LESSON 1

What is law made of?

 Legal norms: produced by a legal system and thus differentiated them from social
rules, conventions, religious norms
Legal norms must be
1) effective = capable of imposing binding rules;
2) endowed with the force of law = capable to innovate the positive legal system;
3) endowed with the force of legitimacy = real observance and respect by the
members of the community, it requires necessarily them to be produced by a valid
legal system
 Public international law: law applied to the affairs of nations It is a system of
implicit and explicit agreements binding nations to recognised values and
standards
 It concerns the States
 Originally denominated as Law of Nations, it springs from the law of the sea and
it was directed to rule fundamental issues like the use of force, trade,
environment, law of the sea (ex. Pirates defined as hostis humani generis =
enemies of humanity)
 Until the latter half of the 20th century public international law focused on the
legal relations among nations, but in the past decades it has shifted its focus
also on international organizations, NGO’s and individuals
 Private international law: it rules contracts and relations between private people
and companies (choice of law, enforcement of judgement)

International law sources

 Treaties: are international conventions (general or particular, bilateral or multilateral)
establishing rules expressly recognized by States; based on the principle of pacta
sunt servanda (pacts must be observed)
 Customs and usage: Practice of states followed from a sense of legal obligation.
The International Court of Justice Statute defines customary international law in
Article 38(1)(b) as "evidence of a general practice accepted as law." This is
generally determined through two factors: the general practice of states and what
states have accepted as law
 General principles of law, i.e. principles common to all the major legal systems and
recognised by all the civilised nations
 Soft law: quasi legal instruments lacking legally binding force, typical of
international law (guidelines, codes of conducts, declarations..).
 Hard law: traditional law with binding force
 The problem of international laws and treaties is their level of effectiveness and
their enforceability, also because we must take into account the principle that the
difficulties of harmonising and coordinating different legislations and national
powers.

Since international law and national law belong to 2 different systems, there are 2
different approaches to give Treaties in force in each State.
 Monist approach = once a convention is approved (ratified) through the legal
procedures of the State, it becomes part of the national legal system
 Dualist approach = being a party of a Convention does not mean that the
Convention is in force in the State. A national law giving effect and incorporating it
 in the national legal system is needed

1969 Vienna Treaty: Convention on the law of treaties is the rules and procedures for
making and applying treaties and their legal effects
Art. 2.1 What is a Treaty: «agreement concluded between States in written form and
governed by international law, whether embodied in a single instrument or in two or
more related instruments and whatever its particular designation». Other words that
can be used are: convention, pact, protocol, covenant, accord.
Art. 26 Treaty: Pacta sunt servanda: Every treaty in force is binding upon the parties to
it and must be performed by them in good faith

Art. 31 – General Rule of interpretation

 A treaty shall be interpreted in good faith in accordance with the ordinary meaning to
be given to the terms of the treaty in their context and in the light of its object and
purpose.
 The context for the purpose of the interpretation of a treaty shall comprise, in addition
to the text, including its preamble and annexes: (a) any agreement relating to the treaty
which was made between all the parties in connexion with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connexion with the
conclusion of the treaty and accepted by the other parties as an instrument related to
the treaty.
 There shall be taken into account, together with the context: (a) any subsequent
agreement between the parties regarding the interpretation of the treaty or the
application of its provisions; (b) any subsequent practice in the application of the treaty
which establishes the agreement of the parties regarding its interpretation; (c) any
relevant rules of international law applicable in the relations between the parties.
 A special meaning shall be given to a term if it is established that the parties so
intended.

After WWII international organizations have flourished, interfering with the traditional
national State powers and functions and giving birth to a complex of legal regulatory
acts in many areas.
Thus it is now possible to talk about an international legal regime consisting in a set of
explicit and implicit principles, norms, rules and decision making procedures around a
set of issues relating to international policy areas
There is a great focus on the so called erosion of the State sovereignty, but the
effectiveness of international treaties still depend on the number of States which ratify
it and the willingness to implement them

Anyway it is true that the modern Nation-State, where the power was concentrated in
the hands of the governmental institutions (monistic State), has been now affected by
a fragmentation of the sovereignity which appears to be strongest in some areas.
The international trade is one of the areas where an international regulatory framework
has been developed by the international community.
States have stayed as the major actors, they are needed for the international
community to exist and, since they are not willing to give up power, the public
international rules are more likely to operate as soft law tools instead of hard law ones
Thus the international arena shows a system of network governance issuing broad
standards and depending on the compliance of the States agencies and institutions
instead of the direct enforcemen of the single rule

