Comprehension
Read the following Passage and answer the questions below :
The World Trade Organisation (WTO) was created in the early 1990s as a component of the Uruguay Round negotiation. However, it could have been negotiated as part of the Tokyo Round of the 1970's, since that negotiation was an attempt at a ‘constitutional reform’ of the General Agreement on Tariffs and Trade (GATT). Or it could have been put off to the future, as the US government wanted. What factors led to the creation of the WTO in the early 1990s? One factor was the pattern of multilateral bargaining that developed late in the Uruguay Round. Like all complex international agreements, the WTO was a product of a series of trade-offs between principal actors and groups. For the United States, which did not want a new organization, the dispute settlement part of the WTO package achieved its long-standing goal of a more effective and more legal dispute settlement system.
For the Europeans, who by the 1990s had come to view GATT dispute settlement less in political terms and more as a regime of legal obligations, the WTO package was acceptable as a means to discipline the resort to unilateral measures by the United States. Countries like Canada and other middle and smaller trading partners were attracted by the expansion of a rules based system and by the symbolic value of a trade organization, both of which inherently support the weak against the strong. The developing countries were attracted due to the provisions banning unilateral measures. Finally, and perhaps most important, many countries at the Uruguay Round came to put a higher priority on the export gains than on the import losses that the negotiation would produce, and they came to associate the WTO and a rules-based system with those gains. This reasoning replicated in many countries - was contained in U.S. Ambassador Kantor’s defense of the WTO, and it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.
A second factor in the creation of the WTO was pressure from lawyers and the legal process. The dispute settlement system of the WTO was seen as a victory of legalists over pragmatists but the matter went deeper than that. The GATT, and the WTO, are contract organizations based on rules, and it is inevitable that an organization created to further rules will in turn be influenced by the legal process. Robert Hudec has written of the ‘momentum of legal development’, but what is this precisely? Legal development can be defined as promotion of the technical legal values of consistency, clarity (or, certainty) and effectiveness; these are values that those responsible for administering any legal system will seek to maximize. As it played out in the WTO, consistency meant integrating under one roof the whole lot of separate agreements signed under GATT auspices; clarity meant removing ambiguities about the powers of contracting parties to make certain decisions or to undertake waivers; and effectiveness meant eliminating exceptions arising out of grandfather-rights and resolving defects in dispute settlement procedures and institutional provisions.
Concern for these values is inherent in any rules based system of co-operation, since without these values, rules would be meaningless in the first place. Rules, therefore, create their own incentive for fulfillment. The momentum of legal development has occurred in other institutions besides the GATT, most notably in the European Union (EU).
Over the past two decades, the European Court of Justice (ECJ) has consistently rendered decisions that have expanded incrementally the EU’s internal market, in which the doctrine of ‘mutual recognition’ handed down in the case Cassis de Dijon was a key turning point. The Court is now widely recognized as a major player in European integration, even though arguably such a strong role was not originally envisaged in the Treaty of Rome, which initiated the current European Union. One means the Court used to expand integration was the ‘teleological method of interpretation’ whereby the actions of member states were evaluated against ‘the accomplishment of the most elementary community goals set forth in the Preamble to the [Rome] treaty.
The teleological method represents an effort to keep current policies consistent with stated goals, and it is analogous to the effort in GATT to keep contracting party trade practices consistent with stated rules. In both cases legal concerns and procedures are an independent force for further co-operation. In large part, the WTO was an exercise in consolidation. In the context of a trade negotiation that created a near-revolutionary expansion of international trade rules, the formation of the WTO was a deeply conservative act needed to ensure that the benefits of the new rules would not be lost. The WTO was all about institutional structure and dispute settlement, these are the concerns of conservatives and not revolutionaries, which is why lawyers and legalists took the lead on these issues. The WTO codified the GATT institutional practice that had developed by custom over three decades, and it incorporated a new dispute settlement system that was necessary to keep both old and new rules from becoming a sham. Both the international structure and the dispute settlement system were necessary to preserve and enhance the integrity of the multilateral trade regime that had been built incrementally from the 1940s to the 1990s.
