You are on page 1of 28

WTO and Pakistan

Submitted to:
Dr. Bilal Aziz
Submitted by:
M.Tayyab
Subject:
WTO

World trade organization


The World
Trade
Organization (WTO)
is
the
only
global
international organization dealing with the rules of trade between nations. At its heart
are the WTO agreements, negotiated and signed by the bulk of the world's trading
nations and ratified in their parliaments.
The World Trade Organization (WTO) establishes rules of trade among its member
nations. To this end, the WTO also handles trade disputes, monitors trade policies,
provides technical assistance for developing countries and cooperates with other
international trade organizations.
The World Trade Organization (WTO) is a global organization that helps countries and
producers of goods deal fairly and smoothly with conducting their business across
international borders. It mainly does this through WTO agreements, which are
negotiated and signed by a large majority of the trading nations in the world. These
documents act as contracts that provide the legal framework for conducting business
among nations. There are several groups within the WTO, with the highest decisionmaking authority going to a group known as the Ministerial Conference, which can make
decisions on all matters and trade disputes among members.

History of world trade organization


The WTO was officially created in January of 1995 and essentially replaced the General
Agreement on Tariffs and Trade (GATT), which had been in force since 1948, a few
years after the Second World War. Before the WTO was created, an initiative to start
something similar known as the International Trade Organization (ITO) took place.
Unfortunately, the ITO treaty was not approved by the U.S. and a few other countries
and ultimately never went into effect.
In the 1980s, as the world economies became more global in trade and business, it
became evident that GATT was not built or structured to address many of the new
global trading challenges that were arising. As a result, the biggest trade negotiating
event on record began in 1986. It was known as the Uruguay Round, seeing as it took
place in Punta del Este, Uruguay. One of the final accomplishments of this round was
the creation of the WTO. The WTO is currently working on new negotiations and
agreements, known as the Doha Development Agenda, and these started in 2001.

Mission statement of World trade organization


It is an international organization whose primary function is to open the trade for all

Goal of World trade organization


The ultimate goal is to help the producers of goods, services and importers and
exporters to conduct their business.

Achievement:-

Global trade in 1997 is increased by 14 fold as compared to 1950


The last half-century has witnessed an exceptional growth in world trade; goods
exports grew on average by 6 % per annum

Criticisms:These are some of the criticisms of the WTO


1.

Free Trade benefits developed countries more than developing


countries. It is argued, developing countries need some trade protection to be
able to develop new industries. The WTO have sought to maintain the same rules for
developing countries preventing them from protecting new industries

2.

Diversification. Arguably developing countries who specialize in primary


products (e.g. agricultural products) need to diversify into other sectors. To diversify
they may need some tariff protection, at least in the short term. Many of the existing
industrialized nations used tariff protection when they were developing. Therefore,
the WTO has been criticized for being unfair and ignoring the needs of developing
countries.

3. Environment. Free trade has often ignored environmental considerations. E.g.


Free trade has enabled imports to be made from countries with the least
environmental protection. Many criticize the WTOs philosophy that the most

important economic objective is the maximization of GDP. In an era of global


warming and potential environmental disaster, increasing GDP may be the least
important.
Arguably
the
WTO
should
do
more
to
promote
environmental considerations.
4.

Free trade ignores cultural and social factors. Arguably a reasonable


argument for restricting free trade is that it enables countries to maintain cultural
diversity. Some criticize the WTO for enabling the domination of multinational
companies which reduce cultural diversity and tend to swamp local industries and
firms.

5. The WTO is criticized for being undemocratic. It is argued that its structure enables
the richer countries to win what they desire; arguably they benefit the most.

How it works
Example:More than 140 countries belong to the WTO, and membership is voluntary. Some
countries hold observer status with the WTO, which enables the country to follow
discussions and matters of particular interest. Some WTO committees are for members
only, however, and do not allow observers.
WTO decisions are made by consensus rather than by delegation to a board of
directors or leader. The WTO's highest authority is the Ministerial Conference, whose
members meet at least once every two years. The WTO General Council, with the
Dispute Settlement Body and the Trade Policy Review Body, handles the WTO's day-today duties. These day-to-day entities, which are collectively referred to as the General
Council, act on behalf of the Ministerial Conference and are composed of several sub
councils, including the Council for Trade in Goods, the Council for Trade in Services and
the Council for Trade-Related Aspects of Intellectual Property Rights. Each sub council
has several committees.
WTO members negotiate World Trade Agreements, which are later ratified by the
participating nations' parliaments or congresses. WTO agreements involve five
principles:
1. With some exceptions, members must provide equal trade-agreement terms to all
fellow WTO countries. This equal treatment is known as most-favored-nation status.
Members also must offer "national treatment," meaning a WTO member may not
discriminate against products from other WTO countries once the products have
entered the member's market.

2. WTO agreements must work to lower trade barriers such as customs duties, tariffs,
import bans and quotas.
3. WTO agreements must help provide a stable and predictable business environment
by including commitments about future trade policies.
4. WTO agreements must define fair and unfair trade practices.
5. WTO agreements must consider the special needs developing countries may have in
implementing WTO requirements.
Dispute settlement processes are written into WTO agreements, which are legally
binding. WTO members enforce agreements according to predetermined procedures,
but there is some concern that economically strong countries may be able to ignore
complaints brought by poorer countries, whose sanctions or other penalties may not
hurt the offending country enough to stimulate compliance.

