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Module 4: WTO I Introduction to the Marrakesh Agreement establishing the WTO
PERSONAL DETAILS
http://www.sidley.com/deepak-raju/?nomobile=temp
DESCRIPTION OF MODULE
Items Description of Module Subject Name Law Paper Name International Trade Law Module Name/Title The World Trade Organization-I Module Id 4 Pre-requisites Introduction to the Marrakech Agreement
establishing the WTO The organizational structure of the WTO, the key
decision making bodies The aims and objectives of the WTO as reflected in
its Preamble and the Marrakech Agreement
Objectives To understand the following:
Organizational structure of the WTO; Key decision making forums in the WTO; Objects and purposes of the WTO as set out in the
Marrakesh Agreement;
Role Name Affiliation Principal Investigator Dr. Ranbir Singh Vice Chancellor, National
Law University, Delhi Co-P.I Prof. Dr. G.S. Bajpai Registrar, NLU, Delhi
Paper Coordinator Dr. Saloni Khanderia-Yadav
National Law University, Delhi
Content Writer/Author Deepak Raju Associate, Sidley Austin LLP (all views are strictly personal, and do not represent the views of the firm or of any of the firm’s clients)
Content Reviewer Prof. A. Jayagovind National Law University, Delhi
Language Editor Dr. Saloni Khanderia-Yadav
National Law University, Delhi
How the WTO agreements give effect to these objects and purposes.
Keywords Organizational structure; objects and purposes; Ministerial Conference; General Council; Dispute Settlement Body; Trade Policy Review Body; Council for trade in Goods; Council for trade in Services; TRIPS Council.
E-TEXT
Introduction and learning objectives The organisational structure of the WTO, the key decision making bodies.
o WTO Ministerial Conference
o The General Council
o General Council Meeting as Dispute Settlement Body
o General Council meeting as Trade Policy Review Body
o The Council for trade in Goods (Goods Council)
o Council for Trade-Related Aspects of Intellectual Property Rights ( TRIPS
Council)
o Council for Trade in Services
The aims and objectives of the WTO as reflected in its Preamble and the
Marrakesh Agreement.
o Creation of a common institutional framework for the conduct of trade
relations
o Provide forum for negotiations
o Developmental goals
o Optimal use of the world’s resources
o Sustainable development and preservation of environment
Further Readings
Introduction and learning objectives
International law, at its inception, was often referred to as the ‘law of nations’, reflecting an
understanding that the legal system concerned solely the conduct of ‘nations’ or ‘States’.1 In
other words, historically States were considered to be the only ‘subjects’ of international law.2 It
was solely the actions of States that created the norms of international law; and it was solely the
actions of States that were governed by international law. However, in the recent times, this
understanding has evolved, and it is now widely accepted that a wide range of entities apart
from States can be ‘subjects’ of international law.3 The first among these new categories of
actors to be recognized as ‘subjects of international law’ was International Organizations.4
In 1949, the International Court of Justice was called upon to render an advisory opinion as to
whether the United Nations had a legal personality of its own, independent of the legal
personalities of its member States.5 The Court undertook an examination of the United Nations
Charter, and the powers and functions vested in the organization under the Charter. The Court
concluded that the Members had vested on the United Nations, powers and functions that could
be performed effectively only if the organization had its own legal personality.6
While studying any international organization, the constituent instrument, usually an
international treaty that establishes the organization is often the best starting point. The same is
true of the World Trade Organization. The efforts at establishing a multilateral normative
1 James Crawford (ed.), Subjects of International Law, in BROWNLIE’S PRINCIPLES OF INTERNATIONAL
LAW (8th
edn., 2013 OUP).
2 Ibid.
3 Ibid.
4 Ibid.
5. Reparation for Injuries Suffered in the Service of the United Nations, 1949 ICJ Rep. 174.
6 Reparation for Injuries Suffered in the Service of the United Nations, 1949 ICJ Rep. 174.
framework for international trade predates the Marrakesh Agreement by nearly half a century.7
The failed attempt at the Bretton Woods conference to establish an International Trade
Organization, and the decades of provisional application of the General Agreement on Tariffs
and Trade are certainly important areas for exploration for any student of the multilateral trade
system. Yet, the Marrakesh Agreement forms a watershed moment in the history of the
multilateral trade framework. For one, the Marrakesh Agreement, contained in its annexes
several substantive agreements, either elaborating the GATT discipline, or imposing additional
commitments on the Members.
