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All about the Marrakesh Agreement

February 21, 2022
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The article is written by Ansruta Debnath, a law student of National Law University Odisha. This article talks about the Marrakesh Agreement which was responsible for establishment of the World Trade Organisation.

Introduction

On April 15, 1994, in Marrakesh, Morocco, after the Uruguay Round of Multilateral Trade Negotiations, the World Trade Organization Agreement also known as the Marrakesh Agreement was signed.

The scope, functions, and agency of the World Trade Organization are all outlined in this agreement. The annexes to the Marrakesh Agreement include agreements negotiated previously under the General Agreement on Tariffs and Trade, as well as accords reached during the Uruguay Round. These agreements have now been reclassified as World Trade Organization (WTO) agreements. The Marrakesh Agreement binds all members of the World Trade Organization, even those who joined after it was signed.

Historical background of the Marrakesh Agreement

General Agreement on Tariffs and Trade, hereinafter referred to as GATT 1947, was an agreement signed between 23 nations in 1947 in Geneva. It came into force on January 1st, 1948 and was primarily brought about to phase out imports of the import quota and reduce tariffs on merchandise trade.

GATT 1947 was the trade agreement that governed international trade from 1948 until a proper international organization for trade got established (World Trade Organization, 1995). Despite its many problems which ranged from the non-inclusivity of various nations to other institutional problems, GATT 1947 was able to conduct eight rounds of multilateral trade negotiations, the last one being the Uruguay Round (1986-1994) that led to the Marrakesh Agreement which in turn established the World Trade Organization.

The Marrakesh Agreement created a new General Agreement on Trade and Tariffs (present in Annexe 1A of the Agreement) which is referred to as GATT 1994.

Need for the Marrakesh Agreement

GATT 1947 was an agreement between certain countries but was not a binding treaty. Thus, its provisions applied to the extent of them being consistent with the country’s laws. The GATT was also signed between 23 nations and clearly, that implied that it was not inclusive at all. As more and more nations started participating in trade talks being organised through GATT, it was understood that GATT would serve better if it had an institutional organization to back it up better. Hence, during the Uruguay Rounds, the Marrakesh Agreement was signed that led to the establishment of an institutional organization, the WTO.

Discussion of the articles of the Marrakesh Agreement 

The primary objectives of the Marrakesh Agreement can be understood by the first part of the agreement, which can be considered to fulfil the objectives of a standard preamble. It says that parties to the Agreement-

  1. Recognized that their trade and economic relations should be conducted to raise living standards, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, all while allowing for the most efficient use of the world’s resources per the goal of sustainable development.
  2. Recognized further that there is a need for positive action for the development of the developing and least-developed nation, such that even they can secure their share in the international market that will aid their home economy.
  3. Were desirous of contributing to the above-mentioned goals by engaging in reciprocal and mutually beneficial agreements aimed at significantly lowering tariffs and other trade obstacles, as well as eliminating discriminatory treatment in international commercial relations.
  4. Resolved to build an interconnected, economically sustainable, and long-lasting world trade system that incorporates the GATT 1947, previous trade liberalisation efforts, and all of the outcomes of the Uruguay Round Multilateral Trade Negotiations.
  5. Were determined to preserve the basic principles and to further the objectives underlying this multilateral trading system

Article I: Establishment of the World Trade Organization

This article establishes the World Trade Organization (hereinafter referred to as WTO)

Article II: Scope

The World Trade Organization (WTO) was established to provide institutional frameworks for the conduct of trade interactions. Furthermore, the agreements in Annexes 1, 2, and 3 are “Multilateral Trade Agreements” and are binding on all current and future members of the WTO, while those in Annexe 4 are “Plurilateral Trade Agreements” and are only binding on members if they agree for them to be binding on their capacity.