Why it matters??
The WTO is one of the most powerful and controversial legislative bodies in the world.
Ideally, the purpose of the WTO is to facilitate free trade while helping governments
meet social and environmental goals.
Whether free trade and the WTO accomplish these goals is the subject of considerable
debate. Some question whether free trade benefits wealthy nations and multinational
corporations rather than communities and the environment. Further, approximately two
thirds of WTO members are developing countries, and some of these countries are
concerned
that
poor
domestic
infrastructure,
political
instability,
and
certain tariff arrangements disproportionately inhibit their abilities to engage in profitable
trade. Critics also point out that a country's choice not to join the WTO may effectively
place an embargo on the goods and services of that country.

Advantages of world trade organization


The WTO is a body designed to promote free trade through organizing trade
negotiations and act as an independent arbiter in settling trade disputes. To some extent
the WTO has been successful in promoting greater free trade.
Free trade has many advantages, such as:
1. Lower prices for consumers. Removing tariffs enables us to buy cheaper imports

2. Free trade encourages greater competitiveness. Firms face a higher incentive to cut
costs. For example, a domestic monopoly may now face competition from foreign firms.
3. Law of comparative advantage states that free trade will enable an increase in
economic welfare. This is because countries can specialize in producing goods where
they have a lower opportunity cost.
4. Economies of scale. By encouraging free trade, firms can specialize and produce a
higher quantity. This enables more economies of scale, this is important for industries
with high fixed costs, such as car and aero plane manufacture.
5. Free trade can help increase global economic growth.

Disadvantages

However, the WTO has often been criticized for ignoring the plight of the developing
world.
It is argued the benefits of free trade accrue mostly to the developed world.
Free trade may prevent developing economies develop their infant industries. For
example, if a developing economy was trying to diversify their economy to develop a
new manufacturing industry, they may be unable to do it without some tariff
protection.

Objectives of world trade organization


1. To improve the standard of living of people in the member countries.
2. To ensure full employment and broad increase in effective demand.
3. To enlarge production and trade of goods.
4. To increase the trade of services.

5. To ensure optimum utilization of world resources.


6. To protect the environment.
7. To accept the concept of sustainable development.

Functions of world trade organization


1. To implement rules and provisions related to trade policy review mechanism.
2. To provide a platform to member countries to decide future strategies related to trade
and tariff.
3. To provide facilities for implementation, administration and operation of multilateral
and bilateral agreements of the world trade.
4. To administer the rules and processes related to dispute settlement.
5. To ensure the optimum use of world resources.

6. To assist international organizations such as, IMF and IBRD for establishing
coherence in Universal Economic Policy determination.

The structure of world trade organization


The structure of the WTO is dominated by its highest authority, the Ministerial
Conference, composed of representatives of all WTO members, which is required to
meet at least every two years and which can take decisions on all matters under any of
the multilateral trade agreements.
The day-to-day work of the WTO, however, falls to a number of subsidiary bodies;
principally the General Council, also composed of all WTO members, which is required
to report to the Ministerial Conference. As well as conducting its regular work on behalf
of the Ministerial Conference, the General Council convenes in two particular forms - as
the Dispute Settlement Body, to oversee the dispute settlement procedures and as the
Trade Policy Review Body to conduct regular reviews of the trade policies of individual
WTO members.

The General Council delegates responsibility to three other major bodies - namely the
Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of
Intellectual Property. The Council for Goods oversees the implementation and
functioning of all the agreements (Annex 1A of the WTO Agreement) covering trade in
goods, though many such agreements have their own specific overseeing bodies. The
latter two Councils have responsibility for their respective WTO agreements (Annexes
1B and 1C) and may establish their own subsidiary bodies as necessary.
Three other bodies are established by the Ministerial Conference and report to the
General Council. The Committee on Trade and Development is concerned with issues
relating to the developing countries and, especially, to the "least-developed" among
them. The Committee on Balance of Payments is responsible for consultations between
WTO members and countries which take trade-restrictive measures, under Articles XII
and XVIII of GATT, in order to cope with balance-of-payments difficulties. Finally, issues
relating to WTO's financing and budget are dealt with by a Committee on Budget.
Each of the four plurilateral agreements of the WTO - those on civil aircraft, government
procurement, dairy products and bovine meat - establish their own management bodies
which are required to report to the General Council.

Pakistan and world trade organization


Pakistan is one of the founder Members of the WTO since 1995, and its predecessor
organization the GATT set up in 1948. We are following an export led growth strategy
and as such market access is of vital importance for our businesses. The increase in
preferential arrangements and free trade areas between some members is also eroding
our market access. Therefore in order to maintain current markets and gain new ones
for our exportable goods and services we are dependent on the WTO to get tariff and
nontariff barriers lowered on an MFN basis. Such MFN liberalization effectively levels
the playing field for competitive suppliers.
Pakistan has been actively engaged in the Doha round of trade talks that were launched
in the Qatari capital in November 2001. Aptly named the "Doha Development Agenda"
(DDA), this round of trade talks has been focusing on removing distortions in the world
agriculture markets and attaining enhanced market access for both products and
service providers from Pakistan.

