WTO Flashcards
general development/description trade regime
- very legalised
- many different agreements
- separate negotiations (-> members always involved)
objectives of the WTO
regulating international trade with the intention to decrease trade limiting practices as much as possible
+
avoiding protectionism (and with that economic crises)
underlying macro-economic logic: trade benefits all trading partners (specialization -> cheaper production = more money)
Importance of the WTO
rule setting authority
means of transparency
court-like dispute settlement procedures for complaints
97% of all trade takes place between WTO members
99% of import tarrifs of developed countries are under WTO rule
history
Bretton Woods Conference 1944
- goal = prevent system crashes by installing the International Trade Organization (failed)
- in the negotiations US pushed for trade liberations, EU was more careful (empire system influenced their behavior), developing countries wanted to protect exporting countries
1947 GATT: implied a number of new negotiating rounds about tariffs and international rules (first focused solely on tariffs, later on on more)
1995 establishment of WTO to implement agreements predating the WTO
series of WTO negotiating round, most recent = Doha Round 2001
main agreements the WTO implements
5
- GATT: General Agreement on Tariffs and Trade (1947)
- GATS: General Agreement on Trade in Services
- TRIPS: Agreement on Trade Related Aspects of Intellectual Property Rights (patents)
- Rules on agricultural trade and subsidies (agriculture is not part of the GATT)
- Trade dispute resolution processes (important for avoiding/solving trade wars)
Doha Round + Geneva package
2001
failure to reach an agreement to continue negotiations -> 2008 breakdown
- increasing bilateral trade agreements
- developing countries found they were disadvantaged in past rounds (Uruguay Round), wanted more influence (formed organized coalitions to resist proposals of the US and EU)
most recent agreement = 2022 Geneva package
- environmental sustainability (fishing)
- waiver for covid vaccines (manufacturing should be spread)
- WTO reform (not specific)
- making the dispute settlement system functional
organs WTO
Ministerial Conference
- highest decisionmaking organ with annual meetings of trade-ministers
General Council: trade officials, meet in various setting to discuss trade in goods, services, agriculture, intellectual property etc.
- meet more often than the Ministerial Conference
Small secretariat (~600 members): supports negotiations among member states
members WTO
164
not all members are states:
‘‘contracting parties’’: states but also political entities that control the economic policy of a territory
- e.g. EU, ‘Hong Kong China’, and ‘Chinese Taipei’
headquarters WTO (and ILO)
Geneva
decision-making WTO
based on consensus
making the WTO intergovernmental: member states have a big influence, have to agree on/with everything
obligations
spelled out by the original GATT agreement
spelled out specifically for different products and ‘‘like products’’
three main obligations/principles
- bound tarrifs: documented in the ‘‘schedule’’ (decided upon in big review conferences of the WTO: in periodic rounds of WTO conferences)
- most-favored nation (GATT article 1): best agreement made with another country serves as the standard for agreements with other countries
- national treatment: requires that WTO members don’t discriminate between domestic goods and imported goods once they are imported
tarrif
the tax that an importer must pay to the government for importing that specific product
highly political matter
'’like products’’
determined by the World Customs Organization in Brussel
Rajesh Pillai found that ‘‘likeness’’ is determined mostly by the Working Party of the Border Tax Adjustments in 1970
exceptions to WTO obligations
6
- general exceptions (to protect human, animal or plant life/health)
- security exceptions
- balance-of payments (safeguard external financial situation)
- temporary waivers
- cultural exceptions
- regional trade agreements
regional trade agreements
allowed to make tariff agreements without having to apply them to other WTO members
requires: limited within a region + agreement must cover substantially all of the trade among those regional partners
US regional trade agreements with Israel and Jordan aren’t really regional, but it is tolerated: no one complains as no one is harmed
why should WTO compliance be automatic or not?
it should be automatic:
- trade produces gains for both partners
- trade increases efficiency by allowing countries to specialize and by encouraging production on larger scale
- prices and diversity should increase in a market that is opened to imports and exports
in practice: trade advantages some and disadvantages others
two sources of noncompliance to the WTO
- political opportunism: to cater/protect domestic interests (costs and benefits are unevenly distributed across domestic industries and between trading partners)
- # free-riding through unilateral non-tariff barriersWTO obligations are reciprocal (each member is supposed to see increased access to others’ markets in exchange for allowing them in their market)
incentive to cheat this bargain by creating nontariff barriers to trade
WTO enforcement / dispute settlement
limited to identifying violations and authorizing members to punish the violator (emphasis that the WTO is mainly about the commitments states make to each other, not to the WTO)
- member complains to the WTO that it believes another member has failed to meet its obligations AND that they have suffered from it
- can only be brought to the WTO if a bilateral solution has failed - creation of a panel of 3 trade experts
- report distributed to the parties who may appeal to a separate Appellate Body
- Report goes to the Dispute Settlement Body: approves or rejects the report (rejection never happened)
- Reports recommendations become legally binding
- If the WTO member doesn’t comply, economic sanctions are allowed: violated members can execute sanctions as harmful as the ones they suffered, should be in the same line of products (is often not the case: e.g. EU once targeted sanctions that would impact Florida and Carolina, which had an important role in the US elections in 2004
! step 6 works for powerful states, but not for smaller states: it may cost them more than that it gains them
problems with enforcement
debate if the Dispute Settlement Management is dead:
- US blocks election of judges in the Appellate Body (once 3 were left it didn’t function anymore)
Appellate Body suspended since December 2019
temporary alternative mechanism for the dispute settlement
2020
Multi Party Interim Appeal Arbitration Arrangement (MPIA)
can only decide between disputes among countries that are part of this alternative mechanism
criticism WTO
Seattle Protests 1999: anti-globalization movement: WTO contributes to the growing inequality
WTO fails to address agricultural subsidies (richer countries subsidize, less developed countries can’t compete)
WTO rules mostly ignore environment and labor-related issues
lack of transparency in ‘‘green room negotiations’’
consensus structure (O’Hara)
two substantively important problems for future of international trade and law
- tangled relationship between trade policy and environmental consequences
- puzzle over the relationship between how things are made and how they are traded (does the production play a role in the likeness of products)?
