World Trade Organization

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World Trade Organization (English) Organisation mondiale du commerce(French) Organizacin Mundial del Comercio(Spanish)

WTO founder members (January 1, 1995) WTO subsequent members Formation Headquarters Membership January 1, 1995 Centre William Rappard, Geneva,Switzerland 153 member states

Official languages English, French, Spanish[1] Director-General Pascal Lamy Budget Staff Website 189 million Swiss francs (approx. 182 million USD) in 2009.[2] 625[3] wto.org

The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs

and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments.[4][5] Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (19861994). The organization is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. However, the negotiation has been dogged by "disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain."[6] The WTO has 153 members,[7] representing more than 97% of the world's population,[8] and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

Contents
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1 History o 1.1 GATT rounds of negotiations  1.1.1 From Geneva to Tokyo  1.1.2 Uruguay Round o 1.2 Ministerial conferences o 1.3 Doha Round 2 Functions 3 Principles of the trading system 4 Organizational structure o 4.1 Voting system 5 Dispute settlement 6 Accession and membership o 6.1 Accession process o 6.2 Members and observers 7 Agreements 8 Effectiveness o 8.1 Developing countries

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8.2 Labour and environment 8.3 Decision making  8.3.1 Future Alternative to Consensus Decision Making: Critical Mass 9 Directors-General 10 See also 11 Notes 12 External links
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[edit] History
See also: Timeline of the World Trade Organization and International Trade Organization

Harry White (l) and John Maynard Keynes at the Bretton Woods Conference Both economists had been strong advocates of a liberal international trade environment, and recommended the establishment of three institutions: the IMF (fiscal and monetary issues), the World Bank (financial and structural issues), and the ITO (international economic cooperation).[9] The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business

practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect.[10][11][12] In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization.[13] [edit] GATT rounds of negotiations See also: General Agreement on Tariffs and Trade The GATT was the only multilateral instrument governing international trade from 1945 until the WTO was established in 1995.[14] Despite attempts in the mid 1950s and 1960s to create some form of institutional mechanism for international trade, the GATT continued to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.[15]
[edit] From Geneva to Tokyo

Seven rounds of negotiations occurred under GATT. The first real GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others broke entirely new ground. Because these plurilateral agreements were not accepted by the full GATT membership, they were often informally called "codes". Several of these codes were amended in the Uruguay Round, and turned into multilateral commitments accepted by all WTO members. Only four remained plurilateral (those on government procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two.[14]
[edit] Uruguay Round

During the Doha Round, the US government blamed Brazil and Indiafor being inflexible, and the EU for impeding agricultural imports.[16]The President of Brazil, Luiz Incio Lula da Silva, responded to the criticisms by arguing that progress would only be achieved if the richest countries (especially the US and countries in the EU) make deeper cuts in their agricultural subsidies, and further open their markets for agricultural goods.[17] Main article: Uruguay Round Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy.[18][19] In response to the problems identified in the 1982 Ministerial Declaration (structural deficiencies, spillover impacts of certain countries' policies on world trade GATT could not manage etc.), the eighth GATT round known as the Uruguay Round was launched in September 1986, in Punta del Este, Uruguay.[18] It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review.[19] The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed April 15, 1994, during the ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh Agreement.[20] The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations (a distinction is made between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994).[18] GATT 1994 is not however the only legally binding agreement included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into a structure with six main parts:
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The Agreement Establishing the WTO Goods and investment the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures Services the General Agreement on Trade in Services Intellectual property the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Dispute settlement (DSU) Reviews of governments' trade policies (TPRM)[21]

[edit] Ministerial conferences

The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the "Singapore issues". The second ministerial conference was held in Geneva inSwitzerland. The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing worldwide attention. The fourth ministerial conferencewas held in Doha in the Persian Gulf nation of Qatar. The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join. The fifth ministerial conference was held in Cancn, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20 developing nations (led by India, China,[22] Brazil, ASEAN led by thePhilippines), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress. The sixth WTO ministerial conference was held in Hong Kong from 1318 December 2005. It was considered vital if the four-year-old Doha Development Agenda negotiations were to move forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries, following the Everything but Arms initiative of the European Union but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2010. The WTO General Council, on 26 May 2009, agreed to hold a seventh WTO ministerial conference session in Geneva from 30 November-3 December 2009. A statement by chairman Amb. Mario Matus acknowledged that the prime purpose was to remedy a breach of protocol requiring two-yearly "regular" meetings, which had lapsed with the Doha Round failure in 2005, and that the "scaled-down" meeting would not be a negotiating session, but "emphasis will be on transparency and open discussion rather than on small group processes and informal negotiating structures". The general theme for discussion was "The WTO, the Multilateral Trading System and the Current Global Economic Environment"[23] [edit] Doha Round Main article: Doha Round

The Doha Development Round started in 2001 and continues today. The WTO launched the current round of negotiations, the Doha Development Agenda (DDA) or Doha Round, at the fourth ministerial conference in Doha, Qatar in November 2001. The Doha round was to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming.[24] The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.[25] The negotiations have been highly contentious and agreement has not been reached, despite the intense negotiations at several ministerial conferences and at other sessions. Disagreements still continue over several key areas including agriculture subsidies.[26]

