DR.

RAM MAHOHAR LOHIYA NATIONAL LAW UNIVERSITY,

LUCKNOW

INTERNATIONAL TRADE LAW

PROJECT ON

1947 AND WTO- A COMPARATIVE ANALYSIS

SUBMITTED BY: UNDER THE GUIDANCE OF:

MAYANK SAHU Ms. KIRTI SINGH

ENROLLMENT NO: 140101076 ASSITANT PROFESSOR

VII SEMESTER (LAW)

B.A. LL.B (H)

 Acknowledgement
I would like to extend my gratitude towards my International Trade Law teacher Ms. Kirti
Singh, Assistant Professor (Law) who gave me the opportunity to work and prepare a project
on this topic. Without her personal guidance and inspiration this project would never have
been completed.

Special thanks must also be given to Dr. Madhu Limaye Library, without whose excellent
facilities it would have been a much more arduous task to complete this project.

Page | 2
 Table of Contents

S. No. Content Page No.

01 Synopsis 04

02 Introduction 06

03 The General Agreement on Tariff and Trade (GATT) 07

04 World Trade Organisation (WTO) 10

05 Comparison between WTO and GATT 13

06 Conclusion 14

07 Bibliography 14

Page | 3
 Synopsis
Introduction
International Trade Law is a complex area of law because it contains various levels of trade
agreements and organizations. These organizations are present today at international level.
But the history which has helped in achieving the present scenario has been eventful one.
Firstly after World War II a failed attempt was led by USA, UK and Canada for the formation
of International Trading Organisation. This led to the birth of The General Agreement on
Tariff and Trade (GATT) which was provisional in nature. Even without permanency, this
system resulted in unprecedented growth in world trade at that time. Various rounds of
negotiations in 1990s led to the birth of World Trade Organisation in 1995. It has replaced
GATT but the trading principles of GATT and WTO are somewhat same.

Objective of Research

The objective of this research paper is to study and elucidate the nature of GATT and WTO.
This project will undertake the task of underlining the historical developments that led to
formation of GATT and WTO. Their structure and modus operandi will also be depicted in
this project. Finally, the project will compare and contrast the WTO and GATT and analyse
these two arrangements.

Hypothesis

An international organization has always been required in world trading. The first such
arrangement was GATT which despite its lack of permanent structure achieved
unprecedented growth rates in world trade. WTO has succeeded it and is functional today.
But it has time and against been criticized for favouring developed countries.

Research Methodology

The study of this project shall involve doctrinal research methodology. Study of this project
will be done through books, e-books, articles, journals and internet database.

Page | 4
 Tentative Chapterisation
1. Introduction
2. GATT
3. WTO
4. Comparative Analysis
5. Conclusion

Tentative Bibliography

1. http://www.manupatra.com

2. http://www.scconline.com

3. http://www.wto.org

4. International Trade Law by Jason Chuah

Page | 5
 Introduction

International trade is a complicated area of law to research because there are numerous levels
of trade organizations and interactions. There are bilateral trade agreements, regional trade
agreements and multinational trade agreements. Each of these agreements has its own history,
policies and dispute settlement procedures. Trade organizations established under the
agreements have separate resources that can be searched. Furthermore, individual countries
have their own policies and laws relating to international trade. International Trade
Law includes the appropriate rules and customs for handling trade between countries.

A study of international trade law might be said to entail the analysis of firstly, legal
relationship between parties who buy and sell goods from each other, secondly, their
relationship with the carrier of goods, thirdly, the arrangement made by the parties with the
insurer to protect the goods from loss or damage and fourthly, the financing and payment
agreements with the banks or financial institutions.1

The history of International Trade Law is short but eventful to say at the least. The advent of
international trade law can be traced to the history and origin of Maritime Law or Law of the
seas. Although the modern touch to this law was provided later in time but there is no
denying the fact that it is a much older stream of law. Currently World Trade Organization is
the supreme body which is overlooking the international trade in the world. This branch of
law i.e International Trade Law is now an independent field of study as most governments
have become part of the world trade, as members of the World Trade Organization (WTO).
Since the transaction between private sectors of different countries is an important part of the
WTO activities, this latter branch of law is now a very important part of the academic works
and is under study in many universities across the world.

