Transformation of GATT into the WTO

3275 words (13 pages) Essay in International Law

02/02/18 International Law Reference this

Last modified: 02/02/18 Author: Law student

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The main questioning on the reasons that led to the replacement of the GATT to WTO of is considered as one most important questions on this topic? Is the change of the GATT simply a change of names and thus replace the GATT of 1947 with the GATT of 1994 [1]? Or Is there any substantial ground for this change relating to the failure of the GATT in achieving its main objectives? And if there are reasons behind this change is faded with the birth of the World Trade Organization?

In fact, the birth of the World Trade Organization by replacing the old organization of the GATT was not merely a new game, but it was a necessity that was required by the stage of the nineties of the last century, especially since the GATT failed to achieve its goals. The weaknesses of the GATT was behind its failure, including the existence of legal problems, particularly in the areas of agriculture and textiles. For example, it can be noted that the United States was not able to convince Japan and China within the framework of the GATT to open its markets to U.S. goods. In addition, the GATT failed to cover trade in services and intellectual property rights, and the absence of an international mechanism to resolve disputes in international trade [2] .

Notwithstanding the above, the GATT has made over 47 years a great success in promoting and ensuring a large part of the liberalization of world trade, and helped reductions in customs duties and ensured the growth of trade and production, it has made a lot of achievements and contributions in the field of liberation of some sectors of the international trade and growth [3] , but it has suffered limited influence on some key aspects. There are many reasons through which the failure of the GATT agreement can be justified, such as the GATT by itself was only the set of rules and multilateral agreements and has no constituent bases, it was only interested in trade in goods without paying attention to services and intellectual property rights, the role of the commission of disputes of the GATT was slow in resolving disputes and it was being subjected to a degree of disruption. One of the main reasons behind the collapse of the GATT was that the organization was in favor of the industrial countries, and lost confidence among the developing countries [4] .

Since the beginning the GATT has suffered from serious problems, for this it has been for many times close to failure, and at the end eventually converted to the WTO. Therefore, it can be said that the organization of trade organization is a new version of the GATT, which has exhausted its purposes and was no longer capable intermediate of consequences on global economic conditions or to achieve the interests of industrial countries. The establishment of the WTO was so important as there was a real necessity for the emergence of a new mechanism to accommodate changes in the international arena, this organization was an old idea that came to light in order to announce the start of a new phase of financial globalization, which is subject both to the developing world south to the control of new industrial nations of the North.

The Difference Between the GATT and the WTO:

The GATT “ the General Agreement on Tariffs and Trade” has been established after the Second World War in 1947 and entered into force in 1948 [5] , it has come as a result of the decision of great states to set up the foundations for a new world order. In fact, the idea of new world order required the establishment of two main axes, the first has a political nature known as the united nations and the second has an economic nature that was the GATT.

The GATT has held many successful rounds on different areas of economic interests, the Kennedy round, which resulted in an agreement to combat dumping, but failed to agree on agricultural issues at the first attempt to negotiate non-tariff measures. The other agreements of non-tariff also were rejected in the United States, this round also failed to reach an agreement on anti-dumping and estimate Customs, because the 1962 law of Special trade expansion has no provisions as regard to non-tariff measures and the rejection of the U.S. Congress to pass the legislation for the agreements [6] . The Tokyo round has been considered as a serious attempt to expand and improve the system of GATT, it has drafted the first set of non-tariff for the management of support and countervailing duties, government procurement, customs valuation, import licensing and levels of anti-dumping duties, civil aviation and the products of dairy and meat [7] .

Finally, the most important round was the Uruguay Round, which led to the establishment of the WTO. This round is considered significant because it has reached a positive outcome on the abolition of quantitative restrictions on imports, not only to regulate trade in goods, but also included trade in services and intellectual property rights, and produced new mechanisms related to settling commercial disputes, and has lasted for more than seven years [8] .

In spite of the successes achieved by the GATT in terms of liberalization of international trade, enhancement of the world productivity and reduce tariffs, it was unable to achieve the interests of developing countries and to cope with international changes. In these circumstances the birth of the World Trade Organization came to complete the process of GATT and perform what the latter failed to achieve.

The Impact of WTO on the Global Economy:

The establishment of the World Trade Organization has changed the features of the global economy by linking the international and commercial relations and the interests of the countries. With the birth of this organization, it can be said that the set up of the modern global economic system has been completed, which is characterized by the dominance of the principles and mechanisms of the capitalist system [9] .

