Is WTO An Aid To The Developing Nations Or Just Power Politics In Play

Author: LawSphereX

Category: General Law

Published: 2026-08-23T20:24:19.621933+00:00

Updated: 2026-08-26T17:10:57.957+00:00

IS WTO AN AID TO THE DEVELOPING NATIONS OR JUST

POWER POLITICS IN PLAY?

Shrey Shukla, Faculty of Law, University of Delhi

ABSTRACT

Upsurge in economic globalization through international trade1has demanded a concrete set of principles or laws for its regulation to realize its just and fair potential for every participant whether developing, emerging, or developed.2 The paper focuses on one of the most important such principles of non-discrimination in WTO law, known as ‘Most Favored Nation Treatment Obligation’, which is provided by article 1 of GATT 1994, article

2 of GATS, and analyzing its effect in the real world with reference to dispute

settlement mechanism of WTO. The question here arises, why this particular principle? One of the objectives two, of WTO is the elimination of discrimination in international trade.3 Thus non-discrimination principle becomes of grave importance, MFN treatment (here), to achieve the real fruits of economic globalization. The paper would majorly focus on analyzing whether the WTO’s MFN Treatment principle has effectively aided the developing nations or the least developed nations, or whether power politics has prevailed over the purpose itself.

1 The Law and Policy of the World Trade Organization.

2 P. Shuterland, ‘Beyond the Market, a Different Kind of Equity’, International Herald Tribune, 20 February 1997.

3 The Preamble, World Trade Organization.

Introduction International organizations like the UN (United Nations) have inherent power inequalities in their institutional structure. The permanent five members have a special veto power which is missing on the part of other member countries. Almost every international organization is flawed in power distribution, which is mostly based on the economic strength of the country, but WTO (World Trade Organization) is an exception here, at least in theory. WTO was created with the intent to equalize the level playing field for the participants of international trade, by eliminating discriminatory treatment4.

The predecessor of WTO, GATT 1994 has two main provisions; Most Favored Nation Treatment Obligation and National treatment, which plays a major role in regulating direct or indirect restrictions on access to free trade placed by any member state against any other member state by using any discriminatory measures. 5 The provisions entitling rights cannot suffice until there is a remedy for the breach of those rights. So only providing clauses of non-discrimination; MFN and National Treatment on paper or in theory, won’t erode the discrimination in effect. There must be a substantive remedy on the part of the victim. WTO provides a way for the member state to get remedy when a certain violation of WTO law is taken place by a member state.

The Dispute Settlement Body of WTO is a place where every member state is treated equally and thus, any member state can bring any claim against any measure developed by another member state if they believe that certain measure is directly or indirectly violating their rights provided by the WTO law. This paper would further discuss the US-Brazil Cotton case to analyze the substance of WTO’s dispute settlement mechanism. Research Question: The essay would address whether the Most Favored Nation Treatment/non-discrimination principle of WTO is substantial in aiding developing or least developed nations. Or Power politics would prevail over the objective of the WTO itself? Principles of Non- discrimination: The most Favoured Nation Treatment (MFN) clause and the National Treatment clause both are based on the principle of non-discrimination, which is a key concept of WTO law.

Article I and Article III of GATT 1994 provide the most favoured treatment and national treatment

4 Ibid 3.

5 GATT 1994.

respectively. The most favoured nation treatment clause basically obliges member states not to discriminate against any member state over another member state. 6 The national treatment clause obliges member states not to discriminate against any member state over itself or not to favour itself over any other member state. 7 Both clauses are applicable for cross-border trade and services. Analysis: MFN Treatment: How powerful is the MFN treatment clause? Article I of GATT 1994 and Article II of GATS 1995 provide that no like products and services shall be discriminated against based on origin or destiny, by giving any favourable or less favourable treatment. EC – Tariff Preferences (2004) has declared MFN to be one of the pillars of WTO law. 8 There is various set of questions to check whether the measure taken by any member state is violative of MFN treatment obligation or not.

