Introduction to the WTO 2 Contents 1. From GATT to WTO 2. The WTO Agreements: an overview 3. Principles of the multilateral trading system 4. The WTO, its structure and functions 5. The Doha Development Agenda 3 1. From GATT to WTO The end of the Great Depression of the 1930s which was basically triggered as a result of countries’ recourse to excessive trade protectionism and mercantilism (maximize your exports, minimize your imports) and World War II brought fundamental changes in the architecture of global economic management with the establishment of the “Bretton Woods Institutions”: the World Bank and the International Monetary Fund. As these institutions dealt with global finance, countries agreed that a case could be made for a third institution, an International Trade Organization (ITO), which would a specialized agency of the United Nations. The draft ITO Charter was ambitious and included rules on employment, commodity agreements, restrictive business practices, international investment, and services. Over 50 countries participated in the negotiations and 23 participants started negotiations in 1946 to reduce and bind customs tariffs. The first round of negotiations resulted in 45,000 tariff concessions affecting US$10 billion of trade, about one fifth of the world’s total and an average reduction of tariffs on industrial goods by 19 per cent. The 23 economies also agreed on some of the draft ITO Charter. The combined package of trade rules and tariff concessions became knows as the General Agreement on Tariffs and Trade (GATT) 1947. The 23 participants became founding GATT members and were referred to in the GATT text as “Contracting Parties”. The ITO Charter was agreed at a United Nations Conference on Trade and Employment in Havana in March 1948 but failed to obtain the necessary ratification, especially in the United States which, ironically, had been the main driving force behind the ITO. The “Havana Charter” and with it, the ITO, never became a reality, although it was agreed that a secretariat would be established to administer the GATT as the only multilateral organization governing international trade. The GATT Secretariat, also referred to effectively as the GATT, was located in Geneva, until it was replaced by the WTO in 1995. The founding of the GATT heralded the birth of a multilateral trading system. The central principle of the GATT is non-discrimination which is embodied in two concepts: Most-Favoured Nation Treatment (MFN): treat each country as your most-favoured trading partner, i.e. do not discriminate among your trading partner with regard to border measures such as tariffs and NTBs. National Treatment: treat imported foreign goods and services the same as locally- produced goods and services (after foreign goods have entered the market) During the GATT years, several rounds of multilateral trade negotiations were held, each resulting in deeper tariff concessions (table 1). A section on development was added in the 1960s and some “plurilateral agreements” (i.e. agreements with voluntary membership) were added in the 1970s. The first few rounds all concentrated on reductions of tariffs on industrial goods. After the first round in Geneva establishing the GATT, the next four rounds only resulted in minor tariff rate reductions. The “Dillon Round”, named after Douglas C. Dillon, the then US Under-Secretary of State, only managed an average reduction of 7 per cent and took two years, 1960-1961. The “Kennedy Round”, named after US President John F. Kennedy in recognition of his support for the reformulation of the United States trade agenda which gave him the widest-ever 4 negotiating authority, had more substantial results. It was held in Geneva from 1964 to 1967 and resulted in an average reduction of industrial tariffs by 35 per cent (except for textiles, chemicals, steel and other sensitive products), plus a 15 to 18 per cent reduction in tariffs for agricultural and food products. The Round was participated by 62 “contracting parties”. The biggest challenge faced by the Kennedy Round was the rapid growth of Japan and the formation of the European Economic Community (EEC, currently the European Union or EU), the European Free Trade Association (EFTA), and the convening of the United Nations Conference on Trade and Development (UNCTAD) in 1964. Minor progress was made in agriculture with the adoption of basic principles on grains which were finally merged into an International Grains Arrangement. The main achievements of the Kennedy Round for developing countries were the adoption of Part IV of the GATT on development (see below), and the adoption of an Anti-Dumping Code, which gave more guidance on the implementation of Article VI of the GATT. : 8 9 . 