What Are the Issues Facing the World Trade Organization - Term Paper Example

Introduction 2006 is a tumultuous year for the World Trade Organization. There are several issues facing the organization this year, ranging from newmembership to agricultural subsidies to genetically modified foods. The organization finds itself at a crossroads in addressing the global trade imbalance between rich and poor countries. This is the final year in which the American president enjoys “Fast-Track” negotiating authority, increasing the urgency of settling negotiations before there is a chance the outcome could be amended by the U.S. Congress prior to approval. Trade liberalization aimed at the economic development of poorer countries through export growth hangs in the balance, with the United States and European Union poised as spoilers. These are the main issues facing the WTO in 2006. This has arguably been the most critical year in the history of the organization. The founding principles of the WTO – trade liberalization that yields a rising tide that raises all ships; and the fair and timely resolution of trade disputes – hang in the balance as richer countries are reluctant to proffer greater access to their markets in exchange for access to markets that may lack the capacity to fully reciprocate the benefits. In 2006, the question of whether truly free trade between rich and poor countries is even possible, assuming countries act in their self interest, is perhaps more palpable than it has ever been before. As membership in the WTO increases, the effectiveness of the trade body in living up to its founding purposes will become increasingly scrutinized. Nevertheless, the benefits of membership in the organization are clear for both rich and poor countries alike. While lowering trade barriers has been perceived as a greater benefit for poor countries, the ability of wealthier countries to effectively resolve disputes, with real teeth behind the adjudication of trade disagreements, has made membership desirable. The issues that have arisen in 2006 have made clear that the WTO is here to stay. Gap between Rich and Poor The promise of the WTO for poor countries has been the ability to boost exports for manufactured and agricultural products, which tend to be the main focus of production for less developed countries. Several years after wealthy countries agreed to forge an international trade system in which less developed countries could thrive, little substance has been achieved. “Rich countries promised 41/2 years ago to make the global trade system fairer for poor countries, changing rules to help them reap the rewards of international commerce. Now the negotiations launched then are reaching a do-or-die stage, but prospects are bleak for a deal that would bestow much benefit on the poor” (Blustein, 2006, para. 1). The WTO has been unable to reach consensus on the extent to which tariffs should be lowered to benefit poor countries, with the E.U. in particular generally unwilling to allow a wholesale reduction of trade barriers, especially for agricultural products. Both America and Europe have a long history of political necessity in protecting home-based producers and manufacturers. To make matters worse, this protectionism is accompanied by billions of dollars in agricultural subsidies that interfere with natural supply and demand in the global market. “The payments encourage excess production of crops, which leads to gluts on world markets, depressing prices” (para. 5). This has been a major grievance of developing countries whose unsubsidized farmers must contend with artificially low prices due to an overabundance of products in the market. The organization has had many opportunities to address these grievances, yet has always failed to do so. WTO discussions about how best to expend trade while addressing global poverty, have been ongoing since 2001 (“WTO Farm-subsidies,” 2006). “Time and again, the WTOs 149 members have missed self-imposed deadlines to agree on how to cut farm tariffs and subsidies, and tariffs on manufactured goods” (para. 6). 2006 appears to be no exception. While the U.S. has offered what the Bush Administration describes as a sixty-percent reduction in farm subsidies on the condition that other countries cut them by two-thirds, the E.U. has been reluctant to comply. The Europeans have asserted that there is little evidence that reduction in farm subsidies would benefit poor countries; and argue that the countries that are pushing hardest for the reductions are the major agricultural exporters, The U.S. and Brazil, who are most likely to gain from increasing global prices for agricultural products. America’s “Fast-Track” Authority The general issue of trade liberalization - particularly the lowering of trade barriers and subsidies for manufacturing and agricultural products in order to assist development of poor countries – is one of many issues that have added urgency in 2006 due to the looming expiration of the U.S. law granting “Fast-Track” negotiating authority to the president. This law, set to expire in 2007, means that Congress must vote up or down on any trade agreements negotiated by the administration. When the law expires, Congress will have the ability to attach amendments prior to approval of agreements negotiated by the president. This essentially introduces a tremendous degree of uncertainty into the negotiating process, as it becomes far less likely that agreements signed by the American side will stand as negotiated. In short, whatever positions the U.S. takes this year on any issues, including its conditional offer of a significant reduction in farm subsidies, must be acted on this year in order to be assured that they will not be altered by Congress. In a way, the urgency added to the negotiating process in 2006 could be positive, as it “prevents negotiators from talking forever” (“Ten Days,” 2006, para. 3). The consequences of failing to reach consensus are potentially dire for the organization. “if negotiators do not agree on how to go about liberalising trade in goods, the round and possibly the World Trade Organisation itself may founder” (para. 1). Renewal of “fast-track” authority is extremely unlikely, and the current administration is poised to become a lame duck for purposes of trade negotiation. “Further serious negotiation would have to wait for a new president in 2009. Even then there is no certainty and maybe little likelihood that he (or she) would make this a priority or get his way if he did” (para. 4). The impending expiration of this American law is arguably the most important issue impacting the WTO in 2006. Genetically Modified Foods In addition to providing a vehicle for trade negotiation, the WTO also serves a critical function as arbiter of trade disputes among its members. One of the most significant disputes addressed by the WTO in 2006 involved