Global Trade Institutions and Agreements

International Trade Policy: A Brief History
- From GATT to WTO
Regional Trade Agreements
- Free Trade Areas
- North American Free Trade Agreement (NAFTA)
- Customs Unions
- Common Markets
The latest Free Trade Agreements

High levels of trade/output in early 20th century with the majority of trade agreements being bilateral.
The Great Depression (1930s):
- Nation-states responded with protectionist policies, which worsened the economic slowdown.
- Example: Smoot-Hawley Tariff Act (1930):
- Tariffs were raised on over 20,000 imported goods, leading to retaliation by trading partners.
In 1944, the eventual victors of World War II—led by the United States and United Kingdom—met at Bretton Woods to reshape the postwar structure of world trade and international finance.

The Bretton Woods Conference established the institutional basis for the postwar global era.
Principal objectives:
- Stabilize the international financial situation
- Rebuild war-damaged economies
Two main institutions established:
- International Bank for Reconstruction and Development (later known as the World Bank)
- International Monetary Fund (IMF)
The General Agreement on Tariffs and Trade (GATT) was signed in 1947 in Geneva, Switzerland.

GATT (1947):
- Countries agreed to reduce trade barriers through multilateral negotiations and not to raise them unilaterally.
- Operates through rounds of negotiations, setting an agenda in terms of binding tariffs to promote trade liberalization and administrative reforms.
Pre-1960s, GATT primarily focused on trade between developed countries. With the development of UNCTAD in 1964, there was a shift towards ensuring developing country access.
- This shift also encompassed geopolitical considerations, such as granting most-favored nation status as a barrier to communism.

Evolution outlined through various negotiation rounds:
- Torquay (1947-48)
- Dillon (1950-51)
- Geneva (1955-56)
- Kennedy (1963-67)
- Tokyo (1973-79)
- Uruguay (1986-94)
- Introduction of agreements covering services, anti-dumping, intellectual property (TRIPS), and trade-related investment measures (TRIMS).
- Current round: Doha Round (2001-), referred to as a “development round.”
Average tariff percentage over time has shown a general decline with increased membership in GATT/WTO.

At the end of the Uruguay Round in 1994, GATT was succeeded by the World Trade Organization (WTO).
Key differences between WTO and GATT:
- WTO is a full-fledged international organization, while GATT was a provisional agreement.
- WTO includes rules on trade in services and defines intellectual property rights (TRIPs).
- WTO has a ‘dispute settlement’ mechanism (tribunal) in place to resolve trade disputes.

Negotiations began in 2001.
Goals include reforming the trading system and reducing government support for agricultural products, particularly in developed economies; this has been contentious.
Involvement from various stakeholders:
- NGOs and civil society actors sought to influence WTO decisions on issues like labor standards, environmental issues, patents, and subsidies.
Major negotiations events:
- Cancun (2003): Breakdown of deal
- Geneva (2008): Developed countries backtrack on pledges
- Bali (2013) and Nairobi (2015) packages aimed to reduce trade barriers while committing support to poorer member countries.
Current status: Are ongoing discussions leading to desired reforms or have efforts stalled? Stay tuned.

Regional Trade Agreements (RTAs) aim to liberalize trade among smaller groups of countries, classified as:
- Free Trade Agreements (FTAs)
- Customs Unions
- Common Markets
Free Trade Area (FTA):
- The least comprehensive of the three, allowing for tariff-free trade among member countries while permitting each country to design its own policy regarding non-member countries.
- North American Free Trade Agreement (NAFTA, 1994):
- Previously the largest FTA until renegotiated to form NAFTA 2.0.

Customs Union:
- A free trade area where member countries agree on a common trade policy with the rest of the world.
- Example: Mercosur, linking Argentina, Brazil, Paraguay, and Uruguay.
Common Market:
- A customs union that also allows free movement of labor and capital among its members.
- Example: The European Union (EU), recognized as the world's largest and most successful common market.

NAFTA was guided by the principle of national treatment, meaning that governments cannot discriminate based on a firm’s nationality.
Key provisions included:
- Elimination of tariffs by 1999.
- Trade restrictions were “grandfathered” or had “sunset” clauses.
- Certain goods remained subject to non-tariff trade restrictions (such as cultural industries in Canada).

Under NAFTA’s dispute settlement mechanism, the imposition of countervailing duties and anti-dumping duties is subject to a review panel of experts from the three member countries.
NAFTA succeeded in restructuring industry towards greater export orientation in Canada, the US, and Mexico, leading to increases in both exports and imports.
However, impacts related to wages and job displacement are also noted.
NAFTA 2.0 (CUSMA, July 2020):
- Changes in the auto sector, updates in supply management, and extensions of patents (increased to 10 years).
- CUSMA is scheduled for review or renegotiation in 2026.

Comprehensive Economic and Trade Agreement (CETA):
- FTA between Canada and the European Union.
- Negotiations occurred from 2004-Augsut 2014; signed in October 2016 and came into force in September 2017.
- Aims to eliminate 98% of tariffs between Canada and the EU.
- Potentially could surpass NAFTA.
Trans-Pacific Partnership (TPP):
- FTA involving 12 Pacific Rim countries with geopolitical implications.
- Negotiations commenced in 2008 and signed in February 2016.
- Goals included decreasing trade and investment barriers and creating a dispute-settlement mechanism for member countries.
- Would have been the world’s largest FTA, accounting for 40% of world trade; however, the US withdrew after November 2016 following Trump's administration changes.

Regional Comprehensive Economic Partnership (RCEP):
- Involving 15 countries (ASEAN plus regional partners)
- Signed on 15 November 2020, creating the world’s largest FTA covering over 30% of global trade.
Trump's tariff wars have raised questions about whether the global free trade neoliberal order is at a crossroads, indicating a potential shift back to bilateralism and a more fragmented regional world economy.