INTRODUCTION TO THE“GATT THE“GATT” ”
GATT (General Agreement on Tariffs and Trade):
The General Agreement on Tariffs and Trade (GATT) was originally created by the Bretton WoodsConference as part of a larger plan for economic recovery after World War II. The GATT‘s main purpose was to reduce barriers to international trade. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements. The GATT was an agreement, not an organization. Originally, the GATT was supposed to become a full international organization like the World Bank or IMF called the International Trade Organization. However, the agreement was not ratified, so the GATT remained simply an agreement. The functions of the GATT have been replaced by the World Trade Organization. What is the purpose of GATT? According to the Preamble of GATT, the objectives of the contracting parties include,
• raising standards of living • ensuring full employment employment • thelarge and steadily growing volume of real income and effective demand • developing the full use of the resources of the world • expanding the production and exchange of goods.
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The Preamble also states the contracting parties‘ belief that ―reciprocal ―reciprocal and mutually advantageous arrangements directed to the substantial reduction in tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce‖ commerce‖ would contribute toward these goals. Importantly, ―free trade‖ is not the stated objective of GATT.
The role of GATT in integrating developing countries into an open multilateral trading system is also of major consequence. The increasing participation of developing countries in the GATT tradingsystem and the pragmatic support provided to them through the flexible application of certain rules helped developing countries to both expand and diversify their trade. It could now be said that a great number of these countries have already become full partners in the system as can bewitnessed by their active participation in the Uruguay Round. The task of helping to integrate further the least-developed countries is one of the challenges that lies ahead in the WTO. Similarly, the full integration of countries with economies in transition into the trading system must be achieved in order to strengthen economic interdependence as a basis for greater prosperity and world peace.
These negotiations were critical to ensure the future health of the world economy and the trading system. The globalization of the world economy over the past decade has created a greater reliance than ever on an open multilateral trading system. Free trade has become the backbone of economic prosperity and development throughout the world. Partly as a result of this, there has been a shift in trade policy mechanisms from border measures to internal policy measures, substantially affecting the management of trade relations.
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The Uruguay Round sought to establish a new balance in rights and obligations among trading nations as a result of this phenomenon. We are gradually moving towards a global marketplace, and for that, we need a global system of rules for trade relations among partners in that market place.
The challenges that we face are therefore enormous. The only way back from this globalization in theworld economy would be through depression and eventual chaos. We therefore have no choice but to move forward. In doing so, however, we must be sure to preserve to the highest extent possible the spirit and tradition of the GATT, which to a large extent was the key to its success.
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PRINCIPLES OF THE “GATT “GATT”&THE ”&THE “WTO” The ultimate aim of GATT is the establishment of a free multilateral trading system and liberalization of international trade through removal of discrimination in international trade and reduction in trade barriers.
For the achievement of this objective, GATT has adopted the following fundamental principles. These principles pri nciples forbid unfair trade practice and set a code co de of o f conduct for the participants.
The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games. Five principles are ar e of particular importance i mportance in understanding both the pre-1994 GATT and the WTO:
1. Non-discrimination:
It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. treatment policy. Both are embedded in the main GATT/WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a GATT/WTO member must apply the same conditions on all trade with other GATT/WTO members, i.e. a GATT member has to grant the most favorable conditions under which it allows trade in a certain product type to all other GATT/WTO members. National treatment means that imported goods should be treated no less favorably than domestically produced goods and was introduced to tackle non-tariff tackle non-tariff barriers to trade.
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2. Reciprocity:
It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to t o negotiate, it is necessary that th at the gain from f rom doing so be be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize.
3. Binding and enforceable enforceable commitments :
The tariff commitments made by GATT/WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the GATT/WTO dispute settlement procedures.
4. Transparency :
The GATT/WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the GATT/WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reportsthrough the Trade Policy Review Mechanism (TPRM).The GATT system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.
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5. Safety valves :
In specific circumstances, governments are able to restrict trade. trade. The GATT‘s GATT‘s agreements permit members to take measures to protect not only the environment but also public health, healt h, animal health and plant health. h ealth.
How do principles works in practice?
Despite high-sounding principles, the WTO Agreements contain an extensive range of measures that permit members at least to modify, and at times to escape, their obligations. A full explanation of how these work would require book-length treatment. Here we provide brief examples of o f some of o f the main mai n qualifications, qualifi cations, which indicate how a member memb er government can exercise a degree of sovereignty within the framework of rules prescribed by the agreements: agreemen ts: 1. Grandfathering pre-existing preferences: This means that if, at the time of signing the agreement, a country gives some trading partners preferential treatment it can continue to do so. 2. Regional trade agreements: Countries can be members of regional trade agreements, as well as the WTO even though there are different obligations. This represents a derogation of the MFN principle but is allowed allo wed under certain conditions. conditi ons. 3. Waivers: Waivers to obligations are permitted in certain exceptional circumstances. For instance, the United States received a waiver in the case of the Canada-United States Automotive Agreement.
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4. Non-application of national nati onal treatment: The national treatment principle does not apply to government procurement or to the provision of subsidies for domestic production. General Exceptions - General exceptions are permitted in cases where government measures, although restrictive of trade, are required for reasons of: public morals; human, animal, plant life and health; compliance with domestic regulations; trade in gold and silver; the products of prison labour; conservation of natural resources; protection of national treasures; and participation in international commodity agreements. 5. National Security: Actions can be taken to protect national security. 6. Food and human security: Temporary export prohibitions are permitted in the case of critical shortages of food and essentials. 7. Balance of payments: A country can take measures to alleviate a balance of payments problem. 8. Safeguards and countervailing duties: Allowance is made for safeguards against injury caused to domestic industries by sudden increases in imports of products. In addition, a country has the ability to address cases of dumping, and to provide countervailing duties against subsidies. 9. Concessions: A country has the ability to reduce or withdraw concessions offered. 10. Developing countries: Special conditions are provided for developing countries.
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OBJECTIVES OF THE “GATT “GATT”&THE ”&THE “WTO” There have been three basic objectives behind the establishment of the GATT.
