Chapter 2-LAW 4000

1
Chapter 2
The World Trade
Organization
Copyright © 2020 Emond Montgomery Publications. All rights reserved.

AGENDA
1. Questions from last week.
2. Essay.
3. Chapter 2.
4. TED Talk
5. Case Study (5%)

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Introduction
• The exchange, purchase, and sale of goods and
services among countries is called international
trade
• This chapter:
• Discusses the foundational legal rules that govern
international trade and the organization that oversees
them
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Rules Governing International Trade and Where

They Come From
• The General Agreement on Tariffs and Trade (GATT) was created in 1947
and became the basis of the international trading system until the
formation of the World Trade Organization (WTO) in 1995
• The GATT had two roles:

• to develop a code of rules governing trade relations among participating countries
• to provide a forum to discuss disputes
• Major negotiating sessions of the GATT, and later the WTO, are referred to
as “rounds.” The Uruguay Round, the most important round, lasted from
1987 to 1993

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The Establishment of the

World Trade Organization
• The Marrakesh Agreement establishing the WTO was formally signed
by more than 100 countries in Morocco on April 15, 1994. It came into
effect on January 1, 1995
• The WTO has 164 state members, accounting for 98 percent of global
trade. It requires that agreements negotiated during the rounds are
adopted by consensus among all member states
• Members of the WTO must adopt the entire bundle of approximately

60 agreements, annexes, decisions, and understandings reached in
the Uruguay Round
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The Fundamental Rules of GATT 1994

• Since GATT 1947 is part of GATT 1994, and GATT 1994 is an integral part
of the WTO, a familiarity with the philosophy and provisions of the GATT
1994 is fundamental to understanding the regulation of modern
international trade
• Three basic rules remain the foundation of the trading rules in the WTO
today:
• Article II of GATT 1994 – Tariffs and the Binding Concessions Rule
• Article I of GATT 1994 – The Most-Favoured-Nation (MFN) Rule
• Article III of GATT 1994 – The National Treatment Rule
• Other significant rules govern special treatment for developing countries,

free trade areas, and customs unions
• dispu_settlement_e.pdf (wto.org)
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Fair Competition
To counter the effects of unfair trading practices, countries may
impose higher tariffs and quotas or bans that would normally not be
allowed by the WTO in the following circumstances:
• Actions to protect domestic industry from dumping
• Actions to counteract subsidies
• Actions, called safeguards, to temporarily limit imports to protect

domestic industry from a surge in imports
• https://youtu.be/6qFkn_4duj0 - How unfair trade policies impact trade
• https://youtu.be/FNz5EqMRqQo

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WTO Exceptions
• In some situations, WTO members may suspend preferential
treatment afforded to trade partners
• The allowable exceptions in Article XX are in connection to
conservation and to the protection of public morals, national
treasures, and human and plant life
• Exceptions are often invoked to address public-policy
concerns of the member governments
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WTO Exceptions (cont’d)

• It is possible for a member country to act in a manner inconsistent
with WTO rules and be excused under the provisions of Article XX
• Countries are within their rights to set criteria for the way products
are produced if the production method leaves a trace in the final
product
• The Sanitary and Phytosanitary Measures Agreement (SPS

Agreement) allows WTO members to take scientifically based
measures to protect public health (human, animal, or plant life)
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• Under Article XXI, WTO members are entitled to deviate from the
obligations of the GATT when they feel it’s necessary to protect
their security interests
• This may include dealing with nuclear matter, traffic in weaponry and dual-use
products, time of war or national emergencies, and sanctions mandated by the
UN Security Council
• Regional trade agreements (RTAs) are separate agreements

between states that are meant to promote freer trade or grant trade
preferences with respect to goods and services
• May include the establishment of free trade areas and customs unions
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• The Enabling Clause, Generalized System of Preferences, and
Article XXXVI provide special treatment for developing countries
• Non-tariff barriers to trade include import licensing, valuation of
goods at customs, pre-shipment inspections, and rules of origin
• The Agreement on Trade-Related Investment Measures
(TRIMS Agreement) applies to domestic rules for investment
measures that discriminate against foreign investors and foreign
goods
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WTO Rules Relating to Trade in

Services
• The General Agreement on Trade in Services (GATS) was
negotiated at the Uruguay Round
• Canada provides open access to its markets in exchange for
greater access to foreign markets for its services
• The MFN and national treatment rules both apply to services
• Government services are explicitly excluded from the GATS
agreement
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Protection of Intellectual Property

Intellectual property has been defined by the World Intellectual
Property Organization (WIPO) as “creations of the mind.” There are two
categories:
• Industrial property
• includes patents, trademarks, industrial designs, and geographical indications of source
• Copyright
• includes literary and artistic works, artistic performances, phonogram recordings, and radio and
television content
Two WTO non-discrimination rules apply to intellectual property

protection: national treatment and MFN treatment
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Ensuring Transparency:
Trade Policy Reviews
• WTO member governments must notify the WTO of specific new
measures, policies, or laws
• The WTO, through the Trade Policy Review Body, conducts regular
reviews of each country’s trade policies
• The reports, including the policy statement by the government under

review and the report written by the WTO Secretariat, are published on
the WTO website
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Dispute Settlement in the WTO

• The Dispute Settlement Body (DSB) is the General Council of the
WTO when acting in its role to supervise the WTO dispute settlement
system
• The dispute settlement system is made up of:
• The panels
• The appellate body
• The compliance phase of WTO dispute settlement does not always

produce a timely and effective implementation of adopted rulings
• https://youtu.be/VnHtAvMLPLo
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WTO Achievements and Challenges

• The WTO has successfully facilitated liberalization of world trade,
especially of goods. This has had positive economic benefits and
contributed to an increase in world GDP.
• The WTO dispute-settlement system:
• Considered one of the few effective state-to-state dispute-resolution mechanisms
internationally
• The foundation of today’s trading system
• Challenges facing the WTO include:

• Limited results of the Doha round of negotiations, perceived inability to tackle unfair
trading practices, and shortcomings in the monitoring and transparency mechanism
• https://youtu.be/i_RgKP3QFo0

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Copyright © 2020 Emond Montgomery Publications. All rights reserved.

Copyright © 2020 Emond Montgomery Publications. All rights reserved.

Rules Governing International Trade and Where

• The GATT had two roles:

Copyright © 2020 Emond Montgomery Publications. All rights reserved.

The Establishment of the

• Members of the WTO must adopt the entire bundle of approximately

The Fundamental Rules of GATT 1994

• Other significant rules govern special treatment for developing countries,

• Actions to counteract subsidies

• Actions, called safeguards, to temporarily limit imports to protect

Copyright © 2020 Emond Montgomery Publications. All rights reserved.

WTO Exceptions (cont’d)

• The Sanitary and Phytosanitary Measures Agreement (SPS

WTO Exceptions (cont’d)

• Regional trade agreements (RTAs) are separate agreements

WTO Exceptions (cont’d)

WTO Rules Relating to Trade in

Protection of Intellectual Property

Two WTO non-discrimination rules apply to intellectual property

• The reports, including the policy statement by the government under

Dispute Settlement in the WTO

• The appellate body

• The compliance phase of WTO dispute settlement does not always

WTO Achievements and Challenges

• Challenges facing the WTO include:

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