Assignment

On
International Business

Topic- World Bank & IMF, WTO, GATT, TRIPS, GATS,

Dispute Settlement Body, WTOs & Agriculture and TRIM

Department of Management Studies Indian School of Mines, Dhanbad

Submitted to:Dr. Niladri Das Submitted by:Sitaram Paul (2010MB0025)

MBA (4th SEM)

CONTENTS
Sl. no TOPICS PAGE NO.

1 2 3 4 5 6 7 8 9

World Bank & IMF WTO GATT & Uruguay Conference TRIPS GATS Dispute Settlement Body WTOs and Agriculture WTOs and Textile TRIM

3-19 20-30 30-33 33-40 40-43 43-48 49-52 53-56 57-59

World Bank

The World Bank is one of the worlds largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers, provide water and electricity, fight disease, and protect the environment. The World Bank is not a "bank" in the common sense. The World Bank is an international organization owned by the 184 countriesboth developed and developingthat are its members. Since it was set up in 1944 as the International Bank for Reconstruction and Development. The number of member countries increased sharply in the 1950s and 1960s, when many countries became independent nations. As membership grew and their needs changed, the World Bank expanded and is currently made up of five different agencies. All support to a borrowing countries is guided by a single strategy (in the case of Afghanistan it is the "Transitional Support Strategy") that the country itself designs with help from the World Bank and many other donors, aid groups, and civil society organizations. Operations: The World Bank exists to encourage poor countries to develop by providing them with technical assistance and funding for projects and policies that will realize the countries' economic potential. The Bank views development as a long-term, integrated endeavor. During the first two decades of its existence, two thirds of the assistance provided by the Bank went to electric power and transportation projects. Although these so-called infrastructure projects remain important, the Bank has diversified its activities in recent years as it has gained experience with and acquired new insights into the development process. The Bank gives particular attention to projects that can directly benefit the poorest people in developing countries. The direct involvement of the poorest in economic activity is being promoted through lending for agriculture and rural development, small-scale enterprises, and urban development. The Bank is helping the poor to be more productive and to gain access to such necessities as safe water and waste-disposal facilities, health care, family-planning assistance, nutrition, education, and housing. Within infrastructure projects there have also been changes. In transportation projects, greater attention is given to constructing farm-tomarket roads. Rather than concentrating exclusively on cities, power projects increasingly provide lighting and power for villages and small farms. Industrial projects place greater

emphasis on creating jobs in small enterprises. Labor-intensive construction is used where practical. In addition to electric power, the Bank is supporting development of oil, gas, coal, fuel, wood, and biomass as alternative sources of energy. The Bank provides most of its financial and technical assistance to developing countries by supporting specific projects. Although IBRD loans and IDA credits are made on different financial terms, the two institutions use the same standards in assessing the soundness of projects. The decision whether a project will receive IBRD or IDA financing depends on the economic condition of the country and not on the characteristics of the project. Its borrowing member countries also look to the Bank as a source of technical assistance. By far the largest element of Bank-financed technical assistance--running over $1 billion a year recently--is that financed as a component of Bank loans or credits extended for other purposes. But the amount of Bank-financed technical assistance for free-standing loans and to prepare projects has also increased. The Bank serves as executing agency for technical assistance projects financed by the United Nations Development Program in agriculture and rural development, energy, and economic planning. In response to the economic climate in many of its member countries, the Bank is now emphasizing technical assistance for institutional development and macroeconomic policy formulation. Every project supported by the Bank is designed in close collaboration with national governments and local agencies, and often in cooperation with other multilateral assistance organizations. Indeed, about half of all Bank-assisted projects also receive cofinancing from official sources, that is, governments, multilateral financial institutions, and export-credit agencies that directly finance the procurement of goods and services, and from private sources, such as commercial banks. In making loans to developing countries, the Bank does not compete with other sources of finance. It assists only those projects for which the required capital is not available from other sources on reasonable terms. Through its work, the Bank seeks to strengthen the economies of borrowing nations so that they can graduate from reliance on Bank resources and meet their financial needs, on terms they can afford directly from conventional sources of capital. The range of the Bank's activities is far broader than its lending operations. Since the Bank's lending decisions depend heavily on the economic condition of the borrowing country, the Bank carefully studies its economy and the needs of the sectors for which lending is contemplated. These analyses help in formulating an appropriate long-term development assistance strategy for the economy. Graduation from the IBRD and IDA has occurred for many years. Of the 34 very poor countries that borrowed money from IDA during the earliest years, more than two dozen have made enough progress for them no longer to need IDA money, leaving that money available to other countries that joined the Bank more recently. Similarly, about 20 countries that formerly borrowed money from the IBRD no longer have to do so. An outstanding example is Japan. For a period of 14 years, it borrowed from the IBRD. Now, the IBRD borrows large sums in Japan.

Organization Five Agencies, One Group The World Bank Group consists of five organizations:

The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries. The International Bank for Reconstruction and Development (IBRD) aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services. Established in 1944 as the original institution of the World Bank Group, IBRD is structured like a cooperative that is owned and operated for the benefit of its 187 member countries. IBRD raises most of its funds on the world's financial markets and has become one of the most established borrowers since issuing its first bond in 1947. The income that IBRD has generated over the years has allowed it to fund development activities and to ensure its financial strength, which enables it to borrow at low cost and offer clients good borrowing terms. At its Annual Meeting in September 2006, the World Bank with the encouragement of its shareholder governments committed to make further improvements to the services it provides its members. To meet the increasingly sophisticated demands of middle-income countries, IBRD is overhauling financial and risk management products, broadening the provision of free-standing knowledge services and making it easier for clients to deal with the Bank.