1. It was to provide a framework for the conduct of trade relations. 2. It was to provide a framework for, and to promote, the progressive elimination of trade barriers. 3. It was to provide a set of rules that would prevent countries from taking unilateral action.
These objectives aimed to make the international trade free from all restrictions and to facilitate the expansion of international trade. Reductions in trade barriers and various rounds of negotiations have facilitated the expansion of trade. ‗Most Favoured Nations (MFN)‘ treatment under GATT has also facilitated the expansion of trade.
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THE GATT YEARS GATT: „provisional‟ for almost half a century:
From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade and presided over periods that saw some of the highest growth rates in international commerce. It seemed well-established, but throughout those 47 years, it was a provisional agreement and organization.
The original intention was to create a third institution to handle the trade side of international economic cooperation, joining the two ―Bretton Woods‖ institutions, the World Bank and the International Monetary Fund. Over 50 countries participated in negotiations to create an International Trade Organization (ITO) as a specialized agency of the United Nations. The aim was to create the ITO at a UN Conference on Trade and Employment in Havana, Cuba in 1947.
Meanwhile, 15 countries had begun talks in December 1945 to reduce and bind customs tariffs. With the Second World War only recently ended, they wanted to give an early boost to trade liberalization, and to begin to correct the legacy of protectionist measures which remained in place from the early 1930s.
This first round of negotiations resulted in a package of trade rules and 45,000 tariff concessions affecting $10 billion of trade, about one fifth of the world‘s total. The group had expanded to 23 by the time the deal was signed on 30 October 1947. The tariff concessions came into effect by 30 June 1948 through a ―Protocol of Provisional Application‖. And so the new General Agreement on Tariffs and Trade was born, with 23 founding members.
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The 23 were also part of the larger group negotiating the ITO Charter. One of the provisions of GATT says that they should accept some of the trade rules of the draft. This, they believed, should be done swiftly and ―provisionally‖ in order to protect the value of the tariff concessions they had negotiated. They spelt out how they envisaged the relationship between GATT and the ITO Charter, but they also allowed for the possibility that the ITO might not be created. They were right.
The Havana conference began on 21 November 1947, less than a month after GATT was signed. The ITO Charter was finally agreed in Havana in March 1948, but ratification in some national legislatures proved impossible. In 1950, the United States government announced that it would not seek Congressional ratification of the Havana Charter, and the ITO was effectively dead. So, the GATT became the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995.
For almost half a century, the GATT‘s basic legal basic legal principles remained much as they were in 1948. There were additions in the form of a section on development added in the 1960s and ― pluri-lateral‖ pluri-lateral‖ agreements (i.e. with voluntary membership) in the 1970s, and efforts to reduce tariffs further continued. Much of this was achieved through a series of multilateral negotiations known as ―trade rounds‖ — the biggest leaps forward in international trade liberalization have come through these rounds which were held under GATT‘s auspices.
In the early years, the GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the 10 | P a g e
system. The eighth, the Uruguay Round of 1986-94, was the last and most extensive of all. It led to the WTO and a new set of agreements.
The Tokyo Round: a first try to reform the system:
The Tokyo Round lasted from 1973 to 1979, with 102 countries participating. It continued GATT‘s efforts to progressively reduce tariffs. The results included an average one-third one-third cut in customs duties in the world‘s nine major industrial markets, bringing the average tariff on industrial products down to 4.7%. The tariff reductions, phased in over a period of eight ei ght years, involved in volved an element of ―harmonization‖ — the higher the tariff, the larger the cut, proportionally.
In other issues, the Tokyo Round had mixed results. It failed to come to grips with the fundamental problems affecting farm trade and also stopped short of providing a modified agreement on ―safeguards‖ (emer gency gency import measures). Nevertheless, a series of agreements on non-tariff barriers did emerge from the negotiations, in some cases interpreting existing GATT rules, in others breaking entirely new ground. In most cases, only a relatively small number of (mainly industrialized) GATT members subscribed to these agreements and arrangements. Because they were not accepted by the full GATT membership, they were often informally called ―codes‖.
They were not multilateral, but they were a beginning. Several codes were eventually amended in the Uruguay Round and turned into multilateral commitments accepted by all WTO members. Only four remained ―plurilateral‖ — those those on government procurement, bovine meat, civil aircraft ai rcraft and dairy produ cts. In 1997 WTO members agr eed to terminate the bovine meat and dairy agreements, leaving only two.
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SUCCESS & FAILURE OF THE “GATT “GATT” ” SUCCESS:
One of the important achievements of GATT was the establishment of a forum for continuing consultations. ―Disputes that might otherwise have caused continuing hard feeling, reprisals, and even diplomatic rupture, have been brought to the conference table and compromised‖. GATT could achieve considerable trade liberalization.
Over the 47 years GATT was successful in promoting and securing liberalization of world trade. Continued reductions in tariffs alone helped to achieve very high rates of world trade growth during the 1950‘s and 1960‘s – around around 8 percent a year on an average. The momentum of trade liberalization helped to ensure that trade growth consistently out paced production growth throughout the GATT era, a measure of countries increasing ability to trade with each other and to reap the benefits of trade.
The rush of new members during the Uraguay Round demonstrated that the multilateral trading system was recognized as an anchor for development and an instrument of economic and trade reform.
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FAILURE:
As time passed new problems arose. The Tokyo Round in the 1970s was an attempt to tackle some of these but its achievements were limited. This was a sign of difficult times to come.
GATT‘s success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased foreign competition. High rates of unemployment and constant factory closures led governments in Western Europe and North America to seek bilateral market-sharing arrangements with competitors competi tors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined GATT‘s credibility and effectiveness.
The problem was not just a deteriorating trade policy environment. By the early 1980s the General Agreement was clearly no longer as relevant to the realities of world trade as it had been in the 1940s. The expansion of services trade was also closely tied to further increases in world merchandise trade. In other respects, GATT had been found wanting. For instance, in agriculture, loopholes in the multilateral system were heavily exploited, and efforts at liberalizing agricultural trade met with little success. In the textiles and clothing sector, an exception to GATT‘s normal disciplines was negotiated in the 1960s and early 1970s, leading to the Multifibre the Multifibre Arrangement. Even Arrangement. Even GATT‘s institutional structure and its dispute settlement system were causing concern.These and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay the Uruguay Round, the Round, the Marrakesh Declaration, and the creation of the WTO.
