IS
THE WTO A WELL-DESIGNED INSTITUTION FOR PROMOTING TRADE IN DEVELOPING AND
DEVELOPED COUNTRIES? EXPLAIN USING AT LEAST THREE CASE STUDIES.               Introduction:In the last two decades,
there has been an overall increase in global trade amidst various economic and
financial crisis. While there is divergence of opinion as to the impact of the
World Trade Organization (WTO) on international trade, most economists are ad idem with the fact that,
international trade should be free1. The WTO, established on
January 1, 1995 through the Marrakesh Agreement as a replacement of the General
Agreement on Tariffs and Trade (GATT) is therefore perceived as the best
available multilateral system2 for the promotion of
predictable, free and fair international trade. However,
the WTO suffers from institutional, operational and structural challenges that
undermine its functioning. Relying on the findings that WTO membership has an
insignificant impact on international trade (Rose, 2004
p. 110), and backed by theoretical analysis of the WTO negotiation and
decision-making process, the principle of ‘single undertaking’ this essay
supports the assertion that, the WTO in its present configuration3 does not promote international
trade evenly4
and fairly in developing and developed countries – a status quo, worsened by a sanction framework that is potentially trade
restrictive. It is worth noting that the observed increased in trade worldwide
nonetheless, is attributable to other factors such as higher rates of productivity
in tradables, falling transport costs, regional trade associations, converging
tastes, the shift from primary products towards manufacturing and services,
growing international liquidity, and changing endowments. Rose, 2004. Without
delving into the question of whether the WTO promotes international trade or
not, the following paragraphs probe into the WTO negotiation and
decision-making process (a), examine the WTO principle of single undertaking (b),
and analyses the trade-restrictive nature of the WTO sanction framework (c), as
institutional/operational weaknesses that affect the mission of the WTO. This
essay ends with a short conclusion.a.)   Negotiation and Decision-Making
ProcessThe first
dysfunctionality of WTO relates its negotiation and decision-making process.  Pursuant to Article IX of the Marrakesh
Agreement, the WTO reaches its agreements by consensus based on the notion of
sovereign equality of nations. Even though the WTO is generally inclusive
because of its worldwide membership and that the agreements reached are
implementable in all States based on the Most Favoured Nation (MFN) principle,
it is still not fully participatory since the underlying bargaining structure
is predicated on strict reciprocityGA1 .
The successive rounds of negotiations are a recurrent cycle of talks in which,
the countries of the global south are coaxed into, if nor coerced to agree on
new concessions in return for support in the form of aid for trade (The Problem of Trade and Development beyond the Doha Round,
p 159). As rightly noted by Steinberg (2002), although trade rounds have
been launched through rule-based bargaining, the rounds have been concluded
through power-based bargaining which is extrinsic to the rules – thus, the
conclusion that the consensus decision-making process of the WTO is organized
hypocrisy with outcomes which are asymmetrical and are not welfare-improving on
an equal basis. To illustrate this point,
a cursory assessment of the Uruguay Round points to the fact though agricultural
market access to developed countries is restrictive as a result of increasing
non-tariff barriers like stricter compliance and phytosanitary regulations and
the trade-distortive nature of agricultural subsidies, developed countries are
still reluctant and unwilling to give up huge amounts of agricultural
subsidies, like the case of the European Union through the Common Agricultural
Policy (CAP). This has persisted over time and in the Ministerial Meeting in
Cancun in September 2003, developing countries refused to negotiate on the
Singapore issues on the basis that developed countries had not taken firm
commitments on the reduction of agricultural subsidies and import barriers on
agricultural products. Unlike a rule-based operation, the recent Doha Rounds
includes a domineering agenda from developed countries on complex issues like the
Agreement on Trade-Related Investment Measures (TRIMS) and the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) – all reflecting
the fact that, the norm-setting process is power-driven – which according to
Baldwin, has an adverse effect on the expansion of world tradeGA2 .
Furthermore, propagated as the silver bullet to bring the developing countries
up in terms of trade transactions, the WTO has been very inefficient in
resolving the trade finance gaps owing to the non-commitment of the developed
countries.  b.)  
The Principle of ‘Single Undertaking’GA3 The Single Undertaking negotiation
technique is another ill-designed mechanism that exacerbates the institutional
ineffectiveness of the WTO. The shorthand description of Single Undertaking is nothing is agreed until everything is
agreed. (Wolf p 835). As per the history of the Uruguay Round, the idea of
Single Undertaking was brought to the fore in 1991 by plans to establish an
integrated dispute settlement system5 and was intended to fix
serious disintegration in the GATT 1947 system with the goal of achieving full consistency
in the application of WTO rulesGA4 .
When the WTO Ministerial Conference in 2001 adopted the ‘Doha Development
Agenda’, it launched an integrated work programme (now known as the Doha Round)
with the understanding that ‘the conduct, conclusion and entry into force of
the outcome of the negotiations shall be treated as parts of a single
undertaking.’6
Using the Uruguay Round
as a case example, the parties in signing the Final Act, agreed ‘that the WTO
Agreements shall be open for acceptance as a whole…’. Article XIV (1) of the
WTO AgreementGA5  stipulates
that ratification applies to the seventeen trade agreements in the annexes –
covering all the Uruguay Round agreements in addition to the revised Tokyo