how does the WTO mainly favor rich countries?
- dispute settlement: imposing sanctions is often costs poor countries more than that they gain
- WTO’s rules standardize trade and reduce tariffs mainly for those goods in which the industrialized countries are already highly productive + exclude those goods of greatest export interests to poorest countries (e.g. agriculture)
*WTO argues that the fault of subsidizing countries and that it isn’t the responsibility of the WTO
case: shrimp-turtle
US ratified a law in 1989 that banned imports on shrimps caught with nets that aren’t turtle-friendly
India, Malaysia, Pakistan and Thailand filed a complaint:
- US wasn’t treating all sources of shrimp equally: some trade partners got longer transition periods and more financial and technical assistance)
- US was attempting to force other countries to adopt domestic policies modeled on American law = extraterritorial application of US law is unacceptable foreign domination
- raised the question if the protection of ‘‘exhaustible natural resources’’ should be interpreted broadly (including species e.g. turtles) ore should it conclude only minerals and similarly inanimate materials?
WTO dispute settlement found the US guilty of violating the most favored nation principle (the first part of the complaint), it didn’t mention the other points
Claerwen O’Hara
consensus and diversity in the WTO: a queerer perspective
focus on the discursive effects of consensus decision making
Uruguay Rounds 1986-1993
O’Hara
It is claimed that 120 states reaching consensus during the Uruguay Round of trade negotiations is the origin story of the WTO.
'’single undertaking’’: US and EU insistence on all-or-nothing basis
queer thinking: result of the round conceals underlying dynamics
states in the Global South felt they weren’t heard
difference unanimity and consensus
unanimity requires affirmative votes from all parties
consensus in the framework of the WTO requires that no party formally objects (such an objection can come with political and economic costs)
consequences of WTO’s consensus decision making
- powerful states more opportunity to use their market size or geopolitical power to influence the WTO
- difficult for low-income states to maintain an objection to a proposed decision
- marginalizes/closets smaller groups (the institution seems to speak as a whole, losing the individual voices of members)
queer thinking
favor establishing consent through open and direct communications due to awareness that social hierarchy may result in different degrees of negotiating power
use of consensus decision making -> marginalizing
Christmas effect + Uruguay round
Eve Kosofsky Sedgwick
all institutions lined up during Christmas to speak with ‘‘one voice’’ -> alienating those who did not fit the dominant narrative
Uruguay Round: idea that the WTO united the world around free-market principles
- discourse of sameness worked to naturalize the WTO’s system, making it appear common sense + excluding other economic visions
in what way did the consensus decision making lead to naturalization of the WTO and its practices?
consensus decision making -> vision of sameness -> discourse making the WTO’s system seem natural + excluding other ways of thinking
WTO intolerance of economic difference
e.g. China: joined in 2001, did not adopt a free-market economy (while it was expected to)
led to claims/worries that China had broken an implicit promise to the WTO by doing this (may have played a role in the US decision to block the appellate body)
queerer approach WTO
may not be possible: to resolved around consensus
maybe what is needed is a move away from the WTO
breaking of trade law into multiple institutional sites, embedding it within different contexts such as food, security, public health, and transnational labor (Michael Fakhri)
to address trade-related issues requires international cooperation without being subsumed within a single unequal vision of the global economy.
Davey, W.
