WTO Establishment

Uruguay Round treaty came into force on January 1, 1995 26,000-page treaty The treaty is one entire unified document implementing the principle of a single undertaking to which all governments must agree in order to become members.

Beginning portion is a brief 14 page text which establishes the WTO as a proper (no longer provisional) organization. This portion of the long treaty is often informally called the WTO Charter. Major portion of the treaty pages are four Annexes to the WTO Charter. Three of the annexes and their contents are mandatory for all the members. A fourth annex, however, contains some optional treaty text.

ANNEX 1 - Multilateral Agreements - Three mandatory substantive agreements.

Annex 1A Goods Basic principles GATT 1994

Revised newer texts, some derived from Tokyo Round side-agreements. understandings and similar complementary documents Tariff schedules (called bindings) which set maximum tariff commitments for each member,

Annex 1B Services
GATS

Annex 1C Intellectual property

TRIPS

Additional details
Market access commitments

Services annexes
Countries schedules of service commitments

Annex 2 - DSU (Dispute Settlement Understanding)

Text of about twenty-four pages which governs the DS procedures in some detail

Annex 3 - TPRM (Trade Policy Review Mechanism)

Text designed to set up a structure of regularly scheduled institutional reviews of each members trade policies. The review is not supposed to be limited to examining compliance with obligations, but to range broadly over all issues relevant to a members international trade measures and policies.

Annex 4 - Plurilateral Agreements (Optional)

Text on government procurement and a text on trade in civil aircraft. At the end of the UR, there were four texts listed but two relating to agriculture were terminated. This annex could be a source of some dynamic flexibility for the WTO institution, but unfortunately the WTO Charter rules require a consensus of members to add any new agreements to Annex 4,5 a requirement which so far has been assumed to be unobtainable.

The WTO Charter establishes an international organization, endows it with legal personality, and supports it with the traditional treaty organizational clauses like
regarding privileges and immunities Secretariat, Director-General, budgetary measures, and explicit authority to develop relations with other intergovernmental organizations and important to some interests non government organizations.

Top - Ministerial Conference, which meets not less often than every two years. Next - General Council has overall supervisory authority including responsibility for carrying out many of the functions of the Ministerial Conference between Ministerial Conference sessions.
In addition, a council for each of the Annex 1 agreements, that is for goods, services, and intellectual property. Some councils have established many committees for specific subjects.

Dispute Settlement Body to supervise and implement the dispute settlement rules in Annex 2.
TPRM Body for the Trade Policy Review Mechanism in Annex 3. Each of these councils and bodies is open to membership of any WTO member who chooses to take it on. Secretariat staff is prohibited by the Charter from seeking or accepting instructions from any government or any other authority external to the WTO.

Article XXV called for one nation, one vote and decision by a majority of votes cast, unless otherwise provided. Basically there are five different techniques for making decisions or formulating new or amended rules of trade policy in the WTO Charter - decisions on various matters, interpretations, waivers, amendments to the agreements and negotiation of new agreements. There are variety of non-majority principles applied, including consensus.

Super-majority requirements i.e. a vote of three-fourths of the membership (not just those present) is required as per WTO Charter Article IX for the members to make a definitive interpretation of some UR text.
Amending also has difficult provisions, depending on text which normally requires a two-thirds vote which is not binding on those not voting to approve; however, a three-quarters vote is binding on all. Even in that case there is provision for a hold-out member to withdraw from the organization or negotiate a special dispensation. Since withdrawal by certain key members of the WTO would probably end the WTOs effectiveness, such key members probably effectively have a veto regarding amendments.

The original membership - Conferred on any GATT contracting party that accepted both the UR treaty and negotiated schedules of concessions for goods and for services. Accepting new members
WTOs acceptance to begin the process Followed by detailed reports on the applicant about its trade policy and legal structure Followed by elaborate questioning from the existing members. Further clarification, and existing members begin negotiating with the applicant, sometimes one on one, to develop over time an usually lengthy and elaborate draft protocol of accession. When this is approved, and the applicant notifies its ratification, then thirty days later the applicant becomes a member.