The object of this project is not to dwell into the nitty-gritties of international trade law but to
comparatively analyse the position of the international trade law as under GATT and WTO.
This project is divided into three major parts. The first part deals with the history and position
of GATT. The second part deals with the origin of WTO and position thereunder and
transition from GATT. The third part deals with differences between the two systems.

1
Jason Chuah, Law of International Trade, Third Edition, 2005, Thomson Sweet & Maxwell, pg. 1.

Page | 6
 The General Agreement on Tariff and Trade (GATT)

The General Agreement on Tariffs and Trade, known as the GATT, is one third of the
Bretton Woods system that was created after World War II to ensure a stable trade and
economic world environment. The International Monetary Fund (IMF) and World Bank are
the other two bodies of the Bretton Woods system. While often referred to as an international
organization, the GATT had a "de facto" role as an international organization before the
creation of the World Trade Organization (WTO). The WTO was established on January 1,
1995 by the Final Act of the Uruguay Round of negotiations. GATT is a multilateral
agreement, between several nations of the world, that regulates international trade. Its
primary objective is to reduce tariffs to a substantial amount along with abolishing other trade
barriers.

The system for creation of GATT was set in motion after World War II when the United
Kingdom and the United States submitted proposals to the Economic and Social Council
(ECOSOC) of the United Nations regarding the establishment of an international trade body
that was to be named the International Trade Organization (ITO). ECOSOC convened a
conference, the United Nations Conference on Trade and Employment in 1946 to consider
the UK and U.S. proposals. A Preparatory Committee drafted the ITO Charter and it was
approved in 1948 at the conference in Havana, Cuba. The Charter is often referred to as the
Havana Charter or the ITO Charter.

The first round of trade negotiations took place while the Preparatory Committee was still
working on drafting the Charter because the participants were anxious to begin the process of
trade liberalization as soon as possible. Their results were incorporated into the General
Agreement, which was signed in 1947.

Since the original signatory nations expected the Agreement to become part of the more
permanent ITO Charter, the text of the GATT contains very little "institutional" structure.
This lack of detail within the agreement created increasing difficulties as the GATT
membership and roles governing trade between so many of the world's nations have grown.
The GATT functioned as an international organization for many years even though it has
never been formalized as such.

ECOSOC established an Interim Commission for the ITO that is referred to as ICITO.
Unfortunately, when it came time for the members to ratify the ITO Charter, the Congress of

Page | 7
the United States refused and the ITO never became a reality. The GATT survived, but
remained intact only due to the Protocol of Provisional Application of the General Agreement
on Tariffs and Trade which was concluded in 1947 and which entered into force in 1948.

The GATT completed 8 rounds of multilateral trade negotiations (MTNs). The Uruguay
Round (the 8th round) concluded with the signing of the Final Act on April 15, 1994, in
Marrakesh, and produced the World Trade Agreement (WTO) and its annexures.2

Impact of GATT

GATT was in existence for more than 45 years. This system expanded itself and included
many more countries within its fold. This agreement was effective for most of the time it was
in force. GATT helped in establishing more and liberal trading environment in the world but
during 1980s, an overhaul of the system was felt which led to Uruguay Round and ultimately
in creation of WTO.

