International Organizations - Week 7
The WTO
1) Performance (compliance with WTO rules) in regard to each trade area is monitored through regular reviews under the Trade Policy Review Mechanism 2) To join-Nations agree to give up key areas of sovereignty and adopt the trade liberalization mantra of the WTO (Neo-liberal policies ) 3) Steady increase in size of WTO (164 members as of 2018)- membership of the club almost de-rigueur aspect of globalization, non-membership can lead to costly tariffs, barriers to trade, = impediments to development 4) Dispute Resolution Mechanism https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm
The WTO-Principles of the WTO 'free' trading system
1. Trade without discrimination 1a. Most-favored nation (MFN) 1b. National Treatment 2. Freer Trade (gradually through negotiation) 3. Predictability (through binding and transparency) 4. Promoting Fair Competition 5. Encouraging Development and Economic Reform
Problems for Developing Countries
Fair Trade focus on agricultural producers. Agricultural producers face: Lack of market access. Lack of information. Lack of access to finance. Lack of access to credit. Inability to switch to other sources of income. Weak legal systems and laws.
So Why Fair Trade?
Fair trade: a stakeholder driven approach. Focus on developing countries and agricultural products. Empower producers. Different producer-consumer relationship. Distribute benefits more equitably among all stakeholders. Create positive externalities - social capital.(trust and community engagement- global civil society)
WTO-Failures
Seattle 1999 and Cancun 2003, -inability to reach consensus " WTO talks collapse amid violent demonstration" War Against Want video
WTO -Restructuring of Basis and negotiating format necessary?
Susan Schwab (US trade negotiator 2006-2009-readings ) argues that perhaps the Doha Round should be abandoned entirely!? "prolonging the Doha Round process will only jeopardise the multi-lateral trading system and threaten future prospects for the WTO-led liberalization and reform" (2011: 105) Schwab points out the developed-versus-developing framework is increasingly anachronistic stating " China's GDP has already overtaken Japan, and will likely have exceeded that of the US before any Doha Round agreement can be fully implemented. Meanwhile the International Monetary Fund has predicted that by mid decade, India will have exceeded Germany, Brazil will have outpaced France and the United Kingdom, Mexico will have passed Canada, and Indonesia and Turkey will have superseded Australia" (2011:208)
General Agreement on Tariffs and TradE-GATT October 1947
The GATT 's prime purpose would be to steer countries (states) on the path of free trade and to prevent them from resorting to protectionism as a way of responding to balance of payment issues. 15 countries had begun talks in December 1945 to reduce and bind customs tariffs in a bid to give an early boost to trade liberalization and to begin to correct the legacy of protectionist measures that had remained in place since the early 1930s. Havana 1948- 23 countries initially involved From its foundation until it was superseded by the WTO in 1995, the GATTs membership grew to more than 120 nations. the GATT didn't attempt to liberalize trade restrictions all in one fell swoop, Tariff reduction was spread over eight rounds of negotiations between 1947 and 1994. GATT regulations were enforced by a mutual monitoring mechanism. If a country believed one its trading partners was violating a GATT regulation, it could ask the Geneva based bureaucracy that administered the GATT to investigate.
WTO -Dispute Resolution Mechanmism
The WTO has taken over the responsibility from GATT for arbitrating trade disputes and monitoring the trade policies of member countries. While the WTO operates on consensus (a problem=more on this later) as did the GATT, in the area of dispute settlement, member countries are no longer able to block the adoption of arbitration reports. Its power comes from its sanctions based dispute mechanism. If offenders fail to comply with the recommendations of the arbitration panel, trading partners have the right to apply for compensation or, in the last resort, to impose (commensurate) trade sanctions. Every stage of the procedure is subject to strict time limits. Thus, the WTO has something the GATT never had-teeth. The WTO is the 'global policeman' of the GATT.
Free Trade
Theory of Comparative Advantage (Ricardo/Smith) A world of interconnected freely trading states allows levels of wealth to be achieved by all states that would not be achievable otherwise.('invisible hand') Free Trade about removal of barriers to movement of goods and services between countries. Natural barriers. Cultural barriers. Market barriers. Policy barriers. Service regulations. Who likes it? Those with power: " the Washington consensus" IMF, WB, WTO Free market economic rationalists. Hyperglobalists. Who doesn't like it? Those who believe: It is too simplistic. It's just economic theory. Ignores too many non-economic factors. Focuses on means rather than ends. Leads to undemocratic and non-consensual change.
WTO- The Doha (development) Round 2001-?
There are three key areas at the forefront of the Doha agenda. 1. Anti-Dumping Actions 2. Protectionism in Agriculture 3. Protecting Intellectual Property. (TRIPS) The Doha Round was essentially suspended, and many commentators argued that it would collapse and end in total failure. Lowest common denominator deal struck in Bali 2013 (Economist 14/12/2013)-"Last week's deal was achieved only after the WTO lowered its sights and settled on a lowest-common-denominator part of the Doha agenda, leaving out more difficult topics such as farm trade and intellectual property. And even then an agreement was reached only when other parties caved in to demands from India, whose politicians stubbornly insisted on getting an indefinite exemption from WTO rules for its farm subsidies" Is there a growing rejection of the WTO as it is currently construed?