However, more importantly for the purposes of this chapter, it was through the Marrakesh
Agreement that the multilateral trade framework attained the form of an international
organization. In addition to establishing the Organization, the Agreement lays down several
detailed rules for the functioning of the Organization, including the decision making processes
within the Organization. The Organization, as well as all the bodies and functionaries of the
Organization derive their powers and functions from this Agreement. Also, the Preamble to the
Marrakesh Agreement elaborates the key objectives of the WTO as an organization, which is a
valuable tool in interpreting and understanding the substantive provisions of both the
Marrakesh Agreement, as well as the other multilateral trade agreements in the WTO
framework.
This chapter seeks to introduce the reader to the organizational structure of the WTO, the key
decision making bodies, as well as the decision making process in the WTO, as established by
the Marrakesh Agreement. Additionally, the readers will be introduced to the aims and
objectives of the WTO as expressed in the Preamble to the Marrakesh Agreement and the
substantive provisions in various substantive agreements that seek to give effect to these aims
and objectives.
The organisational structure of the WTO, the key decision making bodies.
The Marrakesh Agreement establishes several bodies within the WTO institutional framework.
All of them act as important forums for decision making on matters covered by the Organization.
7 John H. Jackson, The International Institutions of Trade: The WTO and the GATT, in World Trading
System: Law and Policy of International Economic Relations (1997 MIT); Peter Van den Bossche,
The World Trade Organization, in The Law and Policy of the World Trade Organization (2005 CUP).
Below is an organizational chart available on the WTO website. As can be seen, the institutional
framework is complex, and includes several committees, working parties, etc. In line with the
introductory nature of this chapter, detailed discussion shall be limited to some key decision
making bodies, namely the Ministerial Conference, the General Council, The Dispute Settlement
Body and the Trade Policy Review Body.
WTO Ministerial Conference:
WTO Ministerial conference, set up under Article IV (1) of the Marrakesh Agreement
establishing the WTO is the highest decision making body of the WTO. It is comprised of all the
member countries and custom unions of the WTO. The ministerial conference meets at least
once in every two years. The ambit of decision making power of the ministerial conference is
wide enough to include matters under any multilateral trade agreement on the request of a
member. There has been nine ministerial conferences till date. Ministerial conference is also
assigned the function of establishing the mandatory committees which are Committee on Trade
and Development, a Committee on Balance-of-Payments Restrictions and a Committee on
Budget, Finance and Administration and such other committees as it may deem fit. The
ministerial conference appoints the Director General of the WTO Secretariat and adopts
regulation laying down the powers, functions, terms of service etc of the Director general. The
decisions at the ministerial conference are made according to the majority of the vote cast with
each member having one vote unless an exception has been provided for in the Marrakesh
agreement or the relevant Multilateral Trade Agreement. The ministerial conference along with
the General Council holds the exclusive authority to adopt the interpretations of the Marrakesh
Agreement as well as other Multilateral Trade Agreements by a three fourth majority of the
members’ votes. It also has the power to waive an obligation imposed on a member state by a
multi lateral treaty under exceptional circumstances and to review such waiver annually until it
is terminated. It also has powers with respect to amendment of the Marrakesh agreement,
Accession to the agreement etc.
The eighth WTO ministerial Conference at Geneva approved the accessions of Russia, Samoa
and Montenegro. It also adopted a waiver to enable developing and developed-country
Members to provide preferential treatment to services and service suppliers of least-developed
country (LDC) Members. The ninth ministerial conference at Bali saw the adoption of the trade
facilitation agreement which is aimed at significant reduction in transaction costs in
international transactions.
The General Council:
The General Council, established under Article IV (2) of the Marrakesh agreement is the
decision making authority of the WTO that meets regularly to carry out the functions of the
ministerial conference that meets only once in two years. The members of the General Council
are the representatives of the member states of the WTO. It approves the rules and procedure
governing the functioning of the various committees established by the ministerial conference.
It facilitates cooperation between the WTO and other intergovernmental and non-
governmental organizations that perform functions that linked to that of the WTO. It approves
the annual budget of the WTO. The decision making process is similar to that at the ministerial
conference and is made according to the majority of the vote cast with each member having one
vote unless an exception has been provided for in the Marrakesh agreement or the relevant
Multilateral Trade Agreement. As mentioned under the heading on ministerial conference, the
General council along with ministerial conference adopts the interpretation of the Marrakesh
Agreement and the Multilateral Trade Agreements on a three fourth majority vote.
The general council also convenes as Dispute Settlement Body and Trade Policy Review Body.