The States belonging to this organization seek to benefit from trade liberalization and the movement of international capital. The birth of this organization has been preceded by difficult negotiations which proved the contradictions that exist among the major industrialized countries, which search for new markets of goods and services, especially those produced by developing countries. The developing countries also seek to protect their economies from the fierce competition and feed its treasury with the proceeds of taxes and customs duties on the imported goods. Such countries considered the organization as a new device to pass the policies of the dominant superpower states [10] .

The Organization has devoted an asymmetric relationship between the industrialized North, where the parties of Trinity , which are the pillars of the global economy (North America, Europe, Japan) produce about 87% of global imports and more than 94% of global exports of materials and manufactured goods, while the south, which still most of its countries suffer from chronic problems such as poverty, unemployment, suffocating foreign debt, and political instability. However, the aggravation of the situation is dire, especially after it seemed clear that the growth and stability of developing countries is a prerequisite for the stability of the global economy.

The organization aims to strengthen the global economy through liberalization of trade from all restrictions, and raising the level of real national income of the member states, and increasing the demand on the economic resources and its optimal exploitation, expanding and facilitating access to international markets, assistance in resolving disputes between states and automation of trade policies and cooperation with other international institutions to achieve harmony between trade and financial policies and cash. The international community has witnessed a growing interest shifts the main characterized of the global economy, having accelerated the pace in an unprecedented manner during the nineties of the twentieth century. The World Trade Organization is considered as a tool and means which has its importance in organizing and promoting the international trade and thus contributes to the globalization of the economy [11] .

Resolution of Commercial Disputes and Appeals and Implementation:

The office of the resolution disputes may adopt the report of the Appellate Body after thirty days of its issuance, and accept the parties to the conflict without condition, with only a consensus against it. The party must show its determination on the implementation of the recommendations reached a settlement of disputes, and it can be given a reasonable period of time determined from a dispute resolution to do so.

In case of failure of a member to implement the decision, the plaintiff can be involved with the negotiated solution to compensatory with other party and it can demand to the withdraw the privileges and obligations of the other party, but that was impractical or ineffective, it could revoke the privileges of other sectors. In any event, the dispute settlement system will continue to implement the recommendations and the adopted resolutions, and will remain no outstanding cases on its agenda until the problem is solved. There is no doubt that the mechanisms for dispute resolution have been expanded in comparison with the special mechanisms (GATT 1947) [12] .

The case of Japan – Alcoholic Beverages, (Canada, European Communities v. Japan)United States) [13] , in this case, the main issue was that the Japanese liquor tax law imposed taxes at different rates on alcohol products, where this law imposed low taxes for the products of shochu less than other products. In this case, the Appellate Body upheld that the imposition of higher taxes on vodka products compared with the taxes imposed on shochu drinks is considered a violation of article 3 (2) of the GATT.

In the case of Australia– Salmon (Canada v. Australia) [14] , the main issue was that Australia has band the importation of the salmon from Canada, and the Australian decision has involved the ban of all Canadian salmon products, fresh or frozen. The Appellate Body found that the decision of banning the importation of Australian salmon from Canada is in violation to article 5 (1) and 5 (5) of the GATT, in particular, and the health care to protect the salmon is the same available for other types of Canadian fish.

In other case of EC – Hormones (United States Canada v. European Communities) [15] The core of this issue in the European Commission related to the prohibition of importation of meat and products that have hormones from the United States. The Appellate Body ruled in the appeal that the decision of the EU embargo is a violation of Article 5 (1) and Article 3 (3) of the GATT, for lack of finality of the EU resolution on the idea of risk assessment, it must be a “relationship rationality” between preventive measures and procedures for assessment evaluation risk

The Evolution of the World Trade Organization: An Evaluative Prospective:

The financial openness associated with the application of policies of the world trade organization helps the developing countries to access international financial markets and it makes it easy for these countries to acquire its demands and funds to fill the gap in local resources. Any failure of savings for financing domestic investment may lead to increase the domestic investment, the rate of economic growth and update banking and financial system always helps in creating an environment conducive to the activity of the private sector, which may lead to reduce the phenomenon of capital transferring abroad. The international investments help for foreign technology transfer, activating the movement of world trade through the exchange commodity and service [16] .