The International Development Association (IDA) provides interest-free loanscalled credits and grants to governments of the poorest countries.

The International Development Association (IDA) is the part of the World Bank that helps the worlds poorest countries. Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve peoples living conditions. IDA complements the World Banks other lending armthe International Bank for Reconstruction and Development (IBRD)which serves middle-income countries with capital investment and advisory services. IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards. IDA is one of the largest sources of assistance for the worlds 81 poorest countries, 39 of which are in Africa. It is the single largest source of donor funds for basic social services in the poorest countries. IDA lends money (known as credits) on concessional terms. This means that IDA credits have zero or very low interest charge and repayments are stretched over 25 to 40 years, including a 5 to 10-year grace period. IDA also provides grants to countries at risk of debt distress. Since its inception, IDA credits and grants have totalled US$238 billion, averaging US$15 billion a year in recent years and directing the largest share, about 50 percent, to Africa.

The International Finance Corporation (IFC) provides loans, equity and technical assistance to stimulate private sector investment in developing countries. A daring new idea when created in the 1950s, IFC is the largest organization of its kind in the world. A sense of innovation and the strength of their core corporate values--excellence, commitment, integrity and teamwork--have driven this remarkable growth over the years. In 1956 IFC opens under Garner's leadership with 12 full-time staff but just $100 million in authorized capital, a low amount that prevents it from making major investments. Shareholders only allow it to make loans, not the equity investments that Garner desired, and that in time would become the key to its profitability. IFC's first investment was $2 million loan to help the Siemens affiliate in Brazil manufacture electrical equipment. Following the mandate, the project is a private sector solution to a development challenge - at the time, Brazil's per capita power consumption is just half of neighbouring Argentina's.

Holding a $48.8 billion portfolio touching almost every major industry, they now reach millions of people in more than 100 countries, creating jobs, raising living standards, and building a better future.

The Multilateral Investment Guarantee Agency (MIGA) provides guarantees against losses caused by non-commercial risks to investors in developing countries. The idea for a multilateral political risk insurance provider was floated long before MIGAs establishmentin fact as far back as 1948. But it was not until September 1985 that this idea started to become a reality. At that time the World Banks Board of Governors began the process of creating a new investment insurance affiliate by endorsing the MIGA convention that defined its core mission: "to enhance the flow to developing countries of capital and technology for productive purposes under conditions consistent with their developmental needs, policies and objectives, on the basis of fair and stable standards to the treatment of foreign investment." On April 12, 1988 an international convention established MIGA as the newest member of the World Bank Group. The agency opened for business as a legally separate and financially independent entity. Membership was open to all IBRD members, and the agency began with capital stock of $1 billion. MIGAs original 29 members were: Bahrain, Bangladesh, Barbados, Canada, Chile, Cyprus, Denmark, Ecuador, Egypt, Germany, Grenada, Indonesia, Jamaica, Japan, Jordan, Korea, Kuwait, Lesotho, Malawi, Netherlands, Nigeria, Pakistan, Samoa, Saudi Arabia, Senegal, Sweden, Switzerland, United Kingdom, and United States. MIGA was created to complement public and private sources of investment insurance against non-commercial risks in developing countries. MIGAs multilateral character and joint sponsorship by developed and developing countries were seen as significantly enhancing confidence among cross-border investors. Today, MIGAs mission is straightforward: To promote foreign direct investment into developing countries to support economic growth, reduce poverty and improve peoples lives.

The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.

ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) with over one hundred and forty member States. The Convention sets forth ICSID's mandate, organization and core functions. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank). It was opened for signature on March 18, 1965 and entered into force on October 14, 1966. The Convention sought to remove major impediments to the free international flows of private investment posed by non-commercial risks and the absence of specialized international methods for investment dispute settlement. ICSID was created by the Convention as an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures. Recourse to the ICSID facilities is always subject to the parties' consent. As evidenced by its large membership, considerable caseload, and by the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development. Today, ICSID is considered to be the leading international arbitration institution devoted to investor-State dispute settlement.

International Monetary Fund

The IMF is an independent international organization. It is a cooperative of 185 member countries, whose objective is to promote world economic stability and growth. The member countries are the shareholders of the cooperative, providing the capital of the IMF through quota subscriptions. In return, the IMF provides its members with macroeconomic policy advice, financing in times of balance of payments need, and technical assistance and training to improve national economic management.

The IMF is one of several autonomous organizations designated by the United Nations (UN) as Specialized Agencies, with which the UN has established working relationships. The IMF is a permanent observer at the UN. The Articles of Agreement that created the IMF and govern its operations were adopted at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, on July 22, 1944, and entered into force on December 27, 1945.3 Article I sets out the mandate of the IMF as follows: y To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy; To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation; To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade To give confidence to members by making the general resources of the IMF temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity; and To shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

This mandate gives the IMF its unique character as an international monetary institution, with broad oversight responsibilities for the orderly functioning and development of the international monetary and financial system. Cooperation and reconstruction (194471) During the Great Depression of the 1930s, countries attempted to shore up their failing economies by sharply raising barriers to foreign trade, devaluing their currencies to compete against each other for export markets, and curtailing their citizens' freedom to hold foreign exchange. These attempts proved to be self-defeating. World trade declined sharply (see chart below), and employment and living standards plummeted in many countries. This breakdown in international monetary cooperation led the IMF's founders to plan an institution charged with overseeing the international monetary systemthe system of

exchange rates and international payments that enables countries and their citizens to buy goods and services from each other. The new global entity would ensure exchange rate stability and encourage its member countries to eliminate exchange restrictions that hindered trade.

