Structure and Key Problems of Wto

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WTO Establishment

Uruguay Round treaty came into force on January 1, 1995

26,000-page treaty

The treaty is one entire unified document implementing the principle of a singleundertaking to which all governments must agree in order to become members.

Beginning portion is a brief 14 page text which establishes theWTO as a proper (no longer provisional) organization. This portionof the long treaty is often informally called the WTO Charter.

Major portion of the treaty pages are four Annexes to the WTOCharter. Three of the annexes and their contents are mandatoryfor all the members. A fourth annex, however, contains someoptional treaty text.


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Annex 1A Goods Annex 1BServicesAnnex 1C

Intellectualproperty

Basicprinciples GATT 1994 GATS TRIPS

Additional

detailsRevised newer texts,

some derived from TokyoRound side-agreements.

understandings andsimilar complementary

documents

Servicesannexes

Market access

commitmentsTariff schedules (calledbindings) which set

maximum tariffcommitments for each

member,

Countries

schedules of servicecommitments

ANNEX - Multilateral Agreements - Three mandatory substantiveagreements.


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Annex 2- DSU (Dispute Settlement Understanding) Text of about twenty-four pages which governs the DS procedures in some detail

Annex 3- TPRM (Trade Policy Review Mechanism) Text designed to set up a structure of regularly scheduled institutional reviews of each members trade

policies.

The review is not supposed to be limited to examining compliance with obligations, but to rangebroadly over all issues relevant to a members international trade measures and policies.

Annex 4- Plurilateral Agreements (Optional) Text on government procurement and a text on trade in civil aircraft.

At the end of the UR, there were four texts listed but two relating to agriculture were terminated.

This annex could be a source of some dynamic flexibility for the WTO institution, but unfortunately theWTO Charter rules require a consensus of members to add any new agreements to Annex 4,5 a

requirement which so far has been assumed to be unobtainable.


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The WTO Charter establishesan internationalorganization, endows it withlegal personality, andsupports it with thetraditional treaty

organizational clauses like regarding privileges and

immunities

Secretariat,

Director-General,

budgetary measures,

and explicit authority to

develop relations with otherintergovernmentalorganizations and important tosome interests nongovernment organizations.


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Top - Ministerial Conference, which meets not less often than every two years.

Next - General Councilhas overall supervisory authority including responsibility forcarrying out many of the functions of the Ministerial Conference between MinisterialConference sessions. In addition, a council for each of the Annex 1 agreements, that is for goods, services, and

intellectual property. Some councils have established many committees for specific subjects.

Dispute Settlement Body to supervise and implement the dispute settlement rules inAnnex 2.

TPRM Body for the Trade Policy Review Mechanism in Annex 3.

Each of these councils and bodies is open to membership of any WTO member whochooses to take it on.

Secretariatstaff is prohibited by the Charter from seeking or accepting instructions fromany government or any other authority external to the WTO.


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Article XXV called for one nation, one vote and decision by a majority of votes cast, unlessotherwise provided.

Basically there are five different techniques for making decisions or formulating new oramended rules of trade policy in the WTO Charter - decisions on various matters,interpretations, waivers, amendments to the agreements and negotiation of new agreements.

There are variety of non-majority principles applied, including consensus.

Super-majority requirements i.e. a vote of three-fourths of the membership (not just thosepresent) is required as per WTO Charter Article IX for the members to make a definitiveinterpretationof some UR text.

Amending also has difficult provisions, depending on text which normally requires a two-thirds

vote which is not binding on those not voting to approve; however, a three-quarters vote isbinding on all. Even in that case there is provision for a hold-out member to withdraw from theorganization or negotiate a special dispensation. Since withdrawal by certain key members ofthe WTO would probably end the WTOseffectiveness, such key members probably effectivelyhave a veto regarding amendments.


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The original membership - Conferred on any GATT contracting party that accepted both the UR

treaty and negotiated schedules of concessions for goods and for services.

Accepting new members WTOs acceptance to begin the process Followed by detailed reports on the applicant about its trade policy and legal structure Followed by elaborate questioning from the existing members. Further clarification, and existing members begin negotiating with the applicant, sometimes one on one, to

develop over time an usually lengthy and elaborate draft protocol of accession. When this is approved, and theapplicant notifies its ratification, then thirty days later the applicant becomes a member.

