World Trade Organization

Econ 490
Flora Lugo & Carlos Rivas

Formation
WTO replaced GATT in 1995
- one nation, one vote (like GATT)
GATT-General Agreement on Tariffs and Trade
Formed in 1947
Came out of the Bretton Woods conference
Part of three organizations that became part of
framework to help manage the postwar global
economy (along with IMF, World Bank)
An informal trade organization

GATT
A.

Principles
1.

2.

3.
4.

Trade Liberalization

Liberalization
1. liberal view
- free market
- limited government
- more optimistic about state cooperation
- trade is a positive sum game

Increase trade
- reduce tariffs
Nondiscrimination

Most Favored Nation

- A trade advantage given to one GATT member must be extended to every other
GATT member

National Treatment
- A member must treat foreign products at least as favorably as domestic products
(i.e. taxes, regulations)
Reciprocity

A state benefiting from another states trade concessions should provide roughly
equal benefits in return
Safeguards and Contingent Measures

Limit of imports that may cause harm to a states industry or economy

Safeguards and Contingent Trade Measures

Safeguards
Temporary
Import Surges
BOP problems
Infant Industries

Permanent
General Exceptions
National Security
Tariff Renegotiations

Contingent Trade
Measures
Anti-dumping duties
(ADDs)
Countervailing duties
(CVDs)

Rounds of GATT and WTO Negotiations

Name

Years

Subjects Covered

Geneva

1947

Tariffs

Countries
Participating
23

Annecy

1949

Tariffs

13

Torquay

1951

Tariffs

38

Geneva

1956

Tariffs

26

Dillon

1960-1961

Tariffs

26

Kennedy

1964-1967

Tariffs and antidumping measures

62

Tokyo

1973-1979

Tariffs, nontariff measures, plurilateral

agreements

102

Uruguay

1986-1993

Tariffs, nontariff measures, rules,

services, intellectual property, dispute
settlement, trade-related investment,
textiles, agriculture, creation of WTO

123

Doha (WTO)

1999-

Agriculture, services, tariffs, nontariff

measures, intellectual property, dispute
settlement

149

GATT in Jeopardy
Non-Tariff Barriers
-not covered in GATT rules
Agriculture had been an exception to restrictions on
import quotas and export subsidies
Agriculture and Textiles mostly excluded from regulations
Easy to circumvent regulations (VER)
Dispute Settlement procedures weak
U.S. and other Developed Countries (DCs) wanted
scope to go beyond trade in goods to trade in services,
intellectual property and investment
Most Less Developed Countries (LDCs) did not agree to
negotiations in the Tokyo Round

WTO Replaces GATT

Formal, legally constituted organization
Oversees trade treaties negotiated in the Uruguay
Round: GATS, TRIPS, TRIMS along with GATT
Meets at least every 2 years
Dispute settlements (DS) more binding and timely:
member states use DS process more then with GATT
Greater effort to integrate LDCs and transition
economies
More involvement with Non governmental Organizations
and civil society groups

1995

Disputes
What causes a dispute?
When a member country of the WTO believes
another member country is violating an agreement or
a commitment that has been set within the WTO.
Agreements are those negotiated under the Rounds of
GATT/ WTO

How is it resolved?
The Dispute Settlement Body composed of member
governments (all WTO members) work together to set
an agreement.

Dispute
Settlement
Process

Steps (& Lengths) of Settlement

1. Consultation (60 days)
2. The Panel (45 days / 6 months)
3. Final Report (3 weeks)
4. Report becomes a Ruling (60 days)
Either side can appeal a panels ruling.
5. Appeals Report (60-90 days)
6. Appeals Report becomes a Ruling (30
days)

Disputes (Examples)
Valenzuela Import Licensing Measures
on Certain Agricultural Products
Complainant: United States
Respondent: Valenzuela

Mexico Tax Measures on Soft Drinks

and Other Beverages
Complainant: United States
Respondent: Mexico

Disputes (cont)
The dispute settlement agreement
stresses that prompt compliance with
recommendations or rulings of the Dispute
Settlement Body is essential in order to
ensure effective resolution of disputes to
the benefit of all Members.
Outstanding cases: Some cases have
remained in the consultation phase since
1995.

Doha Round UnResolved

LDCs:
- want Special and Differentiated Treatment monitored and enforced

- G-20 of LDCs (Brazil, China, India) call for end of EU and U.S.
agricultural export subsidies
- North promised technical assistance not enough

DCs:
- want LDCs reduce barriers to nonagricultural imports
- strengthen and extend agreements for services trade and
intellectual property trade
-Major DCs ( ex.EU and Japan) want to expand WTO to new
areas: government procurement, trade facilitation, competition
policy

Fast Track Authority expired 2007

WTOs Future
G-7: even with one nation one vote
system LDcs have less influence
Increase in Regional Trade Agreements
Doha Round unresolved
Global Recession and Protectionism

References
www.wto.org
Cohn, A. (2008). Global Political Economy. (pp.
195-227). Pearson Education, Inc.

http://www.wto.org/english/thewto_e/what
is_e/whatis_e.htm
http://www.wto.org/english/tratop_e/dispu
_e/dispu_e.htm
http://events.streamlogics.com/wto/2004/
html/001.html