IT Organisation Trade

CHAPTER ONE: INTRODUCTION

1.1 RESEARCH AIM AND OBJECTIVES

The world is getting progressively smaller by the minute. In this age of globalization, this adage has largely been a reality especially in the sense of trading. To those who have faith and accept the rationale of globalization, the observable fact has accomplished a number of important contributions in shifting the situation of the world. A considerable number of academics and economic experts have similar estimations that the development of communication, transportation, and IT technologies has been caused largely by the similar development in the international setting. In the same manner, a considerable number of benefits brought about by globalization appear to be far different from the expected consequences directly related to the economic situation of a state. Improvements in trade and the consequent freedom that comes with it also carry along other improvements in the skills and other branches of proficiency such as technology, accounting, and other knowledge pertaining to financial fields like bank regulation and antitrust procedures.

This paper intends to look on the dispute resolution methods held by one of the major global organizations the World Trade Organization. Specifically, the study will analyse the retaliation mechanism present in the WTO along with its possible impact towards the developing countries. And in order to address the main problem of the study, it is necessary to answer the following specific questions:

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What is retaliation mechanism in the WTO? Theory? Range? Objective? And Function? Etc.

What is the significance of the retaliation mechanism?

What is the relation between developing countries and the retaliation mechanism?

Specifically, This paper aims to meet the following objectives:

Examine the theories basic of the retaliation mechanism;

Reveal the implementation of the retaliation mechanism under the WTO;

Evaluate the substantiality significance of the retaliation mechanism;

Analyze and discuss the impact of the retaliation mechanism towards the developing countries;

Identify WTO contributions to organizations that are planning to enter developing countries' market; and

Carry out possible recommendations on how to improve WTOs relationship with its members.

1.2 RESEARCH METHODOLOGY

The methodology of this study entails the utilization of both the inductive and deductive approaches. Also, secondary sources of data will be used. As such, desk research will be used. The data collected from secondary sources will be analyzed through the various relevant theories.

Research Philosophy

The constructivist epistemology guided the undertakings of the research project. Unlike positivism, this category of epistemology proposes that reality is subjective and thus, the goal of research is to elucidate a viewpoint about a phenomenon. In this light, a phenomenological approach will be adopted. This mode of inquiry is concerned with approaching phenomena as they present themselves to us instead of imposing pre-conceived ideas or hypotheses upon them (Dahlberg and Halling, 2001). This paper intends to analyse the retaliation mechanism present in the WTO along with its possible impact towards the developing countries

1.2.2 Research Approach

Induction and deduction are two approaches used as a guide in the conduct of research. In this study, both of the approaches will be used. According to Kolb (1984), learning starts with actual experiences or an event, which leads the person to observe and reflect (inductive). This allows for a theory to be developed (deductive research), which leads back to the experience stage. Moreover, Saunders et al. (2003) argue that the deductive approach is to explain causal relationships between variables and to generalize regularities in human social behavior. On the other hand, the induction approach enables the researchers to collect data as well as develop theory as a result of their data analysis. Through the adoption of both the inductive and deductive approach, the researcher believes that this paper will be guided accordingly. The advantages of the two approaches are applied in the conduct of this study.

Data Collection Method

The source of data will come from the secondary source. The secondary sources of data will come from books and other secondary materials. The data that will be collected will include concepts like retaliation mechanism, dispute settlement system, as well as World Trade Organization. Since this study is only small scale, it is believed that a secondary is sufficient to address the aims and objectives of the paper. In addition, the time and financial constraints also contributed to the nature of this paper as a secondary research.

As mentioned above, this study is will utilize only the secondary materials. This means that the secondary information will be collected and collated. Theories, models or frameworks will be analyzed in order to address the issues and problems presented in this paper.

With this, the data collection method that will be adopted is the desk research. This method is highly useful in collecting secondary information. Since the focus of this paper is on the secondary information, the method is deemed to be useful and suitable.

There are a plethora of secondary data sources. If coming to the topic from the beginning, the researcher will start wide, and will go through the task of identifying and analysing information that has already been compiled and published in any form.

Desk research was employed because of the convenience it provides. The secondary data is often ready to use or process, and the person doing desk research often does not need to leave the office. On the minus side, the secondary data may not be recent or accurate. Moreover, secondary data sometimes can be hard to find, depending on the subject. Finally, the data derived by others may not be relevant to the context under study.

