1. Globalization: International Trade and the Bretton Woods Institutions Part II: The WTO

2. Recall The Bretton Woods meeting in 1944  Participants  Purpose

3. The GATT General Agreement on Tariffs and Trade Agreement signed in 1947 Signed by 23 countries Purpose: to reduce trade barriers  Reduction in tariffs  Subsidies for trade

4. The WTO Replaced the functions of the GATT in 1995 An international organization, not just an agreement WTO sets rules and arbitrates trade disputes 125 member countries, WTO rules apply to 90% of the world’s trade

5. The WTO The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible Like the IMF and World Bank, the WTO is one of the driving forces of globalization Also like its Bretton Woods counterparts, the methods and goals of the WTO have drawn much criticism

6. Benefits of the WTO The system helps promote peace  Mutually beneficial economic relations discourage war/conflict Disputes are handled constructively  Disputes are brought to the WTO for resolution Rules make life easier for all  Countries do not have to negotiate individual trade agreements  Smaller countries have more bargaining power Freer trade cuts the costs of living  Protectionism costs money  Tariffs raise prices  Subsidies draw from tax dollars It provides more choice of products and qualities  Freer trade means greater access to foreign products

7. Benefits of the WTO Trade raises incomes  Statistics suggest that global income rises with increased international trade Trade stimulates economic growth  Expanded markets mean companies can grow The basic principles make life more efficient  Blanket rules that apply to all save time and money Governments are shielded from lobbying  Gov’ts must reach policy consensus with other nations The system encourages good government  Gov’t can’t reverse decisions

8. The Downside Examples of WTO rulings:  The US laws protecting sea turtles and dolphins are barriers to free trade  US clean air standards are barriers to free trade  The European Union law banning hormone- treated beef is illegal

9. Major Criticisms of the WTO The WTO is undemocratic  Rules and written in secret by corporate lawyers, not elected officials The WTO is a threat to peace  The domination of trade by the wealthy creates resentment which fuels conflict The WTO undermines human rights  Ruled that gov’ts cannot take into account “non commercial values”

10. Major Criticisms of the WTO The WTO encourages privatization of essential services  Water, health care, education The WTO is destructive to the environment  Environmental regulations are a barrier to trade The WTO is killing people  Drug patents and AIDS

11. Major Criticisms of the WTO The WTO is increasing inequality  The richest 20% of the world consume 86% of its resources The WTO is increasing hunger  Market forces should control agriculture The WTO hurts poor, small countries in favour of rich, powerful ones  Minimal voice in WTO, cannot afford to mount legal challenges

12. Major Criticisms of the WTO The WTO undermines domestic decision making  Local policies rewarding companies based on money put back into community, use of local materials/labour, and environmental standards are illegal

13. Other Free Trade Agreements The WTO isn’t the only body that resolves trade disputes Specific countries also have multilateral free trade agreements with one another (ex: NAFTA) NAFTA tribunal rulings are also controversial Chapter 11 of NAFTA gives corporations the right to sue governments if that government passes a law that would impede the corporation's business  Ex: Canadian gov’t bans the gasoline additive MMT (suspected to cause brain damage); the Ethyl Corporation sues the Canadian gov’t for $250 million under NAFTA; Canadian gov’t withdraws the law and settles the suit for $13 million