In brief, the measure shall be covered by article 1 of GATT 1994 and it shall provide a specific advantage. Also, the measure at issue shall concern the like products and it shall be accorded immediately and unconditionally. 9 The MFN treatment looks all good and effective just by reading the text until it is known that there are some legitimate exceptions provided by the Article XX (General Exceptions) of GATT 1994. There are various open-ended exceptions provided under article XX which can be used to justify the measures inconsistent with the other GATT provisions,

here MFN treatment. The clause of general exceptions weakens the MFN clause directly as member states have the opportunity to take actions/measures and justify them with vague exceptions provided by Article XX. The vaguely defined exception already weakens the MFN obligation on member states which is combined with the broad interpretation which can be seen in the US – gasoline (1996) case. As is the case, various countries have taken advantage of Article XX of GATT to justify their violation of MFN treatment obligations.10 The ECJ has also declared that there would be no ‘direct effect’ of the MFN clause or overall GATT/WTO

6 Ibid.

7 Ibid 5.

8 DS 246: EC- Tariff Preferences 2004.

9 Peter Ven Den Bossche & Werner Zdouc, ‘The law and Policy of World Trade Organization’ (3rd ed,

Cambridge University Press). 10 Chad P. Bown, ‘Trade Policy under the GATT/WTO: Empirical Evidence of the Equal Treatment Rule.’, The Canadian Journal of Economics, vol. 37, no. 3, (2004): 678-720.

law. 11 Thus, the MFN treatment clause does not remain as its prima facie interpretation. Here, in theory, the clause is weakened by the general exceptions clause, which is indirectly used by countries to avoid MFN treatment obligations. Dispute Settlement Mechanism: What role does the verdict play in real? And Is Dispute Settlement Body really equal for all? This section of the essay will focus on the effectiveness of the dispute settlement process of the WTO by analyzing the US vs Brazil cotton case. The reason for choosing this case is: the parties involved, the United States, powerful economically and politically, and on the other hand countries of West Africa namely – Mali, Benin, and Burkina Faso, economically poor and politically weak countries, and Brazil.

This is the case where the WTO as a whole would be tested against its objectives, particularly the elimination of discrimination in international trade and commerce. The United States provided subsidies to its domestic cotton producers by way of direct payment, cyclical payments, export credit guarantee programs, and crop insurance payments. 12 These subsidies were so high they directly impacted the price of cotton in the international market and lowered it by 26%. 13 Almost $4 billion were given by the government to the US’s cotton farmers, through which the farmers of the mighty US wouldn’t have to compete with the farmers of other poor countries, whose government cannot afford such subsidies. 14 The farmers of West Africa (here Mali, Benin, and Burkina Faso) majorly depend on cotton export and it contributes a significant percentage to their GDP.

15 These countries are economically weak and thus, cannot provide any subsidy to their farmer population, which results in huge economic losses to those farmers who produce way cheaper cotton than the farmers of the US. Also, they can’t even afford to file a complaint in WTO as the US was violating the ‘Agreement on Agriculture by heavily subsidizing its farmers. Not only the African countries but even Brazil was affected by the scheme of subsidies of the US. But comparatively, Brazil is more economically and politically powerful than the countries of West Africa and thus, was able to lodge a complaint against the US in the WTO, where these countries joined as a third party in 11 Sven Simon. ‘No Direct Effect of Most-Favoured-Nation Clause. ’ European Journal of Risk Regulation, vol. 1, no. 4, (2010): 459-463.

12 DS 267: United States – Subsidies on Upland Cotton.

13 Jefffrey Walter. ‘Power in WTO Dispute Settlement.’ Journal of Third World Studies, vol. 28, no. 1 (2011): 169-183.

14 Ibid.

15 Ibid 13.

the case. The case on the first instance was a victory for the developing world. The panel held the US liable for the violation of WTO law. The US appealed. Even the appellate body uphold the verdict of the panel and declared the policies violative of WTO’s agreement on agriculture. The verdict of the panel and appellate body shall be binding, and the US was advised to comply with the agreement on agriculture. 16 The dispute Settlement Body (DSB) of the WTO cannot guarantee the victim party any remedy as in international law there is no one to place sanctions or no world government who would ensure the compliance of DSB’s recommendations. This is a major drawback of international law (WTO law is a part of international law) and here the ‘power’ (economic and political) prevails in almost every international dispute settlement mechanism.