Creation of WTO-The Uruguay Round of GATT (1986-94)
Uruguay Round had ambitious aims, until then GATT had applied only to trade in manufactured goods and commodities. In the Uruguay Round, members sought to extend GATT rules to cover the new area of global growth, services. Even more ambitiously, and most controversially, it sought to write rules governing the protection of intellectual property, to reduce agricultural subsidies, and to strengthen GATTs monitoring and enforcement programs.
Fair Trade: An attack on free trade?
Yes. Uncompetitive production Price controls, not rules of the free market. Humanitarianism rather than supply and demand. Irrational consumer behaviour is the aim. No. Entrenches it in a similar way to social capital supporting markets. "Free" trade is actually distorted.
The International Trade Organisation
ITO- the 'stillborn' forerunner of WTO was to have been the International Trade Organisation in the new post WWII IO architecture (administered by the UN through ECOSOC) It was to have been the product of a trade agreement to be signed at a UN conference on Trade and Employment -the Havana Charter in 1948. Over 50 countries participated in the negotiations to create the ITO which was envisaged as a specialist agency of the UN complimenting the Bretton Woods institutions, the IMF and IBRD (WB), focusing on the trade side of international economic cooperation
FTA's-The Trans Pacific Partnership (TPP)
Reaching behind the border into domestic law and policy Restrictions on national domestic regulation- the TPP endeavours to set regional regulatory standards which could limit future regulatory moves by governments Government obligations to consult with transnational investors State owned enterprises (SOEs)-reportedly seeks to restrict the commercial activities of SOE's and to remove any favourable treatment such as subsidies Copyright and patents- leaked sections indicate the US had proposed changes to copyright laws advocated by US media companies Finally- negotiation of domestic regulation through a trade agreement removes it from domestic debate and scrutiny- so exacerbating the 'democratic deficit' in the international trade arena.
The GATT Uruguay Round (1986-94) contained the following provisions.
Tariffs on industrial goods were to be reduced by more than one third, and tariffs were to be scrapped on over 40% of manufactured goods. Average tariffs imposed by developed nations on manufactured goods were to be reduced to less than 4 percent of value. Agricultural subsidies were to be substantially reduced. Barriers on trade in textiles were to be significantly reduced over 10 years. GATT fair trade and market access rules were to be extended to cover a wide range of services (General Agreement on Trade and Services- GATS) https://data.oecd.org/trade/trade-in-goods-and-services.htm GATT Rules also were to be extended to provide enhanced protection for patents, copyrights and trademarks (intellectual property-Trade Related Aspects of Intellectual Property Rights- TRIPS) The World Trade Organisation-WTO- was to be created to implement the GATT agreement more forcefully
Fair Trade: An 'Enhancement' of Free Trade?
"Fair trade is a sustainable, market-based solution to global trade failures. Consumers who choose to buy Fair Trade products can choose to make the world a better place while still enjoying consumer goods. Somewhere between the anti-globalisation protestors in Seattle and theories in economics textbooks lies a truly sustainable model for the trading system in which everyone benefits. Fair trade represents such a model" (Nicholls and Opal, 2005: 19).
The WTO- some conclusions/critiques
(Sabrina Varma (2002) writes) "Instead of acting as constructive agents in coordinating and promoting global stability and development, they have focused their efforts on micromanaging developing countries with a standard and stern dose of neo-liberal policy prescriptions and conditionalities (usually under the direction of the G7) with implications for a wide range of domestic policy areas. This level of penetration has provided them (the Bretton Woods IFIs) and the WTO with the power and authority to become monopoly actors in the global economy" Sabrina Varma, 2002, 22. So reforms are clearly needed, what way forwards? WTO Agenda-trade liberalization a false mantra? 1) liberalization process asymmetrical 2) Subsuming national sovereignty 3) Convergence with BW IFIs-"the Washington Consensus" Implications of IMF/WB/WTO coherence threefold 1) Proliferation of singular model of development of trade liberalization as best method to reduce poverty 2) The locking in of liberalisation commitments through the WTOs dispute resolution mechanism and the IMF's SAP's 3) Permanent loss of national sovereignty: the 'right' to pursue a different path of development based on national interest or needs.
Fair Trade Objectives
A social mission. Alleviate extreme poverty. Enhance social capital. Support global trade reform. Treat 'weaker' producers with greater fairness. Conform to minimum guidelines. Consumer information, and relational links with producers.
Elements of Fair Trade: Developing Countries
Agreed minimum prices - floor price. Payment to producers of a social premium. Direct purchasing from producers. Transparent and long-term trading partnerships. Cooperative, not competitive relations. Provision of credit to producers as needed. Provision of market information to producers. Farmers and worker organised democratically. Sustainable production. No labour abuses in production.
