The World Trade Organisation Flashcards
what is the World Trade Organisation?
The WTO began in 1995
Part of the Breton Woods agreement alongside the IMF and World Bank
Based in Geneva Switzerland
Has 164 member states including Russia who joined in 2012
Currently has 634 staff including lawyers Economists Statisticians and communication experts
Led by director-general Roberto Azevedo
Has a budget of 197 million Swiss Francs (2015)
what did the WTO replace?
replaced the general agreement on tariffs and trade GATT which was a series of meetings between member states’ finance ministers
GATT reduced tariff barriers and made sure that any preferential trading agreements had to be extended to other member states basically members could not impose asymmetrical tariffs e.g. higher trading costs on one state but not on another
in what ways does the WTO have a wider focus than GATT?
The WTO was created as a permanent organisation with a much wider focus
It settles trade disputes between member states
in forces international trade rules making the WTO the primary instrument of international trade law
oversees the trade in services via GATS (the general agreement on trade in services)
protects intellectual property via TRIPS (the trade related aspects of intellectual property rights)
overseas nontariff barriers which states put in place to protect domestically produced products
how does decision making take place in the WTO?
Decision-making in the WTO prioritise the speed of a democracy or packages of reform known as a Single Undertaking are presented at ministerial conference meetings to be excepted or rejected in full by members
Single undertakings are negotiated before Ministerial meetings typically by members of the quad an informal alliance of groups of four states that share the same interests on key trade issues
historically the USA the EU Japan and Canada have formed the dominant chord in the WTO the US and the EU represent the main trading nations war Japan represents Asian countries and Canada represents the interests of laughter and states that want liberalisation of the trade in agricultural products
More recently a competing court has emerged consisting of the USEU Brazil and India which better represents the developing world
strengths of the WTO: MORE DEMOCRATIC
The WTO is considered to be a more democratic institution than its fellow Breton Woods institutions
Decisions are made by simple majority is and 2/3 of members are developing States, as a result developing states are much more influential in the WTO than in the IMF and World Bank
The rules of the WTO also written by its member states many of which are democracies on the member states elect its leadership
strengths of the WTO: SUCCESSFUL IN REDUCING TARIFF BARRIERS
GATT and the WTO have both been very successful in reducing tariff barriers
In 1947 average tariffs on imported manufactured goods for 40% of the value of these goods why do you thousand this figure had fallen to 3%
This made it cheaper for states to trade which has benefited ordinary citizens because the prices of manufactured goods have fallen making them more affordable for consumers and allowing people to spend disposable income on more goods therefore stimulating economic growth are leading to better job prospects
By promoting freetrade the WTO has helped to raise living standards around the world consumers benefit significantly more
weaknesses of the WTO: TOO POWERFUL
According to many commentators the WTO is too powerful it can compel sovereign states to change laws and regulations by declaring them to be in violation of free trade rules
Although the Boeing and airbus case study shows powerful states can ignore the WTO which suggests that the organisation is often ineffective
weaknesses of the WTO: DOMINATED BY THE USA
The WTO like other financial institutions is dominated by the US and the EU
Decision-making in the WTO is dominated by the US and the EU through the membership of the the Quad they are able to set the agenda on single undertakings which have to be accepted or rejected in full
This has meant that the problems of developing countries have not been given significant weight or consideration
In spite of the WTO more developed countries have not fully opened their markets to products from less-developed countries
for example the US and the EU have been on willing to abide in protection of their own agricultural and textile industries which has disadvantaged countries like China and India who produce large quantities of these goods at a lower price than the US and EU producers — developed states benefit more And have more freedom to make their own decisions whereas developing states are often pressured into agreements
weaknesses of the WTO: IGNORES WORKERS RIGHTS AND OTHER SOCIAL ISSUES
It is often claimed that the WTO is indifferent to the impact of free trade and workers rights child labour the environment and health
