The implications of the Uruguay Round Agreement on Agriculture for developing countries

Annex 1: The World Trade Organization and Agriculture



The establishment of the World Trade Organisation was not foreseen when talks began in the Uruguay Round in 1986, but as the talks progressed it was put forward as the necessary institutional framework to ensure the implementation of the final agreements. As emphasised throughout this Manual, the agreements reached at the end of the Uruguay Round represented a formidable step forward in efforts to improve the regulation of international trade.

  • In short, the WTO provides the common institutional framework for the conduct of trade relations among its members in matters related to the agreements contained in the Final Act.

Chapter 1 outlined the historical background to the Uruguay Round of negotiations and the issues which were central to the Round. In this Annex, we will examine the agreement that established the World Trade Organisation (WTO).

The establishment of the World Trade Organisation

At the Marrakech Ministerial Meeting on 15 April 1994 the final act embodying the results of the Uruguay Round of Multilateral Trade Negotiations was signed by all GATT contracting parties. A total of 111 countries out of 125 formal participants in the Uruguay Round signed the Final Act. By mid 1996 the organisation had 116 members, with 37 countries having observer status. The list of current members and observers are presented in the Box A1 at the end of this annex.

The WTO provides the common institutional framework for the conduct of trade relations among its members in matters related to the agreements in the final act of the Uruguay Round. The key features and functions of the organisation are highlighted below.

The key features of the WTO

    • It is a single institutional framework encompassing the GATT as modified by the Uruguay Round Negotiations, and all agreements and arrangements concluded under it.
    • It is headed by a Ministerial Conference which meets once every two years.
    • The General Council of the organisation oversees the operations of the organisation and its ministerial decisions, and acts as a dispute settlement body and a trade review mechanism.
    • The General Council establishes subsidiary bodies: a Goods Council, a Services Council, and a TRIPS Council.
    • The WTO framework ensures a single undertaking approach to results from the Uruguay Round; thus membership in the WTO involves accepting all the results of the Round without exception.
The functions of the WTO

    • To facilitate the implementation, administration and operation of the Uruguay Round Agreements.
    • To provide the forum for negotiations among members concerning their multilateral trade relations in matters under the annexed agreements, as well as a forum for further negotiations concerning multilateral trade relations. Related to this is the role of providing the necessary implementation framework for agreements reached in these negotiations.
    • To administer the integrated dispute settlement mechanism linking rights and obligations in trade in goods with those in services and intellectual property rights.
    • To undertake the administration of the Trade Policy Review Mechanism (TPRM).
    • To initiate and conduct co-operation, as appropriate, with other multilateral institutions such as the IMF, the World Bank and its affiliated agencies.

The decision making structure and procedures under the WTO

The WTO is headed by a Ministerial Conference meeting at least every two years, with a General Council meeting when appropriate. The Ministerial Conference is composed of representatives of all WTO members, and can take decisions on all matters under any of the multilateral trade agreements.

The General Council administers the day to day work of the WTO. It is also comprised of all WTO members, and is required to report to the Ministerial Conference. As well as conducting work on behalf of the Ministerial Conference the General Council convenes as the Dispute Settlement Body (DSB) and the Trade Policy Review Body (TPRB).

The General Council delegates responsibility to three other major bodies: namely the Councils for Trade in Goods, Trade in Services and TRIPS. The Council for Goods oversees the implementation and functioning of all the agreements covering trade in goods though many such agreements have their own specific overseeing bodies. There is, for example, a Committee for Agriculture.

Three other bodies are established by the Ministerial Conference and report to the General Council. The Committee on Trade and Development is concerned with issues relating to the developing countries and, especially, to the Least Developed nations. The Committee on Balance of Payments is responsible for consultations between WTO members which undertake trade restrictive in order to cope with Balance of Payments difficulties. Finally, issues relating to WTO's financing and budget are dealt with by a Committee on Budget.

  • The WTO will continue the GATT practice of decision making by consensus. A consensus decision is defined as when no member, present at the meeting when the decision was taken, formally objected to the proposed decision. Voting will decide the issue if no decision by consensus is possible with different procedures for the particular issue under consideration.
Each member of the WTO has a single vote at meetings of the Ministerial Conference and the General Council, except that the European Union will have a number of votes equal to its member countries who are WTO members. But the number of votes in no case can exceed the number of member states.