GATT and WTO trade rou

Name Start Duration Countries Subjects covered April 1947 7 months 23 Tariffs Geneva April 1949 5 months 13 Tariffs Annecy 38 Tariffs Torquay September 1950 8 months 26 Tariffs, admission of Japan Geneva II January 1956 5 months 26 Tariffs Dillon September 1960 11 months May 1964 37 months 62 Tariffs, Anti-dumping Kennedy Tariffs, non-tariff measures, "framework" 102 Tokyo September 1973 74 months agreements Uruguay September 1986 87 months 123 Achievem Signing of Countries Countries $2.5 billio Tariff con Tariff con Tariff redu

Doha

November 2001

141

The round Tariffs, non-tariff measures, rules, services, to major re intellectual property, dispute settlement, full access textiles, agriculture, creation of WTO, etc intellectua Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, The round investment, transparency, patents etc

[edit] Functions
Among the various functions of the WTO, these are regarded by analysts as the most important:
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It oversees the implementation, administration and operation of the covered agreements.[28][29] It provides a forum for negotiations and for settling disputes.[30][31]

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making.[29][31] Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.[32] The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.[33] Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.[30]

[edit] Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.[34] Five principles are of particular importance in understanding both the pre1994 GATT and the WTO: 1. Non-Discrimination. It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members.[34] "Grant someone a special favour and you have to do the same for all other WTO members."[35] National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).[34]

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.[36] 3. Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.[35][36] 4. Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM).[37] The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.[35] 5. Safety valves. In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons.[37] Exceptions to the MFN principle also allow for preferential treatment of developed countries, regional free trade areas and customs unions.[citation needed]

[edit] Organizational structure

The General Council has multiple bodies which oversee committees in different areas, re the following: Council for Trade in Goods There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles.[38]

Council for Trade-Related Aspects of Intellectual Property Rights Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTOs work with other international organizations in the field.[39] Council for Trade in Services The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required.[40] Trade Negotiations Committee The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTOs director-general. The committee is currently tasked with the Doha Development Round.[41] The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments.[38] The General council has several different committees, working groups, and working parties.[42] There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on Least-Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer. [edit] Voting system The WTO operates on a one country, one vote system, but actual votes have never been taken. Decision making is generally by consensus, and relative market size is the primary source of bargaining power. The advantage of consensus decision-making is that it encourages efforts to find the most widely acceptable decision. Main disadvantages include large time requirements and many rounds of negotiation to develop a consensus decision, and the tendency for final agreements to use ambiguous language on contentious points that makes future interpretation of treaties difficult.[citation needed] In reality, WTO negotiations proceed not by consensus of all members, but by a process of informal negotiations between small groups of countries. Such negotiations are often called "Green Room" negotiations (after the colour of the WTO DirectorGeneral's Office in Geneva), or "Mini-Ministerials", when they occur in other countries. These processes have been regularly criticised by many of the WTO's developing country members which are often totally excluded from the negotiations.[citation needed]

Richard Harold Steinberg (2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favouring Europe and the U.S., and may not lead to Pareto improvement.[43]

[edit] Dispute settlement

Main article: Dispute settlement in the WTO In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994.[44] Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy".[45] WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally.[46] The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions.[47] Bodies involved in the dispute settlement process, World Trade Organization.

[edit] Accession and membership

Main article: World Trade Organization accession and membership The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and current trade regime.[48] The process takes about five years, on average, but it can last more if the country is less than fully committed to the process or if political issues interfere.[49] As is typical of WTO procedures, an offer of accession is only given once consensus is reached among interested parties.[50] [edit] Accession process

Status of WTO negotiations: members (including dual-representation with the European Union) Draft Working Party Report or Factual Summary adopted Goods and/or Services offers submitted Memorandum on Foreign Trade Regime submitted observer, negotiations to start later or no Memorandum on FTR submitted frozen procedures or no negotiations in the last 3 years no official interaction with the WTO A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements.[51] The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members.[50] After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant's international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules.[48] The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member's commitments are to apply equally to all WTO members under normal nondiscrimination rules, even though they are negotiated bilaterally.[51] When the bilateral talks conclude, the working party sends to the general council or ministerial conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be's commitments. Once the general council or

ministerial conference approves of the terms of accession, the applicant's parliament must ratify the Protocol of Accession before it can become a member.[52] [edit] Members and observers The WTO has 153 members (almost all of the 123 nations participating in the Uruguay Round signed on at its foundation, and the rest had to get membership).[53] The 27 states of the European Union are represented also as the European Communities. WTO members do not have to be full sovereign nationmembers. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT contracting party, and the Republic of China (ROC) (commonly known as Taiwan, whose sovereignty has been disputed by the People's Republic of China orPRC) acceded to the WTO in 2002 under the name of "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei).[54] The WTO Secretariat omits the official titles (such as Counselor, First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the Permanent Representative and Deputy Permanent Representative.[55] A number of non-members (30) are observers at WTO proceedings and are currently negotiating their membership. The full list of WTO observers are:[56] 1. Afghanistan 2. Algeria 3. Andorra 4. Azerbaijan 5. The Bahamas 6. Belarus 7. Bhutan 8. Bosnia and Herzegovina 9. Comoros 10. Equatorial Guinea 11. Ethiopia 12. Islamic Republic of Iran 13. Iraq 14. Kazakhstan 15. Lao People's Democratic Republic, or Laos 16. Lebanese Republic 17. Liberia 18. Libyan Arab Jamahiriya 19. Montenegro 20. Russian Federation 21. Samoa 22. Sao Tom and Principe 23. Serbia 24. Seychelles 25. Sudan 26. Syrian Arab Republic 27. Tajikistan 28. Uzbekistan 29. Vanuatu 30. Yemen Russia is the biggest economy outside WTO and after the completion of Russia's accession, Iran would be the biggest economy outside the WTO.[57] With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. Some international intergovernmental organizations are also granted observer status to WTO bodies.[58] 14 states and 2 territories so far have no official interaction with the WTO.

