Dispute Settlement Mechanism

A dispute arises when one country adopts a trade policy measure or takes some action that one or
more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to live
up to obligations. A third group of countries can declare that they have an interest in the case and
enjoy some rights.
The WTO's Understanding on Dispute Settlement provides WTO members with a legal framework for
resolving trade disputes that arise between them in implementing WTO agreements.
A procedure for settling disputes existed under the old GATT, but it had no fixed timetables, rulings
were easier to block, and many cases dragged on for a long time inconclusively.
The Uruguay Round agreement introduced a more structured process with more clearly defined
stages in the procedure. It introduced greater discipline for the length of time a case should take to
be settled, with flexible deadlines set in various stages of the procedure.
The agreement emphasizes that prompt settlement is essential if the WTO is to function effectively.
It sets out in considerable detail the procedures and the timetable to be followed in resolving
disputes. If a case runs its full course to a first ruling, it should not normally take more than about
one year — 15 months if the case is appealed. The agreed time limits are flexible, and if the case is
considered urgent (e.g. if perishable goods are involved), it is accelerated as much as possible.
The Uruguay Round agreement also made it impossible for the country losing a case to block the
adoption of the ruling
Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in another
guise), which consists of all WTO members. The Dispute Settlement Body has the sole authority to
establish “panels” of experts to consider the case, and to accept or reject the panels’ findings or the
results of an appeal. It monitors the implementation of the rulings and recommendations, and has
the power to authorize retaliation when a country does not comply with a ruling.
There are two main ways to settle a dispute once a complaint has been filed in the WTO: (i) the
parties find a mutually agreed solution, particularly during the phase of bilateral consultations; and
(ii) through adjudication, including the subsequent implementation of the panel and Appellate Body
reports, which are binding upon the parties once adopted by the DSB.
There are three main stages to the WTO dispute settlement process: (i) consultations between the
parties; (ii) adjudication by panels and, if applicable, by the Appellate Body; and (iii) the
implementation of the ruling, which includes the possibility of countermeasures in the event of
failure by the losing party to implement the ruling.
First stage: consultation (up to 60 days). Before taking any other actions the countries in dispute
have to talk to each other to see if they can settle their differences by themselves. If that fails, they
can also ask the WTO director-general to mediate or try to help in any other way.
Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the panel to
conclude). If consultations fail, the complaining country can ask for a panel to be appointed. The
country “in the dock” can block the creation of a panel once, but when the Dispute Settlement Body
meets for a second time, the appointment can no longer be blocked (unless there is a consensus
against appointing the panel).
Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations. But
because the panel’s report can only be rejected by consensus in the Dispute Settlement Body, its
conclusions are difficult to overturn. The panel’s findings have to be based on the agreements cited.
The panel’s final report should normally be given to the parties to the dispute within six months. In
cases of urgency, including those concerning perishable goods, the deadline is shortened to three
months.
The agreement describes in some detail how the panels are to work. The main stages are:
Before the first hearing: each side in the dispute presents its case in writing to the panel.
First hearing: the case for the complaining country and defence: the complaining country (or
countries), the responding country, and those that have announced they have an interest in the
dispute, make their case at the panel’s first hearing.
Rebuttals: the countries involved submit written rebuttals and present oral arguments at the
panel’s second meeting.
Experts: if one side raises scientific or other technical matters, the panel may consult experts or
appoint an expert review group to prepare an advisory report.
First draft: the panel submits the descriptive (factual and argument) sections of its report to the
two sides, giving them two weeks to comment. This report does not include findings and
conclusions.
Interim report: The panel then submits an interim report, including its findings and conclusions, to
the two sides, giving them one week to ask for a review.
Review: The period of review must not exceed two weeks. During that time, the panel may hold
additional meetings with the two sides.
Final report: A final report is submitted to the two sides and three weeks later, it is circulated to
all WTO members. If the panel decides that the disputed trade measure does break a WTO
agreement or an obligation, it recommends that the measure be made to conform with WTO rules.
The panel may suggest how this could be done.
The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or
recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report (and
in some cases both sides do).
PANELS
A panel is a quasi-judcial body, incharge of adjudicating disputes between members. The panellists
are usually chosen in consultation with the countries in dispute. Only if the two sides cannot agree
does the WTO director-general appoint them.
Panels consist of three (possibly five) experts from different countries who examine the evidence
and decide who is right and who is wrong. The panel’s report is passed to the Dispute Settlement
Body, which can only reject the report by consensus.
Panelists for each case may be chosen from an indicative list of well-qualified candidates nominated
by WTO Members. Different panel for each dispute.
Appeals
Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on
points of law such as legal interpretation — they cannot reexamine existing evidence or examine
new issues. Each appeal is heard by three members of a permanent seven-member Appellate Body
set up by the Dispute Settlement Body and broadly representing the range of WTO membership.
Members of the Appellate Body have four-year terms. They have to be individuals with recognized
standing in the field of law and international trade, not affiliated with any government.
The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally
appeals should not last more than 60 days, with an absolute maximum of 90 days.
 The Dispute Settlement Body has to accept or reject the appeals report within 30 days — and
rejection is only possible by consensus.

