Business Environment

Business Environment CASE STUDY (20 Marks) Since the formation of the General Agreement on Tariffs and Trade (GATT) in 1947, its main objective has been to promote international trade between nations by reducing agricultural tariffs, export subsidies and domestic support, the major barriers to trade. To achieve its objective, GATT monitored eight rounds of negotiations starting with Geneva round in 1947 to the Uruguay round that lasted for 9 years. However, except the Uruguay round that succeeded in setting targets regarding reduction in tariffs, domestic support and subsidies by both developed and developing countries none of the rounds was successful. What were the reasons for the continuous failure of the rounds, when the objective of all the member countries has been the same? n 1995, World Trade Organization (WTO) replaced GATT to carry forward the same noble objective – remove barriers and uplift the developing nations.

The major negotiating round post WTO’s formation was ‘The Doha Development Round’ in July However, not surprisingly, this round also collapsed on the 9th day on the issue of usage of ‘Special Safeguard Mechanism’ by developing countries. Interestingly, Regional Trade Agreements (RTAs) between two or three neighboring countries have had a higher rate of success than Multilateral Trade Agreements (MTAs). When RTAs could be successful, why couldn’t developing and developed countries meet on a consensus with regard to MTAs? In spite of benefits from trade liberalization, why do these trade negotiations continuously fail? Who should be blamed for the failure of the Doha Round? The case delves into the same issues. On November 15th 2008, few of the member countries decided to conclude the Doha round and meet in December 2008 for the same. Will this round be successful? The case also explores into the measures that need to be taken to make all the member countries think and act alike.

Answer the following question. Q1. Explain the historical relevance of formation of WTO (GATT) and other MTAs. Q2. Explain the difficulties in reaching consensus in MTAs and implementing those policies Q3. Analyze the reasons for the failure of Doha round of trade negotiations. Q4. Debate the way forward for this impasse and reflect on the relevance of MTAs in the light of increasing globalization and bilateral trade in the world.