DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY

LUCKNOW

INTERNATIONAL TRADE LAW

FINAL DRAFT ON:

ACCESSION TO WORLD TRADE ORGANISATION

(Submitted for the project undertaken in partial fulfilment of B.A. LL.B. (Hons.)VII Sem.

5 year integrated course at RMLNLU, Lucknow).

SUBMITTED TO: SUBMITTED BY:

Ms. Priya Anuragini ANCHAL SINGH

ASSISTANT PROFESSOR (Law) Enrol : 150101015

RMLNLU Section A, VII Sem

B.A. LL.B.(Hons.)
 ACKNOWLEDGEMENT

Any accomplishment requires effort of many people and this work is no different. I take this
opportunity to thank Ms. Priya Anuragini (Assistant Professor, Law) for giving me such a
wonderful topic for research and providing me valuable training and guidance at the various
stages of my project.

I will also remain highly indebted to the librarian for providing the requisite research material.

Lastly I am thankful to all my colleagues who have given time to help me during the completion
of the project.

Anchal Singh

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 TABLE OF CONTENTS
INTRODUCTION .......................................................................................................................... 4

OBJECTIVE OF THE STUDY ...................................................................................................... 4

RESEARCH QUESTIONS ............................................................................................................ 4

RESEARCH METHODOLOGY.................................................................................................... 4

THE ACCESSION PROCESS ....................................................................................................... 5

BENEFITS OF ACCESSION ........................................................................................................ 6

CHALLENGES IN ACCESSION .................................................................................................. 6

IMPACT OF THE ACCESSION ................................................................................................... 7

Structural reforms ........................................................................................................................ 7

Development impact ................................................................................................................... 8

Impact on World Trade ............................................................................................................... 8

CONCLUSION ............................................................................................................................... 8

REFERENCES ............................................................................................................................. 10

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INTRODUCTION
Since its inception in 1995, the WTO has grown from 123 to 164 members. Membership is not
limited to sovereign states, but may be extended to any customs territory with full autonomy in
the conduct of its external economic relations. Thus Hong Kong, a special administrative region
of the People's Republic of China (PRC), is a founding member of the WTO, whereas the PRC
did not join until 2001. Applicants in the process of negotiating their accession to the WTO are
afforded observer status. The process of joining the WTO, also known as accession, is governed
by Article XII of the Marrakesh Agreement.

The WTO publications contend that membership provides numerous benefits for all members;
but in the empirical literature there is also some criticism of WTO. This course paper shall
analyse the procedure for accession to WTO and its impact on the countries. It will lead to a
critical evaluation of the role of WTO in its member countries’ economic growth due to trade
activity.

OBJECTIVE OF THE STUDY

1. To understand the procedure of accession to World Trade Organisation
2. To study the challenges developing countries in accession to WTO
3. To critically evaluate the role of WTO over its member countries

RESEARCH QUESTIONS
1. What is the procedure for accession to WTO?
2. Why do countries join WTO?
3. What are the challenges faced by countries in joining WTO?
4. What is the impact of WTO membership over economic growth and trade flow of the
countries?
5. Does membership of WTO have any negative effect over the countries?

RESEARCH METHODOLOGY
Doctrinal method of research would be used for this course paper.