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INTRODUCTION TO THE “WTO “WTO” ” The World Trade Organization ( WTO) is an organization that intends to supervise and liberalizeinternational trade. trade. The organization officially commenced on January 1, 1995 under the Marrakech the Marrakech Agreement, replacing Agreement, replacing the General the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations.
The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system. WTO's current Director-General is Pascal is Pascal Lamy, who Lamy, who leads a staff of over 600 people in Geneva, Switzerland.
The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTO‘s current work comes from the 1986– 94 94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the ‗Doha Development Agenda‘ launched in 2001.
Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to open markets for trade. But the WTO is not just about opening markets, and in some circumstances its rules support maintaining trade barriers — barriers — for for example, to protect consumers or prevent prev ent the spread of disease. diseas e. 14 | P a g e
At its heart are the WTO agreements, negotiated and signed by the bulk of the world‘s trading nations. These documents provide the legal ground rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although Alth ough negotiated and signed by b y governments, the goal is is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives.
The system‘s overriding purpose is to help trade flow as freely as possible — so so long as there are no undesirable side effects — because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have hav e to be ‗transparent‘ and predictable. pred ictable.
Trade relations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements.
What is the World Trade Organization?
The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. But there is more to it than that.
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Is it a bird, is it a plane?
There are a number of ways of looking at the WTO. It‘s an organization for liberalizing trade. It‘s a forum for governments to negotiate trade agreements. It‘s a place for them to settle trade disputes. It operates a system of trade rules.
It‟s a negotiating forum:
Essentially, the WTO is a place where member governments go, to try to sort out the trade problems they face with each other. The first step is to talk. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTO's current work comes from the 1986-94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the ―Doha Development Agenda‖ launched in 2001.
Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to liberalize trade. But the WTO is not just about liberalizing trade, and in some circumstances its rules support maintaining trade barriers — barriers — for for example to protect consumers or prevent the spread of disease.
It‟s a set of rules:
At its heart are the WTO agreements, negotiated and signed by the bulk of the world‘s trading nations. These documents provide the legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although Alth ough negotiated and signed by b y governments, the goal is is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. 16 | P a g e
The system‘s overriding purpose is to help trade flow as freely as possible — so so long as there are no undesirable side-effects — because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have hav e to be ―transparent‖ and predictable.
It helps to settle disputes:
This is a third important side to the WTO‘s work. Trade relations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement sett lement process written into the WTO agreements.
The organization is attempting to complete negotiations on the Doha Development Round, Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remains uncertain: The work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed. The further imposition of free trade on industrial goods industrial goods and services and services and the protectionism on farm subsidies to domestic agricultural sector requested from the developed countries, and countries, and the the substantiation of the international liberalization of fair fair trade on agricultural products from developing countries remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiation(s) beyond the Doha Development Round. As a result of this impasse, there has been an increasing amount of bilateral free bilateral free trade agreements.
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HISTORY 1947 October - 23 countries sign the General Agreement on Tariffs and Trade (Gatt) in
Geneva, Switzerland, to try to give an early boost to trade liberalisation. 1947 November - Delegates from 56 countries meet in Havana, Cuba, to start negotiating
the charter of a proposed International Trade Organisation. 1948 1 January - Gatt agreement comes into force. 1948 March - Charter of International Trade Organisation signed but US Congress rejects
it, leaving Gatt as the only international instrument governing world trade. Ann ecy, France, where countries co untries 1949 - Second Gatt round of trade talks held at Annecy, exchanged some 5,000 tariff concessions. Engl and, where countries exchanged some 1950 - Third Gatt round held in Torquay, England, 8,700 tariff concessions, cutting the 1948 tariff levels by 25%. 1955-56 - The next trade round completed in May 1956, resulting in $2.5bn in tariff
reductions. 1960-62 - Fifth Gatt round named in honour of US Under Secretary of State Douglas
Dillon who proposed the negotiations. It yielded tariff concessions worth $4.9bn of world trade and involved negotiations related to the creation of the European Economic Community. 1964-67 - The Kennedy Round, named in honour of the late US president, achieves tariff
cuts worth $40bn of world trade. 1973-79 - The seventh round, launched in Tokyo, Japan, sees Gatt reach agreement to
start reducing not only tariffs but trade barriers as well, such as subsidies and import licensing. Tariff reductions worth more than $300bn dollars achieved. 1986-93 - Gatt trade ministers launch the Uruguay Round in Punta Del Este, Uruguay,
embarking on the most ambitious and far-reaching trade round so far. The round extended 18 | P a g e
the range of trade negotiations, leading to major reductions in agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights. minist ers meet for the th e final time ti me under GATT auspices ausp ices at Marrakesh, Marrak esh, 1994 - Trade ministers Morocco to establish the World Trade Organization (WTO) and complete the Uruguay Round. 1995 - The World Trade Organization is created in Geneva. 1999 - At least 30,000 protesters disrupt WTO summit in Seattle, US; New Zealander
Mike Moore becomes WTO director-general. i n Doha, Qatar, agree on the Doha 2001 November - WTO members meeting in Development Agenda, the nineth trade round which is intended to open negotiations on opening markets to agricultural, manufactured goods, and services. 2002 August - WTO rules in favour of the EU in its row with Washington over tax breaks
for US exporters. The EU gets the go-ahead to impose $4bn in sanctions against the US, the highest damages ever awarded by the WTO. 2003 September - WTO announces deal aimed at giving developing countries access to
cheap medicines, hailing it as historic. Aid agencies express disappointment at the deal. 2004 August - Geneva talks achieve framework agreement on opening up global trade.
