From the General Agreement to the World Trade Organisation

This blog is about the gap between the old GATT mansion (Villa Bocage) and the modern WTO edifice (Centre William Rappard) – or to explain that more clearly it explores the grey area between the two institutions that were/are housed in those two buildings. Both institutions have established sets of rules that underpin the multilateral trading system. The grey area I have in mind arises from the absence of rules on territorial application which impacts on the status of dependent territories in WTO and how they are regulated.

Did you think that GATT 1947 was the same identical text as GATT 1994? Right: we have been taught by the trade law experts that GATT 1947, as it emerged from a series of conferences in London and Havana, is the foundation text of the General Agreement.[1] We have also been told that GATT 1947 in its entirety was incorporated into GATT 1994 which regulates trade in goods and is annexed to the Marrakesh Agreement that established the WTO. The same text it undoubtedly is, but to be found in a more modern framework with a wider coverage; and the changed context means that some rules are still valid legally but less operational in practice.

You might have thought that all the old GATT provisions would remain in force and could be applied to all the systemic issues that affect international trade. To a large extent that is true, in principle; but you might have overlooked the fact that GATT rules were never complete, in the sense that GATS (trade in services) and other trade-related matters were not yet covered. New rules were needed on matters specific to those areas of trade, but that may not have raised general policy concerns unless you are involved in the institutional issues that arise from the administration of the WTO.

The rules that govern WTO membership are a case in point, the formal conditions required of existing members for Acceptance of the WTO and the rules on Accession by non-members. These are important issues affecting rights and obligations of all members, to be found in the Marrakesh Agreement, Articles XI and XII. The key point is that the previous GATT rules and procedures are no longer sufficient to join WTO.[2]

One major difference is that WTO members are required to submit Schedules of their concessions on goods and on services. This was dealt with differently in the GATT era, when goods schedules had existed as a record of commitments taken in several of the early negotiating rounds but they were less directly linked to membership; and in the services case, following adoption of GATS, it was a logical extension to apply the same concept to new trade commitments.

At the point of transformation from GATT to WTO members agreed to a transition period of two years during which countries could notify that they wish to join the new organisation. The intention was to facilitate the task for smaller countries in the context of acceptance and accession by providing a delay and assistance. This can also be read as an indication that for two years the GATT and the WTO were in some sense co-existing together. Ministers also took a decision aimed at various specific situations which might arise during this period, including two specific cases: special conditions for accession of least developed countries and how dependent territories that are ‘separate customs territories’ might be treated.[3]

Dependent territories.[4]
Such territories had been able under certain conditions to join GATT as separate members in their own right or to join under the wing of the metropolitan country responsible for them internationally through the extension of the territorial application of its membership. Despite much progress in moving from colonial structures towards independence in the 1960s and 1970s, these issues were still of importance to several WTO members such as the UK and the Netherlands, but also for Australia, New Zealand and the USA (for Puerto Rico).

The ‘old GATT’ provided for membership for such territories through sponsorship on the basis that the dependent territory was a separate customs territory which had full autonomy of its external commercial relations and was able to comply with GATT rules and obligations.[5] Curiously, although the WTO rules on accession envisage a different process for joining, reflecting the specific changes mentioned above, they still retain much of the GATT language of Article XXVI: 5. In particular they underline the importance of the concept of “a separate customs territory” which had been a key part of the GATT text on Acceptance by members, both for themselves and for their dependent territories.

In the WTO context accession is “on terms to be agreed with WTO members” which historically (since 1995) has meant long and sometimes exhaustive negotiations. A central issue is always that a new member must negotiate its tariff commitments towards all other members and establish the obligations it was willing to offer on services. It must also be able to respect WTO rules and eliminate non-compliant legislation.

There has been only one case of a dependent territory joining WTO, and there may be some degree of controversy about it.[6] Whether it is still possible for a dependent territory to join as a separate member rather than as part of the territory of an existing metropolitan member seems to be an open question, given the requirements related to Schedules. However, it is conceivable – on the face of the text – that such terms could be appropriately drawn, reflecting the small size of the economies, with some acknowledgment of issues as was decided for the least developed countries.. Whether that would pass the political test with other members is another matter.

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[1] There were some review sessions during the 1950s and some additional text was added in the 1960s (Part IV – Articles XXXVI – XXXVIII).

[2] A source for the overall changes that resulted from the Uruguay Round, and the institutional shift from GATT to WTO is John Croome’s book “Reshaping the World trading System”, published in 1995. He documents a detailed history of the Uruguay Round.

[3] Main text is Marrakesh, Article XIV, supplemented by the Ministerial Decision taken in Marrakesh, 14 April 1994. The case of

dependent territories had been the subject of GATT rules (Article XXIV:1-3 and XXVI).

[4] Principal sources for the changes that occurred are Croome’s book cited above, and a recent article by Matthew Kennedy on

“Overseas Territories and the WTO”, published in the journal ‘International & Comparative Law Quarterly’, in 2016.

[5] The best known example of this is Hong Kong, sponsored by the UK in the 1980s.

[6] That was the Isle of Man in 1997