development of the wts

8/7/2019 Development of the WTS

1/11


2/11

Development of the

World Trading Systemy Intellectual arguments for free trade

yAdam Smith and David Ricardo

y Free trade as government policyy Britains (1846) repeal of the Corn Laws

y Britain continued free trade policy

y Fear of trade war


3/11

Development of the

World Trading System

y Great Depression

y US stock market collapse

y Smoot-Hawley tariff (1930)

y Almost every industry had its made to order tariff

y Foreign response was to impose own barriers

y US exports tumbled


4/11

Development of the


y GATT - multilateral agreement established in 1948under US leadership

y Objective is to liberalize trade by eliminating tariffs,

subsidies, and import quotas

y 19 original members grew to 120


5/11

Development of the


y Used rounds of talks to gradually reduce tradebarriers

y Uruguay Round GATT 1986-93

y Mutual tariff reductions negotiated

y Dispute resolution only if complaints were received


6/11

GATT principles

yThe principle non discrimination

yElimination of non tariff barriers suchas quotas except on agricultural

products and forBOP

difficultiesyConsultation among nations in solving

trade disputed within GATT framework


7/11

Uruguay Round

yTariffs-Tariffs on industrial products to be

reduced an average 4.7 percent to 3 percentyQuotas-Nations are to replace quotas on

agricultural imports and imports on textiles

and apparels with less restrictive tariffsyAntidumping-Tougher and quicker actions

to resolve disputes


8/11

Uruguay Round

ySubsidies-Volume of subsidized agricultural

exports is to be reduced 21 percentySafeguards-Nations may temporarily raise

tariffs or other restrictions againinst animport surge that severely harms domestic

industry, but it bars countries fromadministering heath and safety standardsunless based on scientific evidence.


9/11

U

ruguay Round

yIntellectual property-The agreement

provides for 20 year protection ofpatents, trademarks, and copyrights.

yInvestments-The agreement phases out

the requirement that foreign investorsbuy supplies locally or export as muchas they import.


10/11

U

ruguay Round

yWTO-The agreement also called for the

replacement ofGATT with WTO inGeneva with authority not only in trade inindustrial products but also in agriculturalproducts and services. Trade disputes are

also to be settled by a vote of two-thirds orthree quarters of nations rather thanunanimously as under GATT


11/11

Disturbing Trends in the

World Trading Systemy Pressure for greater protectionism due to

y Increase in the power of Japans economic machine

and closed Japanese marketsy US trade deficit

y GATT circumvented by many countries

y Through use of VER

development of the wts

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