1. Origin and Evolution of GATT & WTO

1.1 Background — Protectionism and the Need for Free Trade

After World War II, the international community recognised that the beggar-thy-neighbour protectionist policies (tariffs, quotas, currency manipulation) of the inter-war period had fuelled economic collapse and contributed to the war itself. The response was to create a new multilateral trading framework.

Theories underpinning free trade:

• Comparative Advantage (Ricardo): Countries benefit by specialising in what they produce most efficiently and trading for the rest
• Absolute Advantage (Adam Smith): Countries export goods they can produce at lower absolute cost
• Arguments for protectionism: Infant industry protection, national security, revenue generation, employment protection — these are recognised as exceptions under WTO law (Articles XIX, XX, XXI GATT)

1.2 The Havana Charter and Birth of GATT 1947

In 1944, Bretton Woods established the IMF and World Bank. Plans were made for a third institution — the International Trade Organisation (ITO) — to complete the Bretton Woods trinity. In 1947, 23 countries signed the General Agreement on Tariffs and Trade (GATT) as an interim measure pending the ITO’s establishment. However, the US Senate refused to ratify the Havana Charter creating the ITO, so GATT became the de facto framework for international trade law for nearly 50 years.

1.3 GATT Negotiating Rounds

1.4 Uruguay Round and WTO (1994)

The Uruguay Round (1986-1994) was the most ambitious round of trade negotiations in history. It resulted in the Marrakesh Agreement establishing the World Trade Organization, which came into force on 1 January 1995. The WTO subsumed GATT and expanded the multilateral trade regime significantly.

1.5 Objectives, Structure and Functions of WTO

Principal Organs of the WTO:

• Ministerial Conference: Highest decision-making body; meets every 2 years; has authority to take decisions on all WTO matters
• General Council: Conducts business between Ministerial Conferences; also functions as DSB and TPRB
• Dispute Settlement Body (DSB): Administers dispute settlement rules and procedures
• Trade Policy Review Body (TPRB): Reviews trade policies of members
• Council for Trade in Goods: Oversees implementation of GATT and related agreements
• Council for GATS: Oversees trade in services
• Council for TRIPS: Oversees intellectual property issues
• Committees and Working Groups: On specific topics (Agriculture, SPS, TBT, etc.)
• Secretariat: Headed by Director-General; provides administrative and technical support

Decision-Making: WTO operates primarily by consensus. Voting is available but rarely used. One member, one vote. Decisions on amendments, waivers, and accessions follow specific Article procedures.

2. WTO Dispute Settlement System (DSU)

The WTO Dispute Settlement System is widely regarded as the “jewel in the crown” of the WTO — the most sophisticated international dispute resolution mechanism in existence. It replaced the GATT system where panel reports could be blocked by any party (including the losing party).

2.1 Stages of WTO Dispute Settlement

1. Consultations (Article 4 DSU): A member must first request consultations with the respondent. Mandatory 60-day consultation period (20 days for urgent/perishable goods cases). If no satisfactory solution within 60 days, complainant may request panel.
2. Good Offices, Conciliation and Mediation (Art. 5): Available at any time if parties agree.
3. Panel Establishment (Art. 6): DSB establishes panel on second request. Panel of 3 (exceptionally 5) experts. Panel chosen from WTO’s indicative list; parties may object to panelists.
4. Panel Process (Arts. 12-13): Written submissions, rebuttals, panel meetings with parties, expert consultation. Panel report within 6 months (3 for urgency). Panel report circulated to members.
5. Adoption of Panel Report (Art. 16): Adopted by DSB within 60 days unless appealed or DSB decides by consensus not to adopt (negative consensus — virtually impossible to block).
6. Appellate Body (Art. 17): Either party may appeal on questions of law only. AB has 7 members (3 per case). 60-90 day process. AB report adopted by DSB.
7. Implementation (Art. 21): Respondent must implement within reasonable period of time (usually up to 15 months). DSB monitors implementation.
8. Compensation and Suspension of Concessions (Art. 22): If implementation fails, complainant may seek compensation (agreement) or request DSB authorisation to suspend concessions (retaliation). Retaliation must be equivalent in value.

3. Principles of Non-Discrimination in GATT & WTO

Non-discrimination is the cornerstone of the WTO system, embodied in two principles: Most Favoured Nation (MFN) and National Treatment (NT). Together, they prevent discrimination between foreign products and between foreign and domestic products.