7 $ $ ! ' * +3 + ++ " +4 6 " +4 + + 3 - ' ) * + +3 ! $ 4 5 ' " ) * +3 +3+ " ' 1 ) * / 2 0 1 $ + ++ ' $ " ( ! ! " ) * ! # $ % & , - ) , $ - . UNESCAP Trade Policy Basics Course for Afghanistan, 23-26 April 2006 ' ! * The seventh round of multilateral trade negotiations, the “Tokyo Round”, was much more substantive. Launched in Tokyo, the negotiations took place in Geneva among 102 participating countries from 1973 to 1979. The results included an average one-third cut in customs duties in the world’s nine major industrial markets, bringing the average tariff on industrial goods down to 4.7 per cent. For the first time, a so-called “harmonization” approach was used (the “Swiss Formula”): the higher the tariff, the larger the cut, proportionally. The Round faced challenges in the form of EEC preoccupation with its recent expansion, and the absence of the US President’s trade negotiation authority until January 1975, as well as the US presidential elections in 1976 and preparations for the 5 “New International Economic Order” 1 initiative. The results of the Tokyo Round were therefore relatively modest compared with expectations: there were no breakthroughs on trade in agricultural products and failed to adopt a modified agreement on “safeguards”. Nevertheless, nine agreements on non-tariff barriers (NTBs) emerged, so-called “framework agreements”, in some cases interpreting existing GATT rules, in other breaking entirely new ground. Six of these agreements were called “codes” as they were not accepted by the full GATT membership, the other three were sectoral agreements.2 A major result of the Tokyo Round for developing countries was the adoption of the “Enabling Clause”. This Clause allowed developed countries to accord differential treatment to developing countries in the form of preferential access and accorded special treatment for least developed countries (LDCs). It also allowed developing countries to form free trade agreements and customs unions without fulfilling all the conditions of Article XXIV of GATT on such agreements. It introduced for the first time a concept which would later be known formally as “special and differential treatment”. Although often lengthy, trade rounds offer a package approach to trade negotiations; an approach with a number of advantages over issue-by-issue negotiations. For a start, a trade round allows participants to seek and secure advantages across a wide range of issues. Second, concessions which are necessary but would otherwise be difficult to defend in domestic political terms, can be made more easily in the context of a package which also contains politically and economically attractive benefits. Third, developing countries and other less powerful participants have a greater chance of influencing the multilateral system in the context of a round than if bilateral relationships between major trading nations are allowed to dominate. Finally, overall reform in politically-sensitive sectors of world trade can be more feasible in the context of a global package. While the GATT managed to bring some discipline to world trade, it proved severely wanting in the area of agriculture and industrial goods of importance to developing countries. In the area of textiles and clothing, for instance, a separate regime was negotiated in the 1960s and 1970s resulting in the “Multifibre Arrangement”(MFA). Its effectiveness was also undermined by recessions and crises in the 1970s and the ever rising complexities of world trade, including the rapid rise of trade in services, which was not covered by GATT rules. However, it must be noted that thanks to GATT (and the WTO today) average tariffs have been reduced from 43 per cent in the late 1940s to less than 5 per cent today and that world trade has risen 15-fold representing the biggest boost to economic welfare in the history of the world. Nevertheless, GATT members realized that a new effort to reinforce the multilateral trading system (i.e. the non-discriminatory trading system launched with the establishment of GATT) should be attempted. This resulted in the launch of the “Uruguay Round” in 1986 and finally the establishment of the “World Trade Organization” (WTO) in 1995. WTO Members agreed at the Fourth WTO Ministerial Conference in Doha in 2001 to launch the next round, formally known as Doha Development Agenda. The negotiations under the DDA are meant to be completed by the end of 2006. 1 The New International Economic Order : A campaign launched in the early 1970s by developing countries to bring about radical changes in the international economic order, including an improved terms of trade and access to unconditional financial aid. 2 The Tokyo Round “Codes” were the following: (i) Subsidies and countervailing measures-interpreting Articles 6, 16 and 23 of GATT; (ii) Technical barriers to trade – sometimes called the Standards Code; (iii) Import licensing procedures; (iv) Government procurement; (v) Customs valuation – interpreting Article 7 of GATT; (vi) Anti-dumping – interpreting Article 6, replacing the Kennedy Round Code. The three sectoral agreements were on: (i) Bovine Meat Arrangement; (ii) International Dairy Arrangement; and (iii) Trade in Civil Aircraft. 