The Bretton Woods agreement The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, in the north-eastern United States, agreed on a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression. The IMF came into formal existence in December 1945, when its first 29 member countries signed its Articles of Agreement. It began operations on March 1, 1947. Later that year, France became the first country to borrow from the IMF. The IMF's membership began to expand in the late 1950s and during the 1960s as many African countries became independent and applied for membership. But the Cold War limited the Fund's membership, with most countries in the Soviet sphere of influence not joining. Par value system The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar and, in the case of the United States, the value of the dollar in terms of gold) pegged at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement. This par value systemalso known as the Bretton Woods systemprevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.

The end of the Bretton Woods System (197281) By the early 1960s, the U.S. dollar's fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued. A sizable increase in domestic spending on President Lyndon Johnson's Great Society programs and a rise in military spending caused by the Vietnam War gradually worsened the overvaluation of the dollar. End of Bretton Woods system The system dissolved between 1968 and 1973. In August 1971, U.S. President Richard Nixon announced the "temporary" suspension of the dollar's convertibility into gold. While the dollar had struggled throughout most of the 1960s within the parity established at Bretton Woods, this crisis marked the breakdown of the system. An attempt to revive the fixed exchange rates failed, and by March 1973 the major currencies began to float against each other. Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish (except pegging their currency to gold): allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. Oil shocks Many feared that the collapse of the Bretton Woods system would bring the period of rapid growth to an end. In fact, the transition to floating exchange rates was relatively smooth, and it was certainly timely: flexible exchange rates made it easier for economies to adjust to more expensive oil, when the price suddenly started going up in October 1973. Floating rates have facilitated adjustments to external shocks ever since. The IMF responded to the challenges created by the oil price shocks of the 1970s by adapting its lending instruments. To help oil importers deal with anticipated current account deficits and inflation in the face of higher oil prices, it set up the first of two oil facilities. Helping poor countries From the mid-1970s, the IMF sought to respond to the balance of payments difficulties confronting many of the world's poorest countries by providing concessional financing through what was known as the Trust Fund. In March 1986, the IMF created a new concessional loan program called the Structural Adjustment Facility. The SAF was succeeded by the Enhanced Structural Adjustment Facility in December 1987. Debt and painful reforms (198289) The oil shocks of the 1970s, which forced many oil-importing countries to borrow from commercial banks, and the interest rate increases in industrial countries trying to control inflation led to an international debt crisis.

During the 1970s, Western commercial banks lent billions of "recycled" petrodollars, getting deposits from oil exporters and lending those resources to oil-importing and developing countries, usually at variable, or floating, interest rates. So when interest rates began to soar in 1979, the floating rates on developing countries' loans also shot up. Higher interest payments are estimated to have cost the non-oil-producing developing countries at least $22 billion during 197881. At the same time, the price of commodities from developing countries slumped because of the recession brought about by monetary policies. Many times, the response by developing countries to those shocks included expansionary fiscal policies and overvalued exchange rates, sustained by further massive borrowings. When a crisis broke out in Mexico in 1982, the IMF coordinated the global response, even engaging the commercial banks. It realized that nobody would benefit if country after country failed to repay its debts. The IMF's initiatives calmed the initial panic and defused its explosive potential. But a long road of painful reform in the debtor countries, and additional cooperative global measures, would be necessary to eliminate the problem. Societal Change for Eastern Europe and Asian Upheaval (1990-2004) The fall of the Berlin wall in 1989 and the dissolution of the Soviet Union in 1991 enabled the IMF to become a (nearly) universal institution. In three years, membership increased from 152 countries to 172, the most rapid increase since the influx of African members in the 1960s. In order to fulfil its new responsibilities, the IMF's staff expanded by nearly 30 percent in six years. The Executive Board increased from 22 seats to 24 to accommodate Directors from Russia and Switzerland, and some existing Directors saw their constituencies expand by several countries. The IMF played a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven economies. This kind of economic transformation had never before been attempted, and sometimes the process was less than smooth. For most of the 1990s, these countries worked closely with the IMF, benefiting from its policy advice, technical assistance, and financial support. By the end of the decade, most economies in transition had successfully graduated to market economy status after several years of intense reforms, with many joining the European Union in 2004. Asian Financial Crisis In 1997, a wave of financial crises swept over East Asia, from Thailand to Indonesia to Korea and beyond. Almost every affected country asked the IMF for both financial assistance and for help in reforming economic policies. Conflicts arose on how best to cope with the crisis, and the IMF came under criticism that was more intense and widespread than at any other time in its history.

