Countries all over the world are increasingly engaging in international trade. In order to prevent international disputes, regulation of this trade to a certain extent – can help to improve efficiency and effectiveness of international transactions.
This module deals with tariff barrier reduction on an international level. More specifically, attention will be paid to the working of the World Trade Organisation (WTO) as this organisation is the only International Trade Organisation which aims at the reduction of (tariff) barriers to trade on a world-wide scale.
The WTO was recently set up as a successor to GATT. GATT now forms a part of the WTO, which also covers GATS, the General Agreement on Trade in Service, and Intellectual Property Rights (IPRs).
Global Relations (WTO):
Countries use all kinds of methods to protect their own production from competition from outside. One of those methods consists of imposing tariffs and duties that have to be paid when a product is imported. The price of products is thereby raised, the demand then generally slacks off and imports fall.
The Netherlands and other European countries’ external trade condition are mostly determined by EC Regulations. Special agreements between the EU and EFTA countries (the earlier mentioned EEA) also exist. On an international scale, the member states of the European Union are bound as a block to the agreements of the WTO.
The WTO is the most important Organisation for regulating global trade, replacing the General Agreement on Tariffs and Trade (GATT).
The European Commission acts as the single spokesman for the 15 EU member states in a WTO context. Already widely publicised, agriculture and service included for the first time as sectors in the context of GATT/WTO – have turned out to be the stumbling block on the path to concluding the Uruguay Round of GATT/ WTO negotiations. The EU also plays a not-unimportant role in the framework of the United Nations.
Twenty-three countries signed the General Agreement on Tariffs and Trade (GATT), established in 1947. The organisation was meant to be the forerunner of the International Trade Organisation (ITO), but the latter was later renamed, when installed, and is called the World Trade Organisation (WTO), of which, GATT now only forms one part. The WTO is the one and only Global Body which aims at the liberalisation of global trade on a multilateral basis.
The Uruguay Round discussions began in 1986 (Punta del Este, Uruguay) and were supposed to be concluded at the end of December 1990. However, because of stumbling blocks along the road, negotiations lasted until April 1994. The final act embodying its results came into force on January 1, 1995.
Broadly speaking, three developments made several GATT member countries feel that there was a need to hold a new round of negotiations.
Firstly, it had become evident that, although as a result of the adoption of associate agreements, the rules of GATT in a number of areas had been strengthened; its rules were not being applied in two important trade sectors, viz. agriculture and textiles.
In the agricultural sector, most of the developed countries had taken an advantage of the loophole to establish policies that were not always consistent with GATT principles (the EU’s Common Agricultural Policy is a clear example of this).
In the textile sector, a number of countries imposed restrictions on imports, particularly those originating in developing countries. They did this under the so called Multi-fiber Arrangement (MFA) which provided a legal cover for derogation from the GATT rules against the use of quotas.
Secondly, by the same time, it has become evident that trade in service has grown into an important component of international trade. The rules of GATT applied only to trade in goods and there were no international rules on measures taken by countries to protect their service.
Industrial opinion was growing, therefore, both for the efficient development of the service industries in different countries and to develop trade in service, it was time to bring this trade under international discipline.
Thirdly, industries and trading organisations were complaining that, because of different national standards for the protection of Intellectual Property Rights (IPRs), such as patents and trademarks and ineffective enforcement by governments of the national rules providing for such rights, trade in counterfeit goods was on the increase.
The absence of adequate protection was also considered as a deterrent to foreign investment in the production of patented goods and a reason for the reluctance of industries in developed countries to sell or license technology to industries in developing countries.
In many ways, the launching of the negotiations coincided with the decision of a number of developing countries to reorient their trade and economic policies away from import substitution to export-oriented growth.
The measures they were taking to reduce tariffs, to liberalise their import control system and to open their doors to foreign investment were consistent with GATT principles.
Though these measures were unilateral and not influenced by the launching of negotiations, they enabled developing countries – including those, which were originally skeptical – to take a constructive attitude to the issues being discussed and to agree to integrate them more fully into the legal system which was being formulated.
This shift in trade policies and the adoption of market – oriented reforms also led a number of developing countries to seek GATT membership.
Simultaneously, with the breakdown of Communism, policies favouring privatisation and market oriented reform in the countries, that are now called ‘transitional economies’ prompted most of them to apply for GATT membership.