The World Trade Organization

Article II(3), the exception. The agreements in Annex 4, the Plurilateral Trade Agreements, are part of the Agreement only for those Members that have accepted them, and do not create either obligations or rights for Members that have not accepted them. That is article 34 of the Vienna Convention restated inside the system.

Article II(4). GATT 1994 is legally distinct from GATT 1947. The old agreement was not merely renamed; a new instrument incorporates its text, its protocols and the understandings reached in the Uruguay Round.

The Annexes.

Annex 1A, multilateral agreements on trade in goods, headed by GATT 1994, with the agreements on agriculture, sanitary and phytosanitary measures, technical barriers to trade, anti-dumping, subsidies and countervailing measures, safeguards and others.

Annex 1B, the General Agreement on Trade in Services.

Annex 1C, the Agreement on Trade-Related Aspects of Intellectual Property Rights, worked in [TRIPS].

Annex 2, the Dispute Settlement Understanding.

Annex 3, the Trade Policy Review Mechanism.

Annex 4, the Plurilateral Trade Agreements.

Functions: article III

III(1). To facilitate the implementation, administration and operation, and further the objectives of the Agreement and the Multilateral Trade Agreements, and to provide the framework for the Plurilateral Agreements.

III(2). To provide the forum for negotiations among Members concerning their multilateral trade relations, and a framework for implementing the results.

III(3). To administer the Dispute Settlement Understanding.

III(4). To administer the Trade Policy Review Mechanism.

III(5). With a view to achieving greater coherence in global economic policy-making, to cooperate, as appropriate, with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies.

Note what article III(5) implies. The WTO cooperates with the Fund and the Bank as separate institutions. It is not a specialized agency of the United Nations: it has concluded no agreement under article 63 of the Charter, and it is therefore outside the Charter's article 57 definition. That distinguishes it from the International Labour Organisation, UNESCO and the World Health Organization, all of which are specialized agencies, and it is the point most often got wrong in answers.

Structure: article IV

IV(1), the Ministerial Conference. Composed of representatives of all the Members, meeting at least once every two years. It carries out the functions of the WTO and has authority to take decisions on all matters under any of the Multilateral Trade Agreements, if so requested by a Member.

IV(2), the General Council. Composed of representatives of all the Members, meeting as appropriate, and in the intervals between meetings of the Ministerial Conference its functions are conducted by the General Council. This is the body that in practice runs the Organization.

IV(3), the Dispute Settlement Body. The General Council convenes as appropriate to discharge the responsibilities of the Dispute Settlement Body, which may have its own chairman and its own rules.

IV(4), the Trade Policy Review Body. The General Council likewise convenes as the Trade Policy Review Body.

One body wearing three hats. The same representatives sit as General Council, as Dispute Settlement Body and as Trade Policy Review Body, and the hat determines the powers and the voting rule.

IV(5), the sectoral Councils. A Council for Trade in Goods, a Council for Trade in Services and a Council for Trade-Related Aspects of Intellectual Property Rights, operating under the general guidance of the General Council, each overseeing the functioning of its own agreements, with membership open to representatives of all Members.

IV(6). Those Councils establish subsidiary bodies as required.

The Secretariat, under article VI, is headed by a Director-General appointed by the Ministerial Conference, and the Secretariat's duties are exclusively international in character, with a duty on Members not to seek to influence its staff, which is the same rule as Charter article 100 in [The Secretariat and the Secretary-General]. The seat is at Geneva.

Decision-making: article IX

IX(1). The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter shall be decided by voting, each Member having one vote, and decisions being taken by a majority of the votes cast unless otherwise provided.

The footnote defines consensus, and the definition is the interesting part: the body concerned shall be deemed to have decided by consensus if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision.

Consensus is therefore the absence of formal objection, not unanimity, and not agreement. A Member that is absent cannot block; a Member that dislikes a decision but does not formally object has not blocked it.

IX(2), authoritative interpretation. The Ministerial Conference and the General Council have the exclusive authority to adopt interpretations of the Agreement and the Multilateral Trade Agreements, by a three-fourths majority of the Members, and the paragraph shall not be used in a manner that would undermine the amendment provisions in article X.