No enforcement authority would directly reduce the effectiveness of the dispute settlement mechanism of the WTO in real. There are majorly two remedies for the victim provided by the dispute settlement mechanism: Compensation and Retaliation. Compensation if awarded is in the hand of the offender, whether to pay or not. If not, retaliation can be recommended by the DSB. But it would be logically unsound for the countries like Benin, Mali, and Burkina Faso to retaliate against the economic giant, the US. Even if they opt for the retaliation measures, there would be negligible or no impact on the US. But, if the US targets and retaliate against such small and weak countries, it would be disastrous for them. There is no world sovereign to regulate such matters. Therefore, in such cases, the weak always compromise with the strong.

Now, the other problem is with the claim that any member state can bring a complaint to WTO’s dispute settlement body. Here, we have seen that the West African states (Benin, Mali, and Burkina Faso) were the ones majorly affected by the measure employed by the US. Yet even collectively were not able to afford to file the complaint in the WTO’s DSB as filing the case of WTO law would demand a top-notch team of lawyers to fight against the mighty US, which would be employed for years and years till the case go on. This makes it very clear that, in theory, WTO’s dispute settlement mechanism is open and equal to all member states but in substance, there is indirect discrimination based on the economic capabilities of the member state. To solve this matter, an attempt was made by the WTO.

Advisory Centre on WTO Law (ACWL) was introduced who would assist least developed and developing countries in cases pertaining to WTO law. The lawyers of the ACWL advised the developing countries for free

16 DS 267: United States – Subsidies on Upland Cotton.

but when they represent the country, a fee is charged. 17 The main issue of ACWL was the lowgrade quality of service it provides. 18 Therefore, in reality, the dispute settlement mechanism isn’t equal for all, and it has an inherent system of indirect discrimination. It is equal for limited economically powerful states. Conclusion: To conclude the essay, the WTO is developed with a perfect intent or objectives which is really needed to be achieved in the constantly booming international trade and economic globalization. The Most Favoured Nation clause is the key concept of the WTO law as it is based on the principle of non-discrimination. In theory, the MFN clause seems to be very effective, and it would be in substance too if the DSB follow the norm of a limited and narrow interpretation of the ‘general exceptions’ clause provided by article XX of the GATT.

The real player would still be the DSB in the realization of the objectives intended. To increase the effectiveness of the dispute settlement mechanism, certain authority/ body needs to be developed with the balance of right to regulate/ respect of sovereign of the countries whose primary focus should be to look after the compliance or negotiation between the offender and victim. First of all, the cost of bringing the complaint to the WTO shall be minimized, providing interest-free loans for the cost of legal services shall be offered to least developed countries and developing countries based on certain criteria. Now, for the problem of implementation of recommendations certain measures like restricting or suspending the membership of the state along with an annual report of the cooperation while in dispute could be adopted which would directly impact the image of the country.

Collective sanction plays a major role in the international law regime, which forces the state to be reasonable in the international forum of any kind. Introducing collective sanctions as a customary norm, which would further develop into customary law, for the state who practices non-compliance. These measures could be proved effective for the compliance issue post the delivery of the verdict which would ultimately change and upgrade the scenario of direct or indirect discrimination in WTO law and WTO’s DSB. Thus, the principle of non-discrimination via- MFN Treatment and National 17 Jefffrey Walter. ‘Power in WTO Dispute Settlement. ’ Journal of Third World Studies, vol. 28, no. 1 (2011): 169-183. 18 Jefffrey Walter. ‘Power in WTO Dispute Settlement. ’ Journal of Third World Studies, vol. 28, no. 1 (2011): 169-183.

Treatment would be fulfilling one of the core objectives of developing the WTO, which would equalize the level playing field for developing and developed world.