US and EU will reduce agricultural subsidies, while developing nations will cut tariffs on manufactured goods. 2005 September - Frenchman Pascal Lamy takes over as WTO director-general. He was
formerly the EU's trade commissioner. 2007 December - WTO clears way for Cape Verde's membership by approving a package
of agreements which spell out the terms ofit's accession. Cape Verde is expected to ratify the deal by June 2008.
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2008 July - Ministerial talks aimed at resuscitating the Doha Round of talks break down
on ninth day of meeting after the US and India fail to find a compromise on measures intended to help poor countries protect their farmers against import surges. 2009 March - WTO says global trade flows are set to shrink by 9% during 2009. Hardest
hit will be developed nations, where trade is set to fall 10%. Poorer countries will see exports fall by 2-3%. 2010 March - Pascal Lamy predicts that the worst of global trade recession is over and
WTO economists foresee 2010 world economic growth of 9.5%. 2010 December - The European Union expresses support for Russia's.
bid to join the th e WTO after Moscow agreed agre ed to cut timber t imber export tariffs and rail freight fees. Russia is the only major economy outside the WTO. China says it plans to appeal against a WTO ruling that the US was entitled to impose extra duties on Chinese tyre imports.. 2011 July - WTO upholds complaints by the US, European Union and Mexico that China
had broken global free trade rules by imposing quotas and taxes on exports of certain key materials, including minerals like bauxite, magnesium and zinc. China complains. 2011 December - Russia finally joins the WTO after 18 years negotiating its membership.
Switzerland brokered a deal to persuade Georgia to lift its veto, which it had imposed after the 2008 Russo-Georgian war. WTO agrees terms for Samoa and Montenegro to join in 2012. 2012 January - The WTO rejects China's appeal against a ruling that it broke free trade
rules by imposing quotas and taxes on exports of key materials.
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FUNCTIONS OF THE “WTO” Among the various functions of the WTO, these are regarded by analysts as the most important:
It oversees the implementation, administration and operation of the covered agreements.
It provides a forum for negotiations and for settling disputes.
Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.
The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. organiz ation.
Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.
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ORGANIZATIONAL STRUCTURE The General Council has the following subsidiary bodies which oversee committees in different areas:
Council for Trade in Goods
There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles. Council for Trade-Related Trade-Related Aspects of Intellectual Property Rights
Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTO's work with other international organizations in the field. Council for Trade in Services
The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required.
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Trade Negotiations Committee
The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTO's director-general. As of June 2012 the committee was tasked with the Doha the Doha Development Round.
The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments. The General council has several different committees, working groups, and working parties. There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on LeastDeveloped Countries); Countries); Regional Trade Agreements; Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer.
Decision-making The WTO describes itself as "a rules-based, member-driven organization — organization — all all decisions are made by the member governments, and the rules are the outcome of negotiations among members". The WTO Agreement foresees votes where consensus cannot be reached, but the practice of consensus dominates the process of decision-making.
Richard Harold Steinberg (2002) argues that although the WTO's consensus governance model provides law-based initial bargaining, trading rounds close through power-based bargaining favoring Europe favoring Europe and the U.S., and may not lead to Pareto to Pareto improvement.
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DISPUTE SETTLEMENT In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994. Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy". WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions. Bodies involved in the dispute settlement process, World Trade Organization.
The WTO Dispute Settlement Understanding Understanding (DSU):
Legal approach: rule orientation, or conciliation and negotiation:
According to lawyers, the dispute settlement serves the purpose of clarifying the interpretation of the rule, its scope, and appropriate exceptions. The issues then are whether the dispute settlement is oriented towards ―conciliation and negotiation‖ or more towards ―rule integrity‖, and more importantly importantly whether it should be oriented towards one or the other approach. This issue is related to the distinction between two techniques of modern diplomacy: a ―rule oriented‖ technique and a ―power oriented‖ technique. Under a ―rule oriented‖ technique, international disputes are settled with with reference to norms or rules to which both parties have previously agreed. The parties need to understand that an unsettled dispute would ultimately be resolved by impartial third-party judgments based on the rules. ru les. 24 | P a g e
Under a ―power oriented‖ technique dis putes putes are settled with wit h explicit or implicit impli cit reference to relative power status of the parties. Threats will be a major part of the technique employed.
The history of the dispute settlement under GATT does not give a clear answer to the question whether the the dispute settlement is oriented towards ―conciliation‖ or ―rule integrity‖. On the one hand, many specialists and diplomats see the GATT/WTO mainly as a negotiating forum. On the other hand, there are signs, such as for instance the shift from a ―working party‖ ―working party‖ to a ―panel‖ procedure that the practice evolved in the direction of ―rule integrity‖.
The appellate panel reports seem to strongly reinforce the ―rule orientation‖ of the system.
The procedure:
The Dispute Settlement Body (DSB), which comprises all WTO members, has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of the implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under WTO agreements. If a member considers that abenefit accruing to it directly or indirectly under the WTO agreements is being nullified or impaired, it must first request bilateral consultations. If consultations fail to settle the dispute, the complaining party may request the establishment of a panel, which must be created unless the DSB decides by consensus not to do so.
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A panel is generally composed of three panelists and its deliberations are confidential. Panels must conduct examinations within six months. Within 60 days of the date of circulation of a panel report to WTO members, the report must be adopted at a DSB meeting unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report. The Appellate Body, a standing tribunal created in the Uruguay Round, considers any appeals. The tribunal consists of seven members, of whom three serve on any given case. Appellate Bodyproceedings are not to exceed 60 days and are confidential. When a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it must recommend that the member concerned bring its measures into conformity with the WTO agreement. The last recourse for countries in enforcing compliance with DSB recommendations and rulings is the suspension of concessions.
Developing countries and the DSU:
A number of provisions in the DSU relate to developing countries. Most of those however have proved to be more declarative than operative. More generally, it has been argued that it is a waste of time and money for developing countries to invoke the WTO‘s dispute settlement settlement procedure against industrial countries. Even if, the argument runs, a developing country obtains a clear legal ruling that an industrial country has violated its legal obligations; the developing country has no effective way to enforce the ruling. The only enforcement sanction provided by the WTO dispute settlement procedure is trade retaliation — retaliation — the the imposition of discriminatory trade sanctions by the complaining country against the trade of the defendant country. And trade retaliation bysmaller developing countries, it is argued, simply doesnot inflict any significant harm on larger industrial countries.