IX(3), waiver. In exceptional circumstances the Ministerial Conference may waive an obligation imposed on a Member, by three fourths of the Members unless otherwise provided, a request concerning the Agreement itself going first to consensus with a time period not exceeding 90 days.

Article X governs amendment, with different majorities and effects depending on the provision, some amendments taking effect only for Members accepting them and some requiring acceptance by all.

Membership: articles XI and XII

Article XI(1), original Members. The contracting parties to GATT 1947 as of the date of entry into force, and the European Communities, which accept the Agreement and the Multilateral Trade Agreements and for which Schedules of Concessions and Commitments are annexed to GATT 1994 and Schedules of Specific Commitments to the services agreement.

Article XI(2). The least-developed countries recognised as such by the United Nations will only be required to undertake commitments and concessions to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.

Article XII(1), accession. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for may accede on terms to be agreed between it and the WTO.

Membership is not confined to States. A separate customs territory with full autonomy in its external commercial relations qualifies, which is why customs territories sit as Members alongside States.

Article XII(2). Decisions on accession are taken by the Ministerial Conference, which approves the terms by a two-thirds majority of the Members.

India is an original Member, having been a contracting party to GATT 1947 from its beginning in 1947.

Status, money and the way out: articles V, VII, VIII and XIII to XV

Article V, relations with other organisations. The General Council shall make appropriate arrangements for effective cooperation with other intergovernmental organizations having related responsibilities, and may make appropriate arrangements for consultation and cooperation with non-governmental organizations concerned with related matters. Note the difference in the two paragraphs: cooperation with intergovernmental bodies is mandatory in form, and consultation with non-governmental bodies is permissive, which is the WTO's counterpart of Charter article 71 in [The Economic and Social Council].

Article VII, budget and contributions. The Director-General presents the annual budget estimate and financial statement to the Committee on Budget, Finance and Administration, which reviews them and makes recommendations to the General Council, and the estimate is subject to approval by the General Council. Unlike the funds in [UNDP and UNEP], the WTO is financed by contributions from its Members and not voluntarily.

Article VIII, status. The WTO shall have legal personality, and shall be accorded by each Member such legal capacity as may be necessary for the exercise of its functions, together with such privileges and immunities as are necessary, and its officials and the representatives of the Members shall be accorded such privileges and immunities as are necessary for the independent exercise of their functions. Article VIII(1) is the plain statement of personality that the Charter left to be implied in Reparation for Injuries.

Article XIII, non-application. The Agreement and the Multilateral Trade Agreements in Annexes 1 and 2 shall not apply as between any Member and any other Member if either, at the time either becomes a Member, does not consent to such application. Between original Members that were contracting parties to GATT 1947, the paragraph may be invoked only where the corresponding provision of that Agreement had been invoked earlier and was effective between them.

Article XIII is the exception to the whole scheme, and it is consent doing the work: a Member may decline the relationship with a particular other Member, but only at the moment either joins, and never afterwards.

Article XIV, acceptance and entry into force. The Agreement was open for acceptance, by signature or otherwise, by the contracting parties to GATT 1947 and the European Communities eligible to become original Members, such acceptance applying to the Agreement and the Multilateral Trade Agreements annexed, and it remained open for acceptance for two years after entry into force unless the Ministers decided otherwise. An acceptance after entry into force takes effect on the thirtieth day following it.

Article XV, withdrawal. Any Member may withdraw, the withdrawal applying both to the Agreement and to the Multilateral Trade Agreements, and taking effect on the expiration of six months from the date written notice is received by the Director-General. Withdrawal from a Plurilateral Trade Agreement is governed by that agreement.

Compare article 56 of the Vienna Convention. A treaty silent on withdrawal admits it only where the parties so intended or the nature of the treaty implies it, on twelve months' notice. The WTO Agreement says so expressly, and halves the period.

Dispute settlement

The Dispute Settlement Understanding in Annex 2 is administered under article III(3), and its shape must be known even though its detail belongs to a course in trade law.

Consultations first. A complaining Member requests consultations; the respondent must enter them.