The early years of GATT were dominated by accession negotiations and a session in mid
1950s led to the modification of the treaty. In 1960s, recurring rounds like Dillon Round and
Kennedy Round gradually expanded the scope of GATT. A large number of non-tariff
subjects like anti-dumping measures were brought into the purview of the treaty. During mid-
1980s, sectors like clothing, textile, agriculture and IPR were allowed under the agreement
and were subjected to multilateral treaties.3

Throughout its application, GATT provided rules for much of the world trade and it seemed
well established. But the biggest concern with regards to GATT was that it was a provisional
agreement and organisation. As pointed out earlier, it was third of the Bretton Woods
institutions. The original intention was to an International Trading Organization as a
specialized agency of United Nations. The draft ITO Charter extended beyond world trade
disciplines, to include employment, restrictive trade practices, international investment, etc.
The intention was to create ITO at UN Conference on Trade and Employment at Havana,
Cuba in 1947. The GATT agreement was signed before the Havana Conference but national
ratification of ITO Charter created problem. In 1950, USA announced that it would not get
the charter ratified by US Congress. This led to non-ratification by many more countries and
proved a fatal blow for campaign for creation of ITO. This led GATT to be the only

2
The GATT and WTO, available at https://www.law.berkeley.edu/library/dynamic/guide.php?id=57 accessed
on October 24th 2017 at 3:30 PM.
3
N.K. Jain, WTO- Concept, Challenges and Global Development, 2008 Edition, Regal Publications, Pg. 8

Page | 8
multilateral instrument governing international trade till the time WTO was established in
1995.

GATT was a provisional arrangement with a limited field of action. The success of GATT in
liberalizing and promoting the world trade for 47 years is incontestable. Continual reduction
of tariffs during 1960s and 1950s led to high rates of world trade growth. The growth rate
was around 8% a year on average.4 A rush in the membership of GATT during the Uruguay
Round demonstrated multilateral trading system as represented by GATT was necessary for
development in economic and trade fronts.5 But in 1980s, need for a reform in the structure
was felt and WTO came into existence.

The trade Rounds of GATT and there subjects are as follows:-

Round Year Place Subjects Covered Countries

01 1947 Geneva Tariffs 23
02 1949 Annecy (France) Tariffs 13
03 1951 Torquay (UK) Tariffs 38
04 1956 Geneva Tariffs 26
05 1960-61 Geneva Tariffs 26
(Dillon Round)
06 1964-67 Geneva Tariffs and Anti-Dumping 62
(Kennedy Round) measures
07 1973-79 Geneva Tariffs, Framework 102
(Tokyo Rounds) agreements, non-tariff
measures
08 1986-94 Geneva Tariffs, non- tariffs 123
(Uruguay Rounds) measures, IPR, agriculture,
Dispute settlement, textiles,
employment, etc.

4
K.R. Gupta, A Study of World Trade Organization, 2nd Edition, 2008, Atlantic Publishers, pg. 24
5
Id.

Page | 9
 World Trade Organisation (WTO)

WTO stands for World Trade Organization, is the sole international body concerned with the
provisions of cross-country trade, based in Geneva, Switzerland. Basically, there is an
agreement called WTO agreement, which is duly signed and negotiated by member nations of
the world and confirmed in their parliaments.

In the real sense, WTO is a place, where the governments of member countries attempt to
resolve their trade problems, encountered by them during the trade with other countries. The
member governments (who can be ministers or their ambassadors or delegates) operate WTO
and all decisions are also taken by consensus.

The organization helps the producer of goods and services deal in just and fair manner, to
carry out their business throughout the world. It is aimed at liberalizing trade, for the benefit
of all the nations, but it also imposes certain barriers, such as to provide protection to
consumers or stop the spreading a disease.

World Trade Organization in current existence provides its membership with forums for three
interrelated functionsnegotiation, illumination, and litigationit is probably best known
for the first of these.6 The World Trade Organization (WTO) is an intergovernmental
organization that regulates international trade. The WTO officially commenced on 1 January
1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing
the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the
largest international economic organization in the world. The WTO deals with regulation of
trade in goods, services and intellectual property between participating countries by providing
a framework for negotiating trade agreements and a dispute resolution process aimed at
enforcing participants' adherence to WTO agreements, which are signed by representatives of
member governments.