3.1 Most Favoured Nation Treatment — Article I GATT

Key elements of the MFN obligation:

• “Advantage, favour, privilege or immunity”: Very broad — any benefit must be extended to all members
• “Immediately and unconditionally”: Cannot be made conditional on reciprocity from the receiving country
• “Like product”: The comparator is the “like product” — determined by physical characteristics, end-uses, consumer preferences, and tariff classification
• Applies to: Customs duties, charges, levies, administrative requirements, and anything affecting the competitive relationship between imported products

Exceptions to MFN:

• Customs Unions and Free Trade Areas (Art. XXIV): Preferential tariffs within RTAs allowed if they cover substantially all trade and do not raise external barriers
• Generalised System of Preferences (GSP): Developed countries may grant preferential tariffs to developing countries under the 1971 Waiver and 1979 Enabling Clause
• Article XX: General exceptions (health, environment, public morals, etc.)
• Article XXI: Security exceptions
• GATS Annex on MFN Exemptions: Countries could list specific exemptions when GATS was adopted

3.2 National Treatment — Article III GATT

National Treatment prohibits discrimination between imported and “like” domestic products after entry. It applies to:

• Internal taxes and charges (Art. III:2)
• Regulatory measures: laws, regulations, requirements affecting internal sale, distribution, etc. (Art. III:4)
• The key question is whether imported products are treated “no less favourably” than like domestic products

“Like product” test under NT: The AB has emphasised that likeness is a “marketplace” question — looking at physical characteristics, end-uses, consumer tastes and habits, and tariff classification. The competitive relationship between the products is central.

3.3 Exceptions — Article XX General Exceptions

4. Subsidies and Countervailing Measures (SCM Agreement)

4.1 Definition of Subsidy

Three elements for a subsidy to exist:

1. A financial contribution or income/price support
2. By a government or public body
3. Conferring a benefit on the recipient (benefit = the recipient is better off than without the subsidy)

4.2 Specificity

Only specific subsidies are subject to the disciplines of the SCM Agreement. Specificity means the subsidy is targeted at a specific enterprise, industry, group of enterprises, or region, rather than being broadly available. Types of specificity:

• Enterprise-specific: Subsidy limited to a particular enterprise
• Industry-specific: Subsidy limited to certain sectors
• Regional: Subsidy limited to enterprises in a designated geographic region
• De jure specificity: Explicit limitation in law or regulation
• De facto specificity: In practice, only certain enterprises use the subsidy despite formal availability

4.3 Types of Subsidies under SCM Agreement

5. Dumping and Anti-Dumping Duties

5.1 What is Dumping — Article VI GATT

Three ways to establish “normal value” (Anti-Dumping Agreement Art. 2):

1. Home market price: Price of like product in the ordinary course of trade in the domestic market of the exporting country (primary method)
2. Third country price: Price of like product sold for export to an appropriate third country (if home market sales are below cost or insufficient)
3. Constructed value: Cost of production + reasonable amounts for administrative, selling and general costs + profit

Dumping Margin: Normal Value minus Export Price. If positive, dumping exists. Anti-dumping duties cannot exceed the dumping margin.

5.2 Anti-Dumping Investigation

Three conditions must be met to impose anti-dumping (AD) measures:

1. Dumping: The product is being dumped (NV > EP)
2. Material Injury (or threat thereof): The domestic industry is suffering material injury, or there is a threat of material injury, or material retardation of establishment of a domestic industry
3. Causal Link: The dumped imports are causing the material injury

Investigation procedure: Must be initiated on written application by domestic industry. Sufficient evidence required. Must notify exporting country’s government. Investigation typically takes 1 year (max 18 months). Right of all interested parties to present evidence and submit comments.