A panel. If consultations fail, a panel of three, exceptionally five, is established by the Dispute Settlement Body and reports on whether the measure is inconsistent with a covered agreement.

Appeal. A party may appeal on issues of law and legal interpretations to a standing Appellate Body.

Adoption by negative consensus. The reports are adopted by the Dispute Settlement Body unless there is a consensus against adoption. Since the winning party would have to join that consensus, adoption is in practice automatic. This reverses the GATT 1947 rule, under which a report was adopted only by positive consensus and the losing party could block it, and it is the single most important legal change the Uruguay Round made.

Implementation and retaliation. A Member found in breach must bring the measure into conformity. If it does not, compensation may be agreed, and failing that the Dispute Settlement Body may authorise the complainant to suspend concessions, that is, to retaliate, at a level equivalent to the nullification or impairment suffered.

Compulsory jurisdiction without consent to each case is what distinguishes this system from everything in [The International Court of Justice]. A Member consents once, on joining, and is thereafter answerable to any other Member.

The system is in difficulty. Appointments to the Appellate Body have been blocked since 2019, so appeals cannot be heard, and a panel report appealed into that vacuum is not adopted. A number of Members have adopted an interim arbitration arrangement among themselves in the meantime. An accurate answer states the design and then states this, because a description of the system as fully functioning is out of date.

Miscellaneous, and the relation to other law: article XVI

XVI(1). Except as otherwise provided, the WTO shall be guided by the decisions, procedures and customary practices followed by the CONTRACTING PARTIES to GATT 1947 and the bodies established under it. The half-century of GATT practice was carried forward deliberately.

XVI(3). In the event of conflict between a provision of this Agreement and a provision of any Multilateral Trade Agreement, the provision of this Agreement prevails to the extent of the conflict.

XVI(4). Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements. That is article 27 of the Vienna Convention turned into a positive duty to legislate.

XVI(5). No reservations may be made in respect of any provision of this Agreement. Reservations to a Multilateral Trade Agreement may be made only to the extent that agreement provides.

XVI(6). The Agreement shall be registered in accordance with article 102 of the Charter, which is [Making a Treaty: From Full Powers to Entry Into Force] in operation.

The Agreement was done at Marrakesh on 15 April 1994, in a single copy, in the English, French and Spanish languages, each text being authentic, so article 33 of the Vienna Convention applies to it.

A worked example

State AA, a separate customs territory with full autonomy over its external commercial relations, applies to join. State BB, a Member, imposes a tax on imported cars from State CC alone. State CC complains. State BB pleads that its own constitution requires the tax and that it never accepted the agreement on technical barriers to trade.

May State AA join? Yes. Article XII(1) permits accession by any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations, on terms agreed between it and the WTO, approved by the Ministerial Conference by a two-thirds majority of the Members under article XII(2).

Is State BB bound by the agreement on technical barriers? Yes. It is in Annex 1A, so by article II(2) it is an integral part of the WTO Agreement and binding on all Members. Only Annex 4 agreements are optional, and by article II(3) those create neither obligations nor rights for Members that have not accepted them.

The constitutional plea. Article XVI(4) requires each Member to ensure the conformity of its laws, regulations and administrative procedures with its obligations, and article 27 of the Vienna Convention prevents State BB from invoking internal law to justify non-performance.

A reservation? Article XVI(5) forbids reservations to the WTO Agreement and permits them to a Multilateral Trade Agreement only so far as that agreement provides.

The complaint. State CC requests consultations and, failing agreement, a panel, with appeal to the Appellate Body on issues of law and legal interpretations. Reports are adopted by the Dispute Settlement Body unless there is a consensus against, so State BB cannot block adoption. On failure to comply, the Body may authorise State CC to suspend concessions at an equivalent level.

Change one fact: the Members wish to settle authoritatively what a phrase in GATT 1994 means. Article IX(2) reserves that to the Ministerial Conference and the General Council, acting on a recommendation of the Council for Trade in Goods, by a three-fourths majority of the Members, and it may not be used so as to undermine article X on amendment.