The Bretton Woods Conference, officially known as the United Nations Monetary and Financial
Conference, was a gathering of delegates from 44 nations that met from July 1 to 22, 1944 in Bretton
Woods, New Hampshire, to agree upon a series of new rules for the post-WWII international
monetary system.
The conference resulted in the creation of the International Monetary Fund (IMF) and the
International Bank for Reconstruction & Development (IBRD) though that quickly became become
the World Bank. It was intended that the IMF was to maintain a system of fixed exchange rates
centered on the U.S. dollar and gold, while the IBRD was responsible for providing financial
assistance for the reconstruction of war-ravaged nations and the economic development of less
developed countries.2 The IMF and IBRD formally came into existence on 27 December 1945. The
World Bank opened it doors on June 25, 19463 and made its first loan in 1947
The two major accomplishments of the conference were the creation of the International Monetary
Fund (IMF) and the International Bank for Reconstruction and Development (IBRD).
While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have
remained strong pillars for the exchange of international currencies.

IMF
 The International Monetary Fund (IMF) is an international organization that promotes
global economic growth and financial stability, encourages international trade, and reduces
poverty.
 The IMF was originally created in 1945 as part of the Bretton Woods agreement, which attempted
to encourage international financial cooperation by introducing a system of convertible currencies
at fixed exchange rates.
 The IMF collects massive amounts of data on national economies, international trade, and the
global economy in aggregate and provides economic forecasts.
 One of the IMF's most important functions is to make loans to countries that are experiencing
economic distress to prevent or mitigate financial crises.
 The IMF is a quota-based institution. IMF quotas are distributed according to a four pronged
formula that considers a member country’s GDP, its economic openness, its “economic
variability” and international reserves.
Multiple roles of quotas:
Resource Contributions: Quotas determine the maximum amount of financial resources a
member is obliged to provide to the IMF.
Voting Power: Quotas are a key determinant of the voting power in IMF decisions. Votes
comprise one vote per SDR100,000 of quota plus basic votes (same for all members).
Access to Financing: The maximum amount of financing a member can obtain from the IMF
under normal access is based on its quota.
SDR Allocations: Quotas determine a member’s share in a general allocation of SDRs.
 Quotas are the building blocks of the IMF’s financial and governance structure. An individual
member country’s quota broadly reflects its relative position in the world economy. Quotas are
denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

 Board of Governors
The Board of Governors, the highest decision-making body of the IMF, consists of one governor and
one alternate governor for each member country. The governor is appointed by the member country
and is usually the minister of finance or the governor of the central bank. All powers of the IMF are
vested in the Board of Governors. The Board of Governors may delegate to the Executive Board all
except certain reserved powers. The Board of Governors normally meets once a year.
 The IMF employs three main functions – surveillance, financial assistance, and technical assistance –
to promote the stability of the international monetary and financial system.
Surveillance : The IMF closely monitors each member country's economic and financial
developments and holds a policy dialogue with a member country on a regular basis (also known as
Article IV Consultation), usually once each year, to assess its economic conditions with a view to
providing policy recommendations. The IMF also reviews global and regional developments and
outlook based on information from individual consultations. The IMF publishes such assessment on
the multilateral surveillance through the World Economic Outlook and the Global Financial Stability
Report on a semi-annual basis.
Financial Assistance : The IMF lends to its member countries facing balance of payments problems in
order to facilitate the adjustment process and restore member countries' economic growth and
stability through various loan instruments or "facilities". An IMF loan is usually provided under an
"arrangement," requiring a borrowing country to undertake the specific policies and measures to
resolve its balance of payments problem as specified in a "Letter of Intent."
Technical Assistance : The IMF provides technical assistance to help member countries strengthen
their capacity to design and implement effective policies in four areas, namely, 1) monetary and
financial policies, 2) fiscal policy and management, 3) statistics and
4) economic and financial legislation.
 The IMF strongly supports the role of the World Trade Organization (WTO), including its role in
upholding trade rules and settling trade disputes. The IMF and the WTO work together on many levels,
with the aim of ensuring greater coherence in global economic policymaking. A cooperation
agreement between the two organizations covering various aspects of their relationship was signed
shortly after the WTO’s creation.
The International Monetary Fund (IMF) works to ensure the stability of the international monetary
and financial system. The IMF’s mandate includes facilitating the expansion and balanced growth of
international trade, promoting exchange stability, and orderly correction of countries’ balance of
payments problems.
The World Trade Organization (WTO) deals with the rules of trade between all major trading
economies. The WTO works to help international trade flow smoothly, predictably, and freely, and
provides countries with an outlet for settling disputes over trade issues.