Since 2001, there have two more ministerial conferences in Cancun in 2003 and Hong
Kong in 2005 respectively. There have been many ups and downs in the road to a
successful conclusion to the Doha round that takes into account the myriad interests of
the developing membership. There was a breakdown of talks in the summer of 2006
which led many observers to be skeptical of the entire process. However, sustained
efforts by the membership led to a partial resumption of the talks in November 2006 and
full resumption since January 2007 after the annual meeting of the World economic
forum at Davos.

Continued:Pakistan joined WTO in 1995 when the organization came into being. As a developing
country Pakistan has enjoyed the extra time given for preparations to abide by the
Agreements of WTO up to 2005. The implications to adopt the free liberalization under
WTO has many pros and cons but until now there has been no comprehensive study to
capitulate the total impact in economic terms focusing overall and individual sectors of
the economy in particular. To enter into the intricacies of WTO Agreements and applying
them on sectors of the economy is a huge and difficult task and out of scope of this
essay. In simple terms, WTO negates anything which blocks the way of free movement
of goods and services from one market to another on a basic assumption of improving
the human lifestyle. It demands open market access for foreign goods and services in
the local market without any discrimination by creation of tariff or non-tariff barriers.
Pakistan is required to provide a Most Favored Nation (MFN) status to all trading
partners which means non-discriminatory treatment among the members implying on
any imports or exports origination from respective countries. If Pakistan provides an
MFN status to India for example, then Pakistan has to provide an equitable treatment to
all imports originating from India which will restrict Pakistan to impose any kind of
qualitative or quantities restriction on Indian products. Now this implies to the question
why like India Pakistan is not reciprocating to given the same MFN status. The major
reason is that the total GDP of Pakistan is approximately $80 billion and if India can
subsidize all its imports of an equal amount this will create havoc for the Pakistani
industry. In case of GATT, it requires all countries to reduce their respective rates to a
given limit, and here WTO provides special preferential treatment to the developing and
least developed countries by giving them more time and more flexibility to adjust to the
global trade liberalization system. But in reality, with specific reference to Pakistan
under IMF conditionality and structural adjustment program, Pakistan has to reduce its
tariff from 65% to 30% gradually, and WTO also requires the same. Under WTO it is
partly the mutual consent of the negotiating parties to determine tariff bind and tariff
bound rates but under IMF it is more enforcement of the loan requirements.
In case of a dispute the case is to be presented to the Dispute Settlement Body of
WTO. This requires preparation of the case in context with the legalities of WTO rules. A
developing country like Pakistan which does not have ample resources or know-how of

the subject of WTO rules and references usually are trapped to pay hefty foreign
exchange to international lawyers which are almost unaffordable. An ideal example is of
Basmati Rice, which was initially patented by a U.S. firm has been challenged by India,
where Dispute Settlement body favored India. Now, India having the sole patents
refrains all Pakistani rice exports to be referred as "Basmati" until the patents rights are
paid
for.
Take any industry or sector of economy i.e., textile, fertilizer, pharmaceutical, oil & gas,
ship building, sugar, banks, insurance, leasing, and agriculture WTO directly effects
the local industry both at the import and export ends from the beginning to end focusing
more on quality standards, hygienic conditions, and the very existence of a product or
service through intellectual property clauses.
The negotiation ground of WTO, we must be ready and fully prepared with complete set
of briefings on impacts of WTO Agreements and its agenda on all sectors of Pakistani
economy and industry. Pakistan should have a vision i.e. what it would like to achieve
from other nations before reciprocating market access to respective countries. Like all
other relations, trade relations are friend and foe oriented and are glued with the
broader national goals of the country. Trade relations have become so influential that
they have become either source of normalization of other diplomatic relationships, or
creating more belligerent associations with other countries. If Pakistan has to choose
between the options international trade relationship can work wonders for Pakistan,
making it possible for Pakistan to normalizing relationships with countries where the
advantage
is.
In additions, as it has been emphasized from the beginning that exports are function of
domestic production strength. Pakistan should also develop an indigenous model of
economic development based on local stakeholders rather than following blindly the
policies and guidelines of WTO, WB and IMF. Bangladesh is a key example in this
respect which has achieved formidable success in developing socio-economic
strategies focusing the Small and Medium Enterprises (SMEs) of the country. Gramine
Bank and Gramine Telecom of Dr. Younas are an epic story of mobilizing the poorest
fraction of the country especially women by providing credit loans to them to invest in
local self-employment and business opportunities, and accessing market information
using
communication
facilities.
To what extend the tariff should be bound, to what extend the subsidies to be provided,
to what extend Pakistan can win preferential treatment, win anti-dumping and safeguard
cases, secure intellectual property rights, to choose to give MFN status, to apply
national treatment to foreign products, to acclaim developing country provisions, to
ensure a level playing field for domestic industry is not an easy task for Pakistani
Mission to Geneva in WTO at least for now!