6 2. The WTO Agreements: an overview The Uruguay Round was launched in Punta des Este, Uruguay, on 20 September 1986 and was completed with the adoption of the “Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations” at the Ministerial Conference in Marrakesh, Morocco, from 12 to 15 April 1994. The main results are the establishment of the WTO with its Dispute Settlement mechanism and Trade Policy Review Mechanism, a trade-weighted average tariff cut of 40 per cent on industrial goods from an average of 6.3 per cent to 3.8 per cent, the conclusion of an Agreement on Agriculture which brought agricultural trade for the first time under full GATT disciplines, and adoption of multilateral agreements on trade in services and intellectual property rights. The Results of the Uruguay Round consist of the “Marrakesh Agreement Establishing the World Trade Organization” along with about 60 agreements, annexes, decisions and understandings. The basic structure of the Uruguay Round results is illustrated in table 2. Table 2 The basic structure of the WTO agreements Umbrella AGREEMENT ESTABLISHING WTO Goods Services Intellectual property Basic principles GATT GATS TRIPS (Annex 1A) (Annex 1B) (Annex 1C) Additional details Other goods Services annexes agreements and annexes Market access Countries’ Countries’ commitments schedules of schedules of commitments commitments (and MFN exemptions) Dispute settlement DISPUTE SETTLEMENT (Annex 2) Transparency TRADE POLICY REVIEWS (Annex 3) The Agreement Establishing the WTO outlines the scope, functions, structure, status, budget, decision-making processes of WTO as well as accession to WTO and is further analysed in section 5 below. It forms the umbrella agreement to which all other agreements are annexed. Annex 1 deals with the multilateral agreements on trade in goods of which the most important one is the GATT 1947 updated to GATT 1994. Since 1995, GATT really denotes the agreement on trade in goods only and no longer means the organization which is replaced by WTO. The GATT 7 contains the basic principles and rules for trade in goods which are elaborated and further refined in a set of understandings and complementary agreements. The complementary agreements are as follows: Table 3: The multilateral agreements on trade in goods The General Agreement on Tariffs and Trade 1994 and its Understandings Agreement on Agriculture (AoA) Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) Agreement on Textiles and Clothing (expired 1 January 2005) Agreement on Technical Barriers to Trade (TBT) Agreement on Trade-Related Investment Measures (TRIMS) Agreement on the Implementation of Article VI of the GATT 1994 (Anti-dumping) Agreement on the Implementation of Article VII of the GATT 1994 (Customs Valuation) Agreement on Preshipment Inspection Agreement on Rules of Origin (ROO) Agreement on Import Licensing Procedures Agreement on Subsidies and Countervailing Measures (ASCM) Agreement on Safeguards Schedules of concessions for each WTO Member The GATT remains the principal body of rules and principles for trade in goods. It contains 4 parts. Part I deals with the general principle of MFN (Article I) and the Schedules of Concessions. Schedule of Concessions: a list of bound tariff rates negotiated under WTO auspices (Walter Goode: Dictionary of Trade Policy Terms). Bound tariff rates: agreed ceiling levels of tariffs; actually applied rates are usually much lower than the bound rates and can be raised without repercussions from other WTO Members up to the maximum (bound) rate. If the applied rate exceeds the bound rate, consultations are required and compensation may be paid to affected parties. Part II of the GATT deals with the principles of national treatment (Article III), freedom of transit (Article V, of importance to landlocked countries), anti-dumping and countervailing duties (Article VI), customs valuation (Article VII), marks of origin (Article IX), publication and 8 administration of trade regulations (Article X, part of notification obligations and important for transparency), general elimination of quantitative restrictions (Article XI), restrictions to safeguard the balance of payments (Article XII), subsidies (Article XVI), state trading enterprises (Article XVII), governmental assistance to economic development (Article XVIII, important for developing countries and complemented by Part IV of the GATT), emergency action on imports of particular products (Article XIX, known as safeguards), general exceptions (Article XX), security exceptions (Article XXI), and nullification and impairment (Article XXIII). Some of the articles are subject to elaboration in separate agreements, such as Article VI in the Antidumping Agreement, Article VII in the Customs Valuation Agreement and Article XIX in the Agreement on Safeguards. The GATT provides for flexibility by listing various situations where exceptions of the rules (especially MFN) are possible: for security reasons, balance of payments, development etc. Article XX lists general exceptions. The principle of nullification and impairment is an important GATT and WTO principle. It basically states that damage to a country’s benefits and expectations from its WTO membership can