Three curious aspects of membership and the two-thirds membership vote provision for accepting a new member.
Members of the WTO do not have to be full sovereign nation-states. Instead they must be a customs territory that possess full autonomy in the conduct of its external commercial relations and other matters contained in the UR (WTO) agreement e.g. Chinese Taipei (Taiwan), which carefully crafted its application for GATT (and then WTO) status as such independent customs territory, so as not to offend mainland China. Special WTO provision ( Art. XIII) that allows either an existing member or an applicant member, at the time of accession only, to opt out of the treaty relationship between itself and any other member or applicant. This provision accommodates those countries or customs territories which for political or other reasons did not want any formal treaty relationship with another party. In GATT this was utilized by India to avoid treaty relations with South Africa. The required two-thirds vote in favor for a new member seems in practice in the WTO already to have evolved into a consensus requirement (arguably more restrictive than two-thirds).

Since beginning WTO has faced major criticism, some of them manifested through street demonstrations and others through bitter communications by political and government leaders and the media. Is the institutional structure of the WTO as good for achieving its WTO goals as it should be? consensus questions the attitudes regarding nongovernment actors (and beneficiaries), questions of transparency and democratic legitimacy the relationship of poorer countries to the WTO system worries about inadequate resources of the organization proliferation of discriminatory bilateral and small group trade agreements and the evolving structures of power allocation within the organization and between the WTO and nation-states or other international organizations.

The decision-making procedures are complex and relatively numerous because of some special procedures with super-majority requirements. At the core, however, there is a relatively generic procedure of majority rule, with one nation, one vote operating.

The membership of both GATT and the WTO have consistently manifested strong skepticism about this majority voting in the context of the one nation, one vote equality principle for nation-state members which varied enormously in population size, economic size, geography, and many other characteristics that effectively impact upon an appreciation of real power, as opposed to the nominal equality of the system.
Because of its skepticism, GATT gradually developed a practice of consensus decision making. The word consensus does not appear in the GATT text but is now defined in the WTO Charter. It states that a decision will be deemed accepted in any case where no party to the agreement (present at a meeting) objects. Thus consensus is not precisely the same as unanimity, since an abstaining position is not a negative and absence from a meeting or from a particular voting procedure is also not a negative. The consensus rule has been criticized as disenfranchising members that are absent but may have strong interests to protect.

Certain types of decisions require a super-majority of votes and, in some cases, require at least an attempt to achieve consensus (with a fallback to voting in some cases) or, in other cases, an absolute requirement of so-called full consensus, with no fallback. A very prominent example of the latter is the requirement expressed in the DSU that decisions of the DSB must be taken by consensus, unless otherwise stated. This is in some ways troubling because so much of the DSU is procedural in a context where full consensus on changes to correct what have been discovered to be some drafting problems in the text cannot easily be achieved. A consensus hold-out country can hold up the process, sometimes in order to bargain over matters unrelated to the instant subject being considered. Emphasis on consensus decision making in the WTO can sometimes lead to paralysis, and can be blamed for the perceived inability of the organization. The consensus rule is also likely to bear a fairly heavy responsibility for the failure of certain committees and working parties in the WTO to achieve any meaningful accomplishment in their work. Examples sometimes mentioned in this regard include lack of accomplishment by committees on regional and preferential agreements, rules of origin, and environmental agreements and their relation to trade rules.

