Frequently asked questions on trade - World Trade Organization-WTO:

01. What is the WTO?

The World Trade Organization-WTO is the international organization whose main functions are to facilitate the enforcement of internationally agreed international trade rules and to act as a forum for the negotiation of new trade rules or trade-related issues. It also has an international trade dispute settlement system. Periodically it undertakes a review of the trade policies of each of the current 140 member countries. The WTO is governed by international trade principles developed over the years and consolidated in trade agreements established in eight multilateral trade negotiations under the General Agreement on Tariffs and Trade-GATT, of which the most comprehensive was the eighth, the so-called Uruguay Round, begun in 1986 and concluded in 1992 (the resulting agreements were signed in Marrakech, Morocco in April 1994). WTO's stated purpose is to ensure compliance with the rules governing international trade. To this end, it seeks to ensure that these rules are stable, transparent, and equitable.

Developing countries are generally critical, particularly with respect to the fairness of the rules and their enforcement, although they admit that the stability and predictability provided by WTO is, to a certain extent, a guarantee against unilateral decisions that might be even more detrimental to them.

Sources: WTO homepage on the Internet (nonofficial translation) and Itamaraty's Trade Policy Division. Thorstensen, Vera, WTO: International Trade Rules and the Millennium Round, Customs, 1999.

02. How did the WTO come about?

The WTO was created in January 1995 as an outcome of the Uruguay Round negotiations (1986-1993) under the General Agreement on Tariffs and Trade-GATT. Endowed with new structures, prerogatives, functions, and instruments, WTO succeeded GATT, an agreement established after World War II that was never a formally constituted organization.

Sources: WTO's official homepage on the Internet (unofficial translation) and Itamaraty's Trade Policy Division.

03. What are WTO's functions?

Administering trade agreements; acting as a forum for trade negotiations; settling trade disputes referred to the Organization by the Members; reviewing national trade policies; assisting developing countries in trade policy issues, through technical assistance and training programs; and cooperating with other international organizations.

Sources: WTO's official homepage on the Internet (unofficial translation) and Itamaraty's Trade Policy Division.

04. How does the dispute settlement system work?

Considered by many experts as the most significant result of the Uruguay Round from an institutional standpoint, WTO's dispute settlement system differs in many aspects from the dispute settlement mechanism under GATT. Under GATT, the panels are an obligatory feature. A panel is a group of experts -usually three- established to look into specific disputes that are not resolved through consultation between the disputing parties and one of the parties remains dissatisfied. The panel reports, including recommendations on how to solve the disputes are approved by the Dispute Settlement Body-DSB in which all the members are represented. A panel report fails to be approved only when there is a "negative consensus", i.e., when all Members present (including the possible "winner" of the dispute) withhold approval. There has thus been an inversion of what used to happen under GATT before the WTO, as the party in noncompliance with its obligations could alone raise obstacles to a consensus.

Differently from the dispute settlement mechanism under GATT, the WTO system includes an Appellate Body whose function is to examine, at the request of either disputing party, the legal basis of the panel's report and its conclusions.

The system's objective is to reinforce compliance with multilateral trade rules and the adoption of practices consistent with negotiated agreements. The purpose is not to punish members for the adoption of practices considered incompatible with WTO rules. The system permits at any time the settlement of the dispute by an agreement between the disputing parties.

If a DSB-approved panel report concludes that a Member is engaged in a practice inconsistent with WTO rules, the party concerned should change that practice so as to reestablish the balance between rights and obligations. The WTO may authorize retaliations only if a defeated Member refuses to reestablish this balance.

The dispute settlement system includes several successive stages, summed up as follows (for further details see the Dispute Settlement Understanding*):

01. Consultations;

02. If consultations do not (a) take place within the stipulated time**(30 days or as agreed in common) or (b) fail to arrive at a mutually acceptable solution, the complaining county may request the appointment of a panel;

03. The panel is appointed no later than at the DSB meeting following the meeting when the request figured for the first time on the DSB agenda.

