Appunti International and European Trade law

TRADE LAW

1-WTO Origins and Functions

From GATT to WTO

• 1947 adoption of international treaty: General Agreement on Tariffs and Trade (GATT) – very general, did not

establish very precise obligation. Nevertheless, it was the first attempt to abolish (or redure) the tariffs and the

impediments to free international trade. It was adopted on the basis of:

→ 1945 US initiative – but actually it didn’t result in an international org. because the US didn’t want this type of org.

at that time.

→ 1947 Protocol of Provisional Application – the Agreements entered into force by means of the Protocol of

Provisional Application, which made it binding.

This obligation were not very binding, , they are very general and not so precise. So States were not obliged to

abolish all tariffs that they had established at that time (with regard to international trade and relations), so they

only were invited to reduce progressively this tariffs.

tariffs = payment of an amount of money for the transfer of a good from a country to another, it was one of the

main impediments to international trade.

In order to allow this progressive reduction of the tariffs, the parties of the GATT decide to organize some

conferences of the parties, called ROUNDS. There were different types of rounds:

• 1947-1961 Five Rounds on Reduction of Tariffs

• 1964-1967 Kennedy Round on Non-Tariffs Barriers – after the reduction on tariffs, in order to face other problems.

(ex: quantitative restrictions, other types of domestic restrictions, quality requirements, that can sometimes appear

non-discriminatory but that are actually impediments to the free trade). The most important rounds that took place

in the ‘60s was the Kennedy Round.

• 1973-1979 Tokyo Round on Non-Tariffs Barriers and Dispute Settlement – the Tokyo Round still affects issues

related to non-tariffs barriers and also to the settlement of disputes between States parties to the GATT.

• 1986-1994 Uruguay Round WTO – This Round was very important because it is actually the settlement conference

from which the WTO originated. In fact a proposal for an international organization was made and at this point the

States achieve an agreement and so they establish the WTO in 1994.

This organization is not so autonomous with respect to the former structure of the GATT. We have a permanent

organization, but the WTO works according to the agreements that were adopted within the GATT system, so there

are several agreements that are annexes to the agreements established in the GATT, that provide substantive

obligations for State. This agreements are divided in Multilateral agreements and Plurilateral agreements.

→ WTO Agreement

→ Multilateral Agreements – binding for all states parties to the WTO. (So this are actually the WTO agreements)

→ Plurilateral Agreements – binding for states that want to be bound to it, concluded by States that wanted to have

strict relations within them

WTO Functions – are listed in the WTO Agreemnts

▪ Facilitating the implementation of the WTO agreements- if States establish the WTO, it’s quite clear that they

wants to have a proper functioning international organization, and it must have the function to enforce all the

powers and obligations that are provided within the establishing agreements.

▪ Providing a forum for negotiations – the WTO is not an international organization as effective as others (such as, for

instance, the EU), so the WTO cannot adopt for instance legislative instruments binding states as the EU can do. For

this reason, the only power that the org has as such is to push states to meet in a permanent forum, as the WTO is

with its permanent headquarters, in order to adopt international obligations by means of international agreements.

▪ Administering Dispute settlement – This is the real novelty of the WTO agreements: this functions allows the WTO

to have a total control over the settlement of disputes concerning international trade between states. There is a

specific disputes settlement mechanism (that we will analyse in our future lecture)

▪ Administering Trade Policy Review mechanism – it is a system of control that the WTO organs can exercise with

respect to members states, in order to ascertain how international trade is regulated within domestic legal systems,

so whether a State is intentionally breaching international obligation concerning trade, or if this state cannot comply

with int. oblig. because of concrete impediments that it has in its domestic legal system. This forms of control is

perform by specific organs established by the WTO agreements.

▪ Cooperating with the IMF (international monetary fund) and the WORLD BANK (achieving greater coherence in

global economic policymaking) – obligation for the WTO. To achieve an effective functioning of the economic policy

of international community. 2-WTO Membership

Let’s look how to become or be a member of the WTO. Obviously, there are “signatory parties” = the parties that

were the original parties to the WTO agreement when it was concluded in 1994, that were the same parties to the

GATT.

• 164 Members (at present)

→ States and Non States - non states according to general international law, there are some parties (ex: China

Machao ) which are not an independent states with international personality such as other states, but that are

member of the WTO.

→ EU art XI (1) WTO Agreement - Similarly, another very important active member of the WTO is the EU and the

participation of the EU is expressively provided for in the WTO agreement at the article XI paragraph 1 (which

actually mention the European Community because we were still in 1994)

• ACCESSION - It is the procedure by which a State that is not a party to a traty can become part of it. Obviously in

order to have this possibility of acceding a treaty, it is necessary that the Treaty provide for this possibility, like in the

case of WTO agreement, but the procedure is very complicated. List of the phases of the access prodecure:

First a State must apply, the it starts this procedure:

→ WTO Members examine Applicant’s Report - examination of the report that applicants must submit by all

members states of the WTO. → what is the general behaviour of the state with respect to international trade.