As regards agriculture, Pakistan being an agrarian economy is still a net importer of


food items. The Agreement on Agriculture (AoA) is perhaps one of the most
controversial aspects of WTO. The issues in AoA include subsidies, domestic support
and market access. The developing countries and the developed world are at
loggerheads over agriculture. The developing countries require an AoA that is fair just to
meet both ends, while the developed countries require that they maintain their status
quo to protect their handful of farmers through subsidies and domestic support. As far
as Pakistan is concerned, Pakistan has comparative advantage in many primary
commodities. But in order to fully utilize our comparative advantage, we need to focus
on and solve the problems in supply side (domestic requirements).
Pertaining to TRIPS agreements, different varieties of plants and animal species and
traditional pharmaceutical and herbal knowledge need to be registered to take full
advantage of them. All valuable export brands like Basmati rice, varieties of mangoes,
oranges, etc. need to be protected under different provisions of TRIPS agreement.
Furthermore we need to exploit our comparative advantage in the production of halal
meat, dairy products, fruits, vegetables etc. Same is the case with the services which
are the largest and most dynamic component of both developed and developing
economies.

WTO and its implication for Pakistan


The World Trade Organization (WTO) is an organization that intends to supervise and
liberalize international trade. The organization officially commenced on January 1, 1995
under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade
(GATT), which commenced in late 40s. Along with International Monetary Fund (IMF)
and International Bank for Reconstruction and Development (commonly known as
World Bank) for freer and predictable trade between countries. It tries to provide market
access to countries for their products and services and promotes friendly investment
policies by eliminating trade distortions between countries, trimming down tariff and
non-tariff barriers, removing quotas and abolishing subsidies in a phased manner. It
also has rules that protect local businesses and industry from foreign goods and
services using unfair practices like dumping or transfer pricing mechanisms. The WTO
has rules to address quality issues, labor standards, environmental aspects,
government regulation, and legal frameworks. It is important to understand the evolution
of WTO and how its rules affect developing countries such as Pakistan.
The need for an institution to promote rule based trade was felt when in 1930s world
suffered through the Great Depression and World War II. The Great Depression had
profound effect on the people and nations who lived through it. This economic mayhem
started with the 1929 Stock Market Crash wiping out savings of people and creating
unemployment of the highest level in Western World. That great Depression resulted
into WWII and destroyed many European countries. After the WWII, reconstruction of

the Europe was top most priority of the US and that promoted, along with other steps, to
create some international institutions to facilitate and promote trade and development.
In January 1948, 23 nations organized the General Agreement on Tariffs and Trade
(GATT) in Geneva providing opportunity to start the tariff negotiations. This first round
resulted in 45,000 tariff concessions affecting $10 billion (about 1/5th of the world trade).
In the next 47 years, the basic legal text of the GATT remained the same as it was in
1948, with some additions in the form of plurilateral voluntary membership
agreements and continual efforts to reduce tariffs in a series of trade rounds till the
inception of World Trade Organization on 1st January, 1995 in the 8th round at Uruguay.
The agendas of the eight rounds of the GATT from 1947 to 1994 can be glanced
through
the
following
table.
The WTO is an institution with the broader legal and constitutional elements that
incorporate and standardize the strategies for global economic integration. Its basic
objective is to create a liberal and open trading system under which business
enterprises from respective member countries can trade with one another in a fair and
undisclosed competitive system with an agenda to raising standards of living, ensuring
full employment and a large and steadily growing volume of real income and effect
demand and developing the full sense of the resources of the world and expanding the
production and exchange of goods. These objectives are to be achieved by following
the optimal use of the world's resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance the
means for doing so in a manner which is consistent with their respective needs and
concerns at different levels of economic development. In other words, the WTO
facilitates the implementation, administration and operation, and further the objectives of
the Multilateral Trade Agreements, and also provides framework for the implementation,
administration and operation of the Plurilateral Trade Agreements. It provides the forum
for negotiations among its members concerning their multilateral trade relations in
matters dealt with under the agreements and a framework for the implementation of the
results of such negotiations, as may be decided by the Ministerial Conference. The
WTO administers the Understandings on Rules and Procedures governing the
Settlement of Disputes. It administers the Trade Policy Review Mechanism (TPRM).
With a view to achieving greater coherence in global economic policy-making, the WTO
cooperates, as appropriate, with the International Monetary Fund (IMF) and with the
International Bank for Reconstruction and Development (World Bank) and its affiliate
agencies.

Four Basic rules of WTO are


Protection to domestic industry through tariffs .
GATT requires the member Countries to protect their Domestic industry/production
through tariffs only. It prohibits the use of quantitative restrictions, except in a limited
number of situations.

Binding of tariffs.
The member countries are urged to eliminate protection to domestic industry/
production by reducing tariffs and removing other barriers to trade in multilateral
trade negotiations. The reduced tariffs are bound against further increases by listing
them in each country's national schedule and the schedules are an integrated part of
the GATT legal system.

Most Favored nation treatment (mfn) treatment.


The rule lays down the principles of non-discrimination amongst member countries.
Tariff and other regulations should be applied to imported or exported goods without
discrimination among countries. Exceptions to the rules are to regional
arrangements subjected to preferential or duty free trade agreements, Generalized
System of Preferences (GSP) where developed countries apply preferential or duty
free rates to imports from developing countries.

National Treatment Rule.


The rule prohibits member countries from discriminating between imported products
and domestically produced goods in the matter of internal taxes and in the
application of internal regulations.

