 The Fundamental Principles of the GATT and the WTO

Fundamental principles of the GATT are reciprocity and two nondiscrimination principles—most-
favored-nation treatment and national treatment.

1. Reciprocity:
For the past two hundred years, trade liberalization has been gradually promoted upon the principle
of reciprocity. During the postwar period, how to apply reciprocal relationship among the member
states had been the centerpiece of discussion on the table of the GATT.
General: Exchange of equal or identical advantages or privileges, such as removal of traveling
restriction between two countries.
Reciprocity is defined as a fundamental rule by which plural parties maintain the balance of
treatment by means of granting the same rights and benefits.
A reciprocal relationship can be explained as a balance condition in which one side gives the other
certain treatments while the other retunes the equivalent treatments.

International trade: Lowering of import duties and other trade barriers in return for similar
concessions from another country. Reciprocity is a traditional principle of GATT/WTO, but is
practicable only between developed nations due to their roughly matching economies. For trade
between them and developing nations, the concept of relative reciprocity is applied whereby the
developed nations accept less than full reciprocity from their developing trading partners.

Principle of Reciprocity in GATT: According to the preamble as well as various provisions of the
GATT, negotiations are to be concluded “on a reciprocal and mutually advantageous basis”. That is
to say, that to a country which takes new steps towards liberalization granting trade advantages to
another member state is to be granted in turn – “reciprocally – equivalent privileges by the favored
state.
Also in terms of reciprocity, an exception is made in favor of the developing countries. Under
the Enabling Clause it is permitted to the members to accept less than full reciprocity from their
developing trading partners. In doing so, the nations comply with the principle of solidarity.
 2. Nondiscrimination principles
Most-favored-nation treatment and national treatment
Most-favored-nation treatment: Under the WTO agreements, countries cannot normally
discriminate between their trading partners. Grant someone a special favor (such as a lower customs
duty rate for one of their products) and you have to do the same for all other WTO members.
This principle is known as most-favored-nation (MFN) treatment. It is so important that it is the
first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods.
MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in
each agreement the principle is handled slightly differently. Together, those three agreements cover
all three main areas of trade handled by the WTO.

ARTICLE I:1 OF THE GATT 1994 (MFN PRINCIPLE): With respect to customs duties and charges
of any kind imposed on or in connection with importation or exportation or imposed on the
international transfer of payments for imports or exports, and with respect to the method of levying
such duties and charges, and with respect to all rules and formalities in connection with importation
and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any
advantage, favour, privilege or immunity granted by any contracting party to any product
originating in or destined for any other country shall be accorded immediately and unconditionally
to the like product originating in or destined for the territories of all other contracting parties.
Some exceptions are allowed. For example, countries can set up a free trade agreement that applies
only to goods traded within the group — discriminating against goods from outside. Or they can
give developing countries special access to their markets. Or a country can raise barriers against
products that are considered to be traded unfairly from specific countries. And in services, countries
are allowed, in limited circumstances, to discriminate. But the agreements only permit these
exceptions under strict conditions. In general, MFN means that every time a country lowers a trade
barrier or opens up a market, it has to do so for the same goods or services from all its trading
partners — whether rich or poor, weak or strong.

Example: The MFN Principle

“A” – a WTO Member - the MFN tariff applicable to tomatoes from all WTO Members is 10%. B –
another WTO Member - is a big tomato producer interested in increasing its exports of tomatoes to
A.
Imagine that, during a WTO negotiating round, B initiates tariff negotiations on tomatoes with A.
After long and difficult bilateral meetings, A agrees to give B a duty-free access (0% tariff) for
tomatoes. However, according to the MFN principle, A should extend the 0% tariff on tomatoes to
all WTO Members. This is because all WTO Members should enjoy the most favourable treatment
for tomatoes granted by A.