[edit] Agreements
Main article: Uruguay Round

The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession.[59] A discussion of some of the most important agreements follows. The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or "pillars": domestic support, market access andexport subsidies. The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. The Agreement entered into force in January 1995. The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. The Agreement on the Application of Sanitary and Phytosanitary Measures also known as the SPS Agreement was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement, the WTO sets constraints on members' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases). The Agreement on Technical Barriers to Trade is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994. The object ensures that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade".[60] The Agreement on Customs Valuation, formally known as the Agreement on Implementation of Article VII of GATT, prescribes methods of customs valuation that Members are to follow. Chiefly, it adopts the "transaction value" approach.

[edit] Effectiveness
Main article: Criticism of the World Trade Organization [edit] Developing countries Critics contend that smaller countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the politicians representing the most influential nations in the WTO (and within those countries or between them, influential private business interests) focus on the commercial interests of profitmaking companies rather than the interests of all.[citation needed] Martin Khor argues

that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. Some examples of this bias are: Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing); The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries; The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets; Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products). Khor argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, and, therefore, the credibility of the WTO trade system could be eroded. According to Khor, "one of the major categories of 'problems of implementation of the Uruguay Round' is the way the Northern countries have not lived up to the spirit of their commitments in implementing (or not implementing) their obligations agreed to in the various Agreements."[2] Khor also believes that the Doha Round negotiations "have veered from their proclaimed direction oriented to a development-friendly outcome, towards a 'market access' direction in which developing countries are pressurised to open up their agricultural, industrial and services sectors."[3] Jagdish Bhagwati asserts however that there is greater tariff protection on manufacturers in the poor countries, which are also overtaking the rich nations in the number of anti-dumping filings.[4] [edit] [edit] Labour and environment Other critics claim that the issues of labor and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." He also argues that "in the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs."[5] Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer.[6] On the other side, Khor responds that "if environment and labor were to enter the WTO system [...] it would be conceptually difficult to argue why other social and cultural issues should also not enter." He also argues that "trade measures have become a vehicle for big corporations and social organizations in promoting their interests."[7] Bhagwati is also critical towards "rich-country lobbies seeking on imposing their unrelated agendas on trade agreements." According to Bhagwati, these lobbies and especially

the "rich charities have now turned to agitating about trade issues with much energy understanding."[8] Therefore, both Bhagwati and Arvind Panagariya have criticized the introduction of TRIPs into the WTO framework, fearing that such non-trade agendas might overwhelm the organization's function. According to Panagariya, "taken in isolation, TRIPs resulted in reduced welfare for developing countries and the world as a whole."[9] Bhagwati asserts that "intellectual property does not belong in the WTO, since protecting it is simply a matter of royalty collection [...] The matter was forced onto the WTO's agenda during the Uruguay Round by the pharmaceutical and software industries, even though this risked turning the WTO into a glorified collection agency."[10] For a discussion on the incorporation of labor rights into the WTO, see The Recognition of Labour Standards within the World Trade Organization. [edit] [edit] Decision making Other critics have characterized the decision making in the WTO as over-simplified, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensus-building" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries.[11] The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system".[12] Many non-governmental organizations, such as the World Federalist Movement, are calling for the creation of a WTO parliamentary assembly to allow for more democratic participation in WTO decision making.[13] Dr Caroline Lucas recommended that such an assembly "have a more prominent role to play in the form of parliamentary scrutiny, and also in the wider efforts to reform the WTO processes, and its rules".[14] However, Dr Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasons: It does not resolve the problem of "informal meetings" whereby industrialized countries negotiate the most important decisions; It does not reduce the de facto inequality which exists between countries with regards to an effective and efficient participation to all activities within all WTO bodies; It does not rectify the multiple violations of the general principles of law which affect the dispute settlement mechanism.[15] The lack of transparency is often seen as a problem for communism. Politicians can negotiate for regulations that would not be possible accepted in a democratic process in their own nations. "Some countries push for certain regulatory standards in international

bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism."[16] This is often referred to as Policy Laundering.
[edit] Future Alternative to Consensus Decision Making: Critical Mass

Critical mass decision making is a process in which sufficient number of parties that do not represent the entire membership agree upon a common course of cooperative action to be taken under the auspices of the WTO.[61] Members may agree to negotiate a particular legal obligation provided that the main partners are included.[62]

[edit] Directors-General
The Directors-General of the WTO have been:[63]
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Pascal Lamy, 2005 Supachai Panitchpakdi, 20022005 Mike Moore, 19992002 Renato Ruggiero, 19951999 Peter Sutherland, 1995

The Directors-General of the precursor organization, GATT, were:

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Peter Sutherland, 19931995 Arthur Dunkel, 19801993 Olivier Long, 19681980 Eric Wyndham White, 19481968

