Trade & Labour (GATT, WTO)

What are the historical origins on global economic governance?

Bretton Woods Conference 1944

What was the aim of the Bretton Woods Conference’s aim?

• To establish an International Trade Organisation

• An interdependent systems to make the world more stable, economically, financially, & security.

What could countries not agree on that prevented the creation of the International?

• US = pushed for extensive trade liberalisation 

• Europeans (UK) = wanted more preferential agreements

• Developing countries = pushed for protecting commodities & commodity exporting countries 

What happened in the Bretton Woods Conference 1944?

• Failed to establish the International Trade Organisation (ITO)

What alternative did they agree on?

1947 General Agreement of Tariffs and Trade (GATT)

1947 General Agreement of Tariffs and Trade (GATT)

Institutional framework for trade - an agreement that sets how countries can regulate their imports & exports = characterised trade 

How does GATT work?

• A set of principles

• Countries renegotiating their tariffs on trade = why there are multiple negotiation rounds

Give an example of a famous round of tariff on trade negotiation

• Uruguay Round (1986-94)

• Became apparent that countries couldn't agree on how to handle specific products & matters 

• Round that lead to the creation of the World Trade Organisation in 1995

What was established first?

the General Agreement on Tariffs and Trade

—> became the founding principles for the WTO 1995

What were the first rounds about?

• About tariffs and how high they should be

• What countries should be allowed to introduce tariffs?

• Under what circumstances should tariffs be introduced?

What was incorporated in later rounds?

• Countries began using domestic protection mechanisms to avoid GATT principles

• Non-tariff measures

—> matters of concern

Outline a protectionist mechanism used by countries

• Anti-dumping measures 

• Non-tariff measures

What became incorporated in the last rounds?

• Not just trade in products but also trade in services

  • intellectual property concerns

  • disputes over tariffs

What did the concerns that arose from GATT lead to?

The creation of the World Trade Organisation

• to deal with the issues that became apparent in the last round

What type of agreements supposedly come from WTO?

Multilateral agreements

What was the latest round

Doha 2001 round

How many participants in the Doha 2001 round?

160

When did the round breakdown and why

• 2008

• Because countries failed to agree to continue negotiations for this round

• Led to countries increasing reliance on bilateral trade agreements 

What success was there is 2022 and why was it a success?

the Geneva package - addressed:

• tensions between global north and south

  • characterised the Doha round (protectionist measures by the South, agricultural subsidiaries) from the North lowering prices…

• environmental sustainability

• waiver for covid vaccines 

• WTO reform

Give an example of an environmental agreement included in the Geneva package

Fisheries agreement

• prohibits all illegal, unreported, unregulated fishing to prevent overfishing 

What agreement was involved in the waiver for vaccines in the Geneva package?

Trade Related Intellectual Property Agreement

• protects pharmaceutical companies when developing vaccines

Why was there the reform of the WTO?

• Complaints from Trump, Global South & North

When was the World Trade Organisation founded?

1995 at end of the Uruguay Round

Where is WTO located?

Geneva

How many members?

164

What type of organisation is the WTO?

Primarily intergovernmental

—> all member states are involved in all the decisions being taken

What is the only element which is not intergovernmental but still considered by the WTO?

Dispute Settlement Mechanism 

All all UN members part of the WTO?

Naur - doesn’t have anything to do with the UN

What can the WTO decide about its members?

Who can be an observer

e.g. regional organisations

What is the highest decision making organ in the WTO?

Ministerial Conference

• all members send their trade ministers to the annual conference 

• they make decisions about the Ministerial Conference

What other organ is there?

General Council

Who is the General Council composed of?

• Trade officials

• Meets throughout the years to discuss 

  • trade in goods

  • services

  • agriculture

  • intellectual propers

Does WTO have a Secretariat?

Yes but it is small

• 600 staff members 

How are decisions made by the Secretariat?

By consensus

—> why a trade round breaks down because if states can’t agree no decision is made 

What are the objectives of the WTO?