result from changes in another WTO member’s trade regime of failure to carry out its WTO obligations. In case of non-violation, such damage may be possible even when WTO rules were not violated. In such cases, consultation is called for, and if consultation cannot resolve the matter, recourse to the dispute settlement mechanism is open. Part III of the GATT deals with regional trade agreements (Article XXIV, essentially: free trade agreements and customs unions), entry into force, withdrawal, modification of schedules, amendments, and non-application of the Agreement between particular Contracting Parties (Article XXXV), which states that the Agreement does not apply if either of the contracting parties, at the time either becomes a contracting party, does not consent to such application. Part IV of the GATT deals comprehensively with trade and development. Among the other multilateral agreements on trade in non-agricultural goods, the Agreement on Textiles and Clothing was important as it phased out the quotas which existed on imports of textiles and clothing under the MFA. Such quotas were an exception to the rule as quantitative restrictions had been banned by the GATT but textiles and clothing were considered sensitive. From 1 January 2005, the ATC has ceased to exist and textiles and clothing are fully integrated into the GATT. The Agreement on Agriculture for the first time brought disciplines on trade in agriculture while little liberalization in this sector actually took place. The AoA allows export subsidies and quotas in agriculture which are banned by GATT for non-agricultural products. The SPS and TBT agreements regulate standards for public health and safety reasons to make sure they do not unduly restrict and distort trade. The TRIMS agreement prohibits certain trade-related investment measures which are considered to unduly restrict and distort trade, in particular local content requirements (requiring foreign investors to use domestic suppliers) and trade balancing requirements (requiring foreign investors to limit their imports or to meet minimum export targets). The Anti-Dumping Agreement regulates how governments can act on the dumping practices of enterprises: the sale of a product in an export market at lower price than the price charged in the home market. The Agreement on Subsidies and Countervailing Measures regulates which subsidies are allowed and under what circumstances. Most importantly, it prohibits export subsidies on non- agricultural goods. The Agreement on Safeguards regulates government action to temporarily restrict 9 imports of a product. Anti-dumping, subsidies, countervailing measures and safeguards are part of the negotiations on rules. The agreements on import licensing, customs valuation, preshipment inspection, and rules of origin deal with various bureaucratic or legal issues that could potentially unduly obstruct trade and are meant to establish transparent and uniform rules and principles. Rules of origin determine the origin of a product which can involve more than one country. Such rules are still subject to negotiation as no multilateral system for non-preferential rules of origin as yet exists. Preferential rules of origin exist in the context of regional trade agreements and are only applicable to the parties of such agreements. Finally, there are four plurilateral agreements which were not signed by all WTO Members. They include the Agreements on trade in civil aircraft, government procurement, dairy products and bovine meat. The last two agreements were terminated in 1997. Following the adoption of the WTO agreements, 40 countries, accounting for over 90 per cent of world trade in information technology products, concluded the Agreement on Information Technology Products on 26 March 1997 and agreed to eliminate import duties and other charges on these products by 2000. Annex 1B lists the General Agreement on Trade in Services (GATS), the second main agreement of the WTO, while Annex 1C lists the Agreement on Trade-Related Aspects of Intellectual Property Rights, the third main agreement of the WTO. Both GATS and TRIPS embody the non- discriminatory principles of MFN and national treatment but allow exceptions. The GATS is the first and only set of multilateral rules governing international trade in services. All services are covered by GATS. GATS mandated further negotiations in services to start in 2000. They are now integrated in the Doha negotiations. The TRIPS for the first time introduced intellectual property rules into the multilateral trading system in recognition of the importance of ideas and knowledge (intellectual property) for international trade. It establishes the ground-rules for the protection of intellectual property. 