For the current research, benefits of desk research outweigh costs. This approach was used because of the accessibility of data bases that contain information about the retaliation mechanism in the WTO dispute settlement system and its impact on the developing countries. Such information can be gathered using the online library Questia and databases such as ProQuest, ScienceDirect, and Expanded Academic ASAP. Secondary data were also gathered from documents and reports searchable in Google. These sources provide a plethora of materials. For this research, secondary data are used primarily to identify areas where information gaps exist.

1.3 RESEARCH STRUCTURE

On the structure of the paper, it will be divided into five chapters. These chapters include the introduction section, the review of the literature of the study, the methodology of the research, presentation of the findings of the study as well as the careful interpretation of these findings and, the summary and conclusion section.

The first chapter of this paper is dedicated to the introduction part. This section will give the readers of the paper an idea on what the paper is all about. In other words, it will provide a bird's eye view of the paper; the aim and objectives of the study will be discussed in this section. In addition, this part also deals with the methodology of research. In particular, the researcher will discuss research philosophy, the research approach, as well as the data collection methods.

A review of the related literature is devoted to the second chapter of this paper. This section is deemed to be one of the most important sections since it will generally provide useful information not all for the researcher but as well as the readers of this paper. In a way, it prepares them towards the deeper discussion on the paper. Among the subjects or topics which will be reviewed on this paper are the general concept of advertising,

Moreover, the presentation and interpretation will be on chapter three and chapter four. These chapters attempt to address the research questions or problems which are stated in the first chapter.

The last chapter of the paper is the summary and conclusion. After the discussion and the critical analysis of the findings, the researcher can sum up all of the discussions and highlight those that are important to the study. The key claims or arguments can be emphasized here. After summarizing all the necessary points, the researcher can now draw conclusions for the study. In the conclusion part, one needs to address the paper's main problem. The conclusion will provide a clear and concise answer to the problem of the study.

This division of the paper is deemed to necessary in the ability of the researcher to give a systematic and a well-defined research. Thus, the presented organization of the chapters of the paper is indispensable in making the readers easily understand the discussion of the paper in general- its problem, findings, methods, analysis, conclusion and many more.

CHAPTER TWO: LITERATURE REVIEW

2.1 THEORY BASIC OF THE RETALIATION MECHANISM

2.1.1 The retaliation mechanism under the GATT

Organizations that seek to liberalize trade and lessen trade barriers among the member nations. This actually served as an impetus for countries. Specifically, the GATT was born out of the need to respond to the protectionist policies of the decades following World War I. At that point tariffs on goods shot up to an extent where trading partners in the international arena were not satisfied and similarly imposed higher tariffs in retaliation. A group labelled the International Trade Organization (ITO) was born. Basically, the ITO claims to serve as a body that would ensure that agreements and negotiations among nations would enjoy an impartial and advantageous reduction of tariffs in order to promote international trade. It was in this scenario (1947) that the GATT came about. It served as an interim agreement among the countries who sought to be a member of the ITO. The problem is that the ITO was never actually ratified after the US congress refused to deal with it. Though the ITO was never ratified, the interim agreement prevailed. Up to that point, the GATT still prevails as the governing principles in international trade. Though it is actually an agreement, not an actual organization, its principles continue to be adhered by participating countries. All in all, there have been eight rounds that completed the GATT negotiations. In its earlier rounds, the main purpose was to deal with the reduction of the tariffs on the nations seeking to be part of the agreement.

In the article of Crowley, she noted that certain mechanisms under the GATT rules were imposed to manifest a “measured retaliation” among the signatories of the treaty. These include the use of safeguard in the agreement. As indicated in the Agreement on Safeguards, this initially served as a motivating factor for greater concession. This is seen in Articles XXVIII and XIX on the agreement. The former represents the option of the signatories to raise a tariff or even initiate a restriction on a temporary basis. The latter represents the option of the member countries to impose a permanent raise on the tariffs. In the same way, these safeguards were only reserved for situations where there are “unforeseen” circumstances that brought about increase in imports. The problem seen in this situation basically rests on the definition of “unforeseen” circumstances. As a result, this is used as a retaliatory tool among nations who have been hurt by the imposition of safeguards. Retaliation basically comes in the form of a similar increase in tariff on other products. It was not after the signing of the Uruguay Round that mended the loophole in the said international law. With the conclusion of the Uruguay Round, retaliation has been circumvented to all member countries by imposing a three year grace period from the use of these safeguards.