the export of genetically modified foods by the U.S. Early in 2006, the WTO delivered a victory to the U.S. in its efforts to reap economic benefit from biotechnology by freely exporting genetically modified products. The body ruled that the E.U. could not block the import of genetically modified products. “In a nutshell, the WTO dispute panel has said that Europes moratorium on GMOs - which ended in 2004 with the approval of a GM maize variety - led to trade rules being broken because it caused "undue" delays in the approvals process. In relation to individual products, the panel has also said that 24 of 27 applications awaiting approval were subject to ‘undue’ delays” (Mayer, 2006, para. 6). The EU maintains that the ruling has little effect since the import policy which it addresses expired in 2004. Nevertheless, several EU member countries, including France, Germany and Italy, still have national moratoria in place on GM imports. The U.S., Canada, and Argentina, the countries that brought the complaint, maintain that the ruling confirms that WTO member nations cannot discriminate against imports based on “politics rather than science” (“EU Ban,” 2006, para. 6). The politics of GM products is heated. The U.S. and other major purveyors of GM foods contend that the technology promises to greatly increase the world food supply at a time of tremendous concern about global hunger resulting from an ever-escalating population. The majority of European citizens are concerned about the safety of introducing genetically modified ingredients into their food supply. European producers have responded in an optimal business manner by largely refusing to include those ingredients in their products. The 2006 ruling of the WTO’s dispute panel will not change that reality. The WTO can compel legal and regulatory changes by member states, but certainly cannot compel private business to sell particular products. Therefore, the impact of this decision may not have a significant short-term impact on the economic prospects of GM technologies, although long-term effects remain to be seen. “Greater global acceptance of biotech crops will follow eventuallyas nations gradually realize that they cant arbitrarily ban such foods” (“World Trade Organization’s Ruling,” 2006). Membership Expansion The WTO has grown steadily since its inception as a successor to the beleaguered General Agreement on Tariffs and Trade (GATT). By 1998, just three years after the founding of the WTO, there were 133 members (McGrath, 1998, para. 2). In 2006, there are 149 active members, attracted by the organization’s stated purpose of implementing “agreements that effectively "de-regulate" trade through the reduction of trade barriers and the timely resolution of trade disputes” (para. 4) One of the pressing issues for the WTO in 2006 is the prospect of further membership expansion. Among the countries currently clamoring to join the organization are Russia, Vietnam, Iran, Sudan, Afghanistan and Ukraine. These countries each have unique situations that give rise to their own reasons for wanting to join the WTO. Of these countries, Russia, Vietnam and Iran have produced the most activity and discussion in 2006 pertaining to WTO membership. Russia is the most notable non-member because it is the “only major world economy which remains outside the 149-member WTO” (“No WTO Membership,” 2006). Russian officials largely attribute the delay in Russia’s membership to a failure to reach agreement with the United States. “Negotiators say that talks have been held up by lingering disagreements over aircraft tariffs, banking regulations, movie and music piracy and rules for trade in areas like frozen chicken” (Kramer & Weisman, 2006, para. 2). Recent indications are that Russia is unlikely to gain membership this year. Russia has been somewhat cautious in its membership negotiations for a couple of reasons. First, many Russians are concerned that WTO requirements might be inconsistent with the trade policies that are needed to promote the strength of the country’s unique economy (“Russia unlikely to join,” 2006). Second, Russia’s leading exports are unlikely to benefit from WTO membership. “The Russian economy could get a lift from membership in the World Trade Organization, though it is less likely to help Russia as much as it did China, which exports mainly manufactured goods that face higher tariffs if made by nonmembers of the organization. The largest Russian exports are oil and natural gas, commodities in demand worldwide and not blocked by trade barriers.” (para. 13). Nevertheless, as Russia seeks to continue its role as a dominant geopolitical player and influential world economy, the reality is that WTO membership is necessary to that end. Without membership, the post-Cold War position of Russia is likely to be one of increasing marginalization with minimal prospects for wielding any meaningful influence in a new world that is marked by ever increasing economic interdependence. While the short term benefits to Russia of WTO membership may be relatively scant, the long term implications of failure to gain membership could be grave. Conclusion 2006 has been a pivotal year for the World Trade Organization. Issues confronting the organization this year include whether anything will be done to assist poor countries; what will be the implications of the dispute panel’s decision in favor of genetically modified food imports; the impact of the looming expiration of the American president’s “fast-track” negotiating authority; and which countries should be added to the organization’s membership. In some ways, the very purpose of the organization is being tested by the latest round of talks among WTO members. At the very least, many decisions that have been made and will continue to be made for the remainder of the year promise to alter the landscape of global trade for generations to come. Works Cited Blustein, P. (2006, June 30). A promise not kept. The Washington Post, D1. EU ban on GM foods broke guidelines. (2006, February 10). Farmers Guardian, 7. Kramer, A. and Weisman, S. (2006, July 12). U.S. moving toward approval for Russia membership in WTO. International Herald Tribune, 12. Mayer, S. (2006, February 15). Society: Cut and dried? The Guardian, 9. McGrath, M. (1998, September). From tariffs to turtles: a beginner’s guide to the WTO. Logistics Management and Distribution Report, 37(9), 95. No WTO membership for Russia in 2006. (2006, July 31). Xinhua News Agency, 1. Russia unlikely to join World Trade Organization. (2006, August 2). BBC Monitoring Former Soviet Union, 1. Ten days that could shake the World Trade Organization. (2006, June 21). Financial Times, 21. World Trade Organization’s ruling on biotech food buoys U.S. farmers. (2006, February 10). The Kiplinger Letter, 83(6), 1. WTO farm-subsidies talks collapse. (2006, July 2). Toronto Star, A. 20. Read More