General Agreement on Tariffs and Trade - Term Paper Example

TOPIC: What are the most significant contemporary political problems that are facing the World Trade Organization’s goal of trade liberalization? Submitted to (INSTRUCTOR’S NAME) (INSTITUTION NAME) (ADDRESS) May 5th, 2015 By (STUDENT NAME) (INSTITUTION NAME) Contents Contents 2 Introduction 3 The twisted narrative of GATT and WTO successes 4 Political Contentions in the WTO 6 Negative implication of political bickering of WTO members on its success 8 Increased tension among WTO members 8 Overwhelming workload of WTO institution 8 Inequitable distribution of multilateral trading system benefits among WTO members 10 Conclusion 11 Bibliography 12 What are the most significant contemporary political problems that are facing the World Trade Organization’s goal of trade liberalisation? Introduction World Trade Organization (WTO) model of a multilateral trade system is celebrated as a masterpiece tool of global economic development and management. The achievement of the current WTO as well its predecessor General Agreement on Tariffs and Trade (GATT) has been exemplary. For the last 50 years, GATT and WTO are credited with increased wealth accumulation of industrialized member states as well as fast-tracking development of poor member states to catch up with their industrialized counterparts. GATT and WTO multilateralism is also credited with transition of developing member states economy from a predominantly rural-based economic system to super-competitive trade giants. Further, multilateral trading system has opened up advancement prospects for the poorest contemporary nations. Despite its realist past and current economic benefits and successes as well as its promising future economic potentials, WTO is currently under heightened political attack (Ahnlid 2012, p 67). Majority of WTO criticism is precipitated by the pessimistic perception about the inability of WTO to resolve the entire current and future problem that plagues the global economy as well as social development. Other critics of the WTO cite the idling, out of gear, and falling inefficiency of WTO in tackling the emerging challenges contributed by the globalization process. The twisted narrative of GATT and WTO successes GATT and its successor WTO are credited with exemplary achievement particularly in lowering traditional protectionist barriers to post-war world trade in nature of tariff and non-tariff impediments. For 50 years after the formation of the GATT, mean tariff rates on manufactures in the industrial nations declined dramatically to 4% from 40%. Furthermore, the total value of global merchandise trade rose eighteen-fold over the same period at an average yearly increase of 6%, which was equivalent to three-fold yearly increase rate of global per capita GDP (Capling & Higgott 2009, p 318). Removal of national barriers over successive post-war trade meetings finally culminated in the face-to-face confrontation between trade negotiators with a multiplicity of domestic institutional, regulatory, and structural interests on trade flows. Under conviction about the role of these trade-related factors in the impediment of open flow of products and services, trade negotiators embarked on a mission to address a number of these problems in the Uruguay Round. However, the close link between factors that impede free trade with cultural preferences, business practices, and political arrangements resulted in the overwhelming of trade negotiators due to the inherent complexity and sensitivity of traditional tariff and non-tariff negotiations (Albin 2012, p 3). Furthermore, the growing prospects of multilateral trade negotiations in fields previously considered as domestic policy prerogatives resulted in increased interest of corresponding civil society stakeholders in WTO operations. Japan and Western Europe countries provides a typical example of the astonishing success of GATT multilateralism in transforming the initially devastated recipient of post-war reconstruction financial support into first-world industrial superpowers and major competitor of United States in the global economic supremacy. The exemplary success of GATT and WTO multilateralism continued for the next five decades after post-war period with the growth of developing countries as prominent players in the world economy. A typical indicator of the successful trend of GATT and WTO multilateral trading system is the share of developing countries in global exports of manufactures that grew to 24% from 4% in 1993-1997. Another indicator of the success of multilateral trading system is the significant growth in investment in developing countries since 1980s in terms of portfolio investors, industrial nation firm, and increasingly in terms of entrepreneurs from emerging market nations. For instance, the proportion of developing countries reserve of foreign direct investment to GDP almost rose three-fold to 16.6% from 5.9% in 1980-97 (Dawson 2013, p 13). Despite these milestone accomplishments, an explicit distinction of poorer countries from middle-income and emerging economies reveals unique disgruntlement of poorer countries with WTO multilateral trading system. In particular, poorer countries complain against isolation from the world economy under WTO multilateral trading system. Contrary to the general trend of developing countries, the share of global trade of the world’s 48 poorest nations with a population exceeding 1 billion people is declining. Likewise, the exports of least developed countries (LDCs) has only increased by one-fourth as fast as the average growth of developing countries since 1980. The involvement of the poorest countries in global trade is thus limited in expanse and in depth. For instance, unprocessed raw materials represent 75% of the world’s poorest countries exports. Likewise, over 70% of these nations export earnings is contributed