Law

The World Trade Organization (WTO) is an international organisation that has been designed by its founders to serve as a supervisory body as well as to liberalise international capital trade. Commenced officially on January 1, 1995 under the Marrakesh Agreement mainly to replace the General Agreement on Tariffs and Trade (GATT) of 1947, the WTO deals with the regularization of trade between and among participating countries by providing a framework for negotiations and formalization of trade agreements as well as for the resolution of disputes all aimed at enforcing the participants adherence to WTO agreements as concurred and agreed upon by representatives of member states.
    The number of member states of the WTO has already reached 153 which represent more than ninety-five per cent of the total world trade with about thirty states on observers status and are also seeking membership into the organization. Operationally, the WTO is governed by a ministerial conference that meets every two years a general council which implements the policy decisions of the conference as well as administers the day-to-day affairs and a director-general who is appointed by the ministerial conference, and with a headquarter at the Centre William Rappard, Geneva, Switzerland.
    Currently, the WTO is focusing its efforts on resolving important issues derived from the previous trade negotiations, particularly from the Uruguay Round from 1986 to 1994, as well as endeavouring to proceed and conclude the trade negotiation called Doha Development Agenda (or Doha Round) which was launched in 2001 with the goal of enhancing the equitable participation of poorer countries representing majority of the worlds population. There are, however, pending issues and concerns which have slowed down WTOs processes, such as the conclusion of the Doha Round, for instance, which has been plagued by disagreements between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers pertaining to the precise terms of a so-called special safeguard measure which would ensure the protection of farmers from the foreseen surges in imports.Furthermore, issues and concerns regarding the environmental impacts of the free trade as espoused by the WTOs policies and declarations particularly by the Doha Round have been the strongest reasons for various moves and activism against many of WTOs proposals. One of the lingering questions thrown to the WTO as a whole has been that of Mitsuo Matsushita, a Professor of Law at Seikei University in Tokyo, Japan and who also is a former member of the WTO Appellate Body, who asks how the WTO reconciles free trade and sustainable development.
This paper tackles Prof. Matsushitas question by presenting the WTOs efforts at balancing its acts, wherein it promotes and supports free trade on the one hand, and ensures that sustainable development concerns are addressed on the other hand. By taking a close look at the various policies and agreements, as well as the principles and ethics espoused by the WTO, it is the intent of this paper to find out how both concerns, which are equally important, are addressed or not, as well as whether WTOs policies, declarations, principles and ethics are consistent with its actions and initiatives, so far.
Discussion
The WTO principles, policies and rules for free trade
    The world Trade Organisation (WTO) is the legal and institutional foundation of the worlds multilateral system of trading which provides principal contractual obligations that determine how the member states frame and implement their domestic trade legislations and regulations, anchoring primarily on WTO as the platform on which trade relations between and among countries evolve through a collective debate, negotiation and adjudication.
    As an international body looking at the interests of its member states as well as of the other states in its main goal of promoting open and free trade, the WTO follows its own Principles of the Trading System. With twenty-nine individual legal texts contained in the WTO agreement, which covers almost everything from agriculture to textiles and clothing, as well as from services to government procurement, including rules of origin and intellectual property. Added to all these are more than twenty-five Ministerial declarations, decisions and understandings spelling out further the obligations and commitments for the WTO members.
    The following are the simple and fundamental principles that run through all of the abovementioned instruments of WTO which, together, make up the whole multilateral trading system
1. Trade without discrimination. The key provisions of the General Agreement on Tariffs and Trades (GATT), which is the precursor of the WTO, has, for the last fifty years, outlawed the discrimination among member states and between imported and domestically-produced merchandises. According to the famous most-favoured-nation (MFN) clause, found in Article 1, member states are bound to grant to the products of other member states no less favourable that what is accorded to the products of any other states or countries, making it all a level playing field by ensuring that no country or state is to give special trading advantages to another or to discriminate against any state so that all are able to share the benefits of any moves towards lower trade barriers.However, there are also a number of exceptions to the Article 1, which cover customs unions and free trade areas but which the most-favoured-nations treatment generally ensures that those developing countries and all the others which have little economic leverage are also able to benefit freely from the best trading conditions wherever and whenever they are negotiated.     Another form of non-discrimination, which is known as the national treatment, requires that once the goods have entered the market, they must automatically be treated no less favourably than the equivalent domestically-produced goods or products, which in effect provides equal and fair market treatments for the imported as well as for the local or domestic products.    