WTO Regime and its impact on Pakistan


economy
As far as the industrial sector is concerned, at the moment Pakistan the main export
of Pakistan is Textile and related products. These are discussed separately in this
report. The non-textile export of Pakistan is negligible. This trend needs to be
changed as no country should rely solely on the export of one or few products. On
the Import side, Pakistan recently has rationalized its tariff structure to a large
extent.
The average tariff in Pakistan is around 17 percent with only four tariff slabs. There

should not be any adverse effects on the domestic producer with the globalization as
the local industry has already adjusted to the increased competition from global
market. This however does not hold true for automobile industry, which still enjoys
high protection and needs to become efficient if it wants to survive.
This study attempts to analyze the impact of WTO on the important sectors in
Pakistan i.e. Industry, Textile, Agriculture and Services.

Pakistan Economy
The economy of Pakistan is the 27th largest in the world in terms of purchasing power
parity, and 38th largest in terms of nominal gross domestic product.

Currency:
Pakistani Rupee

Pakistani economy is very much dependent on Agriculture.


1.
2.
3.
4.

Agriculture sector contributes 25% to GNP.


Industry contributes approximately 18% to GNP.
Retail trade account for 15%
Transport and communication for 10%.

Importance of Pakistani Economy


1. 27th largest economy of the world with respect of the purchasing power.
2. The 48th largest in the absolute dollar terms.
3. Pakistan has a semi-industrialized economy.

Impact of WTO policies on Pakistan

As a member it has to abide by the of WTOs objective of putting an end to the


import duties which have been reduced from maximum over 80 percent nine years
ago and 30 percent at present.

Disadvantages of WTO to Pakistan


Provision of commodities injurious to health:
.
As WTO basic rule is no discrimination between import and export while
making
rules and regulations.
Due to it, commodities injurious to health were supplied more,
use of such commodities affects negatively health of people.

Decrease in Revenue of Government and unfavorable Economic


Conditions:
Elimination of taxes on traded goods, results a decrease in government revenue of
developing countries. World Trade Organization also pressurizes its members to
follow its policies that may create difficulties and problems. This makes economic
conditions unfavorable.

Obstacles in establishing new Industries and unfavorable effect of


foreign investment:
Obstacles arise in setting up new industries in developing countries because people
of Pakistan prefer to purchase imported items and it becomes a golden opportunity
for the people if imported goods are available at low price. This reason also creates
unfavorable effect on the inflow of foreign investment.

Slow Speed of Economic Development:


The resources are diverted to increase production of exportable goods
and necessities goods required in the country are not produced in the
country resulting in shut down of domestic industry.

Case related to Pakistan with other


countries with respect to world trade
Organization

Following are the two cases which are occurred in Pakistan with other countries with
respect to world trade organization

United States Import Prohibition of


Certain Shrimp and Shrimp Products
Key Facts
Short Title: US-Shrimp
Complainant: India; Malaysia; Pakistan; Thailand
Respondent: United States
Third Parties: Australia; Canada; Colombia; Costa Rica; European Communities;
Ecuador; El Salvador; Guatemala; Hong Kong, China; Japan; Mexico; Nigeria;
Philippines; Senegal; Singapore; Sri Lanka; Venezuela, Bolivarian Republic of;
Pakistan; Thailand.
Agreements cited: GATT 1994: Art. I, XI, XIII, XX
(as cited in request for consultations)
Request for Consultations received: 8 October 1996
Panel Report circulated: 15 May 1998a

Consultations
Complaint by India, Malaysia, Pakistan and Thailand.
On 8 October 1996, India, Malaysia, Pakistan and Thailand requested consultations
with the United States concerning a ban on importation of shrimp and shrimp products
from these complainants imposed by the US under Section 609 of US Public Law 101162. Violations of Articles I, XI and XIII of the GATT 1994, as well nullification and
impairment of benefits, were alleged.
On 9 January 1997, Malaysia and Thailand requested the establishment of a panel. At
its meeting on 22 January 1997, the DSB deferred the establishment of a panel. On 30
January 1997, Pakistan also requested the establishment of a panel.

General Most-Favored-Nation Treatment

1.
With respect to customs duties and charges of any kind imposed on or in
connection with importation or exportation or imposed on the international transfer
of payments for imports or exports, and with respect to the method of levying such
duties and charges, and with respect to all rules and formalities in connection with
importation and exportation, and with respect to all matters referred to
in paragraphs 2 and 4 of Article III,* any advantage, favor, privilege or immunity
granted by any contracting party to any product originating in or destined for any
other country shall be accorded immediately and unconditionally to the like
product originating in or destined for the territories of all other contracting parties.

2. The provisions of paragraph 1 of this Article shall not require the elimination
of any preferences in respect of import duties or charges which do not exceed the
levels provided for in paragraph 4 of this Article and which fall within the following
descriptions:

(a) Preferences in force exclusively between two or more of the territories


listed in Annex A, subject to the conditions set forth therein;

(b) Preferences in force exclusively between two or more territories which


on July 1, 1939, were connected by common sovereignty or relations of
protection or suzerainty and which are listed in Annexes B, C and D, subject
to the conditions set forth therein;

(c) Preferences in force exclusively between the United States of America


and the Republic of Cuba;

(d) Preferences in force exclusively between neighboring countries listed


in Annexes E and F.

