An Introduction to the WTO

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An Introduction to the WTO

An Introduction to the WTO

    An Introduction to the WTO

    1. Teaching Objectives

    2.Module Schedule *

    3. Textbook

    4. Assessment and Examination

    Attendance and classroom participation:20% Presentation : 20%

    Final exam: 60%

Contact Means


Mobile: 13360025957

    Chapter I

    A General Introduction

I. Why do nations trade?

    II. Regulation of trade

    III. From the GATT to the WTO

    IV. China and the GATT / WTO

Starting/Warm-up Questions

    1. What is the WTO? What does it do? 2. When did the WTO come into being? 3. What is the GATT?

    4.What is GATT 1947? And what is GATT 1994? 5. Has the GATT stopped functioning? 6. When did China become a Contracting Party of the GATT?

    7. When did China become a Member of the WTO?

Section One

     Why do nations trade?

    1.1 To meet domestic needs.

    1.2. To increase national wealth.


    1.3. To increase job opportunities. 1.4. To increase the general wealth of all nations concerned.

     Adam Smith: Theory of Absolute Advantage; The Wealth of Nations (1776)

     David Ricardo: Theory of Comparative Advantage; On the Principles of Political Economy and

    Taxation (1879)


Example 1

    Country A can produce one widget using one unit of labor.

    Country B can produce one widget using two units of labor.

    Country A has an absolute advantage over Country B in producing widgets.

    Example 2

    England: 100 units of labor

     100 tons of cloth

     120 units of labor

     100 tons of wine Portugal;90 units of labor

     100 tons of cloth

     80 units of labor

     100 tons of wine Section Two

    Regulation of Trade

    2.I Why do countries regulate trade? Mercantilism

     2.1.1 BOP problems.

     2.1.2 Domestic employment situation. 2.1.3 protect domestic industries. 2.1.4 Foreign policy considerations. 2.2 How to regulate trade?

     2.2.1Tariff barriers P. 19 Chapter 5 Functions of tariffs

Collection of revenue

     Revenue tariff

    Implementation of foreign policy Discriminative tariff

    Protection of domestic industries and employment

     Protective tariff

    Retaliation against foreign government‟s trade policies

     Retaliative tariff Types of tariffs

    In terms of functions:

     revenue tariff;

     discriminative tariff;

     protective tariff;

     retaliative tariff


In terms of methods of collection:

     ad valorem duty;

     specific duty ;

     compound duty Explanation of tariff schedule P.26


Harmonized Commodity Description and Coding System (HS) “


    six digits: first two refer to the chapter, the second two designate the heading, the next two are subheadings.

    bound rate of duty:约束税率

    Initial Negotiating Right (INR):初谈权

    2.2.2 Non-tariff barriers: quantitative restrictions such as quotas; embargo; monetary and exchange controls; government procurement policies; performance standards; product specifications; health and safety standards; customs procedures; licensing procedures; documentation requirements; inspection procedures etc.

Section Three

    From the GATT to the WTO

    The Great Depression: Smoot-Hawley Act of 1930, trade war, Reciprocal Trade Agreement Act 1934

     An attempt to build a new international economic structure based on three institutions: The IMF, the World Bank and the ITO

    3.1 The abortion of an ITO

     Havana Charter: the draft for ITO, (signed in Havana) was completed in 1947.

    The ITO, created in Chapter VII of that Charter, was going to be the central organization of the United Nations responsible for co-ordinating the various aspects of international economic co-operation among States.

    The ratification of the ITO ran into trouble.

     The U.S. congress was not favourable to the ITO and did not ratify the ITO charter.

3.2 The GATT

     Tariff concessions

     The negotiations for the GATT were concluded in the autumn of 1947, with the signature of 23 Contracting Parties.

     Protocol of Provisional Application of the General Agreement on Tariffs and Trade

     The GATT entered into force on a provisional basis on 1 January 1948.

Professor Jackson pointed out that,

     "the theory of the GATT was that it would be a specific trade agreement within the broader institutional context of the ITO Charter and that the ITO would furnish the necessary organizational and secretariat support for the GATT" .


3.3 The 8 rounds of multilateral trade negotiations under the auspices of the GATT *

    3.4 The Uruguay Round:


     3.4.1 In the field of trade in goods Tariff concessions

Agricultural products and textiles were brought under the world‟s trading system

     GATT 1994 replaced GATT 1947

    3.4.2 Conclusion of GATS and TRIPs Agreements 3.4.3 Establishment of the WTO

Section Four

     China and the GATT/WTO

    4.1 Original contracting party of the GATT 4.2 Taiwan authorities‟ withdrawal

    4.3 China‟s decision to restore its status as the original contracting party of the GATT

    4.4 Negotiation for the restoration of China‟s status as the original contracting party of the GATT 4.5 Negotiation for China‟s accession to the WTO

On November 11, 2001, China signed the Protocol on Accession of the People‟s Republic of China,

    and became the 143rd member of the WTO.