• Private International law develops outside the nations through the contract as a
basic device.
• Public international law is based instead on agreements among nations and, in the
field of the trade and the commercial transactions, is now characterized by a global
legal pluralism = variety of institutions, norms and dispute resolution procedures
located and issued in different sites around the world, expressing a multilevel
governance, committee and intergovernmental networks

• The need for internationational cooperation has prompted the creations of a bunch
of institutions (ONU, UNESCO,WORLD BANK, IFM) and, among them, the World
Trade Organization is seen as the engine of the global economic integration and as
a tool of global constitutionalism
• International organizations = they start as forums of negotiations among States
providing the necessary framework for a viable cooperation

• The WTO system has evolved and it (i) sets international rules of law providing
certainty and stability (ii) sets disputes through the Dispute Resolution Agreement
creating a quasi-judicial system under the rule of law
• Individuals do not participate in the international negotiations but the public
international law is growing and it is used to solve domestic conflicts especially in
the field of trade law. Thus individuals can be (indirectly) affected by it
• The issue is for public international trade law to acquire some form of
constitutional legitimacy since (i) national states cannot contain anymore, in the
field of trade law, the impact of the other countries domestic policies and need
control over global decision-making; (ii) the national state is not enough to secure
the citizens representation in the international arena
• Global constitutionalism =
(1) global trade law is the first step;
(2) global human rights law is the second step;
(3) the evolution could be towards the creation of an international system of law
which gives legal status to individuals

• The WTO policy has been to issue all or nothing agreements (no choice but
packahe agreements where the State signs one and is bound to all), as it has
happened in 1994 with its own creation

The future is actually very uncertain due both to the economic crisis and the
difficulty in achieving a sufficient level of consensus among the different states on
the issues at stake
Note that the Doha Round has started in 2001 and is far from seeing its own
conclusion even if there have developments in 2013 Bali Ministerial Conference
LESSON 2
International Organisations – History

The earliest modern precedents to today’s IO’s:

 The Congress of Vienna - a forum for international collaboration on European
security and commerce. A multipurpose IGO created by the European great powers
to reestablish order and stability on the continent after the Napoleonic Wars.
 The Concert of Europe - Vienna(1815-1914) - was a system of dispute resolution
adopted by the major conservative powers of Europe to maintain their power,
oppose revolutionary movements, weaken the forces of nationalism, and uphold
the balance of power. It was drew upon their ideas and the notion of a balance of
power in international relations, so that the ambitions of each great power would be
restrained by the other
 The League of Nations (1919-1939) - was an intergovernmental
organisation founded on 10 January 1920 as a result of the Pars Peace
Conference that ended the WWI, whose principal mission was to maintain world
peace, having universal membership. UN embraces most of the League’s principles
and structures.
 Failure of the League of Nations: politically challenged by Japan-China conflict in
Manchuria (1931) and the Italy-Ethiopia conflict (1935). The outbreak of WWII
ended the League’s history. However, its legacy lives on.

The post WWII era – massive proliferation of IO’s (over 20,000)

From the League of Nations to UN:
 Creation of UN System in 1945. The founders – victorious allies of WWII – meet in
San Francisco to found a multipurpose IO first envisioned by the League of Nations.
 UN designed to be center of multilateral diplomacy in postwar word politics. Aiming
at restoring peace and maintaining security, establish friendly relations among
nations, address economic, social, cultural and humanitarian problems, and to
promote respect for universal human rights.
 Universal membership, currently up to 192 countries (all countries in the world,
except Vatican and Kosovo)
 Headquartered in New York.
 Six official languages: Arabic, Chinese, English, French, Russian and Spanish.
 UN system structured around five principle organs, together with its several
agencies and autonomous organizations, comprise the UN family of IGOs.
 International organisations grew up out of the diplomatic conferences of the XIX
century
 States sought more effective ways to deal with problems caused by rapid
development of international society
 There are many international organisations today, ranging from large ones with
global responsibilities and virutally universal membership (UN, and UN Agencies), to
regional or highly specialized organisations with a narrow mandate (EU,
Internaitonal Whaling Commission, ILO)
 Spillover effect - cooperation in one issue area may affect another issue area
 Each organisation is different but they share common features
 IO’s are established by treaty (constituent instrument). There are some
exceptions: a) OSCE emerged following the Helsinky Final Act 1975 which was
not a treaty; b) Commonwealth; c) International Commitee of the Red Cross is a
 corporation and States are not members
 Membership is limited exclusively or primarly to States (Intergovernmental
organisation); some organisations admit as members non-State entities on the
basis that they are separate customs territory
 Some organisations have a separate category of associate membership for the
overseas territory of members
 International legal personality
 Financed by its members

Main organs
IO’s usually have 3 main organs:
 an assembly, in which all members are entitled to sit (one vote each)
 an executive body (often with restricted membership)
 a secretariat
The organs need to be distinguished from the organisation itself and its members.

