as
deepening the regulations pertaining to the liberalisation of trade in goods. Yet,
although the Round was successful in bringing about this qualitative shift, it
suffered from the same problems that have hampered previous negotiations.
Furthermore, it is unlikely, given the minimal extent to which the rules relating to
MTNs have been altered, that future negotiations will not suffer from compara-
ble problems. Such problems relate to the difficulty participants face in gauging
accurately the value of reciprocity; the bilateral root of multilateralised
negotiations; the particular kind of reciprocity utilised as the means by which
exchange is governed; and the specific problems encountered by non-principal
suppliers and developing states.
Reciprocity
The manner in which negotiations are organised serves to obscure the way in
which participants are able to calculate the value of that which is exchanged. As
we have seen, though the outcomes of negotiations are multilateralised, MTNs
are, at their root, conducted between two participants, or groups of participants.
In this sense, they are bilateral (cf. Curzon, 1965: 72, 76–7). It is only once
agreement has been reached between the two parties to the negotiations that the
membership at large becomes privy to their results. In the first instance, then,
participants calculate the value of that which is to be exchanged bilaterally. This
calculation is then modified to take account of the value of concessions given
away to, and received from, third-party participants once they have been
conveyed writ large under MFN. What ensues is a situation wherein participants
gauge the value of reciprocity specifically, with the caveat that modifications can
be made towards the end of the negotiations. This is different from the
expectation that reciprocal satisfaction will be accrued in the aggregate and over
time – that is, diffusely. While the multilateralisation process ensures that there is
the perception of a multilateral dimension to MTNs, in reality the value of
reciprocity is calculated at a given point in time and is thus premised on an
underlying notion of bilateral exchange.
The principle that governs MTNs, then, is a modified version of specific
reciprocity. Even the action of multilateralising concessions among the
Membership, though considered a ‘multilateral component’ (Curzon, 1965: 72),
is, at its root, an instance of specific reciprocity. To elaborate further, the key to
multilateralisation is to accept a series of moments in time as points at which
reciprocal satisfaction is accrued. The first moment is arrived at once principal
supplier negotiators reach agreement on the value of their exchange. The
second and further moments are reached when the content of that initial
negotiation is conveyed to all the participants and some rebalancing occurs. In all
instances, the moments at which reciprocal satisfaction is calculated are known to
those involved. There is, then, a known and definable period within which the
value of reciprocity can be gauged. As such, reciprocal satisfaction is not derived
through an on-going process of accrual, as an operationalisation of diffuse
reciprocity would require. Keohane has suggested that because of this, the use of
reciprocity in MTNs is best characterised as a compromise or hybrid form falling
somewhere between its specific and diffuse types (Keohane, 1989: 150). We can
perhaps go further and suggest that because of the existence of a finite time
period, it is rather a modified version of specific reciprocity.
The existence of a known timeframe also alters the expectations that partici-
pants have when engaged in negotiations. For instance, in a collective security
arrangement participants can expect, unless a specific life-span has been
attributed to such an arrangement, that they have the capacity to benefit from
the collective might of all involved should the need arise. As such, they do not
expect to accrue reciprocal satisfaction within a given timeframe. MTNs,
however, are finite in length. As such, each participant expects that they will
accrue satisfaction within the confines of a trade round. Participants are unlikely
to accept that part of their satisfaction will be derived in a future round. This is
particularly the case if they have made a contribution at an initial round and are
likely to be obliged to do so again in any further negotiations. What we can
deduce, then, is that the particular way in which multilateral trade regulation is
operationalised depends on a modified form of specific rather than diffuse
reciprocity. What this tells us is that the particular manner in which trade
negotiations are organised does not lend itself to the generation of an expecta-
tion that reciprocal satisfaction will accrue in the aggregate and over time. Quite
the opposite. It lends itself to a preoccupation with specifically reciprocal
balancing within a finite time period, albeit more often than not protracted (cf.
Curzon and Curzon, 1989: 487–8).
Beyond the particular type of reciprocity utilised during MTNs, attributing a
value to the level of reciprocal satisfaction is itself problematic. Two dimensions
come into play here: the first economic, and perhaps methodological; and the
second political. First, in arriving at that which is acceptable to a negotiator,
calculations must be made as to the net value of concessions received – that is,
once the value of concessions given away has been taken into account. In
arriving at a figure, negotiators employ a range of methods that are unlikely to
be uniform, thus creating additional opportunity for confusion. This, as we know,
is complicated further by the need to revisit those calculations towards the end of
the negotiations. Such calculations are, however, hampered by a range of factors
that can come into play once the concessions exchanged are utilised. For
instance, changes in the demand structure of a particular good or a change in
the competitiveness of an industry over time can affect the net value of
concessions exchanged during the negotiations. Consequently, the net value
attributed to the exchange once utilised can be less than precise.
Second, the calculation of reciprocal satisfaction has a political dimension
(see Dell, 1986; Bhagwati and Irwin, 1987). Not only are negotiators pressured
into achieving at least rough equivalence in the value of exchange, they are also
obliged to secure concessions on politically sensitive areas, and as such be seen to
secure a rough equivalence of value. This can involve gaining concessions on
goods deemed to be of great national significance, and which are subject to
reasonably high barriers to entry into foreign markets.
However, both of the economic and political dimensions to reciprocity can
conflict with one another. What is politically satisfying does not necessarily
equate with that which is of rough economic equivalence, or, for that matter,
benefit. Prising open foreign markets in, say, automobiles, may not accrue the
same level of economic benefit as concessions exchanged in other sectors,
though it may prove to be of great political significance. In this sense, then,
negotiators have to maintain a balance between that which is economically
beneficial and that which is politically sensitive (and indeed acceptable).
Multilateralisation
The multilateralisation techniques employed during negotiations create further
problems. First, smaller, non-principal supplier countries (particularly developing
states) are inhibited in their ability to participate on an equal footing in MTNs.
This is due to the dominance of MTNs by principal suppliers. As principal
suppliers have little in the way of incentive to negotiate with non-principal
suppliers the result is that non-principal suppliers are locked out of the
negotiations (Hoekman and Kostecki, 1995: 71). This can prove significantly
problematic for non-principal suppliers. Without the ability to negotiate agendas
that are specific to their needs, smaller countries are obstructed from dealing
with those problems that are associated with their development, as well as
negotiating concessions for those sectors that are understood to be of benefit.
Gilbert Winham, in commenting on the multilateralisation process during the
Kennedy and Tokyo Rounds, observed that a ‘pyramidal structure’ emerged.
Such a structure ensured that the major industrial powers dominated the
negotiations. Lesser powers were only included during the multilateralisation
process when a rebalancing of concessions was required. Even then, however,
there proved little room for developing countries (Winham, 1986: 371, 376).
Second, it is claimed that the marginalisation of non-principal suppliers
during negotiations can be mitigated to some extent by the trickling down of
concessions conveyed during the multilateralisation process. Because principal
suppliers, which are economically larger and more diverse and thus have more to
offer than smaller economies, multilateralise the results of their negotiations
without the need for reciprocation, it is argued that smaller countries gain
considerably from the concessions traded among their larger counterparts. This
disproportionately larger number of concessions is exacerbated further by the
removal of the obligation to reciprocate by LDCs under the guise of Article
XXXVI of the GATT. This action procures developing countries with a
disproportionately favourable number of concessions. Furthermore, it is argued
that ‘the habit of gaining many concessions and giving few, mean[s] that smaller
countries [take] on fewer binding self-denial ordinances and thus maintain much
higher levels of protection’ (Hart, 1995: 178, 388 fn. 16).
This accrual of a disproportionately large number of concessions is not,
however, as beneficial as it may at first seem. While it may be that developing
countries ‘benefit’ from the multilateralisation process to the extent that they
accrue a number of concessions without the need to reciprocate, the nature of
those concessions is often incongruent with the needs of these smaller countries.
This is particularly the case with concessions negotiated on so-called ‘new issues’.
The export portfolios of smaller and lesser developed countries are predomi-
nantly made up of primary, semi-manufactured and some low-technology goods
(Luke, 1996: 142–8). However, the export portfolios of the industrial powers are
dominated by the production of middle- to high-technology manufactures and
services. As such, the procurement of concessions in, say, financial services is of
relatively lesser value to a developing country than they are to their industrial
counterparts. Not only then are non-principal suppliers locked out of negotia-
tions by their inability to participate, but their plight is compounded by a
perception that this situation is rectified by the gaining of concessions without
reciprocation through the multilateralisation process. At one level, then, the
multilateralisation process appears to equalise the imbalance created by
conducting negotiations among principal suppliers. At a deeper level, however,
we see that the multilateralisation process and thus the accrual of concessions in
incongruous commercial sectors obscures the further disadvantaging of non-
principal suppliers.
Third, and following directly from the last point, the ability of some Members
to derive reciprocal satisfaction from MTNs is impaired by the use of a
multilateralised technique. The action of two Members negotiating bilaterally
ensures that each derives reciprocal satisfaction from the exchange. And, as we
have noted, the results of these negotiations are then conveyed to all in
accordance with the principle of MFN. But this does not ensure that those not
engaged in the initial bilateral negotiation will be able to derive a comparable
level of reciprocal satisfaction in the same manner. The marginalisation of
smaller, non-principal suppliers in the negotiation process ensures that, to
varying degrees, they are unable to satisfy fully their reciprocity function. And as
we have seen, although the results of the principal supplier negotiations are
conveyed to all in accordance with the principle of MFN, those concessions that
are received by smaller countries are of little or no benefit. Nevertheless, the
conveyance of concessions to the wider Membership by principal suppliers
obligates others to act in a like manner, unless they are empowered to utilise
Article XXXVI of the GATT.
Fourth, by promoting the expectation that others engage in similar negotia-
tions, certain parties may be forced to negotiate concessions beyond that which
is prudent (see Bhagwati, 1983: 24–5, 33–8). Three factors come into play here.
In the first instance, by engaging in multilateralised negotiations, Members
obligate others to act in a like manner. This is arguably part of the natural
process of reciprocation – bilateral negotiation is returned for bilateral
negotiation. However, in recognition of the plight of some of the WTO’s
Members, Article XXVIIIbis, for instance, operates as a safeguard by enabling
certain countries to offer concessions at a lower level to those procured by the
larger, more powerful Members (GATT 1994, Article XXVIIIbis, paragraph
3(a)–(c)). However, a third factor comes into play. By failing to meet the full
extent of their obligations (to enter into multilateralised negotiations) Members
risk being labelled as free-riders. Such labelling may pressure others to engage in
negotiations, and to make concessions that they are unable to honour by forcing
them to convey concessions over and above an appropriate level. This can have
the effect of undermining the relative protection allocated to economically less
significant states.
The problems faced by smaller non-principal suppliers are further compli-
cated by the removal of the obligation to reciprocate under Article XXVIIIbis of
the GATT for developing countries. Whereas the requirement to reciprocate
disadvantages smaller non-principal suppliers in that they are obliged to offer
concessions against the receipt of privileges in which they have little say, the
removal of this requirement for developing countries has a converse, yet
comparable, effect. Without the obligation to reciprocate, LDCs have little
impact on the agenda of trade negotiations. Whereas they may have benefited
from improved market access for particular primary or semi-manufactured
products, such concessions could not be secured without a comparable offer. The
consequence is that, while benefiting from an exemption to reciprocate to
correct one problem, the inability to participate in the negotiations creates
another.
Reciprocity and trade negotiations
What we see in the way in which MTNs are conducted is a series of procedures
which advantage principal suppliers and disadvantage smaller, non-principal
supplier developing states. Much of this can be attributed to the imprecise nature
of WTO rules relating to the format of MTNs. The tone of MTNs is decided by
the Ministerial Declarations that precede the negotiation. Even then, the lack of
precision ensures that their format is left open to interpretation. It is because of
this imprecision that the format MTNs take draws heavily on previous practice.
But as we have seen, it is this practice which is the source of much of the
disadvantaging during MTNs.
Principal among these problems is the bilateral manner in which negotiations
are conducted, albeit it with a quasi-multilateral dimension. This bilateral nature
ensures that negotiations operate in accordance with a specific form of
reciprocity. This, in turn, ensures that the way in which the principle of
reciprocity is utilised is such that it fails to generate the expectation that
reciprocal satisfaction is derived in the aggregate and over time. But more
worrying are the disadvantages suffered by developing states. As non-principal
suppliers they are locked out of negotiations; the concessions they accrue are
often incongruous with their economic needs; and the obligation to reciprocate
concessions accrued, in spite of provisions to lessen their extent, may actually
serve to compound the problem. Finally, and somewhat paradoxically, the
marginalisation of developing countries in MTNs may be consolidated by the
removal of the obligation, in certain instances, to reciprocate as it removes the
ability to influence agendas.
What we see in the way in which MTNs are conducted, then, is a particular
utilisation of the principle of reciprocity which serves to compound further the
disadvantages to which smaller, less able, developing countries are privy under
the exception clauses to the principle of MFN. In this sense, the pattern that we
saw emerging at the end of the previous chapter is consolidated under the
WTO’s utilisation of the principle of reciprocity. It is with this in mind that we
turn to explore the operationalisation of the third core architectural principle –
that of dispute settlement.
6 Dispute settlement
and the WTO
As with most things in our already-familiar story, the failure to ratify the Havana
Charter resulted in the implementation of a system of international trade
regulation devoid of the elaborate dispute settlement procedures of the ITO.
Instead, what resulted was the utilisation of a set of procedures enshrined in the
GATT as the de facto means by which Contracting Parties sought to settle
commercial differences. This was to change with the establishment of the WTO.
The Uruguay Round provisions brought with them a more rigorous series of
dispute settlement procedures designed to safeguard the newly extended
parameters of trade regulation administered by a DSB.
The DSB has been among the busiest of the WTO’s ancillary bodies since its
establishment. It has presided over a series of highly charged disputes between
the major powers – such as those relating to the importation of cars and
automotive parts into Japan; the access offered to certain Caribbean banana
producers under the EU’s Lomé Convention; and the ban on US imports of
hormonally modified beef into the EU. But these headline-grabbing cases
obscure another significant feature. Developing countries have also been active
participants in the DSB. By one count, of the 155 requests for dispute settlement
procedures to be instigated by 31 December 1998, 60 per cent involved
developing countries as complainants, defendants or both (Brewer and Young,
1999: 169). This of course tells us little other than that developing countries have
been active in the DSB. Moreover, it obscures some countervailing trends. For
example, Brewer and Young note that evidence is emerging which suggests a
disproportionately high number of complaints involving developing countries
are being settled after bilateral negotiations and prior to the establishment of a
DSB Panel, thus avoiding formal proceedings being taken against a particular
country (Brewer and Young, 1999: 172). This, they intimate, could be because of
a relative deficit in legal expertise between developed and developing countries –
in spite of WTO provisions providing developing countries with legal assistance
(DSU 1994, Article 27(2)).
The broad picture of developing country participation hides other less
positive features. Robert Hudec, for instance, has shown that over the first three
years and four months of operations, the DSM witnessed a three-fold increase in
the number of complaints brought against developing countries when compared
with the period 1980–94 (Hudec, 1998: 24–5). Furthermore, he notes, the
percentage of cases brought by developing countries against others has remained
static, replicating the rate set in the last 14 years of the GATT’s reign (Hudec,
1998: 22–3). When taken together, the increase in activity by developing
countries in the DSM begins to look less impressive.
Beyond this, and perhaps somewhat unsurprisingly, two-thirds of the com-
plaints made by developing countries have been against their developed
counterparts. Even more unsurprisingly, given what we know about the
economic make-up of developing countries, most of these complaints have
involved agricultural produce and textiles and clothing (Brewer and Young, 1999:
169, 174). Yet it has not been the interaction of developing countries in any form
that has been the most notable feature of the DSM. Rather, it has been the
disputes between the principal industrial powers that have attracted the largest
share of attention and have threatened to undermine the new procedures.
Our concern in this chapter is to explore the provisions relating to dispute
settlement under the auspices of the WTO, and to gain a sense of its practice.
We have so far noted something of the distortions arising from the WTO’s
particular utilisation of the first two core architectural principles. But as yet, this
provides us with an incomplete picture of the WTO’s particular expression of
multilateralism. Our aim here, by determining something of the practice of
dispute settlement, is to understand better how this third core architectural
principle is operationalised, and, by extension, to assist us in gaining a greater
sense of the critical juncture through which international trade regulation has
passed as a consequence of the results of the Uruguay Round. By way of
procedure, the next section explores something of the dispute settlement
provisions utilised under the GATT; it then details the dispute settlement
procedures of the WTO, thereafter moving on to an examination of certain key
disputes and related trends as they have emerged since the DSM came into
operation.
Dispute settlement under the GATT

