From GATT to the WTO
Prof. Wise
IR 330
Why are trade relations
so important?
• Broader public views their welfare as being more affected by
trade policy than by monetary, investment, or financial policy
• groups attempt to influence government policy
• Globalization has had a major impact on trade relations
• International Trade is 1 of the 2 most important economic
relationships between countries
What is the “old” and “new” trade
agenda, exactly?
Old:
Agriculture and market access
New:
Services, investment, and
intellectual property rights
Post- WWII
• US became willing/ capable to fulfill its role as
global hegemon
1947: Creation of GATT
• Informal, global trade organization that was formed as
an effort to stimulate European economies via trade
Purpose:
• “Substantial reduction of tariffs and other trade barriers
and the elimination of preferences, on a reciprocal and
mutually advantageous basis”
GATT did not require ratification by US Congress because of
its informal nature as a trade agreement
9 Rounds of GATT & WTO
Negotiations
Name Years Subjects Covered Countries
Participating
Geneva 1947 Tariffs 23
Annecy 1949 Tariffs 13
Torquay 1951 Tariffs 38
Geneva 1956 Tariffs 26
Dillon 1960-1961 Tariffs 26
Kennedy 1964-1967 Tariffs and antidumping measures 62
Tokyo 1973-1979 Tariffs, nontariff measures, plurilateral agreements 102
Uruguay 1986-1993 Tariffs, nontariff measures, rules, services,
intellectual property, dispute settlement, traderelated
investment textiles, agriculture, creation of
WTO
123
Doha 1999-
present
Agriculture, services, tariffs, nontariff measures,
intellectual property, dispute settlement
149
Principles of GATT
1. Trade Liberalization: eliminating protectionist measures mainly by lowering tariffs
2. Nondiscrimination:
External: Most-favored-nation treatment
Internal: National Treatment
3. Reciprocity: A state benefitting from another state’s trade concessions should
provide roughly equal benefits in return
Specific
Diffuse
4. Safeguards: permit members to temporarily raise a duty above the maximum tariff
binding to limit imports that may harm domestic products
Safeguards Agreement
Antidumping Duties
Countervailing Duties
5. Development:
“Development principle”
Old Trade Agenda & GATT
• First 6 rounds of negotiations dealt with opening the
market for trade and reduced tariffs for manufactured
goods (under GATT)
• Agriculture remained a protected industry under GATT
• Producers in damaged countries would not be able to
recover without protection
• US producers still had a strong influence in government
In response, countries used NTBs to decrease the use of
formal tariffs
Old Trade Agenda and
the Tokyo Round
• Tokyo Round (1973-1979) addressed NTBs used by
member countries
• Problems with the Tokyo Round
• NTBs continued to exist
• Textiles/ agriculture were still protected
• GATT dispute settlement procedures were inadequate
• LDCs were not involved in GATT decision-making
Because of its issues, GATT began to decline in power, and
the global community looked to a new, more formal
agreement to replace it
Moving Towards the New
Trade Agenda
• Uruguay Round (1986-1993)
• Addressed service trade, intellectual property, traderelated
investment measures (new trade agenda)
• Applied global trade rules to agriculture and textiles (old)
• Established the WTO to replace GATT as the main global
trade organization in 1995
US wanted to address its merchandise trade deficits by
extending treaties to services trade and intellectual property
DCs wanted to regulate services trade because it was
growing at a high rate
DCs would benefit the most from new treaties because they
were the major exporters of items on the new agenda
WTO
Formal, legally constituted organization meant to govern
international trade relations
• Polices/encourages the multilateral reduction of barriers to
trade/oversees resolution of trade disputes
• Oversees the GATT and other treaties negotiated in the
Uruguay round
• Improved regulation
• Trade Policy Review Body conducts regular reviews of
members’ trade policies to increase transparency and promote
trust between members
• Dispute Settlement Board forms panels to investigate
complaints and oversee trade disputes
The Doha Round (1999)
• Essential because:
1. “The bicycle must keep moving”
2. GATT members agreed to continue to negotiate on
services/ agriculture
3. US/EU conflicts indicated the need to improve WTO
dispute settlement procedures
4. Negotiations were needed to ensure that the growing
number of regional trade agreements were compatible
with the WTO
5. The South and North both had a “wish list” for changes
in the global trade regime
New Trade Agenda:
Doha Round
DCs would give up their agricultural protectionism to give more
opportunities to LDC farmers, who would reciprocate by lowering
import barriers on DC services and manufactured goods
Southern demands:
• G20 demanded an end to US/EU agricultural export subsidies
and lower agricultural import barriers in other DCs
• Technical and building assistance from the North
Northern demands:
• Reduced barriers to LDC non-agricultural imports
• Stronger agreements for services trade/ intellectual property
rights
Suspended in 2008- round was much more unbalanced than
expected
In conclusion…
• The new trade agenda favors DCs over LDCs,
because they have more capital in services,
investment, and intellectual property rights.
• The old trade agenda, which focused on
agriculture and market access, still gave more
power to DCs because they had more
negotiating power in various GATT rounds