WTO Flashcards
When was the World Trade Organisation created?
- Established in 1995.
- Successor to the General Agreement on Trade and Tarrifs (GATT) as part of the Bretton Woods Organisation.
- Reflects the response to a changing world of globalisation and neoliberalism.
What is the general aim of the WTO
Arbitrate trade disputes between member-states and encourages them to liberalise trade (main contributor) by reducing tarrifs and subsidies
Membership of WTO
- 164 in 2019 that account for 98% of the world trade.
- Members commit to the liberal principle that free trade encourages global prosperity and discourages nationalism and conflict..
Key principles of the WTO
Non-Discrimination
States should treat their trading partners equally and fairly, and should not discrimination between domestic and foreign products.
Key principles of WTO
Predictable and transparent
Must not raise trade barriers without warning = it will increase stability and job creation, allowing steady competition and lower prices.
Key principles of WTO
Non-competitive
States shouldn’t interfere to give themself a competitive edge - subsiding exports that are uncompetitive or unsustainable.
Key principles of the WTO
More benefits for the developing countries
Enables them to catch up and transition to becoming full participants in international trade.
Key principles of the WTO
Protection of the environment
Respected nationally and internationally
Successes of the WTO
The General Agreement on Tarrifs and Trade (GATT), 1947
45,000 tariffs removed - still stands today and it has impacted US $10 billion worth of international trade.
Successes of the WTO
Kennedy Round, 1962-67
- Expanded the removal of tariff barriers worth US$40 billion + dealt with issues unrelated to tarrifs for the first time by stopping the ‘dumping’ of cheap products in other states to dominate the market.
- EXAMPLE = China’s steel industry experienced significant excess capacity and it was accused of dumping its products on the EU, selling them for less than they are worth and making it harder for EU producers to compete.
Successes of the WTO
Uruguay Round, 1986-1994
- 123 countries were involved.
- Reducing agricultural subsidies, although the EU’s system, the Common Agricultural Policy (CAP) was largely unaffected - showing the EU markets’ strength.
- Liberalised trade in intellectual property, telecommunications and banking - important because previous rounds only focused on industrial products
Other successes of the WTO
- Stronger than GATT in the field of dispute settlement because it uses a structured process.
- More democratic than the IMF - uses the ‘one country, one vote’ and requires a simple majority = consensus building among members,
- Negotiating the global trade liberalisation = helped boost exports, e.g in 2016 - 250x higher than 1948.
- Expanded membership from 123 (1995) to 164 (2018), including China and Russia = responsible for encouraging dialogue and connections between countries, reducing the risk of conflict.
- 2015 = China agreed to stop restricting the export of rare earth materials upon losing a case brought up by the US, Japan and the EU.
Limitations of the WTO
Doha Round
- Talks were in gridlock of further reductions in agricultural subsidies, which developed states like US, EU and Japan defended as they were unwilling to expand their markets, in the face of a perceived threat form cheaper, agricultural products from the developing world.
- The Organisation for Economic Co-operation and Development (OECD) estimated that the agricultural subsidies give an unfair advantage worth US$300 billion annually.
Impact of the Doha Round on the WTO
- Failure to reach agreement raised criticism of its framework and effectiveness.
- Powerful nations (inc. US and EU) block less-developed nations to preserve the status quo for protectionist reasons = now gridlocked.
- political power resides with the West, who often gains the most from these deals as a ‘rich man’s clubs.’
- Effectively abandoned w/o agreement on 2015. Until new WTO efforts are made, states must resort to negotiating with as many states as possible to further agree to the liberalisation of trade barriers.
- EXAMPLE of TPP and the Trans-Atlantic Trade and Investment Partnership bypassing WTO - others may do the same.
Other limitations
- Democratic approach to achieve concesus makes it difficult to reach decisions. Additionally - undemocratic as developing countries may not have permanent reps in Geneva.
- States aren’t always committed to the principles of free trade. For example, US Pres Trump’s protectionist policies undermined WTO’s principles and credibility as the world’s largest economy. Implies the WTO is only good if countries engage and follow the rules.
- Members can self-categorize themselves as developing states (China, India and Brazil) to give themselves longer to reduce tariffs and subsidies - undermined the confidence of developed nations.
- Inequal distribution of the advantages of economic growth - received backlash from anti-globalisation and anti-capitalists protestors as it protects core countries - challenges the WTO to reach consensus.
- Failed to stop the outbreak of a major trade war between the US and China - from 2017-19, the Trump administration imposed $250 billion of tariffs on Chinese goods. In response, China placed $110 billion worth of tariffs on US goods.