Consensus has important values that need to be preserved. The rule forces the membership to achieve as wide an acceptance of new measures as possible, thus lending democratic legitimacy to measures that are finally adopted. It forces the richer and more powerful members of the organization to take into consideration the needs and opinions of all parts of the organization, including the poorer and less powerful governments. Concepts and approach to end consensus problem
An attempt to define a somewhat different process for procedural rules as opposed to substantive rules. Having a rule against one or just a few holdout votes defeating consensus. A practice might be developed, perhaps beginning with a resolution adopted by consensus, that would strongly urge governments to refrain from blocking a consensus when there was an overwhelming majority (e.g., 90 or 95 percent), and such majority represented an overwhelming amount of trade interest or economic size (sometimes called a critical mass). PLURILATERAL AGREEMENTS - There is also a concept partly embedded in the WTO Charter of plurilateral agreements which contemplates certain kinds of agreements or measures that might be adopted by a sub-group of the total membership, and then only applying to that subgroup. However, this raises important questions regarding the MFN clause (non-discrimination). SCHEDULING APPROACH - In this procedure, the country which is willing to enter into an overall agreement that we would likely call plurilateral, and which agreement would only bind those willing to accept it, would agree to put the essence of that agreement into its services schedule. Thus, there are multiple texts in a variety of schedules, and they bind only those countries that have accepted them. Presumably, they all continue to be subject to the MFN principles and rules. It is conceivable that something like this might actually be workable in some contexts of trade in products, as compared with the services trade.

Another important problem of the WTO is the devilish detail of resources for the institution to operate in an appropriate manner that is both efficient and fair in relation to its very broad responsibilities and the goals of the organization.

The comparison of administrative budgets and staff size of WTO with that of other major international economic organizations, such as the Bretton Woods financial institutions, and institutions such as the OECD demonstrates how small the organization is when compared to these institutions.

Another important problem that has received much attention, criticism, and discussion, but no apparent movement towards any solution, is that of administrative guidance or control of the organization. The WTO has reached a point where it is virtually impossible to set up effective procedures for decisionmaking, negotiation, and so on when all members demand that they be present and active on such decisions (even when solely procedural). It is noted that virtually every other effective international organization has some kind of a smaller sub-group of the total membership that acts at least in an advisory or guidance capacity. GATT for many years operated its green room approach, whereby the Director-General, in consultation with ambassadors of some of the most important and diverse members, would call together a group of principals (ambassadors only, perhaps) into the green room, which is a relatively small conference room in the WTO headquarters building. The green room can only hold several dozen persons. The addition to the headquarters building of the WTO now has a very large auditorium, which can accommodate the entire membership, as well as ancillary staff support for the representatives, but, obviously, certain kinds of negotiation and decisions, including perhaps decisions about agenda and timetable, are very difficult to handle in such a large group.

WTO is trying to develop an appropriate way to have a sufficiently small steering group, working directly with the Director- General, so that decisions can be effectively and efficiently made, particularly as to procedures, timetables, and agenda. This group could also arrange for various proposals or options papers to be delegated and developed to avoid some of the problems of a decision being taken by either too large or too small a group. Unfortunately, every time such a group other than the total membership is suggested, governments feel that they would not be entitled to be part of that group. This steering group would impose a system of transparency to keep all interested governments adequately appraised about what was happening, and to provide that certain members that were on the steering group would have obligations to represent the views of a constituency group of members. These constituencies might be designed by reference to geography or other kinds of identities of interest.

Transparency - Transparency is in the sense of providing a flow of information within an organization and to constituents and important stakeholders not necessarily within the organization. WTO is superior to GATT with respect to transparency. The WTO website is extraordinarily vast and full of information. The rules established for documentation try to enforce the presumption that documents should not be restricted (and, therefore, quickly available to the public on the web). To a large degree, this has already occurred. In particular, the dispute settlement reports are available on the website at least within a month or two of a decision and by the time of the adoption of a report, the public can view the official texts of these reports. Nevertheless, there is still a transparency deficit in the WTO. Some governments and WTO officials avoid the transparency rules by producing non-documents (usually with very tentative proposals) or by using a document that is only referenced as job number and thus not in the official documentation nor even on the web.

Dispute settlement hearings are also not open to the public. Many experienced diplomats and other participants in trade relations feel that the organization would be greatly aided by having those hearings open so that the public could see the seriousness and the high degree of expertise that goes into the deliberations about these specific legal dispute cases.

