Multilateral Trade & The WTO

Question 1

Multilateral ?

Answer 1

It involves more than 2 sides
It explains why it is so hard for countries to reach an agreement. It might not be hard for 2 countries to reach an agreement but when there is a dozen countries involved, it becomes more complicated since each country wants its share of the cake.

Question 2

GATT ?

Answer 2

Stands for: General Agreement on Tariffs and Trade. It was created after the WW2 in 1947 and 23 countries signed the agreement.

Question 3

What was the goal of the GATT ?

Answer 3

To boost trade liberalization since the countries’ economies had suffered from the war + way of tightening their economies after the conflict (creating a bond)
Those countries were called “country partners” and they gathered each time to agree on tariffs (to lower)

Question 4

What is a round ?

Answer 4

Used to refer to a period of negotiations + could last several years. Each round was supposed to lead to an agreement and was on what was achieved on the previous round.

Question 5

What happened in 1950?

Answer 5

Countries had lowered the tariff level by 25%

Question 6

The Kennedy round ?

Answer 6

1964-1967

Introduced rules against dumping exports

Question 7

The Tokyo round ?

Answer 7

1973-1977
Countries agreed to reduce not only tariffs but also other trade barriers (such as import subsidies and import licensing)

Question 8

The Uruguay round ?

Answer 8

1986-1993
Extended the range of trade negotiations leading to major reductions in agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

Question 9

Why are multilateral agreements supposed to be more efficient ?

Answer 9

The main idea is that discrimination poisons trade.

For trade to be more efficient, all countries should be treated equally

Question 10

The MFN (Most favored nation)?

Answer 10

Policy of non discrimination. If a country agrees to reduce a tariff for imports from a specific country, this reduced tariff will also apply to all countries. It provides trade partners with the same tariff treatment. (If you grant a tariff to a country, you do the same for all other countries)

Question 11

What is the problem with MFN ?

Answer 11

Poor countries or developing ones do not have a lot to offer. If this principle didn’t exist, it would have been difficult for these countries to negotiate tariffs.

Question 12

National treatment?

Answer 12

Countries have to treat foreign companies the same as they treat local ones.

Question 13

What are the exceptions in relation to MFN ?

Answer 13

• there are several exceptions to this non-discriminatory treatment. European Union => (no tariffs between European countries)
  
  • Regional trade areas: those areas are allowed if and only if they do not raise barriers to outsiders. (e.g: NAFTA)
  • Countries can discriminate if it favors developing countries
  • if an industry (key industry) is in danger, in that case a government can temporarily increase protection. The problem lies with the definition of “in danger”.
  • increase protection on intellectual property
  • put an end to the multi fiber arrangement => the problem with textile is that it is an intensive industry + developing countries had an advantage, so in order to give time to developed countries to adjust to imports coming from developing countries, they decided to implement a measure that was supposed to be short term (imposed quotas on the amount of textile the developing countries could export to developed countries). It lasted for 30 years.
  • reformed itself into an institution and this is how the WTO was created in 1994.

Question 14

What are the limits of the GATT ?

Answer 14

• all governments needed to sign for the entire package. So it was very long.
• it was just an agreement, no real power to solve disputes or to intervene if countries did not respect the agreement.

Question 15

WTO ?

Answer 15

Created by the GATT in 1994.

Stands for: World Trade Organization.

Question 16

What is the aim of the WTO ?

Answer 16

To facilitate international trade and to settle trade disputes. It is usually described as a “free trade institution” but actually, it allows some tariffs and protection under specific conditions. It is a system of rules dedicated to under distorted competition.

Question 17

Differences between the GATT and the WTO ?

Answer 17

GATT: was an agreement + had no real power to impose tariff reductions
WTO: an international organization + has the power to resolve conflicts between the nations that do not respect the agreements. Has the power to resolve conflicts between countries thanks to the “dispute settlement body” => nations can go when they have disputes and it’ll decide who is right/wrong and possibly sanction.
Possible in the WTO to reach a plurilateral agreement.

Question 18

Global governance and the legitimacy of the WTO:

Answer 18

A lot of people criticize the WTO and argue that the WTO does not represent the will of the citizens. The WTO is based on the principle “sovereign equality” between member states. But individual citizens and NGOs are excluded from the decision-making process.

Question 19

The principle of sovereign equality ?

Answer 19

It is supposed to insure democracy: decisions are taken by members on the basis of “one nation, one vote “but this is based on the presumption that all nations have an equal capacity to negotiate (they do not have the same bargaining power). The consequence is that less powerful countries might be forced to accept laws that they do not want because of diplomatic, economical pressures.
If a country wants any of the benefits of the WTO membership, they must accept all the obligations (very wide range of subjects — agriculture, intellectual property …) that come with it.

Question 20

What is the principle of consensus?

Answer 20

It is precisely to prevent states or nations to be bound by rules or laws they did not really consent to.
Negotiations and decision-making are based on the principle of consensus: any state has the power theoretically to stop an agreement. Consequence of that is it makes it very hard for the two to adopt policies and it weakens its power.

Question 21

What can the WTO do?

Answer 21

• cut living costs and raise living standards
• settle disputes between members and reduce trade tensions
• Stimulate economic growth and employment
• cut the cost of doing business internationally
• Help countries develop
• give the weak a stronger voice
• Support the environment and health