From this experience, the IMF drew several lessons that would alter its responses to future events. First, it realized that it would have to pay much more attention to weaknesses in countries banking sectors and to the effects of those weaknesses on macroeconomic stability. In 1999, the IMFtogether with the World Banklaunched the Financial Sector Assessment Program and began conducting national assessments on a voluntary basis. Second, the Fund realized that the institutional prerequisites for successful liberalization of international capital flows were more daunting than it had previously thought. Along with the economics profession generally, the IMF dampened its enthusiasm for capital account liberalization. Third, the severity of the contraction in economic activity that accompanied the Asian crisis necessitated a re-evaluation of how fiscal policy should be adjusted when a crisis was precipitated by a sudden stop in financial inflows. Debt relief for poor countries During the 1990s, the IMF worked closely with the World Bank to alleviate the debt burdens of poor countries. The Initiative for Heavily Indebted Poor Countries was launched in 1996, with the aim of ensuring that no poor country faces a debt burden it cannot manage. In 2005, to help accelerate progress toward the United Nations Millennium Development Goals (MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI). Globalisation and the Crisis (2005 - present) The IMF has been on the front lines of lending to countries to help boost the global economy as it suffers from a deep crisis not seen since the Great Depression. For most of the first decade of the 21st century, international capital flows fuelled a global expansion that enabled many countries to repay money they had borrowed from the IMF and other official creditors and to accumulate foreign exchange reserves. The global economic crisis that began with the collapse of mortgage lending in the United States in 2007, and spread around the world in 2008 was preceded by large imbalances in global capital flows. Global capital flows fluctuated between 2 and 6 percent of world GDP during 1980-95, but since then they have risen to 15 percent of GDP. In 2006, they totaled $7.2 trillionmore than a tripling since 1995. The most rapid increase has been experienced by advanced economies, but emerging markets and developing countries have also become more financially integrated. The founders of the Bretton Woods system had taken it for granted that private capital flows would never again resume the prominent role they had in the nineteenth and early twentieth centuries, and the IMF had traditionally lent to members facing current account difficulties. The latest global crisis uncovered fragility in the advanced financial markets that soon led to the worst global downturn since the Great Depression. Suddenly, the IMF was inundated with requests for stand-by arrangements and other forms of financial and policy support.

The international community recognized that the IMFs financial resources were as important as ever and were likely to be stretched thin before the crisis was over. With broad support from creditor countries, the Funds lending capacity was tripled to around $750 billion. To use those funds effectively, the IMF overhauled its lending policies, including by creating a flexible credit line for countries with strong economic fundamentals and a track record of successful policy implementation. Other reforms, including ones tailored to help low-income countries, enabled the IMF to disburse very large sums quickly, based on the needs of borrowing countries and not tightly constrained by quotas, as in the past. The IMF and the World Bank Purposes At Bretton Woods the international community assigned to the World Bank the aims implied in its formal name, the International Bank for Reconstruction and Development (IBRD), giving it primary responsibility for financing economic development. The Bank's first loans were extended during the late 1940s to finance the reconstruction of the war-ravaged economies of Western Europe. When these nations recovered some measure of economic self-sufficiency, the Bank turned its attention to assisting the world's poorer nations, known as developing countries, to which it has since the 1940s loaned more than $330 billion. The World Bank has one central purpose: to promote economic and social progress in developing countries by helping to raise productivity so that their people may live a better and fuller life. The international community assigned to the IMF a different purpose. In establishing the IMF, the world community was reacting to the unresolved financial problems instrumental in initiating and protracting the Great Depression of the 1930s: sudden, unpredictable variations in the exchange values of national currencies and a widespread disinclination among governments to allow their national currency to be exchanged for foreign currency. Set up as a voluntary and cooperative institution, the IMF attracts to its membership nations that are prepared, in a spirit of enlightened self-interest, to relinquish some measure of national sovereignty by abjuring practices injurious to the economic well-being of their fellow member nations. The rules of the institution, contained in the IMF's Articles of Agreement signed by all members, constitute a code of conduct. The code is simple: it requires members to allow their currency to be exchanged for foreign currencies freely and without restriction, to keep the IMF informed of changes they contemplate in financial and monetary policies that will affect fellow members' economies, and, to the extent possible, to modify these policies on the advice of the IMF to accommodate the needs of the entire membership. To help nations abide by the code of conduct, the IMF administers a pool of money from which members can borrow when they are in trouble. The IMF is not, however, primarily a lending institution as is the Bank. It is first and foremost an overseer of its members' monetary and exchange rate policies and a guardian of the code of conduct. Philosophically committed to the orderly and stable growth of the world economy, the IMF is an enemy of surprise. It receives frequent reports on members' economic policies and prospects, which it debates, comments on, and communicates to the entire membership so that other members may respond in full knowledge of the facts and a clear understanding of how their own domestic