Case study: 1. EC — Bananas III

Complainant: Ecuador; Guatemala; Honduras; Mexico; United States
Respondent: European Communities
The European Union maintains measures that provide preferential treatment to countries in Africa,
the Caribbean, and the Pacific (ACP) regarding tariff quotas (that is both the quota amount and
applicable tariff rates), under the Lomé Convention. These measures involving bananas have been
before a panel twice under the GATT (See Chapter 15 on Regional Integration). After the conclusion
of the Uruguay Round, the European Union put in place a new tariff quota regime for bananas.
However, the United States, whose companies mainly deal in Latin American bananas, was
unsatisfied with the new regime, and argued that the licensing system still provided preferential
treatment to ACP bananas. The United States further argued that the preferential allocation of the
quota to Latin American countries who are parties to the “Framework Agreement on Bananas
(BFA)” (especially Colombia and Costa Rica) was inconsistent with the WTO Agreement. After
bilateral negotiations under GATT Article XXII between the European Union and the United States
as well as some Latin American countries (Ecuador, Guatemala, Honduras, and Mexico), a panel was
established in May 1996. Japan participated in the panel process as a third party.
The panel found that the European Communities’ banana import regime and the licensing
procedures for the importation of bananas in this regime are inconsistent with the GATT 1994.
Allocating a portion of the quota regarding third-country and nontraditional ACP bananas to only
operators who deal in the EU and traditional ACP bananas is inconsistent with Article I:1 (MFN) and
Article III:4 (national treatment) of the GATT. The Lomé waiver does not waive the EU’s obligations
under Article I:1 with respect to licensing procedures applied to third-country and non-traditional
ACP imports.

2. CANADA Measures Regarding Automobiles

Under the “Auto Pact” (the Agreement Concerning Automotive Products with the United States,
which took effect in 1966), the government of Canada accorded duty-free treatment to vehicles,
provided that importers (the Big Three and others, hereinafter referred as “Auto Pact members”)
met certain conditions (e.g., Canadian value-added — the required rates varied, but in general they
were 60 percent or more). The system had been administered so as to give tariff exemption to
automobiles imported by any company as long as the companies met the above conditions, but the
signing of the Free Trade Agreement (FTA) between the United States and Canada resulted in
barring extension of the Auto Pact status to any new companies. This treatment continued after the
North American Free Trade Agreement (NAFTA) took effect. What this in essence meant was that
original Auto Pact member companies in Canada could import automobiles duty-free so long as
they met the above conditions, while non-members had to pay a 6.1 percent tariff (rate as February
2000), despite the fact that all of these companies involved like products and services through
production, importation and sale of automobiles.
The Ministry of Economy, Trade and Industry (METI) deemed this a priority trade policy, and in July
1998 requested bilateral consultations with Canada under WTO dispute settlement procedures.
Japan requested the establishment of a panel in November of that year, and in February 1999 a panel
was established to review the Japanese complaint in conjunction with a similar EU complaint.
The panel issued its report in February 2000, and the Appellate Body issued its report in May. Both
reports upheld virtually all of the Japanese argument, finding that the measure: 1) violated GATT
Article I:1 (MFN treatment); 2) violated GATT Article III:4 (national treatment); 3) violated the SCM
Agreement; 4) violated Article XVII of the GATS (national treatment); and 5) that the duty waiver
violated Article II of the GATS (MFN treatment) and Article XVII (national treatment) of the GATS.
However, this last finding was overturned by the Appellate Body. Canada repealed the Auto Pact’s
measures on February 19, 2001.

2. National treatment: Treating foreigners and locals equally Imported and locally-produced goods
should be treated equally — at least after the foreign goods have entered the market. The same
should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and
patents. This principle of “national treatment” (giving others the same treatment as one’s own
nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17
of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in
each of these.
National treatment only applies once a product, service or item of intellectual property has entered
the market. Therefore, charging customs duty on an import is not a violation of national treatment
even if locally-produced products are not charged an equivalent tax.
ARTICLE III OF THE GATT 1994 (NATIONAL TREATMENT PRINCIPLE)
Members recognize that internal taxes and other internal charges, and laws, regulations and
requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or
use of products, and internal quantitative regulations requiring the mixture, processing or use of
products in specified amounts or proportions, should not be applied to imported or domestic
products so as to afford protection to domestic production.
Exemple: In Chile - Alcoholic Beverages, the Appellate Body held that the cumulative consequence
of the New Chilean System was that approximately 75 per cent of all domestic production of the
distilled alcoholic beverages at issue would be located in the fiscal category with the lowest tax rate,
whereas approximately 95 per cent of the directly competitive or substitutable imported products
would be found in the fiscal category subject to the highest tax rate (Chile - Alcoholic Beverages,
Appellate Body Report, para. 67).