    There are several other WTO agreements aside from the revised GATT of 1994, or more popularly known as GATT 1994, that contain important provisions pertaining to MFN and national treatment which are the non-discrimination provisions. For instance, the Trade-Related Aspects of Intellectual Property (TRIPS), with some exceptions, contains MFN and national treatment requirements relating to the provision of intellectual property as protected by WTO members. Likewise the General Agreement on Trade in Services (GATS) requires the members to offer MFN treatment to services and service suppliers of other members. However, there are permissions listed about exemptions to the MFN obligation covering specific measures for which the WTO members are not able to offer such treatment initially wherein such exemptions are taken, they need renewal after five years and must not be maintained for more than ten years.
   
    On the other hand, the national treatment is only an obligation under the GATS wherein members explicitly undertake to accord it for particular services or service activities, which only means that the national treatment is often the result of negotiations among members. Of course, there still are other WTO agreements with non-discrimination provisions that are worth mentioning. These include those about rules of origin pre-shipment inspection trade-related investment measures and those about the application of sanitary and phytosanitary measures.
2. Predictable and growing access to markets. The multilateral trading system is an attempt by the governments to provide the investors, employers, employees as well as the consumers with a business environment that greatly encourages trade, investment, and job creation, alongside choice and lower prices in the market place, and such an environment needs some stability and predictability, especially to encourage businesses to invest and thrive.    
The predictability and security of market access is largely ensured by the use of tariffs or customs duties, which are legal in the WTO and which are commonly used by governments to protect their own domestic industries as well as to raise their much-needed revenues, and are unlike quotas which are generally illegal. These measures are, however, subject to disciplines so that they are not discriminatory among imports, as well as they are increasingly becoming bound. Being bound simply means that a tariff level for a particular product becomes a commitment by a WTO member and therefore cannot be increased without negotiations for compensations with its main trading partners, as provided for in Article XXVIII of GATT 1994. It is also why it is frequently the case that the extension of a customs union can lead to higher rates of tariffs in some areas for which the negotiations for compensation are necessary.   

After the 1948 establishment of GATT, the average tariff levels fell progressively and dramatically through a series of about seven trade rounds, and the Uruguay Round was an added success to the whole campaign, consequently cutting tariffs substantially, which at times even to zero, alongside raising the overall level of bound tariffs in significant amounts. As well, the commitments on market access through the reduction of tariffs made by more than 120 countries in the Uruguay Round are contained in about 22,500 pages of national tariff schedules.
    The overall tariff imposition on all non-tariff import restrictions for agricultural products provided a substantial increase in the market predictability level for agricultural products, wherein more than thirty percent of agricultural produce had been subject to quotas or import restrictions implying that virtually all such measures have currently been converted to tariffs which, while initially providing substantially the same level of protection as by the previous non-tariff measures, are being reduced during the six years of implementation of the Uruguay Round agricultural agreement. Further, it is believed and projected that the market access commitments on agriculture will eventually eliminate previous import bans on certain products.
    Although tariffs at the border do not exist for trade in services, there is no less an apparent need for more predictable conditions which can be met by governments undertaking an initial set of commitments covering national regulations that affect various service activities. Such commitments are, similar to those for tariffs, contained in binding national schedules and shall be extended for further rounds of services negotiations. There are a number of other WTO agreements seeking to ensure that the conditions of investment and trade are more predictable by making it reasonably difficult for member states to change the rules of the game at their own whim, and, in almost every policy area impinging on trading conditions, the scope of members to pursue their capricious, discriminatory policies is constrained by the WTO commitments 
Many other WTO agreements seek to ensure conditions of investment and trade are more predictable by making it very difficult for member governments to change the rules of the game at whim. In almost every policy area which impinges on trading conditions, the scope of members to pursue capricious, discriminatory and protectionist policies is constrained by WTO commitments. Perhaps the WTO member states have all agreed that the key to predictable trading conditions is often the transparency of domestic laws, regulations and practices, so that many WTO agreements contain transparency provisions requiring full disclosure at the national in any form, or at the multilateral level strictly through formal notifications to the WTO. A huge amount of the work of the WTO bodies is mainly regarding the review of such notifications, for instance, the regular monitoring of national trade policies through the Trade Policy Review Mechanism has provided a further means of encouraging transparency at both domestic and at the multilateral levels.