As a result many of its meetings have been the target of violent anticapitalist protest such as those in Seattle in 1999 and Cancun in 2003
weaknesses of the WTO: LACKS EXTERNAL ACCOUNTABILITY
The WTO may be internally democratic but it lacks external accountability
It’s hearings on trade disputes are closed to the public and the media this leads to suspicions that judgements are not based on an impartial interpretation of the rules but on the basis of quid pro quos and compromises
These closed-door meetings also mean that the influence and domination of the US and the EU cannot be seen and held to account
CASE STUDY: The Banana Wars
a strength of the WTO: successful in resolving disputes
The EU and the USA had a long running dispute over the EU is banana imports
As part of its international aid program the EU offered tenders on a first come first serve basis for bananas from countries in Africa, the Caribbean and the Pacific
Do US argued that this favourite local producers in former colonies of EU member states over US owned corporations in Latin America
The Clinton Administration responded by imposing heavy tariffs on luxury goods produced in the EU such as cashmere from Scotland
The Clinton administration then took the banana wars to the WTO in 1999 after Chiquita a major US owned a banana producer made a $500,000 donation To the Democratic party
The two sides reached an agreement in 2001 with the EU agreeing to gradually reduce its tariffs on Latin American bananas this illustrates that the WTO can be successful in resolving disputes
CASE STUDY: Boeing and Airbus subsidies
weakness of the WTO: often ineffective and can be ignored
Boeing and airbus dominate the aircraft manufacturing market for commercial planes
Since 2005 there have been complaints to the WTO That Boeing has been receiving state subsidies from the US government an Airbus has been receiving subsidies from European states in contravention of WTO rules
Airbus and Boeing have enjoyed a duopoly of commercial aircraft marketshare since the 1990s so the pressure to resolve this issue has been intense
In 2012 the WTO finally ruled the Boeing had received illegal subsidies but that Airbus had not
But the dispute still continues the USA has claimed that the EU has not fully complied with the terms of the 2012 ruling so it will continue To subsidise Boeing as long as air bus enjoys state support
Demonstrates that the WTO is often ineffective in resolving disputes as powerful states like the US can ignore it’s rulings
criticism of the WTO and G7/8: CREATED BY RICH COUNTRIES TO PROMOTE THEIR OWN INTERESTS
(can be used to criticise any economic global governance organisation)
One criticism that can be made of both the WTO and the G-7 is that they are organisations created by rich countries to promote their own interests
Much of WTO time is taken up by agricultural disputes between the USA EU and Japan
Foremost among these are disputes over Europe’s common agricultural policy (CAP) As nations subsidise their farming industry and give preferential treatment to banana producers in former colonies of European states
The G-7 is made up entirely of rich countries one way the organisation promotes its interests is by encouraging developing countries to adopt neoliberal economic policies and
free trade
This opens up developing countries to TNCs which outcompete domestic industries
what have the WTO and G7 done to help developing countries?
However the WTO has reduced tariffs on imported manufactured goods from 40% of the cost of a product To just 3%
Cheap exports have helped developing countries to compete and reduce prices for consumers
In 1999 the G-7 cancel the date of 19 developing countries worth $100 billion the wiping out of these countries debts meant that government spending could be used for economic development rather than just servicing Debt repayments
successes of the WTO: encouraging free trade
The WTO certainly has had great success in encouraging free trade between countries thereby encouraging global prosperity and stability
In 2005 for example it was estimated that was 6.2% of the $10.5 trillion generated by global trade was spent on freight costs only 3.3% was spent on tariffs
The average tariff on manufactured products in 1947 was 40% by 2000 it had declined considerably to just 3%
Alongside this the value of global trade has increased hugely from $296 billion in 19 $50-$8 trillion in 2005 and just under $20 trillion in 2013
China and Russia have both now joined the WTO which as well as encouraging more trade also connects them more closely with other states so facilitating cooperation and dispute settlement
It has promoted and open trading system based on multilaterally agreed rules that is promoted well trade and economic growth protectionist harris I’ve fallen steeply and now average Leston 5% in industrialised countries partly as a result of this in The 25 years since World War II economic global growth averaged 5% per year and world trade grew by 8%