The Agreement focuses on three main elements. First, it lays the basis for carrying forward the
WTO's Ministerial mandate to achieve greater coherence in global economic policy by cooperating
with the IMF as well as with the World Bank; a cooperation agreement between the WTO and the
World Bank was also recently finalized. Second, reflecting the synergies in the work and
responsibilities of the IMF and the WTO, the Agreement provides channels of communication to
ensure that the rights and obligations of Members are integral to the thinking of each organization.
Third, in keeping with enhanced cooperation, the Agreement accords observer status to the IMF and
WTO in certain of each other's decision-making bodies. Thus, it grants the WTO observer status to
appropriate meetings of the IMF's Executive Board, when it considers trade issues, and in turn grants
observer status to the IMF in most WTO bodies.
The IMF and WTO work together to ensure a strong system of international trade and payments that
is open to all countries, thereby enabling economic growth, raising living standards, and reducing
poverty around the globe.

World Bank

With 189 member countries, the World Bank Group is a unique global
partnership: five institutions working for sustainable solutions that reduce
poverty and build shared prosperity in developing countries.
It is an international financial institution that provides loans and grants to the governments
of low- and middle-income countries for the purpose of pursuing capital projects.

Founded in 1944, the International Bank for Reconstruction and

Development (IBRD) — soon called the World Bank — has expanded
to a closely associated group of five development institutions.
Originally, its loans helped rebuild countries devastated by World War
II. In time, the focus shifted from reconstruction to development, with a
heavy emphasis on infrastructure such as dams, electrical grids, irrigation
systems, and roads.
Headquartered in Washington, D.C., the bank is the largest source of
financial assistance to developing countries. It also provides technical
assistance and policy advice and supervises—on behalf of international
creditors—the implementation of free-market reforms. Together with
the International Monetary Fund (IMF) and the World Trade
Organization, it plays a central role in overseeing economic policy and
reforming public institutions in developing countries and defining the
global macroeconomic agenda.
Globalization has increased the need for closer cooperation between the
multilateral institutions with key roles in the formulation and implementation of
different elements of the framework for global economic policy, in particular the
International Monetary Fund (IMF), the World Bank and the World Trade
Organization. Each of these organizations has a mandate for such cooperation in
the agreements under which they have been established. They also have signed
agreements among themselves, for mutual cooperation and regular consultation,
which identify mechanisms designed to foster greater coherence in global
economic policy-making.

The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the world’s trading nations and
ratified in their parliaments. The goal is to ensure that trade flows as smoothly,
predictably and freely as possible.
The WTO is run by its member governments. All major decisions are made by the
membership as a whole, either by ministers (who usually meet at least once every
two years) or by their ambassadors or delegates (who meet regularly in Geneva).
Decisions are normally taken by consensus
WTO belongs to its members. The countries make their decisions through various councils and
committees, whose membership consists of all WTO members
Highest authority: the Ministerial Conference
The topmost decision-making body of the WTO is the Ministerial Conference,
which usually meets every two years. It brings together all members of the WTO,
all of which are countries or customs unions. The Ministerial Conference can take
decisions on all matters under any of the multilateral trade agreements.
Second level: General Council in three guises
Day-to-day work in between the ministerial conferences is handled by three bodies: • The General
Council • The Dispute Settlement Body • The Trade Policy Review Body All three are in fact the same
— the Agreement Establishing the WTO states they are all the General Council, although they meet
under different terms of reference. Again, all three consist of all WTO members. They report to the
Ministerial Conference. The General Council acts on behalf of the Ministerial Conference on all WTO
affairs. It meets as the Dispute Settlement Body and the Trade Policy Review Body to oversee
procedures for settling disputes between members and to analyze members’ trade policies