Structure of WTO

WTO consists of a four level structure. The First level is the Ministerial Conference. It can
take decision on all matters under any of the multilateral trade agreements. It has to meet
once every two years. The second level is responsible for day-to-day work in between

6
The WTO and GATT: A Principled History, available at
https://www.brookings.edu/wpcontent/uploads/2016/07/selfenforcingtrade_chapter.pdf accessed on 25th
October, 2017 at 6:45 PM.

Page | 10
Ministerial Conferences. It consists of The General Council, The Dispute Settlement Body
and The Trade Policy Review Body. All these bodies consist of all WTO members. The third
level consists of three more councils. They are Goods Council, Services Council and TRIPS
Council. These councils deal with specific yet broad areas of trade. The Fourth level consists
of subsidiary bodies of level three councils. For eg, Goods Council has 11 subsidiary bodies
dealing with agriculture, textile, anti-dumping measure, etc.7

Dispute Settlement in WTO

Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading
system, and as a unique contribution to the stability of the global economy. WTO members
have agreed that, if they believe fellow-members are violating trade rules, they will use the
multilateral system of settling disputes instead of taking action unilaterally. The operation of
the WTO dispute settlement process involves case-specific panels appointed by the Dispute
Settlement Body (DSB), the Appellate Body, The Director-General and the WTO
Secretariat, arbitrators, and advisory experts.

The priority is to settle disputes, preferably through a mutually agreed solution, and provision
has been made for the process to be conducted in an efficient and timely manner so that "If a
case is adjudicated, it should normally take no more than one year for a panel ruling and no
more than 16 months if the case is appealed... If the complainant deems the case urgent,
consideration of the case should take even less time. WTO member nations are obliged to
accept the process as exclusive and compulsory.

Fundamental Principles of the GATT and the WTO

Five principles are of particular importance in understanding both the pre-1994 GATT and
the WTO:

1. Non-discrimination- It has two major components: the most favored nation (MFN)
rule, and the national treatment policy. Both are embedded in the main WTO rules
on goods, services, and intellectual property, but their precise scope and nature differ
across these areas. The MFN rule requires that a WTO member must apply the same
conditions on all trade with other WTO members, i.e. a WTO member has to grant the
most favourable conditions under which it allows trade in a certain product type to all
7
N.K. Jain, WTO- Concept, Challenges and Global Development, 2008 Edition, Regal Publications, Pg. 20-21

Page | 11
 other WTO members. "Grant someone a special favour and you have to do the same
for all other WTO members." National treatment means that imported goods should
be treated no less favourably than domestically produced goods (at least after the
foreign goods have entered the market) and was introduced to tackle non-tariff
barriers to trade (e.g. technical standards, security standards et al. discriminating
against imported goods).
For the national treatment rule he basic idea is simpleonce a foreign-produced good
has paid the price of entry into an import market (an import tariff), it has to be treated
just like a nationally produced good. The good cannot then be subject to additional
taxes or regulatory barriers that would otherwise differentiate it from a domestically
produced good, once the import tariff has been paid. The national treatment rule is
there to prevent policymakers from eliminating the market access promised by tariff
cuts through subsequent recourse to other domestic policies, such as taxes or
subsidies.8
2. Reciprocity- It reflects both a desire to limit the scope of free-riding that may arise
because of the MFN rule, and a desire to obtain better access to foreign markets.9
3. Binding and enforceable commitments- The tariff commitments made by WTO
members in a multilateral trade negotiation and on accession are enumerated in a
schedule (list) of concessions. These schedules establish ceilings- a country can
change its bindings, but only after negotiating with its trading partners, which could
mean compensating them for loss of trade. If satisfaction is not obtained, the
complaining country may invoke the WTO dispute settlement procedures.10

4. Transparency. The WTO members are required to publish their trade regulations, to
maintain institutions allowing for the review of administrative decisions affecting
trade, to respond to requests for information by other members, and to notify changes
in trade policies to the WTO. These internal transparency requirements are
supplemented and facilitated by periodic country-specific reports (trade policy
reviews) through the Trade Policy Review Mechanism (TPRM).
5. Safety values- In specific circumstances, governments are able to restrict trade. The
WTO's agreements permit members to take measures to protect not only the
environment but also public health, animal health and plant health.