by three items on top of their export revenue list. Such dependence of a limited variety of exports increases vulnerability of poor countries to external shocks. The value of poor countries’ basic commodities has also depreciated by half in comparison to other products for the last two decades. Political Contentions in the WTO Majority of governments also seem to entertain the idea that they and the WTO institutions are in the best position to ponder on the multilateral trade organizations achievements. Subsequently, the left out constituencies have become increasingly disgruntled with WTO resulting to several of them expressing open hostility towards the multilateral organization (Conceição-Heldt 2013, p 173). Several developing nations that currently represent the overwhelming majority of WTO members, argue on the inherent bias of the organization against their interest, which results in asymmetrical agreements between poor and rich members. Developing countries are also disgruntled with the degree of trade-related technical aid they have obtained from donor nations besides other multilateral institutions to enable them to cope with the challenges of implementing their share of WTO commitments. The reluctance of chief WTO financial backers to master confidence or courage to convince or prevail upon domestic opposition has resulted in their failure to offer enough funding for WTO Secretarial, which is already weighed down by technical aid demands and by new accessions and dispute arbitration cases. Industrial government often acting on behalf of influential civil society interests, are disappointed by the rigidity of developing nations in challenging new multilateral trade measures as well as discussions on environmental standards, labour standards, and WTO’s operations transparency. A significant part of the business community is also growing increasingly disappointed with the slow progress of WTO decision-making. Furthermore, a section of the business community are becoming with the monotonous outcome of WTO negotiating results that often results in a least-common-denomination characteristic solutions. WTO is hence subjected to an almost unmanageable set of factionary pressures. On one side several civil society groups are fighting for the expansion of the organization’s mandate and powers by advocating for the use of trade sanctions for enforcement of agreements on environmental, labour or other standards. Another faction of civil society groups are lobbying for the trimming of WTO’s mandate in a manner that they perceive would empower existing environmental and social protections or standards (Heron 2008, p 251). Simultaneously, the WTO is struggling with a worrying lack of leadership on the section of majority of its largest members. Majority of industrialized nations whose cohesion has traditionally been critical to progress on institutional changes or fundamental issues are divided. Furthermore, these industrialized nations have performed poorly in presenting a model public image for more free trade and the perpetuation of economic liberalization on which a sizable amount of their current wealth rest. Negative implication of political bickering of WTO members on its success Increased tension among WTO members The success of WTO has been paralleled by a corresponding rise in tension among its members as well as external pressure, which threatens the long-run productivity of the institution. For instance, a number of industrialized members have deliberately declined to offer adequate wage and training support for lower skilled workers who are basically the unfortunate victims of trade liberalization. For instance, the UK Labour Party’s token of “Education, Education, Education” has achieved very little in training and raising the income of lower skilled workers, and has also come too late to impact any change. This has resulted in the waning of UK public support for free multilateral trade and hence the willingness of their political representatives to ratify WTO multilateral treaties and agreements (Thompson & Verdier 2014, p 19). For instance, the disintegration of the Seattle Ministerial Meeting was a clear sign of the worrying state of issues in the multilateral trading system. The stalemate of Seattle Ministerial Meeting was replicated in the Geneva negotiations on agriculture and services as well as the scheduled Uruguay Round negotiations. Overwhelming workload of WTO institution Participation in scheduled meetings of multilateral negotiations and managing daily issue emerging from GATT was much easier role for GATT members in the initial days of the institution compared to the current case witnessed by the WTO. At its beginning, fewer countries participated in GATT’s round of negotiations and in handling current trade disputes than witnessed in contemporary WTO institution. For instance, the total number of nations that signed GATT upon its effective date on January 1st 1948 was 23 members compared to WTO total membership of 144 nations in early 2002. Furthermore, the five multilateral negotiations since 1947 to the Dillon Round in 1960-61 concentrated exclusively on lowering tariffs. Negotiations focussed at lowering nontariff barriers to trade (NTBs) indeed formed part of WTO negotiations items in 1962-67 Kennedy Round of WTO negotiations though the achievements in NTBs area were more modest. Nevertheless, the successful NTBs initiatives in the Tokyo Round pronouncedly increased the depth and level of experts needed to negotiate and monitor newly signed GATT agreements. The negotiations also added the “codes of behaviour” on nontariff issues such as countervailing and subsidies measures, government procurement policies, technical barrier to trade, antidumping measures and customs valuation procedures (Tutwiler 2003, p 684). Different committees were also created within WTO to monitor compliance with the newly formulated rules