Impact of WTO Dispute Settlement Mechanism

This report explores the impact of the WTO dispute settlement mechanism on trade disputes between nations. It discusses the establishment and history of the WTO, as well as the decision-making methods and effectiveness of the dispute settlement mechanism. The report concludes with an analysis of the overall effectiveness of the WTO dispute settlement mechanism.

RESEARCH REPORT
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
INTRODUCTION OF WTO.......................................................................................................3
Origin of WTO............................................................................................................................4
History of establishment..............................................................................................................4
WTO Decision-Making Methods................................................................................................5
Dispute settlement mechanism and its impact.............................................................................5
Effectiveness of WTO Dispute Settlement..................................................................................7
CONCLUSION................................................................................................................................8
REFRENCES.................................................................................................................................10

INTRODUCTION
WTO is an international organization which handles all kind of trade related activities
between the countries and has set certain rule and regulation that has been set-up in order to
make flow of trade smooth between countries. This organization has been established to help in
growing of trade and removing barriers within it. It has a very wider scope because it deals with
trading and rule regarding it at global level. Nature is also very dynamic because it help in
sustaining of trade within global level. This report is going to be based upon World Trade
Organization and the main topic that is going to be covered is dispute settlement mechanism
impact and is it useful in settling of dispute within an organization.
MAIN BODY
INTRODUCTION OF WTO
WTO stands for world Trade Organization which is considered to be dealing with trade
taking place between nations or countries. This organization was established on 1st January 1995
under Marrakesh agreement. One hundred and twenty three countries signed this agreement on
15th April 1994. WTO has been formed to replace General Agreement on Tariffs and Trade
(GATT) and it was formed in the year 1948. It is one of the largest international economic
organizations in the world. WTO deals with regulation of trade in goods, services and intellectual
property between participating countries by providing a framework for negotiation trade
agreements and a dispute resolution process aimed at enforcing the participants to follow WTO
agreements that have been signed by both the parties. The WTO prohibits discrimination
between the trading parties, provides exception from environmental protection, national security
and other important goal. WTO’ s current director is Robert Azevedo and is leading staff of 600
people. Its head quarters is in Geneva Switzerland. Trade facilitation agreement that is part of
Bali Package was agreed by the members on 7th December 2013. It was the first comprehensive
agreement in history of organizations. On 23rd January 2017 another amendment was done in
trade related aspects of WTO and that was Intellectual Property Rights agreement. It was one of
the major agreement since organizations formation. WTO has boosted trade and has successfully
reduced lot of trade barriers (Thomas, 2017).

Origin of WTO
World Trade Organization was created on 1 January 1995 to replace the General
Agreement on Tariffs and Trade (GATT – General Agreement on Tariffs and Trade) which
included a series of commercial treaties concluded at the end of World War II, in order to
facilitate free trade. GATT principles and agreements were adopted by the WTO which was
charged with administering and extending them. Unlike GATT, the WTO has a substantial
institutional structure (Mertens and et. al., 2016).
Effectively, the WTO is long overdue successor to the International Trade Organization which
was originally planned to be successor of GATT. International Charter of the International Trade
Organization was established in the United Nations conference on trade and occupation, held in
Havana in March 1948 but was blocked by the U.S. Senate. Some historians have assumed that
the failure may have resulted from fears coming from within the American business community,
those that the World Trade Organization (WTO) could be used to regulate rather than to
liberalize big business.
History of establishment
The WTO was officially established on January 1, 1995 but the trading system itself has been
developed half a century ago. Since 1948, the General Agreement on Tariffs and Trade (GATT)
the General Agreement on Tariffs and Trade has made the rules for this system. Since the year
1948-1994 the GATT system includes regulations concerning world trade and generates the
highest growth in international trade. At first the GATT aimed to establish the International
Trade Organization (ITO), a UN specialized agency which is part of the system of Breton Woods
(IMF and World Bank). Although the ITO Charter was finally approved in the UN Conference
on Trade and Development in Havana in March 1948, the process of ratification by the
legislative institutions of the state does not run smoothly. The most serious challenge came from
the United States Congress, that although as a trigger, the U.S. did not ratify. Havana ITO
Charter that cannot be implemented effectively. Nevertheless, the GATT remains a multilateral
instrument governing international trade. Nearly half a century of GATT legal text remained the
same as in 1948 with several additions including consent forms (agreed upon by some countries
only) and tariff reduction efforts. Trade problems resolved through a series of multilateral