Case studies: JAPAN-TAXES ON ALCOHOLIC BEVERAGES II

Japanese Liquor Tax Law classified various alcoholic beverages into different categories on the basis
of the alcohol content of the product and established a system of internal taxes applicable to all
liquors at different tax rates depending on the category they fell in. The tax law at issue taxed
shochu at a lower rate than other alcoholic beverages, including vodka and others such as liqueurs,
gin, genever, rum, whisky and brandy.
The Panel found that vodka and shochu were "like" products and that by taxing vodka in excess of
shochu, Japan was in violation of its obligation under Article III:2, first sentence. The Panel also
found that shochu and whisky, brandy, rum, gin, and other liqueurs were directly competitive or
substitutable products according to Article III:2, second sentence, and that Japan, by not taxing
them similarly, was acting in a manner inconsistent with its obligation under Article III:2, second
sentence. Japan appealed both findings.
The Appellate Body upheld the Panel's finding that vodka was taxed in excess of shochu, and found
the measure inconsistent with Art. III:2, first sentence. It also upheld the Panel's finding that
shochu and whisky, brandy, rum, gin and other liqueurs were not similarly taxed so as to afford
protection to domestic production, concluding that the measure was in violation of Art. III:2, second
sentence.

EC-ASBESTOS
The French government adopted Decree No. 96-1133, which imposed a ban on all variety of asbestos
fibres. The Panel found that chrysotile asbestos fibres and polyvinyl alcohol, cellulose and glass
fibres ("PCG fibres") are "like products" under Article III:4. The Panel also found that cement-based
products containing chrysotile asbestos fibres are "like" cement-based products containing PCG
fibres. Having found that the products at issue are like products under Article III:4, the Panel
continued to examine the alleged ''less favourable treatment'' and found that imported asbestos and
asbestos-containing products were treated less favourably than the domestic "like" products. In the
light of the findings, the Panel concluded that the measure was contrary to Article III:4.
On appeal, the European Union argued, among other issues, that the inquiry into the physical
properties of products must include a consideration of the risks posed by the product to human
health.

The Appellate Body reversed the Panel's findings that "it is not appropriate" to take into
consideration the health risks associated with chrysotile asbestos fibres in examining the "likeness"
under Article III:4 and reversed the Panel's finding that cement-based products containing
chrysotile asbestos fibres and cement-based products containing PCG fibres are "like products"
under Article III:4 of the GATT 1994. Accordingly, it reversed the Panel's finding that the measure
was inconsistent with Article III:4 of the GATT 1994.

 GENERAL EXCEPTIONS
Article XX of the GATT 1994 governs the use of the general exception for trade in goods. It
recognizes that Members may need to apply measures for purposes such as the protection of public
morals; human animal or plant life or health; and, the conservation of exhaustible natural resources.
However, any measure adopted under the general exceptions provision must meet the requirements
set out in the sub-paragraphs of Article XX – depending on the objective of the measure - and its
introductory paragraph ("the Chapeau"). According to the Chapeau of Article XX, the measure must
not be applied in a manner that would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions prevail or a disguised restriction on
international trade.
Subject to the requirement that such measures are not applied in a manner which would constitute
a means of arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or a disguised restriction on international trade, nothing in this Agreement shall be
construed to prevent the adoption or enforcement by any Member of measures:
(a)Necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health
(e) relating to the products of prison labour;
(f) imposed for the protection of national treasures or artistic, historic or archaeological value;
(g) relating to the conservation of exhaustible natural resources if such measures are made effective
in conjunction with restrictions on domestic production or consumption;

WTO and environment:

Art. XX GATT: Environmental Exceptions
Article XX: general exceptions Subject to the requirement that such measures are not applied in a
manner which would constitute a means of arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a disguised restriction on international trade,
nothing in this agreement shall be construed to prevent the adoption or enforcement by any
contracting party of measures: ....
• (b) necessary to protect human, animal or plant life or health;
• (g) relating to the conservation of exhaustible natural resources if such measures are made
effective in conjunction with restrictions on domestic production or consumption…