3. Principles of the multilateral trading system The multilateral trading system (MTS) embodies the following main principles: Universal, rule-based and open Non-discrimination Freer trade Predictability Transparency Fair trade and competition Encouraging development and economic reform 10 Universal, rule-based and open The MTS is universal, i.e. it applies to all Members, world-wide. It is rule-based. Before the WTO, only the GATT regulated international trade but was flawed. Without rules, international trade would proceed according to the laws of the jungle. Weaker countries have access to rules which apply to all Members, big and small, and can sue other Members in case of violation of the rules. The establishment of rules for international trade is the principal function of WTO (i.e. its Members through negotiation) rather than trade liberalization per se. Trade liberalization deals with the reduction and simplification of international trade rules. Rules are required for stability, while liberalization ensures the efficiency of international trade. The challenge is to find a suitable balance between those two concepts. The dispute settlement mechanism ensures that the rules are enforced and therefore have credibility and are taken seriously. The MTS is open, i.e. each economy identified as customs territory, can join. Non-discrimination The principle of non-discrimination is embodied in the principles of MFN and national treatment and can be found in all three main agreements. Freer trade As long as there are nation-states with their own sovereignty there will probably never be truly free trade. However, the WTO strives towards freer trade in order to ensure efficiency gains which translate in a rise in global welfare. The WTO is less concerned with the distribution of those gains as it is not a development agency but a body concerned with the establishment of international trade rules through negotiation by its Members. A major achievement is the abolition of quantitative restrictions and the application of more transparent tariffs as the only form of protection in most cases (many exceptions apply, however). Predictability The MTS has greatly improved predictability through the binding of tariffs. While countries can still raise tariffs they cannot go beyond a certain ceiling without offering compensation to their trading partners. Transparency Through a system of notification obligations for WTO Members on changes in their trade regime, the transparency of the MTS is greatly enhanced. In addition, through the WTO website and other modalities, the public at large has access to most matters related to WTO (exceptions being the closed-door stages of the negotiation process at the request of WTO Members). In addition, the Trade Policy Review Mechanism provides for regular review by the WTO of individual countries’ trade policies. The objectives of this process are as follows: To increase the transparency and understanding of countries’ trade policies and practices, through regular monitoring Improve the quality of public and intergovernmental debate on the issues To enable a multilateral assessment of the effects of policies on the world trading system 11 Fair trade and competition WTO Members strive towards establishing a level playing field in international trade transactions but recognizes that some countries are more powerful than others (i.e. the playing field is not level) and could therefore benefit more than other countries. Hence, the concept of special and differential treatment. While it is recognized that the concept of “fair” is relative and not subject to a generally accepted interpretation, the MTS has made great progress compared to the situation before the establishment of the WTO. The establishment of common rules and principles of non- discrimination have contributed to make trade at least more fair than before. Encouraging development and economic reform Through WTO membership and obligations to implement WTO agreements, many countries have received a major boost and more legitimacy to their reform process. In recognition of the problems and disadvantages of developing countries and LDCs, special and differential treatment provisions exist for especially and exclusively for these countries while the GATT has a large part devoted to development concerns. Indeed, there are many exceptions for developing countries in the WTO, in particular for LDCs which routinely are exempt from reduction commitments. Through the WTO, technical assistance schemes exist for these countries, while the Doha Round is meant to pay special heed to the concerns of developing countries and is therefore formally known as Doha Development Agenda. 