→ Bilateral negotiations between single WTO Members and the applicant - (one of the longest phases), when a new

state wants to enter into WTO it has to establish relationships with the states that are already members. There is a

phase in which all members state individually and independently negotiates specific conditions with the applicant

State. In this way it is possible to know, for instance, which type of tariffs are allowed, which type of non-tariffs

barriers are allowed (ex: environmental requirements, products requirements..), etc. All this specific obligations

must be negotiated at the bilateral level. Then all this conditions will be reproduced within a document, which is the

Draft Protocol of Accession.

→ Drafting of a Protocol of Accession - a preliminary form of the Protocol of Accession, which is a document that is

going to be added to WTO agreement, and will be part of it as to the applicant state. So the state when become a

member will be bound by the WTO agreement + the attached protocol of Accession and its obligations.

→ Final decision of the WTO Members – definitive phase of the accession procedure. WTO members must accept

the new State among them.

As to be possible to become a member it is also possible to WAIVE from the WTO:

•WAIVER according to ART. IX (3) WTO AGREEMENT

The members of the WTO have different obligations with respect to the conditions that they accepted when they

entered the organization. In particular we must take into account the different status and roles that members of

WTO have.

For instance, one the most important issues is the relationship between EU and Member states:

they are all parties to the WTO, so even the single members states of the EU are parties to the WTO, not only the EU

itself, because there are some subject matter in which the EU does not have the exclusive competence to accept

obligations at international level in the name of the EU member states.

Nevertheless, the WTO agreement wanted to make it clear that the EU member state should not take advantage of

this double position as independent state and members of an international organization such as the EU, which is also

party to the WTO. So, for this reason the WTO agreement provide that the total amount of votes of the EU and

members State correspond to the number of the Member states → so this means that the EU will not have an

independent vote, but its vote will weight as the present number of its member states (27).

This is very important to distinguish the diverse role of the EU in its entirety and each member state.

Then there is another issue that comes out clearly from this analysis: each member of the WTO has different

obligations, due to the condition that it accepted to become a party of the WTO. And also, there is this condition

that provides for diverse bilateral relationships, that were negotiated during the accession phase.

And these obligations are also specified by the Multilateral agreements, that are binding for all parties to the WTO.

So they are the substantive obligations that are binding within the WTO system. This substantive obligations are

made by the GATT, which now is no longer the GATT 1947, but it’s GATT 1994. So the substantive norms of the GATT

at the time of the establishment of the WTO. And then there are other agreements that were negotiated at the time

of the establishment of the WTO: examples:

GATS – agreements concerning trade of services

TRIPS - agreements concerning the issues relating to intellectual property right affected by trade.

Moreover, there are the Plurilateral agreements that only bind states that have accepted those specific obligations

in order to have a closer relationship from the point of view of international trade.

3-WTO Organs and Functions

WTO ORGANS: Mainly made by states representative.

A,B,C,D,E → Mainly Intergovernamental organs = organs made of states that have as a main concern the protection

of the views and interests of State.

F, G → Real international organs (with respect to the other) that represent the WTO. They are very supranational

organs that work within the structure of the WTO. Their main interests is the safeguard and the recognition of the

WTO at the international level.

(A)• Ministerial Conference (Decision-making power) - not permanent, only when it is necessary to make decision.

Made by very high-level representative of states. This is the organs that adopts agreements and any legal acts, that

establish obligations with respect to the state. This is the organ that meets during the several conferences (ROUNDS)

in which obligations are adopted.

(B)• General Council (Implementation) - Permanent organ within WTO structure and headquarter. It is still made of

representatives of states, but at a lower level with respect to Ministerial Conference. It has the task of implementing

the decisions and agreements adopted by the Ministerial Conference.

(C)• Specialized Councils (GATS TRIPS) - the implementing organs of specific agreements, the Multilateral

agreements. They implemented the obligations adopted as a result of the evolution of the GATS agreement or the

TRIPS agreement.

(D)• Trade Policy Review Body (other form of the General Council) - when the General Council is acting with respect

to a subject matter which is trade policy review. → Trade policy review mechanism: function of the WTO that allows

to control whether or not States are implementing international trade obligations within their domestic legal system.

(E)• Dispute Settlement Body (other form of the General Council) - when the General Council is acting with respect

to a subject matter which is dispute settlement. → Dispute settlement between state: which is supervised by the

WTO by means of the dispute settlement body

This two bodies are not independent organ, they are exactly the same as the General Council acting for two specific

tasks.