Round agreementsGA6 .
In addition, incorporating new plurilateral agreements into the WTO Agreement
is made cumbersome by Article X of the Marrakesh Agreement. Cognizant of the
fact that, the 164 WTO member countries are diverse – with discrepancies in
priorities and perspectives, consensually agreeing on everything is a herculean
task. (Table 1). This was the observation of the Consultative Board in a report
(Sutherland Report) to the Director-General on ‘The Future of the WTO:
Addressing Institutional Challenges in the New Millennium’ Table 1: Source:
Will Martin and Patrick Messerlin, 2007, p 349 The table above shows
that from the Geneva Round in 1947 through to the Torquay Round in 1950-1951,
negotiations were concluded within eight months. It is observable from the
table that as membership in the GATT/WTO increased so too, did the length of
negotiations. Though not included in Table 1 above, the Doha Round launched in
November 2001 (WTO, 2001) is yet to be concluded after 192 months – more than
the average time it took to conclude the rounds from 1947 to 1994GA7 .
c.)    Retaliation under the WTO Dispute
Settlement UnderstandingIn addition to a
defective negotiation and decision-making framework and the ineffective Single
Undertaking principle, the role of the WTO in promoting international trade is
further undermined by the sanction mechanism under the Dispute Settlement
Understanding (DSU). Before expounding on the sanction mechanism, it is
essential to briefly describe the dispute settlement process at the WTO. It
archetypally commences with a formal complaint by one or more WTO members
challenging another member’s measures on grounds that such measures are a
violation of that member’s commitments – which are deemed to be inconsistent
with WTO agreements, rules or principles. While the DSU allows for
consultations7
and the use of good offices, conciliation and mediation8 as alternative mechanisms
to dispute settlement, the judicial process is phased-out as follows: on the
one hand, the establishment of a Dispute Panel9 to adjudicate on the
dispute and make recommendation(s); and on the other hand, the review of panel
recommendation(s) by a Standing Appellate Body10. Dispute Panel Reports
like Appellate Body Reports are adopted through a decision-making mechanism11 referred to as the
‘negative’ or ‘reverse’ consensus12. The legal implication is
that, these reports automatically become binding and enforceable.After dispute proceedings
are closed, the ultimate sanction13 for non-compliance with a
Panel or Appellate Body recommendation is the withdrawal of concessions
(retaliation) as laid down in Article 22 of the DSU – the focus of this essay. Until
the year 2013, there have been over 30 requests for the suspension of
concessions relating to some 28 disputes. It has been observed that some cases
witnessed multiple requests for retaliation by different countries against a
single offender, notably the Canada and the US against the European Community
in the famous beef with hormones dispute; Ecuador and the US against the
European Community in the litigious banana case; New Zealand and the US against
Canada in a dispute over milk and dairy products; the European Community
against the US pre-GATT Anti-Dumping Act of 1916 and Brazil, Canada, Chili, the
European Community, Japan, Korea and Mexico against the US and its Byrd
Amendment14.
The argument in this essay however is not the recurrence in the authorization
and/or use of the retaliatory remedy but an appreciation of its potential
effect on trade. Apparently proposed as a
remedy to promote compliance15 with Panel and Appellate
Reports, retaliation is inherently counterproductive, trade restrictive16 and ineffective. The withdrawal
of concessions against a member who fails to comply with the DSU shall, as per Article
22(4) of the DSU, be equivalent to the level of nullification or impairment. From
a developing or small country perspective, this introduces a significant lop-sidedness
in that, not being able to generally affect the terms of trade of large economies
or developed countries, their potential to induce compliance is weakened.17  According to Meltzer
(2000), and based on the standard cost of protectionist barriers, retaliation
is harmful to the Member undertaking such measures. This leads to some sort of
double ‘economic jeopardy’ wherein, the aggrieved country suffers restrictions
on its exports and an increase in the domestic price of foreign goods selected
for retaliation leading to less price-competitivity for home industries who use
these goods in their production chain. This reasoning is shared by Pauwelyn
Joost who noted that ‘…retaliation implies the raising of trade barriers by the winning member vis-à-vis the losing
member, a move detrimental to free trade principles’18 and leads to loss of
gains therefrom with a destructive effect on market access. In the cautious
unlikely event of too many retaliations, the foundational WTO principle of MFN
will be shredded.19  Conclusion:As noted by Messerlin,
2007a, the consensus rule in negotiations and decision-making framework and the
Single Undertaking principle, are stringent constraints to the functioning of
the WTO and the upshot is the need to reassess the exclusive reliance on the
Single Undertaking principle. The foregoing paragraphs raised issues relating
to the defective negotiation and decision-making process, the ineffective
single undertaking principle, and the trade-restrictive nature of the sanction
framework of the WTO. These institutional dysfunctionalities have a negative
impact on the WTO in promoting predictable, free and fair trade between
developed and developing countries – and the asymmetric gains resulting from
the Uruguay Round with potential imbalances in
futuro from the Doha Round have ensured that the trade politics remain
acutely adversarial (Wilkinson, 2006GA8 ).
This is not good for the multilateral trading system. The observable trend in
the proliferation of bilateralism and regionalism in trade agreements lends
credence to the erosion of the WTO centricity on trade liberalization with the
goal of achieving Pareto-welfare gains and development.