4. The WTO: its structure and functions The establishment of the WTO is probably the most tangible outcome of the Uruguay Round negotiations. Its structure, functions, etc. are regulated by the Marrakesh Agreement Establishing the World Trade Organization”. The WTO has the following functions: Administering the WTO trade agreements Forum for trade negotiations Handling trade disputes Monitoring national trade policies Technical assistance and training for developing countries Cooperation with other international organizations. The WTO is run by its member governments. The chief administrator is the Director-General. Figure 1 shows the organizational chart of the WTO. The highest decision-making body of the WTO is the Ministerial Conference. So far six Ministerial Conferences have been held: The First Ministerial Conference in Singapore, 9-13 December 1996 The Second Ministerial Conference in Geneva, 18-20 May 1998 The Third Ministerial Conference in Seattle, 30 November – 3 December 1999 The Fourth Ministerial Conference in Doha, 9-13 November 2001 The Fifth Ministerial Conference in Cancún, 10-14 September 2003 The Sixth Ministerial Conference in Hong Kong, China; 13-18 December 2005 12 The Second Ministerial Conference for the first time introduced new issues which could be included in future negotiations. These issues included: trade and investment, trade and competition policy, transparency in government procurement, and trade facilitation. These issues are collectively known as the “Singapore Issues”. Currently, only trade facilitation has been included in the Doha negotiations. The Third Ministerial Conference in Seattle tried to launch the next Round of multilateral trade negotiations but failed. However, the Fourth Ministerial Conference in Doha finally managed to launch the Doha Round, or Doha Development Agenda which is scheduled to be completed by the end of 2006. The Doha Round had a mid-term review at the Fifth Ministerial Conference in Cancún, Mexico, which ended in discord and led to a delay of the negotiations. The Sixth Ministerial Conference in Hong Kong, China in 2005 gave new impetus to the negotiations. The General Council consists of representatives of the member governments and is in charge of the day-to-day management and work in between the ministerial conferences. It also acts as Dispute Settlement Body and Trade Policy Review Body and the main Trade Negotiations Committee in the Doha negotiations. Under the General Council are the three Councils monitoring the three main agreements: the Council for Trade in Goods (Goods Council), the Council for Trade in Services (Services Council), and the Council for Trade-Related Aspects of Intellectual Property (TRIPS Council). Special sessions of the Services Council conduct the Doha negotiations in services while special sessions of the TRIPS Council conduct the negotiations on issues related to intellectual property rights. Under the Councils, there are a variety of committees where most of the work is done. Under the Goods Council there are committees on market access (dealing with market access of non- agricultural products), agriculture (overseeing the Agreement on Agriculture as well as conducting the Doha negotiations on agriculture in special sessions), and committees on each of the WTO agreements on goods. The negotiations on non-agricultural market access are not conducted in the Committeee on Market Access but in a special Negotiating Group on Market Access. There is also a plurilateral committee on the Information Technology Agreement and a Working Party on State-Trading Enterprises. The TRIPS Council has no subsidiary bodies but the Services Council has committees on trade in financial services and on specific commitments as well as working parties on domestic regulation and GATS rules. The Doha negotiations on anti-dumping, subsidies and countervailing duties and regional trade agreements are conducted in the Negotiating Group on Rules. Directly under the General Council there are a number of committees dealing with trade and environment, trade and development (with its sub-committee on least developed countries), regional trade agreements, balance of payment restrictions, and on budget, finance and administration. For the accession of each new prospective member, special working parties are formed which last as long as the accession of that particular economy lasts. Finally, there are working parties which do not conduct negotiations but study certain trade-related aspects such as debt and finance, technology transfer and those that dealt with “Singapore Issues” but are no longer active. All decisions made in WTO bodies are by consensus, a practice continued from the GATT days. Where consensus is not possible, voting is possible in specific situations on the basis of “one country, one vote”. For instance, accession of new members requires a two-third majority in the General Council or Ministerial Conference, while a waiver of a certain obligation for a member can be made by three-quarters majority. 