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In the end, the argument concludes, retaliation will harm the developing country imposing it far more than it will harm the industrial country it is supposed to punish. On the contrary, industrial countries are in a better position both because they can afford to take countermeasures and because they can incur the costs of action being taken against them. While there is no doubt that the procedure is onesided, this does not necessarily mean that legal complaints by developing countries – countries – that that is legal complaints without the retaliation option – option – cannot be a useful and effective policy tool. Hudec (2002) for instance, argues that the enforcement of international obligations cannot be explained by superficial analysis of dispute settlement procedures and remedies.
According to him, the compliance decisions of governments are determined more by calculated self-interest than by force. In his view, three factors influence the decision of governments to comply or not. First, in principle, at least some of the political constituencies in the defendant country are likely to consider that the measures imposed by compliance are good policy. Second, some interest groups in the defendant country should perceive a value in the legal system itself. Third, the influence of active pressure by other governments should sh ould not be underestimated. underestimat ed.
Hudec‘s two main conclusions conclusions are thus that a legal ruling without retaliation can still be an effective policy tool for a developing country seeking to reverse a legal violation by a larger country and that developing countries should not expect too much from a more effective retaliation mechanism, which would not bring about a decisive change in the political fundamentals of WTO enforcement.
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Participation Participation in the dispute settlement mechanism:
After a few years of operation under the DSU, there seems to be widespread opinion that the WTO Dispute Settlement procedures are quite successful. The number of cases brought to the WTO dispute settlement settlemen t system per annum is significantly signif icantly higher than the number of disputes brought to the GATT. In the post-Tokyo Round period (1980-94) an average of 5 disputes were initiated every year. This compares to an average number of disputes per year of more than 36 in the period 1995 to 2002. A cursory look at which countries have been involved in the dispute settlement procedure as either complainant or respondent shows that developed countries have been much more involved than developing countries. This should notcome as a surprise if one admits that the number of disputes should be proportional proportional to Members‘ share of world trade. The share of developed countries in world trade is still much larger than the share of developing countries.
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ACCESSION & MEMBERSHIP The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and current trade regime. The process takes about five years, on average, but it can last more if the country is less than fully committed to the process or if political issues interfere.
The shortest accession negotiation was that of the Kyrgyz the Kyrgyz Republic, while Republic, while the longest was that of Russia, Russia, which, having first applied to join GATT in 1993, was approved for membership in December 2011 and became a WTO member on August 22, 2012.
The second longest was that of Vanuatu, whose Working Party on the Accession of Vanuatu was established on 11 July 1995. After a final meeting of the Working Party in October 2001, Vanuatu requested more time to consider its accession terms.
In 2008, it indicated its interest to resume and conclude its WTO accession. The Working Party on the Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss Vanuatu‘s future WTO membership. The re-convened re-convened Working Party completed its mandate on 2 May 2011. The General Council formally approved the Accession Package of Vanuatu on 26 October 2011.
On 24 August 2012, the WTO welcomed Vanuatu as its 157th member. An offer of accession is only given once consensus is reached among interested parties.
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ACCESSION PROCESS A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members.
After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant's international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules.
The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member's commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally.
When the bilateral talks conclude, the working party sends to the general council or ministerial conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be's commitments. Once the general council or ministerial conference approves of the terms of accession, the applicant's parliament must ratify the Protocol of Accession before it can become a member.
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MEMBERS & OBSERVERS
The WTO has 157 members and 27 observer governments governments..[58] In addition to states, the European Union is a member. WTO members do not have to be full sovereign nationmembers. Instead, they must be a customs territory with full autonomy in the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a GATT contracting party, and the Republic the Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei) Taipei) despite its disputed status. status. The WTO Secretariat omits the official titles (such as Counselor, First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the Permanent Representative and the Deputy Permanent Representative.
Iran is the biggest economy outside the WTO. With the exception of the Holy See, observers must start accession negotiations within five years of becoming observers. A number of international intergovernmental organizations have also been granted observer status to WTO bodies. 14 states and two territories so far have no official interaction with the WTO.
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DIFFERENCE BETWEEN THE GATT &THE WTO Is the WTO the same as the GATT?
The short answer is no. The WTO is the GATT plus a lot more, but before we describe the WTO since 1995, it is useful to summarize what happened between 1947 and the start of negotiations in 1986 leading to the WTO. There have been eight rounds of trade negotiations since 1947. The first five rounds were of relatively short duration and dealt mainly with tariff reductions. The sixth, the Kennedy Round (1963-67), achieved deeper and wider tariff cuts, especially in industrial tariffs, and brought developing country concerns to the fore. The seventh, the Tokyo Round, which lasted six years (1973 - 1979), cut tariffs substantially but also introduced a series of codes on non-tariff barriers (NTBs). These codes were only binding on the countries that signed them and were criticized by some as being ―GATT àà-la carte.‖
The WTO was the result of the eighth round of negotiations, known as the Uruguay Round (1986-93). It was named for the country, which held the conference (at Punta del Este) leading to the decision to proceed. By the 1980s, a number of problems with the world trading system needed to be addressed: certain areas such as agriculture were exempt from GATT rules or were managed under separate agreements such as textiles; trade in services and intellectual property were largely outside the agreement; NTBs and new forms of protectionismwere proliferating; and membership had grown toover 90 countries requiring the organization to bereformed. The Uruguay Round was a complex set of negotiations undertaken to address the prevailing inadequacies of the GATT. The negotiations almost floundered on several occasions. 32 | P a g e
The GATT Secretariat prepared an ambitious draft text in December 1991, but only after a breakthrough on agricultural issues between the United States and the European Community did a final agreement emerge in December 1993. In April 1994, in Marrakesh, representatives of 111 GATT member countries signed the Final Act incorporating the agreements. The Final Act was about one page long; the main text including the agreements and annexes about 430 pages long; and there were about 25,000 pages containing the schedules of commitments made by each member country. countr y. The Final Act took effect in January 1995 when the WTO was launched. The WTO club now has more members (148 at the time of writing), has rules covering more activities, and has a more effective means to resolve disputes between the members. The main differences between the GATT and the WTO are described by the WTO as follows: 1.
