Homework Question on GATT/WTO Negotiations
- Discuss the background issues leading to the GATT negotiations immediately following WWII. Why did the Soviet Union and its allies not participate, and why did the US not ratify the initial agreement? Why was trade in agricultural products and services not included? Go on to discuss the dual principles of “free” and “fair” trade, and the success at implementing these goals through the first six “Rounds”.
- In the last half-century there have been three additional rounds of GATT/WTO negotiations. Discuss the achievements and failures of each of these rounds, and summarize.
- The relationship between the less-developed-countries (LDC’s) and the developed countries (DC’s) in the evolution of international trade has always been a bit strained. Discuss this relationship, including policies adopted and/or advocated by each group to “help” the LDC’s. How successful have these policies and/or advice been?
- What is meant by an “effective” rate of tariff and give an example of how this works. Given that expansion of multinational companies has been rapid in the last half-century, discuss the impact(s) that this has made on effective tariff rates and therefore, trade. How could a tariff on an “intermediate” good in production be self-defeating?
- Given the problems facing any further liberalization of trade at the global (WTO) level, “regional” partnerships — often just bilateral — have become increasingly popular, especially since they are allowed within WTO rules. Explain the standard economic methodology typically applied to evaluate gains and losses from such a partnership. Go on to discuss the evolution of the world’s most developed customs union, the EU, including the specific arguments for creating the single currency (the Euro), and problems which have and/or potentially could arise.
Homework Answer on GATT/WTO Negotiations
The establishment of General Agreement on Tariffs and Trade (GATT) was on a temporary basis after the 2nd World War and together with other new bilateral institutions, were committed to global economic collaboration. Later on, over 50 countries, among them being the founders of GATT, approved a draft agreement for an establishment of an International Trade Organization (ITO) which was a United Nations’ agency.
The agreement was meant to impose international trade disciplines while also enacting contained policies regarding employment, goods and global investment. The GATT negotiations were as a result of an attempt to provide an early boost to international trade liberalization after the 2nd World War and to begin to correct the huge overhang of protectionist actions which stayed in place since 1930s (Berg 51).
The major reason behind the declined by the soviets to participate in negotiations is to avoid an element of East-West confrontation. Also, the Soviet basically maintains a zero-access tariff on imports of every commodity and all purchases out of the country result from approved exceptions. Within their scheme of central planning, no Soviet enterprise can procure so much as a paper clip from the West except when the purchase falls inside the framework of transactions permitted by the authorities (Berg 52).