* refer to the case study in the attached (pdf) file and answer the following :How useful is the world Trade Organization? (paraphrase, analyze and summarize the case study . you should highlight the important things which is related ) the assignment should be ::Introduction about 150 wordsmain body 750 wordsconclusion 150 words
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World Development case study: World
Trade Organization
How useful is the World Trade Organization?
Much of the world’s press and many of its political leaders hailed an agreement reached at a
World Trade Organization (WTO) conference at the end of 2013 as a ‘breakthrough
agreement’. The agreement itself did not represent a major success for world trade but it is the
first global agreement the Organization has managed to achieve in the 18 years of its existence.
How useful is the WTO to the development of countries in a global economy?
The WTO was established in 1995 but it really has a much longer history than that. After the
Second World War many countries were economically depressed and the Allied countries, led
by the US, thought that it was vital to promote the spread of liberal capitalism, economic cooperation and increased world trade as a means of preventing future global conflict and the
spread of communism. As a result of the Bretton Woods Conference in 1944, the 44 Allied
countries signed an agreement to set up institutions that would regulate the global monetary
system – the World Bank and the International Monetary Fund. The original intention was to
create a third institution to handle the trade side of international economic co-operation. This
was to be known as the International Trade Organization (ITO), which was to be a specialized
agency of the United Nations. The draft ITO Charter was ambitious and complex. It included
rules on employment, commodity agreements, restrictive business practices, international
investment and services. The aim was to create the ITO at a UN Conference on Trade and
Employment in Havana, Cuba, in 1947.
However, the US refused to sign the original ITO charter, with the result that it was never
ratified. Instead, over the following years there were a series of General Agreements on Tariffs
and Trade (GATT) on specific trade-related issues that were a consequence of negotiations in
Geneva (1964-7), Tokyo (1973-9), Uruguay (1986-94) and the current round of negotiations
that began at Doha in 2001. Each round of negotiations included separate Ministerial
Conferences to evaluate progress. At the Uruguay round of talks, countries reached an
agreement to replace GATT with the World Trade Organization. The WTO was founded on 1
January 1995 but China only joined in 2001 and Russia was not granted membership until
2012, after 19 years of negotiation. There are currently 159 member states.
The objective of the WTO and GATT has always been to lower trade barriers to help trade flow
as freely as possible because increasing trade is seen as important for economic development.
This neoliberal view of global trade is based on the belief that unrestricted flows of goods and
services will sharpen competition, motivate innovation and breed success in
participating countries.
The WTO has three major functions:
• To host negotiations between member countries
• To remove obstacles to trade
• To resolve conflicts of interest between member countries.
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).
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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
negotiated and signed by governments, the goal 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 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 to be ‘transparent’ and
predictable.
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.
WTO Website
The complexity and range of issues involved in global trade has often meant that progress at
trade talks has been very slow. In the last decade, agriculture, industrial tariffs and non-tariff
barriers and services have caused particular problems. The developed nations, (including
the EU, the US and Japan) have significant differences of opinion about the nature of trade from
developing countries (led by India, Brazil, China and South Africa). A lot of problems have been
caused by the imposition of tariffs imposed by the developed nations on goods coming from
developing countries. The maintenance of agricultural subsidies, which operate as trade
barriers, has been a serious source of conflict between the US and the EU. The banana trade
war between the EU and the US began in 1991 over tariffs that were imposed by the EU on
bananas imported from Latin America but owned by companies based in the US. The dispute
only concluded in 2012 when the EU agreed gradually to reduce the tariff over an eightyear period.
The WTO has been criticized by groups with opposing views of world development. Supporters
of trade liberalization have questioned the efficiency of its multilateral approach to trade
negotiations because it makes successful negotiations very hard to achieve. Their evidence is
the lack of progress in the whole of the Doha round towards getting rid of agricultural subsidies
in the developed world. They believe that a unilateral or regional approach would speed up
trade liberalization by reducing the number of countries involved in the talks. On the other
hand, global justice movements such as Occupy see the WTO as an organization that provides
support for the continuing spread of neoliberal capitalist economics, as an organization
dedicated to delivering the goods for Western transnationals at the expense of poor people.