The GATT was provisional. Its contracting parties never ratified the General Agreement, and it contained no provisions for the creation of an organization.
2. The WTO and its agreements are permanent. As an international organization, the WTO has a sound legal basis because all members have ratified the WTO Agreements, and the agreements themselves describe how the WTO is to function. 3. The WTO has ―members.‖ GATT had ―contracting parties,‖ underscoring the fact that officially the GATT was a legal text. 4. The GATT dealt with trade in goods. The WTO deals with trade in services and intellectual property as well. 5. The WTO dispute settlement system is faster and more automatic than the old GATT system. Its rulings cannot be blocked. 6. The WTO has introduced a trade policy review mechanism that increases the transparency of members‘ trade policies and practices.
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THE WTO SECRETARIAT AND BUDGET
A Secretariat of about 500 persons headed by a Director General provides technical support for thevarious councils, committees and conferences as well as technical assistance to developing countries. It also analyzes world trade and explains the workings of the WTO to the public and the media. The Secretariat provides some forms of legal assistance in the dispute settlement process and advises governments applying to become members of the WTO.
In order to interact with this process, which is observed by analysts to be increasingly legalistic especially in terms of handling disputes, membercountries need to have representatives in Geneva as well as persons at home in their trade or foreign ministry that can deal with the issues. This is an increasing burden on smaller and especially developing countries. Effectively it means that some member countries may be disadvantaged relative to others.
The annual budget of the WTO Secretariat is around 160 million Swiss francs (US$135 million). This comes from individual contributions from the members calculated on the basis of their share of global glo bal trade.
The largest single contributor is the United States, atabout US$21.5 million per year, though the EU countries together contribute nearly US$57 million. The WTO budget also supports the International Trade Centre, a capacity-building organization jointlysupported by the WTO and the United Nations Conference on Trade and Development, and members make special contributions for technical assistance. 34 | P a g e
HOW DO WTO RULES AFFECT OUR LIVES?
Since its creation in 1995, the WTO has become a major influence in the lives of the world‘s citizens. Using both the fundamental rules of most WTO-enforced agreements combined with WTO enforcement mechanisms; the major power blocks and their big business sectors are forcing many countries to weaken their regulatory frameworks in several important areas. Economic insecurity:
The WTO was not designed to produce jobs. It has rules and regulations that limit a government‘s gov ernment‘s ability to create jobs. For example, look at the WTO‘s Trade Related Investment Measures (TRIMS). Under these measures, governments cannot require a transnational corporation to meet job creation targets. Governments cannot demand that the transnational‘s transnational‘s balance balance their imports with exports to maintain a level of job security. For the most part, WTO rules favour the interests of foreign-based corporations over domestic companies. While transnational corporations certainly create jobs, they are not the major source of employment. The largest 200 corporations in the world have more economic clout than 4/5th of humanity; yet employ a tiny percentage of all workers. The gap between the rich and poor is staggering. According to the 2000 United Nation‘s Nation‘s Development Report, there is a difference of 150 to 1 between the income levels of the top 20 per cent and bottom 20 percent of the world‘s world‘s population. That represents a doubling in the last 30 years. The 225 richest people in the world now have a combined wealth equal to the annual income of half of the world‘s population. The three richest people have more assets than the combined gross domestic product of 48 countries.
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By promoting free trade rather than fair trade, the WTO rules contribute to these gross economicdifferences. The prices paid to most Third Worldcountries for their exports have declined steadily over the past 10 years. But the cost of imports to these countries has gone up considerably. Industrialized countries too have not lived up to their commitments to open markets for exports from the Third World. About $100 billion USD are lost every year by goods exporting countries in the South because they cannot get access to markets in the North. If global trade is going to increase economic security, then a fair trade agenda must replace the WTO rules. Political insecurity:
Why do governments often seem powerless in the faceof globalization? Why do people feel they have little or not control over their economic , social, or ecological future? A big part of the reason lies in the WTO and its trade rules. The WTO is much more than a global trade body. It makes the rules that control the global economy. The WTO rules amount to a bill of rights and freedomsfor transnational corporations.Under these rules, governments must provide a safe haven for transnational investment and trade in their countries. Through the WTO, transnational corporations are given virtually free reign to operate within the trade organization‘s 148 member countries. Equipped with WTO power tools like ―National Treatment‖ rules and ―Most Favoured Nation‖ status, these corporations can move their operations from one country or region to another. They can take advantage of more profitable investment opportunities, without being restricted by government intervention or regulation. What‘s more, the WTO‘s mechanism for settlingdisputes gives the organization organization incredible power to enforce trade rules. The WTO can strike down laws,policies and programs of democratically democratical ly electedlegislatures — electedlegislatures — including including economic, healt, social and 36 | P a g e
environmental laws. All it takes is a panel ofunelected trade experts to say that a country is violating the WTO trade rules.If a country refuses tochange its laws, it could face economic penalties thatget bigger and bigger. No other global institution hassuch powers. The WTO is a serious threat to thepolitical security of citizens and governments indemocratic societies. If we want global trade to provide conditions for political security through democratic control, then a fair trade agenda must replace the WTO rules. Social insecurity:
Why is our social security rapidly disappearing through the privatization of basic public services and social rights? A major reason liesin the GATS rules of the WTO. The General Agreement on Trade in Services (GATS) gives transnational corporations the power tools toopen up markets. These tools are largely aimed at deregulating and privatizing public services.The GATS rules apply to all the ways of supplying and delivering services. This includes foreign investment, crossborderdelivery, electronic commerce and international travel. The GATS rules include a set of legal limits on what governments can do to restrict the private sector. No other trade regime has reached so far into the policy jurisdiction of governments. Negotiations are now taking place at the WTO to expand the GATS to include public services like health care, education, social assistance, transportation, postal, drinking water and a variety of municipal services. Trade-in-services is the fastest growing sector of the global economy. No wonder, there is a lot of money to be made in privatizing public services. Health care is already a $3.5 trillion annual market worldwide.Education is pegged at $2 trillion and water at $1trillion. The CEO of the world‘s largest for -profit -profit hospitalcorporation (Columbia/ HCA) insists that health care is no different than the airline or ball bearing industry.