13 Figure 1 Organizational chart of the World Trade Organization General Council meeting as General Council meeting as Dispute Settlement General Council Body Appellate Body Dispute Settlement panels Committees on Trade and Environment Council for Council for Council for Trade and Development Trade in Goods Trade-Related Aspects Trade in Services Subcommittee on Least- of Intellectual Developed Countries Property Rights Regional Trade Agreements Balance of Payments Restrictions Budget, Finance and Administration Committees on Committees on Market Access Trade in Financial Services Working parties on Agriculture Specific Commitments Accession Sanitary and Phytosanitary Measures Working parties on Working groups on Technical Barriers to Trade Domestic Regulation Trade, debt and finance Subsidies and Countervailing GATS Rules Trade and technology transfer Measures (Inactive: Anti-Dumping Practices (Relationship between Plurilaterals Customs Valuation Trade in Civil Aircraft Committee Trade and Investment Rules of Origin (Interaction between Government Procurement Committee Import Licensing Trade and Competition Policy Trade-Related Investment Measures (Transparency in Safeguards Government Procurement) Working party on Doha Development Agenda: State-Trading Enterprises TNC and its bodies Textiles Monitoring Body Trade Negotiations Committee Special Sessions of Services Council / TRIPS Council / Dispute Settlement Body / Agriculture Committee / Trade and Development Committee / Trade and Environment Committee Negotiating groups on Plurilateral Market Access / Rules / Trade Facilitation Information Technology Agreement Committee Key Reporting to General Council (or a subsidiary) Reporting to Dispute Settlement Body Plurilateral committees inform the General Council or Goods Council of their activities, although these agreements are not signed by all WTO members Trade Negotiations Committee reports to General Council The General Council also meets as the Trade Policy Review Body and Dispute Settlement Body 14 There are no formal procedures for accession to WTO. However, there are certain steps new applicants have to follow. They have to submit a detailed memorandum on their trade and economic policies which is examined by their working party. Working party members then submit questions which must be satisfactorily answered. Subsequently, the applicant country must enter into bilateral negotiations with each working party member. The results of these negotiations will be multilateralized upon accession. Upon finalization of all bilateral negotiations, the membership terms are drafted which appear in a report which outlines the draft membership treaty (“protocol of accession”) and “schedules” outlining the applicant’s commitments. The decision to allow the applicant to become a Member rests with the General Council or Ministerial Conference. When the decision is favourable, the accession treaty needs ratification by the applicant’s own legislature or parliament. After ratification, the applicant is formally a new Member of the WTO. Currently, there are 150 Members (upon Tonga’s ratification). 5. The Doha Development Agenda At the Fourth Ministerial Conference of the WTO in Doha, Members launched the new round of multilateral trade negotiations, formally known as the Doha Development Agenda (DDA). The mandate of the negotiations is contained in the Doha Declaration. The negotiations are conducted in the Trade Negotiations Committee and its subsidiaries, which are usually either regular councils or committees meeting in “special sessions” or specially-created negotiating groups. Due to discord among the Members, the official deadline of 1 January 2005 to end the negotiations was missed. The negotiations are now scheduled to be completed by the end of 2006. Briefly, the Doha mandate contains the following: Implementation-related issues and concerns Many developing countries face problems implementing their obligations under the Uruguay Round agreements. A separate Ministerial Decision on implementation issues adopted at the Doha Ministerial Conference mandates negotiations on the clarification of these issues. Market access for non-agricultural products These negotiations are known as the non-agricultural market access (“NAMA”) negotiations aiming at cutting tariffs on all non-agricultural products, while addressing issues such as tariff peaks (higher than average tariffs, usually understood as over 15 per cent), tariff escalation (the practice where higher-value added products face higher tariffs). Members have agreed to adopt the so-called “Swiss Formula” for the tariff-cutting exercise. The challenge was to agree on a methodology to convert the rather non-transparent “specific” duties into equivalent and more transparent “ad- valorem” duties. Specific duties express the duty as an amount per quantity imported while ad- valorem expresses the duty as a percentage of the price of the imported product. Conversion is necessary to apply the reduction formula. The negotiations are conducted in the Negotiating Group on Market Access. Agriculture The negotiations already ongoing before the Doha Ministerial Conference are integrated in the Doha negotiations committing the Members to achieve substantial reductions in market access barriers, 15 reductions of export subsidies (with a view to phasing them out) and substantial reductions in levels of domestic support. Members have already agreed on a methodology to convert specific duties into equivalent ad-valorem duties. The negotiations are conducted in special sessions of the Committee on Agriculture. Services The negotiations already ongoing before the Doha Ministerial Conference are integrated in the Doha negotiations and take place on the