Transcript The World Trade Organisation Bretton Woods: plan to establish an international trade organisation Background: Great Depression in the 1930s governments wanted to protect their.

The World Trade Organisation
Bretton Woods: plan to establish an international trade organisation
Background:
Great Depression in the 1930s
governments wanted to protect their national economies
through: - tariffs
- competitive currency devaluations
"beggar-thy-neighbour policies"
vicious circle: retaliation by other countries
higher and higher tariffs and devaluations
collapse of world trade
1946 first talks to set up an "ITO" (International Trade Organisation)
draft charter agreed upon
at UN Conference on Trade and Employment in Havana in March 1948
but: In 1950 USA decided not to ratify it
ITO was dead!
Only surving part of the negotiations:
GATT: "General Agreement on Tariffs and Trade"
International forum for negotiating tariff reductions and solving trade disputes
but: no institution with legal personality and powers!
Principles:
1. nondiscrimination
most-favoured-nation principle (Meistbegünstigungsklausel)
 If one country is granted a favour, this favour must be granted to
all other WTO members, too.
2. elimination/reduction of trade barriers (tariffs, quotas etc.)
Exceptions: - agricultural products
- countries with balance-of-payment difficulties
3. consultation among nations to solve trade disputes within the GATT framework
1947: 23 members
Main negotiation rounds:
Kennedy Round (1964-1967):
 lowered average tariffs on industrial products to less than 10%
 anti-dumping agreement
 aid for developing countries
Tokyo Round (1973-1979):
 average tariff on industrial products down to 4.7%
Uruguay Round (1986-1994):
 cuts in import duties on tropical products (mainly from developing countries)
 revision of rules for settling disputes
 regular reports on Gatt members' trade policies
 agreements on almost all current trade issues
(including services and intellectual property)

foundation of the WTO in 1995
legal institution with the power to impose sanctions
WTO principles today:
 trade without discrimination
 most-favoured-nation principle
 national treatment
imported and locally produced goods must be treated equally
 promotion of free trade
theoretical background:
free allocation of resources (for production) leads to more prosperity for all:
i.e. if each country/region produces what they can produce best/most cheaply,
and then exchange the goods they produce, all countries will be better off.
 theory of comparative advantage
 promotion of fair competition
 encouragement of development and economic reform
Exceptions:
Protection against:
 dumping
 measures: e.g. extra import duty
 certain subsidies in other countries
 measures: e.g. extra import duty, domestic subsidizing
 surging imports if domestic industry is seriously threatenend
(protectionary action only temporarily allowed)
 measures: e.g. extra import duty, import quotas
The Doha round
Start in Doha, Quatar in 2001 (after the cancellation of the Seattle conference in 1999)
Purpose: Agreement on Doha Development Agenda
Key issues:
 farm subsidies
 access to markets for developing countries in developed countries
 export subsidies in developed countries
 establishment of labour and environmental standards
"social dumping" by developing countries
i.e. unfair competition by developing countries
by denying their workers basic rights, decent wages
and working conditions
"advantages" for developing countries through
lower environmental standards
The WTO secretariat
located in Geneva, with 630 staff, headed by a director-general
Responsibilities:
- administrative and technical support for WTO delegate bodies
(councils, committees, working parties, negotiating groups)
- technical support for developing countries
- trade performance and trade policy analysis by WTO economists
- and other day-to-day work
Free Trade
= Fair Trade?
Theory: free trade benefits everybody (theory of "comparative advantage")
Problems:
 there is no free trade (in many cases, especially for agricultural goods)
e.g. EU: - Latin American sugar cane producers have to compete with
subsidized European surplus sugar on the world market and are
not even allowed to export their products to Europe
 unequal trade partners
- lack of infrastructure (roads, railways etc) in LDCs  can't bring their goods to market
- high quality standards of industrial countries are hard to meet
 almost no new trade followed when EU opened up its markets
for the poorest countries in 2001
 not everyone is a winner:
theory of trade liberalization only promises that the country as a whole will benefit
 the majority of citizens or some groups may well be worse off
 "infant industries": new industries in LDCs must be protected until they are strong enough
to compete with big MNCs
 tariffs for such industries should be allowed
 farmers in LDCs: WTO wants to reduce tariff protection for small farmers
 key income because agricultural sector is very important in LDCs
Consequence: Developing countries should be treated differently
(widely accepted view now)
Proposals:
- developed countries (MDCs) should be allowed
to make exceptions from the WTO's "most favoured nation principle"
 e.g. allow lower tariffs on imports from LDCs than from
MDCS (preferential treatment)
- LDCs should be allowed to impose tariffs on goods from MDCs
- rich countries should open up their markets to poorer ones
without reciprocity and conditionality (as the EU did in 2001)
- only countries on the same level should open up their markets to each other reciprocally
 equal conditions among equals instead of equal conditions for all
Subsidy problem:
rich countries are allowed to pay their farmers massive subsidies (even export subsidies)
 2/3 of farm income in Norway and Switzerland come from subsidies
 $2 a day for the average European cow
Japan: 1/2
EU: 1/3
 25.000 cotton farmers get $4 billion in subsidies
effects: - increased production in MDCs  increased supply
on the world market depresses global prices
- producers in LDCs can't compete with subsidized goods from MDCs
 increased poverty in DCs
Trade barriers are still around
e.g. through WTO sanctions:
 in case of a "surge" of imports tariffs are temporarily allowed
 measures against dumping: if a foreign country sells its products below cost
tariffs against that country are allowed
Non-tariff barriers, e.g.:
- technical barriers: specifications on size, shape, functions, performance
- patents, copyrights
- labelling (also: manuals, instructions)
- national regulations on health, safety, employment
- quotas
Patents
TRIPS: Trade-Related Aspects of Intellectual Property Rights
 WTO agreement that forces countries to recognize patents and copyrights
 monopoly rights for inventors
argument: higher prices are anincentive for innovation
Problems:
- high-priced medicines: people in LDCs can't afford it
- patents can slow innovation
 no competition: - no need for innovation
- competitors are discouraged (no research, either)
- many innovations are the result of research in universities
and government-funded research centers, i.e. should be owned by the public
- attempts to expand the scope of intellectual property e.g. - yoga positions
- genes
- patents on plants and animals
Proposals:
(bio-piracy)
- medicines at cost to LDCs
- compulsory licenses to allow LDCs to produce drugs
- reduction of patent protection periods