General Council Meeting as Dispute Settlement Body:
The general council meets as the Dispute Settlement Body (DSB) in order to perform the
functions under the WTO Dispute Settlement Undertaking adopted at the Uruguay Rounds of
Negotiations. It consists of representatives of all member countries. The DSB has its own
chairman and lays down its own procedures for the conduct of its business. The DSB has the
authority to ‘establish panels, adopt panel and Appellate Body reports, maintain surveillance of
implementation of rulings and recommendations, and authorize suspension of concessions and
other obligations under the covered agreements’8. When DSB considers a dispute only such
members who are party to the plurilateral agreement under which the dispute has arisen can
vote on the matter. The DSB informs the councils and committees of the WTO regarding
developments with respect to any dispute. The decisions at the DSB are taken by consensus.
The panels constituted under the DSB in each case assist the DSB in decision making through its
appreciation of facts and law after consultations with the parties to the dispute. Once the panel
has made its report, the report is circulated among the members. The members have 20 days to
consider the report. The parties who object the panel report can raise the same upto 10 days
before the DSB meeting. The report is adopted within 60 days of circulation to the members
unless one of the parties to the dispute informs DSB of its decision to appeal, in which case the
adoption is kept on hold till the decision in the decision on the appeal is made or the report is
unanimously rejected by the DSB.
The DSB also constitutes the appellate body consisting of 7 members, who are individuals with
recognized standing in law and international trade and not affiliated to any government and
three of whom shall serve on each case. Each member has a term of four years. It hears appeals
from panel cases. The appeals are to be decided within 60 days from the date on which a party
signifies his decision to appeal. When the appellate body is unable to deliver its decision within
60 days it has to inform the DSB with the reasons for the same in writing. In any case the
maximum time frame for deciding an appeal cannot exceed 90 days. Appeals can only be from
questions of law in the panel report. The outcome of an appeal may be the appellate body
upholding, modifying or reversing the conclusions of the panel. This report shall be wholly and
8 Article 2(1) WTO Dispute Settlement Undertaking
unconditionally adopted by the DSB and will be binding on parties unless there is a unanimous
decision of the DSB to reject the same.
Generally, the maximum time between DSB constituting the panel and considering the panel
report/ appellate report as the case may be cannot exceed 9 months where the panel report is
not appealed and 12 months where the panel report is appealed.
General Council meeting as Trade Policy Review Body:
As provided under Article IV (4) of the Marrakesh Agreement, the General Council meets as
Trade Policy Review Body(TPRB) to perform its under the Trade Policy Review Mechanism
(TPRM). The body has its own chairman and lays down its own procedure. The body reviews
the trade policy of each member country and the impact of such policy on the multi lateral
trading system on a periodical basis. The frequency of the review on each member depends on
the share of such member in world trade. The review is conducted on the basis of a report
provided by the member who is subjected to review, another report that is prepared by the
WTO secretariat on the basis of the report furnished by the member country after taking
clarifications from that country. Once the review is complete the TPRB publishes the report
furnished by the member country, the report by the WTO Secretariat, and the minutes of the
review meeting of the TPRB and the same is also forwarded to the ministerial conference. The
TPRB is also responsible for the preparation of an annual overview of the developments in the
international trading environment.
The Council for trade in Goods (Goods Council)
The Council for trade in Goods (Goods council), established under IV (5) of the Marrakesh
Agreement looks into the implementation of General Agreement on Trade and Tariff (GATT),
which is the law on international trade in goods. It functions under the guidance of the general
council. The members of the goods council are representatives of the member states. The goods
council is comprised of ten committees, each dealing with a specific subject. These committees
are the committees on agriculture, Anti Dumping, Market Access, Sanitary and Phytosanitary
measures, Technical Barriers to Trade, Subsidies and Countervailing measures, Customs
valuation, Rules of origin, import licensing, Trade related investment methods and Safeguards .
The committees shall establish their respective rules of procedure subject to the approval of the
goods council.
Council for Trade-Related Aspects of Intellectual Property Rights ( TRIPS Council)
Council for Trade-Related Aspects of Intellectual Property Rights ( TRIPS Council), established
under Article IV (5) of the Marrakesh Agreement oversees the implementation of the TRIPS
agreement. The council is under the general guidance of the general council. It has established
subsidiary bodies for the performance of its functions. It’s members are the member States of
WTO. Article 68 of the TRIPS lays down the functions of the TRIPS council to include monitoring
the member countries’ compliance with trips and providing consultations to members on
matters related to TRIPS.
Council for Trade in Services:
Council for trade in services is provided for in Article IV(5) of the Marrakesh Agreement along
with the goods council and TRIPS Council. It functions under the guidance of the general council.
The members include representatives of all member states. Article 24 of the GATS provides the
functions of the council. The council provides consultations to the members with respect to
unresolved issues related to trade in services. The members of the council consist of the
members of the WTO.