    1. Understanding the WTO (pdf): Chapter 1 Basics 2. An Introduction to the WTO Agreements: Chapter 1 THANK YOU

Chapter Two

    The WTO Institutional Structure and Its Legal Framework

I. The WTO Institutional Structure

     Article IV of Marrakesh Agreement Establishing the World Trade Organization

    See the diagram *

    The Ministerial Conference

    The General Council (TPRB & DSB)

    Special Committees and Sectorial Councils Subsidiary Committees or working groups under Sectorial Councils

    The Director-General and the Secretariat


II. The WTO Legal Framework

    Article II of the Marrakesh Agreement Establishing the World Trade Organization

     1. Marrakesh Agreement Establishing the WTO/ The WTO Agreement

     2. Annex I A,B & C

     3. Annex II Understanding on Rules and Procedures Governing the Settlement of Disputes

Annex III Trade Policy Review Mechanism

    Annex IV Plurilateral Trade Agreements


    1. If a provision in other agreements conflicts with a provision in the WTO Agreement, the latter prevails.

    2. If a provision in other agreements in the field of trade in goods conflicts with a provision in GATT 1994, the former prevails.

III. The Status of the WTO

    See Art.VIII of the WTO Agreement

    1.The WTO shall have legal personality, and shall be accorded by each of its Members such legal personality as may be necessary for the exercise of its functions.

    2. The WTO shall be accorded by each of its Members such privileges and immunities as are necessary for the exercise of its functions.

    3. The officials of the WTO and the representatives of its Members shall similarly be accorded by each of its Members such privileges and immunities as are necessary for the independent exercise of their functions in connection with the WTO.

    4. The privileges and immunities to be accorded by a Member to the WTO, its officials and the representatives of its Members shall be similar to the privileges and immunities stipulated in the

    Convention on the Privileges and Immunities of the Specialized Agencies approved by the General Assembly of the United Nations on 21 Nov.,1947.

    5. The WTO may conclude a headquarters agreement.

IV. The WTO v. The GATT

    I. Links

     The WTO is successor to the GATT. It inherits the objectives, functions, basic principles and rules of the GATT. The main provisions of GATT 1947 are still important constituent part of the GATT 1994, which remains the principal norms regulating trade in goods within the WTO legal system.

II Differences

    1. Nature of organization


2. Scope of coverage

    3. Settlement of disputes

    Review questions

    Describe the WTO institutional structure.

    Describe the WTO legal framework.

    What are the main differences between the GATT and the WTO.


    Booklet “An Introduction to the WTO Agreements”: Chapters 1, 5 and 22

    Understanding the WTO: Chapters 1, 7 and p25-26 regarding tariffs

Chapter Three

    The WTO Operational Mechanisms

    Section One The WTO Decision-Making Mechanism

    See Booklet Chapter 22, P.137

     I. Consensus

    Article IX:1 of the WTO Agreement states:

    “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue

    shall be decided by voting.”

II. Voting

     1. Voting in relation to interpretation of agreement provisions ? 2. Voting in relation to a waiver of an obligation ? 3. Voting in relation to amendments to agreements

    a) Decision to submit proposed amendment to Members for acceptance 2/3 b) Amendments to key provisions to take effect upon acceptance by all Members.( Artt.IX &

    X of WTO Agreement; Artt. I & II of GATT 1994; Art. 2(1) of GATS; Art. IV of TRIPs Agreement)

     c) Amendments to non-key provisions that do not alter rights and obligations of Members to

    take effect for all Members upon acceptance by 2/3 majority Members

d) Amendments to non-key provisions that alter rights and obligations of Members to take effect

    upon acceptance by 2/3 majority Members for those Members only. Section Two Dispute Settlement Mechanism

    Booklet Chapter 21,P.129;IBL P.367

     I. The DSU and the DSB

     II. Procedures

     1. Consultations 60 days

     2. Establishment of a panel 45 days


reverse consensus

     3. Panel deliberation 180 days

     4. Adoption of panel report 60 days

     reverse consensus

*5. Review by Appellate Body 60-90 days

     *6. Adoption of Appellate Body report 30days reverse consensus

     7. Implementation of recommendations

     DSB recommendation to offending party offending party‟s plan to implement the recommendation or negotiation with complaining

    party about compensation

Complaining party‟s request to DSB for authorization to retaliate: reverse consensus

     8. Retaliation

     parallel, cross sectorial and cross agreement 9. Surveillance of implementation

III. Other methods of dispute settlement

     1. Expeditious arbitration

     2. Good offices, conciliation and mediation

Section Three Trade Policy Review Mechanism

I. Legal basis

     Artt.III(4) and IV (4) of WTO Agreement

     TPRM (Annex 3 to WTO Agreement)

     II. The TPRB

     III. Objectives and scope of review:

     - Transparency of trade policies

     - Non-discrimination in treatment of trading partners

    - Whether their trade policies contribute to trade liberalization - The degree of stability and predictability in their trade policies

     - The pattern of protection and the extent to which tariffs only are used as means of protection

    in trade in goods

     - Restrictions used in trade in services

    - record of adherence to the multilateral trading system


TPRM is not to be used for enforcement of specific obligations, or for starting dispute

    settlement process, or to impose new policy commitments on Members IV. Frequency of review

    1. The first 4 trading entities or Quad countries ( the US, EU, Japan and Canada): every two years;

     2. The next 16 Members: every four years;

     3. Other Members: every 6 years;

     4. Least-developed country Members: a longer period to be fixed by the WTO; 5. China: every year for 8 years following her accession.