Distinctions table

What it does NOT mean

The WTO is not a specialized agency of the United Nations. It has no article 63 relationship agreement; article III(5) provides only for cooperation with the Fund and the Bank.

Membership is not confined to States. Article XII(1) admits separate customs territories with full autonomy over their external commercial relations.

Consensus is not unanimity. The footnote to article IX(1) defines it as the absence of a formal objection by a Member present at the meeting.

A Member cannot pick its agreements. Article II(2) makes Annexes 1, 2 and 3 binding on all; only Annex 4 is optional.

Reservations are not available. Article XVI(5) forbids them to the Agreement itself.

GATT 1994 is not GATT 1947. Article II(4) says it is legally distinct.

Retaliation is not a penalty. Suspension of concessions is authorised at a level equivalent to the nullification or impairment suffered.

Limits and criticism

The single undertaking bought coherence at the price of choice. Developing Members had to accept the intellectual property and services agreements to keep the market access they already had in goods, and whether that bargain was fair is the oldest complaint against the Uruguay Round.

Consensus decision-making has stopped the negotiating function. With well over a hundred Members, and consensus operating as the absence of formal objection by any one of them, the round launched at Doha in 2001 has not been concluded, and the Organization's rule-making has largely stalled while its adjudication continued.

The dispute settlement system is presently incomplete. With the Appellate Body unable to hear appeals, the compulsory adjudication that was the Uruguay Round's principal achievement operates only for Members willing to forgo appeal or to use the interim arbitration arrangement.

Retaliation favours the large. The remedy for breach is suspension of concessions by the injured Member, which is worth little when a small economy is authorised to retaliate against a large one, since the cost falls chiefly on the retaliating Member's own consumers.

Coherence with other international law is unsettled. The Preamble mentions sustainable development and the environment, and article 31(3)(c) of the Vienna Convention brings in relevant rules applicable between the parties, but how far obligations under environmental, labour and human rights treaties bear on trade obligations is decided case by case and is contested.

Quick revision

Marrakesh Agreement, 15 April 1994, in force 1 January 1995, replacing the provisional GATT 1947. Seat Geneva. Authentic in English, French and Spanish.

Preamble: raising standards of living, full employment, expanding production and trade, optimal use of resources in accordance with sustainable development, protecting the environment, positive efforts so that developing and least developed countries secure a share in the growth of trade, by reciprocal and mutually advantageous arrangements reducing tariffs and eliminating discriminatory treatment.

Article II: the common institutional framework; Annexes 1, 2 and 3 are integral parts binding on all Members, the single undertaking; Annex 4 plurilateral agreements bind only acceptors; GATT 1994 is legally distinct from GATT 1947.

Annexes: 1A goods, 1B services, 1C TRIPS, 2 Dispute Settlement Understanding, 3 Trade Policy Review Mechanism, 4 plurilateral.

Article III: implementation, a forum for negotiations, administering the DSU and the TPRM, cooperation with the IMF and the World Bank. Not a specialized agency.

Article IV: Ministerial Conference of all Members at least every two years; General Council of all Members acting between its meetings and sitting also as the Dispute Settlement Body and the Trade Policy Review Body; Councils for Goods, Services and TRIPS.

Article IX: consensus, defined as no Member present formally objecting; otherwise one vote each and a majority of votes cast; interpretations by three fourths; waivers in exceptional circumstances by three fourths.

Articles XI and XII: original Members are the GATT 1947 contracting parties; accession open to any State or separate customs territory with full autonomy over its external commercial relations, approved by two thirds.

Dispute settlement: consultations, panel, appeal to the Appellate Body on issues of law, adoption by negative consensus, then compliance, compensation, or authorised suspension of concessions. Appellate Body appointments blocked since 2019.

Article XVI: guided by GATT 1947 practice; the Agreement prevails over the Multilateral Trade Agreements; Members must ensure conformity of their laws; no reservations; registered under Charter article 102.