1 Kearl et. al. (1979, p. 30)

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2 Speech by the WTO Director
General, at the opening of the Ministerial Conference, Bueno Aires, December
11, 2017 accessible at https://www.wto.org/english/news_e/spra_e/spra205_e.htm

3 The WTO’s structure consists of a
Ministerial Conference (the primary decision-making body); a General Council; a
series of Councils covering each of the three main commercial areas of the
WTO’s activities (trade in goods, services, and trade-related aspects of
intellectual property rights); a series of Committees dealing with issues such
as trade and development, trade and environment, balance of payments’
restrictions, and budget, finance and administration; a Director-General; and a
Secretariat (Wilkinson, 2006) p 19

4 Subramanian A. and Wei S. ‘The WTO Promotes Trade, Strongly but
Unevenly’, Journal of International Economics (2007), 173

5 John Croome, Reshaping the World
Trading System: A History of the Uruguay Round (World Trade Organization,
Geneva 1995) at 322

6 WTO, ‘Ministerial Declaration’
(World Trade Organization, Ministerial Conference, Fourth Session, Doha, 9–14
November 2001: WT/MIN(01)/DEC/W/1, 14 November 2001), at para 47

7 Article 4

8 Article 5

9 Article 6

10 Article 17

11 Article 16(4) for Panel Reports
and 17(14) for Appellate Body Reports

12 WTO, 2004 ‘Understanding the
Dispute Settlement Understanding’, CUP, p 18

13 Apart from retaliation as a
sanction, compensation is another remedy, though rarely used because most
tariff reductions are WTO-inconsistent with the Most Favoured Nation principle
(WTO, 2004)

14 Diego Bonomo, ‘Hitting Where It Hurts: Retaliation Requests
in the WTO’, March 2014,

15 The 1998 European Communities (EC) – Measures Concerning Meat and Meat Products
(Hormones) case provides counter evidence. Despite full retaliation, full
compliance has not been achieved. The non-compliance by the EC through delayed
attempts to justify and maintain the inconsistent and trade restrictive
measures is a bad precedent for the credibility of the DSU.

16 Bernard Hoekman, Proposals for WTO
Reform: A Synthesis and Assessment, 20 Minn. J. Int’l L. 324 (2011) p 354

17 ibid, p 331

18 Pauwelyn, J (2000) ‘Enforcement
and Countermeasures in the WTO: Rules Are Rules– Towards a More Collective
Approach’ 94 A.J.I.L. 337.

19 Gary N.H, ‘Economic Sanctions in
the GATT/WTO World Trading System’, p 115

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