Three curious aspects of membership and the two-thirds membership vote provision for accepting anew member. Members of the WTO do not have to be full sovereign nation-states. Instead they must be a customs territory

that possess full autonomy in the conduct of its external commercial relations and other matters contained inthe UR (WTO) agreement e.g. Chinese Taipei (Taiwan), which carefully crafted its application for GATT (andthen WTO) status as such independent customs territory, so as not to offend mainland China.

Special WTO provision ( Art. XIII) that allows either an existing member or an applicant member, at the time of

accession only, to opt out of the treaty relationship between itself and any other member or applicant. Thisprovision accommodates those countries or customs territories which for political or other reasons did not wantany formal treaty relationship with another party. In GATT this was utilized by India to avoid treaty relationswith South Africa.

The required two-thirds vote in favor for a new member seems in practice in the WTO already to have evolvedinto a consensus requirement (arguably more restrictive than two-thirds).


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Since beginning WTO has faced major criticism, some of them manifested throughstreet demonstrations and others through bitter communications by political andgovernment leaders and the media.

Is the institutional structure of the WTO as good for achieving its WTO goals as it

should be? consensus questions

the attitudes regarding nongovernment actors (and beneficiaries), questions oftransparency and democratic legitimacy

the relationship of poorer countries to the WTO system

worries about inadequate resources of the organization

proliferation of discriminatory bilateral and small group trade agreements

and the evolving structures of power allocation within the organization andbetween the WTO and nation-states or other international organizations.


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The decision-making procedures are complex and relatively numerous because of some specialprocedures with super-majority requirements. At the core, however, there is a relatively genericprocedure of majority rule, with onenation, one voteoperating.

The membership of both GATT and the WTO have consistently manifested strong skepticism about thismajority voting in the context of the onenation, one voteequality principle for nation-state memberswhich varied enormously in population size, economic size, geography, and many other characteristicsthat effectively impact upon an appreciation of real power, as opposed to the nominal equality of thesystem.

Because of its skepticism, GATT gradually developed a practice of consensusdecision making.

The word consensusdoes not appear in the GATT text but is now defined in the WTO Charter. It statesthat a decision will be deemed accepted in any case where no party to the agreement (present at ameeting) objects. Thus consensus is not precisely the same as unanimity, since an abstaining position is

not a negative and absence from a meeting or from a particular voting procedure is also not a negative.

The consensus rule has been criticized as disenfranchising members that are absent but may have stronginterests to protect.


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Certain types of decisions require a super-majority of votes and, in some cases, require at least anattempt to achieve consensus (with a fallback to voting in some cases) or, in other cases, anabsolute requirement of so-called full consensus, with no fallback. A very prominent example ofthe latter is the requirement expressed in the DSU that decisions of the DSB must be taken byconsensus, unless otherwise stated. This is in some ways troubling because so much of the DSU isprocedural in a context where full consensus on changes to correct what have been discovered tobe some drafting problems in the text cannot easily be achieved. A consensus hold-out country can

hold up the process, sometimes in order to bargain over matters unrelated to the instant subjectbeing considered.

Emphasis on consensus decision making in the WTO can sometimes lead to paralysis, and can beblamed for the perceived inability of the organization.

The consensus rule is also likely to bear a fairly heavy responsibility for the failure of certaincommittees and working parties in the WTO to achieve any meaningful accomplishment in theirwork. Examples sometimes mentioned in this regard include lack of accomplishment by committeeson regional and preferential agreements, rules of origin, and environmental agreements and theirrelation to trade rules.


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Consensus has important values that need to be preserved. The rule forces the membership to achieve aswide an acceptance of new measures as possible, thus lending democratic legitimacy to measures that arefinally adopted.

It forces the richer and more powerful members of the organization to take into consideration the needsand opinions of all parts of the organization, including the poorer and less powerful governments.

Concepts and approach to end consensus problem

An attempt to define a somewhat different process for procedural rules as opposed to substantive rules.