V. Review process

     1. regular report to the TPRB;

     2. Preparation of the Secretariat report

     based on information available

     send representatives to capitals of the Member under review to conduct on-the-spot


     3.Review meetings

4. Publication of report;

     5. Reference of the documents to the Ministerial Conference for record

Review questions

State briefly the WTO decision making mechanism.

    State briefly the WTO dispute settlement mechanism.

    What have made the WTO dispute mechanism so effective?

    State briefly the WTO TPRM.


    Booklet: Chapters 21-22

    Understanding the WTO: Chapter 3


    Chapter I Chapter III

    I. Multiple Choices

    1) Country A imposes $15 on a ton of beef. This kind of tariff is called ______.

     A) specific duty

     B) compound duty


     C) ad valorem duty

    2) Country B charges 15% tariff rate for a TV set worth $200. This is called ______.

     A) specific duty

     B) compound duty

     C) ad valorem duty

    3) Country D imposes zero tariff rate on the import of rice from country X, one of its alliance. This kind of tariff is called _____ tariff.

     A) retaliative

     B) protective

     C) discriminative

     D) revenue

    II. True or False Statements

    1) The panels of the WTO are ad hoc bodies, which are dissolved once they have accomplished the

    tasks, while the Appellate Body is a standing one.

    2) When a dispute arises between Members, the only way to solve it is to bring it to the DSB. Good offices, conciliation and mediation are not allowed after the dispute settlement process begins.

    3) The process of panel establishment is automatic, because of the practice of reverse consensus.

    4) The Ministerial Conference is the highest decision-making body. It also acts as the Trade Policy Review Body and Dispute Settlement Body.

    5) Members of the WTO promise to undertake their obligations not to raise the tariff above the bound level, but if they encounter BOP crisis, they are entitled to withdraw their tariff concessions. III. Choose from the following items to complete the flowchart of the panel process. Terms of reference: “To examine, in the light of the relevant provisions in (name of the covered

    agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name of party) in document ... and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s).” (Article 7.1)

IV. Consider the following question:

     What makes the dispute settlement mechanism of the WTO effective?

1) strict time limit;

    2) reverse consensus

    3) appellate review

    V. Case study


    To protect its ailing industry from import competition, the Kingdom of Richland, a WTO Member, imposed a quota on imports of steel from the Republic of Newland, a recent WTO Member. After intense lobbying by FerMetal, Newland‟s major steel producer, the Government of Newland decided

    to challenge the WTO consistency of Richland‟s import quota.



    As a lawyer in the Brussels-based law firm, Dupont, you have been asked by the Government of Newland to advise on the procedural and systemic issues arising in the course of the dispute settlement proceedings in Geneva. In the course of the proceedings, the following situations arise on which your advice is requested.

Situation 1

    To mitigate the damage to Newland‟s steel exports and employment in the steel industry, it is

    important to act quickly against Richland‟s steel quota. Newland‟s Minister of Foreign Affairs therefore instructs Newland‟s Permanent Representative to the WTO, Ambassador Rita Murillo, to request the establishment of a panel at the next meeting of the DSB. Does Newland act in accordance with the DSU by requesting the establishment of a panel in this way?


    The dispute settlement proceedings always start with consultations, or at least, an attempt to have consultations between the parties to the dispute.

    Requirements for the panel request:

     *must be in writing;

     *must indicate whether consultations were held;

     *identify the specific measures at issue; and

     *provide a brief summary of the legal basis of the complaint (the listing of articles of an agreement)

Situation 2

     Richland‟s Permanent Representative to the WTO, Ambassador Dr. Heinrich reportedly receives instructions from his Government to block the establishment of a panel as much as possible. Is that possible?


     No. The establishment of a panel by the DSB is quasi-automatic.

Situation 3

    The Government of Richland announces that it will insist that the panel includes five members, of which at least one is a national of Richland and none are nationals of developing-country Members. The Government of Richland will not agree to a panel, the composition of which does not meet these requirements. The Government of Newland cannot agree to Richland‟s requirements. What will happen next?


    Panels must be composed of well-qualified governmental and/or non-governmental individuals. Article 8.2 of the DSU stipulates that panel members should be selected with a view to ensuring the independence of the members, providing a sufficiently diverse background and a wide spectrum of experience.

    Nationals of Members that are parties or third parties to the dispute shall not serve on a panel unless the parties to the dispute agree otherwise.

    When a dispute occurs between a developing-country Member and a developed-country Member, the panel shall, if the developing-country requests, include at least one panelist from a developing-country Member.

    Once a panel is established by the DSB, the parties to the dispute will try to reach an agreement on


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