Tuna - Dolphin case

In eastern tropical areas of the Pacific Ocean, schools of yellowfin tuna often swim beneath schools
of dolphins. When tuna is harvested with purse seine nets, dolphins are trapped in the nets. They
often die unless they are released.
The US Marine Mammal Protection Act sets dolphin protection standards for the domestic
American fishing fleet and for countries whose fishing boats catch yellowfin tuna in that part of the
Pacific Ocean. If a country exporting tuna to the United States cannot prove to US authorities that it
meets the dolphin protection standards set out in US law, the US government must embargo all
imports of the fish from that country. In this dispute, Mexico was the exporting country concerned.
Its exports of tuna to the US were banned. Mexico complained in 1991 under the GATT dispute
settlement procedure.
The embargo also applies to “intermediary” countries handling the tuna en route from Mexico to the
United States. Often the tuna is processed and canned in one of these countries. In this dispute, the
“intermediary” countries facing the embargo were Costa Rica, Italy, Japan, and Spain, and earlier
France, the Netherlands Antilles, and the United Kingdom. Others, including Canada, Colombia, the
Republic of Korea, and members of the Association of Southeast Asian Nations, were also named as
“intermediaries”.

Mexico asked for a panel in February 1991. A number of "intermediary" countries also expressed an
interest. The panel reported to GATT members in September 1991. It concluded:
that the US could not embargo imports of tuna products from Mexico simply because Mexican
regulations on the way tuna was produced did not satisfy US regulations. (But the US could apply its
regulations on the quality or content of the tuna imported.) This has become known as a “product”
versus “process” issue.
that GATT rules did not allow one country to take trade action for the purpose of attempting to
enforce its own domestic laws in another country — even to protect animal health or exhaustible
natural resources. The term used here is "extra-territoriality".
WTO and Labor Rights
In the WTO, the debate has been hard-fought, particularly in 1996 and 1999. It was at the 1996
Singapore conference that members agreed they were committed to recognized core labour
standards, but these should not be used for protectionism. The economic advantage of low-wage
countries should not be questioned, but the WTO and ILO secretariats would continue their
existing collaboration, the declaration said. The concluding remarks of the chairman, Singapore’s
trade and industry minister, Mr Yeo Cheow Tong, added that the declaration does not put labour on
the WTO’s agenda. The countries concerned might continue their pressure for more work to be
done in the WTO, but for the time being there are no committees or working parties dealing with
the issue.
The issue was also raised at the Seattle Ministerial Conference in 1999, but with no agreement
reached. The 2001 Doha Ministerial Conference reaffirmed the Singapore declaration on labour
without any specific discussion.
This issue was also indirectly mentioned in the Appellate Body Report on the dispute initiated by
India against the European Communities concerning the conditions for granting of tariff preferences
to developing countries.
Paragraphs (a), (b) and (d) of GATT Article XX (20) to impose unilateral trade restrictive measures
on countries for unacceptable labor standards.

 WTO and Development:

About two thirds of the WTO’s around 164 members are developing countries. They play an
increasingly important and active role in the WTO because of their numbers, because they are
becoming more important in the global economy, and because they increasingly look to trade as a
vital tool in their development efforts. Developing countries are a highly diverse group often with
very different views and concerns.

Special and Differential Treatment

The WTO Agreements allow developing countries some preferential treatment, including the
following measures:
 extra time for developing countries to fulfill their commitments.
 provisions designed to increase developing countries’ trading opportunities through greater
market access.
 provisions requiring WTO members to safeguard the interests of developing countries when
adopting some domestic or international measures.
 provisions for various means of helping developing countries through technical assistance.
GATT Provisions and Decisions:
The Enabling Clause officially called the "Decision on Differential & More Favorable Treatment,
Reciprocity & Fuller Participation of Developing Countries", was adopted under GATT in 1979 and
enables developed members to give differential and more favorable treatment to developing
countries.
The Enabling Clause is the WTO legal basis for the Generalized System of Preferences (GSP). Under
the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties
on imports) to products originating in developing countries. Preference-giving countries unilaterally
determine which countries and which products are included in their schemes.
The Enabling Clause is also the legal basis for regional arrangements among developing countries
and for the Global System of Trade Preferences (GSTP), under which a number of developing
countries exchange trade concessions among themselves.

1. History and Overview

The history of special and differential treatment (SDT) of developing countries can be divided in two
phases: The time before and after the GATT Uruguay Round which began in 1986. This eight-year
negotiation round at whose end in 1994 stood the ratification of the “Marrakesh Agreement
Establishing the World Trade Organization” marks a tidal change in the concept of special
treatment. The quality and background of this change will be described below.