The aims and objectives of the WTO as reflected in its Preamble and the Marrakesh
Agreement.
“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.”9 Given this
cardinal norm of treaty interpretation, it is important to understand the objects and purposes
that treaty parties sought to attain through the treaty. Often, the provisions of the treaty
9 Article 31(1), Vienna Convention on the Law of Treaties, 1969.
themselves, as well as the Preamble of the treaty, provide useful indications of these objects and
purposes.
In case of the Marrakesh Agreement, the Preamble as well as Articles II and III, spell out these
objects and purposes. Some of the key objects and purposes emerging from these provisions
and the Preamble, as how these objectives are sought to be attained through various
substantive WTO agreements is discussed below.
1. Creation of a common institutional framework for the conduct of trade relations
Article II:1 of the Marrakesh Agreement, while listing the functions of the WTO states: “The
WTO shall 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 in the Annexes to this Agreement.”
Countries have engaged in negotiations with each other over matters of international commerce
for millennia. Yet, these negotiations were often bilateral or involved a limited number of States.
Moreover, these agreements seldom created institutional frameworks to ensure their smooth
implementation, particularly at times when political relationships between the parties to the
agreements went through rough patches.
GATT 1947 certainly provided an improvement over this status quo of its time. GATT, as an
international treaty, imposed binding legal obligations upon the Contracting Parties, which they
were expected to honor independent of political circumstances. Moreover, the Contracting
Parties acting collectively could take important decisions regarding the functioning of the
organization and could exercise a limited supervisory role to monitor the implementation of
GATT commitments. Yet, the lack of a real organization with a well adapted institutional
framework meant that the same rudimentary institutional structure would have to deal with all
diverse aspects of international trade. Also, this meant that much of the decision making, as well
as the efficacy of the supervisory functions was dependent on political consensus rather than
legal norms.
It is against this background that Article II:1 of the Marrakesh Agreement envisions WTO as a
common institutional framework. As a first step towards meeting this end, Article I establishes
the World Trade Organization and Article VIII:1 clarifies that it has independent legal
personality, implying that the WTO is capable of holding rights and obligations, independent of
those of its Members. Further, as discussed above, the Marrakesh Agreement and other
multilateral trade agreements establish several specialized bodies for decision making and
monitoring of implementation of commitments in various aspects of international trade.
2. Provide forum for negotiations
Article II:2 of the Marrakesh Agreement states “he WTO shall 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. The WTO may also 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.”
The Marrakesh Agreement and the WTO themselves are results of prolonged negotiations
among a large number of participants. Countries with diverse trade related interests negotiated
on several aspects before the draft of the Marrakesh Agreement and the other multilateral trade
agreements could be finalized. Subsequently, the WTO Membership has engaged in negotiations
on a large number of topics. While a part of these negotiations concern implementation of
existing commitments other negotiations have sought the adoption of additional commitments.
Another important function of negotiations in WTO is clarification or elaboration of existing
rules. An example of negotiations concerning implementation of existing commitments is in the
area of elimination of agricultural subsidies, an issue that developing countries have repeatedly
raised during trade negotiations. The recent efforts at negotiating a Trade Facilitation
Agreement is an example of negotiations intended at adoption of additional commitments. The
Doha Declaration on TRIPS and Public Health was the negotiated outcome, which was largely in
nature of clarifying, qualifying and elaborating existing commitments under the WTO
commitments on intellectual property.
The WTO, as an organization, and its Members, also engage in prolonged negotiations with non-
Members on conditions for their accession to the Organization. These negotiations decide the
extent of tariff bindings, service schedules and other commitments that the new entrant
undertakes as a part of its WTO commitments. Also, these negotiations often focus on reforming
certain laws and institutional structures within the potential Member that the existing
membership views to be inconsistent with WTO commitments. It is also open to the existing
membership to modify certain obligations, particularly implementation timelines, for the
potential Member through clauses in the accession protocol. For instance, Article 28 of the
Agreement on Subsidies and Countervailing Measures allows WTO members a three year time
period to eliminate certain existing subsidies which are inconsistent with the WTO subsidies
discipline. Yet, the accession protocols of Russia and China effectively deny those new entrants
the benefit of the said grace period.
Trade negotiations have always been, and still remain, a political process. The establishment of
the WTO as a forum for negotiations does not change that or eliminate all the difficulties
associated with a political process of negotiation. Yet, in providing a forum where the views of
all members can be expressed, and by providing a common language for negotiations, WTO
does take the process a step further.
