strategy

Regulating world trade

Synonyms:
Administering agreements on international trade
Monitoring world trading practices
Negotiating multilateral trade rules
Strengthening world trading arrangements
Context:
This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities.

The [General Agreement on Tariffs and Trade] (GATT) was signed in 1947 by 23 countries and came into force 1 January 1948. At the time of GATT's creation, the average tariff on manufactured products was 40%. The General Agreement, based largely on selected parts of the draft International Trade Organization (ITO) charter, was concluded in order to get trade liberalization under way quickly, and was provided with only minimum institutional arrangements because it was expected that responsibility for it would soon be assumed by ITO. However, plans for ITO were abandoned when it became clear that its charter would not be ratified, and GATT was left as the only international instrument laying down trade rules accepted by nations responsible for most of the world's trade. In 1965, a new Part IV, on trade and development, was added to the text of the GATT. As part of its services to developing countries, GATT set up, in May 1964, the International Trade Centre which since 1968 has been jointly operated by GATT and through the UN.

Most of the GATT's early trade rounds were devoted to continuing the process of reducing tariffs. The result of the [Kennedy Round] in the mid-sixties, however, included a new [GATT Anti-Dumping Agreement]. The [Tokyo Round] during the seventies was a more sweeping attempt to extend and improve the system, with mixed results. The credibility and effectiveness of GATT was challenged among others by government "subsidies races and loopholing" of the multilateral system, particularly in the agricultural sector, and the fact that the globalization of the world economy was underway and world trade had become far more complex and important than it had been in the 1940s. These and other factors led to efforts to reinforce and extend the multilateral trading system, resulting in the [Uruguay Round] of negotiations whose seeds were sown in 1982 and which lasted until 15 December 1993 for every trade issue to be finally resolved. On 15 April 1994, most of the Ministers from the 125 participating governments gave their political backing to the [Uruguay Round] negotiations by signing the Final Act at a meeting in Marrakesh, Morocco.

At the GATT Annual Meeting in December 1994, the [Uruguay Round] was agreed. A new World Trade Organization (WTO) was established 1 January 1995, and succeeds the current GATT (1994), implements all the results of the [Uruguay Round] negotiations, and comes into force via the [Marrakech Agreement] of 15 April 1994. The WTO not only has a potentially larger membership than GATT (128 by the end of 1994), it also has a much broader scope in terms of commercial activity and trade policies to which it applies. GATT only applied to trade in merchandise goods, whereas the WTO covers trade in goods, services and trade ideas or intellectual property.

The WTO is the legal and institutional foundation of the multilateral trading system. It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations. It is also the platform on which trade relations among countries evolve through collective debate, negotiation and adjudication. In more detail, its essential functions are to: administer and implement the multilateral and plurilateral trade agreements which together make up the WTO; act as a forum for multilateral trade negotiations; seek to resolve trade disputes; oversee national trade policies; cooperate with other international institutions involved in global economic policy-making. Out of a potential membership of 152 countries and territories, 76 governments became members of the WTO on its first day, with some 50 other governments at various stages of completing their domestic ratification procedure, and the remainder engaged in negotiating their terms of entry.

An important aspect of WTO's agenda is to cooperate with the International Monetary Fund (IMF), the World Bank (IBRD), and other multilateral institutions to achieve greater coherence in global economic policy-making.

Its task is complicated by three closely-related trends: (1) The threat of "globalization backlash", as people in countries around the world blame social and economic insecurity on free trade and open markets. (2) The extension of trade liberalization beyond border barriers, such as tariffs and quotas, into areas that were until recently regarded as national policy preserves. As a result, trade liberalization risks stirring up popular resentment when it conflicts with sensitivities over issues such as environmental and food safety standards. (3) Critics allege that the growing reach of the WTO's disputes settlement procedures to enforce world trade law puts countries' sovereignty at the mercy of a judicial process that lies beyond national control. Defenders of the WTO reject such criticisms as inaccurate and ill-informed. If this is the case, some claim that the organization and its members are paying the price for unnecessary secrecy.

In 1998, China was still negotiating its terms of entry to become a member of the WTO due to disputes with WTO demands and with the USA over Chinese counterfeiting of American products. Latin American governments, Germany, and the USA have at various times attacked the EEC/EU banana import regime since coming into effect in July 1993. Some say the system is fraying at the edges, partly under pressure from its own members. Governments involved in controversial trade dispute cases regularly "leak" confidential interim rulings by WTO panels. WTO chief Renato Ruggiero says that unless disclosure rules are reformed, the organisation's credibility will be undermined.

Claim:
1. There is no substitute for the confidence and credibility that the WTO lends to expanding trade based on rules. Nor is there any substitute for the temporary relief the WTO offers national economies, especially against unfair trade and abrupt surges in imports. There is also no substitute for the WTO's authority for resolving disputes which command the respect of all member nations (Clinton at Davos 2000).
Counter Claim:
1. Every agreement within the WTO so far has been the result of intense conflict between countries or groups of countries, which eventually concluded on the basis of the superior bargaining power of developed countries. This process has put the developing countries as a group at an inherent disadvantage.

2. Developed countries are actively advocating the introduction of a "social" clause in the multilateral trading system, which would give privileged countries a tool for selective, one-sided and neo-colonial protectionism, with the effect of increasing poverty instead of attacking it at its root.

3. A multilateral trade regime cannot simply be a mechanism to address trade disputes and remove unequal barriers. It must look at equity not from the narrow confines of trade practices, but from the overall relationship of nations and peoples wellbeing.

4. The positive role of trade in development cannot be realized without addressing the monopolistic operations of global corporations.

5. Ever since the United States supported the creation of the World Trade Organization to resolve international trade disputes, the long-standing question always has been: Will the USA comply if a big decision goes against it? The question arose in 1996, when the European Union filed a complaint with the Geneva-based trade regulatory body over the Helms-Burton law, which prohibits other countries from doing certain kinds of business with Cuba. The USA said openly it would not change the law even if the trade body overruled it. But the case was dropped after the two sides compromised.

6. International rules are undermining domestic sovereignty. Why should we let a bunch of World Trade Organization bureaucrats determine the fate of our Earth?.

7. Today's trade disputes often have little to do with traditional trade barriers - the tariffs and quotas nations impose on each other's goods to protect their domestic industries. Instead, many trade wars are fought over hormones in beef, bananas, or genetically modified foodstuffs - or sea turtles.

8. There are rules for some but not for others, such as the conditions imposed by the IMF and the World Bank.

Facilitates:
Liberalizing trade
Values:
Disagreement
Subjects:
Trade
Inspection, tests
Quality unification
Regulation
Arbitration
Agreements
Administration
Type Classification:
F: Exceptional strategies