A. The Road to the Enabling Clause:

In the ITO negotiations which took place between November 1947 and March 1948 the developing
countries managed to introduce an additional clause in the Havana Charter. This clause allowed
them to apply national protection measures to support “economic development and reconstruction”
of industry and agriculture, although such measures were in general prohibited in the Charter.
At the UNCTAD-II conference in New Delhi in 1968 the USA agreed to the introduction of the
Generalized System of Preferences (GSP) which Prebisch had suggested already in 1964. This system
was finally installed by the industrialized nations on a voluntary basis.
The final step on the road towards the official introduction of special and differential treatment for
developing countries was taken in 1979 with the adoption of the so called Enabling Clause during
the GATT Tokyo Round.
This clause encompassed a) preferential market access for developing countries on a non-reciprocal
and nondiscriminatory basis, b) differential and more favourable treatment of developing countries
with regard to GATT provisions on non-tariff barriers, c) the conclusion of preferential agreements
between developing countries and d) special treatment of the so-called Least Developed Countries
(LDC). As a concrete measure the Enabling Clause provided that GSP and the preferential
agreement between developing countries be exempt from Article I of GATT (Most-Favoured-Nation
Treatment). That means, the time limitation of the Most-Favoured-Nation exemption for the GSP
was withdrawn and thus the exemption became permanent.

B. The Change of Special Treatment During the Uruguay Round:

While before the Uruguay Round flexibility in the application of the trade rules, the protection of
infant industries and the non-reciprocity of liberalisation had stood in the foreground, the special
provisions of the WTO agreements focused on three categories: a) extended transition periods or
other limits regarding the implementation of the agreements, b) exceptions above all for the LDCs
and c) provisions for technical assistance. The provisions of GATT 1947 regarding market access for
developing countries and the Enabling Clause which had established a long-term legal basis for the
GSP were only included in GATT 1994. Thus, the Uruguay Round in no way changed the already
well-known weaknesses of the GSP. The fact that longer transition periods were granted shows that
the negotiators were well aware of the insufficient capacities of many countries to implement the
WTO agreements. These deficits allegedly were to be rectified by technical assistance.
The Bali Ministerial Conference in December 2013 established a mechanism to review and analyse
the implementation of special and differential treatment provisions. The mechanism, which will
take place in Dedicated Sessions of the CTD, will provide members with an opportunity to analyse
and review all aspects of the implementation of S&D provisions contained in multilateral WTO
agreements, Ministerial and General Council Decisions — with the possibility to make
recommendations to the relevant WTO bodies — aimed at either improving the implementation of
reviewed provisions, or improving the provisions themselves through re-negotiations.

2. Generalized System of Preferences, or GSP

The Generalized System of Preferences (GSP) is a generalized, non-reciprocal and
nondiscriminatory preference scheme beneficial to developing countries (also known as preference
receiving countries or beneficiary countries) extended by developed countries (also known as
preference giving countries or donor countries) . It involves reduced MFN Tariffs or duty-free entry
of eligible products exported by beneficiary countries to the markets of donor countries. The main
objectives of granting trade preferences to developing countries are to: • Enhance their export
earnings; • Promote industrialization, and • Encourage the diversification of their economies.

History: The idea of tariff preferences for developing countries was the subject of considerable
discussion within the United Nations Conference on Trade and Development (UNCTAD) in the
1960s. Among other concerns, developing countries claimed that MFN was creating a disincentive
for richer countries to reduce and eliminate tariffs and other trade restrictions with enough speed to
benefit developing countries.
In 1971, the GATT followed the lead of UNCTAD and enacted two waivers to the MFN that permitted
tariff preferences to be granted to developing country goods. Both these waivers were limited in
time to ten years. In 1979, the GATT established a permanent exemption to the MFN obligation by
way of the enabling clause. This exemption allowed contracting parties to the GATT (the equivalent
of today's WTO members) to establish systems of trade preferences for other countries, with the
caveat that these systems had to be "generalized, non-discriminatory and non-reciprocal' with
respect to the countries they benefited (so-called "beneficiary" countries). Countries were not
supposed to set up GSP programs that benefited just a few of their "friends.'

Product Coverage: Most of the GSP product coverage includes agricultural and industrial exports
with a few but often notable exceptions. The exceptions established by the United States GSP
include textiles and apparel, certain footwear, certain leather products (handbags, luggage), certain
watches and watch parts, canned tuna, and petroleum and petroleum products.