GATT and the WTO have tackled some very difficult challenges. The early round of GATT talks
concentrated on reducing tariffs, the Kennedy Round of the 1960s was concerned with an AntiDumping Agreement (selling heavily subsidized products at very cheap prices to other
countries) and the Tokyo Round in the 1970s tackled trade barriers that do not take the form
of tariffs. These might include measures that were apparently for environmental protection
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(such as limits on exhaust emissions that excluded EU and US cars from Japanese markets) or
consumer protection laws that acted as a barrier to imports.
The success of the early GATT talks in reducing tariffs led governments to introduce more
imaginative means of protecting sectors from increased foreign competition. Economic
recessions in the 1970s and 1980s caused high unemployment and factory closures and
encouraged governments in the developed countries to look for market sharing arrangements
with competitors and increased subsidies to agriculture to maintain their hold on agricultural
trade. Both of these things undermined the effectiveness of GATT and increased trade conflicts.
The WTO was criticized for its ineffectiveness in dealing with global trade issues such as this.
The DOHA round of talks that began in 2001 appeared to be heading for failure at the Bali
ministerial conference and the announcement of an agreement between the 159 member
countries of the WTO came as a surprise to many.
The Bali Agreement 2013
The agreement reached in Bali was the first global trade agreement reached by WTO since it
was formed in 1995.
The package of measures agreed by the WTO in Bali has
three main elements:
Trade facilitation
This is a binding pledge by all WTO countries to make it easier for goods to cross borders. It
involves simplifying customs procedures, removing red tape and rooting out corruption. Hailed by
the WTO as one of the biggest reforms since it was founded in 1995, the benefits to the global
economy have been estimated at between $400bn (£244bn) and $1tn. Poorer countries will be given
time and financial help to improve infrastructure and training.
Food security
Talks in Bali almost foundered owing to US pressure on India to stop stockpiling subsidized grain.
New Delhi said the domestic support was needed to feed India’s poor. A ‘peace clause’ was agreed
in which India was allowed to keep its regime in place but only on the basis that the agreement was
temporary, with a permanent deal to be concluded within four years.
Help for the least developed countries
Many Western countries have already agreed duty-free and quota-free access to their markets for
goods from more than 30 of the world’s poorest countries. Those that have not done so for at least
97% of products ‘shall seek’ to improve product coverage. In addition, there will be simplified ‘rules
of origin’ for the world’s poorest countries. The WTO says these will help the least well-off countries
identify products as their own goods, making it easier to get preferential treatment in importing
countries.
The Guardian, 18 December 2013
The outcome of the conference has been received with varying degrees of enthusiasm
depending on where the commentators lie on the neoliberal capitalist and globaljustice spectrum.
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‘The WTO’s Bali agreement represents the rejuvenation of the multilateral trading system that
supports millions of American jobs and offers a forum for the robust enforcement of America’s trade
rights.’ – US President Barack Obama.
‘The Bali package is hardly going to make a difference for poor countries, but at least it keeps the
negotiations on food security alive. Negotiators now have to find a long-term solution to change the
rigged rules that stand in the way of developing countries’ food-security policies.’ – Romain
Benicchio, senior policy adviser with Oxfam.
‘Not even the measures to protect the least developed countries were achieved here. They (developed
countries) keep only empty promises by an organization whose aim is to deliver trade liberalization
and business for corporations.’ – Lucia Ortiz, co-ordinator of the Economic Justice Programme of
Friends of the Earth International.
Failure to reach a comprehensive agreement on a key part of the negotiation package,
subsidized agricultural exports, has been criticized by many development organizations. The
Bali draft agreement states that WTO members have to reduce their subsidized exports. The
talks were brought to the brink of failure by the insistence of the US that the Indian
government should stop subsidizing food crops. The deal that was eventually agreed lets India,
and other developing nations, continue to subsidize their crops because of the need to maintain
food security. However the agreement also obliges India to report details of its food-subsidy
programme or face trade-dispute challenges at WTO. Developed countries also subsidize some
parts of their agriculture but claim that some importing countries depend on supplies of cheap,
subsidized food from the major industrialized nations. They suggest that farmers in poorer
countries may receive a boost from higher prices caused by reduced export subsidies but they
will need temporary assistance to make the necessary adjustments to deal with higher-priced
imports. Many development organizations see this as just an excuse to continue to pay
subsidies to politically powerful farming groups.