Purpose of the analysis

Our purpose is to analyse international organizations related to international business and
economic activity:
 - WORLD BANK
 - IMF
 - OECD
 - EU
 - WTO

WORLD BANK
World Bank, was created by the Bretton Woods Conference (1944), is an international
financial organization that provides loans to countries of the world for capital
programs, is made up of 189 countries.
It comprises 2 different institutions:
 International Bank for Reconstruction and Development (IBRD) – global
development cooperative providing loans, guarantees, risk management
products and advisory services
 International Development Association (IDA) – supports development
programs that boost economic growth by providing credits and grants

The stated official goals to achieve by 2030 are the reduction of poverty and the
promotion of shared prosperity by fostering the income growth. However, according
to its Agreement, all its decisions must be guided by a commitment to the promotion
of foreign investiment and international trade and to facilitation of capital investment.

IMF
International Monetary Fund was created by the Bretton Woods Conference (1944), is an
international organisation of 189 countries working to foster global monetary cooperation,
secure financial stability, facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty
IMF’S responsibilities: the primary purpose is to ensure the stability of the international
monetary system – the system of exchange rates and international payments that enable
countries (and their citizens) to transact with each other.
  Surveillance: to maintain stability and prevent crisis in international monetary
system, the IMF reviewes country policies and national, regional and global
economic and financial development through a formal system known as
surveillance, encouraging policies that foster economic stability, reduce
vulnerability to economic and financial crisis
 Financial assistance: provide its members breathing room to correct balance of
payments problems

OECD
 Organisation for Economic Cooperation and Development is an intergovernmental
economic organisation with 35 member countires (high income economies), founded
in 1960 to stimulate economic progress and world trade. It is a forum of countries
decribing themselves as committed to democracy and the market economy, providing
a platform to compare policy experiences, seeking answers to common problems,
identify good practices and coordinate domestic and international policies of its
members
 Objectives and activities: its mandate covers economic, environmental and social
issues. It acts by peer pressure to improve policy and implement soft law, wich is non
binding instrument tha can occasionally lead to binding traties. In its work OECD
cooperate with businesses, with trade unions and with other representative of civil
society.
 Policies: the policies promoted designed to achieve highest sustainable economich
growth and employment and a risinig of standard of living in Member countries, to
contribute to the expansion of world trade.

LESSON 3: From European Communities to European Union EU Timeline

The Single Market and the Customs Union

Two of the original core objectives of the European Economic Community were the
development of a common market, subsequently becoming a Single Market, and
a Customs Union between its member states.
 The Single Market is ‘an area without internal frontiers in which the free movement
of goods, persons, services and capital is ensured’ (Article 26 TEU).
 The Customs Union is a type of trade bloc which is composed of a free trade area
with a common external tariff

The Single Market involves the free circulation of goods, capital, people and services
within the EU and the Customs Union involves the application of a common external
tariff on all goods entering the market. Once goods have been admitted into the
market they cannot be subjected to customs duties, discriminatory taxes or import
quotas, as they travel internally.

The non-EU member states of Iceland, Norway, Lichtestein and Switzerland participate

in the Single Market but not in the Customs Union (European Free Trade Association).
Half the trade in the EU is covered by legislation harmonised by the EU.

Movement freedoms
  Free movement of capital is intended to permit movement of investments such as
property purchases and buying of shares between countries. Until Economic and
Monetary Union the development of the capital provisions had been slow. Post-
Maastricht there has been a rapidly developing corpus of ECJ judgements regarding
this initially neglected freedom. The free movement of capital is unique insofar as it
is granted equally to non-member states.
 Free movement of persons means that Eu citizens can move freely between
member states to live, work, study or retire in another country. This required the
lowering of administrative formalities and recognition of professional qualifications
of other states.
 Free movement of services and of establishment allows self-employed persons to
move between member states to provide services on a temporary or permanent
basis. While services account for 60–70% of GDP, legislation in the area is not as
developed as in other areas. This lacuna has been addressed by the recently
passed Directive on services in the internal market which aims to liberalise the
cross border provision of services. According to the Treaty the provision of services
is a residual freedom that only applies if no other freedom is being exercised.