ROLE OF WTO IN INTERNATIONAL TRADE

The World Trade Organization or WTO was formed in the year 1995. The main goal of WTO is to help the trading industry to become smooth, fair, free and predictable. It was organized to become the administrator of multilateral trade and business agreements between its member nations. It supports all occurring negotiations for latest agreements for trade. WTO also tries to resolve trade disputes between member nations. Multi-lateral agreements are always made between several countries in the past. Because of this, such agreements become very difficult to negotiate but are so powerful and influential once all the parties agree and sign the multi-lateral agreement. WTO acts as the administrator. If there are unfair trade practices or dumping and there is complain filed, the staff of WTO are expected to investigate and check if there are violations based on the multi-lateral agreements. If the offending country is found guilty of violations, sanctions are levied. To become a member of WTO is very important. It only means that a member country automatically becomes part of the "Most Favored Nations." Having the status of being one of the "Most Favored Nation" gives access to discounted tariffs and lesser trade barriers, excessive regulations and import quotas that are all the privileges of WTO's members. These privileges pave way to bigger market for the members' products which results to more sales, more jobs and better economic growth. More than 75% of the members are ranked as developing countries. Through their membership with WTO, they can easily penetrate the market of developed countries at lower tariffs. At the same time, developing countries are also lessening tariffs in their import market. By doing this practice, developing countries are using the chance to develop their corporations and industries into more mature and sophisticated kind until they become competitive to the market of developed countries. Four Steps to Become a WTO Member 1. The interested country should submit an application to become a member. A committee of any member country can review this application. 2. The interested country then makes negotiations on bilateral agreements on trade with any country it prefers. The content of these agreements will apply automatically to all members of WTO.

3. The review committee of WTO creates a draft of the terms and conditions of membership which takes account of the necessary changes in its current trade policies. 4. Two-thirds of the member nations should vote that the interested country can become a part of WTO. After the voting, the new member must ratify the membership agreement. If a country is not yet a member of WTO, they can opt to become the "observers" where they must apply for membership within five years of being an observer. The highest decision-making committee of the WTO is known as the Ministerial Conference which meets biennially. All the members of WTO attend this conference. The last Ministerial Conference was held in Geneva from November 30 to December 2, 2009.

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3.2.1 Role of the World Trade Organization

Created in 1994 as a result of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO) is a global international trade organization that develops international commerce rules and mediates trade disputes among its members. The WTO brings together 148 members1 that participate in negotiations and binding commitments concerning the promotion of competition and the liberalization of international trade of goods and services. General Agreement on Trade in Services Concluded in 1997 under the auspices of the WTO, the Fourth Protocol to the General Agreement on Trade in Services (GATS) represents one of the major steps towards liberalization of the global telecommunications marketplace and the establishment of liberalization.2 The purpose of GATS is to facilitate liberalization of trade in services. Two types of obligations exist under GATS: (i) general obligations that apply to all members and all service sectors covered under GATS regardless of whether or not specific commitments have been made; and (ii) sector-specific commitments regarding market access and national treatment for sectors and activities that members agree to open to international trade. Under the general obligations, there are two main principles: (i) WTO member countries must afford each other most favored nation (MFN) treatment (i.e., prohibition on discrimination that requires countries to afford treatment no less favourable than that accorded to like services and service suppliers of any other country);3 and (ii) countries must ensure transparency of local regulations (e.g., countries should publish measures of general application, and allow a period of public comment prior to their issuance). Sectorspecific commitments are made regarding market access,4 national treatment5 and other additional commitments.6 WTO members make commitments on market access and national treatment based on one of the following four modes of supply: (i) cross border

supply;7 (ii) consumption abroad;8 (iii) commercial presence;9 and (iv) presence of natural persons.10 Studies show that since 1997, countries that made GATS commitments have experienced faster levels of fixed-line penetration, mobile subscribership, and telecommunications sector revenues.11 In particular, low-income Sub-Saharan Africa countries that have scheduled commitments out-performed those that did not (see Figure 3B). 12 Figure 3-B: Development/Economic Impact of WTO

Basic Telecommunications Agreement The series of telecommunications commitments that make up a portion of the GATS are referred to as the WTO Basic Telecommunications Agreement (BTA).13 (See Box 3-1.) The BTA established the basis for structural reform of the telecommunications sector aimed at removing barriers to entry and competition, and the adoption by the majority of members of certain pro-competitive regulatory principles that are set out in the Reference Paper on Regulatory Principles.14 These telecommunications commitments apply to basic telecommunications and certain value-added services, but not to audiovisual services. To date, 105 of the 148 WTO members have made commitments under the BTA. Ninety-eight WTO members have made specific commitments on basic telecommunications and 89 members with respect to value-added telecommunications services.15 Box 3-1: Communications Sector under GATS Definitions/Coverage: Telecommunications services (covered under the BTA):

basic telecommunications services are public and private telecommunications services that involve end-to-end transmission of customer supplier information. These include voice telephone services, packet-switched data transmission services, circuit-switched data transmission services, telex services, telegraph services, facsimile services, and private leased circuit services. value added-services are services for which suppliers enhance the form or content of the customers information, thereby adding value to the customers information, and include electronic mail, voice mail, on-line information and data base retrieval, Electronic Data Interchange (EDI), enhanced/value-added facsimile services, including store and forward, and store and retrieve, code and protocol conversion, on-line information and/or data processing (including transaction processing), and other services.

