World Trade Organization

WTO IS The only international organization that deals with the global rules between nations. It provides
a framework for conduct of international trade in goods and services. WTO is a facilitator and regulator
of international business. It lays down the rights and obligations of governments in the set of
multilateral agreements. In addition to goods and service, it also covers a wide range of issues related to
international trade such as protection of intellectual property right and dispute settlement and
prescribes disciplines for governments in the formulation of rules, procedures and practices in these
areas. The WTO also covers areas of interest to international business firms such as customs valuation,
pre-shipment inspection, service and import licensing procedures, wherein the emphasis has been laid
on transparency of the procedures so as to restrain their use as non-tariff barriers .

History and evolution

The WTO came in to existence on 1st jan 1995 as a successor to the General Agreemetnes on Tarriffs and
Trade (GATT). Its genesis goes back to the post –second world war period in the late 1940s when
economies of most European countries and the US were greatly disrupted following the war and the
great depression of 1930s consequently a united nations conference on trade and employment was
convend at Havana in November 1947. It late to an international agreement called Havana charter to
create an international trade organization, a specialized agency of the unitred nation to handle the trade
side of international economic cooperation. The draft ITO charter was ambitious and extended beyond
world trade discipline to rules on employment, commodity & agreements, restrictive business practices,
international investment and services. However the attempt to create the ITO WAS aborted as the US
did not retify it and other coutnries found it difficult ot make it operational without US support.

The combined package of trade rules and tariff concessions negotiated and agreed by 23 countries oujt
of 50 participationg countries became known as general agreement on tariff and trade (GATT): an effort
to salvage from the aborted attempt to creat the ITO. India was also the founder member of GATT a
multilateral treaty aimed at trade libaeralization. Gatt provided a multilateral forum during 1948-1994
to discuss the trade problem and reduction of trade barrriers. Its membertship increased from 23
countries in 1947 to 123 countries by 1924. GATT Remembered a proivisonal agreement and
organization throughout these 47 years and facilitated considerabily, tariff reduction. During its
existence from 1948 to 1994, average tariff onf manufactured goods in developed countries declined
from about 40 percent to a mere 4 percent. It was only during the Canady round of negotiations in 1964
-67, that and anti dumping agreement and a section of development under the gatt were introduced the
first major attempt to tackle non tariff barrier was mad e during the TOKYO round. The eiththts round of
negotioation known as Urugwey round of 1986-94 wwas the most comprehensive of all and led to the
creation of WTO with new set of agreements The last round — the 1986-94 Uruguay Round — led to the
WTO’s creation.
The negotiations did not end there. Some continued after the end of the Uruguay Round. In February
1997 agreement was reached on telecommunications services, with 69 governments agreeing to wide-
ranging liberalization measures that went beyond those agreed in the Uruguay Round. In the same year 40
governments successfully concluded negotiations for tariff-free trade in information technology products,
and 70 members concluded a financial services deal covering more than 95% of trade in banking,
insurance, securities and financial information.

The Organization:
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 WTO is run by its member governments. All major decisions are made by the membership
as a whole, either by ministers (who meet at least once every two years) or by their ambassadors
or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.

In this respect, the WTO is different from some other international organizations such as the
World Bank and International Monetary Fund. In the WTO, power is not delegated to a board of
directors or the organization’s head.

When WTO rules impose disciplines on countries’ policies that is the outcome of negotiations
among WTO members. The rules are enforced by the members themselves under agreed
procedures that they negotiated, including the possibility of trade sanctions. But those sanctions
are imposed by member countries, and authorized by the membership as a whole. This is quite
different from other agencies whose bureaucracies can, for example, influence a country’s policy
by threatening to withhold credit.

Reaching decisions by consensus among some 150 members can be difficult. Its main advantage
is that decisions made this way are more acceptable to all members. And despite the difficulty,
some remarkable agreements have been reached. Nevertheless, proposals for the creation of a
smaller executive body — perhaps like a board of directors each representing different groups of
countries — are heard periodically. But for now, the WTO is a member-driven, consensus-based
organization.

Highest authority: the Ministerial Conference

So, the WTO belongs to its members. The countries make their decisions through various
councils and committees, whose membership consists of all WTO members. Topmost is the
ministerial conference which has to meet at least once every two years. The Ministerial
Conference can take decisions on all matters under any of the multilateral trade agreements.

Second level: General Council in three guises

Day-to-day work in between the ministerial conferences is handled by three bodies:

The General Council

 The Dispute Settlement Body

The Trade Policy Review Body

All three are in fact the same — the Agreement Establishing the WTO states they are all the
General Council, although they meet under different terms of reference. Again, all three consist
of all WTO members. They report to the Ministerial Conference.

The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It meets as
the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures for
settling disputes between members and to analyse members’ trade policies.

Third level: councils for each broad area of trade, and more

Three more councils, each handling a different broad area of trade, report to the General Council:

The Council for Trade in Goods (Goods Council)

The Council for Trade in Services (Services Council)

The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)

As their names indicate, the three are responsible for the workings of the WTO agreements
dealing with their respective areas of trade. Again they consist of all WTO members. The three
also have subsidiary bodies.

Six other bodies report to the General Council. The scope of their coverage is smaller, so they
are “committees”. But they still consist of all WTO members. They cover issues such as trade
and development, the environment, regional trading arrangements, and administrative issues. The
Singapore Ministerial Conference in December 1996 decided to create new working groups to
look at investment and competition policy, transparency in government procurement, and trade
facilitation.

Two more subsidiary bodies dealing with the plurilateral agreements (which are not signed by all
WTO members) keep the General Council informed of their activities regularly.

Fourth level: down to the nitty-gritty

Each of the higher level councils has subsidiary bodies. The Goods Council has 11 committees
dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping
measures and so on). Again, these consist of all member countries. Also reporting to the Goods
Council is the Textiles Monitoring Body, which consists of a chairman and 10 members acting in
their personal capacities, and groups dealing with notifications (governments informing the
WTO about current and new policies or measures) and state trading enterprises.
The Services Council’s subsidiary bodies deal with financial services, domestic regulations,
GATS rules and specific commitments.

At the General Council level, the Dispute Settlement Body also has two subsidiaries: the
dispute settlement “panels” of experts appointed to adjudicate on unresolved disputes, and the
Appellate Body that deals with appeals.

‘HODs’ and other bods: the need for informality

Important breakthroughs are rarely made in formal meetings of these bodies, least of all in the
higher level councils. Since decisions are made by consensus, without voting, informal
consultations within the WTO play a vital role in bringing a vastly diverse membership round to
an agreement.

One step away from the formal meetings are informal meetings that still include the full
membership, such as those of the Heads of Delegations (HOD). More difficult issues have to be
thrashed out in smaller groups. A common recent practice is for the chairperson of a negotiating
group to attempt to forge a compromise by holding consultations with delegations individually,
in twos or threes, or in groups of 20-30 of the most interested delegations.

These smaller meetings have to be handled sensitively. The key is to ensure that everyone is kept
informed about what is going on (the process must be “transparent”) even if they are not in a
particular consultation or meeting, and that they have an opportunity to participate or provide
input (it must be “inclusive”).

One term has become controversial, but more among some outside observers than among
delegations. The “Green Room” is a phrase taken from the informal name of the director-
general’s conference room. It is used to refer to meetings of 20–40 delegations, usually at the
level of heads of delegations. These meetings can take place elsewhere, such as at Ministerial
Conferences, and can be called by the minister chairing the conference as well as the director-
general. Similar smaller group consultations can be organized by the chairs of committees
negotiating individual subjects, although the term Green Room is not usually used for these.

In the past delegations have sometimes felt that Green Room meetings could lead to
compromises being struck behind their backs. So, extra efforts are made to ensure that the
process is handled correctly, with regular reports back to the full membership.

The way countries now negotiate has helped somewhat. In order to increase their bargaining
power, countries have formed coalitions. In some subjects such as agriculture virtually all
countries are members of at least one coalition — and in many cases, several coalitions. This
means that all countries can be represented in the process if the coordinators and other key
players are present. The coordinators also take responsibility for both “transparency” and
“inclusiveness” by keeping their coalitions informed and by taking the positions negotiated
within their alliances.
In the end, decisions have to be taken by all members and by consensus. The membership as a
whole would resist attempts to impose the will of a small group. No one has been able to find an
alternative way of achieving consensus on difficult issues, because it is virtually impossible for
members to change their positions voluntarily in meetings of the full membership.

Market access negotiations also involve small groups, but for a completely different reason. The
final outcome is a multilateral package of individual countries’ commitments, but those
commitments are the result of numerous bilateral, informal bargaining sessions, which depend on
individual countries’ interests. (Examples include the traditional tariff negotiations, and market
access talks in services.)

So, informal consultations in various forms play a vital role in allowing consensus to be reached,
but they do not appear in organization charts, precisely because they are informal.

They are not separate from the formal meetings, however. They are necessary for making formal
decisions in the councils and committees. Nor are the formal meetings unimportant. They are the
forums for exchanging views, putting countries’ positions on the record, and ultimately for
confirming decisions. The art of achieving agreement among all WTO members is to strike an
appropriate balance, so that a breakthrough achieved among only a few countries can be
acceptable to the rest of the membership.

Structure

In a nutshell

The basic structure of the WTO agreements: how the six main areas fit together — the umbrella
WTO Agreement, goods, services, intellectual property, disputes and trade policy reviews.

Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPS

Additional details Other goods Services annexes

agreements and
annexes
Market access Countries’ schedules Countries’ schedules
commitments of commitments of commitments(and
MFN exemptions)

Dispute settlement DISPUTE SETTLEMENT

Transparency TRADE POLICY REVIEWS

Role
The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably.
It does this by:

 Administering trade agreements

 Acting as a forum for trade negotiations

 Settling trade disputes

 Reviewing national trade policies

 Assisting developing countries in trade policy issues, through technical assistance and
training programmes

 Cooperating with other international organizations

While the WTO is driven by its member states, it could not function without its Secretariat to
coordinate the activities. The Secretariat employs over 600 staff and its experts — lawyers,
economists, statisticians and communications experts — assist WTO members on a daily basis to
ensure, among other things, that negotiations progress smoothly, and that the rules of
international trade are correctly applied and enforced.

Agreements

The WTO’s rules — the agreements — are the result of negotiations between the members. The
current set were the outcome of the 1986–94 Uruguay Round negotiations which included a
major revision of the original General Agreement on
Tariffs and Trade (GATT).

GATT is now the WTO’s principal rule-book for trade in

goods. The Uruguay Round also created new rules for
dealing with trade in services, relevant aspects of
intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some
30,000 pages consisting of about 30 agreements and separate commitments (called schedules)
made by individual members in specific areas such as lower customs duty rates and services
market-opening.

Through these agreements, WTO members operate a non-discriminatory trading system that
spells out their rights and their obligations. Each country receives guarantees that its exports will
be treated fairly and consistently in other countries’ markets. Each promises to do the same for
imports into its own market. The system also gives developing countries some flexibility in
implementing their commitments.

Goods

It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower
customs duty rates and other trade barriers; the text of the General Agreement spelt out important
rules, particularly non-discrimination.

Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods. It
has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues
such as state trading, product standards, subsidies and actions taken against dumping.

Services
Banks, insurance firms, telecommunications companies, tour operators,
hotel chains and transport companies looking to do business abroad can
now enjoy the same principles of freer and fairer trade that originally
only applied to trade in goods.
These principles appear in the new General Agreement on Trade in
Services (GATS). WTO members have also made individual
commitments under GATS stating which of their services sectors they
are willing to open to foreign competition, and how open those markets
are.

Intellectual property
The WTO’s intellectual property agreement amounts to
rules for trade and investment in ideas and creativity. The
rules state how copyrights, patents, trademarks,
geographical names used to identify products, industrial
designs, integrated circuit layout-designs and undisclosed
information such as trade secrets — “intellectual property”
— should be protected when trade is involved.
Dispute settlement
The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding
is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements are being infringed.
Judgements by specially-appointed independent experts are based on interpretations of the
agreements and individual countries’ commitments.
The system encourages countries to settle their differences
through consultation. Failing that, they can follow a
carefully mapped out, stage-by-stage procedure that
includes the possibility of a ruling by a panel of experts,
and the chance to appeal the ruling on legal grounds.
Confidence in the system is borne out by the number of
cases brought to the WTO — around 300 cases in eight
years compared to the 300 disputes dealt with during the
entire life of GATT (1947–94).
Policy review

The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a greater
understanding of the policies that countries are adopting, and to assess their impact. Many
members also see the reviews as constructive feedback on their policies.

All WTO members must undergo periodic scrutiny, each review containing reports by the
country concerned and the WTO Secretariat.

Special policies
The WTO’s main functions are to do with trade negotiations and the enforcement of negotiated
multilateral trade rules (including dispute settlement). Special focus is given to four particular
policies supporting these functions:

> Assisting developing and transition economies

> Specialized help for export promotion
> Cooperation in global economic policy-making
> Routine notification when members introduce new trade measures or alter old ones.
Assisting developing and transition economies

Developing countries make up about three quarters of the total WTO membership. Together with
countries currently in the process of “transition” to market-based economies, they play an
increasingly important role in the WTO.
Therefore, much attention is paid to the special needs and problems of developing and transition
economies. The WTO Secretariat’s Training and Technical Cooperation Institute organizes a
number of programmes to explain how the system works and to help train government officials
and negotiators. Some of the events are in Geneva, others are held in the countries concerned. A
number of the programmes are organized jointly with other international organizations. Some
take the form of training courses. In other cases individual assistance might be offered.

The subjects can be anything from help in dealing with negotiations to join the WTO and
implementing WTO commitments to guidance in participating effectively in multilateral
negotiations. Developing countries, especially the least-developed among them, are helped with
trade and tariff data relating to their own export interests and to their participation in WTO
bodies.

Specialized help for exporting: the International Trade Centre

The International Trade Centre was established by GATT in 1964 at the request of the
developing countries to help them promote their exports. It is jointly operated by the WTO and
the United Nations, the latter acting through UNCTAD (the UN Conference on Trade and
Development).

The centre responds to requests from developing countries for assistance in formulating and
implementing export promotion programmes as well as import operations and techniques. It
provides information and advice on export markets and marketing techniques. It assists in
establishing export promotion and marketing services, and in training personnel required for
these services. The centre’s help is freely available to the least-developed countries.

The WTO in global economic policy-making

An important aspect of the WTO’s mandate is to cooperate with the International Monetary
Fund, the World Bank and other multilateral institutions to achieve greater coherence in global
economic policy-making. A separate Ministerial Declaration was adopted at the Marrakesh
Ministerial Meeting in April 1994 to underscore this objective.

The declaration envisages an increased contribution by the WTO to achieving greater coherence
in global economic policy-making. It recognizes that different aspects of economic policy are
linked, and it calls on the WTO to develop its cooperation with the international organizations
responsible for monetary and financial matters — the World Bank and the International
Monetary Fund.

The declaration also recognizes the contribution that trade liberalization makes to the growth and
development of national economies. It says this is an increasingly important component in the
success of the economic adjustment programmes which many WTO members are undertaking,
even though it may often involve significant social costs during the transition.
Transparency (1): keeping the WTO informed

Often the only way to monitor whether commitments are being implemented fully is by requiring
countries to notify the WTO promptly when they take relevant actions. Many WTO agreements
say member governments have to notify the WTO Secretariat of new or modified trade
measures. For example, details of any new anti-dumping or countervailing legislation, new
technical standards affecting trade, changes to regulations affecting trade in services, and laws or
regulations concerning the intellectual property agreement — they all have to be notified to the
appropriate body of the WTO. Special groups are also established to examine new free-trade
arrangements and the trade policies of countries joining as new members.

Transparency (2): keeping the public informed

The main public access to the WTO is the website, www.wto.org. News of the latest
developments are published daily. Background information and explanations of a wide range of
issues — including “Understanding the WTO” — are also available. And those wanting to
follow the nitty-gritty of WTO work can consult or download an ever-increasing number of
official documents, now over 150,000, in Documents Online.

On 14 May 2002, the General Council decided to make more documents available to the public
as soon as they are circulated. It also decided that the minority of documents that are restricted
should be made public more quickly — after about two months, instead of the previous six. This
was the second major decision on transparency. On 18 July 1996, the General Council had
agreed to make more information about WTO activities available publicly and decided that
public information, including derestricted WTO documents, would be accessible on-line.

The objective is to make more information available to the public. An important channel is
through the media, with regular briefings on all major meetings for journalists in Geneva — and
increasingly by email and other means for journalists around the world.

Meanwhile, over the years, the WTO Secretariat has enhanced its dialogue with civil society —
non-governmental organizations (NGOs) interested in the WTO, parliamentarians, students,
academics, and other groups.

In the run-up to the Doha Ministerial Conference in 2001, WTO members proposed and agreed
on several new activities involving NGOs. In 2002, the WTO Secretariat increased the number of
briefings for NGOs on all major WTO meetings and began listing the briefing schedules on its
website. NGOs are also regularly invited to the WTO to present their recent policy research and
analysis directly to member governments.

A monthly list of NGO position papers received by the Secretariat is compiled and circulated for
the information of member governments. A monthly electronic news bulletin is also available to
NGOs, enabling access to publicly available WTO information.
General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement
regulating international trade. According to its preamble, its purpose was the "substantial
reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal
and mutually advantageous basis." It was negotiated during the UN Conference on Trade and
Employment and was the outcome of the failure of negotiating governments to create the
International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it
was replaced by the World Trade Organization in 1995.
The original GATT text (GATT 1948) is still in effect under the WTO framework, subject to the
modifications of GATT 1994.

GATT held a total of 8 rounds,

.
GATT and the World Trade Organization
In 1993, the GATT was updated (GATT 1994) to include new obligations upon its signatories.
One of the most significant changes was the creation of the World Trade Organization (WTO).
The 75 existing GATT members and the European Communities became the founding members
of the WTO on 1 January 1995. The other 52 GATT members rejoined the WTO in the
following two years (the last being Congo in 1997). Since the founding of the WTO, 21 new
non-GATT members have joined and 29 are currently negotiating membership. There are a total
of 157 member countries in the WTO, with Russia and Vanuatu being new members as of 2012.
Of the original GATT members, Syria and the SFR Yugoslavia have not rejoined the WTO.
Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations
later split in two), is not recognized as a direct SFRY successor state; therefore, its application is
considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to
establish a working party to examine the request of Syria for WTO membership. The contracting
parties who founded the WTO ended official agreement of the "GATT
1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage of the
negotiations and are expected to become the newest members of the WTO in 2012 or in near
future.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The
WTO expanded its scope from traded goods to include trade within the service sector and
intellectual property rights. Although it was designed to serve multilateral agreements, during
several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral agreements
created selective trading and caused fragmentation among members. WTO arrangements are
generally a multilateral agreement settlement mechanism of GATT.