3. Promoting fair competition. The WTO, which is often described as a free trade institution, reiterates that it is more appropriate to call it as a system of rules that are dedicated to open, fair and undistorted competition wherein its rules on non-discrimination are so designed to ensure that only fair conditions of trade prevail and that the rules on dumping and subsidies are also non-discriminatory and fair. The existing GATT rules which provided the basis on which the governments can impose compensating duties on these two forms of unfair competition, have been extended and clarified in WTO agreements.
    A very concrete example of the WTO ensuring fair competition is its agreement on agriculture, which is designed in order to provide fairness in farm trade. Another example is that on intellectual property which ensures that the conditions of competition improve where ideas and inventions are involved and likewise, the GATS will do the same for the trade in services sector. Further, the so-called plurilateral agreement on government procurement ensures the extension of competition rules to purchases by the thousands of government entities in various countries. In other words, there are a number of other examples of WTO provisions which are designed to promote fair and undistorted competition.
4. Encouraging development and economic reform. Development and economic reform are the main concerns of WTO among its member states which are mostly still developing. In fact, there are over three-quarters of the WTO member states that are still developing or are in the process of economic reform from non-market systems.
    In the Uruguay Round, which was between 1986 and 1993, more than sixty of the less developed and developing countries implemented their own trade liberalisation programmes some as part of their accession negotiations to GATT, and others acted on their own capacities. Also, during the same time, the developing countries and transition economies took a much more active and more influential role in the Uruguay Round negotiations more than in any previous round.

    Effectively enough, such trend somehow stopped the notion that the trading system existed only for the industrialised, as well as significantly changed the previous emphasis on exempting the developing countries from certain GATT provisions and agreements, especially that, at the Uruguay Round, the developing countries were able to show themselves prepared to take on most of the obligations and responsibilities that are required of developed countries. However, given the elements and all the other factors necessary for developing countries to fully fulfill their commitments, they were given transition periods to also adjust to the more unfamiliar and difficult WTO provisions. Special emphasis on the transition period was given to the poorest and least-developed countries that were given extra flexibility by a Ministerial decision.
Because of the support as well as the recognition by the WTO of the less developed and least developed nations, gave value, therefore, to the pursuit of development as far as is reasonable with the recognition of  the WTO principles. Also, it was apparent through those provisions that WTO gives value to the pursuit of open-market oriented policies anchored on WTO principles.  
However, it is not to be assumed that the provisions of GATT favouring the developing countries have been scrapped, for they have not been, and in fact are still in place in the WTO. In fact, three articles contained in Part IV of GATT 1994, as introduced in 1965, encourages industrial countries to assist the developing nation members, calling on the industrial nations to do so as a matter of purposeful effort.
The WTO challenges
Given the principles that the WTO stands for, and the rules and policies that concretise these principles, it is but logical to find out what the institution faces as challenges to its fulfillment of its role as an international trade system facilitating fair and free trade among nations. The following have been identified as the major challenges faced by the WTO today
1. Lost Credibility. WTO has apparently damaged its reputation and credibility from some past unpopular decisions that it took, which the public as a whole did not believe in, and therefore the WTO is not really well-received by many nowadays.
Because of this, WTO is poised to oversell itself to repair the damage, and is bent on ensuring outcomes that would provide significant market access for the member countries as well as push for the stalled negotiations to resume with much careful steps and precautions to avoid tripping over sticky issues along the way.
2. Preferential Trade Agreement. The preferential trade agreement (PTA) as provided is against the most favoured nation and the non-discriminatory principles that the WTO professes to stand for, and is therefore a detriment to the institution to implement or adopt it. Further, the PTAs exclude poor nations like Africa, as well, the PTAs only creates more complications within the already complicated maze of policies and regulations in WTO.
WTO and sustainable development
    Trade, according to WTO, is a powerful ally of sustainable development and as such, the concern on promoting sustainable development has always been recognised by WTO since its founding in 1995 and has always been part of all its negotiations as well.