Audiovisual services involve the dissemination of content, including motion picture and video tape production and distribution services, motion picture projection services, radio and television services, radio and television transmission services, and sound recording. Key Documents: a. GATS (general obligations and Fourth Protocol); b. GATS Annex on Telecommunications; c. Schedules of specific commitments and exemptions (countryspecific); and d. Reference Paper. The purpose of GATS is not to regulate competition, but to ensure that members that have made commitments do not establish regulations that would hinder the international trade of services. WTO membership does not entail automatic submission to the BTA as countries must expressly make commitments through their respective schedule of commitments. These schedules may contain modifications or derogations from the overall text. Members are free to include in their schedules the sectors and activities that will be covered under the commitments. Commitments are made by identifying a particular subsector in the respective schedule and therefore only the services listed in a schedule are open to international trade, subject to any limitations or conditions set forth in the applicable schedule. As a result, if a sector or activity does not appear listed in a schedule it means that a commitment has not been made regarding that sector or activity, and it is not open to international trade.16 Countries can make BTA commitments as part of their accession to the WTO, as part of a formal round of negotiations (e.g., the Doha round of negotiations launched in November 2001), or unilaterally. As a result of the MFN treatment imposed under GATS, a telecommunications commitment made by a WTO member benefits all members regardless of whether or not such other members have made commitments. GATS rules also apply to the provision of services by monopoly service providers, to the extent the provider has been

granted special or exclusive rights to provide the service under monopoly (i.e., the rules do not apply to de facto monopolies).17 Telecommunications services and audiovisual services appear as different subsector classifications under the main Communications sector heading of the GATS Services Sector Classification List.18 While the structure of these schedules is the same, countries were given the flexibility of creating distinctions or sub-divisions within the telecommunications sector heading (i.e., local, long distance and international; wire and radio-based; public or non-public; and resale or facilities-based services), making limitations on market access or national treatment, and in certain cases, adding technological conditions (e.g., for satellite access). As a result, the items and terms included under each classification vary among members, creating potential discrepancies in the manner in which countries classify different types of services.19 These commitments are important documents that establish international obligations undertaken by countries and are a clear reference for potential foreign investors on the countries liberalization strategy. Countries may decide to gradually open their market to competition or to take a more aggressive approach. However, they must clearly specify in their commitments where and for how long they wish to restrict their commitments. Ghana, for example, undertook commitments aimed at phasing in competition over a given period. More specifically, Ghana committed to:20  Duopoly operators for the provision of local, domestic and international long distance services, and private leased circuit services for an exclusive five-year period, ending in 2002. Additional suppliers of local services can be licensed to supply underserved areas where duopoly operators have declined right of first refusal. Full competition in data transmission, Internet and Internet access (excluding voice) and teleconferencing. Mobile services (terrestrial and satellite-based) including mobile data services, fixed satellite services, paging and cellular with the reservation that cross-border voice services can only be supplied through commercial arrangements with the duopoly operators. The Reference Paper on regulatory principles.

 

However, Ghana stated in its commitments that the government would conduct a review of its policy after the duopoly period so as to determine whether to license additional telecommunications services suppliers. This is different from Jordans WTO commitment where the Government specified that no restrictions would exist after 1 January 2005. Jordans commitments are based on a WTO Chairmans Note S/GBT/W/2/Rev.1 dated 16 January 1997. This Note foresees that unless otherwise noted in the sector column, any basic telecommunications service listed encompasses local, long distance, and international services for public and non- public use; that it may be provided on a facilities-basis or by resale; and that it may be provided through any means or technology (e.g., cable, wireless, or satellites).21 Jordans commitments also indicate that it has removed market access limitations on spectrum availability pursuant to another WTO Chairmans Note S/GBT/W/3 dated 3 February 1997. This Note recognizes the right of all WTO members to exercise spectrum/frequency management that may affect the number of service suppliers provided this is done in accordance with the relevant provisions of GATS.

The effects of the BTA extend beyond the countries that have made commitments thereunder, with some countries, such as the United States, adopting parallel commitments under bilateral agreements beyond the scope of the WTO (see Box 3-2). Box 3-2: Beyond the WTO - U.S. Harmonization Efforts Given the slow progress of the Doha Round of negotiations and the uncertainty as to the treatment of certain converged services under the WTO classification framework, the United States has sought to fulfil certain of its trade objectives by means of such bilateral and regional trade agreements. As a result, numerous countries have adopted telecommunications commitments outside the scope of the WTO that are similar to, or which extend beyond, those under the BTA pursuant to these bilateral and regional free trade agreements. In 2002, the U.S. Congress passed the Trade Promotion Authority Act allowing the executive branch to negotiate trade agreements where Congress can only vote to approve or reject the agreements, without making any modifications (this process is referred to as fast-track authority).22 Within this authority is the mandate for the United States Trade Representative (USTR) to ensure that the agreements concluded foresee and prevent trade barriers in digital services, including the trade of digital services and goods (the digital trade agenda).23 Under such fast-track authority and the USTR mandate, to date the United States has concluded eight free trade agreements (and is in the process of negotiating three other agreements, including the U.S.-Andean FTA with Peru, Ecuador and Colombia, and the U.S. SACU FTA, with five member countries of the Southern African Customs Union (SACU) -- Botswana, Lesotho, Namibia, South Africa and Swaziland) where countries have generally agreed to an open and competitive telecommunications market, and removing barriers to the trade of digital goods and services.24 In broad terms, all trade commitments under the FTAs (except for few carve-outs e.g., Costa Rica, under the CAFTA), provide for: (i) reasonable and non-discriminatory access to the networks of the signatory parties; (ii) the right of telecommunications companies to interconnect with networks in the signatory countries at nondiscriminatory, cost-based rates; (iii) nondiscriminatory access to facilities, such as telephone switches and submarine cable landing stations; (iv) the ability to lease elements of telecommunications networks on non-discriminatory terms and to resell such telecommunications services; (v) the recognition by each signatory of the importance of supplying services by electronic means as a vehicle to establish a vibrant e-commerce environment; (vi) non-discriminatory treatment of digital products; and (vii) the protection of intellectual property rights. To a large extent, these principles parallel those under the WTOs Reference Paper, but extend these obligations to digital services and goods that may not be covered under certain countries WTO commitments. The United States has also used the FTA as a means to further expand the scope of WTO commitments of certain countries or to