policies may affect other countries. The IMF is convinced that a fundamental condition for international prosperity is an orderly monetary system that will encourage trade, create jobs, expand economic activity, and raise living standards throughout the world. By its constitution the IMF is required to oversee and maintain this system, no more and no less. Size and Structure The IMF is small (about 2,300 staff members) and, unlike the World Bank, has no affiliates or subsidiaries. Most of its staff members work at headquarters in Washington, D.C., although three small offices are maintained in Paris, Geneva, and at the United Nations in New York. Its professional staff members are for the most part economists and financial experts. The structure of the Bank is somewhat more complex. The World Bank itself comprises two major organizations: the International Bank for Reconstruction and Development and the International Development Association (IDA). Moreover, associated with, but legally and financially separate from the World Bank are the International Finance Corporation, which mobilizes funding for private enterprises in developing countries, the International Center for Settlement of Investment Disputes, and the Multilateral Guarantee Agency. With over 7,000 staff members, the World Bank Group is about three times as large as the IMF, and maintains about 40 offices throughout the world, although 95 percent of its staff work at its Washington, D.C., headquarters. The Bank employs a staff with an astonishing range of expertise: economists, engineers, urban planners, agronomists, statisticians, lawyers, portfolio managers, loan officers, project appraisers, as well as experts in telecommunications, water supply and sewerage, transportation, education, energy, rural development, population and health care, and other disciplines. Source of Funding The World Bank is an investment bank, intermediating between investors and recipients, borrowing from the one and lending to the other. Its owners are the governments of its 180 member nations with equity shares in the Bank, which were valued at about $176 billion in June 1995. The IBRD obtains most of the funds it lends to finance development by market borrowing through the issue of bonds (which carry an AAA rating because repayment is guaranteed by member governments) to individuals and private institutions in more than 100 countries. Its concessional loan associate, IDA, is largely financed by grants from donor nations. The Bank is a major borrower in the world's capital markets and the largest nonresident borrower in virtually all countries where its issues are sold. It also borrows money by selling bonds and notes directly to governments, their agencies, and central banks. The proceeds of these bond sales are lent in turn to developing countries at affordable rates of interest to help finance projects and policy reform programs that give promise of success. Despite Lord Keynes's profession of confusion, the IMF is not a bank and does not intermediate between investors and recipients. Nevertheless, it has at its disposal significant resources, presently valued at over $215 billion. These resources come from quota subscriptions, or membership fees, paid in by the IMF's 182 member countries. Each member

contributes to this pool of resources a certain amount of money proportionate to its economic size and strength (richer countries pay more, poorer less). While the Bank borrows and lends, the IMF is more like a credit union whose members have access to a common pool of resources (the sum total of their individual contributions) to assist them in times of need. Although under special and highly restrictive circumstances the IMF borrows from official entities (but not from private markets), it relies principally on its quota subscriptions to finance its operations. The adequacy of these resources is reviewed every five years. Recipients of Funding Neither wealthy countries nor private individuals borrow from the World Bank, which lends only to creditworthy governments of developing nations. The poorer the country, the more favorable the conditions under which it can borrow from the Bank. Developing countries whose per capita gross national product (GNP) exceeds $1,305 may borrow from the IBRD. (Per capita GNP, a less formidable term than it sounds, is a measure of wealth, obtained by dividing the value of goods and services produced in a country during one year by the number of people in that country.) These loans carry an interest rate slightly above the market rate at which the Bank itself borrows and must generally be repaid within 12-15 years. The IDA, on the other hand, lends only to governments of very poor developing nations whose per capita GNP is below $1,305, and in practice IDA loans go to countries with annual per capita incomes below $865. IDA loans are interest free and have a maturity of 35 or 40 years. In contrast, all member nations, both wealthy and poor, have the right to financial assistance from the IMF. Maintaining an orderly and stable international monetary system requires all participants in that system to fulfill their financial obligations to other participants. Membership in the IMF gives to each country that experiences a shortage of foreign exchange--preventing it from fulfilling these obligations--temporary access to the IMF's pool of currencies to resolve this difficulty, usually referred to as a balance of payments problem. These problems are no respecter of economic size or level of per capita GNP, with the result that over the years almost all members of the IMF, from the smallest developing country to the largest industrial country, have at one time or other had recourse to the IMF and received from it financial assistance to tide them over difficult periods. Money received from the IMF must normally be repaid within three to five years and in no case later than ten years. Interest rates are slightly below market rates, but are not as concessional as those assigned to the World Bank's IDA loans. Through the use of IMF resources, countries have been able to buy time to rectify economic policies and to restore growth without having to resort to actions damaging to other members' economies. Cooperation between Bank and IMF Although the Bank and IMF are distinct entities, they work together in close cooperation. This cooperation, present since their founding, has become more pronounced since the 1970s. Since then the Bank's activities have increasingly reflected the realization that the pace of economic and social development accelerates only when sound underlying financial and economic policies are in place. The IMF has also recognized that unsound financial and economic policies are often deeply rooted in long-term inefficient use of resources that resists

eradication through short-term adaptations of financial policies. It does little good for the Bank to develop a long-term irrigation project to assist, say, the export of cotton, if the country's balance of payments position is so chaotic that no foreign buyers will deal with the country. On the other hand, it does little good for the IMF to help establish a sound exchange rate for a country's currency, unless the production of cotton for export will suffice to sustain that exchange rate over the medium to long term. The key to solving these problems is seen in restructuring economic sectors so that the economic potential of projects might be realized throughout the economy and the stability of the economy might enhance the effectiveness of the individual project. Around 75 percent of the Bank's lending is applied to specific projects dealing with roads, dams, power stations, agriculture, and industry. As the global economy became mired in recession in the early 1980s, the Bank expanded the scope of its lending operations to include structural- and sector-adjustment loans. These help developing countries adjust their economic policies and structures in the face of serious balance of payments problems that threaten continued development. The main objective of structural-adjustment lending is to restructure a developing country's economy as the best basis for sustained economic growth. Loans support programs that are intended to anticipate and avert economic crises through economic reforms and changes in investment priorities. By using so-called policy-based lending, the Bank stimulates economic growth in heavily indebted countries--particularly in Latin America and in sub-Saharan Africa--that are undertaking, often at much social pain, far-reaching programs of economic adjustment. In addition to its traditional function as provider of short-term balance of payments assistance, the advent of the oil crisis in the mid-1970s and the debt crisis in the early 1980s induced the IMF, too, to rethink its policy of restricting its financial assistance to short-term lending. As balance of payments shortfalls grew larger and longer-term structural reforms in members' economies were called for to eliminate these shortfalls, the IMF enlarged the amount of financial assistance it provides and lengthened the period within which its financial assistance would be available. In doing so, the IMF implicitly recognizes that balance of payments problems arise not only from a temporary lack of liquidity and inadequate financial and budgetary policies but also from long-standing contradictions in the structure of members' economies, requiring reforms stretching over a number of years and suggesting closer collaboration with the World Bank, which commands both the expertise and experience to deal with protracted structural impediments to growth. Focusing on structural reform in recent years has resulted in considerable convergence in the efforts of the Bank and IMF and has led them to greater reliance on each other's special expertise. This convergence has been hastened by the debt crisis, brought on by the inability of developing countries to repay the enormous loans they contracted during the late 1970s and early 1980s. The debt crisis has emphasized that economic growth can be sustained only when resources are being used efficiently and that resources can be used efficiently only in a stable monetary and financial environment.