The Retaliation Mechanism in the WTO: the Retaliation Mechanism in the Draft of State obligation

The Uruguay Round dealt with the issues such as intellectual property and investment of the signatories in the agreement. Another effect of the said round is that it ultimately created the WTO. The Uruguay Round eventually created an actual international organization complete with a charter and a dispute settlement unit. In a sense, the Uruguay Round created a similar organization as the ITO adhering to the rules and agreements made in the past eight rounds of the GATT negotiations. The basic premise of the enactment of the GATT/WTO Agreements is to foster international trade. To a certain extent, these agreements do have an optimal outcome when governments maximize the national income by adhering to such international policies.

The retaliation mechanism present in the WTO is basically seen in its dispute settlement measures. According to the article of Crowley one of the main functions of the WTO is to settle the trade disputes between its member countries. In instances that the dispute could not be resolved in an amicable manner between the two nations, then the case would be forwarded to a panel composed of three individuals acting as judges. This panel will hear the facts of the case and analyse whether one of the parties involved is guilty of breach of any GATT obligations. Again, it represents a measured retaliation. Crowley indicated that in such a way, the WTO could allow punishments in the form of retaliatory reduction of trade through reasonable tariff increase.

The retaliation mechanism in the WTO: the unilateral retaliation mechanism by US

The retaliation mechanism under the WTO: the retaliation mechanism under the NAFTA

Similar to the GATT, the North American Free Trade Agreement (NAFTA) is merely an accord between the signatories. This means that the dispute resolution mechanisms or retaliation schemes provided by NAFTA is only applicable to the member states. In looking at the contents of the NAFTA, its Chapter 19 or its subsidies and dumping disputes would be the most appropriate for this paper. The chapter basically allows one of the signatories to ask one of the other signatories to amend its existing legislation to complement anti-dumping policies of NAFTA. Another article of the said chapter allows the creation of a panel to review the adjustments made by the other signatories.

2.2 IMPLEMENTATION OF THE RETALIATION MECHANISM UNDER THE WTO

Range of the retaliation mechanism

The WTO's retaliation mechanism is basically representative of the dispute settlement imperatives under the GATT. However, with the emergence of the Dispute Settlement Understanding (DSU) in 1994 was considered a huge leap for the improvement of the dispute settlement (and consequently an equitable retaliation mechanism) for the international organization. There are several major elements that constitute the DSU. One of these is the creation of the Panel that will be commissioned to adjudicating the issues involving the parties. The Dispute Settlement Body (DSB) of the WTO is tasked to create a panel from a roster of “well-qualified” individuals from both the government and private sector. The findings of the panel will help the DSB in providing the parties involved with the just ruling based on the terms within the general agreement of the organization. Unless a party intends to claim for an appeal or for some reason the DSB could not consensually accept the report of the panel, then the findings of the panel is considered final after sixty days of submission to the DSB.

Another factor that has been added in the inception of the DSU is the availability of an Appellate Body (AB). This is the proper forum in which the parties could forward appeal on specific areas on the findings of the panel. The AB is made up of seven appointed individuals with four-year terms with the maximum of one reappointment. However, a limited area of on the report of the panel could be appealed. Specifically, the AB could only hear “issues of law covered in the panel report and legal interpretations developed by the panel.” The decision of the AB is deemed final unless the DSB consensus finds some reason why the general findings could not be adopted.

Object and Function of the retaliation mechanism

Based on the descriptions of the retaliation mechanism provided by the WTO, one could surmise several objectives of the employment of such schemes. One important objective of the retaliation mechanism is to resolve any conflict. This is done through the exchange of facts and information to arrive at a commonly held solution to the conflict. This is seen in the Dispute Settlement Understanding where it clearly stated that the organization prefer to settle than to provide punishment to the parties involved.

Moreover, the retaliation mechanism is employed because one of parties involved have aggrieved the other party and in so doing possibly violating one of the general agreements of the WTO. In this manner, the WTO's retaliation mechanism is also used as tool for maintaining equality and reciprocity among the members. Specifically, if the panel's decision is in favour aggrieved parties, then their obligation to the violating party would be deemed void. Other courses of action could come in the form of voluntary compensation. In some ways, it balances the equation.