Rather than a wholesale departure from the practices that served the trade
regime since 1947, the Uruguay provisions have sought to build upon the
‘consultation’ (Article XXI) and ‘nullification and impairment’ (Article XXIII)
procedures of the GATT in an effort to approximate more closely a formal
system. In this sense, the establishment of the WTO has codified, as well as
taken forward, existing provisions. The first of these provisions – consultation –
merely established a convention that when in dispute Contracting Parties
engaged, in the first instance, in bilateral consultations. These were comple-
mented by the nullification and impairment provisions of the General Agreement
empowering a contracting party to ask the Contracting Parties to preside over
the settlement of a dispute and, under certain conditions, implement sanctions
against an illegally acting party.
Comparable perhaps to the negotiating provisions explored in the last chap-
Dispute settlement and the WTO 117
ter, what existed under the GATT was a less than comprehensive set of
procedures for dispute settlement. To make up this deficit, a series of practices
evolved to enable Contracting Parties to resolve disputes more ably. During the
initial five years the Contracting Parties handled disputes by means of
establishing working parties. These working parties were designed to move
towards the settlement of a dispute by bringing together the parties to that
dispute with other Contracting Parties in a process of negotiation. However,
from 1952 working parties were replaced by the practice of establishing ‘Panels’
to examine the substance of a dispute. These Panels comprised between three
and five nationals chosen from Contracting Parties other than those parties to
the dispute, deemed fit to undertake such a capacity. Panellists were normally
required to have been involved in some way with the GATT; have served in a
capacity at national level dealing with trade issues; or to have written and
published extensively in the area.
Thereafter the dispute settlement procedures of the GATT were codified
through a series of Decisions and Understandings adopted prior to the
establishment of the WTO (see Petersmann, 1997: 71). Significant among these
was the November 1979 Understanding Regarding Notification, Consultation, Dispute
Settlement and Surveillance and the accompanying annex relating to the Agreed
Description of the Customary Practice of the GATT in the Field of Dispute Settlement
embodying the change in practice for settling disputes (Jackson, 1998b: 166).
The GATT dispute settlement procedures were, however, plagued by the
inability of the Contracting Parties to enforce the recommendations of the
Panels. The problem here was that Contracting Parties were not bound by Panel
decisions. This lack of compunction can be largely attributed to two factors: first,
Contracting Parties were able to exercise a right of veto over Panel recommen-
dations; and second, Contracting Parties were not obliged to implement the
recommendations of the dispute settlement process within a specified time
period.
The absence of a legal compunction to implement the recommendations of a
dispute, in part, accounts for the rise of two kinds of unilateral action that
proved troublesome to the GATT, particularly towards the end of its reign. First,
certain Contracting Parties ignored, or omitted to implement, the recommenda-
tions of a GATT dispute settlement Panel, and thus continued to pursue a
course of illegal action. Second, and perhaps as a consequence of the first,
certain states sought to use, and indeed strengthen, particular aspects of national
legislation in an effort to provide an ad hoc sanctioning mechanism designed to
get illegally acting Contracting Parties to comply with what they deemed to be
‘correct’ interpretations of GATT rules. Most notable among this category was
the US, and in particular its use of the notorious Section 301 of the 1974 Trade
Act (Amended 1988) authorising the use of punitive sanctions in retaliation for a
perceived commercial violation (see Bhagwati and Patrick, 1990; Bayard and
Elliot, 1994; Ryan, 1995).
The evolution of the dispute settlement procedures during the GATT years
culminating with the incorporation of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (known as the Dispute Settlement Understand-
ing – DSU) as one of the six pillars of the WTO’s legal framework can be
described as one aspect of the broader movement towards a rules-based system
brought about by the establishment of the WTO. The narrowing of the
opportunities for unilateral action, and thus the restriction of instances wherein
certain states could attempt to force others to comply with their particular
interpretation of international trade law or embark upon a modicum of free-
riding, represents a qualitative shift not only in the nature of trade regulation,
but also in the way in which commercial disputes are settled. Jackson character-
ises the evolution of the dispute settlement procedures as a movement from
power-oriented to rule-orientated commercial diplomacy (Jackson, 1998a: 109–
12). Put crudely, Jackson is referring to a move away from the settlement of
disputes through implicit or explicit reference to the relative power capabilities of
particular states, to settlement by recourse to a set of rules and norms previously
agreed upon by the disputing parties (Jackson, 1998a: 109). Central to the DSB’s
efficacy, then, is a mitigation of the use of such unilateral measures as those
practised by the US under Section 301. Indeed, it is this very attribute that has
been the source of much praise. This, however, is a point to which we return
later.
The DSB
But how exactly have the dispute settlement procedures been strengthened? And
how do they relate to the rest of the legal framework? Put simply, the DSB’s
principal function is to administer the rules and procedures of the WTO’s legal
framework. In the fulfilment of these duties, the DSB is authorised to establish
Panels to mediate disputes arising between or among Members over a particular
action or from a specific interpretation of trade law; to refer disputes to its
Appellate Body; and survey the implementation of its rulings and recommenda-
tions. Furthermore, the DSB can authorise Members to suspend their procure-
ment of MFN in its relations with an illegally acting state, or request
compensation for such activities (DSU 1994, Article 2, paragraph 1).
The first stage of the dispute settlement process is the establishment of
bilateral negotiations between the disputing parties. As had been the practice
under GATT rules, the WTO facilitates these bilateral consultations by providing
the disputing parties with means conducive to conciliation (DSU 1994, Article
5). The establishment of such consultations allows Members to exercise their
right of complaint and to seek a means of resolution. However, if bilateral
consultations fail to reach a successful conclusion within 60 days, or sooner if a
deadlock has been reached, Members can make a request for the establishment
of a DSB Panel to mediate the dispute (DSU 1994, Article 5, paragraphs 4–5).
Disputes brought before the DSB are presided over by a Panel of individuals
appointed by the WTO on the basis of their experience in trade issues – though,
as was the case with the GATT, Panels do not normally consist of nationals from
those member states in dispute. Panellists normally number three, though in
instances where the disputing parties deemed it to be necessary this can rise to
five. The names of a set of panellists are normally proposed by the WTO
Secretariat, though Members have the right to oppose the appointment of
particular individuals. In cases where the appointment of panellists has proved
contentious, and no agreement has been reached within 20 days of the
establishment of a Panel, at the request of either party in dispute, the Director-
General in consultation with the Chair of the DSB and the Chair of the relevant
Council or Committee (such as the Council for Trade in Goods) has the power to
appoint those deemed most appropriate. Decision-making within these Panels is
done by consensus (DSU 1994, Article 8, paragraphs 1–7). In the event that the
findings of the Panel prove to be unsatisfactory to one or more of the Members
in dispute, the case can then be referred to the DSB’s Appellate Body for further
deliberation.
Members are required to implement the recommendations of a DSB Panel
between 20 and 60 days after the findings of the Panel have been circulated,
unless within 60 days one or more parties to the dispute lodges an intent to
appeal (DSU 1994, Article 16). In the event of an Appellate Body decision,
Members are required to implement the findings within a similar time period. In
an effort to ensure that those involved in a dispute abide by the recommenda-
tions of the DSB, Members are required to make notification of their intentions
within 30 days of the circulation of the report. Members are then required to
implement these intentions (if they meet with DSB approval) immediately or as
soon as is practicable thereafter. Under special circumstances Members can
negotiate an extension to the period within which the recommendations of the
report must be implemented, which, in extreme cases, is not to be more than 18
months from the date of circulation. Once these recommendations have been
implemented, the DSB surveys the activities of the adopting Member, usually at
six-monthly intervals, to ensure that such compliance has occurred (DSU 1994,
Article 21).
If a Member fails to comply with the recommendations of the DSB Panel or
the Appellate Body within the specified period of time, Article 22 of the DSU
empowers Members either to request that the violating party offer compensa-
tion for its actions, or to suspend the procurement of MFN in relations with
that party. A Member can request compensation from another Member only if
the violating party fails, is unwilling, or is unable, to comply with the
recommendations of the DSB or the Appellate Body. The request for
compensation is perceived to be a half-way house between the implementation
of the DSB/Appellate Body recommendations, and the suspension of MFN
privileges for the sector in dispute. Moreover, the offer of compensation is
understood to be a voluntary action taken by the non-implementing party in
instances when it is unable to implement immediately the recommendations of
the DSB or the Appellate Body. The value of this compensation is agreed upon
through negotiations between the two (or more) parties in dispute under the
guidance of the WTO. In the event that Members should fail to reach
agreement on the value of compensation within 20 days of the expiry of the
previously agreed-upon time limit, then the DSB can authorise Members to
suspend MFN privileges with regard to offending parties.
Paragraph 3 of Article 22 of the DSU deals with the procedures for the
suspension of MFN privileges. As a first resort Members are empowered to
suspend MFN privileges for the sector in dispute. If the suspension of conces-
sions in the original sector of dispute is impractical then Members may suspend
concessions for another sector – so-called cross-sector retaliation. The level of
this suspension should only equate to the nullification or impairment of
concessions for that sector. However, when suspending MFN privileges,
Members are required to take into account the effects that such suspension will
have on the offending party’s economic well-being. In order to oversee this
process, the WTO requires that Members provide justification for their actions.
If the suspension is deemed to be detrimental to the Member in question, then
the DSB has the capacity to review the case, which, in turn, may lead to the
establishment of a further Panel.
The DSU also embodies an arbitration process which permits Members to
refer a case back to the original Panel, or to an arbitrator, should the parties in
dispute feel that the settlement procedure has not been followed, or that the level
of rectification (that is, the level of punitive action) exceeds the extent of
nullification or impairment of concessions for the sector in question. Members
are required to accept the decision of the arbitrator (defined either as an
individual or group appointed by the Director-General) as final, and there is no
recourse for further arbitration. The arbitrator is empowered to uphold the level
of original suspension, recommend a modification of that level, or find in favour
of the complaining party.
In an effort to restrict further the ability of Members to contravene the
WTO’s rules, the DSU clearly specifies that neither the suspension of WTO
concessions, nor the payment of compensation, is to be considered as a
preferable course of action to the full implementation of WTO rules. Members
should treat Article 22 as a deterrent, not as a cost to be incurred during the
accrual of disproportionately greater gains through illegal activity. This is an
important point. Some Members may feel that even by incurring sanctions or
providing compensation, their illegal course of action is preferable in the light of
greater aggregate gains. Members may be tempted to follow this course of
action in situations when the cost of an action plus the cost of a WTO sanction is
sufficiently less than the benefits of such a course of action. For instance, by
incurring a suspension of concessions, a Member may still receive greater
benefits from following a course of action that is contrary to WTO rules, than it
would have had it adhered to the provisions of the Agreement. Nevertheless, it is
expected that the Member forgo these gains and abide by the rules of the WTO
(DSU 1994, Article 22, paragraph 1).
In total, the usual time for the dispute settlement procedures to run their
course is nine months. In cases where an appeal has been lodged with the
Appellate Body this can be extended by a further three months. Figure 6.1
summarises the dispute settlement procedure.
Figure 6.1 The dispute settlement procedure
The practice of dispute settlement

The number of cases brought before the WTO’s DSB has far outstripped
anything its predecessor had experienced. By 4 October 1996 – barely 22
months into operations – 56 requests for the establishment of bilateral
consultations had been filed with the DSB. Twelve of these requests resulted in
the establishment of DSB Panels, and two resulted in the dispute being referred
to the Appellate Body – the latter relating to a joint Venezuelan and Brazilian
complaint against the US over new standards for reformulated and conventional
gasoline; and a complaint by Canada, the EU and the US against Japan over
taxation levels on alcoholic beverages. By 18 April 2000, the number of
complaints lodged with the WTO had reached 192 of which 32 cases had been
settled or were inactive; 34 Panel and Appellate Body reports had been adopted;
and 21 cases were still active.
The first complaint overseen by the DSB was lodged by Singapore on 13
January 1995. Singapore complained that Malaysia was illegally prohibiting
imports of polyethylene and polypropylene and was therefore in direct
contravention of Article I (MFN) of the GATT. In accordance with the
requirements of the DSU, Singapore asked that the WTO oversee bilateral
consultations between the two disputing parties (DSU 1994, Articles 4 and 5).
Singapore withdrew the complaint after bilateral negotiations resulted in a
mutually acceptable settlement of the dispute.
This first dispute, while proving uncontentious and relatively undemanding,
was followed by a series of other cases that required the full extent of the WTO’s
dispute settlement procedures to be utilised. We see in surveying a selection of
the most prominent cases an appearance which at first glance indicates a
widespread commitment to adhere to the dispute settlement rules. However,
while this has remained largely the case, we see instances wherein the rules-based
system has come under pressure from the threat of an older, more familiar
power-orientated means of settling disputes.
US, Venezuela, and Brazil: reformulated gasoline