8
Id at 6.
9
N.K. Jain, WTO- Concept, Challenges and Global Development, 2008 Edition, Regal Publications, Pg. 4
10
Ibid.

Page | 12
 Comparison between WTO and GATT

GATT refers to an international multilateral treaty, signed by 23 nations to promote

international trade and remove cross-country trade barriers. On the contrary, WTO is a global
body, which superseded GATT and deals with the rules of international trade between
member nations. While GATT is a simple agreement, there is no institutional existence, but
have a small secretariat. Conversely, WTO is a permanent institution along with a secretariat.

The participating nations are called as contracting parties in GATT, whereas for WTO, they
are called as member nations. GATT commitments are provisional in nature, which after 47
years the government can make a choice to treat it as a permanent commitment or not. On the
other hand, WTO commitments are permanent, since the very beginning.

The scope of WTO is wider than that of GATT in the sense that the rules of GATT are
applied only when the trade is made in goods. As opposed to this, WTO whose rules are
applicable to services and aspects of intellectual property along with the goods. GATT
agreement is primarily multilateral, but plurilateral agreement is added to it later. In contrast,
WTO agreements are purely multilateral.

The domestic legislation is allowed to continue in GATT, while the same is not possible in
the case of WTO. The dispute settlement system of GATT was slower, less automatic and
susceptible to blockages. Unlike WTO, whose dispute settlement system is very effective.

In my opinion, the biggest problem with GATT is that it is not permanent in nature but only
provisional. This gives leeway to the contracting parties to either accept it or reject it. There
is a lack of middle ground in GATT. WTO provides the much needed permanency. It gives
the member countries enough room to get their own agreements into place. The dispute
resolution is also treated as one of the central pillars under WTO which was lacking in
GATT.

WTO and GATT are similar on the points of principle of their operations. But not all
principles are same. It will not be harsh to say that WTO is nothing but an improvement upon
the then existing system of GATT.

Page | 13
 Conclusion

The main purpose of the implementation of GATT was to increase cross-country trade in the
world, so as to reinforce economic soundness, after the Second World War. It is the
foundation of WTO that made open trade between nations but also maintained some barriers
for the benefit of all. Despite what may be considered as weaknesses of GATT system, it
flourished and provided an 8% annual growth rate in trade during 1650s and 1960s. But the
failure of world to establish ITO after World War II came to fore and demands of permanent
system for world trade gave birth to WTO. The results from the history of the GATT and the
WTO negotiationstariff barriers in developed economies that are massively lower today
when compared with those during the Great Depression era of the 1930sis an
unprecedented multilateral outcome for international economic relations. Second, the
underlying principle of reciprocity that served to influence these early negotiations turns out
to have been an important international force allowing governments to coordinate and
simultaneously lower trade barriers.

But not all has been good in WTO. For long there have been accusations that WTO favours
developed countries over developing countries and lets developed countries bully developing
and under developed countries. This is evident from various issues like agricultural subsidies
given by USA and UK are detrimental to developing countries and act as trade barriers but
the practice is still going on.

Bibliography

N.K. Jain, WTO- Concept, Challenges and Global Development, 2008 Edition,
Regal Publications.
K.R. Gupta, A Study of World Trade Organization, 2nd Edition, 2008, Atlantic
Publishers.
Jason Chuah, Law of International Trade, Third Edition, 2005, Thomson Sweet &
Maxwell.
www.law.berkeley.edu
www.brookings.edu
www.wto.org
www.westlawindia.com

Page | 14