Week 5

UK Hegemony in the 19th Century

1500s-1800s: Rise of nationalism was associated with mercantilism Adam Smith's (1723-1790) and David Ricardo's (1772-1823) theories in the 1850s: GB becomes the leader of the free trade movement: Corn laws repealed in 1846; by 1850 all British import restrictions removed and other countries followed. British colonies required to eliminate tariffs Great Britain one of the worlds dominant trading pushed for trade liberalisation. Trend not followed by other major trading partners

GATT: Tokyo Round 1973-1979

Based on the US Trade Reform Act (1974), granting the President "fast-track" authority to negotiate tariff reductions of up to 60% and reductions of nontariff trade barriers: Decrease in tariffs in developed countries by 33% on certain items Government procurement code Uniformity of retaliatory duties for countervailing and anti-dumping cases Generalized system of preferences (GSP) to the exports of developing countries Inclusion of 20 developing countries

GATT

General Agreement on Tariffs and Trade 1947 Includes 35 articles aimed at reducing protectionism Focuses on trade in raw materials and goods with three principles: no discrimination, no quotas, consultation among nations Multilateral agreement to liberalize trade by eliminating tariffs, subsidies, import quotas and discrimination between countries over 8 rounds up to 1995 Steadily decreased tariffs

GATT: Uruguay Round 1986-1993

Most ambitious round of multilateral trade negotiations to date, including 123 countries Aimed at eliminating tariff and non-tariff barriers and developing enforceable international trading rules Disagreement between US and France on agricultural subsidies delayed conclusion for three years

Post-War US HegemonyThe Bretton Wood conference (July 1944)

Rules for international commercial and financial relations. Gold standard and fixed exchange rates (until 1971). World Bank (formerly Bank for reconstruction and Development). International Monetary Fund (IMF). International Trade Organization (ITO), which was never ratified. The US assumed leadership of the Western Alliance The US had 70% of the world's monetary gold stock US dollar became the reserve currency for international payments The UN was established The Marshall Plan was initiated to help rebuild war-stricken countries

WTO principles and benefits of free trade policy

Set up by the final Uruguay round of GATT Now has over 150 members capturing 97% of trade worldwide. More legal approach to dispute settlement e.g. panel and appeal procedure, independent judges, timeframes, negative consensus Takes on broader trade issues e.g. investment, services, IP rights They propose there are ten benefits: peace, dispute settlement, rules, cost of living, choice, incomes, growth and jobs, efficiency, lobbying, good government.

GATT: Uruguay Round 1986-1993

Significant provisions: Establishment of the World Trade Organization Trade-Related Aspects of Intellectual Property Rights (TRIPS) Service market opening (General Agreement on Trade in Services = GATS).

GATT: Uruguay Round 1986-1993

Significant provisions: Tariffs reduced (4.7% to 3% on industrial goods) Quotas on agricultural goods to be replaced with tariffs Subsidies reduced (agricultural goods, industrial research) Safeguards (temporary tariffs in case of domestic industry harm, health and safety)

GATT: Kennedy round 1963-1967

Sixth and more ambitious than previous negotiation rounds. Triggered by US Trade Expansion Act (1962), which was partly a multilateral response to the formation of the EEC (1957) as the first major regional free trade area in the 20th century. Average tariff reduction of around 35% on industrial products in developed countries Anti-dumping provisions International wheat agreement EEC nations as a PTA (exception to MFN rule under GATT/WTO)

WTO Doha Round

Started in Qatar in 2001. Four issues : 1)The increase in anti-dumping laws. 2) High levels of protectionism in agriculture 3) Lack of strong intellectual property rights 4) Continued high tariff rates on non- agricultural goods and services in many nations. Was intended to end in 2005 before the expiration of the US President's "fast-track" authority. Developed countries were initially pushing for the "Singapore issues" to be put on the agenda: Transparency in government procurement Trade facilitation in customs procedures Trade and investment Trade and competition

Doha Breakdown

The Doha Development Agenda (DDA) round finally collapsed in 2008 The Singapore issues had previously been taken off the agenda The disagreement triggering the collapse was the "Special protection mechanism safeguards" for Indian and Chinese farmers. India's Commerce Minister said: "I'm not risking the livelihood of millions of farmers" ..................whilst Brazil, a traditional ally of India and China in promoting the developing countries' interests in the WTO, broke ranks and the US and some European countries blamed India's hard negotiation stance. This disagreement caused the entire deal to fall through despite an agreement of 18 other issues.

WTO Current Challenges

The Doha round has become stuck. The WTO has become a target for anti-globalization demonstrations since Seattle '99. Most trade integration over the last decade has been under regional agreements rather than under the WTO Achieving agreement among 153 members or more is challenging. The US is no longer an undisputed superpower able to dictate its terms. Many "new" issues such as environment, human rights and FDI are difficult, since they could hindereconomic growth in developing countries. Reducing barriers on agriculture is politically difficult in the developed world, especially in times of excessive unemployment. The US is no longer an undisputed superpower able to dictate its terms. Many "new" issues such as environment, human rights and FDI are difficult, since they could hinder economic growth in developing countries. Reducing barriers on agriculture is politically difficult in the developed world, especially in times of excessive unemployment.

The Great Derpression

The Smoot-Hawley Tariff Act of 1930 triggered a spiral of tariff increases: Countries had borrowed heavily from the US and depended on exporting to the US to repay their debt. US was the largest market and its trade dropped by 70% in value from 1929 to 1932. F.D. Roosevelt, US President (1933-1945) persuaded Congress to embrace a new tariff policy to revive trade and the economy: New reciprocal trade agreements with 29 nations by 1947 Tariffs reduced by 50% Trade agreements all included most-favoured-nation (MFN) clause

WTO Current Developments

WTO accession is on-going with Tajikistan joining soon as the 159th member. WTO dispute resolution is relatively successful. Coordination with regional and bilateral agreements and areas. Coordination with other international organizations. Implementation and monitoring of already agreed reforms. Public relations and education/technical assistance. Reform discussions to promote transparency (and democracy?). Doha round continuation at some stage (?). Less ambitious agreements sought for now.

WTO

WTO stands for the World Trade Organisations replaced GATT in 1995 Is an international body whose purpose is to further promote free trade by persuading countries to abolish import tariffs and other barriers. Therefore become very closely related with globalisation. WTO is built on a dispute settlement mechanism (Kodak - Fuji case), with a negative consensus principle. Own employees, Geneva headquarters Ministerial meetings every two years

GATT and WTO differences

Whilst the foundations of the GATT and WTO are the same they are differences between them they are as follows; WTO is a permit legislation with members whereas GATT was adhov and provision with contracting parties. GATT systems allowed existing domestic legislation to continue even if violated GATT agreement whereas WTO does not. WTO is also more powerful and the negative dispute settlement is more efficient way of settling disputes whereas GATT was less powerful and the dispute settlement was less effective.