On 2 February 1995 Venezuela lodged the first complaint with the WTO to
result in the establishment of a DSB Panel (established 10 April 1995).
Venezuela stated that the structure of the US Environmental Protection
Agency’s new standards for reformulated and conventional gasoline discrimi-
nated against its imports (WTO Focus (1995) March–April: 3). The US regulation
under dispute was the Regulation of Fuels and Fuel Additives – Standards for
Reformulated and Conventional Gasoline, Part 80 Title 40, Federal Regulations 7716
(16 February 1994). Venezuela had previously complained about US gasoline
legislation under GATT 1947 rules. However, with the establishment of the
WTO imminent the complaint was withdrawn to enable resubmission under the
newer, more rigorous regulations. Initially, as stipulated by Article 4 of DSU, the
disputing parties entered into bilateral consultations, though they failed to bring
about a successful resolution. As a result, Venezuela asked the WTO to establish
a Panel to examine its complaint against the US.
The legislation in question was the US 1994 Amendment (effective 1 January
1995) of the Clean Air Act which states that only gasoline of a specified
‘cleanliness’ (reformulated gasoline) can be sold to consumers in the most
polluted areas of the US, while in the rest of the country only ‘gasoline no
dirtier than that sold in 1990’ (conventional gasoline) could be offered for sale
(WTO Focus (1996) January–February: 1). On 31 May 1995, upon gaining
consent from both the US and the WTO Secretariat, Brazil joined the Panel
established to examine Venezuela’s complaint. Canada, Norway and the EU also
applied to participate in the Panel as third parties.
Venezuela and Brazil stated that by imposing less favourable standards on
imports of gasoline the US was violating Articles I (MFN) and III (national
treatment) of the GATT, and Articles 2 (Parts 1 and 2) (Preparation, Adoption
and Application of Technical Regulations by Central Government Bodies) and
12 (Special and Differential Treatment for Developing Country Members) of the
Agreement on Technical Barriers to Trade. Both Members argued that these purported
environmental measures were merely a means of disguising discriminatory trade
practices. Brazil stated that the amount of gasoline it had exported to the US
since the imposition of the Environmental Protection Agency’s standards had
fallen from US $8 million per quarter to zero. Furthermore, both Venezuela and
Brazil emphasised that, although they did not object to the imposition of more
stringent environmental regulations, the US measures went beyond that which
was deemed reasonably necessary for such protection (WTO DSB Panel Report,
1996a: 7).
In retort the US claimed justification for its actions as necessary measures to
protect its environment. It argued that amendments to the Clean Air Act were
consistent with Article XX of the GATT (general exceptions), paragraphs (b), (d)
and (g), allowing for the introduction of protectionist measures
necessary to protect human, animal or plant life or health; to secure compli-

ance with laws or regulations which are not inconsistent with the provisions
of this Agreement; [and] relating to the conservation of exhaustible natural
resources if such measures are made effective in conjunction with restric-
tions on domestic production and consumption.
(GATT 1994, Article XX, paragraphs (b), (d), (g))
The DSB Panel established to mediate this dispute decided that the actions of
the US Environmental Protection Agency were inconsistent with Section 4 of
Article III (national treatment) of the GATT. Moreover, the Panel stated that
the use of discriminatory practices under the Clean Air Act could not be
justified under paragraphs (b), (d) and (g) of Article XX. The Panel deemed
imported gasoline to be a ‘like’ product and therefore that it should attract the
same level of treatment as its domestic equivalent. Accordingly, the Panel
recommended that the US bring its gasoline rules into line with its obligations
under the General Agreement. The Panel emphasised, however, that although
Members were free to set their own environmental legislation, and while it
appreciated the need to seek a decrease in national pollution levels, in doing so
they are not to interfere with the provision of equal treatment for domestic and
foreign goods as specified under Article III of the GATT (WTO DSB Panel
Report, 1996a: 47–50).
Although the Panel decision was to the satisfaction of Venezuela and Brazil,
on 21 February 1996 the US notified the DSB of its intention to appeal in
accordance with Rule 20 of the Working Procedures for Appellate Review. US officials
claimed that the Panel report was at error on two counts: first, for suggesting that
US regulations were inconsistent with ‘measures relating to the conservation of
exhaustible natural resources’; and second, for ruling that the US regulations did
not constitute ‘measure[s] … relating to’ the conservation of clean air within the
meaning of Article XX, paragraph (g) (WTO Appellate Body Report, 1996a: 13).
The US decision to appeal was not, however, met favourably by Venezuela. In
spite of a clear adherence to the dispute settlement procedures, Venezuela stated
the US move would ‘diminish the credibility of the WTO dispute-settlement
system and [its] panels’ (WTO Focus (1996) January–February: 2).
On 29 April 1996, the Appellate Body published its decision. The report
concluded that the discrimination resulting from the US action must have been
foreseen. The Appellate Body ruled that the US action under Article XX,
paragraph (g) constituted ‘unjustifiable discrimination’ and a ‘disguised
restriction on international trade’ (WTO Appellate Body Report, 1996a: 28–9).
But, fearing that the ruling would be the source of some contention and would
be perceived as setting a precedent of what constituted justifiable protection of
the national environment, the Appellate report added:
[The decision] does not mean, or imply, that the ability of any WTO Mem-
ber to take measures to control air pollution or, more generally, to protect
the environment, is at issue. That would be to ignore the fact that Article
XX of the General Agreement contains provisions designed to permit impor-
tant state interests – including the protection of human health, as well as the
conservation of exhaustible natural resources – to find expression. The
provisions of Article XX were not changed as a result of the Uruguay
Round of Multilateral Trade Negotiations. Indeed, in the preamble to the
WTO Agreement and in the Decision on Trade and Environment, there is
specific acknowledgment to be found about the importance of co-ordinating
policies on trade and the environment.
(WTO Appellate Body Report, 1996a: 29–30)
Although noting its disappointment with the outcome of the dispute, on 19 June
1996 the US announced its intention to comply with the Appellate Body
recommendations and bring its national legislation into line with WTO
commitments. However, in doing so, it called for a process of consultation to
commence directed at promoting congruence between its commitment to a
reduction in pollution levels under the Clean Air Act and the recommendation
of the Appellate Body (USTR, 1996d).
Japan and alcoholic beverages

Following in quick succession to the gasoline case, the US found itself again
involved in a dispute under consideration by the Appellate Body. This time,
however, its role was as complainant. On 29 June 1995 the EU, Canada and the
US lodged a joint complaint with the DSB against Japan concerning the level of
taxation on imported alcoholic beverages. The complainants argued that
Japanese taxation levels for imports of alcoholic beverages such as whisky,
brandy, rum, vodka and liqueurs were higher than those attracted by the
domestically produced shochu (a potato-derived spirit). These imported alcoholic
beverages, it was argued, were significantly similar to Japanese shochu – that is,
they were ‘like’ products – and as such should enjoy the same level of taxation as
those enjoyed by the comparable domestic produce as required by Articles I
(MFN) and III (national treatment) of the GATT. In accordance with Article 4 of
the DSU, the three complaining Members asked that bilateral negotiations be
established in an effort to solve the dispute.
Under previous GATT arrangements a Panel had been established to mediate
between the then EC and Japan on this issue. The Panel had found in favour of
the EC ruling that ‘whiskies, brandies, other distilled spirits, liqueurs, still wines
and sparkling wines imported into Japan were subject to discriminatory or
protective taxes [and were thus] contrary to Article III: 2’ (national treatment) of
the GATT. As a result, the Panel recommended that Japan bring its alcohol
taxation system into line with GATT rules. However, and contrary to Japanese
assertions that it had twice reformed its alcohol taxation system since the original
complaint, the EC contended that Japan had failed to implement the recom-
mendations of the Panel.
The bilateral consultations established between the three complainants and
Japan under the new DSB arrangements failed to reach a mutually satisfactory
solution. Subsequently, the complainants lodged a request with the DSB for the
establishment of a single Panel. The request, with the consent of Japan, was
granted on 27 September 1995 (under Article 9 of the DSU dealing with
multiple complaints), although Japan made it clear that it regretted that the
dispute had not found a mutually acceptable solution prior to this action (WTO
Focus (1995) August–September: 2).
On 11 July 1996 the DSB Panel reiterated the ruling of the previous GATT
Panel, concluding that the Japanese taxation system for imported alcoholic
beverages was inconsistent with Article III, paragraph 2 of the GATT (WTO
DSB Panel Report, 1996b: 120). Furthermore, the Panel reiterated the need for
Japan to rectify the situation. The Panel based its recommendations on two
conclusions:
(i) Shochu and vodka are like products and Japan, by taxing the latter in excess
of the former, is in violation of its obligation under Article III: 2, first sen-
tence, of the General Agreement on Tariffs and Trade 1994.
(ii) Shochu, whisky, brandy, rum, gin, genever and liqueurs are ‘directly
competitive or substitutable products’ and Japan, by not taxing them simi-
larly, is in violation of its obligation under Article III: 2, second sentence, of
the General Agreement on Tariffs and Trade 1994.
(WTO DSB Panel Report, 1996b: 138)
On 8 August 1996 Japan lodged its intention to appeal with the Appellate Body.
However, the Appellate Body reaffirmed the findings of the Panel and
recommended that Japan amend its taxation system to bring it into line with the
requirements of the GATT. The Appellate report did, however, note that some
inconsistencies existed in the findings of the Panel (WTO Appellate Body
Report, 1996b: 33). The Appellate Body noted that the Panel erred in law in its
conclusion that ‘panel reports adopted by the GATT Contracting Parties and the
WTO Dispute Settlement Body constitute subsequent practice in a specific case
by virtue of the decision to adopt them’; by failing to take into account Article
III: 1 in interpreting Article III: 2, first and second sentences; in limiting its
conclusions in paragraph 7.1(ii) of the Report on ‘directly competitive or
substitutable products’ to ‘shochu, whisky, brandy, rum, gin, genever, and
liqueurs’; and ‘in failing to examine “so as to afford protection” in Article III: 1
as a separate inquiry from “not similarly taxed” in the Ad Article to Article III:
2, second sentence’. Nonetheless, it upheld the Panel’s decision (WTO Appellate
Body Report 1996b: 37–8). In response, Japan provided notification of its
intention to implement the recommendations of the DSB Panel/Appellate Body.
In spite of the sloth demonstrated by Japan with regard to the implementa-
tion of previous GATT Panel recommendations, the consolidation of dispute
procedures under WTO rules seemed to have resulted in a resolution of the case
through a strict adherence to the WTO rules. But trouble was brewing. The
dispute was one of a series brought before the DSB in quick succession involving
the US and Japan.
Car wars
At the same time as the tension surrounding taxes on alcoholic beverages, the
US was also involved in a dispute with Japan over cars and automotive parts. On
10 May 1995 the US notified the WTO that it considered the Japanese car
market for both vehicles and spare parts to be closed to outside competition – a
situation that it contended contravened WTO rules. This was followed on 22
May 1995 by further notice that if the situation was not rectified to US
satisfaction, from 1 July 1995 tariffs of 100 per cent would be imposed on 13
luxury models of Japanese cars under Sections 301 and 304 of the 1974
(Amended 1988) Trade Act. US trade officials asserted that the threat of such
action was necessary to ensure that Members (Japan in this case) lived up to their
obligations, thus allowing the system to work to the benefit of all. Adhering to
WTO procedures, on 17 May Japan asked that bilateral consultations commence
between the disputing parties in an effort to resolve the dispute.
The case against Japan was based on a number of US assumptions about the
nature of the Japanese economy and associated commercial practices. US
officials complained that the massive trade imbalance between the two countries
was a direct result of the employment of discriminatory practices by the
Japanese (see Ravenhill, 1993). Furthermore, the US Trade Representative
(USTR) argued that much of the $36.9 billion US trade deficit for car and
associated components would not exist if Japan had adhered to WTO rules, and
had taken measures to eliminate some of its discriminatory practices. The
USTR had this to say about the Japanese motor industry:
[Japanese automotive] practices are unreasonable and discriminatory and

burden or restrict US commerce …. [The] Japanese market for replacement
auto parts is restricted by a complex system that is not reasonable or justifi-
able. This system channels most repair work to government-certified garages
that use very few foreign parts, and restricts the development of other garages
more likely to carry and use foreign parts … [E]ven minor additions of acces-
sories to motor vehicles requires a full vehicle inspection and tax payment,
which severely limits opportunities for US automotive accessories suppliers.
(USTR, 1996a: 3)
In essence, US trade officials argued that the relationship that exists between
Japan’s car manufacturers and their suppliers and dealers (the so-called Keiretsu
system) militates against sales of imported cars. In order to redress these
perceived imbalances the US demanded that Japan agree to meet informal
import quotas for its cars and associated products.
However, much of the impetus behind the complaint arose not from the size
of the trade imbalance – though this was a factor – but rather from the Clinton
Administration’s preoccupation with the 1996 election. It was by no means a
coincidence that in an era when the US public had voiced its concern about an
ever-growing trade deficit with Japan, that the US should launch a concerted
attack on the perceived discriminatory practices it employed, particularly in the
automotive sector – an area of much US national pride. Evidence of this can be
found in Clinton’s revival, by executive order, of Super 301 following the
breakdown of US–Japan bilateral trade negotiations in February 1994 – an
action which reversed the Bush Administration’s shelving of 301 as a conciliatory
measure during the Uruguay Round (Kunkel, 1995: 13).
Japan replied to these allegations by pointing out that if the US were to carry
out its threat it would be in direct contravention of Articles I (MFN) and II (tariff
binding) of the GATT 1994. Furthermore, US actions would contravene Article
23 of the DSU prohibiting unilateral action as a method for dispute resolution.
Article 23 states:
When Members seek the redress of a violation of obligations or other

nullification or impairment of benefits under the covered agreements or an
impediment to the attainment of any objective of the covered agreements,
they shall have recourse to, and abide by, the rules and procedures of this
Understanding …. In such cases Members shall [not seek to rectify a dis-
pute] except through recourse to dispute settlement in accordance with the
rules and procedures of this Understanding.
(DSU 1994, Article 23, paragraphs 1 and 2(a))
The US action sparked off a barrage of criticism from other WTO Members, as
well as from the WTO itself. During the WTO Council for Trade in Goods
(CTG) and DSB Meetings of 29 and 31 May 1995 respectively, both Japan and
the US were reminded of ‘their responsibilities in adhering to the principles and
procedures of the dispute settlement mechanism’ (WTO Focus (1995)
May–June: 2). While some Members of the WTO wished it to be noted that they
shared US concerns about the protectionist nature of the Japanese economy,
they believed that recourse to unilateral action was not the correct means of
effecting change. The EU stated that although it shared the view that ‘various
rules and practices made access to the Japanese market … difficult, it disap-
proved of the US announcement of unilateral measures as being inconsistent
with the WTO’. India voiced its concern that such action would damage the
multilateral trading system, and that ‘it would be ironic if the major trading
powers … [were] the first to resort to unilateral actions’ (WTO Focus (1995) May–
June: 16). Hong Kong reminded the US that it understood Section 301 to be a
national measure for dealing with trade disputes and other related activities that
fell outside the WTO sphere, but that this was clearly within the WTO’s field of
operation. Similar concerns were raised by Canada, Turkey, Switzerland,
Norway, Brazil, South Korea, Pakistan and the ASEAN countries.
Concerns about the nature of US actions were also raised in the international
press. The Economist, for instance, stated that Japan’s trade surplus with the US,
particularly in the automotive sector, was merely due to Japan’s comparative
advantage (The Economist, 20 May, 1 July 1995). This advantage, it argued, was
made relatively more advantageous by the incongruous nature of US production
techniques with the Japanese market. It noted that many cars produced by the
US were offered for sale with engine sizes larger than 2 litres, a sector accounting
for only 20 per cent of the Japanese market (the largest selling category in Japan
is between 660 cubic centimetres and 2 litres). Moreover, few US models were
offered in Japan in right-hand-drive form, though many Japanese models were
offered in left-hand-drive form for the US market. Indeed, The Economist claimed
that Japanese car manufacturers at the time of the dispute offered 53 models in
left-hand-drive form as opposed to only two right-hand-drive models offered by
their US counterparts (The Economist, 17 June 1995).
On 27 June 1995, the two disputing parties concluded a bilateral agreement
which ended the dispute and halted the establishment of a Panel and any
subsequent referral to the Appellate Body. The US asserted that it had obtained
a significant increase in market access for ‘autos and auto parts based on
quantitative and qualitative objective criteria, as well as structural changes in the
Japanese auto sector’ (USTR, 1996a: 2). The agreement also stated that it had
improved foreign access to Japanese car dealerships; provided for Japanese
government support to facilitate an increase in car and associated product
imports into Japan; promoted parts purchases from non-Keiretsu suppliers;
addressed a list of specific ‘automobile performance and technical standards that
hinder car imports in Japan’; provided vehicle registration data for use in market
research; and made significant gains in the deregulation of barriers to selling
spare parts (USTR, 1996a: 3–4).
On 29 June 1995 Japan announced that it was withdrawing its complaint
against the US after reaching a satisfactory agreement during the second round
of bilateral consultations. The conclusion of this dispute led the WTO to
announce that its ‘dispute-settlement mechanism ha[d] done its job as a
deterrent against conflict and a promoter of agreement’. WTO Director-
General Renato Ruggiero stated that the ‘knowledge that both sides were
prepared to use the system played a crucial role in pressing them towards a deal’
(WTO Focus (1995) May–June: 1).
This was not, however, the end to the matter. Perhaps the most significant
outcome of the early disputes in which the US became embroiled was the
establishment, in January 1996, of a Permanent Monitoring and Enforcement
Unit (PMEU) operating under the auspices of the USTR. Most certainly the car
dispute acted as a catalyst in the creation of the PMEU, though its remit was
clear: to monitor all US trade agreements and to implement US trade laws
‘determining compliance by foreign governments, and pursuing actions
necessary to enforce US rights under those agreements and laws’ (USTR,
1996c). One of the principal responsibilities of the PMEU is to produce, in
conjunction with the US Department of Commerce, a report on the implemen-
tation activities of other states. But perhaps most troubling was the apparent
reluctance to relinquish any recourse to unilateral action. Indeed, the stated
enforcement role of the PMEU was interpreted by some that an end had not
been put to the era of aggressive unilateralism. More elaborately, for the USTR
the PMEU’s role is to:
Identify foreign government practices for US enforcement action and ensure