04. The panel usually consists of three experts, appointed after consultations with the disputing parties. By common agreement, the disputing parties may request that the panel be formed by five experts. Panel discussions are confidential.

05. The panel has to present its report six or nine months, at the most, of the date of its appointment and the definition of its terms of reference;

06. The complaining country may request the suspension of the panel's work for no more than 12 months under risk of expiration of the authority for appointment of the panel.

07. Interim review: after rebuttals and oral arguments by the parties, the panel submits the descriptive (factual and argument) sections of its draft report to the two sides for comment. The panel then submits an interim report, to which the parties may offer comments. The interim report, now including the panel's findings and conclusions, is considered final and ready for circulation to all members if no comments are forthcoming.

08. Adoption of the panel's report: except in cases of appeal, the report should be adopted by the DSB within 60 days of the date of its circulation to all members. Reports are not reviewed by the DSB until 20 days after its circulation to members.

09. Appeal: The Appellate Body-AB consists of seven members appointed for four-year renewable terms. Three members will sit on each case and, as a rule, must submit its report within 60 days of the date of the formal notification of the decision to appeal. The procedure should not exceed 90 days. Only the disputing parties, and no interested third parties, can appeal on the basis of the panel's report.

10. Adoption of the AB's report: within 30 days as of its circulation to the members, unless the DSB decides by consensus not to adopt the AB report.

11. Implementation of DSB's recommendations: at a DSB meeting within 30 days of the adoption of the panel's or AB's report, the concerned party should inform the DSB of its intentions regarding the implementation of the DSB decisions and recommendations. If immediate implementation is not possible, the concerned party should be allowed a reasonable period of time to do so.

12. Compensation: if the concerned party fails to implement the DSB decisions and recommendations within the reasonable period of time established, it should, if requested to do so, negotiate mutually satisfactory compensation with the other party or parties.

13. Suspension of concessions ("retaliation"): If 20 days after expiration of the reasonable period of time no satisfactory compensation is agreed upon, the complaining side may ask the Dispute Settlement Body for authorization to impose the suspension of concessions or obligations under the covered agreements against the other side.

14. The principles governing the suspension of concessions and obligations and the assessment of the amount are subject to arbitration.

15. After the arbitration committee determines the manner and amount of the suspension of concessions, the concerned party should request DSB's authorization to implement the suspension.

*DSB's rules are enforced in combination with the rules and procedures under agreement(s) that may be related to the dispute. Specific rules of agreements or understandings prevail over general DSB rules. There is still an alternate way of settling a dispute through arbitration by mutual agreement between the disputing parties.

**The timetable for the conclusion of the various panels varies according to the dynamics of the negotiating process and the nature of the dispute. For example, the panel on Venezuelan oil (Brazil and Venezuela vs. the USA) lasted two years and seven months from beginning to the reversal of the measures adopted by the USA.

Sources: WTO's official homepage on the Internet (unofficial translation) and Itamaraty's Trade Policy Division.

05. How many disputes is Brazil involved in?

Disputes in which Brazil is complainant

- United States: practice of applying countervailing rights to privitized enterprises. Brought in December 2000.

- United States-Byrd Amendment (antidumping legislation). Brazil brought the complaint together with other countries: Australia, Chile, European Community, India, Indonesia, Japan, and Thailand. Based on procedural provisions, the United States blocked the participation of other countries. Brought in December 2000.

- United States: Consultation on patent legislation. Brought in January 2001.

- Mexico: Electric transformers-antidumping. Brought in December 2000.

- Turkey: Iron joints-antidumping. Brought in November 2000.

- European Union: Iron joints-antidumping. Brought in December 2000.

- Canada: Commuter airplanes-subsidies. Brought in January 2001.

Disputes in which Brazil is the target of complaint

- United States: Nonautomatic licensing/Customs valuation. Brought in July 2000.

- European Union: Nonautomatic licensing/Customs valuation. Brought in November 1999.

- United States: Intellectual property-patent protection. Brought in June 2000.

- Canada: Commuter airplanes. Brought in February 2001.

Source: Itamaraty's Trade Policy Division. Updated March 19, 2001.