The World Trade Organisation (WTO) was created in the early 1990s as a component of the Uruguay Round negotiation. However, it could have been negotiated as part of the Tokyo Round of the 1970's, since that negotiation was an attempt at a ‘constitutional reform’ of the General Agreement on Tariffs and Trade (GATT). Or it could have been put off to the future, as the US government wanted. What factors led to the creation of the WTO in the early 1990s? One factor was the pattern of multilateral bargaining that developed late in the Uruguay Round. Like all complex international agreements, the WTO was a product of a series of trade-offs between principal actors and groups. For the United States, which did not want a new organization, the dispute settlement part of the WTO package achieved its long-standing goal of a more effective and more legal dispute settlement system.
For the Europeans, who by the 1990s had come to view GATT dispute settlement less in political terms and more as a regime of legal obligations, the WTO package was acceptable as a means to discipline the resort to unilateral measures by the United States. Countries like Canada and other middle and smaller trading partners were attracted by the expansion of a rules based system and by the symbolic value of a trade organization, both of which inherently support the weak against the strong. The developing countries were attracted due to the provisions banning unilateral measures. Finally, and perhaps most important, many countries at the Uruguay Round came to put a higher priority on the export gains than on the import losses that the negotiation would produce, and they came to associate the WTO and a rules-based system with those gains. This reasoning replicated in many countries - was contained in U.S. Ambassador Kantor’s defense of the WTO, and it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.
A second factor in the creation of the WTO was pressure from lawyers and the legal process. The dispute settlement system of the WTO was seen as a victory of legalists over pragmatists but the matter went deeper than that. The GATT, and the WTO, are contract organizations based on rules, and it is inevitable that an organization created to further rules will in turn be influenced by the legal process. Robert Hudec has written of the ‘momentum of legal development’, but what is this precisely? Legal development can be defined as promotion of the technical legal values of consistency, clarity (or, certainty) and effectiveness; these are values that those responsible for administering any legal system will seek to maximize. As it played out in the WTO, consistency meant integrating under one roof the whole lot of separate agreements signed under GATT auspices; clarity meant removing ambiguities about the powers of contracting parties to make certain decisions or to undertake waivers; and effectiveness meant eliminating exceptions arising out of grandfather-rights and resolving defects in dispute settlement procedures and institutional provisions.
Concern for these values is inherent in any rules based system of co-operation, since without these values, rules would be meaningless in the first place. Rules, therefore, create their own incentive for fulfillment. The momentum of legal development has occurred in other institutions besides the GATT, most notably in the European Union (EU).
Over the past two decades, the European Court of Justice (ECJ) has consistently rendered decisions that have expanded incrementally the EU’s internal market, in which the doctrine of ‘mutual recognition’ handed down in the case Cassis de Dijon was a key turning point. The Court is now widely recognized as a major player in European integration, even though arguably such a strong role was not originally envisaged in the Treaty of Rome, which initiated the current European Union. One means the Court used to expand integration was the ‘teleological method of interpretation’ whereby the actions of member states were evaluated against ‘the accomplishment of the most elementary community goals set forth in the Preamble to the [Rome] treaty.
The teleological method represents an effort to keep current policies consistent with stated goals, and it is analogous to the effort in GATT to keep contracting party trade practices consistent with stated rules. In both cases legal concerns and procedures are an independent force for further co-operation. In large part, the WTO was an exercise in consolidation. In the context of a trade negotiation that created a near-revolutionary expansion of international trade rules, the formation of the WTO was a deeply conservative act needed to ensure that the benefits of the new rules would not be lost. The WTO was all about institutional structure and dispute settlement, these are the concerns of conservatives and not revolutionaries, which is why lawyers and legalists took the lead on these issues. The WTO codified the GATT institutional practice that had developed by custom over three decades, and it incorporated a new dispute settlement system that was necessary to keep both old and new rules from becoming a sham. Both the international structure and the dispute settlement system were necessary to preserve and enhance the integrity of the multilateral trade regime that had been built incrementally from the 1940s to the 1990s.