the proper coordination of the Super 301 process and Special 301 review of
countries that deny adequate and effective protection for intellectual prop-
erty rights, the Section 1377 review of the operation and effectiveness of US
telecommunications trade agreements, and the Title VII report identifying
countries that discriminate in government procurement against US goods
and services. Ensure that all of our trade policy leverage … and other uni-
lateral trade preference programs is brought to bear on countries that do not
comply with their obligations.
(USTR, 1996c)
Barely 18 months after the auto agreement had been reached between the US
and Japan the shadow of retaliatory action once again appeared. In an interim
report produced by the PMEU surveying Japan’s implementation of the auto
agreement it was noted that, while some ‘positive trends’ were apparent during
the year following the dispute, concern was expressed that a degree of ‘stalling’
had become evident. As a consequence, the report urged that Japan be asked to
‘redouble its commitment to make on-going efforts throughout the life of the
Agreement’ (US Dept of Commerce/USTR, 1997: 1–2).
Other statements revealed a resolve to maintain at least the threat of unilat-
eral action if not the reality in the face of what was deemed to be non-
compliance by other Members. The 1996 President’s Trade Policy Agenda provides a
good example of this:
Our trade agreements are mere pieces of paper unless we pursue their
dictates in a vigorous manner. A major priority this year [1996] is to ensure
that the members of the World Trade Organization [live] up to the com-
mitments they made during the Uruguay Round of multilateral negotia-
tions. We will work through the many committees created under the WTO
to ensure that new obligations are met and that our trading partners have
put in place the laws, regulations and policies necessary to ensure compli-
ance with the WTO agreements. We are already using the WTO dispute
settlement process to press other countries to faithfully implement their
WTO obligations, and we will continue to do so …. Enforcement of both
international trade agreements and US trade laws underpins our approach
to trade and continues to be central to our agenda in 1996. Since we are the
world’s largest trading nation, it is our interest to strengthen the rule of law
and its institutions.
(USTR, 1996b: 2, 6–8)
Disputes between the US and Japan have remained a staple feature of the
activities of the DSB. Japan has been on the receiving end of DSB Panel and
Appellate decisions instigated by the US relating to measures affecting
photographic film and agricultural products. And the pressing open of market
access for US goods in Japanese markets has remained a prominent feature of
subsequent Presidential Trade Agendas (USTR, 1997, 1998, 1999a). But the
militancy with which the US has pursued redress of perceived discriminatory
practices by Japan has not been unique. The ratification of the Helms–Burton
Bill facilitated by the shooting down of a US-registered light aircraft by the
Cuban Air Force in early 1996, sanctioning all goods, and all goods that contain
Cuban produce from entry into US markets, was also the cause of some concern
within the CTG (WTO Focus (1996) May: 9; also Lisio, 1996; Snyder and
Agostini, 1996). Many argued that by introducing a ban on all produce
containing ingredients of Cuban origin, the US was in contravention of Articles
I (MFN) and III (national treatment) of the GATT and discriminated against not
only Cuba but also other WTO Members.
Disputes between the US and the EU have also seized much attention. Two
cases, in particular, have been the source of much controversy: the first relating
to market access for bananas into the EU; and the second concerning restrictions
on the importation of hormonally modified beef and related products into
European markets. In both cases the threat of unilateral action has been
apparent, though the WTO’s dispute settlement rules were not contravened. It is
to these cases that we now turn.
Bananas
The dispute that broke out between the US and EU over the latter’s import
regime for bananas – though also involving Ecuador, Guatemala, Honduras and
Mexico – reflected deep-seated tensions between the two powers over a
preferential trade relationship nurtured by Europe with certain of its dependen-
cies and former colonies since the establishment of the EEC in 1957. This
relationship has evolved from an association agreement under Part IV of the
Treaty of Rome, through Yaoundé Conventions I and II, to its most familiar
incarnation as the Lomé Convention. It should be noted, however, that from
June 2000 Lomé was replaced by a 20-year ‘partnership’ agreement signed in
Fiji (and will, most likely, take that name) (The Courier (2000) February–March: 5).
But the banana dispute is not just reflective of tensions surrounding Europe’s
preferential regime, it also reflects wider tensions between the two powers over
trade in agriculture – tensions which, as we saw in Chapter 1, contributed to the
protraction of the Uruguay Round.
The Lomé Convention grew out of, first, a French desire to incorporate
formally its colonial relations in the Treaty of Rome establishing the EEC, and
later, an extension of the geopolitical parameters of that relationship to include
sections of the UK’s dependencies and former colonies in a comparable
relationship in the wake of its 1973 accession. The history of the Lomé
Convention is much longer than can be recounted here (see Cosgrove-Twitchett,
1978, 1982; Frey-Wouters, 1980; Long, 1980; Ravenhill, 1985; Lister, 1988). Put
simply, under the Lomé Convention a range of African, Caribbean and Pacific
states (ACP) are privy to preferential, and non-reciprocal, access into European
markets for a range of products. The conveyance of preferential treatment to the
ACP was permissible under the waiver attained for Lomé from the GATT.
In recognition of the severe export dependency of certain Caribbean states
the preferential relationship between the EU and ACP has comprised, from the
outset, a Banana Protocol. Most simply, the purpose of the Protocol has been to
offset, to some degree, the relative uncompetitiveness of ACP banana producers.
In 1993 a set of rules was agreed for allowing for a continuation of traditional
levels of banana imports from the ACP, while at the same time setting a limit on
imports from non-ACP producers into the European market for a period of 10
years (McMahon, 1998: 103–4). These rules established a quota for imports set
at 2 million tonnes, comprising 90,000 tonnes of duty-free entry for ACP
producers, and the remainder for the more competitive non-ACP producers at a
duty of 100 ECU per tonne (rising to 850 ECU per tonne for any excess). The
level of this quota was, however, the source of much discontent, particularly as
non-ACP Caribbean Basin producers argued that the quota had been set at a
level below the 1988 rate of imports (McMahon, 1998: 104).
In spite of an EU response to increase the size of its quota, on 5 February
1996 Ecuador, Guatemala, Honduras, Mexico and the US requested that
bilateral consultations be established with the EU in an effort to find a mutually
acceptable conclusion to the dispute. Under the auspices of the GATT, a Panel
had twice been established to determine whether the market access provisions of
the Lomé Convention contravened GATT rules. In both cases the Panel found
that EU measures were inconsistent with GATT rules. However, the complaining
parties argued that the EU had ignored the recommendations of both of these
reports and continued to use unfair trade practices. After a breakdown in the
bilateral consultations, on 8 May 1996 the complainants requested that a DSB
Panel be established to examine the issue.
The EU argued that it interpreted the Lomé waiver to empower it to deter-
mine the necessary level of preferential access for ACP producers as required by
the provisions of the Convention. Furthermore, it argued that the interpretation
of the Convention was a matter for itself and the ACP rather than for the DSB
Panel. As such, it suggested that ‘the Panel was not empowered to give an
interpretation of the Lomé Convention which was at odds with the [EU’s] and
ACP’s understanding of their obligations under that agreement’ (McMahon,
1998: 105; WTO DSB Panel Report 1997a: 32). The EU, therefore, did not
consider its import regime for bananas to be at odds with its WTO commitments.
Nevertheless, the Panel again found in favour of the complainants. It asserted
that aspects of the EU’s import regime for bananas contravened Articles I,
paragraph 1 (MFN), III, paragraph 4 (national treatment), X, paragraph 3
(publication and administration of trade regulations), XIII, paragraph 6
(quantitative restrictions) of the GATT; Article 1, paragraph 3 of the Agreement on
Import Licensing Procedures; and Articles II (MFN) and XVII (national treatment) of
the GATS. The Panel concluded by recommending that the EU bring aspects of
its banana regime into line with its commitments under the GATT, GATS and
the Agreement on Import Licensing Procedures.
The EU reacted by rejecting the findings of the Panel and on 11 June 1997
requested that the matter be referred to the Appellate Body. Nearly 20 months
after the initial request for the establishment of bilateral consultations the
findings of the Appellate Body were published. With minor amendments, the
Appellate Body report recommended that the EU be asked to bring its import
regime for bananas into conformity with its obligations under GATT and GATS
(WTO Appellate Body Report, 1997: 118–21). As a result, the EU notified the
WTO that it would implement the recommendations of the report.
However, this did not bring an end to the dispute. In October 1997 the EU
lodged a request for consultations to be undertaken with the complaining parties
in order to reach agreement on what constituted a ‘reasonable period of time’
for the implementation of the recommendations. But the consultations failed to
result in agreement. This resulted in the complaining parties requesting, on 17
November 1997, that the EU be bound to Article 23, paragraph 3(c) of the DSU
empowering them to take punitive action for non-implementation (WTO
Arbitrator’s Report, 1998: 1–2).
In turn, the EU lodged a request for arbitration on the issue of a reasonable
time period in which to implement the recommendations of the Appellate Body
report. However, indicative of the political tensions surrounding this dispute, the
disputing parties could not agree on the appointment of an arbitrator and
requested that the Director-General of the WTO do so. An arbitrator was finally
appointed on 8 December 1997. The arbitrator’s report, published on 7 January
1998, provided the EU with a longer than expected respite within which to alter
its importation regime for bananas, citing the period 25 September 1997 to 1
January 1999 as appropriate (WTO Arbitrator’s Report, 1998: 7).
That said, by 1 January 1999 the EU had not implemented the recommen-
dations of the Appellate report to the satisfaction of the US. In response, on 14
January 1999 the US published its intention to take punitive action against the
EU by implementing 100 per cent tariffs on a range of products to the value of
$520 million – the value of harm to the US economy caused by EU actions
estimated by the USTR. The US justified its action by suggesting that the EU
had implemented measures that had perpetuated ‘discriminatory aspects of the
regime identified by a WTO panel and Appellate Body as being WTO-
inconsistent’ (USTR, 1999b). Unsurprisingly, the announcement resulted in an
escalation of tension between the two powers.
In an effort to dissipate some of this growing tension, on 25 January 1999 the
then Director-General Renato Ruggiero put forward a compromise proposal for
both parties to enter into consultations to find a mutually agreeable solution to
the dispute with an accompanying commitment to empower the US to
implement its proposed sanctions if further arbitration found them to be
justified. In this instance, the arbitrator was identified as the original Panel which
had examined the case in 1997. Both the US and EU agreed to the proposal,
though sought to maintain their aggressive posturing. After a series of delays
which saw the date for agreeing a decision move from March to April 1999, the
arbitrators decided that the damage suffered by US companies as a result of the
EU’s preferential market access regime was significantly lower that had been
suggested. The arbitrator put the estimated damage suffered at $191.4 million,
and ruled that the figure was final and not subject to appeal (WTO Arbitrator’s
Report, 1999: 43). Both parties accepted the ruling of the arbitrator.
What the banana dispute demonstrates, then, is at one level a willingness by
the parties involved to adhere to the dispute settlement procedures of the WTO.
However, the need for a compromise solution to be found by utilising aspects of
the DSU for further deliberation illustrates that at another level, the threat, if not
the reality, of power-orientated resolution remains a feature of contemporary
international trade. Furthermore, it raises questions as to the equity of stretching
DSB procedures. For instance, it is unlikely that any procedural compromise
would have been put forward had it been two developing countries in dispute.
Beef – a challenge to the procedures of the WTO?

The banana dispute is indicative of more traditional trade disputes. The same
could be said of the other disputes we have so far visited in this chapter. That
which arose over an EU ban on imports of hormonally modified beef from the
US, however, comprises a dimension previously unseen in the disputes mediated
by the WTO and one which threatens to become more prominent in the future.
Whereas the banana dispute was about the perceived discrimination arising from
a bilateral agreement between the EU and ACP, the decision to ban US beef
imports, though at one level also about discrimination, owed much to public
fears about the health consequences as well as the moral implications of
hormone modification in bovine products.
The dispute arising from the EU’s decision to ban imports of beef and bovine
products from the US, like so many other disputes that were unsatisfactorily
addressed prior to the establishment of the WTO, has its roots in a GATT action
taken by the US. In response to a long history of growing concern about the
human health and animal welfare implications of hormone use in livestock
husbandry throughout the 1970s and 1980s the EC (as it was then) decided to
ban the use of growth hormones with ramifications for the importation of goods
produced using such methods (WTO DSB Panel Report, 1997b: 9). In March
1987, the US challenged the EU decision under the Tokyo Round Agreement on
Technical Barriers to Trade (TBT) (WTO DSB Panel Report, 1997b: 12). Bilateral
consultations were established to review the ban, but failed to result in a
satisfactory conclusion. In response, the US requested that a technical experts
group be established to examine the issue. This request was, however, denied on
procedural grounds. This resulted in the US implementing retaliatory action in
the form of 100 per cent tariffs against a list of EU products. The EU requested
that a Panel be established to review the action. This was, however, denied by
the US. That said, the two parties did manage to agree to limit the extent of the
US punitive action in exchange for a certification process identifying products
that had not been produced using hormones (WTO DSB Panel Report, 1997b:
12).
The establishment of the WTO witnessed renewed resolve to find a resolu-
tion to the dispute. On 26 January 1996 the US requested bilateral consultations
to be established with the EU to discuss the latter’s Directive banning the use of
hormones in livestock farming. Canada, Australia and New Zealand joined the
consultations. Yet the consultations failed to result in a conclusion to the dispute,
and on 20 May 1996 a Panel was established to examine the issue. In light of the
establishment of the Panel, the US withdrew its retaliatory action (WTO DSB
Panel Report, 1997b: 1, 12). In an independent action, a Canadian request for
the establishment of a Panel was granted. Nonetheless, the composition of the
two Panels was, with the agreement of the EU, identical.
The substance of the US complaint (though not entirely identical to that
brought by Canada but sufficiently comparable for our purposes) was that it
perceived the EU to be in contravention of, among others:
• Articles III (national treatment) and XI (general elimination of quantitative

restrictions) of the GATT;
• Articles 2 (basic rights and obligations), 3 (harmonisation) and 5 (assessment
of risk and determination of the appropriate level of sanitary and phyto-
sanitary protection) of the Agreement on the Application of Sanitary and Phytosani-
tary Measures;
• Article 2 (preparation, adoption and application of technical regulations by
central government bodies) of the Agreement on Technical Barriers to Trade;
• and Article 4 (market access) of the Agreement on Agriculture.
(WTO DSB Panel Report, 1997b: 1)
The US claimed that the EU action was (i) ‘not based on an assessment of
risk …; (ii) without sufficient scientific evidence …; (iii) not based on scientific
principles …; (iv) not applied only to the extent necessary to protect human life
or health; (v) more trade-restrictive than required’; (vi) arbitrary and constituted
unjustified discrimination; and (vii) a disguised restriction on international trade.
Moreover, the US argued that the EU measures discriminated against imports
which it deemed to be ‘like’ products to those produced and sold in European
markets (WTO DSB Panel Report, 1997b: 12–13).
In retort the EU argued, among other things, that the meat from these
animals was not ‘like’ that of non-hormonally modified livestock; and even if
they were ‘like’ in kind, imports were given no less favourable treatment than
domestic products. As such, it was not in contravention of the national treatment
requirements of the GATT (Article III).
The Panel found in favour of the US arguing that the EU’s measures were
not based on adequate risk assessment of the situation; that the levels of sanitary
protection adopted were arbitrary and unjustifiable; and that the measures
adopted were not based on any existing international standards. As a result, the
Panel recommended that the EU bring its measures into line with the require-
ments of the Agreement on the Application of Sanitary and Phytosanitary Measures. The
EU appealed against the findings of the report. However, though the Appellate
Body overturned aspects of the Panel’s conclusions, it recommended that the
general recommendations of the report be upheld (WTO Appellate Body
Report, 1998a: 102–3).
The significance of this case is not so much that it reflects a continuation of a
US conviction to threaten unilateral action. It lies in the use of scientific
evidence in the settlement of the dispute and the incongruity of this approach
with a rising tide of public concern at the effects of what have been called
‘Frankenstein foods’. It is not so much that the scientific evidence is incorrect –
most agree that the effects of hormone and genetic modification have yet to be
fully established – rather that there exists a moral dimension to this dispute.
Much of the hostility towards foods of this kind has been motivated by a moral
rejection of the excessive modification of life forms. This has been seen
throughout the EU not only with regard to livestock products, but also in relation
to genetically modified crops. This moral rejection has, in certain European
countries, led to the development of a more rigorous system of labelling
enabling consumers to identify foodstuffs that contain any kind of modification.
Furthermore, certain supermarkets have resolved themselves to a marketing
strategy based on a complete absence of modification in their ‘own-brand’
products.
In this light, the EU could perhaps have based its defence on action taken to
protect public morals (Article XX, paragraph (a) of the GATT dealing with
general exceptions) rather than those clauses of the Agreement on the Application of
Sanitary and Phytosanitary Measures which, building on the general exceptions clause
of the GATT, empower Members to restrict the importation of particular
products which are deemed to threaten ‘human, animal or plant life or health’
(see Chapter 4). Nonetheless, and procedural matters aside, this is an issue that is
likely to become an increasing feature of civic disquiet at the nature and
direction of international trade regulation. As a result, what may or may not be
scientifically provable is of little consequence to those who are critical of the
activities of the WTO.
Dispute settlement and the WTO