WTO dispute settlement: crown jewel or costume jewelry?
status quo dispute settlement system WTO
largely ineffective dispute settlement system with two classes of obligations: those that are enforceable by the MPIA and those who aren’t
US objections to the appellate body
- appellate body has interpreted WTO agreements to impose on members obligations to which they never agreed
- fails to meet 90 day mandatory deadline of issuance of its reports in recent years
- has permitted its members to sit on appeals after the expiration of their terms of office
- issues advisory opinions not necessary for resolutions of disputes
- reviews panel factual findings despite being limited to consider legal issues
- treats its reports as precedent even though only WTO members are authorized to interpret the WTO agreements
claims that the appellate body has gotten bigger and more crucial than intended:
- more disputes than envisioned
- appeals became the norm
- Appellate Body engaged in searching re-examination of panel reports
Walker decisions
7
2019 DSB chair David Walker proposed a decision to solve the US’ objections
(a) Limits were placed on the ability of the Appellate Body members to hear cases after expiration of their terms
(b) 90-day limit restated (subject to an agreement by the parties to extend it)
(c) Restated that only issues of law and legal interpretations may be appealed + that municipal law is to be considered as fact
(d) Only issues raised by parties may be decided upon by the Appellate Body
(e) Precedent is not created in WTO dispute settlement (previous relevant reports should be taken into account)
(f) Restated that dispute settlement cannot add to or diminish the rights and obligations provided in the WTO agreements
(g) A formal dialog between WTO members and the Appellate Body would be established
criticism/failure Walker decisions
they mainly restate already existing obligations of the Appellate Body
US didn’t agree: walker decisions didn’t adequately explain/consider why the Appellate Body didn’t follow these provisions in the past
DSU
dispute settlement understanding
MPIA basis
+ problems
article 25 of the DSU allows a stop-gap measure for WTO members who wish to have an Appellate Body like appeals process
no appeals so far, ongoing proceedings will be subject to the arrangement
- doesn’t offer long-term solution since the US will most certainly not join
possible ways forward with the DSB
- revived appellate body (without a clear enforcement mechanism unsure if the US will accept this)
- limited appeal (broad support doubtful)
- panel only, with limited review (senior panelist proposal could be accepted by the US, permanent panel body probably not)
- back to GATT 1947 (would be a step back)
possible ways forward with the DSB: revived appellate body
revived appellate body with strengthening of walker principles:
- prohibition of gap filling
- promoting greater use of non-liquet (situation where there is no proven innocence or guilt as there is no applicable law)
- requirement to reject aggressive interpretations
- exhortations on the proper limited role of dispute settlement
- rules limiting the influence of the Appellate Body secretariat
- exemption of trade remedy cases from standard appellate review (hard to justify)
compliance of these suggestions would be hard to monitor
perhaps: Appellate Body - WTO member dialog on issues on a regular basis + providing informal feedback
Hillman: compliance to the Appellate Body to the walker principles would require the creation of a new committee (not clear what would happen if the committee found noncompliance)
without a clear enforcement mechanism unsure if the US will accept this revived Appellate Body
possible ways forward with the DSB: limited appeal
revising the system so that appeals would be limited and uncommon
- e.g. requirement that a party has to convince the Limited Appellate Body that the panel report conflicted with another panel report or has a wrong interpretation of an agreement
will lead to many requests and much time will be spent in determining whether the conditions for appeal have been met
seems doubtful that there would be broad support for this
could serve as a standard for ad hoc appellate review under DSU article 25 when a non-MPIA party is in dispute
possible ways forward with the DSB: panel only, with limited review
- 2 proposals
proposal to create a Permanent Panel Body to serve as panelists in all cases (with better quality panel reports perhaps an appellate system is not needed)
doubts that the US will agree: new institution that might be seen as little different from the current system
proposal to keep the current panel process + possibility of a review by senior panelists to resolve conflicts over truly bad decisions
- informal review mechanism: ad hoc basis to submit an appeal with three arbitrators selected by the parties from a list compiled by the WTO secretariat of the seven most experienced panelists
advantage of avoiding creation of a new institutions + ensures expertise
could be accepted by the US
possible ways forward with the DSB: back to GATT 1947
system without an Appellate Body
could function if blockage seldom occurred
would have defects of the GATT system and a step back from the progress made in the Uruguay round
GATT dispute settlement:
no options for appeals
establishment of a panel + adoption of reports + authority to retaliate = all subject to consensus based decision-making
prospects for resolving the DSB crisis
US is the one who started it and the only one that can solve it
hopeful sign of change: US Dec. 2021 agreed to the adoption of a panel report even though it disagreed with the panel on several important points
to figure out how to solve it, it is important to think about what the underlying reasons for the US’ behavior are:
- is it really about substance?
if so, it would be hard to change the Appellate Body in the US wishes: most WTO members agree with decisions the US objects to (-> members will agree to some changes, but not too big ones) - is it really about dispute settlement?
US shows problems with support for any form of binding dispute settlement (e.g. withdrawal general compulsory jurisdiction ICJ, refusal to join ICC)
other problem Dispute Settlement Body WTO (apart from appellate body crisis)
is it possible for a strong dispute settlement system to co-exist with a weak political system?
- Davey thinks so: appellate body would probably still be operating today if it treated trade remedy cases as it did health and environmental cases + if it hadn’t reversed a handful of panel decisions
- combination is still problematic: the role of dispute settlement cannot be to settle what negotiators could not
WTO system must rein in its ambitions to decide all issues + be more willing to conclude a compliant has not proved its case