achieve some of the same objectives sought under the WTO. For example, the recently approved U.S.-Central American Free Trade Agreement (CAFTA) is directed to promote trade liberalization between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. Although some of the CAFTA countries are WTO members, they had not fully adopted the BTA or the WTO Information Technology Agreement. However, in signing CAFTA these countries committed to a chapter on telecommunications services that incorporates many elements of the BTA and the Reference Paper. In addition, CAFTA, which was substantially modeled after the ten-year old North American Free Trade Agreement (NAFTA), also contains a relevant section directed to the liberalization of telecommunications among the signing parties. Thus, through CAFTA, Costa Rica, for the first time made a commitment to open its market to foreign competition in Internet services, private data networks, and wireless services. CAFTA also requires the Dominican Republic, Guatemala, Honduras and Nicaragua to join the WTO ITA so that U.S. high-tech exports enter their markets duty-free.25 WTO Reference Paper The Reference Paper, which consists of six principles that serve as a checklist of success of telecommunications reform in many countries,26 was conceived as a necessary instrument for the removal of regulatory barriers to market access, and its implementation is aimed at preventing anticompetitive practices by major suppliers.27 Members may adopt the Reference Paper in whole or in part, and by doing so, they commit to maintain appropriate regulatory measures to ensure a competitive marketplace, as well as transparent and fair regulatory procedures. The six Reference Paper principles are: 1. Competitive safeguards: Members are required to establish competitive safeguards preventing major suppliers from engaging in anticompetitive conduct. The Reference Paper does not define competitive safeguards or anticompetitive practices; this is left for each member to determine in its national legislation. However, the Reference Paper lists certain examples of anticompetitive practices including: anticompetitive crosssubsidization; use of information obtained from competitors with anticompetitive results; and withholding technical data. 2. Interconnection: Major suppliers (i.e., those with the ability to materially affect the terms of price and supply in the market by exploiting their control over essential facilities or their position in the market) of members are required to provide interconnection upon request, under non-discriminatory terms and conditions, and at cost-orientated rates that are transparent and feasible. 3. Universal service: Members have the right to define the kind of universal service obligation they wish to maintain, provided such obligations are not anticompetitive per se, and are administered in a transparent, non-discriminatory and competitively neutral manner. Universal service obligations may not create unnecessary burdens on service suppliers. 4. Public availability of licensing criteria: To the extent a licence is required, members should make publicly available: (i) the licensing criteria and the time it will take to decide on a licence application; and (ii) the terms and conditions of individual licences.

5. Independent regulators: Members should ensure that the regulatory authority is separate from, and not accountable to, any supplier of basic telecommunications services, and that their decisions are impartial with respect to market participants. This requirement seeks equal, transparent and objective treatment of all operators in the market. 6. Allocation and use of scarce resources: Allocation and use of scarce resources (i.e., frequencies, numbers, and rights of way) should be carried out in an objective, timely, transparent and non-discriminatory manner, and the allocation of frequency bands should be made publicly available. Details of government-use frequencies do not have to be made publicly available. To date, close to 90 countries have committed to adopting the Reference Paper.28 The Reference Paper has been criticized for its general nature and the fact that it does not prescribe the manner in which these principles should be applied. However, it has provided countries with a baseline approach of what are considered the minimum standards of international good practice.29 Moreover, it can be, and has already been, used as a vehicle to evaluate the appropriateness of existing measures or the lack thereof under the WTOs dispute settlement mechanism (the decisions of which are binding upon WTO members). (See Section on WTO Dispute Settlement Mechanism below for a discussion on the U.S.Mexico Panel Report.) Annex on Telecommunications Concluded at the Uruguay Round, the GATS Annex on Telecommunications recognizes that access to and use of public telecommunications networks are essential to the effective provision of services covered under GATS and requires WTO members to allow suppliers of scheduled services to use the public telecommunications transport network and services on reasonable and non-discriminatory terms.30 This obligation extends to any kind of service sector for which a schedule has been made accepting specific market access and national treatment (e.g., value-added services, banking services, legal services, and computer services) regardless of whether the particular country has liberalized its basic telecommunications sector. As a result, the Annex on Telecommunications does not deal with market access to basic telecommunications (as this is dealt with in each members schedule) and does not specifically require liberalization of telecommunications services; rather it deals with the ability of service suppliers to access such services.31 Such ability is limited by the right of the network owner to establish access and use conditions that address public service responsibilities, the protection of the technical integrity of the network or to deny use of the network for services not covered under any schedule of commitments. Audiovisual Services Also under the Communications sector list are audiovisual services (i.e., motion picture and videotape production services, motion picture projection services, radio and television services, sound recording, and others). These services are not covered under the BTA, and the national laws of each country are used to interpret the services that fall under the audiovisual subsector (e.g., for most WTO member countries, satellite services fall under broadcasting/audiovisual activities, but under U.S. legislation these are considered telecommunications services).32 Audiovisual services are not as liberalized as telecommunications services and many countries maintain rules prohibiting foreign ownership of broadcasters and reception of foreign satellite television programming. Some countries expect to achieve greater

