The Marrakesh Agreement, Article by Article

Article IV: Structure

The Ministerial Conference, of all members, meeting at least once every two years, with authority to take decisions on all matters under any Multilateral Trade Agreement.

The General Council, of all members, acting between Ministerial Conferences and carrying out the functions assigned to it, and convening separately as the Dispute Settlement Body and as the Trade Policy Review Body, each of which may have its own chairman and its own rules of procedure.

Three sectoral Councils under the General Council's general guidance: for Trade in Goods, overseeing Annex 1A; for Trade in Services, overseeing the GATS; and for TRIPS. They may establish subsidiary bodies.

Three committees established by the Ministerial Conference: on Trade and Development, on Balance-of-Payments Restrictions, and on Budget, Finance and Administration, with power to establish others. The Committee on Trade and Development is required to review periodically the special provisions in favour of least developed country members.

And the Annex 4 bodies, which operate within the WTO framework and report regularly to the General Council.

Article V: Relations with other organizations

The General Council makes arrangements for cooperation with other intergovernmental organizations, and may make arrangements for consultation and cooperation with non-governmental organizations. The difference between shall and may in those two paragraphs is the legal footing of every argument about civil society participation in the WTO.

Article VI: The Secretariat

A Secretariat headed by a Director-General, appointed by the Ministerial Conference, which also adopts the regulations setting out his powers, duties, conditions of service and term. The Director-General appoints the staff.

Article VI:4 is the provision to quote. The responsibilities of the Director-General and the staff are exclusively international in character; they shall not seek or accept instructions from any government or other external authority, and members undertake to respect that character and not to seek to influence them.

Article VII: Budget and contributions

The Director-General presents the estimates to the Committee on Budget, Finance and Administration, which recommends to the General Council, which approves. Contributions are apportioned among members, in practice by share of world trade.

Article VIII: Status

Legal personality, and such privileges and immunities as are necessary for the exercise of its functions, for the organisation, for its officials and for members' representatives. GATT had none of this, which is why it borrowed a secretariat from the Interim Commission for a body that never existed.

Article IX: Decision-making

Consensus is continued as the practice, and consensus is defined in a footnote: the body is deemed to have decided by consensus if no Member present at the meeting formally objects. Where consensus fails, the matter is decided by voting, one member one vote, by a majority of votes cast unless otherwise provided.

Interpretations of the Agreement and the Multilateral Trade Agreements are the exclusive authority of the Ministerial Conference and the General Council, by a three fourths majority, and may not be used to undermine Article X.

Waivers of an obligation may be granted in exceptional circumstances by three fourths of the members, on a request considered first by consensus for up to ninety days, and every waiver must state the exceptional circumstances, the terms and conditions and the termination date, and is reviewed annually if granted for more than a year.

Article X: Amendment

The subject of its own chapter. In outline: proposals go to the Ministerial Conference; some amendments take effect only on acceptance by all members, and the rest bind those who accept, with the Conference able to decide by three fourths that a non-accepting member may withdraw or remain with the Conference's consent. The most favoured nation provisions of Article I of GATT, Article II:1 of GATS and Article 4 of TRIPS may be amended only with the acceptance of every member.

Articles XI to XV: Membership and entry

Article XI, original membership for the GATT 1947 contracting parties accepting the Agreement and the Multilateral Trade Agreements and having schedules; least developed countries are required to undertake commitments only to the extent consistent with their development, financial and trade needs.

Article XII, 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, the decision being taken by the Ministerial Conference by a two thirds majority.

Article XIII, non-application: the Agreement and the Multilateral Trade Agreements do not apply between two members if either, at the time either becomes a member, does not consent.

Article XIV, acceptance, entry into force and deposit. Article XV, withdrawal, taking effect six months after written notice to the Director-General.

Article XVI: Miscellaneous provisions

Article XVI:1 is the continuity provision: 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.

Article XVI:3 gives the Agreement precedence over any conflicting provision of a Multilateral Trade Agreement.

Article XVI:4 is the end of the grandfather clause: each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations. No reservations may be made in respect of any provision of the Agreement without the consent of the other members.