What we see in exploring how the third core architectural principle has been
utilised and strengthened with the creation of the WTO is an incomplete
movement from power-orientated dispute resolution to settlement through rule-
orientated procedures. Rather we see, in the actions of the US, an adherence to
WTO procedures, conducted against a background wherein the threat of power-
orientated measures still exists in the pursuit of dispute resolution. A WTO
investigation into the consistency of Sections 301–10 of the US 1974 Trade Act
which found that they are ‘not inconsistent with US obligations under the WTO’
(WTO DSB Panel Report, 1999: 350) has done little to alter this.
What is also apparent is that while there has been some increase in the use of
the dispute settlement procedures by developing states, it is the activities of the
principal trading powers that have dominated the functioning of the DSB.
Furthermore, it is these disputes, rather than those brought by developing
countries, that have resulted in the utilisation of the full extent of DSM
procedures and have offered the clearest test to date of the efficacy of that
system.
Beyond these trends, we see in the case of hormonally modified beef and
bovine products a public morality issue which may come to present itself more
forcefully among the concerns of those who are critical of the activities of the
WTO. Indeed, the beef dispute is not the only dispute presided over by the DSB
which has been the focus of public attention. Much public interest surrounded
the dispute brought against the US by India, Malaysia, Pakistan and Thailand
over import prohibitions of shrimp and shrimp products. The dispute revolved
around US legislation requiring trawlers to use turtle excluder devices when
harvesting shrimp in an effort to minimise the resulting number of turtle deaths.
The US lost the case after the Panel ruled that its measures were inconsistent
with the general exceptions clause of the GATT (Article XX) – a ruling that has
been acutely unpopular among environmental groups. The Appellate Body
upheld the general findings of the Panel report, but made slight alterations
concerning the submission of information from NGOs (see WTO Appellate
Body Report, 1998b). As the WTO makes an increasing number of rulings on
issues that are of public concern, what may result is an increase in hostility from
civic groups. This, in turn, will place increasing pressure on the WTO to become
more accountable for its actions. It is to this issue, among others, that we turn in
the concluding chapter to this study.
7 Multilateralism and the
WTO
Extending the parameters of trade
regulation?
For many, the media reports of the demonstrations during the WTO’s Seattle
Ministerial Meeting, as well as those accompanying the meetings of the IMF and
World Bank in April 2000, offered the first glimpse of a global institutional
framework which, though still rudimentary, is firmly rooted and has gone some
way towards consolidating its form. As we have seen, much of the recent
consolidation in this global institutional framework can be attributed to the
completion of the Uruguay Round and the subsequent co-operation that has
taken place among these three organisations. It is unlikely that we will witness
any regression in the evolution of this framework – what we have called
throughout global economic governance – though at times it will wax and wane.
Rather, we are likely to see further consolidation, development and evolution.
Inevitably, this will ensure that these organisations remain the source of much
attention.
By exploring the legal framework of the WTO through the prism of multilat-
eralism, this book has attempted to gain a sense of one aspect of this evolving
global structure. We see in undertaking such a task, not only something of the
qualitative shift in the nature of international trade regulation brought about by
the conclusion of the Uruguay Round, but also the gulf between the idea of
multilateralism and the particular way it is expressed in the regulation of global
commerce.
Building on the work of Ruggie and Keohane we extracted a conception of
multilateralism which allowed us to conceive of such forms as comprising a set of
constitutive and authoritative rules ordering relations among three or more states
in accordance with three generalised principles of conduct: indivisibility, diffuse
reciprocity and dispute settlement. In observing the manner in which each of
these three principles is utilised by the WTO’s legal framework we arrived at
three conclusions.
First, though purported to embody the essence of non-discrimination, the
principle of MFN and its corollaries are utilised in such a way so as to empower
Members to discriminate against others in particular instances. In this we see
how certain provisions can be operationalised in such a way that they actively
disadvantage smaller, less able, newly acceded developing and transitional states.
Second, we see that trade negotiations are governed in accordance with a
specific form of reciprocity. The bilateral character of negotiations that arises
from this particular operationalisation causes distortions in the way in which
Members participate, again actively disadvantaging smaller, less able, non-
principal supplier developing countries. Third, we see in the new dispute
settlement procedure an increase in activity by developing countries, but we also
see that it is the activities of the leading industrial states that have dominated its
practice. And in their domination of the dispute settlement procedures, we see
the remnants of an older more power-orientated means of settling disputes.
These conclusions, in this instance at least, would seem to add some substance
to Cox’s claim that while multilateralism in form appears non-hierarchical, ‘in
reality it cloaks and obscures dominant-subordinate relationships’ (Cox, 1997:
xvi). They also appear to be somewhat at odds with Ruggie’s assertion that
multilateralism can intervene in such a way that it offers a degree of risk
insurance to smaller countries (Ruggie, 1998: 128). But the distortions in the
WTO’s legal framework did not suddenly arise with the completion of the
Uruguay Round and the establishment of the WTO. More accurately, they
represent the augmentation of existing practices and procedures in the evolution
of international trade regulation. Exceptions to MFN were key features of the
GATT, and both the negotiating and dispute settlement procedures of the WTO,
though sufficiently novel to represent a qualitative change, build upon, rather
than depart from, those of the General Agreement.
These issues have all been addressed in the previous chapters. The purpose of
this chapter is not to recover that ground, but rather to draw this study to a close.
This it does by exploring two questions that follow naturally from our assertion
that the establishment of the WTO marks a qualitative shift in the nature of
trade regulation. To what extent has the qualitative shift in the nature of trade
regulation reached a point beyond which it can no longer continue on its present
trajectory? And, by extension, what factors, if any, present themselves in such a
way that they divert attention towards addressing some of the deficiencies in the
WTO’s legal framework?
Throughout the history of international trade regulation, change has come in
the main from the major powers. War between the European powers, the US
and Japan brought with it designs for a system of global economic governance
centred on the regulative disciplines of the still-born ITO; the US and UK were
instrumental in designing the institutional structure that was to emerge after the
war, and the US and the EU have exercised, at key moments, significant
influence over the nature of trade regulation. In short, the history of trade
regulation has been a history of the changing commercial activities of the
leading industrial powers.
In truth, others have also had an influence. But that influence has been much
less pronounced. The critical mass generated among post-independence
developing countries proved decisive in the addition of Part IV to the GATT;
and the influence of various collectives in the content and, to a lesser degree, the
format of some MTNs is not without note. Yet Part IV was largely ineffective,
and although groups of medium-sized powers such as the Cairns Group have
Multilateralism and the WTO 139
been reasonably successful in developing a negotiating presence, the industrial
countries still dominate trade negotiations.
That said, the critical juncture brought about by the completion of the
Uruguay Round may contain within it seeds which have the capacity to bring
about change. The content of contemporary trade regulation is such that it has
created significant tensions in certain quarters. These tensions, in turn, may
present challenges to the WTO which, at some point in time, have the capacity
to exert an alternative influence on the trade agenda – although, as we will see
momentarily, at present they appear to be at odds with one another. It is to these
tensions that we now turn.
The future extension of trade regulation?

In many ways identifying the most pertinent challenges to the WTO ties in with
current debates on the future shape of the trade agenda. Had the so-called
Millennium Round been launched by the Seattle Ministerial Meeting, it would
most likely have sought a consolidation of existing, though as-yet-incomplete,
areas of regulation. This would most likely have included pushing forward
liberalisation in agriculture, and textiles and clothing; pursing the in-built
liberalisation procedures of the GATS; and extending the coverage of
intellectual property protection. It is also likely that greater attention would have
been directed towards beginning the task of setting out the regulative contours of
e-commerce.
But an agenda comprising these issues would not have been as clear cut as
might at first seem to be the case. It is likely that any attempt to consolidate, or
further extend, the parameters of trade regulation will be met with significant
opposition. The reasons for this are best illustrated by exploring briefly one of
the issues that has long been touted as a potential agenda item: investment.
Investment inhabits that space between a new issue and one that requires
consolidation in the wake of the Uruguay provisions, and is likely to be included
on any proposed agenda. This is primarily for two reasons. First, the Uruguay
Round provisions that resulted in the TRIMs proved to be far less comprehensive
than had been intended. Rather, what resulted was an Agreement that only
partially addressed the issue of barriers to global investment flows, and repre-
sented a compromise indicative of the political tension surrounding the issue.
Second, many have speculated that investment may gain salience as an issue
for WTO discussion in the wake of the failed attempt by the Organisation for
Economic Co-operation and Development (OECD) to negotiate a Multilateral
Agreement on Investment (MAI) (see Wilkinson, 1999c). Although the MAI was
originally intended to be an agreement among the members of the OECD
seeking far-reaching investment liberalisation, it was drafted in such a way that
its format replicated that of the Agreements administered by the WTO. Put
more precisely, the draft MAI had at its root an adherence to the same core
architectural principles as those around which the WTO’s legal framework is
arranged.
The MAI negotiations officially broke down in October 1998 with the
withdrawal of the French government. However, at least two other factors
contributed to their breakdown. First, a huge display of civic discontent grew in
opposition to the MAI that saw over 560 NGOs organise against it. Second, cries
were heard that the MAI sought to enhance further the competitive advantage of
the North over their Southern counterparts (as membership of the OECD is
almost exclusively Northern), and thus preclude those states from enjoying the
perceived ‘fruits’ of investment liberalisation. Like the official explanation of the
breakdown of the Seattle Ministerial Meeting, the stalling of the MAI was
attributed to the inability to reach agreement among participating states;
however, it would be wholly inaccurate to suggest that neither the extent of civic
disquiet, nor the displeasure of some in the South, were not contributing factors.
It is these two issues – civil society and development – that pose the most
significant barriers to the future extension of trade regulation. The first is
associated with a proliferation of civic organisations and relates to a broader
grassroots backlash against economic globalisation and the propagation of that
process by trade and investment liberalisation. The second challenge is in many
ways more familiar, and relates to the capacity of developing states to participate
on an equal footing in global commerce. These two challenges have been
referred to throughout this book. Yet it is the qualitative shift in the nature of
trade regulation that has brought these issues into sharper relief.
The challenge of civil society

Civil society, by which I am referring rather artificially to those NGOs and
grassroots movements that in some way oppose one or a number of aspects of
the WTO’s remit (for a more elaborate and comprehensive discussion of civil
society see Kasfir, 1998; Cox, 1999), has long been critical of the direction of the
trade agenda. The claims of those critical of the trade agenda are many and
varied, yet all to a degree assert that the regulative framework of the WTO
empowers business, and in particular multinational corporations, to operate in a
range of ways that are perceived to be detrimental to unskilled and semi-skilled
workers, the environment and developing states. Put crudely, they argue that the
trade and investment liberalisation activities of the WTO and other like-minded
bodies create a culture of competitiveness that enables producers to seek out the
lowest costs of production. As every producer is, at a minimum, seeking to
maintain their market share, and a maximum to increase it, downward pressure
is exerted on the cost of existing factors of production. As a result, not only will
producers compete with one another to seek out lower and more efficient
production costs, governments will also compete in an effort to attract foreign
investment. In terms of labour, this is manifest in the form of cost-cutting
exercises in monetary and non-monetary remuneration, infrastructural
provision, health and safety, or the removal of national labour legislation for
particular industries or commercial zones (such as export processing zones). In
terms of the environment, this is manifest in the relaxation of environmental
standards, the exploitation of scarce or endangered resources, the abdication of
the responsibilities and costs of pollution, and the reckless use of genetic
technology. And, with regard to developing states, the pressure to create an
environment in which inflows of investment will occur is deemed to constrain
the range of politically possible action. Put another way, it is said to undermine
the sovereignty of many in the South.
To separate out the concerns of civil society into labour, the environment and
sovereignty is, however, to miss much. Equally important concerns are voiced
about the negative impact of trade liberalisation on different social structures,
the relationship between women and the nature of production, and so on. And
although many acknowledge that liberalisation has the capacity to enable
consumers to purchase goods at reduced costs, they argue that this will only be
the case for a few. Furthermore, as pressure increases for ever-lower production
costs this group will inevitably shrink in size thus reinforcing the global trend
towards increasing disparities in income and wealth distribution. The sum of this
activity will be to make production socially and ecologically unsustainable. It is in
response to these perceived dangers that civic groups have pursued a range of
political activity, asking, at the very least, that the WTO become more sensitive
to the negative impact that an increase in unregulated production can have, or,
for the more radical, the abolition of the WTO.
The WTO’s response to the concerns of civil society has been, as we have
already noted, cautious – though even this has begun to change. With regard to
the labour standards debate, we have seen how the WTO has attempted to side-
step the issue by acknowledging support for the principle of worker rights, but to
abdicate any responsibility it may have in their maintenance (see Chapter 3).
With regard to the environment, the WTO’s response, while appearing to be
slightly more progressive, has been to fall into line with the rhetoric of
sustainable development and to look to the process put in place by a range of
global environmental summits, rather than to endorse more ecologically sensitive
legislation.
That said, mixed signals have been emanating from the WTO. On the one
hand, the sympathetic statements of Renato Ruggiero, the first Director-General
of the WTO, US President Bill Clinton and former EU Trade Commissioner
Leon Brittan in the aftermath of the Geneva Ministerial Meeting appeared to
some as opening up an avenue for dialogue. On the other hand, the way in
which the concerns of civil society were dealt with in run-up to, during and after
the Seattle Meeting have since served to undo much of this. For instance, the
International Confederation of Free Trade Unions (ICFTU) was told prior to
the Seattle Meeting that the labour issue was a ‘false debate’ and, by extension,
not the concern of the WTO (WTO, 1999e). Furthermore, NGOs were told that
the WTO is not a world government, nor does it have any intention of
becoming one (WTO, 1999f). While the same point can be made in the
reverse, these statements revealed a lack of understanding of the concerns of
civil society within the WTO. Labour is vital to the process of production that
results in the making of goods and services for trade, and although the WTO is
not a world government, its rules and underlying ideology have governance-like
consequences on national and local structures, particularly in developing states.
Unsurprisingly, the WTO’s seemingly dismissive attitude towards the con-
cerns of civil society failed to have the desired effect. Furthermore, it illustrated a
lack of understanding that has dogged the evolution of international trade
regulation since its beginning.
The challenge of development

