World Trade Organisation

Question 1

GATT

Answer 1

General Agreement on Tariffs and Trade - 1947.
- Set of rules to govern trade among 23 member countries, as US support for another formal international institution waned.
- 1995 - replaced by WTO.

Question 2

Bretton Woods conference

Answer 2

1944 - Culmination of 2.5 years planning for postwar reconstruction by US/UK treasuries, after the gold standard collapsed (money being directly exchanged for gold)
- US and British representatives studies what was lacking between the world wars - a system of international payments that would allow trade with no fear of sudden depreciation or wild exchange rate fluctuations.
- Created IMF and World Bank

Question 3

GATT/WTO principles - RECIPROCITY

Answer 3

Reciprocity = the practice of swapping tariff concessions.

One country offers to reduce a barrier of trade, the other “reciprocates” by offering to reduce one of its own.

Question 4

Terms-of-trade improvement =

Answer 4

= When the price of a country’s import good falls globally relative to the price of all its exported goods.

Question 5

Importance of reciprocity

Answer 5

• When a large country imposes a tariff, the quantity of imports demanded reduces, causing the world price to fall.
• Terms-of-trade improvement

Question 6

Principles of WTO/GATT -
NON-DISCRIMINATION

Answer 6

If one member offers a benefit/ tariff concession to another, it must offer the same to all.

Question 7

Importance of non-discrimination

Answer 7

• Convenient as less complexity in international trading relations
• Practical, easier to negotiate one set of import tariffs than dozens.
• Ensure countries import from lowest-cost source country
• Prevents trade re-routing, goods being moved through a 3rd country to avoid a high tariff.

Question 8

Exceptions to non-discrimination principle

Answer 8

• When developed countries offer trade concessions to developing countries, they should not expect it in return.

Question 9

WTO dispute resolutions

Answer 9

• Panel of 3 ‘judges’ from the Appellate Body (AB)

US CRITICISMS - AB often doesn’t stick to the 90-day deadline to issue reports.
- Allows members to rule on cases after the terms of their appointment end.

Question 10

Benefits of WTO trading system

Answer 10

1. Helps promote peace
2. Disputes handled constructively
3. Freer trade cute living cost
4. More choice of product
5. Trade raises income + stimulates economic growth
6. Governments shielded from lobbying