Test yourself

1. How does the WTO differ from GATT 1947?

GATT 1947 was a trade agreement applied provisionally, with no organisation behind it, because the Havana Charter for an International Trade Organization never entered into force; its parties were contracting parties rather than members, and it covered goods alone. The Marrakesh Agreement of 15 April 1994 established an organisation providing the common institutional framework for trade relations among its Members, extending to services and intellectual property as well as goods. Article II(2) makes the agreements in Annexes 1, 2 and 3 integral parts binding on all Members, the single undertaking, whereas under GATT 1947 the side agreements were optional. And the dispute settlement rule was reversed: reports are now adopted unless there is a consensus against adoption, where formerly adoption required a positive consensus that the losing party could withhold.

2. Is the WTO a specialized agency of the United Nations?

No, and the point is frequently got wrong. A specialized agency, by article 57 of the Charter, is an organisation established by intergovernmental agreement with wide international responsibilities in economic, social, cultural, educational, health and related fields which has been brought into relationship with the United Nations under article 63, by an agreement concluded with the Economic and Social Council and approved by the General Assembly. The WTO has concluded no such agreement. Article III(5) of the Marrakesh Agreement provides only that, with a view to achieving greater coherence in global economic policy-making, the WTO shall cooperate as appropriate with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies. It is therefore an independent international organisation which cooperates with the United Nations system without belonging to it, unlike the International Labour Organisation, UNESCO and the World Health Organization.

3. Explain the single undertaking.

Article II(2) provides that the agreements and associated legal instruments in Annexes 1, 2 and 3, called the Multilateral Trade Agreements, are integral parts of the WTO Agreement and binding on all Members. A Member therefore accepts the whole package: the agreements on trade in goods in Annex 1A, the General Agreement on Trade in Services in Annex 1B, the TRIPS Agreement in Annex 1C, the Dispute Settlement Understanding in Annex 2 and the Trade Policy Review Mechanism in Annex 3. Only the Plurilateral Trade Agreements in Annex 4 are optional, and article II(3) provides that they create neither obligations nor rights for Members that have not accepted them. Article XVI(5) reinforces the position by forbidding reservations to the WTO Agreement and permitting them to a Multilateral Trade Agreement only so far as that agreement itself provides.

4. How does the WTO take decisions?

Article IX(1) provides that the WTO shall continue the practice of decision-making by consensus followed under GATT 1947, and that except as otherwise provided, where a decision cannot be arrived at by consensus the matter shall be decided by voting, each Member having one vote and decisions being taken by a majority of the votes cast unless otherwise provided. The footnote defines consensus as the position where no Member present at the meeting when the decision is taken formally objects to the proposed decision, so consensus is the absence of formal objection rather than unanimity or positive agreement. Article IX(2) reserves the exclusive authority to adopt interpretations of the agreements to the Ministerial Conference and the General Council, acting by a three-fourths majority of the Members, and article IX(3) permits a waiver of an obligation in exceptional circumstances by three fourths of the Members.

5. Describe the dispute settlement system and the change it made.

A complaining Member first requests consultations. If they fail, a panel is established by the Dispute Settlement Body, which is the General Council convened under article IV(3), and it reports on whether the measure is inconsistent with a covered agreement. A party may appeal on issues of law and legal interpretations to the standing Appellate Body. Reports are then adopted by the Dispute Settlement Body unless there is a consensus against adoption, which means that since the winning party would have to join any such consensus, adoption is effectively automatic. That negative consensus rule is the decisive change from GATT 1947, where a report required positive consensus and the losing party could block it. Where a Member found in breach does not bring the measure into conformity, compensation may be agreed, and failing that the Body may authorise the complainant to suspend concessions at a level equivalent to the nullification or impairment suffered.

6. Who may become a Member of the WTO?

Article XI(1) makes original Members the contracting parties to GATT 1947 as of the date of entry into force of the Agreement, together with the European Communities, which accept the Agreement and the Multilateral Trade Agreements and for which the required Schedules of Concessions and Commitments and Schedules of Specific Commitments are annexed. Article XII(1) then permits accession by any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for, on terms to be agreed between it and the WTO. Membership is therefore not confined to States. Article XII(2) requires decisions on accession to be taken by the Ministerial Conference, approving the terms by a two-thirds majority of the Members, and article XI(2) provides that least-developed countries recognised as such by the United Nations will only be required to undertake commitments and concessions to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.