The disadvantages of the WTO can be summarized as it exposures the local industries to collapse as a result of the inability to compete, shifting of the underdeveloped and the developing nations to lasting product’s markets of the advanced countries, losing the quit capacity for future competition, keeping the situation as it is for the level of development and progress in developing countries, weakening the national sovereignty in the area of fiscal policy and economy and entry of dirty money into the country [17] .

The share of the third world of the total GDP is declining in a regular basis, this does not contradict with the reality of economic growth experienced by several developing countries (Asian Tigers), which is humble in all other developing countries, it has deepened the gap between North and South. In spite of the role played by the World Trade Organization in the output of the global economy from recession – through the liberalization and increase the volume of foreign trade – it remains for the benefit of the active economic states in the global economy (the United States, Europe and Japan). The continued escalation of the differences between rich and poor is obsessed with putting question marks in front of many: Who benefits from the liberalization of foreign trade? Is a system of partnership and integration between the North and the South justified?

The question here Is there a real need for the WTO? Despite the claim that this organization contributes to the flow of foreign investment to the member states of the Organization, as one of the key benefits of economic globalization, these investments come to serve foreign trade and make a profit out of abundant and rapid, it is therefore working to strengthen the international division and not change it for the benefit of developing countries [18] . As the opinion of supporters of the World Trade Organization and other international institutions, say that the trade liberalization and foreign investments contribute effectively to the economic growth of countries, is subjected to reservations, because the only growth and performance of the economy that brings foreign private investment. Since these investments like foreign loans granted by international financial institutions go to the States that have already succeeded in raising the rates of growth than to go to countries that need the money to raise the growth rate, as evidenced by the distribution of this investment between the regions of the world [19] .

It can be concluded that addressing the globalization of the economy – after the World Trade Organization – may be possible for the industrialized countries that deal with the global economy from a strong and influential position, but it is difficult for developing countries because of its vulnerability in the global economy and a bug deep in the international economic balances.


The emergence of international institutions, especially those of financial institutions and monetary repercussions on the economies of the third world is not only the issue of dominating these economies, but it also extends to fluctuations in exchange rates, employment levels and consumption and production, where the international economic system became unfair, this system which is adjusted by the industrialized nations for its advantage in the way ensures the continued depletion of the wealth of the developing countries and re-entry the distribution of its incomes on behalf of the industrialized countries. This fact and the resultant indicators imposed on countries require to face difficult challenges and pursue a policy of standardization efforts in the area of cooperation in the form of economic groups or South-South cooperation and support activity Regional institutions, and coordinating facilities in international markets to defend its interests and the reduction of monopolies in the international prices of their exports and benefit from the proceeds of this investigative exports.

This situation has emerged as the various blocs within the European countries, South Asian countries, South America and North and Arab States in the Maghreb and the Gulf States, and in order to expand the horizons and areas of activity of institutions of economic regions, in particular, they unify their positions within economic organizations and international financial and monetary.

The increase in efficiency and the effective use of state’s own resources in its various forms can significantly reduce the economic dependency and thereby reducing the negative impacts on their economies, the crises imposed by the international economic system are not fair on the developing states and have their negative impacts the economies of these countries and to get rid of the dominance of international capital the efforts should focus on the following areas: First, there should be some sort of coordination between monetary and financial policies of these countries in order to consolidate them in the future. Second, states should establish and create common financial companies. Third, the efforts of the development and expansion of markets and financial cash should be taken in the third world. Moreover, states should find the means and instruments savings and efficient investment to meet development needs. Finally, states should facilitate the movement of capital between countries’ competitiveness.

To sum up, there is no doubt that the achievement of all of these aims requires hard efforts and long-term plans, and in front of the growing economic challenges must be enabled on the role of these clusters and complete the following stages of what plans have been adopted and studies on strengthening economic cooperation and unity on the level of these clusters to meet the international hegemony.

Table of Cases:

Canada v. Australia [1998] VIII AC 3327 (WT/DS18/AB/R)

Canada, European Communities v. Japan [1996] I AC 97 ( WT/DS8-10-11/AB/R)

United States Canada v. European Communities [1998] I AC 135 (WT/DS26-48/AB/R)

Table of Authorities:

The General Agreement on Tariffs and Trade (GATT 1994) (Adopted 15 April 1994, entered into force 1 January 1995) 1867 UNTS 187

The General Agreement on Tariffs and Trade (GATT 1947) (Adopted 30 October 1947, entered into force 1 January 1948) 55 UNTS 194

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