New Coalitions emerged in the Doha Round
Apart from the old 'quad' of developed nations (The US, Japan, Canada and the EU) several new developing world coalitions have emerged around contesting agendas in the Doha Round. These include the African Group, the less developed countries (G90), the Like Minded Group ( a 'strong' Sth coalition), the Small and Vulnerable Economies group, the G33 on Strategic Products, the Core Group on Singapore issues, the coalition on cotton and the G20 on Agriculture and so on. (Narikar and Van Houten-readings for this week)
Major Criticisms of free trade
Brutal "in-your-face" globalisation/ capitalism. Globalisation is a myth: Not well advanced. Not inevitable or unstoppable. Not always good for everyone Massive global inequality. The poorest 20% of the world's population generates 1% of global GDP. The richest 20% of the world's population generate 86% of global GDP. And the disparities are increasing
Problems in Decision making: Consensus
Emphasis on consensus in decision making In the WTO trade weighted voting power tends to underpin (and undermine) any process of consensus-based decision making. Some argue that consensus is merely a public relations tactic for the domination of certain countries within international organizations WTO haven't gone to a vote generally unless there is consensus on everything! Another problem with consensus decision making is that it fosters a culture of informality which is always followed by non-transparency, reducing the scope for accountability. Consensus works to the detriment of developing countries as it institutionalizes inequities
critics of Wto
In an era of growing talk of nationalism / protectionism / insular policies - global cooperation on lowering trade barriers difficult to sustain Globalisation critics see free trade as impinging on state sovereignty, working against domestic interests and favouring developed countries and their MNCs over the interests of developing states Labour movements and environmental groups have found common ground NGOs are largely excluded from WTO negotiations and when included are kept in the periphery
WTO-problems of decision making
In WTO member countries are represented through the one country one seat concept (as in UN) ¾ of membership made up of developing countries. Plenary body the Ministerial Conference, meets every two years. The General Council (Executive) oversees daily operations and the various councils/committee working parties etc, comprised of official representatives from member countries Assumption that all members are present -and can participate effectively! -roughly 20 poorer countries can't afford to keep reps in Geneva
What is the WTO?
In its own words- "the WTO deals with the rules of trade between nations at a global or near global level. It is an organization for liberalising trade; it's a forum for inter-governmental agreements. It's also a place for them to settle disputes. It operates a system of trade rules" (enforces the GATT) , and above all it's ostensibly a negotiating forum. It brought into reality in 1995 -in an updated form -the failed attempts in 1947-48 to create an International Trade Organisation. (ITO)
FTA's (Free Trade Agreements) -The Trans Pacific Partnership (TPP)
There has been a proliferation of bilateral and regional Free Trade Agreements since the WTO Doha Round stalled from 2003 (Cancun) onwards
1980-1993 Protectionist Trends-GATT under threat
Three key reasons underlay the rise in protectionist pressures in the 1980s The economic success of Japan strained the world trading system The world trading system was strained by the persistent trade deficit in the world's largest economy, the US. Many countries were finding ways to get around GATT regulations- Bilateral Voluntary Export Restraints (VERs)
FTA's-The Trans Pacific Partnership (TPP)
Until Trump's election US had actively pursued several bilateral and regional arrangements (NAFTA), apart from the TPP it has also been negotiating the Trans-Atlantic Investment Partnership with the European Union TPP was also part of the broader US strategic 'pivot' to Asia to form a Pacific Rim trade regulation framework between the Americas and selected countries in Asia (but not China) covering 40% of global trade 11 countries now involved -Australia, Canada, Mexico, Chile, Peru, Brunei, Singapore, Vietnam, Malaysia, New Zealand, and Japan- Trump tweeting US may want back-in (US-China Tariffs factor?) Re NAFTA- US announced a new deal with Mexico, covering mainly Automobiles, Intellectual Property, and Labour in late August 2018, Canada as yet to say they will sign up to the new arrangements (end of NAFTA?) Critics of the TPP argued that it was an attempt by the US as the dominant state actor to establish regional regulatory frameworks which suit its most powerful export industries- in particular its pharmaceuticals, information technology, and media (entertainment) industries One of the most contentious aspects has been the US promotion of the inclusion of an Investor State Dispute Settlement process (ISDS) for the TPP Secrecy-all negotiations have been non-transparent behind closed doors-a TPP document published by the NZ government reveals that there is an agreement among the parties not to release any of the draft negotiating texts until 4 years after the conclusion of the agreement DFAT- Benefits for Australian exporters of goods The Agreement will eliminate more than 98 percent of tariffs in the free trade area. Highlights include: new reductions in Japan's tariffs on beef, (Australian exports worth $2.1 billion in 2016-17); new access for dairy products into Japan, Canada and Mexico, including the elimination of a range of cheese tariffs into Japan covering over $100 million of trade; new sugar access into the Japanese, Canadian and Mexican markets; tariff reductions, and new access for our cereals and grains exporters into Japan, including, for the first time in 20 years, new access for rice products into Japan; elimination of all tariffs on sheepmeat, cotton and wool; elimination of tariffs on seafood, horticulture and wine; and elimination of all tariffs on industrial products (manufactured goods). https://dfat.gov.au/trade/agreements/not-yet-in-force/tpp-11/outcomes-documents/Pages/tpp-11-outcomes-at-a-glance.aspx