Paris Treaty 1951 – 1952

The Treaty of Paris (formally the Treaty establishing the European Coal and Steel
Community) was signed between France, West Germany, Italy and the three Benelux
countries (Belgium, Luxembourg, and the Netherlands). It expired on 23 July 2002.
The treaty was seen as producing diplomatic and economic stability in western Europe
after the WWII. Countries were sharing production of coal and steel, the key-resources
which previously led to war.

Rome Treaty 1957 – 1958

The Treaty of Rome, officially the Treaty establishing the European Economic Community
(TEEC) led to the foundation of the European Economic Community (EEC). It was signed
by Belgium, France, Italy, Luxembourg, the Netherlands and West Germany.
The TEEC proposed the creation of a common market for goods, workers, services and
capital within the EEC's member states (single market).

Merger Treaty 1965-1967

The Merger Treaty combined the executive bodies of the European Coal and Steel
Community (ECSC), European Atomic Energy Community (Euratom) and the European
Economic Community (EEC) into a single institutional structure (European Council and
European Commission, Parliamentary Assembly and Court of Justice).
Although each Community remained legally independent and were together known as the
European Communities.

Schengen Agreement 1985

The Schengen Agreement led to the creation of Europe's borderless Schengen Area in
1995. The Schengen Area presents external border controls for travellers entering and
exiting the area, and common visas, but no internal border controls.
It currently consists of 26 European countries (not all part of the EU and not including all
the EU’s Countries).

The Single European Act 1986

The Single European Act (SEA) was the first major revision of the 1957 Treaty of Rome.
It was occasioned by the discontent among EEC’s members about the persisting lack of
free trade among them (The Single Market should have been created by the 1969). A core
element of the SEA was to create a Single Market within the European Community by 1992.
In order to make this objective possible the SEA reformed the legislative process to make
it easier and shorter (introducing the Qualified Majority Voting to new areas).
The SEA outlined actions to remove barriers and to increase harmonisation among EEC’s
Countries countries.

The Maastricht Treaty 1992

The Maastricht Treaty better known as Treaty on European Union (TEU) undertaken to
integrate Europe, shifting from EEC to EU.
It modified the TEEC (Treaty of Rome) in order to set the basis for a Economic and
Monetary Union. The Treaty led to the creation of the single currency (Euro).
The treaty based European Union on three pillars:
1. the European Community (EC) pillar (substituting EEC, ECSC and EUROATOM)
outlined by the TEEC;
2. the Common Foreign and Security Policy (CFSP) pillar;
3. the Justice and Home Affairs (JHA) pillar.

 In the first pillar the EU's supra-national institutions — the Commission, the Council,
the European Parliament and the European Court of Justice — operate and exercise
their powers and their influence on member states (also providing binding acts and
exercising jurisdictional powers) – Community method provided by the TEEC.
 The other two pillars were essentially intergovernmental in nature with decisions
principally taken unanimously by the Council or by committees composed of
member states' politicians and officials.

The Nice Treaty 2001

Treaty of Nice reformed the institutional structure of the European Union to withstand
eastward expansion (European Parliament, European Commission, ECJ). The changes
regarded rules on the mechanisms for approval of acts; composition of EU institutions,
and so on.
The European Council of Nice will be chiefly remembered for the approval of the Charter
on Fundamental rights of EU citizens. The legal value of this Charter was not set in Nice.

The Lisbon Treaty 2007-2009

The Lisbon Treaty amended the Treaty on European Union (TUE) (the Maastricht Treaty)
and the Treaty of Rome establishing the European Community (TEEC) (the Rome Treaty,
now the Treaty on the Functioning of the European Union (TFEU).
It abolished the three pillars system. However, roles and decision-making procedures for
former II and III pillars’ matters (intergovernamental method, unanimity rules).
The EU has legal personality, which was previously an attribute of the European
Community only. This legal personality confers on the EU new rights at international level
(The High Representative of the Union for Foreign Affairs and Security Policy was created
for that purpose): EU can conclude international agreements and can join international
organisations (like WTO).