Article III: Functions

This article talks about the functions of the WTO. The functions are as follows-

  1. The WTO is responsible for supporting and taking every step to ensure the implementation, administration, and operation of the Marrakesh Agreement and Multilateral Trade Agreements, as well as provide the framework for the implementation, administration, and operation of Plurilateral Trade Agreements, to achieve their objectives.
  2. It provides a forum for negotiation about trade issues under the various Multilateral Agreements as well as other further negotiations to all its members.
  3. WTO is also a dispute resolution body among its members
  4. The WTO is also responsible for administering the Trade Policy Review Mechanism (TPRM). This is the main transparency instrument of the WTO, affording opportunities for a process of a collective evaluation of the trade policies and practices of individual members.
  5. Finally, The WTO was tasked to work with the International Monetary Fund, the International Bank for Reconstruction and Development, and its affiliated organizations to achieve more coherence in global economic policymaking.

Article IV: Structure

The Ministerial Conference is the WTO’s highest decision-making body, bringing together all of the organization’s members. It meets every two years and has the authority to make decisions under any multilateral trade agreement.

Because the Conference only meets every two years, the General Council is in charge of the WTO’s day-to-day operations and any other interim concerns. It is made up of representatives from all WTO member countries. When appropriate, the General Council meets as the Trade Policy Review Body and the Dispute Settlement Body. Three bodies are functioning directly under the General Council-

  1. The Council for Trade in Goods (Goods Council), which deals with the trade agreements under Annexe 1A 
  2. The Council for Trade in Services (Services Council), deals with the General Agreement on Trade in Services (GATS) which is present in Annexe 1B
  3. The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council), deals with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) present in Annexe 1C.

The Ministerial Conference also established a Committee on Trade and Development, a Committee on Balance-of-Payments Restrictions, and a Committee on Budget, Finance, and Administration, each of which is responsible for carrying out the functions delegated to them by the Marrakesh Agreement and Multilateral Trade Agreements, as well as any additional functions delegated by the General Council.

Article V: Relations with Other Organizations

The General Council was tasked with putting in place suitable structures for effective cooperation with other intergovernmental organisations that have WTO-like requirements. The General Council was also given the authority to devise appropriate mechanisms for communication and cooperation with non-governmental organisations working on WTO problems.

Article VI: The Secretariat

The World Trade Organization’s Secretariat, which is now based in Geneva, is led by a Director-General who is appointed by the Ministerial Conference. Its tasks are stated as “exclusively international in character” in the Marrakesh Agreement, which means they report to and are accountable to only the WTO as a whole, and not to any individual country or member.

Article VII: Budget and Contributions

The Secretariat compiles and delivers to the Committee on Budget, Finance, and Administration the WTO’s annual budget estimate and financial statement. The General Council evaluates it and makes recommendations to the Committee on Budget, Finance, and Administration, which makes the final decision. With a two-thirds majority, the General Council approves the budget, and members are responsible for contributing their share of expenses as per the General Council’s financial norms.

Article VIII: Status of the WTO

The World Trade Organization (WTO) is a legal entity that, along with its members, enjoys several immunities and privileges that are necessary for it to carry out its activities and functions properly. This article further states that the privileges and immunities granted should be identical to those established in the Convention on the Privileges and Immunities of Specialized Agencies, which was passed by the United Nations General Assembly on November 21, 1947.

Article IX: Decision-making

All of the choices are made by consensus. When there is no consensus, decisions are made by a majority of the votes cast. Both the Ministerial Conference and the General Council follow this procedure. Each WTO member gets a single vote. In addition, the Ministerial Conference and General Council have sole authority to interpret this Agreement and the Multilateral Trade Agreements. They can utilise their authority to interpret a Multilateral Trade Agreement in Annexe 1 based on a recommendation by the Council monitoring the Agreement’s functioning. A three-fourths majority vote of the Members is required to accept an interpretation.

Article X: Amendments

This article talks about the various ways and procedures through which amendment to the Marrakesh Agreement and the other agreements of the annexures can take place.

Article XI: Original Membership

This article talks about all those who would be original members of the WTO. The contracting parties to GATT 1947, the European Communities which accept the Marrakesh and all the other agreements were considered to be the original members.