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THE ACCESSION PROCESS
The first step in the process of becoming a Member of the WTO is for the applicant government
to send a communication to the Director-General of the WTO. This must state that the applicant
wishes to accede under Article XII. The WTO General Council considers the request and
establishes a Working Party mandated to examine the application and to report back with
recommendations, which may include a draft Protocol of Accession. Membership of the
Working Party is open to all interested WTO Members. Once a Working Party is established, all
applicant governments become observers to the General Council with the rights and obligations
that this entails, including the obligation to pay a financial contribution. All matters relevant to
an accession are dealt with in its Working Party and the General Council is not usually called
upon to consider such matters until it receives the final Report of the Working Party which also
concludes the Working Party’s mandate.1
The Working Party begins its work with an examination of factual information on the trade
regime of the applicant. This is based on a Memorandum2(Memorandum on the Foreign Trade
Regime a.k.a MFTR) supplied by the applicant on all aspects of its trade regime, supporting
documentation containing more detailed information on its trade measures and written answers
to questions addressed to it by members of the Working Party. When enough progress has been
made on factual examination of trade regime, Working Party members often ask the Secretariat
to prepare and circulate a document concerning a Factual Summary of Points Raised.
Thereafter, negotiations on the terms of accession are initiated under the aegis of the Working
Party. Acceders must be prepared to accept all the rules contained in the WTO Agreement. Their
obligations on rules are contained in their Protocol commitments.
The results of the negotiations are all brought together in a draft Protocol setting out the terms on
which the applicant is to be invited to accede. The Protocol is annexed to the Report of the
Working Party. The Working Party also annexes a draft Decision for the General Council
inviting the applicant to accede on the terms set out in the draft Protocol. The General
Council/Ministerial Conference adopts Working Party Reports in accordance with the relevant
WTO decision-making procedures. When they adopt the Decision, WTO Members offer terms of
accession to the acceder. When it accepts the Protocol, by signature or otherwise, the acceder
1
Handbook on Accession to WTO, World Trade Organisation (Nov 5, 2018) available at
https://www.wto.org/english/thewto_e/acc_e/cbt_course_e/intro_e.htm
2
User Guide to WTO Accession Jargons, WTO OMC (Nov 5, 2018) available at
https://www.wto.org/english/thewto_e/acc_e/accession_speak_e.pdf

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also accepts those terms and becomes a Member of the WTO thirty days after notifying
acceptance of the Protocol.

BENEFITS OF ACCESSION
First, the WTO grants each member Most Favored Nation status, which means that WTO
members must treat each other the same. They give no preferential trade benefit to any one
member without giving it to all.
Second, WTO members have lower trade barriers with each other. That includes tariffs, import
quotas, and regulations. Lower trade barriers allow members larger markets for their goods.
Larger markets lead to greater sales, more jobs, and faster economic growth.
Third, around two-thirds of WTO members are developing countries. Their membership gives
them immediate access to developed markets at the lower tariff rate. This gives them time to
catch up with sophisticated corporations and their mature industries. They don't have to remove
reciprocal tariffs in their markets until later. That means developing countries don't immediately
have to open their markets to overwhelming competitive pressure. 36 WTO members are
categorized as least-developed countries or LDCs. The United Nations grants that status to low-
income countries with severe blocks to sustainable economic growth. The U.N. and other
agencies provide them extra assistance in development and trade.

CHALLENGES IN ACCESSION
Unlike GATT Accession, accession to WTO is a hard and long drawn-out process. Accession
Negotiations typically last about ten years and require far reaching commitments which in
several instances go beyond those applied to existing members and occasionally even
acquiescence to lesser rights – at least temporarily. 3 This procedure has sometime been
characterized in the development and legal literature as ‘unfair’ to new members, as
discriminatory, arbitrary and as possibly undermining the legitimacy of the WTO as a body of
law. Others, however, have argued that accession terms related to the scope and extent of
liberalization can and should vary, as they do vary greatly for WTO members.4
The main difficulty of joining the WTO lies in the adjustment and compliance costs - political,
social, and economic - that accompany trade liberalization and de-regulation. Some of these
3
Uri Dadush and Chiedu Osakwe, WTO Accession and Trade Multilateralism, Cambridge University Press(2015).
4
Ibid.

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costs are incurred because a number of institutional elements of WTO membership require
expenditures to develop legal and regulatory systems, such as intellectual property protection,
customs valuation, and product standards compliance. For poorer countries, external aid may be
required to finance these expenditures. In addition, of domestic resources, a situation often made
worse by factor immobility and other market rigidities. Internal market reforms and (in wealthier
countries) adjustment assistance to workers may be necessary to smooth the process of
adjustment that is necessary to move resources into more competitive industries, and may
therefore shape the domestic policy agenda as part of joining the WTO. Poor countries in
particular typically have deficient internal adjustment mechanisms, including a lack of
infrastructure, weak market institutions, and insufficient trade capacity.5

IMPACT OF THE ACCESSION

WTO Accession can be used as an important tool for development. It can be a mechanism to
intensify and accelerate domestic structural reform beyond simple trade policy. When countries
apply for WTO membership, they are already thinking of reform process that is wider than the
WTO itself. WTO membership enables countries to adhere to multilateral rules, thus reducing
the potential for policy reversal and raising confidence among investors.