Having a rule against one or just a few holdout votes defeating consensus. A practice might be developed, perhapsbeginning with a resolution adopted by consensus, that would strongly urge governments to refrain from blocking aconsensus when there was an overwhelming majority (e.g., 90 or 95 percent), and such majority represented anoverwhelming amount of trade interest or economic size (sometimes called a critical mass).

PLURILATERAL AGREEMENTS- There is also a concept partly embedded in the WTO Charter of plurilateral agreementswhich contemplates certain kinds of agreements or measures that might be adopted by a sub-group of the totalmembership, and then only applying to that subgroup. However, this raises important questions regarding the MFN clause(non-discrimination).

SCHEDULING APPROACH - In this procedure, the country which is willing to enter into an overall agreement that wewould likely call plurilateral, and which agreement would only bind those willing to accept it, would agree to put theessence of that agreement into its services schedule. Thus, there are multiple texts in a variety of schedules, and theybind only those countries that have accepted them. Presumably, they all continue to be subject to the MFN principles andrules. It is conceivable that something like this might actually be workable in some contexts of trade in products, ascompared with the services trade.


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Another important problem of the WTO is the devilish detailof resources for the institution to operate in an appropriatemanner that is both efficient and fair in relation to its verybroad responsibilities and the goals of the organization.

The comparison of administrative budgets and staff size ofWTO with that of other major international economicorganizations, such as the Bretton Woods financial

institutions, and institutions such as the OECD demonstrateshow small the organization is when compared to theseinstitutions.


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Another important problem that has received much attention, criticism, and discussion, but no apparent

movement towards any solution, is that of administrative guidance or control of the organization.

The WTO has reached a point where it is virtually impossible to set up effective procedures for decision-making, negotiation, and so on when all members demand that they be present and active on suchdecisions (even when solely procedural). It is noted that virtually every other effective internationalorganization has some kind of a smaller sub-group of the total membership that acts at least in an advisoryor guidance capacity.

GATT for many years operated its green room approach, whereby the Director-General, in consultationwith ambassadors of some of the most important and diverse members, would call together a group ofprincipals (ambassadors only, perhaps) into the green room, which is a relatively small conference room inthe WTO headquarters building.

The green room can only hold several dozen persons. The addition to the headquarters building of the WTOnow has a very large auditorium, which can accommodate the entire membership, as well as ancillary staffsupport for the representatives, but, obviously, certain kinds of negotiation and decisions, includingperhaps decisions about agenda and timetable, are very difficult to handle in such a large group.


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WTO is trying to develop an appropriate way to have a sufficiently small steering group,working directly with the Director- General, so that decisions can be effectively andefficiently made, particularly as to procedures, timetables, and agenda.

This group could also arrange for various proposals or options papers to be delegated anddeveloped to avoid some of the problems of a decision being taken by either too large or toosmall a group.

Unfortunately, every time such a group other than the total membership is suggested,governments feel that they would not be entitled to be part of that group.

This steering group would impose a system of transparency to keep all interestedgovernments adequately appraised about what was happening, and to provide that certainmembers that were on the steering group would have obligations to represent the views of aconstituency group of members. These constituencies might be designed by reference to

geography or other kinds of identities of interest.


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Transparency - Transparency is in the sense of providing a flow of information within an organization andto constituents and important stakeholders not necessarily within the organization.

WTO is superior to GATT with respect to transparency. The WTO website is extraordinarily vast and full ofinformation. The rules established for documentation try to enforce the presumption that documentsshould not be restricted (and, therefore, quickly available to the public on the web). To a large degree,this has already occurred. In particular, the dispute settlement reports are available on the website at

least within a month or two of a decision and by the time of the adoption of a report, the public can viewthe official texts of these reports.

Nevertheless, there is still a transparency deficit in the WTO. Some governments and WTO officials

avoid the transparency rules by producing non-documents (usually with very tentative proposals) or byusing a document that is only referenced as job number and thus not in the official documentation nor

even on the web.

Dispute settlement hearings are also not open to the public. Many experienced diplomats and otherparticipants in trade relations feel that the organization would be greatly aided by having those hearingsopen so that the public could see the seriousness and the high degree of expertise that goes into thedeliberations about these specific legal dispute cases.


