INTERNATIONAL TRADE LAW

16th October 2017

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 INTERNATIONAL TRADE LAW

• Peter Van den Bossche, The Law and Policy of the World
Trade Organization: Text, Cases and Materials, Cambridge
University Press; third edition (September 23, 2013).
• Hanoi Law University, International Trade and Business
Law Textbook, the People’s Public Security Publishing
House, Hanoi, 2012 (this Bilingual Textbook was published
within framework of the Viet Nam - MUTRAP Project III)
• WTO Secretariat, Understanding the World Trade
Organization, (WTO - www.wto.org)
• Other materials to be distributed every Thursday via emails
Assignment 1: History of international trade regulation

• A brief history of international trade regulation

• Features of European trade (Greek and Roman
empire), Islamic trade, Chinese trade
• Trade regulation and legal instruments
• Arguments for and against free trade
• Why do states trade?
• Economic theories and empirical data
• Political interests
• The process of trade liberalization after WWII from an
economic perspective
 International trade law
• International trade law is a branch of international economic law
(trade, investment, finance,..)
• International trade law is a part of (public) international law:
• Legal Subjects: states, countries, separate custom territory
(e.g: Separate Customs Territory of Taiwan, Penghu, Kinmen
and Matsu —Chinese Taipei), international organizations,…
• Object of law: legal relationship arising between countries
when participating in international trade (goods, services,
IPRs, investment…)
• Sources of law: international treaties, WTO agreements,
bilateral/regional trade agreements, international customs,
general principles of law, … (Article 38, paragraph 1 of The
Statute of the International Court of Justice)
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Structure of the WTO &
Process of WTO Rule-Making
16th October 2017

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 Overview
• WTO as an IO
• WTO Treaty Structure
• WTO Rule-Making: Trade Rounds vs Rule
Application/ Treaty Interpretation
• Relationship to other IOs
• Administering the WTO: WTO bodies
• WTO Membership, Accessions &
Observers
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History: The post WWI trade disorder

• Reconstruction Period (1918-1925)

• Normalization Period (1925-1930)
• Disintegration of World Trade (1930)
• Retaliation and Business Decline, WW II

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 Post-war US attitudes

“Trade conflicts breed non-cooperation,

suspicion, bitterness. Nations which
are economic enemies are not likely to
remain political friends for long.”
Harry Hawkins (1944)

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 From GATT 1947 to WTO
• The new “guaranteed free trade” after 2nd WW
(Bretton Woods Agreements)
• States understood the necessity of international
rules to prohibit the protectionist behavior of States:
– Creation of International Organizations with the mandate
to enforce rules in the economic field
• The ITO (International Trade Organization) – trade sector
• The IMF (International Monetary Fund – monetary sector
• The World Bank (International Bank for the Reconstruction
and the Development) – financing the reconstruction of
States destroyed by the 2nd WW
Failure of ITO and creation of GATT
• Why ITO failed?
– ITO: organization aimed at regulating trade
– Organs could enact binding decisions
– Voting system: one head one vote
– US: contested this system; the US Congress did
not ratify the constitutive agreement of ITO
• After the failure…
– States feared that the absence of rules would
have led to the same anarchy existing before the
world war
– 23 States met in Geneva, excerpted part IV from
ITO Chart and signed it as an autonomous treaty
– They called it GATT
 From GATT 1947 to WTO
• General Agreement on Trade in Goods—GATT
1947
– concluded by the Havana Charter in March 1948
• Left-over from a more ambitious project, the
International Trade Organization (ITO)
– ITO was supposed to be 3rd leg of the post-WWII
world economic order, alongside IMF & WB
– US Congress diapproved of liberalizing labor mobility
(amongst others) in ITO
• only the GATT 1947 (liberalization of trade in
goods) came through, „provisionally
applied“ (PPA) until 1994!

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 GATT characteristic (1947-1994)
– No formal international organization (it was an agreement)…de
facto organization
• No formal organs, no power to enforce decisions; decisions adopted
with the ‘consensus’
• No permanent secretariat, entry into force only by means of
Provisional Protocol of Application (PPA), later Protocols of
Accession
– The GATT 47 was conceived as an interim Agreement, pending
entry into force of ITO, no status of international organization
– Based on some principles
• Non discrimination
• Periodic meeting/negotiations between States for the reduction of
trade barriers (Rounds)
• Prohibition of QRs (with some exceptions)
• Rules aimed at controlling certain trade policy instruments of States
(antidumping, public subsidies)
 GATT 1947
• Treaty: provisionally applied with a secretariat in
Geneva
– GATT 1947 was not an international organization
• „GATT Contracting Parties“ (not „members“ or member
states!)
• Goals: liberalization of trade in goods
– tariffication, reduction and binding of tariffs
• Method: trade rounds (total of 8)
– Uruguay Round: 24.9.1986, Punta del Este-15.4.1994
Marrakesh
• this last round under the „old GATT“ established the WTO
• achieved a 40% reduction of tariffs on goods