3. The provisions of paragraph 1 shall not apply to preferences between the


countries formerly a part of the Ottoman Empire and detached from it on July 24,
1923, provided such preferences are approved under paragraph 5(1) of Article

XXV which shall be applied in this respect in the light of paragraph 1 of Article
XXIX.

(Footnote original) 1 the authentic text erroneously reads subparagraph 5 (a).

4. The margin of preference* on any product in respect of which a preference is


permitted under paragraph 2 of this Article but is not specifically set forth as a
maximum margin of preference in the appropriate Schedule annexed to this
Agreement shall not exceed:

(a) in respect of duties or charges on any product described in such


Schedule, the difference between the most-favored-nation and preferential
rates provided for therein; if no preferential rate is provided for, the
preferential rate shall for the purposes of this paragraph be taken to be that
in force on April 10, 1947, and, if no most-favored-nation rate is provided for,
the margin shall not exceed the difference between the most-favored-nation
and preferential rates existing on April 10, 1947;

(b) In respect of duties or charges on any product not described in the


appropriate Schedule, the difference between the most-favored-nation and
preferential rates existing on April 10, 1947.

In the case of the contracting parties named in Annex G, the date of April 10,
1947, referred to in subparagraph (a) and (b) of this paragraph shall be replaced
by the respective dates set forth in that Annex.

General Elimination of Quantitative


Restrictions

1.
No prohibitions or restrictions other than duties, taxes or other charges,
whether made effective through quotas, import or export licenses or other
measures, shall be instituted or maintained by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any other
contracting party.
2.

The provisions of paragraph 1 of this Article shall not extend to the following:
(a)
Export prohibitions or restrictions temporarily applied to prevent or
relieve critical shortages of foodstuffs or other products essential to the
exporting contracting party;
(b)
Import and export prohibitions or restrictions necessary to the
application of standards or regulations for the classification, grading or
marketing of commodities in international trade;

(c) Import restrictions on any agricultural or fisheries product, imported in


any form,* necessary to the enforcement of governmental measures which
operate:
(i) to restrict the quantities of the like domestic product permitted to be
marketed or produced, or, if there is no substantial domestic production of
the like product, of a domestic product for which the imported product can
be directly substituted; or
(ii)
to remove a temporary surplus of the like domestic product, or, if
there is no substantial domestic production of the like product, of a
domestic product for which the imported product can be directly
substituted, by making the surplus available to certain groups of domestic
consumers free of charge or at prices below the current market level; or
(iii)
to restrict the quantities permitted to be produced of any animal
product the production of which is directly dependent, wholly or mainly, on
the imported commodity, if the domestic production of that commodity is
relatively negligible.
Any contracting party applying restrictions on the importation of any product
pursuant to subparagraph (c) of this paragraph shall give public notice of the total
quantity or value of the product permitted to be imported during a specified future
period and of any change in such quantity or value. Moreover, any restrictions

applied under (i) above shall not be such as will reduce the total of imports relative
to the total of domestic production, as compared with the proportion which might
reasonably be expected to rule between the two in the absence of restrictions. In
determining this proportion, the contracting party shall pay due regard to the
proportion prevailing during a previous representative period and to any special
factors* which may have affected or may be affecting the trade in the product
concerned.

Non-discriminatory Administration of
Quantitative Restrictions
1. No prohibition or restriction shall be applied by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation of any product destined for the territory of any other contracting party,
unless the importation of the like product of all third countries or the exportation of
the like product to all third countries is similarly prohibited or restricted.

2. In applying import restrictions to any product, contracting parties shall aim at


a distribution of trade in such product approaching as closely as possible the
shares which the various contracting parties might be expected to obtain in the
absence of such restrictions and to this end shall observe the following provisions:
(a)
Wherever practicable, quotas representing the total amount of
permitted imports (whether allocated among supplying countries or not) shall
be fixed, and notice given of their amount in accordance with paragraph 3
(b) of this Article;
(b)
In cases in which quotas are not practicable, the restrictions may be
applied by means of import licences or permits without a quota;
(c) Contracting parties shall not, except for purposes of operating quotas
allocated in accordance with subparagraph (d) of this paragraph, require that
import licences or permits be utilized for the importation of the product
concerned from a particular country or source;
(d) In cases in which a quota is allocated among supplying countries the
contracting party applying the restrictions may seek agreement with respect
to the allocation of shares in the quota with all other contracting parties

