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

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

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

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

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

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

The WTO

Main interests of … Developed countries More liberalization in services and manufactures in developing countries More liberalization in services and manufactures in developing countries Defensive interests in agriculture (EU) Defensive interests in agriculture (EU) Broaden the agenda over the New Issues: Broaden the agenda over the New Issues: The Singapore Issues (1996): competition, investments, government procurement, trade facilitation The Singapore Issues (1996): competition, investments, government procurement, trade facilitation Labor and environmental Standards 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

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

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

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

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

The Doha negotiations(I) Stagnation and conflict Stagnation and conflict Minimal progress in all subjects Minimal progress in all subjects 2003: TRIPS bashful reform 2003: TRIPS bashful reform Cancun Summit 2003: Another failure 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 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 Consolidation of solid coalitions in developing countries, especially G-20

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

Negotiations collapse Pro-liberalization lobbies, comfortable with current regulation Pro-liberalization lobbies, comfortable with current regulation The WTO is not useful to liberalize services The WTO is not useful to liberalize services Tariffs below max Tariffs below max Increase in the price of commodities Increase in the price of commodities USs TPA USs TPA

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

World Trade keeps on growing: , almost doubled the GDP and investment is five times the GDP Weight of the MNEs World Trade keeps on growing: , 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 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. Causes: high growth, previous liberalization in developing countries, fragmentation of the chain value, new technologies, etc. If Doha fails?

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

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

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