    This has been elaborated by saying that, it is in fact the potential impact of the economic growth and poverty alleviation that has made trade or the international trading system which is the WTO a powerful ally to sustainable development, and it is the trading system that becomes s tool to carry such alliance forward.
    To provide particular insights and ways as to how the WTO can ensure that it is indeed an ally of sustainable environment movements and advocates and not an adversary as it has been popularly depicted to be, the WTO provides the following insights and reasons. The very purpose that trade liberalisation embodies and one of the key principles of WTO which is non-discrimination is a very efficient way of resource allocation, which WTO believes is good for the environment.
    In the 1992 United Nations Conference on Environment and Development (UNCED, the Earth Summit) in Rio, it was recognised that the multilateral trading system is greatly contributing to the advancement of sustainable environment. WTO, in various documents and reports, have emphasised that the concerns on sustainable environment have been interwoven in all its principles and policies, because these principles primarily do not in any way contradict the workings for sustainable development. To look at the concrete examples of the effects of trade liberalization to the environment or to sustainable development agenda as a whole, it is important to take a look at less developed or developing countries, like those in Latin America, where recent studies have shown that there are clear trends to indicate the growing link between the socio-environmental sphere as well as both the unilateral trade policies of these countries and their policies and standards applicable to the goods market. Such phenomenon can be observed not only in relation to the environmental and labour agendas, but also, in recent times, in the agenda for climate change.
    In the various trade forums that have been held, the Latin American countries have historically adopted a defensive stance regarding to topics related primarily to sustainable development, particularly in terms of the ties between trade and environmental as well as labour issues. Countries from the region, generally speaking, see protectionist intentions hidden behind the efforts of linking these topics to trade negotiations, but recent changes in the situation of the said countries in recent years have seen that on one hand, several countries in the region have accepted the inclusion of chapters exclusively dedicated to environmental and labour topics in the free-trade agreements (FTAs) which they signed with the US and Canada, with the demands as defined by such agreements increasing gradually. The countries covered in this work are Argentina, Brazil, Chile and Peru, which have consequently experienced in various levels and intensities, the liberalisation of their trade and investment regimes over the past decades, with such processes in Argentina beginning in as early as the 1970s, and gaining ground in both cases in the 1990s.
    The economic integration, along with the intensities and levels of the liberal reforms, have been varied among the four countries 1. Chile combined its growing unilateral trade liberalization with the negotiations on free trade and agreements on investment with its major trading partners 2. Peru refused to participate in the preferential agreements, except its participation in the Andean Community, while it was experiencing unilateral trade liberalization and reform of the international investment regime of the 1990s, and it was only recently that the country began its negotiations for preferential free trade agreements with the developed and developing nations to further the implementation of the liberalization that was initiated unilaterally in the 1990s. Similar to Chiles situation, Perus negotiation with developed nations pertaining to free trade agreements needed Peru to address the links between trade and the environment and work standards 3. Brazil and Argentina both implemented the unilateral trade openings at the beginning of the 1990s, and after which period became the main partners on a sub-regional integration project, which was named MERCORSUR, but were not able to sign any preferential agreements or anything related to it, with countries that do not belong to the block. While Argentina did sign a number of bilateral investment protection agreements, Brazil did not ratify about fifteen of the agreements that it did sign. It turned out in the end that the sustainable development aspect was not included in the trade agenda of both countries, and was therefore addressed only on a marginal level within the sphere of MERCOSUR.
    Likewise, as a result of WTOs push for sustainable development agenda among its member nations, the attention to non-trade concerns have been growing, particularly in the Northern countries, which implies the incorporation of increasingly demanding obligations for countries within the region regarding topics associated with environmental management and social labour rights within the free trade agreements that are to be negotiated. The analysis of the experiences of the two countries previously mentioned, Peru and Chile, with previously signed agreements and the evaluation of the eventual introduction of those topics into the WTOs thematic agenda, could clearly be considered as a representation for the countries of the said region and can also be a relevant field of studies for the entire region.

Furthermore, the increasingly rigorous obligations by the developed countries for the reduction of greenhouse gas emissions may well lead to the transfer of more carbon-intensive
industries and sectors to the countries of the region. Likewise, the growing investments in the
sectors that are environmentally-sensitive can foster the debate on the convenience and feasibility of the introduction of filters for the entry of these investments as well as their compatibility with the obligations as established in the trade and investment agreements.