THE WORLD TRADE ORGANISATION and its principles

The genesis of the WTO can be explained through three main periods. Firstly, negotiations leading to the
GATT 1945, secondly multilateral trade negotiations under the GATT 1947 and the multilateral system un-
der the WTO.

The GATT which is the General agreement of tariffs and trade was created in 1947 after intense negotia-
tions. It contains the major rules and principles of international trade based on which international trade is to
be carried out. Since its inception in 1947, there has been 8 rounds of multilateral trade negotiations starting
from the GENEVA Round in 1947 up to the Uruguay Round in 1994.

It should be noted that discussion on the creation of the WTO has been a very challenging one. In the 7 pre-
vious rounds of negotiations, the WTO was either never discussed or discussed without consensus. It was
only 1994 during the Uruguay round that the WTO was created and came into force in 1995. The WTO
therefore is known to be the successor of the GATT. However, one should not think that the GATT is now
obsolete because the WTO itself has decided to retain the GATT by bringing it under the aegis.

The WTO is an intergovernmental organisation which provides for a platform for treaties to be made but also
for trade related disputes to be resolved. The WTO is established by the the WTO Agreement which provides
for the functions of it under ARTICLE 3. Some of them are

1) The administration of WTO trade agreements

2) A Forum for trade negotiations
3) Mechanisms for resolving trade disputes
4) Monitoring National trade policies by providing for technical assistance
5) To foster open trade without any barrier in a fair manner as a general objective.

Information about membership to the WTO, the organisational structure ( the Ministerial Conference) being
the highest Authority as well as the various agreements created by the WTO can be accessed on its website.

The main document of the WTO is the Marrakesh Agreement establishing the WTO ( also known as WTO
Agreement). However more important than this agreement are the annexes attached to it. We have 4 of them.

1) ANNEX 1 - Multilateral Trade Agreements which is broken into three parts namely ANNEX 1 A for
goods which include the GATT 1994 to which the GATT 1947 has been merged. ANNEX 1 B which is
for services represented by the GATS which is the General Agreement of trade in services, ANNEX 1C
for intellectual property represented by the TRIPS ( Trade related aspects of intellectual properties)
2) ANNEX 2 - The rules of Dispute Settlement including the Dispute Settlement Mechanisms
3) ANNEX 3 - The trade policy review mechanism
4) ANNEX 4- Plurilateral agreements

THE MAIN PRINCIPLES OF THE WTO

Similar to old international institutions, decisions, actions and acts of the WTO are guided by some primary
principles. These principles are considered to be the spine of the WTO and all their agreements are based on
them. There are 6 of them and they are as follows

1) Principle of non discrimination

2) Rules on market access including rules on transparency
3) Rules on unfair trade
4) Rules on Conflicts between trade liberalisation and other societal values and interests
5) Rules on Special and Differential Treatment for developing countries
6) Institutional and Procedural Rules relating to decision making and dispute settlement

1) PRINCIPLE OF NON DISCRIMINATION

This principle advocates for no discrimination between trading partners as well as between foreign and local
products. To implement this principle, two sub principles are used namely the most favoured nation rule
( MFN) and the National Treatment Principle ( NT).

A ) MFN - Based on this rule, trading partners should not discriminate among themselves. It implies that
country A should provide for the same treatment that it gives to country B being its most favoured nation, to
all its other trading partners. This is a legal obligation enshrined in Article 1 of the WTO Agreement. This
implies that if Country C which is a trading partner with country A does not feel that it is being treated in the
same way as Country B it has the right to sue Country A for non observance of Article 1 of the WTO agree-
ment. In this respect, the reference case is the EC - the Bananas Case and the US Footwear case whereby the
dispute settlement mechanism of the WTO has implemented and applied the MFN principle.

B) National Treatment Principle - Under this principle, trading partners are required to give the same treat-
ment to imported goods as they would have given to their own local products in the same area. For example,
if MTML decides to provide for internet services in Mauritius, the product has to be treated in the same way
as products of other local companies in the same field such as Emtel or My.T. if the Mauritian Government
allows EMTEL to have a period of 10 years since start of operation of tax holiday then it must be able to pro-
vide the same condition to MTML. Therefore treatment implies any condition of operation, investments,
payment of services such as electricity and water and even labour charges that are given to the trading com-
panies.

2) Rules of Market Access

This rule strictly regulates the imposition and application of quotas and bans on products that are entering a
foreign market from its country of production. In some cases, with the aim of protecting the local markets or
manufacturers, governments may decide to impose a quantitative restriction on a particular product coming
from a particular country. Unless, genuinely justified, such types of quotas has the effect of reducing market
access to the detriment of the foreign manufacturer. Therefore such types of restrictions are regulated by Ar-
ticle 11 of the GATT and was discussed in the case of Shrimp/ turtle of 1998. This rule is constituted of 4
sub rules namely rules on custom duties, rules on other duties and financial charges, rules on quantitative re-
strictions and rules on other non tariff barriers such as technical specifications or government procurement
etc.

3) Rules on Unfair Trade

These rules regulate unfair trade which can be highly detailed, technical and complexed. Unfair trade can be
done through subsidies, imposition of intellectual property rights as well as practices such as dumping.
Dumping refers to circumstances where products are brought on to the market of another country at a price
less than the normal value of that product. For example, if a water dispenser of acceptable quality on the
Mauritian Market costs Rs 200, a trader ( whether foreign or local) would be accused of doing dumping if it
brings to the Mauritian market another model of water dispenser from China which is costing only 50 Rs in a
very large quantity. The main legislation is the anti dumping agreement concerning dumping whereas for
subsidies we have the subsidies and countervailing measures agreement. Subsidies without any justified rea-
sons is not acceptable.

4) Rules on Conflicts between trade liberalisation and other societal values and interests

These rules allow members to consider economic and non economic values and interests that compete or
conflict with trade. Examples include protection of environment, public health, public morals and national
security. These rules on conflicts are provided by Article 20 of the GATT of 1947. The reason has to be jus-
tified otherwise it will be unfair trade.

5) Rules on Special and Differential Treatment for developing countries

At the WTO, it has always been recognised that some developing and least developed countries will also
have some special needs in order to integrate the multilateral trade system. For example, maize farmers in
Mozambique will always need subsidies from the Government to be able to export their maize on the inter-
national market more than maize farmers from a European country. Therefore this special and differential
treatment is allowed by the WTO in the form of special Assistance, trade concessions and financial assis-
tance to countries that are developing or least developed ones in order to be able to compete. When these
measures are legally justified, then they are not considered as a violation of the WTO rules and principles.
Some of these rules can found at article 24 of the GATT.

6) Institutional and Procedural Rules relating to decision making and dispute settlement

In this category, rules related decision making and dispute settlements mechanisms are provided for. For ex-
ample a complainant country can appeal against a decision of the first instance panel to the appellate body of
the dispute settlement mechanism of the WTO. Therefore the rules for appeal are found in this category.