liberalization of these services through the Doha Round of negotiations; however, there have been challenges in achieving a unified approach since a division exists between those countries with a strong interest to export audiovisual services and those whose cultural and/or economic objectives direct them to protect their domestic industries. New Round of Services Negotiations WTO members commit to progressively liberalize trade in services through periodical rounds of negotiations.33 The Doha Round of negotiations launched in 2001 includes negotiation of telecommunications services and audiovisual services, and there have been proposals to: (i) update the listing of services; (ii) negotiate an e-commerce classification; (ii) enhance provisions on regulatory independence; and (iii) limit licensing and universal services fees. Negotiations (expected to conclude in 2005) are still underway and WTO members are expected to address the following issues:34  (i) reduction of national treatment exemptions and increase of market access on basic telecommunications and value-added services, and negotiation on the coverage of new convergence services and technologies (i.e., VoIP and broadband); (ii) increasing the number of countries that adhere to the Reference Paper; (iii) reclassification of basic telecommunications and value-added services; and (iv) recognizing the maturation of e-commerce related to market access fortelecommunications-related services that also form the basis for e-businesses, as well as those that use networks for this purpose.

  

Regulatory Impact of WTO commitments WTO commitments constitute legally binding obligations on members, enforceable through the WTOs binding dispute settlement process. As a result, the impact of WTO commitments on a countrys regulatory framework can be seen through voluntary compliance of a members commitments or as a result of enforcement through the WTOs dispute settlement mechanism. Voluntary Compliance WTO commitments may have a greater impact on developing countries than on developed countries. For many developed countries, adoption of the GATS principles was a reinstatement of pro-competitive liberalization policies that were already in place and compliance with GATS did not require substantial legislative reform. However, for many developing countries, liberalization of their telecommunications market required certain reforms to their telecommunications legislation and structure. GATS seeks the establishment and enforcement of a framework without creating unnecessary barriers to trade.35 It explicitly recognizes members right to regulate the supply of services in order to meet national policy objectives, and therefore liberalization does not imply deregulation. One of the main objectives of GATS with respect to developing countries is to increase their participation through progressive liberalization, taking into account their development levels.36 To achieve such liberalization and comply with GATS telecommunications commitments, many WTO members were required to modify their laws to reflect compliance with their international commitments (e.g., implementing transparent regulatory structures and procedures,establishing an independent regulator; and removing market access barriers). While GATS does not require members to privatize the incumbent operators, many countries did engage in privatization and liberalization efforts as a means to introduce competition in the market. However, even when countries have adopted the legal and structural reforms necessary to comply with their WTO commitments, effective

competition and adequate enforcement of a regulatory framework may sometimes be hindered by the size of the market and the countrys lack of technical, financial, and human resources. For example, Bangladesh has been WTO a member since its inception in 1995. Bangladesh did not expressly agree to adopt the Reference Paper, 37 but rather to review the creation of regulatory disciplines, including specific commitments to:38     issue licences to two additional fixed-line operators; introduce full competition in voice and data transmission over closed user groups and Internet access services; grant licences to four mobile telephone service suppliers; and make no limitations on national treatment (subject to certain subsidies and tax benefits that may only be extended to national operators).

In 2001, Bangladesh approved the Telecommunications Act, establishing an independent regulator and setting the stage for telecommunications reform. Mobile licences were also issued to four companies, which has permitted growth and competition in the sector. Licences were also granted to fixed-line operators, but competition and growth in this market has been slower as a result of interconnection issues with the fixed incumbent telecommunications operator.39 Bangladesh is expected to privatize the incumbent operator and remove additional barriers that still exist in the mobile services market (i.e., restrictions on interconnection with the incumbent operator).40 Also illustrative of the impact of the WTO is Uganda. Although a founding WTO member, Uganda made GATS commitments on basic telecommunications unilaterally (i.e., not as a part of formal negotiating rounds) and revised these commitments in 1999 as a result of the introduction of competition and privatization of the incumbent operator. In its schedule of specific commitments Uganda:   agreed to adopt the Reference Paper; maintained the right of duopoly major licence holders and other pre-existing licence holders over international gateway services (including international roaming for mobile services) according to the terms of those licences; and agreed to grant licences to three mobile carriers.