The bedrock of cooperation between the Bank and IMF is the regular and frequent interaction of economists and loan officers who work on the same country. The Bank staff brings to this interchange a longer-term view of the slow process of development and a profound knowledge of the structural requirements and economic potential of a country. The IMF staff contributes its own perspective on the day-to-day capability of a country to sustain its flow of payments to creditors and to attract from them investment finance, as well as on how the country is integrated within the world economy. This interchange of information is backed up by a coordination of financial assistance to members. For instance, the Bank has been approving structural- or sector-adjustment loans for most of the countries that are taking advantage of financial assistance from the IMF. In addition, both institutions encourage other lenders, both private and official, to join with them in cofinancing projects and in mobilizing credits to countries that are in need. Cooperation between the Bretton Woods Institutions has two results: the identification of programs that will encourage growth in a stable economic environment and the coordination of financing that will ensure the success of these programs. Other lenders, particularly commercial banks, frequently make credits available only after seeing satisfactory performance by the borrowing country of its program of structural adjustment. Cooperation between the Bank and the IMF has over the past decade been formalized with the establishment in the IMF of procedures to provide financing at below market rates to its poorest member countries. These procedures enable the IMF to make available up to $12 billion to those 70 or so poor member countries that adjust the structure of their economies to improve their balance of payment position and to foster growth. The Bank joins with the IMF in providing additional money for these countries from IDA. But what IDA can provide in financial resources is only a fraction of the world's minimum needs for concessional external finance. Happily, various governments and international agencies have responded positively to the Bank's special action program for low-income, debt-distressed countries of the region by pledging an extra $7 billion for co financing programs arranged by the Bank. The Bank and the IMF have distinct mandates that allow them to contribute, each in its own way, to the stability of the international monetary and financial system and to the fostering of balanced economic growth throughout the entire membership. Since their founding 50 years ago, both institutions have been challenged by changing economic circumstances to develop new ways of assisting their membership. The Bank has expanded its assistance from an orientation toward projects to the broader aspects of economic reform. Simultaneously the IMF has gone beyond concern with simple balance of payment adjustment to interest itself in the structural reform of its members' economies. Some overlapping by both institutions has inevitably occurred, making cooperation between the Bank and the IMF crucial. Devising programs that will integrate members' economies more fully into the international monetary and financial system and at the same time encourage economic expansion continues to challenge the expertise of both Bretton Woods Institutions.

The International Monetary Fund and the World Bank at a Glance International Monetary Fund
y

World Bank
y

oversees the international monetary system promotes exchange stability and orderly exchange relations among its member countries assists all members--both industrial and developing countries--that find themselves in temporary balance of payments difficulties by providing short- to medium-term credits supplements the currency reserves of its members through the allocation of SDRs (special drawing rights); to date SDR 21.4 billion has been issued to member countries in proportion to their quotas draws its financial resources principally from the quota subscriptions of its member countries

seeks to promote the economic development of the world's poorer countries assists developing countries through long-term financing of development projects and programs provides to the poorest developing countries whose per capita GNP is less than $865 a year special financial assistance through the International Development Association (IDA) encourages private enterprises in developing countries through its affiliate, the International Finance Corporation (IFC) acquires most of its financial resources by borrowing on the international bond market has an authorized capital of $184 billion, of which members pay in about 10 percent has a staff of 7,000 drawn from 180 member countries

y y

y y

has at its disposal fully paid-in quotas now totaling SDR 145 billion (about $215 billion)
y

has a staff of 2,300 drawn from 182 member countries

World Trade Organisation (WTO)

History: The multilateral trading systempast, present and future

The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. So while the WTO is still young, the multilateral trading system that was originally set up under GATT is well over 50 years old. The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The last round the 1986-94 Uruguay Round led to the WTOs 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. In 2000, new talks started on agriculture and services. These have now been incorporated into a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. The work programme, the Doha Development Agenda (DDA), adds negotiations and other work on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, intellectual property, and a range of issues raised by developing countries as difficulties they face in implementing the present WTO agreements.