5.3 Anti-Dumping Measures

• Provisional measures: Preliminary duties imposed for up to 4 months pending final determination
• Price undertakings: Exporters may revise prices voluntarily — if accepted, investigation suspended
• Definitive anti-dumping duties: Imposed for maximum 5 years, subject to Sunset Review
• Sunset Review: Must be reviewed within 5 years — duties continue only if their expiry would likely lead to continuation or recurrence of dumping and injury

6. Services, Investment and Intellectual Property (GATS, TRIMs, TRIPS)

6.1 General Agreement on Trade in Services (GATS)

GATS obligations:

• General obligations (apply to all services): MFN (Art. II), transparency (Art. III), domestic regulation (Art. VI)
• Specific commitments (apply only to sectors scheduled by each Member): Market access (Art. XVI) — no restrictions on number of suppliers, total value of transactions, total operations, total number of natural persons, types of legal entity; National treatment (Art. XVII) — no less favourable treatment than domestic services
• Members schedule sectors they open; all others remain uncommitted

6.2 Trade-Related Investment Measures (TRIMs Agreement)

6.3 Trade-Related Intellectual Property Rights (TRIPS Agreement)

TRIPS is the most comprehensive multilateral agreement on intellectual property. Key features:

• Sets minimum standards for: copyright, trademarks, geographical indications, industrial designs, patents, layout-designs of integrated circuits, undisclosed information, and anti-competitive licensing practices
• Applies MFN and national treatment to IP protection
• 20-year patent protection; 10-year trademark registration; life + 50 years for copyright
• Compulsory licensing (Art. 31): Permitted for public health emergencies (clarified by Doha Declaration on TRIPS and Public Health, 2001)
• Enforcement obligations — civil and criminal remedies must be available

7. Export Trade Transactions and International Commercial Contracts

7.1 Standard Trade Terms — INCOTERMS

INCOTERMS (International Commercial Terms) are standardised trade terms published by the International Chamber of Commerce (ICC). They allocate costs, risks and duties between buyer and seller in international sales contracts. The latest version is INCOTERMS 2020.

8. Payments in International Trade

8.1 Bills of Exchange

A bill of exchange is an unconditional order in writing, addressed by one person (drawer) to another (drawee), signed by the person giving it (drawer), requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer (Negotiable Instruments Act, 1881, Section 5).

Parties: Drawer (exporter/seller) · Drawee (importer/buyer — before acceptance) · Acceptor (after acceptance) · Payee · Endorser · Holder in due course

Types: Sight draft (payable on presentation) · Usance/Time draft (payable after a fixed period)

8.2 Letter of Credit (Documentary Credit)

Parties to an LC:

• Applicant: The buyer/importer who requests the bank to open the LC
• Issuing Bank: The buyer’s bank that opens the LC and undertakes to pay the seller
• Beneficiary: The seller/exporter in whose favour the LC is opened
• Advising Bank: The seller’s bank that advises (notifies) the beneficiary of the LC’s opening
• Confirming Bank: A bank (usually in the seller’s country) that adds its own undertaking to pay — guaranteeing the LC even if the issuing bank defaults
• Negotiating Bank: A bank that purchases the documents and bills of exchange from the beneficiary

9. Carriage of Goods — Bills of Lading

Three functions of a Bill of Lading:

1. Receipt for goods: Acknowledges that the carrier has received the goods in the condition stated
2. Document of title: Whoever holds the bill of lading (or endorsee) is entitled to possession of the goods — this makes it a negotiable document of title
3. Evidence of contract of carriage: Sets out the terms on which goods will be carried (though the actual contract may be the charter party)

Types of Bills of Lading:

• Straight (non-negotiable): Consigned to a named person — cannot be transferred by endorsement
• To Order (negotiable): Consigned “to order” or “to order of [party]” — transferable by endorsement; most common in trade finance
• Bearer Bill: Payable to bearer — transferable by delivery alone
• Claused/Dirty: Contains reservations about the condition of goods received
• Clean: No adverse notations — required by most LCs
• Through Bill of Lading: Covers carriage by multiple modes of transport

The Hague/Hague-Visby Rules: The International Convention for the Unification of Certain Rules relating to Bills of Lading (Hague Rules 1924, as amended by Visby Protocol 1968) sets minimum liability standards for carriers:

• Carrier’s fundamental duties: seaworthy ship; properly man, equip and supply; make holds fit and safe for goods
• Carrier’s immunities (Hague Rules Art. IV, Rule 2): Act of God, act of war, act of public enemies, management of ship, fire (unless carrier’s fault), nautical fault of master/crew
• Package limitation: Carrier’s liability limited to 666.67 SDR per package or 2 SDR per kg
• Time bar: 1 year from delivery or date of delivery