3. Waivers:
Going beyond legal provisions stated explicitly in WTO agreements, actions in favor of developing
countries, individually or as a group, may also be taken under “waivers” from the main WTO rules.
These waivers are granted by the General Council according to procedures set out in Article IX:3 of
the Agreement Establishing the WTO. Recent examples of waivers include the EC/France Trading
Arrangements with Morocco, the United States' Caribbean Basin Economic Recovery Act (CBERA),
the Canadian Tariff Treatment for Commonwealth Caribbean Countries (CARIBCAN), the United
States' Andean Trade Preference Act, and the ACP-EC Partnership Agreement (currently under
consideration).
The June 1999 General Council Decision on Waiver regarding Preferential Tariff Treatment for
Least-Developed Countries allows developing country members to provide preferential tariff
treatment to products of least developed countries.

4. Duty Free and Quota Free (DFQF)

Duty Free: Goods that international travelers can purchase without paying the usual taxes on
imported goods. the duty-free stores can charge less than they would if they were selling the same
goods to consumers who were not leaving the country.
Quota Free: Without any limit on the amount of particular goods that can be imported or exported

Historical Development of DFQF: Trade preferences for LDCs has been featuring since long time
in the international trading system. The concept of the Generalized System of Preferences was
adopted in New Delhi in 1968 in the context of UNCTAD II. As stated in UNCTAD Resolution 21(II):
The objectives of the generalized, non-reciprocal, non-discriminatory system of preferences in
favour of the developing countries, including special measures in favour of the least advanced
among the developing countries, should be:
 (a) to increase their export earnings;
 (b) to promote their industrialization;
 (c) to accelerate their rates of economic growth

Ministerial conferences:
1. Bali Conference 2013:
The Ninth World Trade Organization Ministerial Conference was held in Bali, Indonesia from 3 to 7
December 2013.
Covers measures for the least developed countries and developing countries, including preferential
treatment and market access.
Preferential Rules of Origin for Least-Developed Countries - simplified rules for identifying origin
and qualifying for preferential treatment with importing countries.
Operationalization of the Waiver Concerning Preferential Treatment to Services and Service
Suppliers of Least-Developed Countries - allows preferential treatment to be given to LDCs for 15
years from date of agreement adoption.
Duty-Free Quota-Free (DFQF) Market Access for Least-Developed Countries
WTO members agreed that: “Developed-country members shall, provide duty-free and quota-free
market access on a lasting basis, for all products originating from all LDCs.
Members shall provide duty-free and quota-free market access for at least 97 percent of products
originating from LDCs defined at the tariff line level”, while taking steps to progressively achieve 100
per cent DFQF.

2. Nairobi Ministerial Conference:

The WTO's 10th Ministerial Conference was held in Nairobi, Kenya, from 15 to 19 December 2015.
Special Safeguard Mechanism for Developing Country Members: In the context of addressing
outstanding agricultural issues; and
Taking note of the proposals made by Members in this regard;
Decides as follows:
1. The developing country Members will have the right to have recourse to a special safeguard
mechanism (SSM) as envisaged under paragraph 7 of the Hong Kong Ministerial Declaration.
2. To pursue negotiations on an SSM for developing country Members in dedicated sessions
of the Committee on Agriculture in Special Session ("CoA SS").
3. The General Council shall regularly review progress in these negotiations

Preferential Rules of Origin for Least Developed Countries: Recalling the "Decision on
Measures in Favour of Least-Developed Countries" (Annex F of the Hong Kong Ministerial
Declaration) which states that: "Developed country Members shall, and developing country
Members declaring themselves in a position to do so should: ensure that preferential rules of origin
applicable to imports from LDCs are transparent and simple, and contribute to facilitating market
access";
Reaffirming and building upon the guidelines enumerated in the "Ministerial Decision on
Preferential Rules of Origin for Least-Developed Countries" adopted at the Bali Ministerial
Conference;

Implementation of Preferential Treatment in Favour of Services and Service Suppliers of

Least Developed Countries and Increasing LDC Participation in Services Trade.

 WTO: SETTLING DISPUTES

How long to settle a dispute?
These approximate periods for each stage of a dispute settlement procedure are target figures — the
agreement is flexible. In addition, the countries can settle their dispute themselves at any stage. Totals
are also approximate.
60 days Consultations, mediation, etc.

