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International trade: from the GATT to the WTO

International trade: from the GATT to the WTO. Federico Steinberg Universidad Autónoma de Madrid. Outline . From GATT to WTO GATT Principles GATT Rounds and results The Doha Round The new north – south conflict Does it matter that Doha fails?

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International trade: from the GATT to the WTO

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  1. International trade: from the GATT to the WTO Federico Steinberg Universidad Autónoma de Madrid

  2. Outline • From GATT to WTO • GATT Principles • GATT Rounds and results • The Doha Round • The new north – south conflict • Does it matter that Doha fails? • The WTO’s role in the globalization governance

  3. The GATT • Founded in 1947 as a piece of “embedded liberalism” (23 countries) • Goal: regulate international trade (not liberalize it) • Principles: • Most-favored-nation clause • No discrimination • Reciprocity/Exchange of concessions • Flexibility: exceptions and “GATT a la carte” • “Special and differentiated” treat for the Developing Countries

  4. The Rounds generated… • Important liberalization in manufactures • Close to zero tariffs in advanced countries • Higher tariffs in developing countries • Until the Uruguay Round: • Agriculture and services excluded • Tariffs on textiles (multi-fibers agreement) • In practice, the GATT was a club of rich countries who liberalized trade among themselves: • They set rules on the issues they were more interested in • They did not listen to the demands of developing countries

  5. Role of the developing countries • Isolated until the Uruguay Round • Demanded special and differentiated treatment and preferences • Passive attitude towards negotiations • Uruguay Round  Radical Change • Some emerging countries with large domestic markets take up a pro-active position and start exchanging concession • Least Developed Countries remain on the sidelines: lack of resources

  6. The Uruguay Round  WTO • The most comprehensive and ambitious: fully global • Creation of the WTO: an authentic International Organization • Single undertaking (“everyone must comply everything”) • Content: • Dispute settlement mechanism– “good for everyone” • GATT 1994 • Agriculture • Textiles liberalization: in 2005 – success of the developing countries • GATS: services modalities – favors the rich countries • TRIPS: Intellectual Property. In Favor of MNCs • Other agreements: TRIMS, plurilateral agreements, working groups But the WTO reproduces the power asymmetries international system

  7. The WTO

  8. Developed countries More liberalization in services and manufactures in developing countries Defensive interests in agriculture (EU) Broaden the agenda over the New Issues: The Singapore Issues (1996): competition, investments, government procurement, trade facilitation Labor and environmental Standards Emerging economies Keep a limited agenda Increase market access to advanced countries (textiles, Agriculture,…) Receive support for the implementation of RU agreements Modify TRIPS to gain flexibility Reduce peak and progressive tariffs Liberalize GATS Mode IV Main interests of …

  9. The biggest conflict is in the “new issues” • They are trade-related. • They imply regulatory harmonization. • Opposition from developing countries: • Undermine sovereignty • Reduce “development space” • Have high implementation costs • Could be used as a protectionist excuse • Support of the developed countries (mostly the EU) to “ensure” fair trade.

  10. The “new issues” • The Singapore issues • Trade and investments • Trade and policy competition • Trade and government procurement • Trade Facilitation (it is being negotiated) • Other new issues: • Labor Standards • Environmental Standards

  11. After Uruguay: The WTO • Imbalances of the Uruguay Round • Liberalization favored disproportionately developed countries (+/- 70%) • The north-south conflict grows, mainly around the new issues • Unsuccessful attempts to launch a New Round: • 1999 – Failure of the Seattle Ministerial Conference: disagreement over the Agenda, specially over the new issues • Birth of the anti-globalization movement?

  12. What’s at stake? Who wins?Who loses? Impact over the income of a full merchandise trade liberalization (NOT SERVICES) by country and region in 2015 (compared with 2001)

  13. The Doha negotiations(I) • Stagnation and conflict • Minimal progress in all subjects • 2003: TRIPS bashful reform • Cancun Summit 2003: Another failure • The agricultural supply of the rich is considered insufficient by the developing countries, who reject to talk about the Singapore issues • Consolidation of solid coalitions in developing countries, especially G-20

  14. The Doha negotiations (II) • The Hong Kong agreement (2005): • Elimination of agricultural export subsidies by 2013 • Aid for the Most Developed Countries: • Access to the market in rich countries, (as an EBA initiative) • Aid for trade: What does it mean? • All the Singapore issues are excluded except trade facilitation (the only one that is not problematic) • It is still pending to close the NAMA “package”, services and set the details in agriculture • Stagnated Negotiations since then (several failed re-launch attempts), the last one in July 2007

  15. Negotiations collapse • Pro-liberalization lobbies, comfortable with current regulation • The WTO is not useful to liberalize services • Tariffs below max  • Increase in the price of commodities • US’s TPA

  16. Stagnated Negotiations: structural causes • Change in the equilibrium of power in the global economy  The emerging powers gain importance • GATT Institutional inertia  governance problems • High Expectations: Development Round and UR background • 2/3 of the WTO members are developing countries • The G-20: joint group with offensive interests

  17. If Doha fails? • World Trade keeps on growing: 1990-2005, almost doubled the GDP and investment is five times the GDP  Weight of the MNEs • 13 billions of US dollars yearly (76% merchandise and 24% services), such as the USA economy IMF, WEO April 2009 • Causes: high growth, previous liberalization in developing countries, fragmentation of the chain value, new technologies, etc.

  18. Long run costs • Important, but difficult to quantify • Weakening of the legitimacy of the multilateral trade system GLOBAL PUBLIC GOOD • Rejection of the emerging to the current regime  search for de alternatives • More commercial pleadings • Boom of preferential agreements

  19. Problems of the bilateral agreeements • Discriminatory and inefficient ( it erodes the multilateral system) • It consumes diplomatic resources for the multilateral negotiations • More geopolitical than economical motivation • They usually benefit the relatively richest countries, that includes the “new issues”

  20. The most recent ones • USA: “competitive liberalization” (Colombia, Korea, CAFTA, LA, Maghreb and Middle East) Trans Pacific Partnership (2012) • EU: new impulse to regionalism since 2006 (enlargement, Mediterranean, Korea, LA) • Transatlantic Economic Area (just launched) • Strong integration in Southeast Asia India and China • Expansion of MERCOSUR • Even thought, there are more confrontations in Doha Ex. EU-MERCOSUR

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