General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) is a treaty of the World Trade
Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round
negotiations. The treaty was created to extend the multilateral trading system to service sector, in
the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for
merchandise trade.
All members of the WTO are signatories to the GATS. The basic WTO principle of most
favoured nation (MFN) applies to GATS as well. However, upon accession, Members may
introduce temporary exemptions to this rule.
History
Before the WTO's Uruguay Round negotiations began in 1986, public services such as
healthcare, postal services, education, etc. were not included in international trade agreements.
Most such services have traditionally been classed as domestic activities, difficult to trade across
borders, not withstanding the fact that for example educational services have been "exported" for
as long as universities have been open to international students. Nevertheless, foreign
participation has existed in many countries prior to the GATS.
Nonetheless, most service sectors—in particular, international finance and maritime transport—
has been largely open for centuries, as necessary components of merchandise trade. Other large
sectors have undergone fundamental technical and regulatory changes in recent decades, opening
them to private commercial participation and reducing barriers to entry. The development of
information technologies and the internet have expanded the range of internationally tradeable
service products to include a range of commercial activities such as medicine, distance learning,
engineering, architecture, advertising and freight forwarding.
While the overall goal of the GATS is to remove barriers to trade, members are free to choose
which sectors are to be progressively "liberalised", i.e. marketised and privatised, under which
mode of supply a particular sector would be covered under, and to what extent to which
liberalisation will occur over a given period of time. Members' commitments are governed by a
"ratchet effect", meaning that commitments are one-way and should not be wound back once
entered into. This reason for this is the creation of a stable trading climate. Article XXI allows
Members to withdraw commitments and so far two members have used this option (USA and
EU). In November 2008, Bolivia notified that it will withdraw its health services commitments.
Some activist groups consider that the GATS risks undermining the ability and authority of
governments to regulate commercial activities within their boundaries, with the effect of ceding
power to business interests over the interests of citizens. In 2003 'GATS watch' network
published a critical statement which was supported in 2003 by over 500 organisations in 60
countries.
Purpose of the GATS
The creation of the GATS was one of the landmark achievements of the Uruguay Round, whose
results entered into force in January 1995. The GATS was inspired by essentially the same
objectives as its counterpart in merchandise trade, the General Agreement on Tariffs and Trade
(GATT): creating a credible and reliable system of international trade rules; ensuring fair and
equitable treatment of all participants (principle of non-discrimination); stimulating economic
activity through guaranteed policy bindings; and promoting trade and development through
progressive liberalization.

While services currently account for over 60 percent of global production and employment, they
represent no more than 20 per cent of total trade (BOP basis). This — seemingly modest — share
should not be underestimated, however. Many services, which have long been considered
genuine domestic activities, have increasingly become internationally mobile. This trend is likely
to continue, owing to the introduction of new transmission technologies (e.g. electronic banking,
tele-health or tele-education services), the opening up in many countries of long-entrenched
monopolies (e.g. voice telephony and postal services), and regulatory reforms in hitherto tightly
regulated sectors such as transport. Combined with changing consumer preferences, such
technical and regulatory innovations have enhanced the “tradability” of services and, thus,
created a need for multilateral disciplines.

All WTO Members, some 140 economies at present, are at the same time Members of the GATS
and, to varying degrees, have assumed commitments in individual service sectors.

Services

The GATS applies in principle to all service sectors, with two exceptions.

Article I (3) of the GATS excludes “services supplied in the exercise of governmental authority”.
These are services that are supplied neither on a commercial basis nor in competition with other
suppliers. Cases in point are social security schemes and any other public service, such as health
or education that is provided at non-market conditions.

Further, the Annex on Air Transport Services exempts from coverage measures affecting air
traffic rights and services directly related to the exercise of such rights.

The GATS distinguishes between four modes of supplying services: cross-border trade,
consumption abroad, commercial presence, and presence of natural persons.

Cross-border supply is defined to cover services flows from the territory of one Member into
the territory of another Member (e.g. banking or architectural services transmitted via
telecommunications or mail);

Consumption abroad refers to situations where a service consumer (e.g. tourist or patient)
moves into another Member's territory to obtain a service;

Commercial presence implies that a service supplier of one Member establishes a territorial
presence, including through ownership or lease of premises, in another Member's territory to
provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains); and

Presence of natural persons consists of persons of one Member entering the territory of another
Member to supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of
Natural Persons specifies, however, that Members remain free to operate measures regarding
citizenship, residence or access to the employment market on a permanent basis.

Basic obligations under the GATS

Obligations contained in the GATS may be categorized into two broad groups: General
obligations, which apply directly and automatically to all Members and services sectors, as well
as commitments concerning market access and national treatment in specifically designated
sectors. Such commitments are laid down in individual country schedules whose scope may vary
widely between Members. The relevant terms and concepts are similar, but not necessarily
identical to those used in the GATT; for example, national treatment is a general obligation in
goods trade and not negotiable as under the GATS.

(a) General obligations

MFN Treatment: Under Article II of the GATS, Members are held to extend immediately and
unconditionally to services or services suppliers of all other Members “treatment no less
favourable than that accorded to like services and services suppliers of any other country”. This
amounts to a prohibition, in principle, of preferential arrangements among groups of Members in
individual sectors or of reciprocity provisions which confine access benefits to trading partners
granting similar treatment.

Derogations are possible in the form of so-called Article II-Exemptions. Members were allowed
to seek such exemptions before the Agreement entered into force. New exemptions can only be
granted to new Members at the time of accession or, in the case of current Members, by way of a
waiver under Article IX:3 of the WTO Agreement. All exemptions are subject to review; they
should in principle not last longer than 10 years. Further, the GATS allows groups of Members
to enter into economic integration agreements or to mutually recognize regulatory standards,
certificates and the like if certain conditions are met.

Transparency: GATS Members are required, inter alia, to publish all measures of general
application and establish national enquiry points mandated to respond to other Member's
information requests.

Other generally applicable obligations include the establishment of administrative review and
appeals procedures and disciplines on the operation of monopolies and exclusive suppliers.

(b) Specific Commitments

Market Access: Market access is a negotiated commitment in specified sectors. It may be made
subject to various types of limitations that are enumerated in Article XVI(2). For example,
limitations may be imposed on the number of services suppliers, service operations or employees
in the sector; the value of transactions; the legal form of the service supplier; or the participation
of foreign capital.

National Treatment: A commitment to national treatment implies that the Member concerned
does not operate discriminatory measures benefiting domestic services or service suppliers. The
key requirement is not to modify, in law or in fact, the conditions of competition in favour of the
Member's own service industry. Again, the extension of national treatment in any particular
sector may be made subject to conditions and qualifications.

Members are free to tailor the sector coverage and substantive content of such commitments as
they see fit. The commitments thus tend to reflect national policy objectives and constraints,
overall and in individual sectors. While some Members have scheduled less than a handful of
services, others have assumed market access and national treatment disciplines in over 120 out of
a total of 160-odd services.

The existence of specific commitments triggers further obligations concerning, inter alia, the
notification of new measures that have a significant impact on trade and the avoidance of
restrictions on international payments and transfers.

“Built-in agenda” of the GATS

The GATS sets out a work programme which is normally referred to as the “built-in” agenda.
The programme reflects both the fact that not all services-related negotiations could be
concluded within the time frame of the Uruguay Round, and that Members have already
committed themselves, in Article XIX, to successive rounds aimed at achieving a progressively
higher level of liberalization (see below). In addition, various GATS Articles provide for issue-
specific negotiations intended to define rules and disciplines for domestic regulation (Article VI),
emergency safeguards (Article X), government procurement (Article XIII), and subsidies
(Article XV). These negotiations are currently under way.

At the sectoral level, negotiations on basic telecommunications were successfully concluded in

February 1997 and negotiations in the area of financial services in mid-December 1997. In these
negotiations, Members achieved significantly improved commitments with a broader level of
participation.

Dispute Settlement Body (DSB)

Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique
contribution to the stability of the global economy. Without a means of settling disputes, the
rules-based system would be less effective because the rules could not be enforced. The WTO’s
procedure underscores the rule of law, and it makes the trading system more secure and
predictable. The system is based on clearly-defined rules, with timetables for completing a case.
First rulings are made by a panel and endorsed (or rejected) by the WTO’s full membership.
Appeals based on points of law are possible.

However, the point is not to pass judgement. The priority is to settle disputes, through
consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached
the full panel process. Most of the rest have either been notified as settled “out of court” or
remain in a prolonged consultation phase — some since 1995.
Dispute Settlement Summary

The power to settle international disputes with binding authority distinguishes the World Trade
Organization from most other intergovernmental institutions. The Understanding on Rules and
Procedures Governing the Settlement of Disputes gives the WTO unprecedented power to
resolve trade-related conflicts between nations and assign penalties and compensation to the
parties involved.

Dispute settlement is administered by a Dispute Settlement Body (DSB) that consists of the
WTO's General Council. The DSB has the authority to "establish panels, adopt panel and
Appellate Body reports, maintain surveillance of implementation of rulings and
recommendations, and authorize suspension of concessions and other obligations." The Dispute
Settlement system aims to resolve disputes by clarifying the rules of the multilateral trading
system; it cannot legislate or promulgate new rules.