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He vows to destroy every public hospital in North America. Investment houses like Merill Lynch predict that public education will be privatized the world over during the next decade. Water service corporations like Vivendi and Suez of France are moving aggressively to privatize water in the U.S. and Canada. At the same time, they are working hand-in-glove with the World Bank to force developing states to do the same. This is nothing new for most peoples in the Third World. There the ―str uctural uctural adjustment pr ograms‖ ograms‖ of the IMF and World Bank have already stripped the poor majority of their basic social rights. The GATS will simply simpl y reinforce the effects of these programs. pro grams. If global trade is going to provide conditions for strengthening peoples‘ social security, then a fair trade agenda must replace the GATS rules on public services. Ecological insecurity:
Why are so many people feeling anxious about their ecological future? Why do climate change, global warming and the fear that not enough is being done to ensure the survival of the planet trouble people? Part of the reason lies in the WTO and its trade rules. The WTO rules do not protect the environment. Under Article XX of the General Agreement on Trade and Tariffs (GATT), member countries can adopt laws ―necessary ―necessary to protect human, animal or plant life li fe or health. relating to the conservation con servation of exhaustible exh austible natural resources...‖ But resources...‖ But the WTO rules also make it clear that environmental protections cannot be applied in a way that discriminates against transnational corporations. Nor can governments legislateenvironmental regulations that the WTO says are a disguised barrier to trade. In disputes brought before the WTO, business rights have been consistently upheld over environmentalrights.Also the WTO rules trump all internationalenvironment standards in favour of the global economy. For example, the WTO rules do not recognize then authority of the Multilateral Agreements on the Environment. They also threaten to undercut agreements such as the 38 | P a g e
International Convention on Endangered Species of Fauna and Flora. The WTO rules are also a threat to the Earth‘s biodiversity. Under the WTO rules on Trade Related Intellectual Property Rights, transnational corporations can claim ownership by taking out patents. Now pharmaceutical and agrochemical corporations want to revise these rules at the WTO. They want to allow the patenting of life forms, including inclu ding medicinal plants. Peace insecurity:
Why did the global arms race continue after the collapse of the Berlin Wall and the end of the Cold War in 1989? One of the reasons is that the WTO encourages militarism and the arms race. According to the WTO, it looks like governments have one legitimate role. That role is to provide a military infrastructure to protect their countries and a police force to ensure civil order. The only areas of government activity not covered by WTO trade rules are military operations and police enforcement. The right of individual governments to control these areas is provided under under the WTO‘s soso-called ―security exception‖ clause (Article XXI of the General Agreement on Trade and Tariffs). The security exception clause gives governments the freedom to take any actions deemed necessary to protect their national security interests. These These includeactions ―relating to the traffic in arms, ammunitionand implements of war and such traffic in other goodsand materials as is carried on directly for the purposeof supplying a military establishment [or] taken intime of war or other emergency in internationalrelations.‖ Under the protection of this WTO clause, massive government subsidies fuel the arms industry and military build-up in Third World countries. In the U.S., much of the annual $309 billion military budget subsidizes corporate players like Lockheed Martin, Boeing, BAe Systems, Raytheon, Thomson-CSF, and Daimler-Chrysler. These corporations form the backbone of the military-industrial complex. 39 | P a g e
If we want global trade to establish conditions for peace security, then a fair trade agenda must replace the WTO rules.
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ARTICLE
“GATT TURNS 60”
Sixty years ago this week (April 10, 1947) at the Palais des Nations in Geneva, Switzerland, representatives from 23 nations opened a conference that attracted little attention at the time, but had far-reaching consequences for the world economy. The conferees met to negotiate tariff reductions and finalize the text of a General Agreement on Tariffs and Trade (GATT). They sought to create an open world trading system, one in which trade would flow relatively freely between countries with the understanding that new trade barriers would not be erected to impede this flow. In the 60 years since then, world trade and prosperity have flourished to a degree well beyond the hopes of the founders founder s of the GATT, a result that t hat can be attributed attribu ted in part to their sage actions half a century ago. The origins of the GATT can be found in the economic disaster of the interwar period. After World War I, the United States turned its back on the League of Nations and international economic cooperation. World leaders failed to put the world trade and payments system, s ystem, which had been severely disrupted by the war, on a functional funct ional basis after the war. On top of this came the Great Depression, and with it a dramatic contraction of world trade. The U.S. imposed the protectionist Smoot-Hawley tariff in 1930. Two years later, Britain abandoned its traditional free trade policy by imposing a General Tariff and signing the Ottawa agreements with its former colonies, creating a preferential trading bloc that discriminated against nonmembers. Germany strong-armed countries in southeastern Europe into special bilateral trading arrangements with the Reich. Japan created the Greater East Asian Co-Prosperity Sphere to siphon off Asian trade 41 | P a g e
for its own benefit. Although the world economy recovered slowly from the depression, the spread of high tariffs, import quotas, discriminatory practices and foreign exchange restrictions meant that world trade remained stagnant and compartmentalized throughout the 1930s. The tragic economic and political consequences of that "low dishonest decade" spurred some officials to think about a new economic framework. Marked by the bitter experience after World War I, Cordell Hull -- FDR's Secretary of State -- came to believe that "unhampered trade dovetail[s] with peace; high tariffs, trade barriers and unfair economic competition, with war." As he declared, "I will never falter in my belief that enduring peace and the welfare of nations are indissolubly connected with friendliness, fairness, equality and the maximum practicable degree of freedom in international trade." Due to Hull's guidance and persistence, Congress enacted the Reciprocal Trade Agreements Act of 1934, which gave the executive branch the authority to undertake bilateral negotiations to reduce tariffs. Although the trade agreements negotiated during the 1930s had a limited effect, it marked a significant departure from the old non-negotiable high tariffs enacted by Congress, and set the stage for a new era in U.S. trade policy. World War II provided the opportunity for Anglo-American cooperation on postwar commercial policy. While the Americans envisioned expanding the bilateral approach it had taken in the 1930s, the British advocated a much more ambitious multilateral approach. In 1942, James Meade, then a U.K. civil servant and later a professor and Nobel laureate in economics, drafted a plan for an International Commercial Union, the trade counterpart to John Maynard Keynes's proposal for an International Clearing Union for postwar finance. After the War Cabinet endorsed Meade's plan, British and