The organisational structure of the WTO is shown in Figure 1.

Figure A-1 The organisational structure of the WTO

The organizational structure of the WTO

The settlement of disputes under The WTO

It is widely accepted that dispute settlement procedures have been strengthened by the Uruguay Round Negotiations. There is now a unified dispute settlement process covering the three areas of goods, service and investment. This is reinforced by the groundbreaking Agreement on Agriculture.

Some of the improvements include:

    • The DSB will be permitted to consider cross-retaliation which involve disputes in one area with possible withdrawal of concessions in others.

    • Rights to a panel are now automatic.

    • Panel reports must now be rejected (rather than accepted) by consensus.

    • Strict time limits apply to each stage of the procedures, so that blocking and delay are all but eliminated.

    • There is an explicit commitment by contracting parties (WTO members) to conform with panel reports without recourse to unilateral measures outside of the dispute settlement process.

    • Establishment of procedures enabling the Right to Appeal panel decisions.

However, some of the criticisms of the new dispute settlement procedures include:

    • No changes are made in the level of penalties which accompany determinations of the violations of rules.

    • No special efforts have been made beyond dispute settlement to address issues of clarity and interpretation of rules.

    • Rights to retaliate in the event of rule violation now accrue automatically, removing the previous defendants right to authorisation of retaliation.

In general, it is widely expected that smaller countries will now be able to bring disputes to panels and have them settled more effectively. However, the positive changes could be countered with the establishment of an appellate body which could mean that panel decisions are likely to be appealed against, so that governments can demonstrate their concerns with respect to affected domestic industries.

Overall, the significance of the WTO can be placed into a clearer perspective if we consider the counterfactual. Without the WTO the changes and disciplines established by the Uruguay Round would nevertheless have been incorporated into the previously provisional nature of the GATT framework.

  • The establishment of the WTO undoubtedly creates a degree of permanence in the enforcement of the GATT framework. There is now an established institutional framework to enforce and administer the GATT agreements including, most significantly, the mandate to impose cross retaliation.

This illustrates the clearest change since the WTO, unlike the previous process, enforces all the various agreements and decisions under the GATT.

The main features of dispute settlement

  • Where a dispute is not settled through consultations the Dispute Settlement Unit (DSU) requires the establishment of a panel, at the latest at the meeting of the Dispute Settlement Body (DSB) following that at which a request is made, unless the DSB decides by consensus against establishment. The DSU also set out specific rules and deadlines for deciding the terms of reference and composition of panels. Where the parties do not agree on the composition of the panel (normally three persons), this can be decided by the Director-General.
  • A panel will normally complete its work within six months or, in cases of urgency within three months. Within 60 days of the issuance of the panel's report, it will be adopted, unless the DSB decides by consensus not to adopt the report or one of the parties notifies the DSB of its intention to appeal.
  • In the event of an appeal, an Appellate Body will be established, composed of seven members, three of whom will serve on any one case. An appeal will be limited to issues of law covered in the panel report and legal interpretations developed by the panel. Appellate proceedings shall not exceed 60 days from the date a party formally notifies its decision to appeal. The resulting report shall be adopted by the DSB and unconditionally accepted by the parties within 30 days following its issuance to Members, unless the DSB decides by consensus against its adoption.
  • Once the panel report or the Appellate Body report is adopted, the party concerned will have to notify its intentions with respect to implementation of adopted recommendations, If it is impracticable to comply immediately, the party concerned shall be given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of the report or through arbitration within 90 days of adoption.
  • Further provisions set out rules for compensation or the suspension of concessions in the event of non-implementation. Within a specified time-frame, parties can enter into negotiations to agree on mutually acceptable compensation. Where this has not been agreed, a party to the dispute may request authorisation of the DSB to suspend concessions or other obligations to the other party concerned. The DSB will grant such authorisation within 30 days of the expiry of the agreed time-frame for implementation.
  • Disagreements over the proposed level of suspension may be referred to arbitration. In principle, concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement. In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions, may be made under another agreement.
The Trade Policy Review Mechanism (TPRM)

The regular monitoring of national trade policies of the WTO's members is an important part of the work of the TPRB under the General Council. The objectives of the TPRM are via regular monitoring:

    • To increase the transparency and understanding of trade policies and practices.