having a substantial interest in supplying the product concerned. In cases in


which this method is not reasonably practicable, the contracting party
concerned shall allot to contracting parties having a substantial interest in
supplying the product shares based upon the proportions, supplied by such
contracting parties during a previous representative period, of the total
quantity or value of imports of the product, due account being taken of any
special factors which may have affected or may be affecting the trade in the
product. No conditions or formalities shall be imposed which would prevent
any contracting party from utilizing fully the share of any such total quantity
or value which has been allotted to it, subject to importation being made
within any prescribed period to which the quota may relate.*
3. (a) In cases in which import licences are issued in connection with import
restrictions, the contracting party applying the restrictions shall provide, upon the
request of any contracting party having an interest in the trade in the product
concerned, all relevant information concerning the administration of the
restrictions, the import licences granted over a recent period and the distribution of
such licenses among supplying countries; Provided that there shall be no
obligation to supply information as to the names of importing or supplying
enterprises.
(b)
In the case of import restrictions involving the fixing of quotas, the
contracting party applying the restrictions shall give public notice of the total
quantity or value of the product or products which will be permitted to be imported
during a specified future period and of any change in such quantity or value. Any
supplies of the product in question which were en route at the time at which public
notice was given shall not be excluded from entry; Provided that they may be
counted so far as practicable, against the quantity permitted to be imported in the
period in question, and also, where necessary, against the quantities permitted to
be imported in the next following period or periods; and Provided further that if any
contracting party customarily exempts from such restrictions products entered for
consumption or withdrawn from warehouse for consumption during a period of
thirty days after the day of such public notice, such practice shall be considered
full compliance with this subparagraph.
(c)
In the case of quotas allocated among supplying countries, the
contracting party applying the restrictions shall promptly inform all other
contracting parties having an interest in supplying the product concerned of the
shares in the quota currently allocated, by quantity or value, to the various
supplying countries and shall give public notice thereof.
4. With regard to restrictions applied in accordance with paragraph 2 (d) of this
Article or under paragraph 2 (c) of Article XI, the selection of a representative

period for any product and the appraisal of any special factors* affecting the trade
in the product shall be made initially by the contracting party applying the
restriction; Provided that such contracting party shall, upon the request of any
other contracting party having a substantial interest in supplying that product or
upon the request of the CONTRACTING PARTIES, consult promptly with the other
contracting party or the CONTRACTING PARTIES regarding the need for an
adjustment of the proportion determined or of the base period selected, or for the
reappraisal of the special factors involved, or for the elimination of conditions,
formalities or any other provisions established unilaterally relating to the allocation
of an adequate quota or its unrestricted utilization.
5.
The provisions of this Article shall apply to any tariff quota instituted or
maintained by any contracting party, and, in so far as applicable, the principles of
this Article shall also extend to export restrictions.

General Exceptions
Subject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a disguised restriction on
international trade, nothing in this Agreement shall be construed to prevent the
adoption or enforcement by any contracting party of measures:
(a)

Necessary to protect public morals;

(b)

Necessary to protect human, animal or plant life or health;

(c)

Relating to the importations or exportations of gold or silver;

(d) necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of this Agreement, including those relating to
customs enforcement, the enforcement of monopolies operated
under paragraph 4 of Article II and Article XVII, the protection of patents,
trademarks and copyrights, and the prevention of deceptive practices;
(e)

Relating to the products of prison labor;

(f)
imposed for the protection of national treasures of artistic, historic or
archaeological value;
(g)
Relating to the conservation of exhaustible natural resources if such
measures are made effective in conjunction with restrictions on domestic
production or consumption;
(h)
undertaken in pursuance of obligations under any intergovernmental
commodity agreement which conforms to criteria submitted to the
CONTRACTING PARTIES and not disapproved by them or which is itself so
submitted and not so disapproved;*
(i)
involving restrictions on exports of domestic materials necessary to
ensure essential quantities of such materials to a domestic processing
industry during periods when the domestic price of such materials is held
below the world price as part of a governmental stabilization
plan; Provided that such restrictions shall not operate to increase the exports
of or the protection afforded to such domestic industry, and shall not depart
from the provisions of this Agreement relating to nondiscrimination;
(j) essential to the acquisition or distribution of products in general or local
short supply; Provided that any such measures shall be consistent with the
principle that all contracting parties are entitled to an equitable share of the
international supply of such products, and that any such measures, which
are inconsistent with the other provisions of the Agreement shall be
discontinued as soon as the conditions giving rise to them have ceased to
exist. The CONTRACTING PARTIES shall review the need for this subparagraph not later than 30 June 1960.

Panel and Appellate Body proceedings


Further to Malaysias and Thailand's request, the DSB established a Panel at its
meeting on 25 February 1997. At the same meeting, the DSB established a panel in
accordance with the request made Pakistan. It also agreed that the two panels would be
consolidated in a single panel, pursuant to Article 9.1 of the DSU with standard terms of
reference. Australia, Colombia, Costa Rica, Ecuador, the European Communities,

Guatemala, Hong Kong, India, Japan, Mexico, Nigeria, the Philippines, Senegal,
Singapore and Sri Lanka reserved their third-party rights.
On 25 February 1997, India also requested the establishment of a panel on the same
matter. At its meeting on 20 March 1997, the DSB deferred the establishment of a
panel. Further to a second request to establish a panel by India, the DSB agreed to
establish a panel at its meeting on 10 April 1997. The DSB also agreed that this panel
would be consolidated with the panel already established at the request of Malaysia,
Thailand and Pakistan. El Salvador and Venezuela reserved their third party rights, in
addition to those delegations who had reserved their third-party rights to the panel
established at the requests of Malaysia, Pakistan and Thailand. On 15 April 1997, the
panel was composed.
On 15 May 1998, the panel report was circulated to Members. The panel found that the
import ban in shrimp and shrimp products as applied by the United States is
inconsistent with Article XI:1 of the GATT 1994, and cannot be justified under Article XX
of the GATT 1994.
On 13 July 1998, the United States notified its intention to appeal certain issues of law
and legal interpretations developed by the panel. The Appellate Body report was
circulated to Members on 12 October 1998. The Appellate Body reversed the panels
finding that the US measure at issue is not within the scope of measures permitted
under the chapeau of Article XX of the GATT 1994, but concluded that the US measure,
while qualifying for provisional justification under Article XX(g), fails to meet the
requirements of the chapeau of Article XX.
The DSB adopted the Appellate Body report and the Panel report, as modified by the
Appellate Body report, on 6 November 1998.