Economic and Monetary Union

1. stage (1990-1993): exchange controls are abolished, thus capital movements are
 completely liberalised in the EEC. The Maastricht Treaty in 1992 sets a number of
economic convergence criteria, concerning the inflation rate, public finances,
interest rates and exchange rate stability.
2. stage (1994-1998): EU Council decides at Amsterdam to adopt the Stability and
Growth Path designed to ensure budgetary discipline after creation of the euro, and
a new exchange rate mechanism (ERM II) is set up to provide stability above the
euro and the national currencies of countries that haven't yet entered the eurozone.
3. stage (1999-): EU has achieved Economic and Monetary Union, the euro is now a
real currency, and a single monetary policy is introduced under the authority of the
ECB and also a weak political Union (European citizenship and Common Foreign
and Security Policy).

Main EU Institutions
 European Parliament: it the legislative and budgetary authority of the Union with
the Council of the EU (it is one of the two legislative Chambers). It has weaker
powers than the Council in some sensitive areas, and does not have legislative
initiative.
 European Council: it is the highest political body of the European Union, composed
by heads of state or government of the EU member states. It provides overall
political direction. It meets two/three times a year to define the Union's policy
agenda and give impetus to integration. It has no legislative power.
It should not be confused with the Council of Europe, an international organization
promoting co-operation between all countries of Europe in the areas of legal
standards, human rights, democratic development, the rule of law and cultural co-
operation. It was founded in 1949, has 47 member states. Unlike the EU, the Council
of Europe cannot make binding laws.
 Council of the Eu (or Council of Minister or Council): It is a body holding legislative,
budgetary and some limited executive powers and is thus the main decision
making body of the Union. It also lead the Common Foreign and Security Policy.
The Council is composed of twenty-eight national ministers (one per state). Votes
are taken either by majority or unanimity with votes allocated according to
population.
 European Commission: is the executive arm of the Union. It is a body composed of
one appointee from each state, currently twenty-eight. However, it is designed to be
independent of national interests. The body is responsible for drafting all law of the
European Union and has a near monopoly on proposing new laws. It also deals
with the day-to-day running of the Union and has the duty of upholding the law and
treaties (in this role it is known as the "Guardian of the Treaties").
 European Court of Justice: It is responsible for interpreting EU law and treaties.
 European Central Bank: is the central bank for the eurozone (the states which have
adopted the euro) and thus controls monetary policy in that area with an agenda to
maintain price stability.

EU and Trade
The EU is the world’s biggest trader, accounting for 16.5% of the world's imports and
exports. Free trade among its members was one of the EU's founding principles, and it is
committed to liberalising world trade as well.

Trade - a global system

World trade is founded on rules laid out by the World Trade Organisation that help ensure
that trade agreements and obligations between countries are open and fair.
EU trade policy is made exclusively at EU level. The Commission negotiates agreements
on behalf of the EU within WTO rules and works closely with national governments and the
European Parliament to maintain the global system and enable it to adapt to worldwide
changes.

Trading as a world leader

The EU is the world's biggest exporter of manufactured goods and services, and it is the
biggest import market for over 100 countries.
It is also the world's largest single market area. Both European and international
consumers and investors enjoy the many benefits of a simplified system – in an area
where people, goods, services and money can move freely.

Building a fair and open playing field

The EU negotiates agreements through its world-wide network of trade relations. It
engages with a huge range of partners, mostly through free trade agreements.
These partnerships seek to create growth and jobs for Europeans by opening new markets
with the rest of the world. Transatlantic markets, for example, represent transactions
worth around 2 billion euros every day.
EU trade policy also aims to reduce child and forced labour, environmental destruction and
price volatility. Schemes which ensure transparency and traceability in supply chains are
one example.
For the world's poorest countries, EU trade policy looks to combine trade and
development. Allowing lower duties, supporting small export businesses, and advising on
improvements to governance are just some of the ways trade and development can work
hand in hand to ensure the neediest benefit from trade-led growth.

LESSON 4: World Trade Organization

 WTO was established and became operational on 1 January 1995
 It is the youngest of all major international intergovernmental organizations, and
one of the most influential in economic globalization
 It is the primary international organization for international trade and trade related
matters
 It is also one of the most controversial organizations

The origins of WTO

 The origins of WTO lie in the General Agreement on Tariffs and Trade (GATT) of
1947
 The origins are very relevant: decisions, procedures and customary practices of
GATT 1947 still guide WTO in its actions

The section on the origins of WTO will discuss:

 The genesis of GATT 1947 and its operation until 1994
 GATT Uruguay Round of Multilateral Trade Negotiations (1986-1994) and the
emergence of WTO