45 days Panel set up and panelists appointed

6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute Settlement Body adopts report (if no appeal)

Total = 1 year (without appeal)

60-90 days Appeals report

30 days Dispute Settlement Body adopts appeals report

Total = 1y 3m (with appeal)

HOW ARE DISPUTES SETTLED?

Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in
another guise), which consists of all WTO members. The Dispute Settlement Body has the sole
authority to establish “panels” of experts to consider the case, and to accept or reject the panels’
findings or the results of an appeal. It monitors the implementation of the rulings and
recommendations, and has the power to authorize retaliation when a country does not comply with
a ruling.

First stage: consultation (up to 60 days). Before taking any other actions the countries in dispute
have to talk to each other to see if they can settle their differences by themselves. If that fails, they
can also ask the WTO director-general to mediate or try to help in any other way.

Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the panel to
conclude). If consultations fail, the complaining country can ask for a panel to be appointed. The
country “in the dock” can block the creation of a panel once, but when the Dispute Settlement Body
meets for a second time, the appointment can no longer be blocked (unless there is a consensus
against appointing the panel).
Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations. But
because the panel’s report can only be rejected by consensus in the Dispute Settlement Body, its
conclusions are difficult to overturn. The panel’s findings have to be based on the agreements cited.
The panel’s final report should normally be given to the parties to the dispute within six months. In
cases of urgency, including those concerning perishable goods, the deadline is shortened to three
months.

The agreement describes in some detail how the panels are to work. The main stages are:
Before the first hearing: each side in the dispute presents its case in writing to the panel.
First hearing: the case for the complaining country and defence: the complaining country (or
countries), the responding country, and those that have announced they have an interest in the
dispute, make their case at the panel’s first hearing.
Rebuttals: the countries involved submit written rebuttals and present oral arguments at the
panel’s second meeting.
 Experts: if one side raises scientific or other technical matters, the panel may consult experts or
appoint an expert review group to prepare an advisory report.
First draft: the panel submits the descriptive (factual and argument) sections of its report to the
two sides, giving them two weeks to comment. This report does not include findings and
conclusions.
Interim report: The panel then submits an interim report, including its findings and conclusions,
to the two sides, giving them one week to ask for a review.
Review: The period of review must not exceed two weeks. During that time, the panel may hold
additional meetings with the two sides.
Final report: A final report is submitted to the two sides and three weeks later, it is circulated to
all WTO members. If the panel decides that the disputed trade measure does break a WTO
agreement or an obligation, it recommends that the measure be made to conform with WTO rules.
The panel may suggest how this could be done.
The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or
recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report (and
in some cases both sides do).

PANELS
Panels are like tribunals. But unlike in a normal tribunal, the panellists are usually chosen in
consultation with the countries in dispute. Only if the two sides cannot agree does the WTO
director-general appoint them.
Panels consist of three (possibly five) experts from different countries who examine the evidence
and decide who is right and who is wrong. The panel’s report is passed to the Dispute Settlement
Body, which can only reject the report by consensus.
Panelists for each case may be chosen from an indicative list of well-qualified candidates nominated
by WTO Members, although others may be considered as well, including those who have formerly
served as panelist. Panelists serve in their individual capacities. They cannot receive instructions
from any government. The indicative list is maintained by the Secretariat and periodically revised
according to any modifications or additions submitted by Members.

APPEALS
Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on
points of law such as legal interpretation — they cannot reexamine existing evidence or examine
new issues.
Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the
Dispute Settlement Body and broadly representing the range of WTO membership. Members of the
Appellate Body have four-year terms. They have to be individuals with recognized standing in the
field of law and international trade, not affiliated with any government.
The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally
appeals should not last more than 60 days, with an absolute maximum of 90 days.
The Dispute Settlement Body has to accept or reject the appeals report within 30 days — and
rejection is only possible by consensus.
If the country that is the target of the complaint loses, it must follow the recommendations of the
panel report or the appeals report. It must state its intention to do so at a Dispute Settlement Body
meeting held within 30 days of the report’s adoption. If complying with the recommendation
immediately proves impractical, the member will be given a “reasonable period of time” to do so. If
it fails to act within this period, it has to enter into negotiations with the complaining country (or
countries) in order to determine mutually-acceptable compensation — for instance, tariff reductions
in areas of particular interest to the complaining side