IDRB

UNIT-5 INTERNATIONAL TRADE DISPUTE (WTO)

SYNOPSIS
 Introduction
 Objectives of world trade organisation
 Functions of WTO
 Important principles of WTO
 WTO’s dispute settlement mechanism

INTRODUCTION
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 WTO has 164 members (including European Union) and 23 observer
governments (like Iran, Iraq, Bhutan, Libya etc).

OBJECTIVES OF WTO
The WTO was established to fulfil key objectives with respect to international
trade and other economic activities, including:
1. The welfare of the people
The main objective of the WTO is to improve the lives of people by raising their
living standards, creating jobs, raising their incomes, or expanding the trade of
goods and services globally. It helps developing or under-developed countries
enhance their trade capacity so that they can achieve economic growth and
stability.
2. Negotiating trade rules
WTO strives to remove trade barriers or any other obstacles from the way of the
progressive international trading system. These negotiations help the countries
open their markets for trade. But at the same time, some trade barriers were
maintained in order to protect the interests of consumers or the environment,
etc.
 3. Supervising WTO agreements
WTO agreements provide the rules for conducting international trade and
commerce. It binds the signatory countries to limit their trade policies in
accordance with these agreement provisions. These agreements strive to protect
and help producers of goods and services, importers or exporters in conducting
their businesses, and others involved in these trading activities.
4. Ensuring open trade
The main objective behind the emergence of the WTO is to maintain the free
flow of trade as much as possible without any undesirable consequences like
unfair competition, hegemony in a certain variety of goods or services, biassed
trade policies, etc.
5. Dispute settlement
In conducting international trade, several trade disputes also arise due to the
conflicting interests of one nation and those of another nation. These disputes
have been settled or negotiated by the WTO, which also involves the
interpretation of WTO agreements. The WTO, as a neutral body, settles these
disputes in accordance with the Dispute Settlement process provided in WTO
agreements.

FUNCTIONS OF WTO
1. 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.
2. Trade negotiations
This is one of the most important functions of the WTO. WTO agreements
include goods, services, and intellectual property. These agreements are not
fixed, they may be negotiated according to the situation of one or more
countries and their commitments to open trade markets. The WTO provides
exceptions to various principles of trade enshrined in WTO agreements. New
rules or agreements are also added from time to time.
3. Settling of disputes
Settling disputes arising between countries or with respect to trade is essential
for the system of international trade to run smoothly. The process for settling
such disputes is provided in WTO agreements. So, if any country thinks that its
rights under any agreement have been infringed, it can bring such disputes to
the WTO. The WTO appoints independent experts to resolve its disputes based
on the interpretation of provisions of the WTO agreements and other relevant
factors.
4. Help countries build trade capacity
The WTO empowers developing countries to boost their trading capacity and
help them develop the skills and infrastructure required to expand their trade. It
conducts various missions or courses, especially focused on developing
countries. Even in WTO agreements, special provisions were provided for
developing countries.
5. Enhancing cooperation between states and non-state actors
WTO remains in constant touch with various non-governmental organisations
(NGOs), media, parliamentary members, other international organisations, and
the general public in order to get their opinions on various aspects of WTO and
ongoing negotiations and maintain their cooperation in the international trading
system.
6. Conducting economic research
The WTO conducts research in the field of trade and other economic activities
and also collects and disseminates various data and information in support of its
activities.

PRINCIPLES OF WTO
1. No discrimination in trade
According to the WTO agreements, countries cannot discriminate between two
countries as trading partners. They cannot grant some countries special favours
in trade by lowering rates of customs duty or taxes, etc. Every WTO member
should be treated likewise.
2. Free trade
The WTO conducts its activities on the principle of “free trade” or “progressive
liberalisation”. It encourages nations to open their markets, lower their trade
barriers, or restrict customs duties, import bans, or quotas.
3. Transparency in the trading system
It is the duty of the WTO to ensure that the trade policies and rules of each
member country are transparent and easily predictable. These policies should
not be subject to too many recurring changes, they should be stable enough to
avoid any inconsistencies in their understanding by other countries.
4. Fair competition
The WTO is dedicated to establishing open and fair competition in the
international trading system. As it is based on the principle of non-
discrimination in trade, it is successfully establishing secure conditions for fair
and undistorted competition.
5. Economic development and reform
WTO helps in the development of nations. It has provided special provisions for
developing nations, allowing them certain trade concessions. Certain
agreements by the WTO provide developing countries with a ‘period of
transition’ so that they may easily adjust to new situations.
6. Building trade capacity of developing countries by the WTO
The WTO plays an important role in uplifting developing countries, which
make up three-fourths of its total membership. Through various assistance
programmes or partnerships, the WTO tries to increase the capability of
developing nations to carry out trade and business so that they can present
themselves in the global market.
7. Committee on Trade and Development (CTD)
It is the main body in the WTO responsible for the coordination of work on
development. It approves, monitors, and provides guidance for technical
assistance programmes conducted by the WTO.
8. Aid for Trade initiative
The Aid for Trade initiative was launched by the WTO in December 2005 at
the Sixth WTO Ministerial Conference held in Hong Kong, China. It works on
the basis of a biennial work programme. It was designed to help developing
nations build trade capacity by opening opportunities for them to enhance their
infrastructure and improve their ability to earn benefits.

WTO’S DISPUTE SETTLEMENT MECHANISM

The dispute settlement mechanism provided by the WTO is very essential for
the smooth functioning of the multilateral trading system and the effectiveness
of its rules and agreements. It contributes to maintaining stability in the global
economy.
Any dispute brought to the WTO has to go through various stages of dispute
resolution. There are two ways of dispute resolution:
1. Mutual agreement,
2. Adjudication

STAGES OF DISPUTE SETTLEMENT

1.Consultation: Before bringing the dispute to the authorities, both parties try to
resolve it through consultation. If it fails to bear fruitful results in the desired
period, parties may request adjudication by panels.
2.Adjudication by panels: Parties may request the establishment of panels in
writing to the Dispute Settlement Body (DSB).
 This request must contain details like whether consultations were held, a
summary of the complaint and its legal basis, etc.
 The panellist is a third party who is selected by the WTO Secretariat.
After the selection of a panellist, they have one week to set the timetable
for the whole process.
 Each party to the dispute makes submissions, presents their cases, and
makes rebuttals before the panel.
 The panel then reaches a solution to the dispute after examination of each
and every aspect of the dispute and submissions and sends its report to
the Dispute Settlement Body.
 If no solution can be found, they send a report containing the findings of
the case and their recommendations.
 This report can only become binding when the Dispute Settlement Body
adopts it.
 In case the party has opted to appeal, the panel report will be considered
for adoption only after the completion of the appeal.
 If no appeal is filed, the DSB may adopt the panel report, unless there is a
negative consensus in the DSB against the adoption.
3.Implementation of ruling: Once there is the adoption of the panel report, DSB
addresses some recommendations and ruling for the party who has lost the case,
so that it can bring itself into compliance with the WTO ruling or find
satisfactory adjustments.
This compliance is necessary for the effective settlement of disputes. DSB is
responsible for the implementation of the panel or Appellate reports. The party
has been provided with a reasonable period of time to get into compliance with
the ruling.

UNIT-5, GATT

SYNOPSIS
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