basis of “requests and offers”: a negotiating method where Members negotiate on a bilateral basis submitting “requests” to their principal trading partners which replies with “offers”. Since the Hong Kong, China Ministerial Conference, plurilateral request-offer negotiations are also allowed. The negotiations take place in the special sessions of the Services Council. Trade-related aspects of intellectual property rights (TRIPS) Members adopted a Declaration on TRIPS and Public Health at the Doha Ministerial Conference which stresses that the TRIPS Agreement should be implemented and interpreted in such a way that it support public health, by promoting access to existing medicines and the creation of new medicines. Members have now agreed that developing countries can import generic copies of patented medicines without consent of the patent holder. Other issues under negotiation include geographical indications (geographical place names identified with the quality or other characteristics of a particular product), biodiversity, traditional knowledge and reviews of the TRIPS provisions. The negotiations take place in special sessions of the TRIPS Council. “Singapore” issues The Doha Declaration mandates negotiations upon explicit consensus of the all Members on the following areas: trade and investment, trade and competition policy, transparency in government procurement, and trade facilitation. These issues were first raised at the Second WTO Ministerial Conference in Singapore. Members have now agreed to negotiate on trade facilitation only. The negotiations are conducted in the Negotiating Group on Trade Facilitation. Rules and regional trade agreements The Doha Declaration mandates negotiations on clarification and improvement of the so-called “rules”, i.e. anti-dumping and subsidies. Negotiations are also mandated on clarifying and improving disciplines on regional trade agreements. The negotiations in these areas are conducted in the Negotiating Group on Rules. Dispute settlement understanding Negotiations are mandated to improve the Dispute Settlement Understanding. The negotiations take place in special sessions of the Dispute Settlement Body (i.e. the General Council) 16 Trade and environment Negotiations are mandated on (a) the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements (MEAs); (b) procedures for information exchange between secretariats of MEAs and the WTO secretariat; (c) develop criteria for observership of other international governmental organizations in WTO; (d) reduction or elimination of tariff and NTBs to environmental goods and services; and (e) clarify and improve WTO rules that apply to fisheries subsidies. The negotiations on these issues take place in special sessions of the Committee on Trade and Environment, with the exception of market access for environmental goods and services negotiations which take place in special sessions of the Negotiating Group on Market Access and the Services Council. Other issues Other issues which are part of the Doha mandate include: Electronic commerce (General Council) Small economies (General Council) Trade, debt and finance (Working Group) Trade and technology transfer (Working Group) Technical cooperation and capacity building (General Council) Least-developed countries (Sub-committee on LDCs) Special and differential treatment (Committee on Trade and Development) The various deadlines imposed by the Doha Declaration for the negotiations were mostly missed and the Fifth Ministerial Conference at Cancún ended in disarray over agricultural subsidies and the Singapore issues. Progress was finally made with the adoption of the 1 August 2004 Decision, also known as the July 2004 Framework Agreement which outlined the framework of the new agreement. This framework agreement was further refined at the Sixth Ministerial Conference in Hong Kong, China in December 2005. All negotiations, except those on dispute settlement, are part of the “single undertaking”, i.e. they must be concluded as a package and members must accept the package as a whole. The negotiations also maintain the principle of “reciprocity” under which a country seeking improved access to an overseas market (e.g. through tariff reductions) must be ready to make concessions (e.g. in tariffs) that its trading partners consider to be advantageous and of reciprocal or equivalent value to the concessions they are seeking (exceptions for developing countries as part of S&D). The Sixth Ministerial Conference basically reiterated the commitments made at earlier conferences and fine-tuned the July 2004 Framework Agreement. However, it revived the Doha negotiations and had three outstanding outcomes: Elimination of all export subsidies by 2013 and for cotton by 2006. Elimination of all duties and quotas on at least 97 per cent of exports from LDCs by developed countries and developing countries in a position to do so by 2008 or no later than the start of the implementation period. Introducing “Aid-for-Trade”, in particular for purposes of building supply-side capacities.