Multilateral Trade Negotiations and Agreements Under GATT and WTO. Promoting Imperialism or Bolstering Development? The debate continues..

1. International Relations 101
Section 2
Summer of 2012
Faculty – Moushumi Shabnam (MuS)
Group Research Presentation

2. Multilateral Trade
Negotiations and
Agreements Under GATT
and WTO
Promoting Imperialism or Bolstering Development?
The debate continues..

3. Globalization
• In modern world Globalization is
considered to be one of the finest
blessings when it comes to achieving
economic growth, prosperity and
bolstering pro-poor growth.

4. The dynamic process of
globalization includes:
• Increased internationalization of economic
markets as reflected in trade and financial
capital flows.
• Institutional changes in nation states
which include modifications in policies.
• Social changes in nation states.

5. • However, accelerated economic growth is
just one dimension of this complex
phenomenon- Globalization can lead to
higher poverty, inequality between and
within nation states and exploitation of
labor.
• Conventionally free trade has been
regarded as the best growth policy of
developing and least developed nations
instead of restricted trade.

6. • With the ideology of a positive relationship
between free trade and economic growth,
GATT was established in 1947, with 128
signatories and 23 original members.
• The main objective was to promote trade
liberalization.
• GATT is a legal instrument that lays down
rules and regulations that govern trade.

7. Why are rules needed to govern
trade?
• To prevent unfair trade such as dumping.
• To involve the developing nations in world
trade.
• To liberalize trade, that is remove all sorts
of trade barriers like tariffs and quotas to
increase economic growth and
development in developing nations.

8. • These rules are negotiated in different
rounds where each member country has a
right to vote.
• There were in total 8 rounds under GATT
 Geneva Round (April 1946)
 Annecy Round (April 1949)
 Torquauy Round (Aril 1950)
 Geneva round II (January 1956
 Dillon Round (September 1961)
 Kennedy Round ( May 1964)
 Tokyo Round ( September 1973)
 Uruguay Round ( September 1986)

9. • The general GATT rules were
 Removal of all import quotas and import subsidies.
 Reduction of Tariff by all member countries
 Nondiscriminatory treatment to all nations.
• However, these rules were not applied
properly, specially by the developed
nations. There were several loop holes.

10. Violations of GATT Rules
• GATT rules were explicitly violated in
trade in agriculture, textile and clothing.
• The DCs imposed Multi-fiber Arrangement
(MFA ) on developing countries. This
allocated system of quota restricted export
of textile and clothing from developing
countries.

11. • To restrict trade in agriculture for the
developing countries and to bolster their
own agricultural sector, the DCs imposed
high tariff on agricultural imports from
developing countries and also provided
export subsidies-$47 billion in 10 years to
their domestic farmers which ultimately led
to dumping, severely hurting the balance
of payments of developing nations.

12. • There were no rules governing trade in
services and intellectual property rights.
• All these factors called for a reform.
• Hence in 1st January 1995, under the
Uruguay Round, World Trade
Organization was formed with 5 basic
principles and 4 main rules.

13. The five principles of WTO
•
•
•
•
•
Non-discriminatory.
Safety Valves.
Binding and enforcement of commitments.
Transparency.
Reciprocity.

14. Rules under Non discriminatory
principle
• Most favored nation’s (MFN’s) treatment
to all nations. This for example is called for
the abolition of MFA.
• National treatment (NT). Any nation
cannot differentiate between domestic
product and imported product.

15. Rule under Binding and
enforcement of Commitments
• Tariff must be reduced and bound against
further increase to prevent Back Sliding.
• Domestic industries must be only protected by
tariff and not by any sort of import quota.
• All rates of tariffs and other concessions must be
recorded in the National Schedule of
Concession saved in the database of WTO.

16. Safety valves were provided under
3 conditions
 Non-economic reasons.
 Unfair trade.
 Economic reasons- infant industries are hurt and
BOp deteriorates.
• For victims of unfair trade, they were
allowed to imposed anti-dumping and
countervailing duties on top of normal
duties.

17. Results of Uruguay Round
Agreement on Agriculture.
Issue of Market Access
Agreement on Textile and Clothing.

18. Agreement on Agriculture
2 types of agricultural products:
 Tropical zone products
 Temperate zone products
• Significant Liberalization was achieved in
Tropical zone products.
• Stricter barriers to trade was imposed on
temperate zone products by DC’s through
WTO.

19. • The DCs like the US and EU were
imposing heavy tariffs and paying export
subsidy to temperate zone productsviolation of WTO law.
• The DCs in order to correct this
infringement influenced the WTO to allow
“Tariffication” of all agricultural goods.
• The result: One barrier was just replaced
by another. Ultimately, there were no
Liberalization and the DCs were the sole
winners.

20. • The tariffied rate was 300% to 350%
• This allowed zero market access to the
developing countries in case of temperate
goods.
• The Export of developing countries
diminished.

21. Agreement on Textile and Clothing
• Before UR, the DCs had MFA for
restricting import of textile from the
developing countries.
• Hence, the agreement of phasing out MFA
in 4 stages within a transitional period of
10 years (1st January 1995 to 1st January
2005) was signed by all member
countries.

22. 4 Stages of Phasing out of MFA
• 16% of the products in 1995.
• 17% of the products at the end of 1998.
• 18% of the products at the end of 2002.
• 49% of the products by the 10th year, 2005.
This system of phasing out was benefiting
the DCs in disguise.

23. • Most of the products were left to be
integrated at the last moment.
• These products were of special export
interest to the DCs, hence they were
reluctant in reducing the tariff on these
products.
• This once again favored the DCs leaving
developing countries disadvantaged.

24. • During the UR, the DCs reduced tariff by
100% on products like pharmaceuticals,
furniture, steel tools and others in which
they had no comparative advantage and
allowed the developing countries to freely
export these.
• They pretended to help out the poor but
actually they were just ripping off benefits
for themselves.

25. WTO Supporting Imperialism.
• WTO has promoted capitalism and always
given leeway to the DCs through its partial
agreements.
• It has strengthened protection of
Intellectual property rights to discourage
technology transfer and to favor the nonstate actors: the giant multinational
corporations.

26. • WTO has always tried to implement a
development model which the DCs think is
right for LDCs, it is just an exploitation tool
used by the clever DCs.
• WTO makes global rules that affect the
policy space of developing countries which
limit their option in dealing with poverty
and inequality.

27. Why Developing countries are
lagging behind?
• Weaknesses in negotiating strategies and
poor leadership.
• Psychological factors that limit perceived
prospects for success in negotiations.
• A very little market share of world imports
(US and EU are the top consumers of world
imports).

28. • Lack of financial assets.
• High dependence on DCs for aid and
other assistance.
• Political and macroeconomic instability.

29. New emerging powers in trade.
• Brazil, India, China, Mexico, South Africa
and Germany.
• Brazil, India, Germany and Japan for
permanent seats on the United Nations
Security Council (UNSC)

30. Recommendations
• Building coalitions with DCs.
• Better coordination with the other developing
countries to strengthen their stand in MTNs.
• Form Regional Trade Arrangements ,like
SAFTA.
• Need to improve and strengthen the decisionmaking machinery and institutions.
• Get support from Multinationals Corporations.

31. THANK YOU!