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American officials began informal discussions about the shape of the postwar trading system. These informal meetings eventually led to the 1947 GATT conference in Geneva. The U.S. and Britain, along with other countries, exchanged tariff reductions and finalized the provisions of the GATT. Although the Anglo-American delegates agreed on the overriding objective of freeing trade, the negotiations were difficult and required many compromises. The U.S. insisted that the most-favored nation (MFN) clause -- ensuring nondiscrimination in trade -- be the Article I cornerstone of the GATT because it wanted to prevent the spread of Imperial preferences that discriminated against its exports. Fearful of its postwar financial situation, Britain demanded large American tariff cuts in exchange for a reduction in preferences and wanted the freedom to impose quantitative restrictions on imports in case of balance of payments difficulties, something that became Article XII of the GATT. Initially, the tariff reductions negotiated in Geneva had a limited impact on international trade because wartime exchange controls and quantitative restrictions remained in place. However, as these controls were phased out during the 1950s, the lower tariffs allowed world trade to grow rapidly. The expansion of world trade promoted the rapid economic recovery of Europe and Japan. In turn, the spread of economic growth allowed democracy to become firmly established in a way that had failed dismally during the interwar period. By the 1960s, the flourishing world economy gave the GATT participants the confidence to build on this early success and reduce tariffs and non-tariff barriers even more. Thus followed the Kennedy Round in the 1960s, the Tokyo Round in the 1970s,
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and the Uruguay Round in the late 1980s and early 1990s, each of which chipped away at the protectionist walls blocking world trade. In 1995, the World Trade Organization (WTO) was established in recognition of the fact that world trade rules had been extended to services, intellectual property and other new areas of trade. Over its 60-year history, the GATT has had many shortcomings. Agricultural trade has largely eluded liberalization. The current spread of preferential trade arrangements, in the form of bilateral and regional so-called free trade agreements, have reintroduced discriminatory trade practices in a way that weakens the multilateral system built on the MFN clause. The GATT has also gone through many difficult phases. The world economy went through a particularly dangerous period in the late 1970s and early 1980s, when sluggish growth and painful structural adjustments led many countries to ignore the GATT rules altogether. Trade barriers in the form of voluntary export restraints and orderly marketing arrangements proliferated, restricting trade in sectors such as automobiles, steel and textiles. In this environment, the prospect for new trade negotiations seemed so dismal that some suggested "the GATT is dead." Despite these shortcomings and difficulties, the GATT framework has survived as a durable code of conduct for commercial policy and dispute resolution. Tariffs have been ratcheted down, the penchant for voluntary trade trad e restrictions restrictio ns has been put to rest, and potential trade wars have been peacefully defused. The relevance of the GATT is reflected in the WTO's ever-growing membership, now up to 150 countries. The prosperity of the world economy over the past half century owes a great deal to the growth of world trade which, in turn, is partly the result of farsighted officials who created the GATT. They established a set of procedures giving stability to the trade-
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policy environment and thereby facilitating the rapid growth of world trade. With the long run in view, the original GATT conferees helped put the world economy on a sound foundation and thereby improved the livelihood of hundreds of millions of people around the world. The task for statesmen today is to look beyond short-term political considerations, arising from the complaints of special interests that fear market competition and the parsing of subsidies, and bring brin g the ongoing Doha Doh a Round to a successful s uccessful conclusion. If immediate steps cannot be taken to liberalize trade, then the phasing in of reforms and the phasing out of subsidies over many years is perfectly consistent with the long-term objectives of the GATT. We should remind ourselves how much poorer the world would be today without the politically courageous decisions made by visionary diplomats meeting in Geneva 60 years ago this month. Even as the World Bank and International Monetary Fund struggle to rethink their role in the modern world economy, the role of the GATT and WTO is secure. The postwar expansion of world trade fostered by the GATT has made a lasting contribution to world prosperity and, as Cordell Cordel l Hull suggested, to world peace as well. well .
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CONCLUSION The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating international trade. According to its preamble, its purpose is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the UN the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1948 and lasted until 1993, when it was replaced by the the World Trade Organization in 1995. The original GATT text (GATT 1958) is still in effect under the WTO framework, subject to the modifications of GATT 1994.
The World Trade Organization (WTO) is an organization that intends to supervise and liberalizeinternational trade. trade. The organization officially commenced on January 1, 1995 under the Marrakech the Marrakech Agreement, replacing Agreement, replacing the General the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986 – 1994).
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BIBLIOGRAPHY ARTICLES: 1. Douglas Irwin, an Irwin, an economics professor at Dartmouth, is author of "Free Trade Under Fire" (Princeton, 2005).Monday, April 9, 2007
WEBSITES: 1. www.google.com 2. www.gatt.org 3. www.wto.org
REFRENCES: 1.
World Trade Organization: WTO Organization: WTO legal texts; General texts; General Agreement on Tariffs and Trade 1994
2.
a)The GATT years: from Havana to Marrakesh, Marrakesh, World Trade Organization b)Timeline: b)Timeline: World Trade Organization – Organization – A A chronology of key events, BBC events, BBC News c)Brakman-Garretsen-Marrewijk-Witteloostuijn, Nations and Firms in the Global Economy, Chapter 10: Trade and Capital Restriction
3.
http://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm
4.
http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
5.
http://www.wto.org/english/thewto_e/acc_e/a1_syrian_arab_republic_e.htm
6.
http://www.wto.org/english/news_e/news10_e/gc_04may10_e.htm
7. What is the WTO? (Official WTO site)
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