Reasonable period of time


On 25 November 1998, the United States informed the DSB that it was committed to
implementing the recommendations of the DSB and was looking forward to discussing
with the complainants the question of implementation. The parties to the dispute
announced that they had agreed on an implementation period of 13 months from the

date of adoption of the Appellate Body and Panel reports, i.e. it expired on 6 December
1999. On 22 December 1999, Malaysia and the United States informed the DSB that
they had reached an understanding regarding possible proceedings under Articles 21
and 22 of the DSU.

Compliance proceedings
On the grounds that the United States had not implemented appropriately the
recommendations of the DSB, on 12 October 2000, Malaysia requested that the matter
be referred to the original panel pursuant to Article 21.5 of the DSU. In particular,
Malaysia considered that by not lifting the import prohibition and not taking the
necessary measures to allow the importation of certain shrimp and shrimp products in
an unrestrictive manner, the United States had failed to comply with the
recommendations and rulings of the DSB. At its meeting of 23 October 2000, the DSB
referred the matter to the original panel pursuant to Article 21.5 DSU. Australia, Canada,
the European Communities, Ecuador, India, Japan, Mexico, Pakistan, Thailand and
Hong Kong, China reserved their third-party rights. On 8 November 2000, the
compliance panel was composed.
The compliance panel circulated its report on 15 June 2001. The compliance panel
concluded that:

the measure adopted by the United States in order to comply with the
recommendations and rulings of the DSB violated Article XI:1 of the GATT 1994;

in light of the recommendations and rulings of the DSB, Section 609 of Public
Law 101-162, as implemented by the Revised Guidelines of 8 July 1999 and as
applied so far by the US authorities, was justified under Article XX of the GATT
1994 as long as the conditions stated in the findings of this Report, in particular
the ongoing serious good faith efforts to reach a multilateral agreement, remain
satisfied.

Should any one of the conditions referred to above cease to be met in the future,
the recommendations of the DSB may no longer be complied with. In such a
case, any complaining party in the original case may be entitled to have further
recourse to Article 21.5 of the DSU.

On 23 July 2001, Malaysia notified the DSB its intention to appeal the compliance panel
report. In particular, Malaysia sought review by the Appellate Body of the compliance
panels finding that the US measure at issue does not constitute unjustifiable or arbitrary
discrimination between countries where the same conditions prevail and that it is

therefore within the scope of the measures permitted under Article XX of the GATT 1994
as long as the conditions stated in the findings of the compliance panel report, in
particular the ongoing serious good faith efforts to reach a multilateral agreement,
remain satisfied.
On 19 September 2001, the Chairman of the Appellate Body informed the DSB that it
would not be able to circulate its report within 60 days. It was estimated that the
Appellate Body report would be circulated no later than 22 October 2001.
The Appellate Body report was circulated to the Members on 22 October 2001. The
Appellate Body upheld the contested findings of the compliance panel. Since it had
upheld the panels findings that the US measure was now applied in a manner that met
the requirements of Article XX of the GATT 1994, the Appellate Body refrained from
making any recommendations. On 21 November 2001, the DSB adopted the Appellate
Body report and the compliance panel report, as upheld by the Appellate Body report.

Implementation of adopted reports


At the DSB meeting on the adoption of the Appellate Body report and the compliance
panel report, as upheld by the Appellate Body on 21 November 2001, the United States
stated that was pleased that both the Article 21.5 panel and the Appellate Body had
found that the United States had implemented the DSB's recommendations and rulings
insofar as it had found that the US compliance measure was justified as a conservation
measure under Article XX(g) of the GATT 1994 and that the United States had rectified
the prior measure's discriminatory aspects.

Case no 2.
Pakistan Patent mailbox provision
Plaintiff: United States
Defendant: Pakistan

Outcome
The United States and Pakistan reached on an agreement on agreement prior to a
panel decision whereby Pakistan agreed to come into compliance with WTO intellectual
property provisions.

Major case issues

The United States complained that Pakistan had neither made patent protection
available for pharmaceutical and agricultural chemical inventions nor established a
system, called a mailbox for filling patent applications for these inventions, as
required by the agreement of its trade-related aspects of intellectual property
(TRIPS). The United States also argued that Pakistan had failed to establish a
system to provide a patent application with exclusive marketing rights for their
products as required by the agreement.
Pakistan responded as its parliament was considering amending its patent law to
include patent protection.

Case resolution

The United States and Pakistan negotiated a mutually agreed solution to the dispute, in
which Pakistan stated that it had taken action to come into compliance with (TRIPS).

Action taken to comply


Pakistans president issued an ordinance to provide a system for submitting patent
applications and for granting exclusive marketing rights to the patent applications with
compliance to (TRIPS).

You might also like