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 The “Rounds” of GATT

• Year Place/name Subjects covered Countries

• 1947 Geneva Tariffs 23
• 1949 Annecy Tariffs 13
• 1951 Torquay Tariffs 38
• 1956 Geneva Tariffs 26
• 1960-1961 Dillon Round Tariffs 26
• 1964-1967 Kennedy Round Tariffs AD measures 62
• 1973-1979 Tokyo Round Tariffs, non-tariff 102

• 1986-1994 Geneva Uruguay Round Tariffs, non-tariff measures, rules,

services, intellectual property, dispute settlement, textiles, agriculture, creation of
WTO, etc 123
• 2001 - Doha Round
WTO: an international organization
Art. VIII WTOA: WTO has a „legal personality“: not soft law
• Location: Geneva, Switzerland
• Established: 1 January 1995
• Created by: Uruguay Round negotiations (1986-94)
• Membership: 164 countries on 29 July 2016
• Budget: 197 million Swiss francs for 2016 (member’s contributions according to their
share (%) of international trade, i.e. goods, services, IPRs for the last 5 years
• Secretariat staff: 647
• Head: Roberto Azevêdo of Brazil (Director-General)
• Functions:
1. Administering WTO trade agreements
2. Forum for trade negotiations
3. Handling trade disputes
4. Monitoring national trade policies
5. Technical assistance and training for developing countries
6. Cooperation with other international organizations

source: www.wto.org 15
» From GATT to WTO:
improvements?

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 GATT problems
1) Rules sometimes were not precise, flawed, easy to circumvent (e.g. VERs –
Prohibition of QRs)
2) The system for the settlement of dispute was inadequate (based on positive
consensus)
3) No institutional framework (impossibility to check the application of the
agreement by member States)
4) Fragmentation of the GATT legal system (e.g. in the Tokyo Round only 37
States signed the new agreements)
5) GATT entered into force with a protocol of provisional application and with
a ‘grandfather clause’
6) No direct effect of GATT rules in national legal orders
7) Rules limited to trade in goods (excl. Textiles and Agriculture); no rules for
trade in services; no rules for the protection of intellectual property rights

HAVE ALL OF THESE PROBLEMS BEEN SOLVED BY THE WTO?

 GATT Problems Solved by the WTO
1) Rules more precise and more difficult to circumvent
2) Improvement of the dispute settlement system
3) WTO is an international organization (institutional framework)
4) Fragmentation has been eliminated through the application of a “single
undertaking rule”
5) WTO agreement has been signed and ratified as a treaty (and not as a
provisional protocol)
6) not solved: WTO rules have not direct effect within the national legal
systems
7) extension of the multilateral rules to trade in services, protection of
intellectual property rights; new agreement for textiles and clothing sector
and for agriculture
 Single Undertaking
• Concept of the UR: „nothing is agreed until
everything is agreed“
– prevent a remake of „GATT-à-la-carte“ situations
• side agreements (Tokyo Rd) applied only to signatories
• undermined the multilateral character of trade liberalization
⇒ leads to capacity problems for developing
countries:
– Corrective: Special and Differential Treatment (SDT)
provisions in the different WTO covered agreements
• Longer transition periods (TRIPS)
• Technical assistance

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 Single undertaking
• Pro:
– Cross-sectoral bargaining
facilitated
– Sovereign equality of all
countries: no opt-outs
– Consolidation of the WTO
as an institution and
constitutional agreement
• Contra:
– WTO is held hostage by
complex issues, which
would otherwise be easily
resolved
– complicates negotiations for
small and vulnerable
economies w/o sufficient
resources for bargaining
– « pasting on » new
structures (climate change,
migration, finance) rather
than plurilateral agreements
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 From GATT to WTO: In short
• The Uruguay Round Negotiations (1986-1993)
• The conclusion of negotiations (Geneva, 15.12.1993)
– The signature of Marrakesh agreement (14.4.1994)
– The enter into force of WTO (1.1.1995)
• GATT Problems solved by the WTO
• Problems still existing
– Trade ands…
• Environment
• Social and human rights
• Health
• Development
– Specific problems:
• Pharmaceuticals and Protection of Intellectual Property
• Protectionism of developed countries in some sectors (agriculture)
– Other problems not directly linked to WTO
• External debt of Developind Countries
• Financial crisis and IMF and World Bank deficiencies
The Multilateral Agreements
Structure of WTO Agreements
• Final Act of the Uruguay Round annexed to which are:

1. Marrakesh Agreement establishing the WTO: trade constitution

or „umbrella“ for the „covered agreements“, which are annexed:
• Annex 1a Multilateral agreements on trade in goods: GATT
1994 and other agreements
• Annex 1b GATS
• Annex 1c TRIPS
• Annex 2 DSU
• Annex 3 TPRM
• Annex 4 plurilateral agreements

2. WTO Members‘ schedules of commitments

3. UR declarations and decisions

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 WTO: Functions
• Progressively liberalize: Annex 1A
– trade in goods and services
– enhance the protection of trade-related IPRs
• Regulate: Annex 1A
– Unfair trade (anti-dumping duties, countervailing duties)
– Harmonize sanitary, phytosanitary, technical standards, domestic
regulation, trade-related IPRs
– Transparency and good governance
• Dispute settlement system: Annex 2
• Surveillance/Monitoring of implementation: Annex 3
– ensure WTO conformity of national laws, regulations and
administrative procedures“: Art. XVI:4 WTOA

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Multilateral Trade Negotiations
(MTN)
Ministerial Conference

General Council Trade Negotiations Committee

Market Environ-
Services Rules DSB Agriculture
Access ment

TRIPs Development

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Ministerial Conference
• Meets once every two years (Singapore
96, Geneva 98, Seattle 99, Doha 01, Cancun 03,
HK 05, Geneva 09 , Geneva 11, Bali 13)
• Gathers ministerial representatives
of WTO Members
• Has general competence (Art.IV
WTOA):
– Shall carry out the functions of WTO
– Take the necessary actions
Ministerial Conf. - competences
• Decides about negotiations on
– The matters covered by WTO agr.
– Developments of the multilateral trade
system
– Implementation of these negotiations
• Therefore, it provides for guidelines
and orientation of WTO activity
 General Council
• Executive body
• Plenary composition
• Diplomatic representatives
• The core of institutional system
 General Council - competences
• Replaces the Min. Conf. in the intervals between its meetings
• Implements the tasks assigned to it by the Min. Conf.
• It concludes cooperation agreement with other I.O.
• Appoints the Director General + staff
• It interprets WTO Agr.’s provisions
– Differences “interpretation” of GC and “interpretation of
DSB”?
– “the rulings and recommendations of the DSB serve only
‘to clarify the existing provisions of those agreements’ and
‘cannot add to or diminish the rights and obligations
provided in the covered agreements.’” (US-FSC case)
– Interpretation can be a “subsequent agreement” (EC-
Banana III case)
 WTO Secretariat
• Body of individuals
• Acts independently from Members
• Guarantees the functioning of the
other bodies
– Prepares notes, reports on trade policy
review, factual and legal information for
panels, Appellate Body…
• Gives technical assistance to
Members
WTO Director General
• Appoints the Secretariat’s officers
• Responsible for presenting the
budget to the GC
• Represents the WTO
• Keeps WTO legal instruments
• Is given roles in the DS Mechanism
 WTO Decision-making process
• Trade rounds (WTO as forum for negotiations)
• Member-driven
– no power to WTO DG
– consensus-rule (voting does usually not take
place)—paralysis
– negative consensus (adoption of Panel and AB
reports)
• Single undertaking (rigidity) rather than
flexibility—difficult to amend WTO agreements

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WTO Decision-making process
• Art.IX WTO:
– “one head, one vote”
– Consensus are general rule
– If cannot be reached, and if it
explicitly so provided, voting
– Provision for consensus:
• Ex. Amendements to DSU
– Provision for majority votes
• Ex. Decision to adopt interpretations by
the MC or the GC: ¾
 Special Voting Situations
• 4 specific voting situations:
– three-quarter majority
• adopt an interpretation of any of the multilateral trade agreements
(IX:2)
• waive an obligation imposed on a particular member by a
multilateral agreement (IX:3)
• amend provisions of those multilateral agreements where
amendment needs no consensus (Art. X)
– two-thirds majority
• admit a new member (Art. XII)
• Reverse consensus rule in WTO Dispute Settlement:
• no veto possible (FN to Art.2:4 DSU: 6:1, 16:4; 17:14; 22:6; 22:7
DSU)
• Particular rules on decision-making in plurilateral
Agreements (Art. IX:5)

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 Decision-making in practice
• Spirit of « progressive liberalization » mandated by
Preamble WTOA or Art. XIX GATS
• Art. IV:1 WTOA: every 2 years: Ministerial Conferences
• Trade Negotiations „Rounds“
– a trade negotiations committee is established (TNC)
• De jure all WTO members have equal standing in
negotiations
• De facto, developing countries are disadvantaged
– lack representation: no permanent missions in Geneva
– excluded from „green room“