Uganda began its telecommunications liberalization process in 1994 with the introduction of competition in the mobile sector where three operators currently compete. Liberalization of the fixed-line market began in 1997 when it awarded a second licence to a fixed-line operator, granting it shared-exclusivity with the incumbent telecommunications operator until 2005. In 1997, Uganda issued the Telecommunications Act establishing an independent regulatory body, as well as a neutral supervisory body for the settlement of telecommunications disputes. Other countries that were not WTO founding members, but have acceded to the WTO post BTA, have been required to undertake significant market restructuring as part of their accession, including dismantling of their monopoly telecommunications operators. For example, Croatia and Georgia, which entered telecommunications commitments in 2000, were required to open their telecommunications market to competition by removing existing monopolies by 2003 and 2004, respectively.41 In 2001, Moldova also agreed to lift the existing monopoly by 2003.42 WTO Dispute Settlement Mechanism - Effects of the DSB decision within Mexico

The impact of WTO commitments in the shaping of national legislation also can be seen in the context of the dispute settlement mechanism provided in GATS.43 WTO Dispute Settlement Body (DSB) rulings are binding for the members upon which judgment has been passed, and are automatically adopted unless there is a consensus to the contrary.44 In this sense, dispute settlement constitutes a coercive mechanism for enforcing members WTO commitments in such cases where voluntary compliance is not forthcoming. Hence, such disputes may arise, for example, when one member takes, or omits to take, certain actions that another member state deems a breach of pre-existing WTO commitments. WTO rules exclude individual service providers from directly seeking relief, but the service provider may seek its country of origin government to put pressure on another countrys government to comply with its GATS obligations, and ultimately activate the dispute settlement procedure. To date, only one telecommunications case has been submitted to the DSB: a case involving trade of services between the United States and Mexico, which resulted in the Report of the Panel on Mexicos Measures Affecting Telecommunications Services (the Panel Report).45 In 2000, after failed bilateral talks, the United States initiated a WTO consultation proceeding claiming Mexicos failure to comply with its commitments under the GATS Annex on Telecommunications and the Reference Paper with respect to basic and value-added services. Mexicos schedule of commitments (adherence to the Reference Paper, market access, and national treatment) required it to:    ensure cost-orientated interconnection; prevent anticompetitive practices; and ensure that foreign service suppliers have access to Mexican public telecommunications networks.

The United States claimed that Mexico: 1. Failed to ensure that local operator, Telmex, provide interconnection to U.S. suppliers on cost-orientated, reasonable rates, terms and conditions (i.e., inconsistency with interconnection principles under the Reference Paper). 2. Maintained legislation that failed to prevent anticompetitive practices by Telmex, allowing it to establish international interconnection rates on behalf of all of the suppliers in the market (i.e., inconsistency with the competitive safeguards principles under the Reference Paper). 3. Failed to comply with the Annex on Telecommunications, as U.S. suppliers were unable to access Mexicos public telecommunications network for the provision of certain international services (i.e., non-facilities based services through Mexican commercial agencies, comercializadoras, and international simple resale through cross-border leased circuits). As a result of the failed consultation proceedings, in 2002, a Panel was constituted, concluding with the DSB Panel Report in June 2004 which found that Mexico had breached several of its WTO telecommunications obligations. As a result, the United States and Mexico agreed on an implementation timetable addressing the compliance issues laid out in the Panel Report. According to such compliance agreement, Mexico was required to: 1. Revise its International Long Distance Rules (the ILD Rules), eliminating those aspects of the existing ILD Rules that implemented the uniform settlement rate system, the proportional return system, and the requirement that the carrier with the greatest proportion of outgoing traffic to a country negotiate the settlement rate on behalf of all Mexican carriers for that country. All such practices were deemed by the Panel Report

to be a breach of Section 1.1 of the Reference Paper.46 Thus, the new ILD Rules had to allow the competitive commercial negotiation of international settlement rates. 2. Maintain regulations authorizing the issuance of permits for the resale of international long distance public switched telecommunications services. Such regulations would have to regulate commercial agencies (comercializadoras) established in Mexico and permit them to purchase and resell these telecommunications services through the use of capacity of concessionaires. The absence of such regulations was deemed by the Panel Report to be a breach of Article 5 (a) and (b) of the Annex on Telecommunications. In light of this compliance schedule, Mexico has undertaken the following reforms: 1. New international long distance telecommunications rules47 were approved providing for the competitive negotiation of settlement accounting rates or international interconnection rates, including prices for incoming and outgoing traffic.48 In addition, foreign operators now are free to decide which Mexican operator they wish to use to terminate their traffic in Mexico.49 2. With regards to the rules for licensing of comercializadoras, Mexico issued Regulations for the Resale of Long distance and International Long distance Telecommunications Services, allowing the commercial resale of long distance and international long distance services originating in Mexico. This regulation authorizes the issuance of licences for the resale of international long distance public switched telecommunications services. Converged Services in the WTO Framework Regulatory frameworks that are vertically structured around industries and more serviceorientated, face greater challenges in adapting to and enabling convergence. While the WTO framework was an important step towards removing traditional barriers to trade and competition in the telecommunications market, its vertically segmented structure may lead to an un-harmonized approach towards convergence. As shown above, communications subsectors are technology oriented, and may not provide the flexibility necessary to accommodate new converged services. A 1998 note by the WTO Secretariat highlighted that the GATS classification of services [may be] inadequate [] to meet the rapid changes of the sector [] and any other list that might be devised could become quickly out of date. Moreover, the lack of specificity regarding the scope and services under each commitment creates a degree of uncertainty about members commitments in connection with converged services. Moreover, WTO members have the flexibility to use their national legislation to interpret or define the category of services for which commitments have been made and therefore the treatment and liberalization of the same service may vary by country. The evolution of convergence has caused the vertical separation of services and industries to disappear, making the WTOs service-based classification obsolete. This also leads to uncertainty regarding the commitments applicable to newly developed services, as such services may potentially fall outside of the scope of existing classification headings and therefore not be subject to any commitment.

http://www.fpif.org/reports/wto_and_developing_countries