Entwined with the civil society issue is a much older and more familiar source of
tension – development – though the interrelationship between the two issues is
not, at first glance, obvious. Throughout the Uruguay Round much of the
South, in as much as the developing countries can be deemed a coherent and
consciously identifiable group, was uneasy about a number of issues under
discussion. This unease was made all the more pronounced when viewed in
conjunction with the memory of the GATT’s ineffectuality in dealing with
development issues and the overt protectionism of agreements such as the MFA.
Many hoped that a new round (as the Uruguay Round was then) would offer a
means of moving away from the generally poor economic performances of the
post-war period; the dashed hopes of the NIEO; the spectre of the debt crisis
that haunted many in the 1980s; and the residual structural disadvantages
resulting from a history of colonialism. The result was, however, a round
characterised by a breakdown in negotiations between the US and EU over
agriculture, and the introduction of a series of Agreements that many felt were
of little benefit to the economic capabilities of the South.
Since the conclusion of the Uruguay Round a series of events have served to
consolidate the perceived anti-developmentalism inherent in the trade agenda.
The efforts of the US and EU to get the WTO to undertake an examination of
the relationship between trade and labour standards was deemed by some to be
a means of: (i) attempting to erode the comparative wage advantage of
developing countries; (ii) introducing legislation which could be used as veiled
protectionism; and (iii) attacking the value systems of many developing countries
by requiring that they adhere to a set of culturally incongruous economic and
social rights. Opposition governments were quick to point out that their rejection
was not an endorsement of the use of exploitative forms of labour. On the
contrary – rather, that such a remit belonged to the ILO. The Singapore
Ministerial Declaration, as we have seen, reflected much of the tension over this
issue. It appeared at one and the same time to be offering an emphatic rejection
of any WTO involvement in the issue, but also leaving the door open for a future
re-examination (see Hughes and Wilkinson, 1998: 375–80). The issue was not
helped when delegates, primarily from the industrial North, raised the issue
again (albeit indirectly) during the Geneva Ministerial Meeting. Although much
of this raising was carefully worded to ensure that it fell broadly into line with
the Singapore Ministerial Declaration, while at the same time attempting to allay
the concerns of many of the demonstrators outside the meeting, the continued
political support for the issue did not go unnoticed, and several developing
members saw fit to reinforce the Meeting’s rejection of the issue.
The way in which the Seattle Ministerial Meeting unfolded served to irritate
further those who sought an emphatic rejection of the labour issue. The sheer
size of labour groups represented outside the Meeting; the US government’s
apparent pandering to the concerns of US labour; the EU proposal for the
creation of a joint WTO/ILO working group; and the general anathema many
felt by the size and inappropriateness of the protest were all contributing factors.
As has been noted, the prominence gained by labour issues at Seattle has come
at the cost of considerable hostility from many of the governments of East Asia
(Haworth, 2000).
But the labour issue has not been the only source of tension between devel-
oped and developing countries. Environmental issues have also been at the heart
of many a terse debate. Like the issue of worker rights, many in the South have
been opposed to the introduction of any means of enforcing environmental
protection into the legal framework of the WTO. Opposition stems, not from a
disregard for the health of the global ecosystem, but rather from the possibility
that such protection has the capacity to undermine the competitiveness of the
South as well as the potential for such legislation to be used as a form of veiled
protectionism. Furthermore, many bemoan the lack of a comparable regulative
inhibition on the developmental drives of the industrial North as a further
example of the perceived bias of trade regulation. Again the lack of develop-
mentalism in previous incarnations of trade regulation serves to sharpen this
view (see Brack, 1999: 139–41).
Although, as we noted in Chapter 3, the WTO as yet has little in the way of
substantive legislation that is environmentally sensitive, the potential for a move
in this direction creates a good deal of hesitancy among many in the South.
Evidence to support this hesitancy is abundant: the critical mass generated by the
various post-Rio conferences on the environment (most of which, it must be
noted, either have not been implemented properly, or are full of rhetoric and
little else); the prominence of the issue among the concerns of those raised in
Seattle; and the apparently conciliatory stance of some industrial governments
to the concerns of the Seattle protestors. It is unsurprising, then, that a backlash
may emerge among those who perceive that issues such as the environment may
crowd out any discussion of development.
The political fall-out from the election of Renato Ruggiero’s successor must
also be considered as a factor in the further alienation felt by much of the South.
The politicking that preceded the election witnessed all but two candidates fall by
the wayside. A lack of clear consensus saw the Members of the WTO offer their
backing to the two remaining candidates – Mike Moore of New Zealand, and
Supachai Panitchapakdi of Thailand. However, the political aligning that
occurred witnessed much of the North, and in particular the US, support the
election of Moore, whereas a good deal of the South opted to throw their weight
behind Supachai. A stalemate ensued that ensured the successor was not
appointed until four months after the end of Ruggiero’s tenure. But even then
the issue was not adequately resolved. The stalemate that resulted was such that
a resolution to the situation only came about when both candidates were elected
to the post for two consecutive terms fixed at three years instead of the normal
four. Even then, however, Moore’s tenure was to precede that of Supachai.
Further residual tensions present themselves over services, investment and
intellectual property. In addition to the unease that much of the South feels at a
movement into these areas, the lack of a significant service sector, the much
documented negative impact of foreign multinational corporations, and the
inappropriateness of intellectual property legislation, all add weight to the
perception that the principle of reciprocity is being compromised by placing
issues such as these on the trade agenda. Irrespective of Part IV of the GATT’s
insistence that certain developing countries do not have to reciprocate (which, as
we noted in Chapter 5, can itself serve to lock LDCs out of negotiations), the
granting of access into foreign service markets is, for instance, of absolutely no
benefit to a primary producing developing country.
It is, then, with some hesitancy that the South approaches the prospect of a
new round of trade negotiations. This hesitancy is compounded further by the
prospect of a series of new issues comprising the agenda. Promises have been
made before, and are now being made again. Periodically there has been talk of
a development-centred approach to trade liberalisation, yet little substantive
appears to have been achieved. Many have joined Mike Moore in advocating
that a Millennium Round of trade negotiations would be a ‘Development
Round’. But even this may not be enough to dissipate growing hemispheric
tension.
The sum of this is that development presents itself again as the issue which
international trade regulation must address. Any attempt to introduce additional
‘new’ issues onto the trade agenda, and thus to extend the parameters of trade
regulation further, is unlikely to be successful unless the development issue is
properly addressed. In doing so, it must be remembered that the root of the
tension is not that the South is anti-worker, anti-environment or anti-
liberalisation; rather, it is that the political foothold from which the developing
countries start is, to greater or less degrees, significantly smaller than that of their
Northern counterparts and has little sign of increasing.
The concerns of civil society are also of great and equal importance. The
rights of workers, the need for greater and more substantive environmental
sensitivity, the need for greater civic accountability, and the necessity of a greater
transparency in WTO working procedures are all challenges which the WTO
cannot shy away from. In short, the twin spectres of development and civil
society offer the most serious challenges to the future expansion of international
trade regulation as well as to the functioning of the WTO. It is these that are
likely to present themselves in such a way that they may inhibit any further,
qualitatively significant extension of international trade regulation even if at the
present they appear in conflict with one another.
This is not, however, to suggest that the WTO will not be faced with other
challenges jostling to occupy much of its time in the medium term. Much has
been made of the tensions that plague the commercial relations between the US,
EU and Japan. Yet, in spite of some alarmist suggestions, all three remain
relatively close on a number of issues, both within the WTO’s remit as well as
outside. Furthermore, they have not suffered the kind of alienation that the
developing world and civil society have had to endure. The mandate of the
WTO is, after all, to promote an increase in the volume and value of trade for
all, not just for a small group of producers in the industrial world. It is to this
task that the WTO must turn.
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Index
accession: concessions 89; Establishing Agreement Armenia 58

