LLM Group 2 Business Law Global Trade Under World Trade Organisation 2024 Question Paper with Solutions

Why a new round was needed

By the early 1980s GATT was succeeding at what it did and failing at everything it did not do. Seven rounds had cut industrial tariffs in the developed world from about forty per cent to under seven. But protection had migrated. Voluntary export restraints, orderly marketing arrangements and other grey area measures now covered a large share of trade in steel, automobiles, machine tools and electronics, and they sat outside Article XI because they were formally imposed by the exporter. Agriculture stood almost wholly outside the disciplines, protected by the American waiver of 1955 and by the European Community's variable levies and export restitutions. Textiles were governed by the Multi Fibre Arrangement of 1974, a licensed derogation from Articles I and XI.

Three further pressures were building. Services had become the largest sector of developed economies and were being traded, but GATT covered goods only. Counterfeiting and the absence of pharmaceutical product patents in countries like India were a first order commercial grievance in the United States, which had begun to use section 301 of the Trade Act of 1974 unilaterally. And the dispute procedure could be blocked at will, which meant the rules were unenforceable against a determined respondent.

Montreal, December 1988: the mid term review. Agreement was reached on the framework for services, on a trade policy review mechanism and on improvements to dispute settlement, and deadlock was declared on agriculture, textiles, intellectual property and safeguards. The agricultural stalemate was between the United States and the Cairns Group, which wanted deep cuts, and the European Community, which would not accept binding reductions in domestic support. The review was suspended and resumed in Geneva in April 1989.

Brussels, December 1990: collapse. The Round was to have ended. It broke down entirely on agriculture, the European Community refusing the reduction commitments demanded. Latin American delegations walked out. The Round was declared to be in crisis and the deadline abandoned.

15 December 1993: the Round concludes at Geneva, after the United States negotiating authority deadline forced closure. 15 April 1994: the Final Act is signed at Marrakesh by one hundred and twenty three participants, together with the Agreement Establishing the World Trade Organization and the Ministerial Decisions and Declarations. Entry into force was 1 January 1995.

What the Round produced

A new organisation with legal personality, a Ministerial Conference, a General Council and three sectoral Councils. A restated GATT, GATT 1994, with six Understandings and the Marrakesh Protocol carrying the Schedules. Twelve specific agreements on goods, of which the new ones were Agriculture, Sanitary and Phytosanitary Measures, Trade Related Investment Measures, Safeguards, Rules of Origin, Preshipment Inspection and Textiles and Clothing, and the revised ones Anti-Dumping, Subsidies, Customs Valuation, Technical Barriers and Import Licensing.

Two new pillars, GATS and TRIPS. A new dispute settlement system with negative consensus and an Appellate Body. A Trade Policy Review Mechanism. And, in numbers, tariff reductions averaging about a third, tariffication of agricultural protection with reduction commitments, and the phase out of the Multi Fibre Arrangement quotas by 1 January 2005.

Third, the dispute settlement reform required an organ. Negative consensus needs a body that meets, has a chairman, and can be deemed to have decided. The DSU therefore had to be annexed to a constituent instrument creating such a body, and Article IV:3 supplies it by making the General Council sit as the Dispute Settlement Body. A single integrated procedure covering goods, services and intellectual property also required a single forum, which is Article 1.1 and Appendix 1 of the DSU.

Fourth, the idea was not new and its history should be given. The Havana Charter of 24 March 1948 had provided for an International Trade Organization, and GATT was only its detached commercial policy chapter, brought into force provisionally in 1948 because the Charter was awaiting ratification that never came. Canada proposed a Multilateral Trade Organization in April 1990; the European Community supported it; the United States resisted until late in the Round and secured the change of name to World Trade Organization. So the WTO is the completion of an unfinished design of 1948, and Article XVI:1 of the Marrakesh Agreement, binding the new organisation to GATT's decisions and customary practices, is the drafting that makes the continuity legal.

The case that decides what the Round actually created, worked out

The Uruguay Round's legal effect was litigated within three years of its entry into force, and the answer is not the obvious one.

Brazil: Measures Affecting Desiccated Coconut, WT/DS22/AB/R, Appellate Body report adopted 20 March 1997.

The facts. Brazil imposed a countervailing duty on desiccated coconut from the Philippines. Both the investigation and the imposition predated 1 January 1995. The Philippines complained after that date and argued that, because the duty remained in force, it had to be tested against the new SCM Agreement and GATT 1994, which contain disciplines the Tokyo Round Subsidies Code did not.

The issue. Did the Round replace GATT 1947, so that everything in force on 1 January 1995 fell to be judged under the new agreements, or did it enact a new instrument applying only prospectively?

Conclusion. The Uruguay Round ran from the Punta del Este Declaration of 20 September 1986 to the Marrakesh Final Act of 15 April 1994, through the Montreal mid term review of 1988, the collapse at Brussels in December 1990, the Dunkel Draft of 20 December 1991 and the Blair House accord of November 1992. It was called because GATT could not reach grey area measures, agriculture, textiles, services or intellectual property, and could not enforce what it did reach.

It created the WTO because the three central innovations of the Round each required an institution: the single undertaking needed one instrument to annex the package to, the new pillars needed a common roof under Article II:2, and negative consensus needed a standing body to decide automatically under Article IV:3. In creating it the Round completed the design of the Havana Charter of 1948, which is why the Marrakesh Agreement reads in part like a succession instrument and why the substantive rules of world trade law are still, in their text, the rules written in 1947.