Question: 1
What could be the closest reason why the WTO was not formed in the 1970s?
What could be the closest reason why the WTO was not formed in the 1970s?
Updated On: Aug 20, 2025
- The US government did not like it.
- Important players did not find it in their best interest to do so.
- Lawyers did not work for the dispute settlement system
- The Tokyo round negotiations was an attempt at constitutional reform
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The Correct Option is B
Solution and Explanation
Step 1 — Recall the historical context from the passage:
The passage mentions that the WTO could have been negotiated as part of the Tokyo Round in the 1970s, which was an attempt at “constitutional reform” of GATT. However, the organization was not created at that time.
Step 2 — Look at reasons why it was delayed:
It is clearly stated that the WTO could also have been put off to the future, as the U.S. government wanted. This means major powers (like the United States) were not willing to commit to forming a new organization in the 1970s.
Step 3 — Interpretation:
The creation of such an institution requires multilateral bargaining and acceptance by principal actors. In the 1970s, these actors — especially the U.S. — did not find it in their interest to establish a new body. Thus, the WTO was delayed until the 1990s, when a favorable balance of interests emerged during the Uruguay Round.
Step 4 — Conclusion:
The closest reason why the WTO was not formed in the 1970s is that important players did not find it in their best interest to do so.
Answer: (B) : Important players did not find it in their best interest to do so.
The passage mentions that the WTO could have been negotiated as part of the Tokyo Round in the 1970s, which was an attempt at “constitutional reform” of GATT. However, the organization was not created at that time.
Step 2 — Look at reasons why it was delayed:
It is clearly stated that the WTO could also have been put off to the future, as the U.S. government wanted. This means major powers (like the United States) were not willing to commit to forming a new organization in the 1970s.
Step 3 — Interpretation:
The creation of such an institution requires multilateral bargaining and acceptance by principal actors. In the 1970s, these actors — especially the U.S. — did not find it in their interest to establish a new body. Thus, the WTO was delayed until the 1990s, when a favorable balance of interests emerged during the Uruguay Round.
Step 4 — Conclusion:
The closest reason why the WTO was not formed in the 1970s is that important players did not find it in their best interest to do so.
Answer: (B) : Important players did not find it in their best interest to do so.
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Question: 2
The most likely reason for the acceptance of the WTO package by nations was that
The most likely reason for the acceptance of the WTO package by nations was that
Updated On: Aug 20, 2025
it had the means to prevent the US from taking unilateral measures.
- they recognized the need for a rule-based environment to protect the benefits of increased trade.
it settles disputes more legally and more effectively.
its rule-based system leads to export gains.
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The Correct Option is B
Solution and Explanation
Step 1 — Recall what the passage says about acceptance:
The passage explains that many countries came to put a higher priority on export gains than on import losses, and they began to associate the WTO and a rules-based system with securing those gains.
Step 2 — U.S. Ambassador’s defense:
It cites U.S. Ambassador Kantor’s defense of the WTO: international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.
Step 3 — Interpretation:
So the acceptance was less about political symbolism and more about ensuring that the benefits of liberalized trade would not be undermined. A rules-based system was needed to protect gains and discipline unilateral measures.
Step 4 — Conclusion:
The most likely reason for the acceptance of the WTO package was that nations recognized the need for a rules-based environment to protect the benefits of increased trade.
Answer: (B) : they recognized the need for a rule-based environment to protect the benefits of increased trade.
The passage explains that many countries came to put a higher priority on export gains than on import losses, and they began to associate the WTO and a rules-based system with securing those gains.
Step 2 — U.S. Ambassador’s defense:
It cites U.S. Ambassador Kantor’s defense of the WTO: international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.
Step 3 — Interpretation:
So the acceptance was less about political symbolism and more about ensuring that the benefits of liberalized trade would not be undermined. A rules-based system was needed to protect gains and discipline unilateral measures.
