WTO - General Agreement on Tariffs and Trade 1994

Introduction

The World Trade Organization (WTO) and the General Agreement on Tariffs and Trade 1994 (“GATT”) are together part of an effort to bring about international free trade. GATT’s political and legal origins, which are found in the principles of the WTO and important provisions of the GATT will be examined below. Whilst there are many provisions, a select number of important issues pertaining to international free trade are discussed here within the context of the GATT. Issues discussed include how the GATT seeks to resolve disputes, how to motivate countries towards adopting free trade measures, and which exceptions to free trade the GATT identifies as needed, for example in environmental protection.

Context: Free Trade

The GATT was most recently negotiated between the members of the WTO in the so-called Uruguay Round of 1986-1994,^[1] following previous negotiations. The GATT was conceived to assist its signatories for opening markets and lowering trade barriers.^[2]  The GATT, as with other WTO Treaties, is designed to “provide the legal ground rules for international commerce.”^[3] The rules are expressed as being akin to contracts, binding the signatory countries to keeping their trade policies within agreed limits.^[4]

The WTO recognises that attempting to promote and secure international free trade can be complicated by “conflicting interests.”^[5] Pursuant to overcoming these conflicts, the WTO needs to retain several powers to be effective in managing, enforcing and promoting international free trade, and the GATT assists the WTO in securing these powers,^[6] several of which are listed below.

The first power is negotiation: the GATT, like other WTO agreements, is designed to help spell out the principles of free trade to signatories and to determine limited exceptions.^[7]  The GATT can help identify exceptions that require trade barriers such as consumer protection and preventing the spread of disease.^[8] The second power is notification: the WTO needs the power to require signatory countries to notify the WTO about laws they draft which may affect international trade.^[9] The third is dispute settlement: the WTO must be able to assist its signatory countries in resolving disputes, such as where countries believe free trade measures have been infringed, in a manner which is as “smooth as possible.”^[10]

The GATT is wide-ranging. As with other WTO activities and Treaties, the goal of the GATT was to “help trade flow as freely as possible”^[11] in goods,^[12] services and intellectual property.^[13] The Goods Council, a group comprised of representatives from all signatory countries, is further comprised of 10 sub-groups dealing with specific subjects, such as agriculture and anti-dumping measures.^[14]  It is submitted the diversity of sub-committees shows the range of areas in which the WTO seeks to harmonise free trade measures.

Important Provisions

The WTO has noted international trade involves competing interests, and one of the functions of the GATT is to help resolve disputes between the signatory countries. Further to this ambition, The GATT has a dispute-resolving mechanism with legal force. Article XXIII.1 requires parties to consult with a view to the satisfactory adjustment of the matter.^[15] The consultations allow parties to assess the strengths and weaknesses of their respective cases, to narrow the scope of differences between them, and potentially reach a mutually agreed solution. Even where a mutually agreed solution is not forthcoming, consultations can at least help to narrow the scope of the dispute between consulting parties.^[16] Consultations are seen as a cost-effective and expeditious alternative to arbitration.^[17]

It has been recognised that dispute-resolving measures, including arbitration, can result in unfairness, or at least an unwillingness by less-powerful members to engage in dispute resolution.^[18] Therefore, in a bid to motivate less influential signatory countries, such as developing States, such countries can request a panel when engaging in consultation. Establishing a panel “arguably reduces the impact that so-called power-oriented diplomacy may have during those consultations.”^[19] As noted, the GATT actively requires this step to be taken, therefore it is submitted both the GATT and the WTO strive to seek harmonisation of free trade and makes the resolution of disputes a priority.

The WTO seeks to promote “transparency” and clarity of trade measures.^[20] Article II provides a Schedule of Concessions, namely an agreement to record in national schedules any “other duties or charges” that are levied in addition to the recorded tariff and to bind them at the levels prevailing at the date established in the Uruguay Round.^[21] The GATT therefore gives legal effect to the WTO seeking to harmonise, and to make transparent, the tariffs and barriers to trade that are present in member countries.

However, the WTO accepts there has to be grounds for member countries to make their own arrangements. Paragraph 5, Article XXIV says the GATT will not prevent the formation of a free trade area, or the adoption of an interim agreement necessary for the formation of a free trade area between the territories of contracting parties.^[22] Conversely, Article XXXV will allow contracting parties or newly acceding countries to invoke the non-application of the GATT vis-à-vis another party when both parties wish to enter tariff negotiations.^[23] The WTO recognises that countries will seek to achieve their own “social and environmental objectives”^[24], and the WTO agrees there is a need, pursuant to those objectives, for countries to both make smaller free trade agreements where it is needed, as well as impose tariffs where the affected parties agree to those tariffs.^[25]

Pursuant to allowing for trade restrictions, Article XX of the GATT permits restrictions to trade,^[26] including an exception for “necessary” health measures.^[27] Other have argued the meaning of trade-restrictiveness is “vague”, and its scope and significance “uncertain.”^[28] It is submitted these concerns underlie the importance for negotiation and consultation.

Conclusion

The WTO, together with the GATT, seek to achieve transparency and eliminate trade barriers. At the same time, the GATT has provisions which recognise there will be competing interests between countries, and certain objectives within countries, that require tariffs. The GATT therefore has measures which permit derogations and negotiation.

BIBLIOGRAPHY

Legislation

General Agreement on Tariffs and Trade 1994 (“GATT 1994”) (WTO)

Journal articles

Thaddeus Manu, ‘Assessing the potential impact of intellectual property standards in EU and US bilateral trade agreements on compulsory licensing for essential medicines in West African states’ (2015) A.J.I.C.L. 226

Jaime Tijmes, ‘Who wants what? – final offer arbitration in the World Trade Organization’ (2015) E.J.I.L. 587

Tania Voon, ‘Exploring the meaning of trade-restrictiveness in the WTO’ (2015) World T.R. 451

Websites

World Trade Organization (WTO), ‘Who we are’ accessed at https://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htmon 19^th February 2016

WTO, ‘GATT and the Goods Council’ accessed at https://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm on 19^th February 2016

WTO, ‘What we do’ accessed at https://www.wto.org/english/thewto_e/whatis_e/what_we_do_e.htmon 19^th February 2016