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International commercial diplomacy - GATT/WTO

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WTO – some facts

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The 10 benefits

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Benefit nr 1: Peace Peace is partly an outcome of two of the most fundamental

principles of the trading system: helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces.

History is littered with examples of trade disputes turning into war. One of the most vivid is the trade war of the 1930s when countries competed to raise trade barriers in order to protect domestic producers and retaliate against each others’ barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2.

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Nr 10: Good government

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The World Trade Organisation

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Principles of the WTO

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Why is it called “most-favoured”? The name sounds like a contradiction. It

suggests some kind of special treatment for one particular country, but in the WTO it actually means non-discrimination — treating virtually everyone equally.

Each member treats all the other members equally as “most-favoured” trading partners. If a country improves the benefits that it gives to one trading partner, it has to give the same “best” treatment to all the other WTO members so that they all remain “most-favoured”.

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Exceptions to MFN About 100 of the 144 members are

developing countries - and it it “permitted” to discriminate favourably towards developing countries

Regional trade agreements are permitted

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Regional agreements

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GATT- WTO

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GATT - WTO

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Did GATT succeed ? Tariff rates dramatically reduced from

40 % to 4 % on industrial goods Much smaller success with NTBs Small or no legal power, but has been

much strengthened in the WTO Outstanding problems

regional agreements EU and CAP (Common Agricultural Policy)

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Eight rounds since 1947

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What happened in the different rounds of negotiations between 1947 and nowadays?

• The first five GATT rounds concentrated largely on tariff reductions. The first round, involving 23 countries in 1947, resulted in 45,000 tariff concessions affecting $10 billion of trade, about one-fifth of the world's total. The 23 also agreed to adopt the General Agreement in Tariffs and Trade, rescued from the failed attempt to create an International Trade Organisation.

• The next GATT rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs (non-tariff barriers), and to improve the system. The eighth, the Uruguay Round of 1986-94, was the latest and most extensive of all. It led to the WTO and a new set of agreements covering goods, services, intellectual property and a new dispute settlement mechanism.

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The Uruguay Round

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Problem nr 1: Agriculture

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Agriculture - very expensive

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Solving disputes

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Much faster than it used to be