(F)• WTO Secretariat and (G)• WTO Director General:

WTO Secretariat – very administrative body, made of the employee of the organization (not representatives of state)

WTO Director General – position, individual organ, a single person that is appointed by the Ministerial Conference,

but he does not represent States, he represents the WTO. (Head of the secretariat)

This two organs have primarily functions of

→ Secretarial and Technical support

Secretarial support: performed by allowing states to meet during the Ministerial conference or during the meeting of

the General Council, in order to facilitate the adoption of obligations or, at least, to facilitate the functioning of the

WTO itself.

Technical support: the possibility of providing states with some specific information about the very peculiar issues

relating to trade.

→ Relations with: both maintain relations with

▫ Members (states), in particular those that need stronger support, such as:

Developing Countries in particular when involved in dispute settlements, or when must deal with very

technical issues and they may need assistance

▫ Third States that maybe are interested in becoming members.

▫ Media

WTO FUNCTIONS: • Intergovernmental Character: in short, if we look at the institutional structure of the WTO, we

can affirm that the majority of the functions are Intergovernmental functions (as well as the organs). In fact, if we

look at the function, we see that for instance this organ made of representatives of states, mainly decide by

Consensus.

→ Consensus - all of them they must agree in general about of everything (almost unanimity).

→ Ministerial Conferences for negotiations - the fact that the majority of norms and acts are adopted during the

Ministerial conference, it means that this organization is strongly determined by the will of member states. So there

is a very limited possibility for the org. as such to influence the decision-making process.

In fact, if we look at the only supranational functions that we find within the WTO, we see that there are very limited

functions:

• Supranational Character:

→ Trade policy review - procedure concerning the trade policy review. The only situation in which the organization,

by means of the Trade Policy Review Body, can control the way in which single states act within the domestic legal

order

→ Technical assistance to developing countries - the other supranational role, it is the exercise with respect to

developing countries (which have a general interest).

In the end we can say that from the institutional structure of the WTO, we notice that, unlike for instance the EU,

this organization does not has autonomous and independent powers that may allow it to prevent States from doing

something, or to oblige States to do something.

But this organization can be forum, a place in which States meet in order to regulate an important and general

subject such as International Trade. WTO Dispute Settlement

The WTO dispute settlement system is certainly one of the greatest novelties of this regime, in particular because we

know that this system is an evolution of t he 1947 GATT agreement, and with this mechanism the WTO has strongly

enhanced the effectiveness of the GATT and all the WTO Agreement.

1947 GATT Dispute Settlement Mechanism – it was very flexible, was not a proper international settlement over

dispute. But what’s is important is the definition of dispute, that was formulated in art. XXIII of the GATT that is still

valid in the WTO system. This definition of international dispute is quite different from the traditional one, which

usually implied the breach of an international obligation.

This is not the case of the GATT and the WTO: this is due to the subject matters of this dispute that affect

international trade: it’s not a problem of ascertain whether on not an international norm is been violated, but it is

necessary to ascertain whether or not the behaviour of a State has had a negative impact on the conditions of other

states.

• 1947 General Agreement on Tariffs and Trade (GATT)

→ Types of Disputes Art. XXIII (1) - according to art. XXIII a dispute may arise:

- Breach of GATT obligations

- Nullification or impairment of the conditions of other States – adoption of a domestic measure by a state

that may imply the nullification or impairment of a situation or a right that other State enjoy on the basis of

international obligation.

From this definition we’ll see that the dispute settlement mechanism is not a proper legal system, where the

breach of law is ascertained and then a penalty is established.

→ Diplomatic Means – means established were very general, mainly diplomatic means, that never leads to a

binding solution. Law is not the most important instrument, States try to find the most appropriate solution

which is not necessarily the most “lawful solution”. The diplomatic instruments adopted within the GATT

were:

- Consultation as established in Art. XXII – the attempt to resolve a dispute by the parties of the dispute

itself, without the participation of third parties.

- Mediation of the other Contracting parties (Working Parties) Art. XXIII (2) – in which the involvement of a

third party is possible. In this case of a mediation in the GATT system, the mediation is performed by the

other Contracting Parties that take the name of Working Parties.

This two were the only means available for a long time in the GATT system.

• 1979 Tokyo Round – due to the increasing activities concerning international trade, it was no longer possible to

resolve dispute according to the very limited instruments of 1947. For this reason, some developments were made

during the Tokyo Round: a the end of it, a new dispute settlement regime originated, which attempted to be stricter

than the former regime, although it was not completely based on legal principle (due to the fact that international

trade issues cannot be resolved on the basis of so legal instruments.

→ establishment of Panels – sort of arbitral tribunal in which some experts (in particular trade experts, and

experts of the specific sector that were iss