At the end of the second World War, 23 nations signed the General Agreement on Tariffs and Trade, a treaty which aimed at progressive liberalization of international trade through rounds of negotiations. The eighth round, or Uruguay Round, lasted from 1986 to 1994 and ended with the establishment, on 1st January 1995, of the World Trade Organization (WTO), which currently has more than 130 member states. The World Trade Organization is the international organization dealing with the rules of trade between nations. At its heart are the WTO Agreements. In these Agreements, which are negotiated and signed by WTO member governments, the rules for international commerce are laid down. The WTO Agreements cover goods (the General Agreement on Tariffs and Trade or GATT), services (the General Agreement on Trade in Services or GATS) and intellectual property (the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPs). They are lengthy and complex because they are legal documents. But a number of simple, fundamental principles underlay all of them; these are:
• Non-discrimination. Under the WTO Agreements, countries cannot normally discriminate between their trading partners. This is referred to as the most-favoured-nation (MFN) principle; it means that countries have to treat all foreign nations equally. However, some exceptions are allowed, for example regional free trade agreements. A second aspect of non-discrimination is “national treatment”; this means that imported and locally produced goods should be treated equally, at least after they have entered the market.
• Transparency and predictability. In order to stimulate free trade, the business environment should be stable and predictable. Trade rules and practices should be clear and publicly disclosed.
• More favorable treatment for developing countries. Opening markets can be beneficial, but also requires adjustment. The WTO Agreements allow countries to introduce changes gradually, through progressive liberalization. Developing countries, and particularly the least-developed countries, are usually given extra time (the transitional periods) to adjust to the more unfamiliar and, perhaps, difficult WTO provisions and to fulfill their obligations 1. However, at the end of their respective transitional periods, the rules and obligations under the TRIPs Agreement are the same for all countries, regardless of their level of development.
1 In some WTO Agreements (but not TRIPs), developed countries were also given transitional periods.
Another important aspect of WTO’s work is dispute settlement. Trade relations often involve conflicting interests. Contracts and agreements, including those painstakingly negotiated in the WTO system, often need interpreting. When interpretations differ, disputes between countries may arise; the best way to settle these is through an agreed, standardized procedure. The WTO dispute settlement process consists of several stages. The first stage consists of consultations: the countries concerned have to agree to discuss the issue and see if they can reach agreement. If this fails, a Panel will be selected by the parties to the dispute or, failing that, appointed by the WTO Director General. The Panel will review the evidence and hear the arguments of both sides. The Panel will issue a report and its recommendations will be adopted by the Dispute Settlement Body by negative consensus (this means the report will be adopted unless there is a consensus in the Dispute Settlement Body - that is, among all WTO members - to reject it). Parties in the dispute have the option to appeal a Panel’s report; however the Appellate Body will only re-examine the legal interpretation of WTO Agreements and rules, it will not (re)evaluate the evidence.
The country that loses, must follow the Dispute Settlement Body’s recommendations. If it does not comply within a reasonable period of time, it may be required to provide compensation; otherwise, as a last resort, trade sanctions may be applied against that country.
So far, there have been about 20 WTO disputes related to the TRIPs Agreement; this represents about 10% of all WTO disputes. Taking into account the fact that TRIPs is only one of 26 Agreements, this is a fairly high percentage. Moreover, it could rise with the ending of the transitional period for developing countries; for most developing countries, the transitional period, at the end of which they have to comply with TRIPs standards, has ended in January 2000 (least developed countries have until January 2006).