Good many of the committees and working groups of the WTO should also make their meetings more transparent, either by having a public or press gallery, through Internet broadcasting, or at least through the provision of a transcript, available very quickly after a particular meeting. There is also an internal transparency problem within the WTO, since sometimes some members do not have access to information that is known to other members. All the hearings and documents, including the submittals by disputants in the dispute settlement process, is also not available to all the members. This is a problem with the dispute settlement system, since the hearings are not open to all members. Generally only the disputants themselves and the so-called third parties have the ability to attend the hearings, and even the third parties are not allowed to attend all portions of a procedure. Some point the transparency of these submittals should be mandatory, either through the governments themselves or through the Secretariats placement of them online.

The world is seeing an enormous amount of activity by nongovernment entities, and many of these entities, such as NGOs or private businesses, are demanding some opportunity not only to learn about what is going on in decision-making quarters of the international institutions including the trade system, but also to have an opportunity to comment, make suggestions, or put forward various viewpoints that such entities have. This is complex because the governments feel that they are the only legitimate entities that are participating in the WTO, and that they represent their constituents, and that is as it should be. The governments do not want the interference of nongovernmental entities because they fear that economic power could alter the balance of the different interests that might demand participation. As previously noted, one of the problems with NGOs is that they are often single-issue entities, whereas governments have to balance a number of issues and a number of sometimes contradictory policy goals. A single issue NGO may at times possess more resources than the WTO itself, and even perhaps more resources than a large number of the nation-state government members.

The experience of the last decade or two is showing that the NGOs and other nongovernmental entities cannot be excluded, and can also often make constructive additions to the general discourse of officials and diplomats. Many international organizations have made special accommodations regarding both the transparency and the participation of non-governmental entities, such as businesses, labor organizations, and NGOs. Fairly common among these accommodations is a credentialing process -International organization receives applications from nongovernmental entities to receive certain types of information, and also have an opportunity to make inputs into the decision-making processes of the organization. In the WTO context, credentialing is controversial, but there are calls for some sort of recognition for NGO contributions to policy debates. There is even a question of transparency and participation with respect to government entities other than the government participants at the WTO. For example judicial officers, or other specialized officers of governments should be encouraged to play a role that would give them input into some of the decisions being made, so as to improve the drafting of treaty language and to better avoid later interpretive problems.

There are problems that have developed with the ministerial meetings of the WTO. As at January 2006, there have been six such meetings so far, Singapore in 1996, Geneva in 1998, Seattle in 1999, Doha in 2001, Cancn in 2003, and Hong Kong in 2005. There were difficulties in the procedural structure at the Seattle Ministerial. Doha seemed to be better, but then again at Cancn the process seemed to break down. It is better not to have ministerial meetings away from the headquarters in Geneva because this means that a certain amount of the key leadership is provided by the host country, which may not always be the most appropriate approach for carrying out the requirements of the meeting. It is also much more expensive to have a ministerial meeting away from Geneva than in Geneva itself, although part of the WTOs motivation in having those meetings elsewhere is that most of the expenses are then covered by the host country (as opposed to the WTO Secretariat).

WTO has been a remarkable new organization. It has attracted a very broad and powerful membership, now covering approximately 93 percent of world trade. When questioned directly, a number of governments in the trading system would agree that, on the whole, the WTO is both necessary and desirable. The fact that there are a number of institutional problems and also a number of criticisms would likely be expected by any international institution, indeed, by nation-state governments as well.

WTO has a very difficult role to play, because it must address issues that are being generated in the world, with particular reference to economic issues, which constantly change and involve problems over which governments and the international organization have relatively little control.
WTOs task is the unenviable one of assisting governments to achieve a better solution for managing the problems of globalization and interdependence than could be achieved without the coordination techniques that can be carried out under the umbrella of a WTO. However, the shortcomings exist, and they certainly merit attention.