The origins of WTO - GATT 1947

 1945: USA invited its war-time allies to enter in negotiation to conclude a
multilateral agreement for reciprocal reduction of tariffs on trade in goods
  1946: United Nations Economic and Social Council adopted a resolution calling for
a Conference to draft a charter to create International Trade Organization (ITO). The
Conference did recognize the need for a comparable international institution for
trade, complement the IMF and the WB (as part of the Bretton Woods 1944)
 1946-1947: Geneva > work on the charter, divided in 3 major parts:
1. Preparation of the charter for the establishment of ITO
2. Negotiation of a multilateral agreement to reduce tariffs reciprocally
3. Drafting the general clauses of obligations relating to tariffs obligations
 1947: the negotiations on GATT advanced well and by October they reached an
agreement. The negotiations on ITO were more difficult and it was clear that
towards he end of 1947 Geneva meeting the ITO Charter would not be finished
before 1948
 1947: GATT was finished and brought into force immediately but this created a
problem: some countries could not agree to certain obligations of GATT (that
require changes to national legislations) without submitting the agreement to
parliaments
 30 October 1947: 8 countries of the 23 that negotiated the GATT signed Protocol of
Provisional Application of GATT (PPA)
 1948: Havana: negotiations on ITO Charter were successfully completed, but never
entered into force: SIGNIFICANT GAP

GATT 1947
INTERNATIONAL ORGANISATION FOR TRADE
 In the absence of an international trade organization for trade, countries turned,
from 1950, to the only existing multilateral international institution for trade to
handle problems concerning trade relations
 Over the years GATT transform itself in a pragmatic and incremental manner into a
de facto international organization
 GATT was very successful in reducing tariffs on trade in goods, in particular on
industrial goods from developed countries

GATT 1947 – Rounds of negotiations

In 8 negotiating rounds between 1947 and 1994, the average level of tariffs of developed
countries on industrial products was brought down from over 40% to less than 4%
 REDUCTION OF TARIFFS
• Geneva (1947)
• Annecy (1949)
• Torquay (1951)
• Geneva (1956)
• Dillon (1964-67)

 REDUCTION OF NON-TARIFFS BARRIERS

• Kennedy Round (1964-67) onwards: negotiations was less successful and much
more complex
• Tokyo Round (1973-79): produced better results but there was a lack of real
consensus among negotiators

In the early 1980’s it was clear that a new Round of trade negotiations would be necessary:
the world was becoming increasingly more complex and interindipendent
USA and other few countries in favour with a new Round including new subjects: trade in
services and protection of intellectual property rights

Uruguay Round of Multilateral Trade Negotiations

 1986: Punta del Este: the GATT 123 Contracting Parties agreed to start a new
Round hoping to expand the competence of GATT to important new areas (services,
capital, intellectual property, textiles, agriculture)
 This Round was the first set of multilateral trade negotiations in which developing
countries has played active role

Punta del Este Declaration

 the negotiations would cover, inter alia, trade in goods (agricultural and textiles) and
in services (first time)
 It recognized the need for institutional reforms in the GATT system
 The establishment of a new international organization for trade was not among the
Uruguay Round’s main objectives

Montreal Ministerial Mid term review Conference 1988

 Implement a Trade Policy Review Mechanism to improve adherence to GATT rules
 Agreement attempting to create greater cooperation between GATT, IMF and WB as
a first step to achieve greater coherence in global policy making
 Contracting Parties, in order to improve functioning of GATT, meet at least once
every 2 years at ministerial level
 Italy proposed idea to establish a new international organization for trade
 In 1990 Canada formally proposed establishment of World Trade Organization with
purpose to administer different multilateral instruments related to international
trade

 In I990, along the same lines, EC submitted a proposal calling for the establishment
of a Multilateral Trade Organization. GATT needed an institutional framework to
ensure the effective implementation of the results of the Uruguay Round
 USA and most developing countries NOT enthusiastic > fear of supernationalism of
major trading nations
 December 1990: Brussels Draft Final Act closed the Conference of the Uruguay
Round > did not contain an agreement for an international organization for trade.
This Conference was a total failure
 December 1991: proposal (EC, Canada and Mexico) for an Agreement Establishing
the Multilateral Trade Organization > USA remain opposed until 1992, instead most
countries signed up.

