The Political Economy of the World Trading System: From GATT to WTO

The Political Economy of the World Trading System: From GATT to WTO

The Political Economy of the World Trading System: From GATT to WTO

The Political Economy of the World Trading System: From GATT to WTO

Synopsis

The World Trade Organization is likely to be a major international organization for the foreseeable future. This volume, the first full-length study of the WTO and GATT from the viewpoint of public choice and political economy, details the mechanics of the multilateral trading system that emerged from the Uruguay Round of GATT. The authors, who were involved in the negotiations of the Uruguay Round, explain why WTO rules are phrased the way they are, the successes and failures of WTO and GATT, and how business, industrial associations and political lobbies influence the multilateral trading system.

Excerpt

The World Trade Organization(WTO)is an international organization, established in 1995. It is responsible for administering multilateral trade agreements negotiated by its Members, in particular the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), and the Agreement on Trade-Related Intellectual Property Rights (TRIPs). Total world trade in goods, services, and intellectual property stood at US $5 trillion in 1995, of which services and intellectual property accounted for over $1 trillion. The WTO's rules and principles establish a set of disciplines regarding the regulatory framework in which this exchange takes place.

The WTO builds upon the organizational structure that existed under GATT auspices as of the early 1990s. After its creation in 1947, the GATT progressively developed into a system of great complexity. Its reach expanded steadily in response to developments in the world economy and the interests of its signatories. Initially largely limited to a tariff agreement, the GATT increasingly came to incorporate negotiated disciplines on non-tariff trade policies, which increased in relative importance as average tariff levels fell. Its success was reflected in a steady expansion in the number of contracting parties. During the Uruguay round (1986-94), some 25 countries joined -- bringing the total to 128 as of early 1995. To a large extent the GATT managed to fill the gap created by the stillborn International Trade Organization(ITO) of 1948 and emerge as the world's de facto trade organization. With the 1994 agreement to establish the WTO, the institution was formally transformed into an international organization of equal standing to the International Monetary Fund (IMF) and the World Bank (as originally intended by the 1944 Bretton Woods conference where agreement was reached to create these bodies). The WTO itself does not embody substantive rules regarding government policies -- it is simply a formal institutional structure under whose auspices Members negotiate and implement trade agreements. The rules are contained in the treaties it oversees (GATT, GATS, TRIPs). The GATT therefore continues to exist as a substantive agreement, establishing a set of disciplines on the trade policies of its Members. Indeed, its reach was greatly expanded by the Uruguay round. As trade in goods is by far the most important component of international trade, understanding what the GATT is and what it does (and does not do) is the key to understanding the WTO. Much of this volume therefore focuses on the GATT.

The basic underlying philosophy of the WTO is that open markets, nondiscrimination, and global competition in international trade are conducive to the national welfare of all countries. The underpinnings of the GATT and the WTO go back to the 1930s, a period when many countries pursued . . .

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