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Good many of the committees and working groups of the WTO should also make theirmeetings more transparent, either by having a public or press gallery, through Internetbroadcasting, or at least through the provision of a transcript, available very quickly after aparticular meeting.

There is also an internal transparency problem within the WTO, since sometimes somemembers do not have access to information that is known to other members.

All the hearings and documents, including the submittals by disputants in the disputesettlement process, is also not available to all the members. This is a problem with thedispute settlement system, since the hearings are not open to all members. Generally only

the disputants themselves and the so-called third parties have the ability to attend thehearings, and even the third parties are not allowed to attend all portions of a procedure.Some point the transparency of these submittals should be mandatory, either through thegovernments themselves or through the Secretariats placement of them online.


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The world is seeing an enormous amount of activity by nongovernment entities, and many ofthese entities, such as NGOs or private businesses, are demanding some opportunity notonly to learn about what is going on in decision-making quarters of the internationalinstitutions including the trade system, but also to have an opportunity to comment, makesuggestions, or put forward various viewpoints that such entities have.

This is complex because the governments feel that they are the only legitimate entities thatare participating in the WTO, and that they represent their constituents, and that is as itshould be. The governments do not want the interference of nongovernmental entitiesbecause they fear that economic power could alter the balance of the different intereststhat might demand participation.

As previously noted, one of the problems with NGOs is that they are often single-issueentities, whereas governments have to balance a number of issues and a number ofsometimes contradictory policy goals. A single issue NGO may at times possess moreresources than the WTO itself, and even perhaps more resources than a large number of thenation-state government members.


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The experience of the last decade or two is showing that the NGOs and other

nongovernmental entities cannot be excluded, and can also often make constructiveadditions to the general discourse of officials and diplomats. Many internationalorganizations have made special accommodations regarding both the transparency and theparticipation of non-governmental entities, such as businesses, labor organizations, andNGOs.

Fairly common among these accommodations is a credentialing process -Internationalorganization receives applications from nongovernmental entities to receive certain types ofinformation, and also have an opportunity to make inputs into the decision-making processesof the organization. In the WTO context, credentialing is controversial, but there are calls forsome sort of recognition for NGO contributions to policy debates.

There is even a question of transparency and participation with respect to governmententities other than the government participants at the WTO. For example judicial officers, orother specialized officers of governments should be encouraged to play a role that wouldgive them input into some of the decisions being made, so as to improve the drafting oftreaty language and to better avoid later interpretive problems.


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There are problems that have developed with the ministerial meetings of the WTO.

As at January 2006, there have been six such meetings so far, Singapore in 1996,Geneva in 1998, Seattle in 1999, Doha in 2001, Cancn in 2003, and Hong Kong in2005. There were difficulties in the procedural structure at the Seattle Ministerial.Doha seemed to be better, but then again at Cancn the process seemed to breakdown.

It is better not to have ministerial meetings away from the headquarters in Genevabecause this means that a certain amount of the key leadership is provided by thehost country, which may not always be the most appropriate approach for carryingout the requirements of the meeting.

It is also much more expensive to have a ministerial meeting away from Genevathan in Geneva itself, although part of the WTOs motivation in having those

meetings elsewhere is that most of the expenses are then covered by the hostcountry (as opposed to the WTO Secretariat).


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WTO has been a remarkable new organization. It has attracted a very broad and powerfulmembership, now covering approximately 93 percent of world trade.

When questioned directly, a number of governments in the trading system would agree that, on thewhole, the WTO is both necessary and desirable.

The fact that there are a number of institutional problems and also a number of criticisms wouldlikely be expected by any international institution, indeed, by nation-state governments as well.

WTO has a very difficult role to play, because it must address issues that are being generated in theworld, with particular reference to economic issues, which constantly change and involve problemsover which governments and the international organization have relatively little control.

WTOs task is the unenviable one of assisting governments to achieve a better solution for managing

the problems of globalization and interdependence than could be achieved without thecoordination techniques that can be carried out under the umbrella of a WTO.

However, the shortcomings exist, and they certainly merit attention.

Documents

Structure and Key Problems of Wto