International Trade - Theory and Policy, 2010a

ules are national governments. In this sense, then, the WTO does not govern anybody. A better way to
think of the WTO is as a club of member nations. The club’s purpose is to monitor each member country’s
trade policies with respect to the trade agreements that were made in the Uruguay Round. The WTO
agreements include thousands of promises for every country, all intending to reduce barriers to trade
relative to what the barriers were before the Uruguay Round. The WTO does not represent free trade. At
best, the agreements can be described as freer trade.
Besides monitoring each member country’s trade policies, which the WTO fulfills by conducting periodic
trade policy reviews of the member countries, the WTO club was also created to deal with disputes. This is
surely the most important “power” of the WTO.
The Dispute Settlement Process
Disputes are handled by the Dispute Settlement Body (DSB). The DSB works like a committee that meets
regularly to discuss any issues countries may have with respect to each other’s trade policies. The DSB is
comprised of one representative from each member country. When they meet, countries have the right to
object to the trade policies of another country. However, they cannot object to anything or everything;
instead, a country can only object to an unfulfilled promise with respect to one or more of the WTO
agreements.
When the Uruguay Round was finalized, each member country went back to its own legislature and
changed its trade policies and rules to conform to its new commitments. Sometimes inadvertently and
sometimes purposely, some countries do not implement their commitments fully. Or sometimes a country
believes that it has fulfilled its commitment, but its trading partner believes otherwise. Or new legislation
may violate one of the country’s previous commitments. In these cases, a member country (the
complainant) is allowed to register a dispute with the DSB against another member country (the
defendant). Resolution of a dispute follows these steps:
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