WTO/GATT TRANSITION NEEDS CO-EXISTENCE FOR A WHILE

7:13 AM Sep 26, 1994

WTO/GATT TRANSITION NEEDS CO-EXISTENCE FOR A WHILE
Geneva 26 Sep (Chakravarthi Raghavan) -- Excepting for the United States, most participants at the meeting of the WTO Preparatory Committee on Institutional, Procedural and Legal Matters appear to be supporting the view that for a while both the GATT 1947 and the WTO would need to co-exist.

The United States has so far taken the position that simultaneously with its acceptance of the WTO and its entry into force, the US will withdraw from the GATT 1947.

The WTO is structured such that its GATT 1994 (which will be the GATT 1947, all the decisions and understandings of the GATT CPs from 1947, and the amendments and understandings concluded in the Uruguay Round) would be different from the GATT 1947.

The Marrakesh Agreement and understandings envisage the WTO coming into force on 1 January 1995 (or as soon as may be thereafter, on a date to be set by the Implementation Conference), with all those fulfilling the requirements and eligible to become original members of the WTO, having a two-year transition period to complete their domestic processes.

The issue of the legal situation of two separate contractual trade systems, the WTO with its GATT 1994 and the GATT 1947, has been engaging the attention of the institutional sub-committee chaired by Amb. Kesavapani of Singapore.

The discussions in the subcommittee on Friday would appear to have resulted in an overwhelming view that while there would be complications in a country being both a member of the WTO as well as the GATT 1947, the complications for those not yet in a position to become a member of the WTO would be much greater in that they would find themselves without a multilateral framework for their trade relations with the major trading partners.

At the meeting of the Quad countries (Canada, EU, Japan and the United States) earlier in September in San Francisco, the United States would appear to have indicated that simultaneously with its accession to the WTO and its entry into force, the US would withdraw from the GATT 1947. However, other Quad members would appear to have noted the complications that could ensue for those who might be having problems in acting quickly in terms of domestic legislation, in time for the WTO's entry into force, and the desirability of maintaining both for a while.

At the Friday meeting of the WTO Prepcom sub-committee, the US would appear to have indicated that it still preferred to withdraw from the GATT 1947, simultaneously with the entry into force of WTO, and that it might be giving the 3-months notice required (in terms of the GATT's protocol of provisional application) for withdrawal from the GATT 1947.

However, others while understanding the complications of two systems and framework of rules and rights and obligations, also noted the difficulties that would be caused by lack of any transitionary multilateral framework for those who were trying to complete their domestic formalities.

In this view, several felt that the Prepcom and the WTO would need to take some steps by consensus to deal with these problems, but that the two would need to exist for a while.

Apart from the difficulties that could be caused to those whose accession to the WTO is delayed, there is also the other complication of the various disputes pending under the GATT and the Tokyo Round agreements. If the US which is a party to many of these withdraws from the GATT 1947, as soon as the WTO comes into being there would be a complicated legal situation.

The WTO and its rules in these areas, as also its integrated dispute settlement mechanism comes into play only for disputes raised after the WTO entry into force. Earlier disputes and the rights and obligations would be governed by the GATT 1947 and the Tokyo Round codes.

In the rush and hurry to conclude the Uruguay Round, neither the GATT secretariat and its legal office, not the participants appear to have paid much attention. In the discussions in the legal drafting process in 1993, there was a suggestion for inclusion of a denunciation clause in the Final Act, to ensure that acceptance of the WTO would automatically mean denunciation of the Tokyo Round agreements, but this did not find much favour.

In terms of international law, rather than denunciation or withdrawal by individual countries, all parties to a treaty may decide to terminate it, even if the treaty itself does not provide for this. Under Vienna Law of Treaties, a treaty could also be considered to be terminated if all parties to it conclude a later treaty on the same subject and the provisions of the latter treaty shows that the parties intend to be governed by the latter treaty. In this view, once all GATT 1947 cps, become members of the WTO and the signatories to the Tokyo Round codes join the WTO, both GATT 1947 and the Tokyo Round codes could be viewed as terminated.

While the termination of a treaty would release the parties to it from any obligation to further perform the treaty, it would not affect rights, obligations or legal situations of parties created prior to its termination. This would also be the case in respect of a party withdrawing or denouncing a treaty, in respect of its obligations with others party to the treaty prior to its withdrawal.

When the WTO comes into being, the GATT 1994 and GATT 1947 will be two separate entities, giving the GATT 1947 cps three options: withdraw from GATT 1947 and become a WTO member, remain a GATT 1947 cp and not become WTO member, or remain a GATT 1947 cp and also become a WTO member.

Even the replacement of the GATT 1947 as an institution by the WTO requires creation of a legal basis that has to be endorsed by the GATT 1947 CPs, the UN Interim Committee for the International Trade Organisation (ICITO) which provides the legal cover for the GATT secretariat.

After the WTO enters into force, where a country is only a member of the GATT 1947, its obligations would fully apply. Where a country is party to both GATT 1947 and WTO, visavis a country which is only a GATT 1947 cp, the GATT 1947 would fully apply and WTO has to be implemented in a manner consistent with GATT 1947. Where a country is only a member of WTO, visavis a GATT 1947 cp, neither GATT 1947 nor WTO would apply, except for the rights and obligations of GATT 1947 created prior to WTO.

Where a country is both a GATT 1947 cp and a WTO member visavis another similarly placed country, after WTO entry into force, the GATT 1947 would fully apply as also the WTO, and GATT 1947 would apply to the extent that its provisions are compatible with WTO. But visavis a country which is only a WTO member, only the WTO will apply.

If a country is only a member of the WTO, it will have no obligations to perform the GATT 1947 obligations visavis a country which is only a GATT 1947 cp, and the WTO will fully apply visavis a country similarly situated (member of WTO, not a GATT 1947 cp). Visavis a country which is both a GATT 1947 and WTO member, the WTO will fully apply, while GATT 1947 must be implemented by the country also member of WTO consistently with WTO.

At the Institutional subcommittee meeting, while most speakers recognised the difficulties of such a complex legal situation during a transition period, most were also conscious that the problems will be greater if countries who are not yet members of the WTO finds themselves without any multilateral framework of relations with those who join the WTO and withdraw from the GATT 1947. In this view many were of the view that WTO members continuing to be party to the GATT 1947 during the transition period should be envisaged.

This issue finally has to be tackled and decided (by consensus) at the 25 October Preparatory Committee meeting for the WTO, which is to set the implementation conference dates.

There has been some suggestions (within the Quad) that the implementation conference should be able to take decisions by majority vote, and not by the consensus rules of the GATT, so that once the Quad have does their ratifications and were ready to bring the WTO into force, this should be done and those facing problems should not be allowed to deny consensus.

However, this view now seems unlikely to prevail. There was also the view canvassed by the US and others privately, that the countries who have ratified or accepted the WTO could meet separately and bring the treaty into force, without waiting for the other GATT CPs. But this would really mean that these WTO members would have to meet and act outside the GATT 1947 and its secretariat and services and might find a smooth transition even more complicated.