When a Member believes that another party has taken an action that impairs “benefits accruing
to it directly or indirectly” under the Uruguay Round Agreements, it may request consultations to
resolve the conflict through informal negotiations. If consultations fail to yield mutually
acceptable outcomes after 60 days, Members may request the establishment of a panel to resolve
the dispute. Panels typically consist of three individuals with expertise in international trade law
and policy; these panelists hear the evidence and present a report to the DSB recommending a
course of action within six months. The panel can solicit information and technical advice from
any relevant source, though it is not required to do so. Only submissions from Members are
guaranteed to be heard, although in rare cases, panels have consulted submissions from
interested non-governmental organizations. Third-party member nations may also involve
themselves in the dispute settlement process. All deliberations and communications are
confidential, and only the final panel reports become part of the public record.

Once panel reports have been prepared, they are presented to the Dispute Settlement Body,
which either adopts the report or decides by consensus not to accept it. Alternatively, if one of
the parties involved decides to appeal the decision, the report will not be considered for adoption
until the completion of the appeal.

In the case of an appeal, a three-person Appellate Body chosen from a standing pool of seven
persons will assess the soundness of the panel report’s legal reasoning and procedure. An
Appellate Body report is adopted unconditionally unless the DSB votes by consensus not to
accept its findings within 30 days of circulation to the membership.

The primary goal of dispute settlement is to ensure national compliance with multilateral trade
rules. Accordingly, the Dispute Settlement Body encourages Members to their make best
possible efforts to bring legislation into compliance with the panel ruling within a “reasonable
period of time” established by the parties to the dispute. If a Member does not comply with
rulings, the DSB can authorize the complainant to suspend commitments and concessions to the
violating Member. In general, complainants are encouraged to suspend concessions with respect
to the same sector as the subject of the dispute; however, if complainants find this ineffective or
impracticable, they may suspend concessions in other sectors of the same Agreement or even
under separate Agreements. Ecuador, for example, suspended its TRIPs commitments to the
European Union in retaliation against the EU’s non-compliance with panel rulings in the goods-
based Banana dispute.

Some groups, such as the Center for International Environmental Law, have criticized the
dispute settlement process for its lack of transparency and democratic accountability, as well as
for a perceived insensitivity to environmental and social standards. The increasing use of the
system by developing countries, however, is one indicator of its institutional success. Ultimately,
the dispute settlement system is a significant milestone in the development of a rules-based
multilateral trading system.

WTO Bodies involved in the dispute settlement process

The operation of the (WTO) dispute settlement process involves the parties and third parties to a
case, the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts
and several specialized institutions. This chapter gives an introduction to the WTO bodies
involved in the dispute settlement system. The involvement of the parties and third parties, the
primary participants in a dispute settlement proceeding, has already been outlined here. The
precise tasks and roles of each of the actors involved in the dispute settlement process will
become clear in the later chapter on the stages of the dispute settlement process.

Among the WTO bodies involved in dispute settlement, one can distinguish between a political
institution, the DSB, and independent, quasi-judicial institutions such as panels, the Appellate
Body and arbitrators.

The Dispute Settlement Body (DSB)

Functions and composition

The General Council discharges its responsibilities under the Dispute Settlement Understanding
(DSU) through the DSB (Article IV: 3 of the WTO Agreement). Like the General Council, the
DSB is composed of representatives of all WTO Members. These are governmental
representatives, in most cases diplomatic delegates who reside in Geneva (where the WTO is
based) and who belong to either the trade or the foreign affairs ministry of the WTO Member
they represent. As civil servants, they receive instructions from their capitals on the positions to
take and the statements to make in the DSB. As such, the DSB is a political body.

The DSB is responsible for administering the DSU, i.e. for overseeing the entire dispute
settlement process.
The DSB has the authority to establish panels, adopt panel and Appellate Body reports, maintain
surveillance of implementation of rulings and recommendations and authorize the suspension of
obligations under the covered agreements (Article 2.1 of the DSU). In less technical terms, the
DSB is responsible for the referral of a dispute to adjudication (establishing a panel); for making
the adjudicative decision binding (adopting the reports); generally, for supervising the
implementation of the ruling; and for authorizing “retaliation” when a Member does not comply
with the ruling.

The DSB meets as often as is necessary to adhere to the time-frames provided for in the DSU
(Article 2.3 of the DSU). In practice, the DSB usually has one regular meeting per month. When
a Member so requests, the Director-General convenes additional special meetings. The staff of
the WTO Secretariat provides administrative support for the DSB (Article 27.1 of the DSU).

Decision-making in the DSB

The general rule is for the DSB to take decisions by consensus (Article 2.4 of the DSU).
Footnote 1 to Article 2.4 of the DSU defines consensus as being achieved if no WTO Member,
present at the meeting when the decision is taken, formally objects to the proposed decision. This
means that the chairperson does not actively ask every delegation whether it supports the
proposed decision, nor is there a vote. On the contrary, the chairperson merely asks, for example,
whether the decision can be adopted and if no one raises their voice in opposition, the
chairperson will announce that the decision has been taken or adopted. In other words, a
delegation wishing to block a decision is obliged to be present and alert at the meeting, and when
the moment comes, it must raise its flag and voice opposition. Any Member that does so, even
alone, is able to prevent the decision.

However, when the DSB establishes panels, when it adopts panel and Appellate Body reports
and when it authorizes retaliation, the DSB must approve the decision unless there is a consensus
against it (Articles 6.1, 16.4, 17.14 and 22.6 of the DSU). This special decision-making
procedure is commonly referred to as “negative” or “reverse” consensus. At the three mentioned
important stages of the dispute settlement process (establishment, adoption and retaliation), the
DSB must automatically decide to take the action ahead, unless there is a consensus not to do so.
This means that one sole Member can always prevent this reverse consensus, i.e. it can avoid the
blocking of the decision (being taken). To do so that Member merely needs to insist on the
decision to be approved.

No Member (including the affected or interested parties) is excluded from participation in the
decision-making process. This means that the Member requesting the establishment of a panel,
the adoption of the report or the authorization of the suspension of concessions can ensure that its
request is approved by merely placing it on the agenda of the DSB. In the case of the adoption of
panel and Appellate Body reports, there is at least one party which, having prevailed in the
dispute, has a strong interest in the adoption of the report(s). In other words, any Member
intending to block the decision to adopt the report(s) has to persuade all other WTO Members
(including the adversarial party in the case) to join its opposition or at least to stay passive.
Therefore, a negative consensus is largely a theoretical possibility and, to date has never
occurred. For this reason, one speaks of the quasi-automaticity of these decisions in the DSB.
This contrasts sharply with the situation that prevailed under GATT 1947 when panels could be
established, their reports adopted and retaliation authorized only on the basis of a positive
consensus. Unlike under GATT 1947, the DSU thus provides no opportunity for blockage by
individual Members in decision-making on these important matters. Negative consensus applies
nowhere else in the WTO decision-making framework other than in the dispute settlement
system.

When the DSB administers the dispute settlement provisions of a plurilateral trade agreement (of
Annex 4 of the WTO Agreement), only Members that are parties to that agreement may
participate in decisions or actions taken by the DSB with respect to disputes under these
agreements (Article 2.1 of the DSU).

With respect to the more operational aspects of the DSB’s work, the Rules of Procedure for
Meetings of the DSB provide that the Rules of Procedure for Sessions of the Ministerial
Conference and Meetings of the General Council apply, subject to a few special rules on the
chairperson and except as otherwise provided in the DSU. An important organizational aspect of
these general rules is the requirement for Members to file items to be included on the agenda of
an upcoming meeting no later than on the working day before the day on which the notice of the
meeting is to be issued, which is at least ten calendar days before the meeting (Rule 3 of the
Rules of Procedure). In practice, this means that items for the agenda must be made on the 11 th
day before the DSB meeting and on the 12th or 13th day if the 11th day were to fall on a Saturday
or Sunday.

4.3 Types of dispute in the other multilateral agreements on trade in goods

Most of the multilateral agreements on trade in goods other than GATT 1994 include an express
reference to Articles XXII and XXIII of GATT or paraphrase the criteria contained therein.
Minor adaptations are of course necessary because, for instance, the failure to carry out an
obligation under the agreement then refers to the respective agreement, not to GATT 1994.
Similarly, the benefit must be one accruing under that agreement. Accordingly, the following
section will only highlight the instances in which there are departures from what was explained
in the context of GATT 1994.

The SCM Agreement also refers to Articles XXII and XXIII of GATT 1994. However, in Article
4, it specifically provides otherwise in relation to the prohibited subsidies as defined in Article 3
(export subsidies and import substitution subsidies) by not requiring any claim of nullification or
impairment of a benefit. As a consequence, Article 3.8 of the DSU is not applicable.
4.4 Types of dispute in the GATS

The dispute settlement provisions of the GATS are contained in Articles XXII and XXIII of that
Agreement. The GATS only provides for two types of complaints, the violation complaint and
the non-violation complaint. There is no situation complaint and the GATT 1994 clause referring
to the scenario that “the attainment of any objective of the Agreement is being impeded” also
does not exist.

As regards the violation complaint, Article XXIII:1 of the GATS provides that a WTO Member
that considers that another Member has failed to carry out its obligations under the GATS may
have recourse to the DSU. The GATS thus abandoned the notion of nullification or impairment
as a requirement in addition to the failure to carry out obligations. Consequently, Article 3.8 of
the DSU is of no relevance to complaints brought under the GATS.

The non-violation complaint of GATS resembles that of GATT 1994 because a Member can
allege nullification or impairment of a benefit it could reasonably expect to accrue to it under a
specific commitment of another Member in the absence of a conflict with the provisions of
GATS.

