The World Trade Organisation Bretton Woods:plan to establish an international trade organisation Background:Great Depression in the 1930s governments wanted to protect their national economies through:- tariffs - competitive currency devaluations "beggar-thy-neighbour policies" vicious circle: retaliation by other countries higher and higher tariffs and devaluations collapse of world trade 1946first talks to set up an "ITO" (International Trade Organisation) draft charter agreed upon at UN Conference on Trade and Employment in Havana in March 1948 but: In 1950 USA decided not to ratify itITO was dead!

Only surving part of the negotiations: GATT:"General Agreement on Tariffs and Trade" no institution with legal personality and powers! International forum for negotiating tariff reductions and solving trade disputes but: Principles: 1. nondiscrimination most-favoured-nation principle(Meistbegünstigungsklausel) If one country is granted a favour, this favour must be granted to all other WTO members, too. 2. elimination/reduction of trade barriers (tariffs, quotas etc.) Exceptions:- agricultural products - countries with balance-of-payment difficulties 3. consultation among nations to solve trade disputes within the GATT framework 1947: 23 members

Main negotiation rounds: Kennedy Round ( ): lowered average tariffs on industrial products to less than 10% anti-dumping agreement aid for developing countries Tokyo Round ( ): average tariff on industrial products down to 4.7% Uruguay Round ( ): cuts in import duties on tropical products (mainly from developing countries) revision of rules for settling disputes regular reports on Gatt members' trade policies agreements on almost all current trade issues (including services and intellectual property) foundation of the WTO in 1995 legal institution with the power to impose sanctions

WTO principles today: most-favoured-nation principle national treatment imported and locally produced goods must be treated equally promotion of free trade promotion of fair competition encouragement of development and economic reform trade without discrimination theoretical background: free allocation of resources (for production) leads to more prosperity for all: i.e. if each country/region produces what they can produce best/most cheaply, and then exchange the goods they produce, all countries will be better off. theory of comparative advantage

Exceptions: Protection against: dumping certain subsidies in other countries surging imports if domestic industry is seriously threatenend (protectionary action only temporarily allowed) measures: e.g. extra import duty measures: e.g. extra import duty, domestic subsidizing measures: e.g. extra import duty, import quotas

The Doha round Start in Doha, Quatar in 2001 (after the cancellation of the Seattle conference in 1999) Purpose:Agreement on Doha Development Agenda Key issues: farm subsidies access to markets for developing countries in developed countries export subsidies in developed countries establishment of labour and environmental standards "social dumping" by developing countries i.e. unfair competition by developing countries by denying their workers basic rights, decent wages and working conditions "advantages" for developing countries through lower environmental standards

The WTO secretariat located in Geneva, with 630 staff, headed by a director-general Responsibilities: - administrative and technical support for WTO delegate bodies (councils, committees, working parties, negotiating groups) - technical support for developing countries - trade performance and trade policy analysis by WTO economists - and other day-to-day work

Free Trade Theory: free trade benefits everybody Problems: there is no free trade (in many cases, especially for agricultural goods) e.g. EU: - Latin American sugar cane producers have to compete with subsidized European surplus sugar on the world market and are not even allowed to export their products to Europe unequal trade partners - lack of infrastructure (roads, railways etc) in LDCs can't bring their goods to market - high quality standards of industrial countries are hard to meet almost no new trade followed when EU opened up its markets for the poorest countries in 2001 not everyone is a winner: theory of trade liberalization only promises that the country as a whole will benefit the majority of citizens or some groups may well be worse off "infant industries": new industries in LDCs must be protected until they are strong enough to compete with big MNCs tariffs for such industries should be allowed (theory of "comparative advantage") = Fair Trade?

Consequence: Developing countries should be treated differently (widely accepted view now) - developed countries (MDCs) should be allowed to make exceptions from the WTO's "most favoured nation principle" e.g. allow lower tariffs on imports from LDCs than from MDCS (preferential treatment) Proposals: - rich countries should open up their markets to poorer ones without reciprocity and conditionality (as the EU did in 2001) - only countries on the same level should open up their markets to each other reciprocally - LDCs should be allowed to impose tariffs on goods from MDCs equal conditions among equals instead of equal conditions for all WTO wants to reduce tariff protection for small farmers key income because agricultural sector is very important in LDCs farmers in LDCs:

Subsidy problem: 2/3 of farm income in Norway and Switzerland come from subsidies Japan: 1/2 EU: 1/3 $2 a day for the average European cow cotton farmers get $4 billion in subsidies effects:- increased production in MDCs increased supply on the world market depresses global prices increased poverty in DCs - producers in LDCs can't compete with subsidized goods from MDCs rich countries are allowed to pay their farmers massive subsidies(even export subsidies)

Trade barriers are still around e.g. through WTO sanctions: in case of a "surge" of imports tariffs are temporarily allowed measures against dumping: if a foreign country sells its products below cost tariffs against that country are allowed Non-tariff barriers, e.g.: - technical barriers: specifications on size, shape, functions, performance - patents, copyrights - labelling (also: manuals, instructions) - national regulations on health, safety, employment - quotas

Patents TRIPS: WTO agreement that forces countries to recognize patents and copyrights Trade-Related Aspects of Intellectual Property Rights monopoly rights for inventors argument: higher prices are anincentive for innovation Problems: - high-priced medicines: people in LDCs can't afford it - patents can slow innovation no competition: - no need for innovation - competitors are discouraged (no research, either) - many innovations are the result of research in universities and government-funded research centers, i.e. should be owned by the public - attempts to expand the scope of intellectual propertye.g. - yoga positions - genes - patents on plants and animals (bio-piracy)Proposals: - medicines at cost to LDCs - compulsory licenses to allow LDCs to produce drugs - reduction of patent protection periods