70; Ministerial Conferences 89; non- ASEAN 128
application clause 87–8, 89; Plurilateral Asher, Robert 33
Agreements 70 Atlantic Charter (1941) 13–14
advanced industrial countries (AICs): non-tariff Australia: dispute settlement 134; free-trade
barriers (NTBs) 24 areas 95; Havana Charter (1948) 18;
Africa: colonialism 33 Japanese membership 88
African, Caribbean and Pacific States (ACP) 131, Awuku, Emmanuel Opoku 3
132, 133 Axelrod, Robert 40
Aggregate Measure of Support (AMS) 61 Azerbaijan 58
Agostini, Stephano 130
Agreement on Agriculture: Aggregate Measure of balance of payments: consultation/discussions
Support (AMS) 61; developing countries 60; 86, 87; GATS 85, 86; GATT 25, 85–7; less
export subsidies 60; GATT issue-specific developed countries (LDCs) 86; MFN
extension 59; most-favoured-nation (MFN) qualification 85–7; monetary reserves 86;
60; scope 59–61; tariffication 60 protracted difficulties 86; quantitative
Agreement on Basic Telecommunications (1997) 55 restrictions 86; Uruguay Round (1986–94) 87
Agreement on Government Procurement 67, 68 Bandung Conference (1955) 28
Agreement on Import Licensing Procedures 132 Barshefsky, Charlene 77
Agreement on Sanitary and Phytosanitary Measures 73, Bayard, Thomas O. 117
135 Becker, Lawrence C. 40
Agreement on Technical Barriers to Trade (TBT) 123, Belgium 88
134 Belgrade Conference (1961) 28
Agreement on Textiles and Clothing 59, 61–2 Berne Convention (1971) 64, 83, 84
Agreement on Trade in Civil Aircraft 67 Bhagwati, Jagdish 32, 36, 93, 111, 113, 117
Agreement on Trade in Financial Services 63–4 bilateral negotiations: concessions 113; dispute
agricultural policy: dispute settlement 116; EEC settlement 115, 116, 122, 128; ITO 48–9;
25; GATT 23, 25; grey-area measures 25; reciprocity 113, 114
United States 25; WTO 57 bilateralism: colonialism 33; most-favoured-
aid regimes: multilateralism 32–3, 36 nation (MFN) 35; multilateralism
Annecy Round (1949) 23 distinguished 32; specific reciprocity 40, 41
anti-dumping provisions: countervailing duty Bismarckian alliance 38
92–3; GATT 91–3; MFN qualification 91–3; Bosnia 34
Schuman Plan 20 Bowles, Paul 93
Anyaoku, Emeka 34 Brack, Duncan 3, 143
arbitration: dispute settlement 120, 132, 133 Brazil 72, 91, 121, 122–4
architecture: ITO 44, 56; meaning 6–7; Bretton Woods Conference 13, 15, 16
multilateralism 4, 31–52; trade regulation Bretton Woods system: exchange rate stability
31–52, 100; WTO 56, 57, 58, 80, 100 25; grassroots criticism 75; IMF see
Ariff, M. 3 International Monetary Fund (IMF);
Index 159
Keynesian trinity 19; World Bank see World Das, Bhagirath Lal 3, 29, 61
Bank decision-making: benefits 6; collective
Brewer, Thomas L. 115, 116 participation 6; consensus 69; economic
Brittan, Leon 77, 141 governance 71; Ministerial Conferences 5;
Bronkers, Marco C.E.J. 3, 64, 65 voting 70
Brown, William Adams 16 Dell, Edmund 111
Bulmer, Simon 2 demonstrations: IMF 137; Second Ministerial
Burch, Martin 2 Meeting (Geneva) 55–6, 75, 78; Third
Cairns Group 138 Ministerial Meeting (Seattle) 1, 56, 137, 143;
Canada: dispute settlement 121, 122, 128, 134; World Bank 137
free-trade areas 95; TPRB 67; WTO origins developing countries: Agreement on Agriculture 59–
29 60; dispute settlement 115–16; G77 28;
capital flows: multilateralism 35 GATT 26, 28, 29, 142; general standard of
Capling, Anne 65 living 97; Government Assistance to
Caporaso, James A. 37, 41 Economic Development 96; infant industries
Cerny, Philip G. 37 28, 96–7; intellectual property 73; LDCs see
Charnovitz, Steve 74 less developed countries (LDCs); marginal-
Charter for the Maintenance of International isation 27; MFN qualification 96–9;
Peace and Security 90 multilateral trade negotiations (MTNs) 103;
China 58–9 non-tariff barriers (NTBs) 24; Soviet Union
Churchill, Winston S. 13 28; Uruguay Round (1986–94) 109, 142;
civil society: challenges 4, 140–2; NGOs see non- WIPO 65
governmental organisations; protest see development policy: anti-developmentism 142;
demonstrations; WTO relationship 3, 140–2 challenge 142–5; GATT 25–9, 97–9; United
Cline, William R. 24 Nations 28
Clinton, William Jefferson (Bill) 77, 127, 141 Diebold, William 14, 18, 19, 20, 35
Cobden–Chevalier Treaty (1860) 44 diffuse reciprocity: dispute settlement 42;
Coffin, Frank M. 32 indivisibility 41; multilateral trade
Cold War 17, 18, 29, 38, 58 negotiations (MTNs) 101; multilateralism 40,
Coleman, William D. 93 41; principle 3, 4, 5, 41, 43; see also
collective security: indivisibility 39–40; specific reciprocity
reciprocity 38, 39, 40, 41, 110 Dillon Round (1960-1) 23, 24, 61, 101
colonial powers: GATT 26–7 discrimination: free-trade areas 95; most-
colonialism: Africa 33; bilateralism 33 favoured-nation (MFN) 80, 84; preferences
Commercial Union (proposed) 15 see preferential treatment
Committee on Trade and Environment (CTE) 58 dispute settlement: agriculture 116; alcoholic
Commonwealth: multilateralism 34 beverages 124–6; arbitration 120, 132, 133;
concessions: accession 89; bilateral negotiations Australia 134; bananas 115, 130–3; beef
113; Kennedy Round (1964–7) 24; less 133–6; bilateral negotiations 115, 116, 122,
developed countries (LDCs) 112; most- 128; Canada 121, 122, 128, 134; cars 126–30;
favoured-nation (MFN) 113; multilateral compensation 119, 120; conflict reduction
trade negotiations (MTNs) 24–5, 105, 106–7, 49; Decisions and Understandings 117;
111–13; new issues 112; reciprocity 48, 111 developing countries 115–16; diffuse
Cosgrove-Twitchett, Carol 131 reciprocity 42; enforcement 117; Establishing
Cox, Robert W. 3, 31, 34, 138, 140 Agreement 66; European Union (EU) 115, 121,
cross-conditionality: IMF 71; Uruguay Round 122, 128, 130–6; gasoline imports 91, 121,
(1986–94) 108 122–4; GATT 21, 25, 29, 51, 96, 116–18,
Cuba 130 125; Havana Charter (1948) 50, 51, 115;
Curzon, Gerard 22, 24, 35, 36, 40, 44, 84, 106, impairment 51, 96, 116; indivisibility 42;
109, 111 International Trade Organisation (ITO) 50–1,
Curzon, Victoria 22, 24, 35, 36, 40, 84, 111 115; Japan 115, 121, 124–30; legal assistance
customs unions: definition 94; MFN 115; MFN qualification 95–6; MFN
qualification 93–4; preferential treatment 93, suspension 119, 120; multilateralism 42;
94, 95 nullification 51, 96, 116; practice 121–36;
160 Index
principle 3, 4, 43, 49–50; sanctions 117, 120; European Union (EU): bananas 115, 130–3;
textiles 116; time 120; unilateral action 127–8; beef 133–6; dispute settlement 115, 121,
United States 115, 121,122–35; Uruguay 122, 128, 130–6; Fiji agreement (2000) 131;
Round (1986–94) 115, 116; working parties investment 62; labour standards 142, 143;
117; WTO 5, 57, 66 Lomé Convention 122, 131, 132; preferential
Dispute Settlement Mechanism (DSM): treatment 94, 131; restricted institution 37;
Appellate Body 91, 96, 118, 120, 121, 124, TPRB 67; trade regulation 138
125–6, 132; DSB Panel 91, 96, 115, 118–23, Evans, John W. 17, 26
125, 131–2, 134–6; increased activity 116; exchange: contingency/equivalence 40
legal framework 5, 66; procedure 118–21 exchange rate stability: Bretton Woods system 25
Dispute Settlement Understanding (DSU) 66, export subsidies: Agreement on Agriculture 60
95–6, 117–18, 120, 127
division of labour: multilateralism 35 Fawcett, J.E.S. 16, 17
Donnelly, Michael W. 88 Feis, Herbert 17, 27
Drake, William J. 3, 62 Feldman, Herbert 33
dumping: material injury 92, 93; meaning 91–2; Fields, Gary 74
measures see anti-dumping provisions financial crises: East Asia 72; Wall Street Crash
East Asia: export performance 26; financial (1929) 13
crisis 72 financial services: most-favoured-nation (MFN)
Economic and Social Council (ECOSOC): 64
economic governance 7; International Trade Finger, J. Michael 11
Organisation (ITO) 16 Finlayson, Jock A. 6
economic governance: betterment 13; decision- First Ministerial Meeting, Singapore (1996):
making 71; Establishing Agreement 71; Free labour standards 55, 74, 142; NGOs 76–7
Trade Union proposal 12; GATT 27, 70; Ford, Lucy 75
Havana Charter (1948) 19, 71; foreign direct investment (FDI) 62, 65
interorganisational co-operation 71, 72–3, France 88, 140
76, 137; ITO 70, 71; meaning 7; MFN free trade: multilateralism 35
qualifications 99; WIPO 7, 71, 76; WTO 7, free-riding: conditionally open institutions 38;
70–5 most-favoured-nation (MFN) 84; multilateral
Ecuador 70, 130, 131 trade negotiations (MTNs) 107, 113
Edgren, Gus 74 free-trade areas: definition 94; discrimination
electronic commerce 139 95; MFN qualification 94–5; preferential
Elliot, Kimberely Ann 117 treatment 94, 95
employment policy: Establishing Agreement 58; Frey-Wouters, Ellen 131
GATT 20, 75; ILO see International Labour
Organisation; Japan 88; standards see labour Gamble, Andrew 93
standards; United Kingdom 16; WTO 58, 141 Gardner, Richard 14, 15, 16, 17, 18, 22, 35
environmental policy: United States 91, 122–4; General Agreement on Tariffs and Trade
WTO 58, 143 (GATT): ad hoc nature 22; agricultural policy
Establishing Agreement: accession 70; dispute 23, 25; anti-dumping provisions 91–3;
settlement 66; economic governance 71; balance of payments 25, 85–7; colonial
employment policy 58; Havana Charter powers 26–7; commercial treatment 23;
compared 18; ILO 73; legal framework 59; contracting parties 20, 22–8, 49, 51, 70, 86–9,
negotiations 103, 105; NGOs 75; non- 102–3, 106–9; core principles 31; creeping
application clause 87; sovereignty 90; TPRB inertia 24; customs unions 93–4; de facto
66, 67 regulation 56; derogations 25; developing
Estonia 58 countries 26, 28, 29, 142; development policy
European Community (EC): multilateral trade 25–9, 97–9; dispute settlement 21, 25, 29, 51,
negotiations (MTNs) 29, 30 96, 116–18, 125; economic climate 25;
European Economic Community (EEC): economic governance 27, 70; employment
agricultural policy 25; preferential treatment policy 20, 75; escape clauses 23; flexibility 23;
130–1; Tokyo Round (1973–9) 107; Yaoundé free-trade areas 94; general exceptions 90–1;
Conventions 131 Havana Charter (1948) 17, 20, 49; IMF 21,
Index 161
70, 75; investment 21, 62; less developed Hart, Michael 112
countries (LDCs) 97–8; membership 58, 87–8; Hasenclever, Andreas 6
MFN see most-favoured-nation; MTNs see Hatch, Walter 88
multilateral trade negotiations; multi- Hathaway, Dale E. 25
lateralism 36, 47; national treatment 23, 47, Havana Charter (1948): commercial order 14,
82, 91; NGOs 75; non-discrimination 81–2; 15; content 18; disagreements 17; dispute
operation 23–5; organisational structure 7, settlement 50, 51, 115; economic governance
22–3; origins 16, 20–3; Plurilateral Agreements 19, 71; GATT 17, 20, 49; IMF 19;
see Plurilateral Agreements; Preparatory indivisibility 44–7; International Labour
Committee 16, 20, 21; provisional status 20; Organisation (ILO) 19, 71, 73; ITO see
quantitative restrictions 47, 70, 81, 82; International Trade Organisation; labour
reciprocity 23, 24, 36, 49, 144; review (1954– standards 57–8; most-favoured-nation (MFN)
5) 22; shortcomings 11; signatories 20; 45–8; national treatment 46, 47; NGOs 75;
sovereignty 21; textiles 61; trade liberalisation principles 44; ratification failure 19;
20, 21, 100; WTO origins 2, 3, 11 signatories 18; trade liberalisation 48; World
General Agreement on Trade in Services Bank 19
(GATS): balance of payments 85, 86; general Havana Conference on Trade and Employment
exceptions 90; Ministerial Conferences 63, (1948) 16, 17, 27
82; most-favoured-nation (MFN) 63, 81, 82–3, Haworth, Nigel 3, 6, 74, 143
84; multilateral trade negotiations (MTNs) Helleiner, Eric 13
103–4; national treatment 83; negative list Hoekman, Bernard M. 3, 30, 61, 63, 65, 83, 105,
63, 82; non-discrimination 82–3; preferential 106, 107, 111
treatment 83; progressive liberalisation 103–4; Honduras 130, 131
relationships 63; scope 62–4; trade Hong Kong 59, 61
liberalisation 139; Uruguay Round (1986–94) Hudec, Robert E. 2, 3, 21, 115–16
62–3; WTO architecture 57 Hughes, Steve 3, 6, 57, 74, 75, 142
generalised principles of conduct 3, 4, 39, 42
Geneva Ministerial see Second Ministerial impairment: dispute settlement 51, 96, 116
Meeting India 61, 136
Geneva Round (1947) 23 indivisibility: collective security 39–40; diffuse
Geneva Round (1956) 23, 24 reciprocity 41; dispute settlement 42; Havana
Geneva Round (1960–1) see Dillon Round Charter (1948) 44–7; most-favoured-nation
Geneva Round (1964–7) see Kennedy Round (MFN) 5, 39–40, 44–7; principles 3, 4, 5, 40,
Georgia 58 41, 43
Germain, Randall 13 infant industries: developing countries 28, 96–7
Germany: GATT 88; interwar period 13; institutions: conditionally open 37, 38; meaning
Schacht Plan 39 7; multilateralism 37, 41, 42; open 37, 38;
global governance: economic see economic restricted 37, 38
governance; meaning 3; multilateralism 34 intellectual property: Berne Convention (1971)
Goodwin, G.L. 22, 23, 28 64, 83, 84; developing countries 73; foreign
Gosovic, Branislav 28 direct investment (FDI) 65; less developed
Government Assistance to Economic countries (LDCs) 65; most-favoured-nation
Development 96 (MFN) 83–4; Paris Convention (1967) 64, 84;
Graz, Jean-Christophe 2, 14 piracy 65; Rome Convention (1961) 64, 83,
Great Depression 84; trademarks 64; Treaty on Intellectual
Group of Seven (G7): economic governance 7 Property in Respect of Integrated Circuits
Guatemala 130 64, 84; TRIPS see Trade-Related Aspects of
Guinness, A.R. 13 Intellectual Property Rights; Uruguay Round
Guth, Eckart 25 (1986-94) 64, 65; WIPO see World
Intellectual Property Organisation
Haggard, Stephen 6 International Agreement on Bovine Meat 67
Halliday, Fred 33 International Chamber of Commerce (ICC) 7
Hanson, Brian T. 93 International Confederation of Free Trade
Harbeler Report (1958) 26 Unions (ICFTU) 141
162 Index
International Court of Justice (ICJ) 50 Keohane, Robert O. 31, 32, 36–8, 40–3, 107,
International Dairy Agreement 67–8 110, 137
International Labour Organisation (ILO): Keynes, John Maynard 12, 13, 30
Havana Charter (1948) 19, 71, 73; WTO 2, Kostecki, Michel 3, 30, 61, 63, 106, 107, 111
73, 142, 143 Krasner, Stephen D. 6
International Monetary Fund (IMF): aid Krueger, Anne O. 3, 57
procurement 33, 36; co-operation 71, 72, 73, Kunkel, John 127
76; cross-conditionality 71; demonstrations Kyrgystan 58
137; economic governance 7; establishment
15, 16; GATT 21, 70, 75; Havana Charter labour standards: European Union (EU) 142,
(1948) 19; reconstruction programme 21 143; Havana Charter (1948) 57– 8; ILO see
International Trade Centre (ITC) 73 International Labour Organisation;
International Trade Organisation (ITO): Ministerial Conferences 55, 74, 141, 142–3;
architecture 44, 56; bilateral negotiations 48–9; United States 142, 143; see also employment
commercial provisions 21, 81; Conference policy
18, 19, 50; core principles 31; dispute Langille, Brian 74
settlement 50–1, 115; Economic and Social Latvia 58
Council (ECOSOC) 16; economic League of Nations: Economic Committee 44–5;
governance 70, 71; Executive Board 18–19, economic management 12; most-favoured-
50; GATT compared 20–3; Havana Charter nation (MFN) 44–5; organisation building 2;
see Havana Charter; International Court of United States 18
Justice (ICJ) 50; negotiations 48–9; objectives League of the Three Emperors 38
2, 44; Preparatory Committee 16; Lee, Eddy 74
quantitative restrictions 46, 47; UK proposals Lend-Lease Agreement (1942) 14, 16, 50
15; UK/US disagreement 17; United States LeQuesne, Caroline 58
18, 21; WTO lineage 2, 11, 12, 20, 56 less developed countries (LDCs): balance of
interorganisational co-operation: economic payments 86; concessions 112; GATT 97–8;
governance 71, 72–3, 76, 137 intellectual property 65; manufactures 26;
investment: foreign direct investment (FDI) 62, multilateral trade negotiations (MTNs) 112,
65; GATT 21, 62; Multilateral Agreement on 113; terms of trade 26; TPRB 67; trade
Investment (MAI) 139–40; TRIMs see Trade- barriers 26; WTO legal framework 97–8; see
Related Investment Measures; Uruguay also developing countries
Round (1986-94) 62 Liberia: Havana Charter (1948) 18
Irwin, Douglas 111 Lipson, Charles 6
Israel 95 Lisio, Stephen A. 130
Lister, Majorie 131
Jackson, John H. 2, 3, 20, 29, 30, 32, 35, 36, 61, Lithuania 58
71, 106, 118 London Charter 16
Japan: alcoholic beverages 124–6; business Luxembourg 88
practices 88, 126, 127; cars 126–30; dispute
settlement 115, 121, 124–30; employment Macau 59
policy 88; GATT membership 88; investment Maclean, Brian 93
62; Keiretsu 127, 128; multilateral trade McMahon, Joseph A. 131, 132
negotiations (MTNs) 29; non-application Malawi 70
clause 88; textiles 61; TPRB 67; US trade Malaysia 122, 136
imbalance 126, 127, 128 manufactures: less developed countries (LDCs) 26
Joint Vienna Institute 73 Marceau, Gabrielle 75, 77
market access: multilateral trade negotiations
Kasfir, Nelson 140 (MTNs) 106–7
Kazakhstan 58 market share: dumping 92
Kennedy Round (1964–7): across-the-board 106, Markwell, D.J. 13
107; agricultural policy 25; concessions 24; Marrakech Agreement (1994) 30, 55
negotiations 23, 112; pyramidal structure 112 Marshall Aid 21
Index 163
membership: accession see accession; GATT 58, Geneva Round (1947) 23; Geneva Round
87–8; WTO 2, 58, 70 (1956) 23, 24; Japan 29; Kennedy Round see
merchandise trade: growth 23–4 Kennedy Round; less developed countries
Mexico 130, 131 (LDCs) 112, 113; linear approach 106, 107;
Millennium Round: development policy 144; marginalisation 112; market access 106–7;
launch failed 1, 101, 139; NGOs 78 Millennium see Millennium Round;
Ministerial Conferences: accession 89; decision- multilateral balancing 107; multilateralisation
making 5, 69–70; GATS 63, 82; Geneva see techniques 111–13; non-principal suppliers
Second Ministerial Meeting; labour standards 112; permanent forum 103; political
55, 74, 142– 3; organisational structure 68, dimension 111; practice 105–13; principal
69; protests see demonstrations; Seattle see suppliers 106, 107, 112, 113; product-by-
Third Ministerial Meeting; Singapore see product 49, 102, 106, 107, 108; reciprocity
First Ministerial Meeting; voting 70 23, 24, 49, 101, 105, 109–11, 113–14;
Montreal Ministerial Meeting (1988) 66 request and offer system 106; sector-by-sector
Moore, Mike 56, 143, 144 106, 108; specific reciprocity 110–11; Tokyo
most-favoured-nation (MFN): Agreement on see Tokyo Round; Torquay Round (1951) 23;
Agriculture 60; anti-dumping provisions 91–3; trade regulation 100–1; TRIPs 104–5;
balance of payments 85–7; bilateralism 35; United States 29, 30; Uruguay see Uruguay
concessions 113; conditional 35; developing Round; see also negotiations
countries 96–9; discrimination 80, 84; multilateralism: aid regimes 32–3, 36;
dispute settlement 95–6; financial services 64; architecture 4, 31–52; bilateralism
free-riding 84; GATS 63, 81, 82–3, 84; distinguished 32; capital flows 35;
GATT 21, 23, 27, 36, 39, 47, 81–2, 83, 84–99; Commonwealth 34; conceptual framework
general exceptions 90–1; Havana Charter 36–43; core principles 31, 43; definition 37;
(1948) 45–8; impairment 51, 96; indivisibility diffuse reciprocity 40, 41; dispute settlement
5, 39–40, 44–7; intellectual property 83–4; 42; division of labour 35; dominant/
League of Nations 44–5; multilateralism 35, subordinate relationships 138; extended 55–
44–7; national treatment see national 79, 137–45; free trade 35; GATT 36, 47;
treatment; non-application clause 87–90; generic understanding 41; global governance
nullification 51, 96; preferential treatment 34; institutions 37, 41, 42; longevity 42; most-
93–4; qualification 80, 81, 84–99; favoured-nation (MFN) 35, 44–7; natural
quantitative restrictions 27, 46, 47; resources 35; preliminary exploration 32–6;
reciprocity 48; security exception 90; qualitative dimensions 31, 32, 37, 40, 42;
sovereignty 90; suspension 96, 119, 120; sovereignty 33; structural dynamics 4; trade
trade liberalisation 47, 100; TRIPS 81, 83–4; regulation 43–51, 137–45; unilateralism
unconditional 35, 36, 40, 45, 80; United distinguished 32; WTO 137–45; WTO
States 91; unrestricted application 45; organisational form 3
waivers 70; WTO 56, 81–4 Murphy, Craig N. 28
MultiFibre Agreement (MFA): discrimination
107; phased out 57, 61; quantitative national treatment: GATS 83; GATT 23, 47,
restrictions 61, 142; see also textiles 82, 91; Havana Charter (1948) 46, 47
Multilateral Agreement on Investment (MAI) natural resources: multilateralism 35
139–40 negotiations: bilateral see Bilateral negotiations;
Multilateral Convention on Commercial Policy 15 Bretton Woods Conference 15; ITO 48–9;
multilateral trade negotiations (MTNs): across- Kennedy Round (1964–7) 23, 112; MTNs see
the-board 106, 107; Annecy Round (1949) multilateral trade negotiations; Tokyo Round
23; barter 105; concessions see concessions; (1973–9) 23, 101, 107, 112; Uruguay Round
developing countries 103; diffuse reciprocity (1986–94) 11–12, 23, 29, 101, 108–9, 131
101; Dillon Round (1960–1) 23, 24, 61, 101; Netherlands 88
equivalence of value 105; European New International Economic Order (NIEO) 29,
Community (EC) 29, 30; exemption lists 107; 142
format 101–5; free-riding 107, 113; functions new issues 112, 144
101; GATS provisions 103–4; GATT New Zealand 88, 95, 134
practice 106–8; GATT provisions 101–3; newly industrialised countries (NICs) 26, 29
164 Index
Nicoladis, Kalypso 3, 62 Plurilateral Agreements: accession 70; GATT
Nkrumah, Kwame 33 57, 67; reporting 69; scope 67–8
Nogues, Julio 32 Prebisch, Raul 28
Non-Aligned Movement (NAM) 28 preferential treatment: customs unions 93, 94,
non-application clause: accession 87–8, 89; 95; EEC 130–1; European Union 94, 131;
Japan 88; MFN qualification 87–90; free-trade areas 94, 95; GATS 83; MFN
reciprocity 89 qualification 93–4; spillover effect 94
non-discrimination: GATS 82–3; GATT 81–2;
quantitative restrictions 81, 82; taxation 81, quantitative restrictions: balance of payments
82; TRIPS 83–4 86; GATT 47, 70, 81, 82; International
non-governmental organisations (NGOs): Trade Organisation (ITO) 46, 47; most-
GATT 75; Havana Charter (1948) 75; favoured-nation (MFN) 27, 46, 47;
Millennium Round 78; WTO linkages 73, MultiFibre Agreement (MFA) 61, 142; non-
75–8, 79, 140 discrimination 81, 82
non-tariff barriers (NTBs): advanced industrial Qureshi, Asif H. 3, 66
countries (AICs) 24; developing countries 24;
protectionism 24; tariffication see tariffication; Ravenhill, John 126, 131
Tokyo Round (1973-9) 24 reciprocity: ambiguity 40; bilateral negotiations
Nordic UN project 33 113, 114; concessions 48, 111; diffuse see
North Atlantic Treaty Organisation (NATO) 37, diffuse reciprocity; GATT 23, 24, 36, 49,
38 144; most-favoured-nation (MFN) 48;
Norway 122, 128 multilateral trade negotiations (MTNs) 23–4,
nullification: dispute settlement 51, 96, 116 49, 101, 105, 109–11, 113–14; non-
Nye, Joseph S. 32 application clause 89; specific see specific
reciprocity; trade liberalisation 47–9, 100;
O’Brien, Patrick 44 WTO 56
O’Brien, Robert 76–7 regulation: meaning 5; re-regulation 5; WTO
Office International des Epizooties 73 remit 2; see also trade regulation
organisation: meaning 7 Rhodes, Carolyn 40, 107
Organisation for Economic Co-operation and Robertson, Charles L. 28
Development (OECD) 139, 140 Rome Convention (1961) 64, 83, 84
Organisation for European Economic Co- Roosevelt, Franklin Delano 13
operation (OEEC): Code of Liberalisation of Ruggie, John 3, 14, 31, 36–43, 137, 138
Trade 20, 21 Ruggiero, Renato 56, 64, 74, 77, 129, 133, 141,
Organisation for Trade Co-operation (OTC): 143
architecture 22, 56; core principles 31; failure Russia 58, 72
2, 11, 22; GATT origins 11; WTO lineage 2 Ruttley, Philip 57
Organisation of Petroleum Exporting Countries Rwanda 34
(OPEC) 29 Ryan, Michael P. 117
Ostry, Sylvia 18, 23
Salvatore, Dominick 95
Page, Sheila 24, 26 Schacht Plan 39
Pakistan 61, 70, 129, 136 Scherrer, Christoph 74
Panitchapakdi, Supachai 56, 143, 144 Schild, Georg 14
Pankopf, Tonia 25 Scholte, Jan Aart 75
Paris Convention (1967) 64, 84 Schultz, Siegfried 93
Parmar, Inderjeet 16 Schuman Plan 20
Patrick, Hugh T. 32, 117 Schüßler, Rudolph A. 40
Patterson, Gardner 88, 90 Seattle Ministerial see Third Ministerial Meeting
Payne, Anthony 93 Second Ministerial Meeting, Geneva (1998):
Pedersen, Peter N. 75, 77 demonstrations 55–6, 75, 78; labour
Penrose, E.F. 14, 15, 16 standards 74, 141, 142, 143; NGOs 73, 77
Petersmann, Ernst-Ulrich 2, 3, 117 security: Charter for the Maintenance of
Pigman, Geoffrey Allen 44 International Peace and Security 90;
Index 165
collective 38–41, 110; indivisibility 39–40; relative price considerations 35; sanctions
MFN qualification 90; specific reciprocity 38, 117, 118, 126, 127
39, 40, 41 trade growth: merchandise 23–4, 63; services
Siebert, Horst 93 63; Uruguay Round (1986–94) 55
Simmons, Beth 6 trade liberalisation: barrier reduction 100–14;
Singapore 122 GATS 139; GATT 20, 21, 100; Havana
Singapore Ministerial see First Ministerial Charter (1948) 48; most-favoured-nation
Meeting (MFN) 47, 100; MTNs see multilateral trade
Snape, Richard H. 35 negotiations; reciprocity 47–9, 100; relative
Snyder, Jeffrey L. 130 impact 108; textiles 62; trade focus 2
South Africa 88 Trade Policy Review Board (TPRB) 66, 67
South Korea 128 Trade Policy Review Mechanism (TPRM) 66–7
sovereignty: Establishing Agreement 90; GATT 21; trade regime: meaning 6
most-favoured-nation (MFN) 90; trade regulation: architecture 31–52, 100;
multilateralism 33 European Union (EU) 138; future extension
Soviet Union: Cold War 17, 18; developing 139–40; institutional evolution 11–30;
countries 28 international evolution 51–2; major powers
specific reciprocity: bilateralism 40, 41; 138; meaning 5; multilateral trade
collective security 38, 39, 40, 41, 110; negotiations (MTNs) 100–1; multilateralism
multilateral trade negotiations (MTNs) 110– 43–51, 137–45; post-war evolution 43–51;
11; see also reciprocity trade-related areas 57; United States 138
Strange, Susan 24, 36 Trade-Related Aspects of Intellectual Property
Sugden, Robert 40 Rights (TRIPs): Council (CTRIPs) 69;
Switzerland 128 GATT/GATS contrasted 65; general
exceptions 90; geographical indicators 104;
Taiwan 59 most-favoured-nation (MFN) 81, 83–4;
tariffication 60 multilateral trade negotiations (MTNs) 104–5;
taxation: alcoholic beverages 124–6; non- non-discrimination 83–4; scope 57, 64–5;
discrimination 81, 82 WIPO 71; see also intellectual property
terms of trade: less developed countries (LDCs) 26 Trade-Related Investment Measures (TRIMs):
textiles: Agreement on Textiles and Clothing 59, 61–2; compromise 139; foreign direct investment
dispute settlement 116; GATT 61; Long-Term (FDI) 62; GATT issue-specific extension 59;
Agreement on Cotton Textiles 107; MFA see scope 57, 62, 139
MultiFibre Agreement; Short-Term Agreement on transparency: Millennium Round 1
Cotton Textiles 61, 107; Textile Monitoring Treaty for Mercantile Intercourse between
Board (TMB) 62; trade liberalisation 62; England and Flanders (1417) 44
United Kingdom 61; United States 61 Treaty on Intellectual Property in Respect of
Thailand 91, 136 Integrated Circuits 64, 84
Third Ministerial Meeting, Seattle (1999): Turkey 128
demonstrations 1, 56, 137, 143; failure 1, 56,
101, 139, 140; inter-institutional co-operation Ukraine 58
73; labour standards 74, 141 Underhill, Geoffrey R.D. 93
Thurow, Lester C. 95 unilateralism: multilateralism distinguished 32
Tokyo Round (1973-9): agricultural policy 25; United Kingdom: Bretton Woods Conference
EEC 107; harmonisation formula 106; linear 13; employment policy 16; imperial
approach 106, 107; negotiations 23, 101, preferences 16; International Trade
107, 112; non-tariff barriers (NTBs) 24; Organisation (ITO) 15; investment 62;
pyramidal structure 112 Japanese membership 88; textiles 61
Torquay Round (1951) 23 United Nations: Committee for Development
trade barriers: Agreement on Technical Barriers to Planning (CDP) 95; Conference on Trade
Trade (TBT) 123, 134; dumping see anti- and Development (UNCTAD), Geneva
dumping provisions; less developed countries (1964) 28, 73; declarations 28, 29, 142;
(LDCs) 26; NTBs see non-tariff barriers; development decade 28; Economic and
quantitative see quantitative restrictions; Social Council (ECOSOC) 7, 16; Economic
166 Index
Commission on Latin America (ECLA) 28; Williams, Marc 18, 28, 75
Environment Programme (UNEP), WTO 73; Winham, Gilbert 112
New International Economic Order (NIEO) Winters, Alan L. 35, 106
29, 142; WTO 73 Woods, Randall Bennett 14
United States: Agreement on Trade in Financial World Bank: aid procurement 33, 36; co-
Services 64; agricultural policy 25; beef operation 71, 72, 73, 76; cross-conditionality
exports 133–6; car imports 126–30; 71; demonstrations 137; economic
Caribbean Basin Economic Recovery Act 70; governance 7, 70–5; establishment 15, 16;
Cold War 17, 18; Cuba 130; Department of Havana Charter (1948) 19; reconstruction
Commerce 129; dispute settlement 115, 121, programme 21
122–35; environmental policy 91, 122–4; World Intellectual Property Organisation
free-trade areas 95; gasoline imports 91, 121, (WIPO): developing countries 65; economic
122–4; Helms-Burton Bill 130; International governance 7, 71, 76; TRIPs 71; WTO 73,
Trade Organisation (ITO) 18, 21; investment 76; see also intellectual property
62; Japanese membership 88; labour World Organisation for Animal Health 73
standards 142, 143; League of Nations 18; World Trade Organisation (WTO): accession
most-favoured-nation (MFN) 91; Multilateral 70, 87–9; agreement see Establishing Agreement;
Convention on Commercial Policy 15; agriculture 57; architecture 56, 57, 58, 80,
multilateral trade negotiations (MTNs) 29, 100; assessment 3; civil society 3, 140–2;
30; Permanent Monitoring and Enforcement conferences see Ministerial Conferences; core
Unit (PMEU) 129; Reciprocal Trade principles 31; Council for Trade in Goods
Agreement Act 16; Section 301 sanctions (CTG) 68, 69, 127; Council for Trade in
117, 118, 126, 127; shrimps 136; tariff Services (CTS) 69; Council for Trade-
schedules 108; textiles 61; TPRB 67; trade Related Aspects of Intellectual Property
regulation 138; US Trade Representative Rights (CTRIPs) 69; cross-conditionality 71,
(USTR) 126–7, 129, 130, 133 108; Director-General 56, 67, 68, 69, 78,
Uruguay Round (1986–94): Agreement on 143–4; dispute settlement 5, 57, 66;
Government Procurement 68; aims 108; balance economic governance 7; employment policy
of payments 87; completion 11; cross- 58, 141; environmental policy 58, 143;
conditionality 108; developing countries 109, establishment 1, 11, 30, 55; General Council
142; dispute settlement 115, 116; GATS 62–3; 68, 69, 70, 75, 76, 89; ILO 2, 73, 142, 143;
intellectual property 64, 65; inter-institutional ITO legacy 2, 11, 12, 20, 56; legal
co-operation 72, 137; investment 62; Agreements 58, 59, 60; membership 2, 58,
Ministerial Declaration (1986) 66, 109; 70; most-favoured-nation (MFN) 56, 81–4;
negotiations 11–12, 23, 29, 101, 108–9, 131; multilateralism extended 55–79, 137–45;
origins 29–30; product-by-product 106, 108; NGOs 73, 75–8, 79, 140; non-
protracted negotiations 11–12, 131; trade discrimination 80–99; objectives 56;
growth 55 organisational structure 68–70; origins 2, 3,
US Trade Representative (USTR) 126–7, 129, 11, 20; reciprocity 56; regulatory scope 2,
130, 133 5–6; Secretariat 68, 69; transparency 75;
Uzbekistan 58 UNCTAD 73; UNEP 73; United Nations
73; WIPO 73, 76
Van Liemt, Gijsbert 74 World War I: Paris Peace Accords 12, 13
Van Whitman, Marina 25 WTO rules: agriculture see Agreement on
Venezuela 91, 121, 122–4 Agriculture; intellectual property see Trade-
Viner, Jacob 16, 23, 45, 47 Related Aspects of Intellectual Property
Vines, David 71 Rights; investment see Trade-Related
Investment Measures; legal framework 59–68;
waivers 69, 70, 82, 131, 132 services see General Agreement on Trade in
Wall Street Crash (1929) 13 Services; textiles 59, 61–2; trade in goods 59–
Wang, Lei 89 62; trade regime 6
Warsaw Treaty Organisation 38 Young, Stephen 115, 116
Wells, Sidney 27
Wiener, Jarrod 36 Zacher, Mark W. 6