as well as for handling disputes emerging among GATT members. The Tokyo and Uruguay Rounds saw the transformation of WTO from an organization focussed majorly on lowering import duties and preventing the offsetting of such reductions through different nontariff initiatives to an institution with the prime goal of lowering a wide variety of predominantly governmental measures, which upset trade among countries from the regular pattern formed by free competitive market. These changes have significantly increased WTO institutional workload and degree of expertise needed by governments to effectively enhance and protect their economic interest in WTO negotiations and operations. In particular, the increased workload under the current WTO institutional structure and mandate has been adversely overwhelming to tiny and less developed nations whose governments don’t have sufficient resource to enhance and secure their national interest sufficiently in the widened WTO. The workload attributed to the expansion of WTO rules into additional economic areas has thus become increasingly difficult and complex for developing countries to handle. Developing nations are also contemptuous about their share of benefits derived from the newly introduced WTO rules during the Tokyo and Uruguay Rounds, which are outweighed by the economic and social costs incurred in implementation of the changes proposed by the rules. Inequitable distribution of multilateral trading system benefits among WTO members The trade-off between developing countries prospective benefits of market-access for their clothing, textiles and agricultural products to developed countries with developed countries free trade of intellectual property rights and services to developing countries provide a typical case of inequitable distribution of WTO multilateral trade system benefits. In many cases, the proceeds from developed countries intellectual property and services exports to developing nations has far much exceeded developing countries export revenue from their textile, clothing and agricultural industries. Furthermore, developed countries have appeared to observe just the minimum phrase-out of import quotas stipulated under WTO agreement on textiles and clothing for the last decade, which is contrary to developing countries expectations (Elsig 2013, p 487). The limited degree to which agricultural markets in Japan and European Union have been opened after the effective date of Uruguay Round Agreement on Agriculture has also formed a central board of contention between developing and developed members of WTO. Furthermore, developed countries have expressed reluctance in honouring new Uruguay agreements on the scrapping of countervailing-duty and antidumping measures by continuing with their protectionist countervailing-duty and antidumping policy against developing countries. Developed countries reluctance to honour new Uruguay Round agreements is also blamed for its basis on their protectionism ideologies rather than counter measures to developing countries unfair trade practices. Conclusion Developing countries disgruntlement with the inequitable distribution of WTO multilateral trading system benefits forms the prime board of political contention among WTO members that hiders its success. The political bickering within WTO organization is also prompted by developed countries look warm support to the organization’s successive rounds of agreement as illustrated by Japan, United States and European Union adherence to the minimum basic requirement of the 2001 Doha Conference WTO Rounds of Agreement. The look warm commitment of developed members to WTO successive rounds of talks is also evident in their limited aid to the organization’s secretariat (Conceição-Heldt 2013, p 437). However, the Doha conference witnessed the withering of the political acrimony between developed and developing members as illustrated by the adoption of WTO new budget that raised its technical aid funds by as much as 80%. Further harmonization of political interest of members was marked by the formation of a Doha Development Agenda Global Trust fund with a projected core budget of approximately $9 million. Ministers of member states also adopted some fifty decisions outlining the implementation duties of the developing nations and also agreed to negotiate on other persistent implementation issues. Bibliography Ahnlid, A. (2012), Improving the Effectiveness of Multilateral Trade Negotiations: A Practitioner's Perspective on the 2008 WTO Ministerial Meeting, International Negotiation, 17(1), 65-89. Albin, C. (2012), Improving the Effectiveness of Multilateral Trade Negotiations: A Synopsis, International Negotiation, 17(1), 1-8. Capling, A., & Higgott, R. (2009), Introduction: The Future of the Multilateral Trade System--What Role for the World Trade Organization? Journal of East Asian Studies, 313-325. Conceição-Heldt, E. (2013), The Domestic Sources of Multilateral Trade Negotiations: Explaining Brazil's Negotiating Position in the Doha Round, The International Trade Journal, 27(2), 173-194. Conceição-Heldt, E. (2013), Emerging Powers in WTO Negotiations: The Domestic Sources of Trade Policy Preferences, The International Trade Journal, 27(5), 431-449. Dawson, L. (2013), Labour Mobility and the WTO: The Limits of GATS Mode 4, International Migration, 51(1), 1-23. Elsig, M. (2013), The democratizing effects of multilateral organizations: A cautionary note on the WTO, World Trade Review, 12(3), 487-507. Heron, T. (2008), Small States and the Politics of Multilateral Trade Liberalization, The Round Table, 97(395), 243-257. Thompson, A., & Verdier, D. (2014), Multilateralism, Bilateralism, and Regime Design, International Studies Quarterly, 58(1), 15-28. Tutwiler, M. (2003), Challenges Facing the World Trade Organization Negotiations on Agriculture, American Journal of Agricultural Economics, 85(3), 684-685. Read More