Step 4 — Conclusion:
The most likely reason for the acceptance of the WTO package was that nations recognized the need for a rules-based environment to protect the benefits of increased trade.
Answer: (B) : they recognized the need for a rule-based environment to protect the benefits of increased trade.
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Question: 3
According to the passage, WTO promoted the technical legal values partly through
According to the passage, WTO promoted the technical legal values partly through
Updated On: Aug 20, 2025
- integrating under one roof the agreements signed under GATT.
- rules that create their own incentive for fulfillment
- grandfather-rights exceptions and defects in dispute settlement procedures.
- grandfather-rights exceptions and defects in dispute settlement procedures.
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The Correct Option is A
Solution and Explanation
Step 1 — Recall the section on legal development:
The passage explains that the WTO was influenced by the “momentum of legal development,” which promoted the legal values of consistency, clarity, and effectiveness.
Step 2 — How consistency was promoted:
It says: “As it played out in the WTO, consistency meant integrating under one roof the whole lot of separate agreements signed under GATT auspices.”
Step 3 — Interpretation:
Thus, one way in which the WTO advanced these legal values was by consolidating and integrating all the separate agreements into a single coherent institutional framework.
Step 4 — Conclusion:
According to the passage, the WTO promoted technical legal values partly through integrating under one roof the agreements signed under GATT.
Answer: (A) : integrating under one roof the agreements signed under GATT.
The passage explains that the WTO was influenced by the “momentum of legal development,” which promoted the legal values of consistency, clarity, and effectiveness.
Step 2 — How consistency was promoted:
It says: “As it played out in the WTO, consistency meant integrating under one roof the whole lot of separate agreements signed under GATT auspices.”
Step 3 — Interpretation:
Thus, one way in which the WTO advanced these legal values was by consolidating and integrating all the separate agreements into a single coherent institutional framework.
Step 4 — Conclusion:
According to the passage, the WTO promoted technical legal values partly through integrating under one roof the agreements signed under GATT.
Answer: (A) : integrating under one roof the agreements signed under GATT.
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Question: 4
In the method of interpretation of the European Court of Justice
In the method of interpretation of the European Court of Justice
Updated On: Aug 20, 2025
- current policies needed to be consistent with stated goals
- contracting party trade practices needed to be consistent with stated rules.
- enunciation of the most elementary community goals needed to be emphasized.
- actions of member states needed to be evaluated against the stated community goals
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The Correct Option is D
Solution and Explanation
Step 1 — Recall what the passage says about the ECJ:
The passage highlights the teleological method of interpretation used by the European Court of Justice (ECJ).
Step 2 — What teleological method means:
It explains that the Court evaluated the actions of member states against “the accomplishment of the most elementary community goals set forth in the Preamble to the Rome Treaty.”
Step 3 — Interpretation:
This means that instead of narrowly interpreting rules, the ECJ judged whether national actions were consistent with the overarching community goals of integration stated in the Treaty.
Step 4 — Conclusion:
Thus, in the ECJ’s method, actions of member states needed to be evaluated against the stated community goals.
Answer: (D) : actions of member states needed to be evaluated against the stated community goals.
The passage highlights the teleological method of interpretation used by the European Court of Justice (ECJ).
Step 2 — What teleological method means:
It explains that the Court evaluated the actions of member states against “the accomplishment of the most elementary community goals set forth in the Preamble to the Rome Treaty.”
Step 3 — Interpretation:
This means that instead of narrowly interpreting rules, the ECJ judged whether national actions were consistent with the overarching community goals of integration stated in the Treaty.
Step 4 — Conclusion:
Thus, in the ECJ’s method, actions of member states needed to be evaluated against the stated community goals.
Answer: (D) : actions of member states needed to be evaluated against the stated community goals.