4.5 Types of dispute in the TRIPS Agreement

In Article 64.1, the TRIPS Agreement contains a reference to Articles XXII and XXIII of
GATT 1994. There are three different types of complaints that could be brought under the TRIPS
Agreement. However, Article 64.2 of the TRIPS Agreement excluded non-violation and situation
complaints for the first five years from the entry into force of the WTO Agreement. Article 64.3
mandated the Council for TRIPS to examine the scope and modalities for non-violation and
situation complaints during the five-year moratorium and to submit recommendations to the
Ministerial Conference for approval by consensus.

The five-year deadline of Article 64.2 expired on 31 December 1999, but the TRIPS Council has
not so far submitted recommendations to the Ministerial Conference, nor has the Ministerial
Conference approved any recommendations in that regard. This has resulted in a controversy
among Members over whether, in the absence of an approved recommendation on scope and
modalities, complaints of the type set out in Article XXIII:1(b) and 1(c) of GATT 1994 are
possible since the expiry of the Article 64.2 moratorium. Despite this controversy, no non-
violation and situation complaints were brought by Members under the TRIPS Agreement.

At their fourth ministerial session in 2001, ministers of the WTO Members renewed the
moratorium contained in Article 64.2 and directed the TRIPS Council to continue its
examination of the scope and modalities for non-violation and situation complaints and to make
recommendations to the fifth session of the Ministerial Conference that took place in September
2003. However, the fifth session was concluded without any action on this matter.
 Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Intellectual property rights are the rights given to persons over the creations of their minds. They
usually give the creator an exclusive right over the use of his/her creation for a certain period of
time.

Intellectual property rights are customarily divided into two main areas:

(i) Copyright and rights related to copyright.

The rights of authors of literary and artistic works (such as books and other writings, musical
compositions, paintings, sculpture, computer programs and films) are protected by copyright, for
a minimum period of 50 years after the death of the author.

Also protected through copyright and related (sometimes referred to as “neighbouring”) rights
are the rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound
recordings) and broadcasting organizations. The main social purpose of protection of copyright
and related rights is to encourage and reward creative work.

(ii) Industrial property.

Industrial property can usefully be divided into two main areas:

 One area can be characterized as the protection of distinctive signs, in particular

trademarks (which distinguish the goods or services of one undertaking from those of
other undertakings) and geographical indications (which identify a good as originating in
a place where a given characteristic of the good is essentially attributable to its
geographical origin).

The protection of such distinctive signs aims to stimulate and ensure fair competition and
to protect consumers, by enabling them to make informed choices between various goods
and services. The protection may last indefinitely, provided the sign in question continues
to be distinctive.

 Other types of industrial property are protected primarily to stimulate innovation, design
and the creation of technology. In this category fall inventions (protected by patents),
industrial designs and trade secrets.
The social purpose is to provide protection for the results of investment in the
development of new technology, thus giving the incentive and means to finance research
and development activities.
A functioning intellectual property regime should also facilitate the transfer of
technology in the form of foreign direct investment, joint ventures and licensing.

The protection is usually given for a finite term (typically 20 years in the case of patents).
While the basic social objectives of intellectual property protection are as outlined above, it
should also be noted that the exclusive rights given are generally subject to a number of
limitations and exceptions, aimed at fine-tuning the balance that has to be found between the
legitimate interests of right holders and of users.

Types of intellectual property

Copyright and related rights

Trademarks, including service marks
Geographical indications
Industrial designs
Patents
Layout-designs (topographies) of integrated circuits
Undisclosed information, including trade secrets

Intellectual property: protection and enforcement

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),

negotiated in the 1986-94 Uruguay Round, introduced intellectual property rules into the
multilateral trading system for the first time.

Origins: into the rule-based trade system

Ideas and knowledge are an increasingly important part of trade. Most of the value of new
medicines and other high technology products lies in the amount of invention, innovation,
research, design and testing involved. Films, music recordings, books, computer software and
on-line services are bought and sold because of the information and creativity they contain, not
usually because of the plastic, metal or paper used to make them. Many products that used to be
traded as low-technology goods or commodities now contain a higher proportion of invention
and design in their value — for example brand named clothing or new varieties of plants.

Creators can be given the right to prevent others from using their inventions, designs or other
creations — and to use that right to negotiate payment in return for others using them. These are
“intellectual property rights”. They take a number of forms. For example books, paintings and
films come under copyright; inventions can be patented; brand names and product logos can be
registered as trademarks; and so on. Governments and parliaments have given creators these
rights as an incentive to produce ideas that will benefit society as a whole.

The extent of protection and enforcement of these rights varied widely around the world; and as
intellectual property became more important in trade, these differences became a source of
tension in international economic relations. New internationally-agreed trade rules for
intellectual property rights were seen as a way to introduce more order and predictability, and for
disputes to be settled more systematically.
The Uruguay Round achieved that. The WTO’s TRIPS Agreement is an attempt to narrow the
gaps in the way these rights are protected around the world, and to bring them under common
international rules. It establishes minimum levels of protection that each government has to give
to the intellectual property of fellow WTO members. In doing so, it strikes a balance between the
long term benefits and possible short term costs to society. Society benefits in the long term
when intellectual property protection encourages creation and invention, especially when the
period of protection expires and the creations and inventions enter the public domain.
Governments are allowed to reduce any short term costs through various exceptions, for example
to tackle public health problems. And, when there are trade disputes over intellectual property
rights, the WTO’s dispute settlement system is now available.

The agreement covers five broad issues:

how basic principles of the trading system and other international intellectual property
agreements should be applied
how to give adequate protection to intellectual property rights
how countries should enforce those rights adequately in their own territories
how to settle disputes on intellectual property between members of the WTO
special transitional arrangements during the period when the new system is being
introduced.

Basic principles: national treatment, MFN, and balanced protection

As in GATT and GATS, the starting point of the intellectual property agreement is basic
principles. And as in the two other agreements, non-discrimination features prominently:
national treatment (treating one’s own nationals and foreigners equally), and most-favoured-
nation treatment (equal treatment for nationals of all trading partners in the WTO). National
treatment is also a key principle in other intellectual property agreements outside the WTO.

The TRIPS Agreement has an additional important principle: intellectual property protection
should contribute to technical innovation and the transfer of technology. Both producers and
users should benefit, and economic and social welfare should be enhanced, the agreement says.

How to protect intellectual property: common ground-rules

The second part of the TRIPS agreement looks at different kinds of intellectual property rights
and how to protect them. The purpose is to ensure that adequate standards of protection exist in
all member countries. Here the starting point is the obligations of the main international
agreements of the World Intellectual Property Organization (WIPO) that already existed before
the WTO was created:
 The Paris Convention for the Protection of Industrial Property (patents, industrial designs,
etc)
The Berne Convention for the Protection of Literary and Artistic Works (copyright).

Some areas are not covered by these conventions. In some cases, the standards of protection
prescribed were thought inadequate. So the TRIPS agreement adds a significant number of new
or higher standards.

Copyright
The TRIPS agreement ensures that computer programs will be protected as literary works under
the Berne Convention and outlines how databases should be protected.

It also expands international copyright rules to cover rental rights. Authors of computer programs
and producers of sound recordings must have the right to prohibit the commercial rental of their
works to the public. A similar exclusive right applies to films where commercial rental has led to
widespread copying, affecting copyright-owners’ potential earnings from their films.

The agreement says performers must also have the right to prevent unauthorized recording,
reproduction and broadcast of live performances (bootlegging) for no less than 50 years.
Producers of sound recordings must have the right to prevent the unauthorized reproduction of
recordings for a period of 50 years.

Trademarks
The agreement defines what types of signs must be eligible for protection as trademarks, and
what the minimum rights conferred on their owners must be. It says that service marks must be
protected in the same way as trademarks used for goods. Marks that have become well-known in
a particular country enjoy additional protection.

Geographical indications
A place name is sometimes used to identify a product. This “geographical indication” does not
only say where the product was made. More importantly, it identifies the product’s special
characteristics, which are the result of the product’s origins.

Well-known examples include “Champagne”, “Scotch”, “Tequila”, and “Roquefort” cheese.

Wine and spirits makers are particularly concerned about the use of place-names to identify
products, and the TRIPS Agreement contains special provisions for these products. But the issue
is also important for other types of goods.

Using the place name when the product was made elsewhere or when it does not have the usual
characteristics can mislead consumers, and it can lead to unfair competition. The TRIPS
Agreement says countries have to prevent this misuse of place names.
For wines and spirits, the agreement provides higher levels of protection, i.e. even where there is
no danger of the public being misled.

Some exceptions are allowed, for example if the name is already protected as a trademark or if it
has become a generic term. For example, “cheddar” now refers to a particular type of cheese not
necessarily made in Cheddar, in the UK. But any country wanting to make an exception for these
reasons must be willing to negotiate with the country which wants to protect the geographical
indication in question.

The agreement provides for further negotiations in the WTO to establish a multilateral system of
notification and registration of geographical indications for wines. These are now part of the
Doha Development Agenda and they include spirits. Also debated in the WTO is whether to
negotiate extending this higher level of protection beyond wines and spirits.

Industrial designs
Under the TRIPS Agreement, industrial designs must be protected for at least 10 years. Owners
of protected designs must be able to prevent the manufacture, sale or importation of articles
bearing or embodying a design which is a copy of the protected design.