    • To improve the quality of public and intergovernmental debate on the issues at stake.

    • To enable a multilateral assessment of the effects of policies on the world trading system.

    • To encourage, through this process, member countries to follow more closely the WTO rules and disciplines, and the commitments undertaken.

Reviews are undertaken on a regular basis. The four largest trading members; the EU, the United States, Japan and Canada, are examined every two years. The next 16 countries in terms of their share of world trade are reviewed every four years; and the remaining countries every six years, with the possibility of a longer interim period for developing countries.

As we stated earlier, the reviews are undertaken by the TPRB, established at the same level as the General Council, on the basis of two documents: a policy statement by the government under review, and a detailed report prepared independently by the WTO secretariat. These two reports, together with the proceeding of the TPRB are published after the review meeting.

The TPRB will also carry out an annual overview of the developments in the international trading environment which are having an impact on the multilateral trading system, assisted by an annual report by the Director-General setting out major activities of the WTO and highlighting significant policy issues affecting the trading system.

  • In addition to TPRM, many other WTO agreements contain obligations for member governments to notify the WTO of new or modified trade measures. For example, details of any new anti-dumping or countervailing legislation, new technical standards affecting trade need to be notified to the appropriate bodies in the WTO.
It is also important to note that the Agreement on Agriculture involves annual reporting to the Committee on Agriculture, with details of any changes in the use and levels of tariffs, NTBs, export subsidies and domestic support arrangements, including updated AMS calculations.

Membership and accession

Membership to the WTO can be in the form of an individual country or a customs territory having full autonomy in the conduct of its trade policies. Thus, the European Union is a member of the WTO. This is of particular significance in the voting and decision making process. Although decisions are taken on the basis of one member one vote, it is possible that regional groups (who have a number of votes equal to the number of members) will use their voting strength to disproportionate effect.

A key issue is the accession of non-members. The entry requirements for new members requires the acceptance of all the Agreements of the Uruguay Round. In practice, this will mean that new members are likely to have to accept stricter requirements than existing and founding members of the WTO. The implications of this were foreseen by many countries and this explained the high number of new GATT members during the course of the Uruguay Round negotiations.

The accession process

In the first stage of the accession procedures the applicant government is required to provide the WTO with a memorandum covering all aspects of its trade and economic policies having relevance to the WTO agreements. This becomes the basis for a detailed examination in a working party.

Alongside the working party examination, the applicant government engages in bilateral negotiations with interested WTO member governments to establish its concessions and commitments on goods and services. This bilateral process, among other things, determines the specific benefits for WTO members in approving the accession. Once both the examination of the applicants trade regime and market access negotiations are complete, basic terms of accession are drawn up by the working party.

The final stage sees the results of the working party contained in a report, a draft protocol of accession, and the agreed schedules resulting from the bilateral negotiations are presented to the General Council or the Ministerial Conference for adoption. Successful accession requires a two-thirds majority vote in favour by WTO members. The applicant may then sign the protocol and accede to the Organisation; when necessary, after ratification in its national parliament or legislature.

The significance of the WTO

In this annex we have tried to describe the regulatory framework of the GATT which is now embodied in the agreement establishing the WTO. The aim has been to give an understanding of the role of the WTO, and the extent to which it might ensure a non-discriminatory multilateral trading system.

The importance of the WTO lies in its consolidation of all the Agreements and arrangements of the GATT, both 1947 and 1994, under a single umbrella. Thus, there is a common institutional framework enabling greater clarification and enforcement of all the procedures and commitments under the GATT. The bi-annual Ministerial Conference presents an opportunity for permanent dialogue and monitoring of trade policies. This will complement and reinforce the scheduled negotiations in the drawn out 'Round' process. Although limited, the WTO presents a permanent structure in place of the provisional nature of the previous GATT enforcement and negotiating process.

In the short term, the WTO remains the 'shell' to which previous GATT agreements rest but it is more than likely to emerge in the coming years with its own distinct organisational niche in the multilateral trading system. The Organisation's impact may lie in its prevention of the breakdown future trade negotiations and the maintenance of forward momentum in the multilateral trading system.

Box A1: WTO members and observers