Article XII: Accession

The Marrakesh Agreement and the addition of new members to the WTO are discussed in this article. Any State or separate customs territory having total autonomy over its external commercial relations and other areas covered by this Agreement and the Multilateral Trade Agreements may accede to this Agreement on terms agreed upon by it and the WTO. Such membership will have an impact on this Agreement as well as the Multilateral Trade Agreements that are linked to it. Decisions on accession are made by the Ministerial Conference. At the Ministerial Conference, a two-thirds majority of WTO members must ratify the conditions of entry agreement.

Article XIII: Non-Application of Multilateral Trade Agreements between Particular Members

While the Marrakesh Agreement and other Multilateral Agreements apply to all the original members, it is important to note that they do not apply to the members who accede to it under Article XII if they do not consent to it before the accession takes place and the same is notified to the Ministerial Conference.

Article XIV: Acceptance, Entry into Force and Deposit

This article talks about the formal procedures to be undertaken on accession to the Marrakesh Agreement and the other ancillary agreements.

Article XV: Withdrawal

All members are allowed to withdraw from the Marrakesh Agreement and the other Multilateral Trade Agreements. The withdrawal takes effect after six months from when the notice of withdrawal is given to the Director-General of the WTO.

Other agreements within the Marrakesh Agreement 

Annexe 1

  1. ANNEX 1A:  Multilateral Agreements on Trade in Goods
  1. General Agreement on Tariffs and Trade 1994
  2. Agreement on Agriculture
  3. Agreement on the Application of Sanitary and Phytosanitary Measures
  4. Agreement on Textiles and Clothing
  5. Agreement on Technical Barriers to Trade
  6. Agreement on Trade-Related Investment Measures
  7. Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
  8. Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994
  9. Agreement on Preshipment Inspection
  10. Agreement on Rules of Origin
  11. Agreement on Import Licensing Procedures
  12. Agreement on Subsidies and Countervailing Measures
  13. Agreement on Safeguards
  1. ANNEX 1B: General Agreement on Trade in Services and Annexes
  2. ANNEX 1C:  Agreement on Trade-Related Aspects of Intellectual Property Rights

Annexe 2

This annexe contains “Understanding on Rules and Procedures Governing the Settlement of Disputes”.

Annexe 3

This annexe contains the “Trade Policy Review Mechanism”.

Annexe 4

This annexe contains all the Plurilateral Trade Agreements. They are as follows: 

  1. Agreement on Trade in Civil Aircraft
  2. Agreement on Government Procurement
  3. International Dairy Agreement
  4. International Bovine Meat Agreement

Implications of the Marrakesh Agreement

The Marrakesh Agreement established the first-ever international trade organization. This led to a much more structured approach to international trade leading to the increased inclusivity of various countries in the era of globalization. The creation of the World Trade Organization led to a rapid expansion of international trade, accelerating the individual growth of member and non-member countries.

WTO is a champion of free trade. While this has allowed for the growth of various multinational corporations and easy access to cheap goods throughout the world, it has negatively impacted the home-grown economies of various third-world countries. Through its campaign on free trade, many critics say that WTO has side-lined the needs of these countries because of lack of trade protection. Another WTO principle is the “most favoured nation” principle. This postulates that countries must trade without discrimination. While this has been beneficial in certain circumstances, in most cases, developing countries are prevented from favouring their own companies which might have helped in accelerating development. WTO also does not take adequate consideration of environmental concerns which is extremely concerning.

Conclusion

The Marrakesh Agreement was thus responsible for bridging the gap between the developed and developing nations by establishing the World Trade Organization. The WTO is one the most important international organizations in the world today and is responsible for regulating trade between almost 164 entities. The organization assumes more importance especially due to the creation of a globalized economy. 

References

  1. Trade Guide: Marrakesh Agreement Establishing the WTO
  2. Marrakesh Agreement Establishing the World Trade Organization: pdf
  3. https://www.economicshelp.org/blog/4/trade/criticisms-of-wto/

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