Patents
The agreement says patent protection must be available for inventions for at least 20 years.
Patent protection must be available for both products and processes, in almost all fields of
technology. Governments can refuse to issue a patent for an invention if its commercial
exploitation is prohibited for reasons of public order or morality. They can also exclude
diagnostic, therapeutic and surgical methods, plants and animals (other than micro-organisms),
and biological processes for the production of plants or animals (other than microbiological
processes).

Plant varieties, however, must be protectable by patents or by a special system (such as the
breeder’s rights provided in the conventions of UPOV — the International Union for the
Protection of New Varieties of Plants).

The agreement describes the minimum rights that a patent owner must enjoy. But it also allows
certain exceptions. A patent owner could abuse his rights, for example by failing to supply the
product on the market. To deal with that possibility, the agreement says governments can issue
“compulsory licences”, allowing a competitor to produce the product or use the process under
licence. But this can only be done under certain conditions aimed at safeguarding the legitimate
interests of the patent-holder.

If a patent is issued for a production process, then the rights must extend to the product directly
obtained from the process. Under certain conditions alleged infringers may be ordered by a court
to prove that they have not used the patented process.
An issue that has arisen recently is how to ensure patent protection for pharmaceutical products
does not prevent people in poor countries from having access to medicines — while at the same
time maintaining the patent system’s role in providing incentives for research and development
into new medicines. Flexibilities such as compulsory licensing are written into the TRIPS
Agreement, but some governments were unsure of how these would be interpreted, and how far
their right to use them would be respected.

A large part of this was settled when WTO ministers issued a special declaration at the Doha
Ministerial Conference in November 2001. They agreed that the TRIPS Agreement does not and
should not prevent members from taking measures to protect public health. They underscored
countries’ ability to use the flexibilities that are built into the TRIPS Agreement. And they
agreed to extend exemptions on pharmaceutical patent protection for least-developed countries
until 2016. On one remaining question, they assigned further work to the TRIPS Council — to
sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals
domestically can import patented drugs made under compulsory licensing. A waiver providing
this flexibility was agreed on 30 August 2003.

Integrated circuits layout designs

The basis for protecting integrated circuit designs (“topographies”) in the TRIPS agreement is
the Washington Treaty on Intellectual Property in Respect of Integrated Circuits, which comes
under the World Intellectual Property Organization. This was adopted in 1989 but has not yet
entered into force. The TRIPS agreement adds a number of provisions: for example, protection
must be available for at least 10 years.

Undisclosed information and trade secrets

Trade secrets and other types of “undisclosed information” which have commercial value must
be protected against breach of confidence and other acts contrary to honest commercial practices.
But reasonable steps must have been taken to keep the information secret. Test data submitted to
governments in order to obtain marketing approval for new pharmaceutical or agricultural
chemicals must also be protected against unfair commercial use.

Curbing anti-competitive licensing contracts

The owner of a copyright, patent or other form of intellectual property right can issue a licence
for someone else to produce or copy the protected trademark, work, invention, design, etc. The
agreement recognizes that the terms of a licensing contract could restrict competition or impede
technology transfer. It says that under certain conditions, governments have the right to take
action to prevent anti-competitive licensing that abuses intellectual property rights. It also says
governments must be prepared to consult each other on controlling anti-competitive licensing.

Enforcement: tough but fair

Having intellectual property laws is not enough. They have to be enforced. This is covered in
Part 3 of TRIPS. The agreement says governments have to ensure that intellectual property rights
can be enforced under their laws, and that the penalties for infringement are tough enough to
deter further violations. The procedures must be fair and equitable, and not unnecessarily
complicated or costly. They should not entail unreasonable time-limits or unwarranted delays.
People involved should be able to ask a court to review an administrative decision or to appeal a
lower court’s ruling.

The agreement describes in some detail how enforcement should be handled, including rules for
obtaining evidence, provisional measures, injunctions, damages and other penalties. It says
courts should have the right, under certain conditions, to order the disposal or destruction of
pirated or counterfeit goods. Wilful trademark counterfeiting or copyright piracy on a
commercial scale should be criminal offences. Governments should make sure that intellectual
property rights owners can receive the assistance of customs authorities to prevent imports of
counterfeit and pirated goods.

Technology transfer
Developing countries in particular, see technology transfer as part of the bargain in which they
have agreed to protect intellectual property rights. The TRIPS Agreement includes a number of
provisions on this. For example, it requires developed countries’ governments to provide
incentives for their companies to transfer technology to least-developed countries.

Agriculture: fairer markets for farmers

The original GATT did apply to agricultural trade, but it contained loopholes. For example, it
allowed countries to use some non-tariff measures such as import quotas, and to subsidize.
Agricultural trade became highly distorted, especially with the use of export subsidies which
would not normally have been allowed for industrial products. The Uruguay Round produced the
first multilateral agreement dedicated to the sector. It was a significant first step towards order,
fair competition and a less distorted sector. It was implemented over a six year period (and is still
being implemented by developing countries under their 10-year period), that began in 1995. The
Uruguay Round agreement included a commitment to continue the reform through new
negotiations. These were launched in 2000, as required by the Agriculture Agreement.

The Agriculture Agreement: new rules and commitments

The objective of the Agriculture Agreement is to reform trade in the sector and to make
policies more market-oriented. This would improve predictability and security for importing and
exporting countries alike.

The new rules and commitments apply to:

 market access — various trade restrictions confronting imports

 domestic support — subsidies and other programmes, including those that raise or
guarantee farm gate prices and farmers’ incomes

 export subsidies and other methods used to make exports artificially competitive.

The agreement does allow governments to support their rural economies, but preferably through
policies that cause less distortion to trade. It also allows some flexibility in the way commitments
are implemented. Developing countries do not have to cut their subsidies or lower their tariffs as
much as developed countries, and they are given extra time to complete their obligations. Least-
developed countries don’t have to do this at all. Special provisions deal with the interests of
countries that rely on imports for their food supplies, and the concerns of least-developed
economies.

“Peace” provisions within the agreement aim to reduce the likelihood of disputes or challenges
on agricultural subsidies over a period of nine years, until the end of 2003.

Market access: ‘tariffs only’

The new rule for market access in agricultural products is “tariffs only”. Before the Uruguay
Round, some agricultural imports were restricted by quotas and other non-tariff measures. These
have been replaced by tariffs that provide more-or-less equivalent levels of protection — if the
previous policy meant domestic prices were 75% higher than world prices, then the new tariff
could be around 75%. (Converting the quotas and other types of measures to tariffs in this way
was called “tariffication”.)

Numerical targets for agriculture

The reductions in agricultural subsidies and protection agreed in the Uruguay Round. Only the
figures for cutting export subsidies appear in the agreement.

Developed Developing
countries countries
6 years: 1995-2000 10 years: 1995-2004

Tariffs
average cut for all agricultural products -36% -24%

minimum cut per product -15% -10%

Domestic support

total AMS cuts for sector (base period: 1986-88) -20% -13%

Exports

value of subsidies -36% -24%

subsidized quantities (base period: 1986-90) -21% -14%

Least developed countries do not have to make commitments to reduce tariffs or subsidies.

The base level for tariff cuts was the bound rate before 1 January 1995; or, for unbound tariffs,
the actual rate charged in September 1986 when the Uruguay Round began.

The other figures were targets used to calculate countries’ legally-binding “schedules” of
commitments.

The tariffication package contained more. It ensured that quantities imported before the
agreement took effect could continue to be imported, and it guaranteed that some new quantities
were charged duty rates that were not prohibitive. This was achieved by a system of “tariff-
quotas” — lower tariff rates for specified quantities, higher (sometimes much higher) rates for
quantities that exceed the quota.

The newly committed tariffs and tariff quotas, covering all agricultural products, took effect in
1995. Uruguay Round participants agreed that developed countries would cut the tariffs (the
higher out-of-quota rates in the case of tariff-quotas) by an average of 36%, in equal steps over
six years. Developing countries would make 24% cuts over 10 years. Several developing
countries also used the option of offering ceiling tariff rates in cases where duties were not
“bound” (i.e. committed under GATT or WTO regulations) before the Uruguay Round. Least-
developed countries do not have to cut their tariffs. (These figures do not actually appear in the
Agriculture Agreement. Participants used them to prepare their schedules — i.e. lists of
commitments. It is the commitments listed in the schedules that are legally binding.)
For products whose non-tariff restrictions have been converted to tariffs, governments are
allowed to take special emergency actions (“special safeguards”) in order to prevent swiftly
falling prices or surges in imports from hurting their farmers. But the agreement specifies when
and how those emergency actions can be introduced (for example, they cannot be used on
imports within a tariff-quota).

Four countries used “special treatment” provisions to restrict imports of particularly sensitive
products (mainly rice) during the implementation period (to 2000 for developed countries, to
2004 for developing nations), but subject to strictly defined conditions, including minimum
access for overseas suppliers. The four were: Japan, Rep. of Korea, and the Philippines for rice;
and Israel for sheepmeat, wholemilk powder and certain cheeses. Japan and Israel have now
given up this right, but Rep. of Korea and the Philippines have extended their special treatment
for rice. A new member, Chinese Taipei, gave special treatment to rice in its first year of
membership, 2002.

Domestic support: some you can, some you can’t

The main complaint about policies which support domestic prices, or subsidize production in
some other way, is that they encourage over-production. This squeezes out imports or leads to
export subsidies and low-priced dumping on world markets. The Agriculture Agreement
distinguishes between support programmes that stimulate production directly, and those that are
considered to have no direct effect.