• Regulate international trade to reduce trade limited practices

  • countries gain economically from trade 

• Rule-setting authority

• Transparency 

  • fixed public list of import tariffs for all products

What is the macro-economic logic?

that trade liberalisation leads to economic growth through: 

• specialisation + comparative advantage 

• large-scale production

What is the overall objective of the WTO

• Avoid protectionism 

• they caused global crisis

List some agreements relevant for WTO decisions

• General Agreement on Tariffs and Trade (GATT)

• General Agreement on Trade in Services (GATS)

• Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

• Rules on agricultural trade and subsidies

  • (agriculture is not part of GATT)

• Agreement to establish a trade dispute settlement process 

Why is the agreement to establish a trade dispute settlement process revolutionary for WTO?

Because it can decide independently on matters of disputes between WTO members

What do WTO members agree to do in negotiations? Also known as bound tariffs 

Set ceilings for import taxes on specific goods

What is this ceiling?

• Legally binding

• Can be amended through negotiations 

How much of the import of richer countries do tariffs cover?

99%

How much of the import of developing countries do tariffs cover?

73%

What does Hertz say about chandeliers?

That the characterisation of goods is important

What is the ‘Most-favoured Nation’ principle?

Article 1 GATT (WTO members)

= the best agreement made with another countries should be the standard for agreements with other countries 

—> whatever you do with one country you should do with another (not only in trade)

What are the goals of the ‘Most Favoured Nation’ principle

1. Simplify the global trade system

2. Lower import tariffs 

What is the second most important principle

National Treatment principle

What is the National Treatment principle?

Article III(4) GATT

= prohibits the discrimination between domestically produced goods and imported goods 

= products need to be ‘like’ each other

When are exceptions in tariffs allowed?

• Necessary measures to protect human, animal, plant life/ health

• Security exceptions

  • protection national security interests (e.g. Trumps Steel production)

• Regional trade agreements

  • e.g. NAFTA, EU, CETA, TTIP

• Balance of payments

  • safeguard external financial situations (temporary e.g. covid, financial crisis…)

• Temporary waivers (temporary)

• Cultural exceptions (since 1993)

  • European films to protect their industry

Is there compliance with WTO rules?

There is a lot of non-compliance

What are sources of non-compliance?

1. Political opportunism = domestic interests groups put pressures on governments to protect an important domestic sector  

2. Free-riding = avoiding unilateral non-tariff barriers

What happens when a state does not complying with the principles?

The dispute settlement mechanism takes place

List the steps in the dispute settlement mechanism

1. First attempts = bilateral resolution (one on one)

2. WTO Dispute Settlement Body = appoints a panel of 3-5 trade experts to write a report

3. If the report is accepted it becomes legally binding

4. If the report is rejected - the countries can go into the Appellate Body (7 specialists appointed for 4 years)

5. The Dispute Settlement Body re-approves or rejects the report (never been rejected) = legally binding

What happens if there is non-compliance

The harmed party can ask the Dispute Settlement Body to impose economic sanctions

Name and explain a case study that demonstrates how the Dispute Settlement Mechanism Works

Shrimp-Turtle case

• 1980 - US passed a law banning imports of Shrimp from countries that had not proved their shrimping industry didn’t harm turtles 

• India, Malaysia, Pakistan, Thailand = complained that US was not treating all sources equally 

  • Caribbean countries were given technical and financial assistance & longer transition periods

• Us was found to be violating its commitments by discriminating among its trading partners 

• Violating the Most Favoured Nation principle 

What is the current situation of the Dispute System Mechanism?

• The Appellate Body is suspended since 2019

  • functioning anymore because all the judges because the US always refuses the reappointment of them 

What is the alternative to the Appellate Body?

• A temporary alternative mechanism in 2020 adopted by a few countries

• A Multi Party Interim Appeal Arbitration Arrangement

• 2024 Formal reform process - currently on hold

—> not automatic, need individual states to sign up to these alternatives

—> as long as Trump is in presidency, there will be no effort