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Question: 5
In the statement ‘.... it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment’, ‘it’ refers to
In the statement ‘.... it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment’, ‘it’ refers to
Updated On: Aug 20, 2025
- Ambassador Kantor’s defence of the WTO
- the higher priority on export gains placed by many countries at the Uruguay Round
- the export gains many countries came to associate with a rule-based system
- the provision of a rule-based system by the WTO.
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The Correct Option is C
Solution and Explanation
Step 1 — Locate the sentence in the passage:
The statement appears after the discussion of why countries accepted the WTO: “Finally, and perhaps most important, many countries at the Uruguay Round came to put a higher priority on the export gains than on the import losses … This reasoning … was contained in U.S. Ambassador Kantor’s defense of the WTO, and it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.”
Step 2 — Identify what ‘this reasoning’ was:
The reasoning was that export gains were considered more important than import losses, and countries came to associate those export gains with a rule-based system like the WTO.
Step 3 — Interpretation:
Therefore, the pronoun ‘it’ in the statement refers to the export gains many countries came to associate with a rule-based system.
Step 4 — Conclusion:
‘It’ refers to the export gains many countries came to associate with a rule-based system.
Answer: (C) : the export gains many countries came to associate with a rule-based system.
The statement appears after the discussion of why countries accepted the WTO: “Finally, and perhaps most important, many countries at the Uruguay Round came to put a higher priority on the export gains than on the import losses … This reasoning … was contained in U.S. Ambassador Kantor’s defense of the WTO, and it amounted to a recognition that international trade and its benefits cannot be enjoyed unless trading nations accept the discipline of a negotiated rules-based environment.”
Step 2 — Identify what ‘this reasoning’ was:
The reasoning was that export gains were considered more important than import losses, and countries came to associate those export gains with a rule-based system like the WTO.
Step 3 — Interpretation:
Therefore, the pronoun ‘it’ in the statement refers to the export gains many countries came to associate with a rule-based system.
Step 4 — Conclusion:
‘It’ refers to the export gains many countries came to associate with a rule-based system.
Answer: (C) : the export gains many countries came to associate with a rule-based system.
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Question: 6
The importance of Cassis de Dijon is that it
The importance of Cassis de Dijon is that it
Updated On: Aug 20, 2025
- gave a new impetus to the momentum of legal development at the European Court of Justice.
- resulted in a decision that expanded incrementally the EU’s internal market
- strengthened the role of the Court more than envisaged in the Treaty of Rome.
- led to a doctrine that was a key turning point in European integration.
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The Correct Option is D
Solution and Explanation
Step 1 — Recall Cassis de Dijon from the passage:
The passage mentions that over two decades, the European Court of Justice (ECJ) expanded the EU’s internal market, and the doctrine of mutual recognition handed down in the case Cassis de Dijon was identified as a key turning point.
Step 2 — What the doctrine meant:
The doctrine of mutual recognition stated that if a product is lawfully produced and sold in one member state, it should be accepted in others. This greatly facilitated free trade and integration within the EU.
Step 3 — Interpretation:
Thus, the importance of Cassis de Dijon is that it established this doctrine of mutual recognition, which became a crucial milestone in European integration.
Step 4 — Conclusion:
The Cassis de Dijon case led to a doctrine that was a key turning point in European integration.
Answer: (D) : led to a doctrine that was a key turning point in European integration.
The passage mentions that over two decades, the European Court of Justice (ECJ) expanded the EU’s internal market, and the doctrine of mutual recognition handed down in the case Cassis de Dijon was identified as a key turning point.
Step 2 — What the doctrine meant:
The doctrine of mutual recognition stated that if a product is lawfully produced and sold in one member state, it should be accepted in others. This greatly facilitated free trade and integration within the EU.
Step 3 — Interpretation:
Thus, the importance of Cassis de Dijon is that it established this doctrine of mutual recognition, which became a crucial milestone in European integration.
Step 4 — Conclusion:
The Cassis de Dijon case led to a doctrine that was a key turning point in European integration.
Answer: (D) : led to a doctrine that was a key turning point in European integration.
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