Domestic policies that do have a direct effect on production and trade have to be cut back. WTO
members calculated how much support of this kind they were providing per year for the
agricultural sector (using calculations known as “total aggregate measurement of support” or
“Total AMS”) in the base years of 1986-88. Developed countries agreed to reduce these figures
by 20% over six years starting in 1995. Developing countries agreed to make 13% cuts over 10
years. Least-developed countries do not need to make any cuts. (This category of domestic
support is sometimes called the “amber box”, a reference to the amber colour of traffic lights,
which means “slow down”.)

Measures with minimal impact on trade can be used freely — they are in a “green box” (“green”
as in traffic lights). They include government services such as research, disease control,
infrastructure and food security. They also include payments made directly to farmers that do not
stimulate production, such as certain forms of direct income support, assistance to help farmers
restructure agriculture, and direct payments under environmental and regional assistance
programmes.

Also permitted, are certain direct payments to farmers where the farmers are required to limit
production (sometimes called “blue box” measures), certain government assistance programmes
to encourage agricultural and rural development in developing countries, and other support on a
small scale (“de minimis”) when compared with the total value of the product or products
supported (5% or less in the case of developed countries and 10% or less for developing
countries).

Export subsidies: limits on spending and quantities

The Agriculture Agreement prohibits export subsidies on agricultural products unless the
subsidies are specified in a member’s lists of commitments. Where they are listed, the agreement
requires WTO members to cut both the amount of money they spend on export subsidies and the
quantities of exports that receive subsidies. Taking averages for 1986-90 as the base level,
developed countries agreed to cut the value of export subsidies by 36% over the six years starting
in 1995 (24% over 10 years for developing countries). Developed countries also agreed to reduce
the quantities of subsidized exports by 21% over the six years (14% over 10 years for developing
countries). Least-developed countries do not need to make any cuts.

During the six-year implementation period, developing countries are allowed under certain
conditions to use subsidies to reduce the costs of marketing and transporting exports.

The least-developed and those depending on food imports

Under the Agriculture Agreement, WTO members have to reduce their subsidized exports. But
some importing countries depend on supplies of cheap, subsidized food from the major
industrialized nations. They include some of the poorest countries, and although their farming
sectors might receive a boost from higher prices caused by reduced export subsidies, they might
need temporary assistance to make the necessary adjustments to deal with higher priced imports,
and eventually to export. A special ministerial decision sets out objectives, and certain measures,
for the provision of food aid and aid for agricultural development. It also refers to the possibility
of assistance from the International Monetary Fund and the World Bank to finance commercial
food imports.

The WTO’s Agriculture Agreement was negotiated in the 1986–94 Uruguay Round and is a
significant first step towards fairer competition and a less distorted sector. WTO member
governments agreed to improve market access and reduce trade-distorting subsidies in
agriculture. In general, these commitments were phased in over a six years from 1995 (10 years
for developing countries). The Agriculture Committee oversees the agreement’s
implementation.

Meanwhile, members also agreed to continue the reform. Further talks, which are separate from
the committee’s regular work, began in 2000. They were included in the broader negotiating
agenda set at the 2001 Ministerial Conference in Doha, Qatar.
 Trade-related Investment Measures (TRIM)
In the late 1980s, there was a significant increase in foreign direct investment throughout the
world. However, some of the countries receiving foreign investment imposed numerous
restrictions on that investment designed to protect and foster domestic industries, and to prevent
the outflow of foreign exchange reserves. Examples of these restrictions include local content
requirements (which require that locally-produced goods be purchased or used), manufacturing
requirements (which require the domestic manufacturing of certain components), trade balancing
requirements, domestic sales requirements, technology transfer requirements, export
performance requirements (which require the export of a specified percentage of production
volume), local equity restrictions, foreign exchange restrictions, remittance restrictions, licensing
requirements, and employment restrictions. These measures can also be used in connection with
fiscal incentives as opposed to requirement. Some of these investment measures distort trade in
violation of GATT Article III and XI, and are therefore prohibited. Until the completion of the
Uruguay Round negotiations, which produced a well-rounded Agreement on Trade-Related
Investment Measures (hereinafter the "TRIMs Agreement"), the few international agreements
providing disciplines for measures restricting foreign investment provided only limited guidance
in terms of content and country coverage. The OECD Code on Liberalization of Capital
Movements, for example, requires members to liberalize restrictions on direct investment in a
broad range of areas. The OECD Code's efficacy, however, is limited by the numerous
reservations made by each of the members. In addition, there are other international treaties,
bilateral and multilateral, under which signatories extend most-favoured-nation treatment to
direct investment. Only a few such treaties, however, provide national treatment for direct
investment. Moreover, although the APEC Investment Principles adopted in November 1994
provide rules for investment as a whole, including non-discrimination and national treatment,
they have no binding force.

The Trade Related Investment Measures Agreement came into effect on 1 January 1995 as part
of the Uruguay Round negotiations. It addressed investment measures that were trade related
and which violated Article III (National Treatment) or Article XI (general elimination of
quantitative restrictions). Basically it prohibited member countries making the approval of
investment conditional on compliance with laws, policies or administrative regulations that
favoured domestic products.

The Agreement did not define TRIMs, but provided an illustrative list (Annex 1). Examples of
TRIMs are;

- Local content requirements where governments require enterprises to use or purchase

domestic products.
- Trade balancing measures where governments impose restrictions on imports by an enterprise
or link the amount of imports to the level of its exports
- Foreign exchange balancing requirements where an enterprise has the level of imports linked
to the value of its exports in order to maintain a net foreign exchange earning.
The lack of a precise definition means that the issue is not always clear cut and there has been
considerable disagreement as to whether or not certain measures are covered by the Agreement.

TRIMs Elimination and Transition Periods

Under the Agreement member states were given 90 days to notify the WTO of any existing
TRIMs. There were 43 notifications by 24 developing countries (19 related to the auto industry
and 10 to the agri-food industry).

Member states were then given a "transition period" during which their notified TRIMs were to
be eliminated. The length of time was based on a state's level of development i.e. developed
countries were given 2 years; developing countries were given 5 years; and least-developed
countries were given 7 years. Therefore all developing countries should have implemented the
TRIMs agreement and eliminated their regulations by 1 January 2000.

However, Article 5.3 of the Agreement permits developing and least-developed countries to
apply for an extension of the transition period. 10 WTO members have so far submitted
transitional period extension requests (Annex 2). It is likely that a number of other countries will
seek extended transitional periods, but are waiting to see what happens with the "first batch".
The requests range from Chile 1 year to Pakistan 7 years. Since 1995 the TRIMs obligations that
new members face on accession to the WTO depend on the terms of their accession. So far all
acceding countries have agreed to implement the TRIMs agreement upon accession regardless of
whether they are developing countries or not.

Trade and Investment

There are three main areas of work in the WTO on trade and investment:

 A Working Group established in 1996 conducts analytical work on the relationship

between trade and investment.

 The Agreement on Trade-Related Investment Measures (“TRIMs Agreement”), one of

the Multilateral Agreements on Trade in Goods, prohibits trade-related investment
measures, such as local content requirements, that are inconsistent with basic provisions
of GATT 1994.

 The General Agreement on Trade in Services addresses foreign investment in services as

one of four modes of supply of services.

Agreement on Trade-Related Investment Measures

TRIMs prohibited on the grounds that they extend more favourable treatment to domestic
products in comparison to imports and thus infringe the national treatment principle include
those that require:

 Purchase or use by an enterprise of products of domestic origin or from any

domestic source (local content requirements), or

 That an enterprise’s purchase or use of imported products should be limited to an amount

related to the volume or value of the local products it exports (trade-balancing
requirements).

TRIMs considered inconsistent with the provisions of Article XI of GATT against the use
of quantitative restrictions on imports and exports include those that:

 Restrict imports to an amount related to the quantity or value of the product exported
(i.e. trade-balancing requirements constituting restrictions on imports);

 Restrict access to foreign exchange to an amount of foreign exchange attributable

to the enterprise (i.e. exchange restrictions resulting in restrictions on imports);

Specify exports in terms of the volume or value of local production (i.e. domestic sales
requirements involving restrictions on exports).

The Agreement provides transition periods for the elimination of prohibited TRIMs. For
developed countries, the period was two years from 1995 when the Agreement entered into
force; this period has already expired. Developing countries have a transition period of up to five
years (i.e. until 1 January 2000) and least developed countries up to seven years (until 1
January 2002). It should be noted, however, that these transition periods are available only for
the prohibited TRIMs notified when the Agreement became operational.

WTO and Textile

Textiles, like agriculture, was one of the hardest-fought issues in the WTO, as it was in the
former GATT system. It has now completed fundamental change under a 10-year schedule
agreed in the Uruguay Round. The system of import quotas that dominated the trade since the
early 1960s have now been phased out.