WTO AGREEMENT
 December 1993: USA formally agreed to the establishment of the new organization,
but they demanded a change of the name as a condition for giving its consent.
 April 1994: the Agreement Establishing the World Trade Organization was signed in
Marrakesh and entered into force 1st of January 1995, and it was considered as the
greater achievement in institutionalized global economic cooperation

MANDATE OF THE WTO

 WTO was formally established and became operational on 1st of January 1995
when the WTO Agreement entered into force
 WTO has a broad and ambitious mandate:
 Objectives of WTO
The reasons for establishing WTO and the policy objectives of this international
organization are set out in the PREAMBLE to the WTO Agreement
1. The increase of standard of living
2. The attainment of full employment
3. The growth of real income and effective demand
4. The expansion of production of goods and services
5. The expansion of trade in goods and services

According to the PREAMBLE it is clear that pursuing the objectives WTO must take
into account the need for preservation of the environment and the needs of
developing countries (absent from GATT1947)
The PREAMBLE stresses the importance of sustainable economic development
taking into account:
1. Environmental concerns
2. Social concerns
3. Integration on developing countries in world trading systems

According to the PREAMBLE to the WTO Agreement, the 2 main instruments to

achieve the objectives are:
1. The reduction of tariffs barriers and other barriers to trade
2. The elimination of discriminatory tratement in international trade relations

 Functions of WTO
The primary function of WTO is to provide the common institutional framework for
the conduct of trade relations among its members in matters related to the
agreements and associated legal instruments included the Annexes to the WTO
Agreement

Defined functions in Article III of WTO Agreement

1. Facilitate the implementation, administration and operation, and further the
objectives of WTO Agreement and of the Multilateral Trade Agreements, and shall
also provide the framework for the implementation, administration and operation of
the Plurilateral Trade Agreements.
2. Provide the forum for negotiations among its Members concerning their multilateral
trade relations in matters dealt with under the agreements in the Annexes to this
Agreement., and provide a forum for further negotiations among its Members
concerning their multilateral trade relations, and a framework for the
implementation of the results of such negotiations, as may be decided by the
Ministerial Conference.
3. Administer the Understanding on Rules and Procedures Governing the Settlement
of Disputes (hereinafter referred to as the "Dispute Settlement Understanding" or
"DSU") in Annex 2 to WTO Agreement.
4. Administer the Trade Policy Review Mechanism provided for in Annex 3 to this
Agreement.
5. With a view to achieving greater coherence in global economic policy-making, the
WTO shall cooperate, as appropriate, with the International Monetary Fund and with
the International Bank for Reconstruction and Development and its affiliated
 agencies

In addition to functions of WTO expicitly referred in Article III of WTO Agreement, technical
assistance to developing country Members, is to consider an important function of WTO
to allow the latter to integrate into the world trading system

1) Implementation of WTO agreements

Art. III: the first function of WTO is to facilitate the implementation, administration and
operation of WTO Agreement and the multilateral and plurilateral agreements annexed to
it, and has the task of furthering the objectives of these agreements

 Agreement on Sanitary and Phitosanitary Measures (SPS): Article 12.2 states that
SPS Committee shall :
1. encourage and facilitate consultations or negotiations among Members
2. encourage use of international standards, guidelines or reccomendations
3. sponsor technical consultation
4. study with the objective of increasing coordination and integration between
international and national systems

 Agreement on Safeguards: Article 13 states that the tasks of Committee on

Safeguards include:
1. to monitor, and report annually to the Council for Trade in goods on the general
implementation and make reccomendations
2. to find, upon request of Members, whether or not the procedural requirements have
been complied and reports its findings to the Council
3. sponsor technical consultation
4. to assist Members in their consultations under the provision of the Agreement
5. The function of facilitating the implementation, administration and operation of the
WTO agreements and furthering the objectives of these agreements is an essential
function and it involves most of the bodies and takes up much of their time

2) Negotiation of new agreements

The second function of WTO is to provide a permanent forum for negotiations amongst its
Members, on matters already covered by the WTO. WTO is also a forum among others
with regard to negotiations on matters not yet addressed.
The 5 trade agreements in the framework of WTO provide for:
 Further market access commitments for specific services and service providers
(financial services in 1995 and 1997, basic telecommunications services in 1997,
movement of persons in 1996)
 Liberalisation of trade in information technology products (1996)
NO FURTHER AGREEMENTS NEGOTIATED