A worked illustration of the whole instrument

A State wishes to join and to keep a law inconsistent with GATT. Under GATT 1947 the Protocol of Provisional Application would have preserved that law if it pre-dated 1947. Under the Marrakesh Agreement it cannot: Article XII requires accession on negotiated terms to the Agreement and all the Multilateral Trade Agreements, Article II:2 makes those binding in full, Article XVI:4 requires conformity of domestic law, and Article XVI:5 forbids reservations without the consent of the other members. The only lawful routes to relief are a transition period negotiated in the accession protocol, a waiver under Article IX:3, or an amendment under Article X, and each of those is granted by the membership rather than claimed as of right.

Quick revision

• I establishment. II scope, the single undertaking in II:2, plurilaterals in II:3, GATT 1994 distinct in II:4. III five functions. IV structure.
• V other organisations, shall for intergovernmental and may for non-governmental. VI Secretariat, exclusively international by VI:4. VII budget.
• VIII legal personality and immunities, which GATT never had. IX decision-making: consensus defined as no formal objection by a member present, three fourths for interpretations and waivers.
• X amendment, with unanimity for the three MFN provisions. XI original membership. XII accession by two thirds, open to a separate customs territory with full commercial autonomy. XIII non-application. XIV acceptance. XV withdrawal on six months notice.
• XVI:1 guided by GATT 1947 decisions and practice; XVI:3 the Agreement prevails; XVI:4 conformity of domestic law, ending the grandfather clause; XVI:5 no reservations without consent.

Test yourself

1. List the five functions of the WTO under Article III. First, to facilitate the implementation, administration and operation of the Marrakesh Agreement and the Multilateral Trade Agreements and to further their objectives, and to provide the framework for the plurilateral agreements. Second, to provide the forum for negotiations among members on their multilateral trade relations in the matters dealt with by the annexed agreements, and such further negotiations as the Ministerial Conference decides. Third, to administer the Understanding on Rules and Procedures Governing the Settlement of Disputes in Annex 2. Fourth, to administer the Trade Policy Review Mechanism in Annex 3. Fifth, to cooperate as appropriate with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies, with a view to achieving greater coherence in global economic policy-making. The fifth is the surviving trace of the Bretton Woods design in which trade, money and development finance were one project.

2. How does the Marrakesh Agreement end the grandfather clause, and why does that matter? Through three provisions working together. Article II:2 makes the agreements in Annexes 1, 2 and 3 integral parts of the Agreement, binding on all members, so there is no menu from which a member may take rules and leave others. Article XVI:4 requires each member to ensure the conformity of its laws, regulations and administrative procedures with its obligations under the annexed agreements, which is a positive duty of legislative alignment owed from the day of accession. Article XVI:5 forbids reservations in respect of any provision of the Agreement, and permits reservations to a Multilateral Trade Agreement only to the extent that agreement itself allows. Taken together they abolish the position under the Protocol of Provisional Application, where the substantive obligations of Part II of GATT applied only so far as not inconsistent with legislation already in force in 1947. It matters because the grandfather clause had protected inconsistent domestic law indefinitely and as of right, so that its removal could only ever be bought, not demanded.

3. Explain decision-making under Article IX. The WTO continues GATT's practice of deciding by consensus, and the footnote to Article IX:1 defines consensus negatively: a body is deemed to have decided by consensus if no member present at the meeting when the decision is taken formally objects. Where a decision cannot be reached by consensus the matter is to be decided by voting, each member having one vote and decisions being taken by a majority of the votes cast unless the Agreement or the relevant Multilateral Trade Agreement provides otherwise. Two special majorities are provided. Interpretations of the Agreement and of the Multilateral Trade Agreements are within the exclusive authority of the Ministerial Conference and the General Council and require a three fourths majority, and may not be used in a manner that would undermine the amendment provisions of Article X. Waivers of an obligation in exceptional circumstances also require three fourths, after a request considered under the consensus practice for a period not exceeding ninety days, and each waiver must state the exceptional circumstances, the terms and conditions and the date of termination, and is reviewed annually if granted for more than a year. In practice voting is not used, and consensus is both the source of the system's legitimacy and the cause of its legislative paralysis.