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    Frequently Asked Questions... about the World Trading System

     

     
     
    © International Trade Centre, International Trade Forum - Issue 1/2001 
     

    Over the past four years, ITC's World Tr@de Net programme (previously the Uruguay Round Follow-up programme) has delivered nearly 200 seminars in 70 developing and transition economies to brief business and government leaders about the world trading system. Below is a sample of questions posed most frequently by seminar participants.

    The questions reflect real concerns of seminar participants and, as such, represent perspectives of the business community in developing countries. For answers to your frequently asked questions, see the World Tr@de Net web site http://www.intracen.org/worldtradenet

    Business implications 

    Q. How do I find out which WTO Agreements concern my business? 

    A. Practically all products and markets are affected by one or several of the WTO Agreements, at least for WTO member countries. Progressive liberalization of trade through successive negotiations has led to lower (or zero) import duties, and thus increased export opportunities, especially in developed country markets. It has also created greater predictability of market access by "binding" reduced (or zero) tariff rates.

    Most governments impose technical regulations or standards on (domestic and imported) products to protect human, animal or plant life or health, as well as the environment. The Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary Measures ensure that such requirements do not create unnecessary obstacles to international trade and provide certain rights to exporters. It is up to each exporter to find out about such requirements in the relevant foreign markets.

    National enquiry points, which WTO members are required to set up in their countries under certain WTO Agreements, can provide information on national laws and regulations that affect your business. Enquiry points are usually ministries of trade, agriculture or national standardization institutes.

    Business role 

    Q. Private-sector participation in multilateral trade negotiations is essential to safeguard its interests. What can business communities do? 

    A. In a number of WTO member countries, mechanisms exist for business and industry associations to be regularly consulted and put their point of view to the governmental policy-makers and negotiators during multilateral trade rounds. In other countries, contact points have been established to which enquiries relating to trade policy matters can be addressed. Experience has shown that the establishment of such links has been most beneficial to both the private sector and the governments of the respective countries. Similar mechanisms could be put into place in other countries where they do not yet exist.

    WTO membership 

    Q. What are the advantages and disadvantages for my country to join the World Trade Organization? 

    A. WTO membership gives a country the legal right not to be discriminated against in its trade with the other members of the organization. The principle of non-discrimination, which is especially important for a country's exports, is laid down in the most favoured nation (MFN) clause and the national treatment clause. In addition, every WTO member is entitled to seek redress against any impairment of its rights by another country through the dispute settlement mechanism. Another important element of WTO membership is the right to take part in the decision-making process of the organization and in the conduct of future multilateral trade negotiations.

    On the other hand, WTO members must respect the general rules and obligations contained in the various WTO Agreements, in particular the GATT 1994 (goods), the GATS (services) and the TRIPs (intellectual property) Agreements. A flexible application is foreseen in many of these Agreements for developing and least developed countries, as well as for countries moving from a centrally-planned to a market, free-enterprise economy. Each WTO country must make binding commitments on market access for goods and services. The degree of access for developing countries depends on their development, financial and trade needs.

    Settling disputes 

    Q. How does WTO ensure that its members respect their commitments and obligations? How does the WTO dispute settlement system work? 

    A. Each member country has the right of redress in cases where its trading interests are nullified or impaired, for example by an illegal measure taken by another country. This right is guaranteed through the WTO dispute settlement system, which was considerably improved in the Uruguay Round. Only WTO member governments have access to this system; private companies (exporters, importers or other persons) cannot directly approach the WTO. Complaints must be channelled through governments; each government examines the facts and evidence put forward by private parties before deciding whether to bring the case to the WTO.

    The different phases of the dispute settlement process are as follows:

    • Initially, the complaining country requests and holds bilateral consultations with the country concerning the measure in question. These consultations are aimed at finding a mutually acceptable solution to the problem.

    • If consultations fail, the WTO Dispute Settlement Body (DSB) will, upon request, establish a panel of (normally three) independent experts whose task it is to examine the case and hear the arguments of the two sides. The panel then presents a report to the DSB stating whether any rights of the complaining country have been violated or impaired.

    • The DSB will normally adopt the report, including recommendations for action, unless one (or both) parties to the dispute appeals to the WTO Appellate Body. The Appellate Body examines any issue of law in the panel report and submits its own report to the DSB.

    • After the DSB adopts the report of the panel or the Appellate Body, it monitors implementation of recommendations, such as to withdraw the measure which has been found to be violating the rights of the complaining country.

    • If corrective action is not taken within a reasonable period of time, the violating country is obliged to provide compensation to the affected country, for example through tariff reductions in areas of interest to the complainant.

    • If no satisfactory compensation is agreed, the complaining country can request retaliatory action from the DSB authorization by suspending concessions or obligations against the other party.

    Q. Can WTO members take their case to the International Court of Justice in the Hague? 

    A. No. The WTO dispute settlement system is a coherent and self-contained legal framework to which all member countries have agreed, thereby excluding any further legal action in a context outside WTO.

    Q. Do developing countries get fair treatment in cases of disputes with larger trading nations? 

    A. Developing countries have, in the context of the WTO dispute settlement mechanism, the same rights as other countries. Developing countries are bringing a growing number of complaints against developed and developing countries, demonstrating their faith in the system.

    The dispute settlement mechanism facilitates the task of developing countries as follows:

    • In cases between a developing and a developed country, the panel - upon request by the former - includes at least one panelist from another developing country.

    • Panel reports explicitly indicate how provisions on differential and more favourable treatment for the developing party in the dispute have been taken into account.

    • Upon request, the WTO secretariat can make a qualified legal expert available to any developing country to provide legal advice and assistance.

    • Other countries are expected to exercise due restraint in bringing complaints against least developed countries. At the stage of bilateral consultations, the WTO Director-General or the DSB Chairman can, upon request, offer their good offices, conciliation or mediation with a view to settling the dispute.

    Klaus Kautzor Schröder, ITC consultant and a former Director of GATT, developed the answers for these and other frequently asked questions about the world trading system, available on the World Tr@de Net web site. 



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