DOHA Development Round

2001 - Doha Session of the Ministerial Conference
After failing WTO decided to start a new Round of multilateral trade negotiations,
commonly referred as Doha Development Round.
Doha Ministerial Declaration: WTO Members stressed their commitment to the WTO as
the unique forum for global trade rule-making and liberalization.
Doha Ministerial Declaration include matters on which WTO Members had agreed in the
WTO Agreeement:
  Trade in agricultural products
 Trade in services
 Problems of developing countries members
 Market access for non agricultural products
 TRIPS issues (access for LDC to essential medicines
 Rules on antiduping duties,subsidies
 Dispute settlement

DOHA Development Round – an uncertain future

 The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001.
Subsequent ministerial meetings took place in Cancùn, Mexico (2003), and Hong
Kong (2005). Related negotiations took place in Paris, France (2005), Potsdam,
Germany (2007), and Geneva, Switzerland (2004, 2006, 2008);
 Progress in negotiations stalled after the breakdown of the July 2008 negotiations
over disagreements concerning agriculture, industrial tariffs and non-tariffs barriers,
services, and trade remedies. The most significant differences are
between developed nations led by the European Union (EU), the United States (US),
Canada, and Japan and the major developing countries led and represented mainly
by India, Brazil, China, and South Africa. There is also considerable contention
against and between the EU and the US over their maintenance of agricultural
subsidies—seen to operate effectively as trade barriers.

3) Dispute settlement
The third function of WTO is the administration of WTO dispute settlement system. Article
3.2 of the Dispute Settlement Uniderstanding states:
 The dispute settlement system of WTO is a central element in providing security
and predictability to the multilateral trading system
The dispute settlement is essential for the effective functioning of the WTO and for
maintaining a proper balance between the rights and the obligations of Members.

The WTO dispute settlement system serves:

 To preserve the rights and obligations of Members under the WTO agreements
 To clarify the existing provisions of those agreements
Since 1. January 1995 almost 400 disputes have been brought to WTO system for
resolution (ex.: national legislation on public health or environmental protection

4) Trade policy review

The fourth function of the WTO is the administration of Trade Policy Review Mechanism
(TPRM), which provides for the regular collective appreciation and evaluation of the full
range of individual Members’ trade policies and practices and their impact on the
functioning of multilateral trading system.
 PURPOSE:
1. Achieve grater transparency and understanding of trade policies and practices of
Members
2. Contribute to improve adherence by all Members to rules, disciplines and
commitments made under the WTO agreements
 Under the Trade Policy Review Mechanism (TPRM), trade policies and practices of all
Members are subject to periodic review.
 The frequency of the review is determined by reference to each Member’s share of
world trade in a recent representative period
 The 4 largest trading entities (EC, USA, Japan and China) are subject to review every 2
years
 The next 16 are reviewed every 4 years
 Other Memebers are reviewed every 6 years except LDC

5) Cooperation with other organizations

Article III.5 of WTO agreement refers specifically to cooperation with the IMF and the WB.
Such cooperation is mandated by the need for greater coherence in global economic
policy making
 Linkages between the different aspects of global economic policy (financial,
,monetary and trade) require that international institutions with responibilities in
these areas follow coherent and mutually supporting policies
 Uruguay Round Declaration on Coherence: pursue and develop cooperation with
international insititutions responsible for monetary and financial matters

Article V.1 of WTO agreement, states that the Wto is also to cooperate with other
international organisations:
 The General Council shall make appropriate arrangements for effective cooperation
with other intergovernmental organizations that have responsibillities related to
those of the WTO
 WTO has made cooperation arrangements with World Intellectual Property
Organization (WPO) and the UN Conference on Trade and Development (UNCTAD)

6) Technical assistance to developing countries

The functions of WTO listed in Article III of WTO Agreement do not explicitate technical
assistance to developing countries Members: this is an important function
 In order to exercise their rights and obligations under WTO Agreement, to
participate fully and effectively in trade negotiations, most developing countries
Members need to have significantly more expertise and resources in the area of
trade law and policy
 Many WTO agreements (TBT, TRIPS…) all specificaly provide for technical
assistance to developing countries, or multilateral assistance by WTO Secretariat

Since 2005, WTO Members have donated over 50 million Swiss Francs for the Doha
Development Agenda Global trust Fund, as a source of funding for the WTO
Secretariat’s training and technical assistance activities
Coordination with WB and IMF and other international organizations takes palce in the
context of the Integrated Framework for Trade-Related Technical Assistance (IF) with 2
objectives:
1. Integrate trade priorities into the national development plans and poverty reduction
strategies of LDC
2. Assist in the coordinated delivery of trade related assistance to LDC