The Trade Policy Review Mechanism
Chapter Nineteen
Syllabus topic 1, "World Trade Organisation (WTO) Agreement."
Pages 78 to 80 of 533
In one line
Every member's entire trade regime is examined periodically by the whole membership, on the basis of two reports, and nothing is enforced at the end of it.
In exam wording: the Trade Policy Review Mechanism, established by Annex 3 to the Marrakesh Agreement and administered by the WTO under Article III:4, subjects each member's trade policies and practices to periodic collective appraisal by the Trade Policy Review Body, for the purpose of transparency and understanding rather than enforcement.
Why a review mechanism at all
Because most trade friction is caused by not knowing. A measure that looks protectionist to an exporter is often a domestic regulatory choice with a reason behind it, and a measure that looks innocuous is sometimes decisive. A forum in which a government explains its whole regime, and answers questions on the record, removes a great deal of that friction before it becomes a dispute.
And because transparency is cheap and consent is expensive. The membership cannot agree to new obligations, but it can agree to look at each other. That is why the TPRM has functioned continuously since 1989, when it was created provisionally during the Uruguay Round, while the negotiating function has not.
What Annex 3 provides
The objectives, in Annex 3's own terms. To contribute to improved adherence by all members to the rules, disciplines and commitments, and hence to the smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of Members.
And the express limit, which is the most quoted sentence in the Annex. The review mechanism is not intended to serve as a basis for the enforcement of specific obligations under the Agreements or for dispute settlement procedures, or to impose new policy commitments on Members.
The two documents. A policy statement by the member under review, and a report drawn up by the Secretariat on its own responsibility, based on the information available to it and that provided by the member. The Secretariat is required to seek clarification from the member, and the report is the reason the exercise is not merely a government presenting itself.
The frequency, graduated by trade share. The four members with the largest shares of world trade are reviewed every three years, the next sixteen every five years, and the rest every seven years, with a longer interval possible for least developed members. Those intervals were lengthened by a decision of the General Council in 2017 to three, five and seven from the original two, four and six.
The Trade Policy Review Body is the General Council convened for the purpose, under Article IV:4 of the Marrakesh Agreement, and it may have its own chairman.
The Trade Policy Review Mechanism
What a review actually looks like
A two day meeting, with a discussant, on two documents that may run to hundreds of pages. Members submit written questions in advance, often several hundred, and the member under review answers them, in writing and on the record. The Body issues no findings and makes no recommendations; the chairman's concluding remarks summarise the discussion.
The value is in the record. A question asked at a review, and the answer given, is a public statement of policy by a government to the whole membership. That is not a legal obligation, and it is not nothing.
A worked example of what it does and does not do
Suppose a member maintains an import licensing regime that another member believes breaches the Agreement on Import Licensing Procedures.
At the review, the Secretariat report describes the regime, other members put questions about its criteria and delays, and the government explains and sometimes announces changes. Nothing decided at that meeting can be cited in a panel proceeding as an admission of breach, because Annex 3 says the mechanism is not a basis for dispute settlement.
If the complaining member wants a remedy, it must start again under the DSU: consultations under Article 4, then a panel. The review and the dispute are different instruments with different consequences, and confusing them is the commonest error in this topic.
Distinctions
| Trade Policy Review | Dispute settlement | |
|---|---|---|
| Trigger | The calendar | A member's complaint |
| Subject | The member's whole trade regime | One measure or set of measures |
| Standard | Description and appraisal | Consistency with a covered agreement |
| Output | Reports, questions, a chairman's summary | A binding report with recommendations |
| Consequence | None in law | Compliance, compensation or retaliation |
| Basis | Annex 3 | Annex 2, the DSU |
What this does NOT mean
It does not mean the review is toothless in practice. Preparing for a review forces a government to collect and reconcile information about its own regime that often nobody has assembled before, and the Secretariat report is a public document that traders, exporters and courts read.
And it does not mean nothing said at a review has legal life. A measure notified and explained at a review is discoverable and quotable in later negotiations and in the political debate around a dispute, even though it cannot found a claim.
Quick revision
- Annex 3 to the Marrakesh Agreement; administered under Article III:4; conducted by the Trade Policy Review Body, which is the General Council in another capacity under Article IV:4.
- Purpose: greater transparency in, and understanding of, members' trade policies, contributing to smoother functioning and improved adherence.
- Express limit: not a basis for enforcement of specific obligations, or for dispute settlement, or for imposing new commitments.
- Two documents: the member's own policy statement and the Secretariat's independent report.
- Frequency by share of world trade: the largest four every three years, the next sixteen every five, the rest every seven, lengthened from two, four and six by a General Council decision in 2017.
- Created provisionally in 1989 during the Uruguay Round, and it has never been interrupted since.
The Trade Policy Review Mechanism
Test yourself
1. What is the Trade Policy Review Mechanism and what is it for? It is the procedure in Annex 3 to the Marrakesh Agreement by which the whole membership periodically examines each member's trade policies and practices, administered by the WTO under Article III:4 and conducted by the Trade Policy Review Body, which is the General Council convened for that purpose. Its stated purpose is to contribute to improved adherence by all members to the rules, disciplines and commitments made under the multilateral trade agreements, and hence to the smoother functioning of the system, by achieving greater transparency in and understanding of members' trade policies and practices. Annex 3 states the limit as plainly as the purpose: the mechanism is not intended to serve as a basis for the enforcement of specific obligations, or for dispute settlement procedures, or for imposing new policy commitments. Each review proceeds on two documents, a policy statement by the member under review and a report prepared by the Secretariat on its own responsibility, with written questions submitted in advance and answered on the record.
2. How often is a member reviewed, and on what basis is the interval fixed? The interval is graduated by the member's share of world trade, on the theory that the larger a trader is, the greater the systemic interest in its policies. The four members with the largest shares are reviewed every three years, the next sixteen every five years, and all other members every seven years, with the possibility of a longer interval for least developed country members. Those figures are the result of a General Council decision of 2017 which lengthened the original intervals of two, four and six years, the change having been made to reduce the burden on the Secretariat and on delegations as the membership grew. The European Union counts as a single trading entity for this purpose, which is how four entities can account for the largest shares.
3. Distinguish a trade policy review from a dispute, and explain why the distinction is insisted on. A review is triggered by the calendar, a dispute by a complaint. A review examines a member's entire trade regime descriptively; a dispute examines one measure against the text of a covered agreement. A review produces two reports, a discussion and a chairman's concluding remarks; a dispute produces findings, a recommendation to bring the measure into conformity and, ultimately, authorised retaliation. A review has no legal consequence at all; a dispute has the full consequence of the DSU. Annex 3 insists on the distinction expressly, providing that the mechanism is not intended to serve as a basis for the enforcement of specific obligations or for dispute settlement, and the insistence is deliberate. If what a government said at a review could be used against it in a panel, governments would say as little as possible, and the transparency that is the whole value of the exercise would disappear. The price of candour is that nothing said is actionable, and that bargain is why the mechanism has functioned without interruption since 1989.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.