Structural reforms
While the final outcome of accession brings much benefits, the process itself, is important as it is
that period during which most of the structural reforms are implemented within the applicant
country. WTO plays a significant role in safeguarding its member countries’ commitment to
globalization. 6 During accession process, acceding country has to show its commitment
regarding market access and other reform areas to the Working Party constituted. The accession
is often part of broader structural reforms that lead to growth. Most of the benefits of the
accession comes from the countries’ own internal structural reforms, with an impact on export
development, domestic market enhancement, investment in infrastructure and human resource
capital, and domestic and social reform measures.

5
Jones K.,The political economy of WTO accession: the unfinished business of universal membership, World Trade
Review(2009).
6
Hadad M., Holdweig C.H and Peres A.P, The Structural Reform Implications of WTO Accession, WTO
Accessions and Trade Multilateralism(2015).

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Development impact
WTO accession can be an effective lever to promote not only trade liberalization but also
substantive domestic regulatory reform that extends beyond the border, helping countries move
to a more open and market-oriented model of economic development. A country’s negotiation on
bilateral market access with the countries on its WTO working party on accession include
measures that go beyond tariff policy, such as customs administration, technical barriers to trade
and sanitary and phytosanitary measures. They also include liberalization of the foreign
investment regime (in particular regulations relating to the services sector); privatization,
including the dissolution of state monopolies; taxation; government procurement; price controls;
foreign exchange regimes; transparency in trade regulations and trade-related governance
matters. 7

Impact on World Trade

A membership in the WTO comes with responsibilities. Members agree to avoid trade barriers
and abide by the WTO's resolution of any dispute. That prevents retaliatory trade warfare. These
escalating trade restrictions help individual countries in the short term but hurt world trade in the
long term.8 This type of trade protectionism, in fact, worsened the Great Depression of 1929. As
global trade slowed, countries sought to protect domestic industries. They erected trade barriers.
These created a downward spiral. As a result, world trade shrank by 25 percent.

CONCLUSION
The WTO remains arguably the most successful international organization of its kind, bringing
significant economic benefits to its members through a system of rules, a forum for dispute
settlement, and a framework for further trade liberalization. It has indeed moved closer to
universal membership, but many of the remaining accession cases are likely to be extremely
difficult. The accession process has become excessively lengthy and burdensome for applicants,
delaying the gains from trade and a more inclusive trading system, imposing heavy financial
costs on new members, and potentially creating lingering resentment from the one-sided
negotiations. WTO members could improve the accession process by introducing more

7
Ibid.
8
WTO Members, Categories and Benefits (Nov 5, 2018) available at https://www.thebalance.com/wto-membership-
benefits-and-importance-3306364

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flexibility in transition periods, improving the coordination of aid to fund mandated internal
reforms, and limiting the demand for "WTO-plus' concessions from applicants.
WTO rules have imparted to its members superior bargaining power in accession negotiations,
which they have learned to exploit, all the more so in response to the stalled Doha Round. They
are unlikely to give up their superior bargaining power easily, but perhaps the best prospect
would lie in an effort to revive the GATT-based approach of getting everyone inside the tent first
through a broader application of S&D treatment in accessions, supported by redoubled efforts to
revive multilateral trade liberalization. As a consensus based organization, the WTO may in fact
find it easier to promote multilateral trade liberalization in future years by easing up on the
draconian accession process now, thereby promoting a more viable system of participation and
"ownership' by its new members.

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membership-how-joining-the-gattwto-undermines-
gsp/9620A3DD3084358FC50257D0A798EE70 (last visited Nov 5, 2018).
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Nov 5, 2018).
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Accession-the-Possible-Benefits-for-Ethiopia.pdf (last visited Nov 5, 2018).
4. Sadeq Z. Bigdeli, Iran's Accession to the World Trade Organization: An Impediment or a
Catalyst for Development SpringerLink(1970),
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Catalyst for Development?SpringerLink(1970),
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change (last visited Nov 5, 2018).
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https://www.dailyo.in/business/wto-donald-trump-trade-wars-world-bank-agriculture-
subsidies/story/1/26544.html (last visited Nov 5, 2018).
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