Contrary to the general trend of developing countries, the share of global trade of the world’s 48 poorest nations with a population exceeding 1 billion people is declining. Likewise, the exports of least developed countries (LDCs) has only increased by one-fourth as fast as the average growth of developing countries since 1980. The involvement of the poorest countries in global trade is thus limited in expanse and in depth. For instance, unprocessed raw materials represent 75% of the world’s poorest countries exports.

Likewise, over 70% of these nations export earnings is contributed by three items on top of their export revenue list. Such dependence of a limited variety of exports increases vulnerability of poor countries to external shocks. The value of poor countries’ basic commodities has also depreciated by half in comparison to other products for the last two decades. Political Contentions in the WTO Majority of governments also seem to entertain the idea that they and the WTO institutions are in the best position to ponder on the multilateral trade organizations achievements.

Subsequently, the left out constituencies have become increasingly disgruntled with WTO resulting to several of them expressing open hostility towards the multilateral organization (Conceição-Heldt 2013, p 173). Several developing nations that currently represent the overwhelming majority of WTO members, argue on the inherent bias of the organization against their interest, which results in asymmetrical agreements between poor and rich members. Developing countries are also disgruntled with the degree of trade-related technical aid they have obtained from donor nations besides other multilateral institutions to enable them to cope with the challenges of implementing their share of WTO commitments.

The reluctance of chief WTO financial backers to master confidence or courage to convince or prevail upon domestic opposition has resulted in their failure to offer enough funding for WTO Secretarial, which is already weighed down by technical aid demands and by new accessions and dispute arbitration cases. Industrial government often acting on behalf of influential civil society interests, are disappointed by the rigidity of developing nations in challenging new multilateral trade measures as well as discussions on environmental standards, labour standards, and WTO’s operations transparency.

A significant part of the business community is also growing increasingly disappointed with the slow progress of WTO decision-making. Furthermore, a section of the business community are becoming with the monotonous outcome of WTO negotiating results that often results in a least-common-denomination characteristic solutions. WTO is hence subjected to an almost unmanageable set of factionary pressures. On one side several civil society groups are fighting for the expansion of the organization’s mandate and powers by advocating for the use of trade sanctions for enforcement of agreements on environmental, labour or other standards.

Another faction of civil society groups are lobbying for the trimming of WTO’s mandate in a manner that they perceive would empower existing environmental and social protections or standards (Heron 2008, p 251). Simultaneously, the WTO is struggling with a worrying lack of leadership on the section of majority of its largest members. Majority of industrialized nations whose cohesion has traditionally been critical to progress on institutional changes or fundamental issues are divided. Furthermore, these industrialized nations have performed poorly in presenting a model public image for more free trade and the perpetuation of economic liberalization on which a sizable amount of their current wealth rest.

Negative implication of political bickering of WTO members on its success Increased tension among WTO members The success of WTO has been paralleled by a corresponding rise in tension among its members as well as external pressure, which threatens the long-run productivity of the institution.

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