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Multilateralism and the

World Trade Organisation

The demonstrations that accompanied the World Trade Organisation’s (WTO’s)

Rorden Wilkinson is Lecturer in International Relations and International

1 The Future of the Nation-State

2 Classical Liberalism and International Economic Order

3 Coping with Globalization

5 Japanese Capitalism in Crisis

6 Globalization and Social Change

7 Multilateralism and the World Trade Organisation

London and New York

First published 2000

ISBN 0–415–22171–4 (Print Edition)

ACP African, Caribbean and Pacific states

The organisation of the book

The post-war settlement and the ITO

The commitments outlined in the Atlantic Charter, and in particular the

To that end [the promotion of mutually advantageous economic relations]

The Havana Charter and the ITO

[a]lmost every one – [was] trying to re-write important sections of the

The GATT in operation

The development of certain internal practices also contributed to the GATT’s

Development, the GATT and the threat of

Tracing the historical evolution of the institutional basis of international trade

Multilateralism: a preliminary exploration

the principle of sovereignty outside Western Europe raises a similar set of

The inability of the global community to respond with equal concern to

Multilateralism: towards a conceptual framework?

what is distinctive about multilateralism is not merely that it coordinates

To support his claim, Ruggie compares the organisational structures of the

one’s partners may be viewed as a group rather than as particular actors,

It is Keohane’s claim that because of specificities of each kind of reciprocity,

Multilateralism and the post-war evolution of trade

To further the enjoyment by all countries, on equal terms, of access to the

Multilateralism, indivisibility and MFN

MFN was not, however, simply to be defined as a positive commitment, in the

No prohibition or restriction other than duties, taxes or other charges,

Similarly, the commitment to MFN was to be complemented by a comparable

Reciprocity and the pursuit of liberalisation

a) Negotiations were to be carried out on a product-by-product basis ‘to take

Multilateralism and the evolution of international

The Uruguay Round of trade negotiations finally reached completion in

The legal framework

principles. In approaching the problem of non-tariff measures new rules on

Textiles and clothing

any sign, or combination of signs, capable of distinguishing the goods or

Trade policy review

Figure 3.1 The organisational structure of the WTO

The organisational structure

The WTO and global economic governance

Extending global economic governance: NGOs and

developed through various means such as inter alia the organisation on an ad

and not through a formal and institutionalised process. Nevertheless, the

The ‘Battle in Seattle’

We have so far gleaned something of the institutional evolution of international

MFN and the WTO

Non-discrimination and the GATT

[A]ny advantage, favour, privilege or immunity granted by any contracting