From 1974 until the end of the Uruguay Round, the trade was governed by the Multifibre
Arrangement (MFA). This was a framework for bilateral agreements or unilateral actions that
established quotas limiting imports into countries whose domestic industries were facing serious
damage from rapidly increasing imports.
The quotas were the most visible feature. They conflicted with GATT’s general preference for
customs tariffs instead of measures that restrict quantities. They were also exceptions to the
GATT principle of treating all trading partners equally because they specified how much the
importing country was going to accept from individual exporting countries.
Since 1995, the WTO’s Agreement on Textiles and Clothing (ATC) took over from the
Mulltifibre Arrangement. By 1 January 2005, the sector was fully integrated into normal GATT
rules. In particular, the quotas came to an end, and importing countries are no longer be able to
discriminate between exporters. The Agreement on Textiles and Clothing no longer exists: it’s
the only WTO agreement that had self-destruction built in.
Integration: returning products gradually to GATT rules
Textiles and clothing products were returned to GATT rules over the 10-year period. This
happened gradually, in four steps, to allow time for both importers and exporters to adjust to the
new situation. Some of these products were previously under quotas. Any quotas that were in
place on 31 December 1994 were carried over into the new agreement. For products that had
quotas, the result of integration into GATT was the removal of these quotas.
The agreement stated the percentage of products that had to be brought under GATT rules at
each step. If any of these products came under quotas, then the quotas had to be removed at the
same time. The percentages were applied to the importing country’s textiles and clothing trade
levels in 1990. The agreement also said the quantities of imports permitted under the quotas had
to grow annually, and that the rate of expansion had to increase at each stage. How fast that
expansion would be was set out in a formula based on the growth rate that existed under the old
Multifibre Arrangement.

Four steps over 10 years

The schedule for freeing textiles and garments products from import quotas (and returning them
to GATT rules), and how fast remaining quotas had to be expanded.
The example is based on the commonly-used 6% annual expansion rate of the old Multifibre
Arrangement. In practice, the rates used under the MFA varied from product to product.
Step Percentage of products Percentage of products
to be brought under to be brought under
GATT (including GATT (including
removal of any quotas) removal of any quotas)

16% 6.96%
Step 1:
(minimum, taking 1990 per year
1 Jan 1995 (to 31 Dec 1997)
imports as base)

Step 2: 17% 8.7%

1 Jan 1998 (to 31 Dec 2001) per year

Step 3: 18% 11.05%

1 Jan 2002 (to 31 Dec 2004) per year

Step 4: 49% No quotas left

1 Jan 2005 (maximum)

>Full integration into GATT (and final

elimination of quotas).
>Agreement on Textiles and Clothing
terminates.

The actual formula for import growth under quotas was:

by 0.1 x pre-1995 growth rate in the first step;
0.25 x Step 1 growth rate in the second step; and
0.27 x Step 2 growth rate in the third step.

Products brought under GATT rules at each of the first three stages had to cover the four main
types of textiles and clothing: tops and yarns; fabrics; made-up textile products; and clothing.
Any other restrictions that did not come under the Multifibre Arrangement and did not conform
with regular WTO agreements by 1996 had to be made to conform or be phased out by 2005.
If further cases of damage to the industry arose during the transition, the agreement allowed
additional restrictions to be imposed temporarily under strict conditions. These “transitional
safeguards” were not the same as the safeguard measures normally allowed under GATT
because they can be applied on imports from specific exporting countries. But the importing
country had to show that its domestic industry was suffering serious damage or was threatened
with serious damage. And it had to show that the damage was the result of two things: increased
imports of the product in question from all sources, and a sharp and substantial increase from the
specific exporting country. The safeguard restriction could be implemented either by mutual
agreement following consultations, or unilaterally. It was subject to review by the Textiles
Monitoring Body.
In any system where quotas are set for individual exporting countries, exporters might try to get
around the quotas by shipping products through third countries or making false declarations
about the products’ country of origin. The agreement included provisions to cope with these
cases.
The agreement envisaged special treatment for certain categories of countries — for example,
new market entrants, small suppliers, and least-developed countries.
A Textiles Monitoring Body (TMB) supervised the agreement’s implementation. It consisted of
a chairman and 10 members acting in their personal capacity. It monitored actions taken under
the agreement to ensure that they were consistent, and it reported to the Goods Council which
reviewed the operation of the agreement before each new step of the integration process. The
Textiles Monitoring Body also dealt with disputes under the Agreement on Textiles and
Clothing. If they remained unresolved, the disputes could be brought to the WTO’s regular
Dispute Settlement Body. When the Textiles and Clothing Agreement expired on 1 January
2005, the Textiles Monitoring Body also ceased to exist.

Agreement on Textiles and Clothing

The object of this negotiation has been to secure the eventual integration of the textiles and
clothing sector — where much of the trade is currently subject to bilateral quotas negotiated
under the Multifibre Arrangement (MFA) — into the GATT on the basis of strengthened GATT
rules and disciplines.
Integration of the sector into the GATT would take place as follows: first, on 1 January 1995;
each party would integrate into the GATT products from the specific list in the Agreement which
accounted for not less than 16 per cent of its total volume of imports in 1990. Integration means
that trade in these products will be governed by the general rules of GATT.
At the beginning of Phase 2, on 1 January 1998, products which accounted for not less than 17
per cent of 1990 imports would be integrated. On 1 January 2002, products which accounted for
not less than 18 per cent of 1990 imports would be integrated. All remaining products would be
integrated at the end of the transition period on 1 January 2005. At each of the first three stages,
products should be chosen from each of the following categories: tops and yarns, fabrics, made-
up textile products, and clothing.
All MFA restrictions in place on 31 December 1994 would be carried over into the new
agreement and maintained until such time as the restrictions are removed or the products
integrated into GATT. For products remaining under restraint, at whatever stage, the agreement
lays down a formula for increasing the existing growth rates. Thus, during Stage 1, and for each
restriction previously under MFA bilateral agreements in force for 1994, annual growth should
be not less than 16 per cent higher than the growth rate established for the previous MFA
restriction. For Stage 2 (1998 to 2001 inclusive), annual growth rates should be 25 per cent
higher than the Stage 1 rates. For Stage 3 (2002 to 2004 inclusive), annual growth rates should
be 27 per cent higher than the Stage 2 rates.
While the agreement focuses largely on the phasing-out of MFA restrictions, it also recognizes
that some members maintain non-MFA restrictions not justified under a GATT provision. These
would also be brought into conformity with GATT within one year of the entry into force of the
Agreement or phased out progressively during a period not exceeding the duration of the
Agreement (that is, by 2005).
It also contains a specific transitional safeguard mechanism which could be applied to products
not yet integrated into the GATT at any stage. Action under the safeguard mechanism could be
taken against individual exporting countries if it were demonstrated by the importing country
that overall imports of a product were entering the country in such increased quantities as to
cause serious damage — or to threaten it — to the relevant domestic industry, and that there was
a sharp and substantial increase of imports from the individual country concerned. Action under
the safeguard mechanism could be taken either by mutual agreement, following consultations, or
unilaterally but subject to review by the Textiles Monitoring Body. If taken, the level of
restraints should be fixed at a level not lower than the actual level of exports or imports from the
country concerned during the twelve-month period ending two months before the month in
which a request for consultation was made. Safeguard restraints could remain in place for up to
three years without extension or until the product is removed from the scope of the agreement
(that is, integrated into the GATT), whichever comes first.
The agreement includes provisions to cope with possible circumvention of commitments through
transhipment, re-routing, false declaration concerning country or place of origin and falsification
of official documents.
The agreement also stipulates that, as part of the integration process, all members shall take such
actions in the area of textiles and clothing as may be necessary to abide by GATT rules and
disciplines so as to improve market access, ensure the application of policies relating to fair and
equitable trading conditions, and avoid discrimination against imports when taking measures for
general trade policy reasons.
In the context of a major review of the operation of the agreement to be conducted by the
Council for Trade in Goods before the end of each stage of the integration process, the Council
for Trade in Goods shall by consensus take such decisions as it deems appropriate to ensure that
the balance of rights and obligations in this agreement is not upset. Moreover, the Dispute
Settlement Body may authorise adjustments to the annual growth of quotas for the stage
subsequent to the review with respect to Members it has found not to be complying with their
obligations under this agreement.
A Textiles Monitoring Body (TMB) oversees the implementation of commitments and to prepare
reports for the major reviews mentioned above. The agreement also has provisions for special
treatment to certain categories of countries — for example, those which have not been MFA
members since 1986, new entrants, small suppliers, and least-developed countries.
WTO AND ANTI DUMPING
A product is regarded as dumped when its xport price is less than the normal price in the
exporting country or its cost production plus a reasonable amount for administrative selling and
any other costs and for profits.
Anti dumping masures can be emplotyd only if dumped importes are shown to cause serious
damage to the domestic industry in the importing country. Further anti dumping measures are n
ot alloed if the margin of dumping ie the price differences or volume of dumped imports is
negligible
Dumping occurs whenb the price at which th goods are expressed as a percentage of the expo\rt
price. In the ordinary course of trade, the normal velue is the comparable price ate which goods
under complaint are sold in the domestic market of the exporting country of territory. If the
normal value can not be determined this way, the folloeing two alternative methods are provided
fro: i) Comparable representative expoet price to an appropriate tehird country, II) Cost of
production in the country of origin with reasonable addition for administreative selling and
general costs and for profits. It is also amended in article VI of GATT 1994
Antidumping invstigation is a systematic and time specific and time consuming process.
Anti dumping duty shall not eceed the margin of dumping. It is suggested tehat it would b
desirable if the appropriate authorities impose a lsser duty which is adequate to remove th injury
cused tol the domestic industry
Anti dumping actions may be suspended or terminated if the exporter concerned furnishes an
undertaking to revise the price to remove the dumping or the injurious effect of dumping. The
rule also provide for retrospective measures in certain cases.
The anti dumping investigation process is digramatically presentd below:

Preliminary screening

Rejection under de minimis unsubstantiated information etc.

Initiation

Exporting country allowed to modify practice

 Preliminary findings

Final findings and measures