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 organizations 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 countrys 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, antidumping 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 Councils 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 directorgenerals conference room. It is used to refer to meetings of 2040 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 directorgeneral. 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 Basic principles Additional details GATT Other agreements annexes Services GATS goods Services annexes and Intellectual property TRIPS

Market commitments

access Countries schedules Countries schedules of commitments of commitments(and MFN exemptions) DISPUTE SETTLEMENT TRADE POLICY REVIEWS

Dispute settlement Transparency

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

Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes

y y

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 WTOs rules the agreements are the result of negotiations between the members. The current set were the outcome of the 198694 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the WTOs 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 WTOs 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 WTOs 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 WTOs 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 (194794). Policy review The Trade Policy Review Mechanisms 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 WTOs 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 Secretariats 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 centres help is freely available to the least-developed countries.

The WTO in global economic policy-making An important aspect of the WTOs 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.

GATT and The Uruguay Round

It took seven and a half years, almost twice the original schedule. By the end, 123 countries were taking part. It covered almost all trade, from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments. It was quite simply the largest trade negotiation ever, and most probably the largest negotiation of any kind in history. At times it seemed doomed to fail. But in the end, the Uruguay Round brought about the biggest reform of the worlds trading system since GATT was created at the end of the Second World War. And yet, despite its troubled progress, the Uruguay Round did see some early results. Within only two years, participants had agreed on a package of cuts in import duties on tropical products which are mainly exported by developing countries. They had also revised the rules for settling disputes, with some measures implemented on the spot. And they called for regular reports on GATT members trade policies, a move considered important for making trade regimes transparent around the world. A round to end all rounds? The seeds of the Uruguay Round were sown in November 1982 at a ministerial meeting of GATT members in Geneva. Although the ministers intended to launch a major new negotiation, the conference stalled on agriculture and was widely regarded as a failure. In fact, the work programme that the ministers agreed formed the basis for what was to become the Uruguay Round negotiating agenda. Nevertheless, it took four more years of exploring, clarifying issues and painstaking consensus-building, before ministers agreed to launch the new round. They did so in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating agenda that covered virtually every outstanding trade policy issue. The talks were going to extend the

trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles. All the original GATT articles were up for review. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it. Two years later, in December 1988, ministers met again in Montreal, Canada, for what was supposed to be an assessment of progress at the rounds half-way point. The purpose was to clarify the agenda for the remaining two years, but the talks ended in a deadlock that was not resolved until officials met more quietly in Geneva the following April. Despite the difficulty, during the Montreal meeting, ministers did agree a package of early results. These included some concessions on market access for tropical products aimed at assisting developing countries as well as a streamlined dispute settlement system, and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members. The round was supposed to end when ministers met once more in Brussels, in December 1990. But they disagreed on how to reform agricultural trade and decided to extend the talks. The Uruguay Round entered its bleakest period. Despite the poor political outlook, a considerable amount of technical work continued, leading to the first draft of a final legal agreement. This draft Final Act was compiled by the then GATT director-general, Arthur Dunkel, who chaired the negotiations at officials level. It was put on the table in Geneva in December 1991. The text fulfilled every part of the Punta del Este mandate, with one exception it did not contain the participating countries lists of commitments for cutting import duties and opening their services markets. The draft became the basis for the final agreement. Over the following two years, the negotiations lurched between impending failures, to predictions of imminent success. Several deadlines came and went. New points of major conflict emerged to join agriculture: services, market access, anti-dumping rules, and the proposed creation of a new institution. Differences between the United States and European Union became central to hopes for a final, successful conclusion. In November 1992, the US and EU settled most of their differences on agriculture in a deal known informally as the Blair House accord. By July 1993 the Quad (US, EU, Japan and Canada) announced significant progress in negotiations on tariffs and related subjects (market access). It took until 15 December 1993 for every issue to be finally resolved and for negotiations on market access for goods and services to be concluded (although some final touches was completed in talks on market access a few weeks later). On 15 April 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The delay had some merits. It allowed some negotiations to progress further than would have been possible in 1990: for example some aspects of services and intellectual property, and the creation of the WTO itself. But the task had been immense, and negotiation-fatigue was felt in trade bureaucracies around the world. The difficulty of reaching agreement on a complete

package containing almost the entire range of current trade issues led some to conclude that a negotiation on this scale would never again be possible. Yet, the Uruguay Round agreements contain timetables for new negotiations on a number of topics. And by 1996, some countries were openly calling for a new round early in the next century. The response was mixed; but the Marrakesh agreement did already include commitments to reopen negotiations on agriculture and services at the turn of the century. These began in early 2000 and were incorporated into the Doha Development Agenda in late 2001. What happened to GATT? The WTO replaced GATT as an international organization, but the General Agreement still exists as the WTOs umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. Trade lawyers distinguish between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994. Confusing? For most of us, its enough to refer simply to GATT. The post-Uruguay Round built-in agenda Many of the Uruguay Round agreements set timetables for future work. Part of this built-in agenda started almost immediately. In some areas, it included new or further negotiations. In other areas, it included assessments or reviews of the situation at specified times. Some negotiations were quickly completed, notably in basic telecommunications, financial services. (Member governments also swiftly agreed a deal for freer trade in information technology products, an issue outside the built-in agenda.) The agenda originally built into the Uruguay Round agreements has seen additions and modifications. A number of items are now part of the Doha Agenda, some of them updated. There were well over 30 items in the original built-in agenda. This is a selection of highlights: 1996
y y y

Maritime services: market access negotiations to end (30 June 1996, suspended to 2000, now part of Doha Development Agenda) Services and environment: deadline for working party report (ministerial conference, December 1996) Government procurement of services: negotiations start