The other major component of the Bali deal is an agreement on ‘trade facilitation’ that has been
welcomed by developed nations. Basically it involves measures to reduce trade costs by cutting
red tape and paperwork in customs procedures. Some have estimated that trade facilitation
could cut global trade costs by more than 10%. This would raise annual global output by over
$400 billion. Supporters of the measure claim that benefits will flow disproportionately to
developing economies. The counter claim is that many developing countries do not have the
infrastructure to facilitate the speedier processing of goods that are being traded across
international boundaries. The British government has welcomed the agreement and claimed
that Britain could gain as much as a billion pounds a year from the facilitation agreement.
Does the World Trade Organization help world
development?
Assessing the value of the WTO to world development is always going to depend on which
political criteria you adopt. One approach is to ask is whether the world would be a better place
without the WTO and its predecessor GATT. If the global economy is going to be dominated by
liberal economics and transnational corporations, then a case can be made that an organization
such as the WTO is probably needed – even if its achievements are underwhelming. If its record
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of achieving successful agreements is to be improved it will probably have to abandon its policy
of seeking full accord on all policies from all member nations. The process is too unmanageable
and is a recipe for deadlock. The latest agreement was actually reached after taking only some
of the elements from a much wider agenda that was originally proposed for discussion. The
result is a limited agreement that does not impress many people.
Another route for potential progress would be to move from multilateral talks involving all
members to ‘plurilateral’ talks where groups of countries agree to try and reach an accord on
liberalizing the rules on a good or service with other countries joining in as it suits them. The
idea would be to simplify the attempts to reach agreements and also to offer inducements to
countries to participate or get left behind by the countries who have reached agreement. The
agreements reached may turn into global agreements or not. The limited nature of the Bali
agreement is at least partial recognition that the negotiation process needs to be simplified if
the organization is to have any relevance in the future.
Individuals and organizations that see the global dominance of liberal economics as a
catastrophe for global development just see WTO as a part of the problem. It provides a
structure for the developed and wealthy nations to impose their rules on the weaker and less
developed countries. Negotiations are never conducted between equal partners and the dice
are loaded in favour of the developed countries. What use is a referee if they only give decisions
that favour the home side?
Between these two opposing views there are a lot of people who see no alternative to an
organization such as WTO but also believe that its continued usefulness to development
depends on finding ways of working that are more flexible, less cumbersome and more
representative of the views of developing countries
Reading and Resources
The World Trade Organization website. Useful for historical detail and the aims and objectives
of the organization.
http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm
Larry Elliott, The Guardian, 18 December 2013
http://www.theguardian.com/business/2013/dec/18/roberto-azevedo-wto-bali-global-trading
Dr Kamal Monno, The Nation, 16 January 2014
http://www.nation.com.pk/columns/25-Dec-2013/wto-bali-deal-what-now
Editorial, The Economist, 9 December 2013
http://www.economist.com/blogs/freeexchange/2013/12/world-trade-organisation
Friends of the Earth International, Radio Mundo Real, 19 December 2013
http://www.foei.org/en/what-we-do/land-grabbing/latest-news/wto-talks-a-death-sentence-morebusiness-and-trade-liberalization
Alan Bjerga, Bloomberg News, 8 December 2013
http://www.bloomberg.com/news/2013-12-07/wto-deal-buys-trade-talks-time-to-craft-elusive-broadagreement.html
Australia Network News, 8 December 2013
http://www.abc.net.au/news/2013-12-07/an-indonesia-wto/5142410
Andrew Walker, BBC News, 7 December 2013 http://www.bbc.co.uk/news/business-25274889
John Hilary, The Guardian, 25 November 2009 (‘Time to kill off
Doha’)http://www.theguardian.com/commentisfree/2009/nov/25/doha-round-trade-talks-wto
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