Third level: councils for each broad area of trade, and more
Three more councils, each handling a different broad area of trade, report to the General Council: •
The Council for Trade in Goods (Goods Council) • The Council for Trade in Services (Services Council)
• The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council) As their names
indicate, the three are responsible for the workings of the WTO agreements dealing with their
respective areas of trade. Again they consist of all WTO members. The three also have subsidiary
bodies (see below). Six other bodies report to the General Council. The scope of their coverage is
smaller, so they are “committees”. But they still consist of all WTO members. They cover issues such
as trade and development, the environment, regional trading arrangements, and administrative
issues.
Two more subsidiary bodies dealing with the plurilateral agreements (which are not signed by all
WTO members) keep the General Council informed of their activities regularly.
Fourth level:
Each of the higher level councils has subsidiary bodies. The Goods Council has 11 committees dealing
with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so
on). Again, these consist of all member countries. Also reporting to the Goods Council is the Textiles
Monitoring Body, which consists of a chairman and 10 members acting in their personal capacities,
and groups dealing with notifications (governments informing the WTO about current and new
policies or measures) and state trading enterprises.
All WTO members may participate in all councils, committees, etc, except Appellate Body, Dispute
Settlement panels, Textiles Monitoring Body, and plurilateral committees.

Role of WTO
The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the world’s trading nations and
ratified in their parliaments. The goal is to ensure that trade flows as smoothly,
predictably and freely as possible.
Global rules of trade provide assurance and stability. Consumers and producers know they can enjoy
secure supplies and greater choice of the finished products, components, raw materials and services they
use. Producers and exporters know foreign markets will remain open to them. By lowering trade barriers
through negotiations among member governments, the WTO’s system also breaks down other barriers
between peoples and trading economies.
The WTO's founding and guiding principles remain the pursuit of open borders, the guarantee of most-
favoured-nation principle and non-discriminatory treatment by and among members, and a commitment to
transparency in the conduct of its activities.
the WTO's main activities are:
— negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and
agreeing on rules governing the conduct of international trade (e.g. antidumping, subsidies, product
standards, etc.)
— administering and monitoring the application of the WTO's agreed rules for trade in goods, trade in
services, and trade-related intellectual property rights
— monitoring and reviewing the trade policies of our members, as well as ensuring transparency of
regional and bilateral trade agreements
— settling disputes among our members regarding the interpretation and application of the agreements
— building capacity of developing country government officials in international trade matters
— assisting the process of accession of some 30 countries who are not yet members of the organization
— conducting economic research and collecting and disseminating trade data in support of the WTO's
other main activities
— explaining to and educating the public about the WTO, its mission and its activities.

Implementation of the WTO agreements

WTO ensures that governments of every member country make their trade
policies in accordance with the WTO agreements. WTO councils and
committees ensure that WTO agreements are properly implemented and all
other requirements have been satisfied. To monitor the status of such
implementation, all members have to undergo a periodic review of their
trade policies.
Trade negotiations
The WTO agreements cover goods, services and intellectual property. They spell out the principles of
liberalization, and the permitted exceptions. They include individual countries’ commitments to lower
customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures
for settling disputes. These agreements are not static; they are renegotiated from time to time and new
agreements can be added to the package. Many are now being negotiated under the Doha Development
Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.
Implementation and monitoring
WTO agreements require governments to make their trade policies transparent by notifying the WTO
about laws in force and measures adopted. Various WTO councils and committees seek to ensure that
these requirements are being followed and that WTO agreements are being properly implemented. All
WTO members must undergo periodic scrutiny of their trade policies and practices, each review containing
reports by the country concerned and the WTO Secretariat.
Dispute settlement
The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for
enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the
WTO if they think their rights under the agreements are being infringed. Judgements by specially
appointed independent experts are based on interpretations of the agreements and individual countries’
commitments.
Building trade capacity
WTO agreements contain special provision for developing countries, including longer time periods to
implement agreements and commitments, measures to increase their trading opportunities, and support to
help them build their trade capacity, to handle disputes and to implement technical standards