negotiations known as the “Round of Trade” (trade round), in an effort to encourage the
liberalization of international trade.
WTO Decision-Making Methods
WTO, GATT uses the traditional method of making decisions in the voting, but consensus
(consensus) method. The members of this procedure, sometimes for the benefit of the
multilateral trading system of consensus, the self-interest, provide a good opportunity to be
considered. WTO consensus cannot be provided, using the method of voting. In such cases,
using each country, one vote, and decisions are taken by majority vote. There are four different
method of voting adopted the WTO Agreement. First, three-fourths vote of the members of the
WTO multilateral trade agreement any of the creation of many acceptable. Second, a quarter of
the Conference of Ministers of the three mostly the responsibility of an international agreement
can be removed by any member of a loaded. Thirdly, the provisions of international agreements,
but all the members decided to cancel two-thirds majority, depending on the nature of the
adoption or decision can be taken. However, this cancellation decisions, may enter into force
only after being accepted by WTO members. Finally, the Ministerial Conference, but two-thirds
majority to be a new member after accepting occurs.
Dispute settlement mechanism and its impact
WTO’s procedure is a mechanism which is used to settle trade dispute under the Dispute
Settlement Understanding. A dispute arises when a member government believes that another
member government is violating an agreement which has been made in the WTO. However,
these agreements are consequential to dialogues between the member States and hence they are
the writers of such agreement. In case any dispute arises, the ultimate duty to settle it lies in the
hands of member government through Dispute Settlement Body. This system already achieved a
great deal and providing some of the necessary attributes of security and predictability which
trader and other market participants need and which is called for in the Dispute Settlement
Understanding under Article 3. The WTO’s Dispute Settlement Understanding (DSU) advanced
out of the ineffective means used under the GATT for settling disagreements among members.
Under the GATT, procedures for settling disputes were ineffective and time consuming since a
single nation, including the nation whose actions was the subject of complaint could effectively
block or delay every stage of the dispute resolution process. It remains to be seen whether

countries will comply with the new WTO dispute settlement mechanism, but thus far the process
has met with relative success. The DSU was designed to deal with the difficulty of reducing and
eliminating non-tariff barriers to trade. A non-tariff trade barrier can be almost any government
policy or regulation that has the effect of making it more difficult or costly for foreign
competitors to do business in a country. In the early years of the GATT, most of the progress in
reducing trade barriers focused on trade in goods and in reducing or eliminating the tariff levels
on those goods. More recently, tariffs have been all but eliminated in a wide variety of sectors.
This has meant that non-tariff trade barriers have become more important since, in the absence of
tariffs, only such barriers significantly distort the overall pattern of trade-liberalization.
Frequently, such non-tariff trade barriers are the inadvertent consequence of well-meaning
attempts to regulate to ensure safety or protection for the environment, or other public policy
goals. In other cases, countries have been suspected of deliberately creating such regulations
under the guise of regulatory intent, but which have the effect of protecting domestic industries
from open international competition, to the detriment of the international free-trade regime
(Castillo-Montoya, 2016).
The Dispute Settlement Understanding (DSU) officially known on rules and procedure
Governing the Settlement of Disputes, establishes rules and procedures that manage various
disputes arising under the Covered Agreements of the Final Act of the Uruguay Round. There
had been total 314 complaints brought by the member of WTO. All WTO member nation-states
are subject to it and are the only legal entities that may bring and file cases to the WTO. The
DSU created the Dispute Settlement Body (DSB), consisting of all WTO members, which
administers dispute settlement procedures. It provides strict time frames for the dispute
settlement process and establishes an appeals system to standardize the interpretation of specific
clauses of the agreements. It also provides for the automatic establishment of a panel and
automatic adoption of a panel report to prevent nations from stopping action by simply ignoring
complaints. Strengthened rules and procedures with strict time limits for the dispute settlement
process aim at providing “security and predictability to the multilateral trading system” and
achieving “[a] solution mutually acceptable to the parties to a dispute and consistent with the
covered agreements.” The basic stages of dispute resolution covered in the understanding include
consultation, good offices, conciliation and mediation, a panel phase, Appellate Body review,
and remedies. WTO, trade and environmental issues are connecting to each other. In this respect

1995 was established a committee to deal with in the following topics: multilateral
environmental agreements, sustainable growth, environment and trade, market access, especially
in the development of exports to developing countries, trade in domestic trading of banned
goods, packaging, labels and other recycled materials, trade-related legislations provided at being
compatible with each other. Launched in 2001, within the framework of the Doha Development
round, the Trade and Environment Committee and the committee was established, environmental
products, market access, multilateral environmental agreements – the relationship between the
WTO and the development of environmentally sensitive issues such as trade practices linked to
the appointment decision(Durkee-Lloyd, 2016).
Effectiveness of WTO Dispute Settlement
It an strong argument to be made that WTO dispute solving mechanism is creating an
outstanding affect over nation performing mechanism under it. Still there has been rejection over
the opinion which regards to the length of process and lack of retaliatory power particularly over
the developing countries. The legal proceedings in the WTO dispute settlement take often a
relatively long time in duration and might require additional costs. limited retaliatory authority
from developing countries might deter making complaints. If there is no hope for their
views of imposing rulings in their favor, especially since there is no mechanism for collective
punishment of recall- citrate respondents. Furthermore, small developing countries may
workout self-constraint in blaming their struggles in order not to threaten the privileges that they
rely on, including development aid and unilateral trade preferences. All of these arguments
are constructed to counter the effectiveness of the WTO dispute settlement (Adashi, Walters. and
Menikoff, 2018).
CONCLUSION
From the above report it is clear that all kinds of WTO is that organization which has
been formed to run trade in smooth manner between two nations. This is a very important
organization as it helps in making agreements that are legal in nature. History of WTO has been
explained and establishment of it has been explained. Further dispute solving mechanism and its

effectiveness has been explained. In this report various things related to WTO and its dispute
solving mechanism has been covered.
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