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 Membership
• 26 „old GATT“, 124 UR, 164 today (2017)
• Members (not member states)
– including custom territories (Palestinian
authority) (see Explanatory Note to WTOA)
• EU by itself and its members states: Art. XI
WTO Agreement
– voting? Art. IX:1 EU vote equals vote of all its
members

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Accession to WTO
• Art.XII WTO:
– Who can acceed? “Any State or separate
customs territory possessing full
autonomy in the conduct of its external
commercial relations and of the other
matters” covered by the WTO
– How? “on terms to be agreed between it
and the WTO”
– Decision is taken by Min. Conf.(2/3)
• GATT practice; Secretariat Note WT/
ACC/1 (1995)
 Accession procedure
Art. XII WTO Agreement: by Ministeral Conference
1. submission of a formal written request by the applicant
government.
2. bilateral exchange of tariff and services concessions
with all WTO members
3. in parallel, system issues (transparency etc) in working
group
4. Accession „package“
– Working Party Draft Report:
• summary of proceedings, conditions of entry and a Protocol of
Accession
– Schedules of tariffs and services commitments
– Approval by consensus

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 Accession procedure (2)
• Accession „Package“ submitted to 2/3
majority voting in Ministerial conference or
General Council meeting
– General Council decision
– Protocol of Accession
• ratification within 30 days upon signature of PA
• notification to WTO Secretariat
• „Terms of accession“ (Art. XII:2 WTOA) are
different for every country

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China and Russia‘s accession
• Non-market economies (see also Viet Nam,
Laos)
• China‘s terms of accession: far-reaching
transparency obligations
• Publication of trade-relevant laws
• Enquiry points
• Independant judicial review of agency/administration‘s
decisions
• Russia started talks in 1995
• according to WTO observership rules, accession needs to be
completed within 5 years of obtaining observer status
• see: http://www.youtube.com/watch?
v=tbLNJqZLLUI&feature=channel

ITR p. 79-80
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Vietnam’s economic integration process
WTO accession in brief

Source: www.wto.org
 Vietnam‘s accession to the WTO
• 01/1995: Vietnam filed application package
• 08/1996: submission of Memorandum on the Foreign Trade Regime
• Formal meetings of Working Party:
• First formal meeting: 27-28/07/1998
• Last formal meeting: 26/10/2006
• Bilateral negotiations: 28 Members (initially 40 Members requested for
bilateral negotiations)
• 2004: finished talks with the EU
• 2005: completed negotiations with China
• 05/2006: concluded bilateral negotiations with the US
(the Jackson-Vanik Waiver; PNTR for Vietnam in 2006)
• 07/11/2006: General Council’s Decision on the Accession
• 15/11/2006: Completed the Protocol of Accession
• 28/11/2006: Protocol of Accession ratified by Vietnam’s National Assembly
• 12/12/2006: Notification of Acceptance received by the WTO and Entry Into
Force of the Protocol of Accession
• 11/01/2006: Vietnam became the 150th Member of the WTO

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 Observers
• States & International Organizations
– Requirements:
• „direct interest in trade policy matters“,
• „responsibilities related to those of the WTO“
– Rights:
• upon invitation, right to speak in WTO bodies, subsequent to
Members of that body
– no right to circulate papers or participate in decision-making
• obtain technical assistance
– Duties:
• States with observer status must take up accession
proceedings within 5 yrs

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 Private companies & NGOs
• Main beneficiaries of trade liberalization
– No formal status in WTO decision-making
– No formal status in WTO dispute settlement
• Amici curiae briefs (unsollicitated opinions) are not taken into
account by panels or the AB
• Lobbying with their national governments in trade
negotiations
• Reform proposals since Seattle Ministerial Con-
ference of 1999 (protests criticizing the lack of
WTO democratic legitimacy)
– Sutherland Report on WTO Reform
• Public hearings in dispute settlement upon approval of parties
in dispute

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 Summary: WTO
• History of the GATT and the establishment of the WTO
• Problems of GATT
• Improvements from GATT to WTO
• The establishment of WTO: The Marrakesh agreement
establishing the WTO, at the end of the Uruguay Round
• The WTO structure of agreements
• The WTO concept of ‘Single Undertaking’
• WTO Functions: progressive liberalization, trade policy
monitoring, dispute settlement mechanism,…
• WTO Decision-Making process: consensus, majority voting,
negative consensus
• WTO Bodies: MC, GC, Secretariat..
• Membership and Accession procedures
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