3. Developmental goals
Smith and Ricardo provided economic evidence to suggest that trade benefits both parties to it.
In simple terms, Smith and Ricardo suggest that countries would benefit if they produced what
they could produce at lower cost than other countries, exported these goods to other countries,
and imported those goods that other countries could produce at a lower cost. While economic
literature, both in support of trade and against it, has moved to higher levels of complexity on
this point, WTO is founded on the assumption that trade benefits all trading partners. Yet, it was
recognized that special emphasis should be given to the developmental needs of least developed
countries and other developing countries, and special efforts should be made to meet these
needs.
In recognition of this, the Preamble of the Marrakesh Agreement makes the following
statements in expression of the developmental goals of the organization:
“Recognizing that their relations in the field of trade and economic endeavor 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, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development,
Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development,”
The multilateral trade agreements sought to give effect to these goals through several
provisions directed at ensuring the Special and Differential Treatment of developing countries.
Part V of the GATT contained several provisions seeking to address the special needs of
developing countries by calling upon developed countries to enhance the market access for
developing country products, without expectation of reciprocity. Additionally, in 1979, the
GATT Contracting Parties adopted the Enabling Clause, which clarified that the Most Favored
Nation principle under Article I of the GATT did not prevent developed countries from
extending additional benefits to developing countries through a ‘Generalized System of
Preferences’. Also, several substantive agreements allowed developing countries additional
time to implement their commitments. Despite these, several scholars argue that the WTO’s
outlawing of protectionist tactics like quantitative restrictions, voluntary export restrictions,
export subsidies and domestic content subsidies, stringent intellectual property norms, etc. will
deprive the developing countries from availing of the same path that several developed
countries adopted in their journey towards the present stage of their development, ‘kicking
away the ladder’.
4. Optimal use of the world’s resources
As evident from the portion of the Preamble to the Marrakesh Agreement quoted above, optimal
use of the world’s resources is among the proposed objectives of the WTO. There exist concerns
that the lure of additional revenues from trade will result in over-exploitation of certain
exhaustible resources. As a partial solution, Article XX(g) of the GATT allows measures “relating
to the conservation of exhaustible natural resources” as an exception to GATT commitments.
The Appellate Body has clarified that the expression “exhaustible natural resources” must be
given a broad interpretation in line with the objective of sustainable development. Accordingly,
even measures taken to protect living creatures have been held to fall under the ambit of this
provision.
However, Article XX(g) is available as an exception only “if such measures are made effective in
conjunction with restrictions on domestic production or consumption”. Therefore, it may not be
available as a justification where a country chooses to allot a particular commodity solely for
domestic purposes even if that country determines for itself that the said measure is the most
‘optimum’ use of the said resource. In China – Raw Materials,10 China argued that its ban on
10
China — Measures Related to the Exportation of Various Raw Materials, WT/DS 394, Panel Report
certain raw materials was justified since China deemed this to be an optimal use of the resource.
However, the same was rejected by the Panel. Here, there seems to be a divergence between the
multilateral trade frameworks on the one hand, and customary international law which
recognizes the permanent sovereignty of States over their natural resources,11 and by
implication their right to determine what uses of natural resources are ‘optimal’.
5. Sustainable development and preservation of environment
The Preamble of the Marrakesh Agreement also highlights environmental goals and sustainable
development among the objects and purposes of the Organization. However, the substantive
provisions of the multilateral agreements do not create any environmental obligations for the
parties. Rather, they often provide exceptions to ensure that trade commitments do not come in
the way of environmental goals of the members.
For instance, Article XX of GATT contains the following exceptions – “(a) necessary to protect
public morals; (b) necessary to protect human, animal or plant life or health; […] (g) relating
to the conservation of exhaustible natural resources”.
These exceptions have been used to justify measures taken to inter alia, protect clean air,12
conserve marine mammals,13 and prevent accumulation of waste tyres.14 Recently, the Appellate
Body has also held that prevention of animal cruelty can fall within ‘public morals’ under Article
XX(a), when deciding a dispute relating to trade in seal products.15 India recently banned the
import of foie gras based on cruelty to geese.
11
Permanent Sovereignty over Natural Resources, G.A. res. 1803 (XVII), 17 U.N. GAOR Supp.
(No.17) at 15, U.N. Doc. A/5217 (1962).
12 United States — Standards for Reformulated and Conventional Gasoline, WT/DS2
13 United States — Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS 58; United
States — Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products,
WT/DS 381.
14 Brazil — Measures Affecting Imports of Retreaded Tyres, WT/Ds 332..
15 European Communities — Measures Prohibiting the Importation and Marketing of Seal Products,
DS 401