It also appears that the implementation of the retaliation mechanism in the WTO encourages compliance to its member states. Violating at least one of the agreed upon tenets of the organization is a guaranteed means of being called upon in the DSB panel. The possible punishments may be enough to make the other member states think twice on the matter. Thus, along with being a means of encouraging observance of the rules, it could also serve as deterrence for any possible negative actions that member states may engage in. Suspension is the possibly the top form of punishment as indicative to the WTO Rules.

On a lighter note, these retaliation mechanisms and the process that goes behind it also allows some level of interpretation of the rules in the WTO. With the DSB panel deliberating and interpreting the possible implications of the existing rules ratified by the WTO, it is inevitable that certain ambiguous or even areas which may be considered too general would be clarified. Thus, these retaliation mechanisms serve as a means to install a precedent on how the specific laws and rules relating to the organization are interpreted.

Conditions of the Retaliation Mechanism

Level of the Implementation of the Retaliation Mechanism

The actual implementation of the retaliation mechanisms of the WTO also comes into question particularly with the interpretation of the terms. In this part of the study, the discussion will be concentrated on the discussion on what and how “equivalent” level of nullification or impairment is achieved in the context of the retaliation mechanisms used by the WTO. The first part will consult Article 22.4 of the DSU and look into the closest connotation of the word. The second part will be taking into consideration the process in which the level of being “equivalent” is met.

With such ideas presented, the process in which the DSB and the DSU establishes what actually is “equivalent” to the actions made by the nonconforming country is needed to be discussed. The manner in which arbitrators uncover the manner in which a remedy is actually deemed equivalent appears to be a subjective process. How will the suspensions be ultimately be equal to the actions done by another member state?

Article 22.4 of the DSU indicated that the authorized level of suspension or any other punishment to the nonconforming party should be made “equivalent.” As the task is delegated to the arbitrators, they have the hard task of interpreting the level of damage that the breach caused to the aggrieved country. This means that the process involved in the retaliation mechanism of the WTO leaves no room for any punitive damages. As stated in the earlier parts of the study, certain trade benefits would be more suitable in this context. Moreover, the context of equivalence is analysed by the arbitrators through the context of nullification and impairment, particularly on the level on which this has affected the parties. This is a far cry from the dispute settlement procedure that has been implemented under the GATT rules where the appropriateness of the findings and punishment prevail over the possible equivalence. All in all, the countermeasures that is present in the DSU standards represent a more automatic and mandatory kind of retaliation mechanism.

Principle and Modality of the retaliation mechanism by Implementation

The principle and modality of the retaliation mechanism of the WTO is also reflected in the implementation of the said dispute settlement procedures present in the organization. The following discussions will look into the modality, particularly on how the DSU have carried out their decisions. Consequently the analysis of the said cases will open the discussion on the principles which these retaliation mechanisms take into account.

Given the observation on how the retaliation is effective, there is still doubt left as to whether the retaliation mechanism imposes obedience in an unconditional manner among all the member states. Based on the said case, unconditional obedience with the rules is not the purpose of the systems within the WTO. Even supposing that there is a requirement to end the breach, the breach can as well be discontinued by not applying or altering the existing rule in the first place by means of anther negotiation, bilateral agreement or waiver.

Authorization and termination of the retaliation mechanism

Authorization of the retaliation mechanism

The retaliation mechanism of the WTO is a huge part of the agreement that the organization holds between the member nations. This means that upon signing an accession with the organization, the states involved automatically agrees to an enforced and automatic system of settling trade conflicts. Thus, all the member states have accepted the existence of a retaliation mechanism and how its consequences would essentially affect them once they were proven to have dissented any of the terms of agreements noted in the WTO. Ironically, once this retaliation mechanism is authorized, it also means that one of the member states involved disagree of the purpose of a particular term of the WTO agreements. It could also represent the possible inability, despite the guarantee of obedience prior to the accession, of the member state to comply with these general rules. For this reason, the remedies and possible sanctions to the erring countries are limited by a qualifying term of “equivalence.”

Despite these accounts, the fact lingers that much is currently expected from the term “suspension of concessions” presented by the WTO as a sanction for nonconformity. The authorization of the retaliation mechanism is thus is perceived as a device to restore equilibrium, to pay compensation, to persuade conformity and settlement and to discourage prospective infringements.

Termination of the retaliation mechanism

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