1997
y y y

Basic telecoms: negotiations end (15 February) Financial services: negotiations end (30 December) Intellectual property, creating a multilateral system of notification and registration of geographical indications for wines: negotiations start, now part of Doha Development Agenda

1998
y y y y y

Textiles and clothing: new phase begins 1 January Services (emergency safeguards): results of negotiations on emergency safeguards to take effect (by 1 January 1998, deadline now March 2004) Rules of origin: Work programme on harmonization of rules of origin to be completed (20 July 1998) Government procurement: further negotiations start, for improving rules and procedures (by end of 1998) Dispute settlement: full review of rules and procedures (to start by end of 1998)

1999
y

Intellectual property: certain exceptions to patentability and protection of plant varieties: review starts

2000
y y y y

Agriculture: negotiations start, now part of Doha Development Agenda Services: new round of negotiations start, now part of Doha Development Agenda Tariff bindings: review of definition of principle supplier having negotiating rights under GATT Art 28 on modifying bindings Intellectual property: first of two-yearly reviews of the implementation of the agreement

2002
y

Textiles and clothing: new phase begins 1 January Textiles and clothing: full integration into GATT and agreement expires 1 January

2005
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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:
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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 WTOs 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 WTOs 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 WTOs 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 ones own nationals and foreigners equally), and most-favourednation 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 wellknown 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 products special characteristics, which are the result of the products 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 microorganisms), 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 breeders 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 systems 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 leastdeveloped 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 anticompetitive 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 courts 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. Transition arrangements: 1, 5 or 11 years or more When the WTO agreements took effect on 1 January 1995, developed countries were given one year to ensure that their laws and practices conform with the TRIPS agreement. Developing countries and (under certain conditions) transition economies were given five years, until 2000. Least-developed countries had 11 years, until 2006 now extended to 2013 in general, and to 2016 for pharmaceutical patents and undisclosed information. If a developing country did not provide product patent protection in a particular area of technology when the TRIPS Agreement became applicable to it (1 January 2000), it had up to five additional years to introduce the protection. But for pharmaceutical and agricultural chemical products, the country had to accept the filing of patent applications from the beginning of the transitional period (i.e. 1 January 1995), though the patent did not need to be

granted until the end of this period. If the government allowed the relevant pharmaceutical or agricultural chemical to be marketed during the transition period, it had to subject to certain conditions provide an exclusive marketing right for the product for five years, or until a product patent was granted, whichever was shorter. Subject to certain exceptions, the general rule is that obligations in the agreement apply to intellectual property rights that existed at the end of a countrys transition period as well as to new ones.

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 sectorsin particular, international finance and maritime transporthas 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 WTOs 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 WTOs 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 WTOs 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 reports 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 EUs noncompliance 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 decisionmaking 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 DSBs 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 11th 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.

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:
y y

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 dont 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 minimum cut per product Domestic support total AMS cuts for sector (base period: 1986-88) -20% Exports value of subsidies subsidized quantities (base period: 1986-90) -36% -21% -24% -14% -13% -36% -15% -24% -10%

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 cant 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 members 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 WTOs Agriculture Agreement was negotiated in the 198694 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 agreements implementation. Meanwhile, members also agreed to continue the reform. Further talks, which are separate from the committees regular work, began in 2000. They were included in the broader negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar.

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 GATTs 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 WTOs 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: its 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 countrys 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 to be brought under GATT (including removal of any quotas) 1: Percentage of products to be brought under GATT (including removal of any quotas)

Step 1 Jan 1995 (to 31 Dec 1997) Step 1 Jan 1998 (to 31 Dec 2001) Step 1 Jan 2002 (to 31 Dec 2004) Step 1

16% 6.96% (minimum, taking 1990 per year imports as base) 8.7% per year 11.05% per year No quotas left

2: 17%

3: 18%

Jan

4: 49% 2005 (maximum)

>Full integration into GATT (and final elimination of quotas). >Agreement on Textiles and Clothing terminates. The actual formula for import by 0.1 x pre-1995 growth 0.25 x Step 1 growth rate 0.27 x Step 2 growth rate in the third step. growth under quotas rate in the first in the second step; was: step; and

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 agreements 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 WTOs 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 twelvemonth 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.

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 domestic products. purchase

- 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 leastdeveloped 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:
y

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: y Purchase or use by an enterprise of products of domestic origin or from any domestic source (local content requirements), or

That an enterprises 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. References: 1) http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,content MDK:20046292~menuPK:1696892~pagePK:51123644~piPK:329829~theSit ePK:29708,00.html 2) http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,content MDK:20653660~menuPK:72312~pagePK:51123644~piPK:329829~theSiteP K:29708,00.html 3) http://www.imf.org/external/about/histend.htm 4) http://www.imf.org/external/about/history.htm 5) http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr02_e.htm 6) http://www.imf.org/external/index.htm 7) http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c3s1p1_e. htm 8) http://www.cid.harvard.edu/cidtrade/issues/dispute.html 9) http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm 10) http://www.wto.org/english/tratop_e/agric_e/agric_e.htm 11) http://www.wto.org/english/tratop_e/invest_e/invest_e.htm 12) http://www.wto.org/english/docs_e/legal_e/18-trims_e.htm 13) http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm 14) http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm5_e.htm 15) http://www.wto.org/english/docs_e/legal_e/ursum_e.htm#cAgreement