Globalisation, WTO and

GATT

Globalisation
Definition:
An economic phenomenon?
A social phenomenon?
A cultural phenomenon?

The movement towards the expansion of

economic and social ties between countries
through the spread of corporate institutions and
the capitalist philosophy that leads to the
shrinking
of the world in economic terms.
World Bank: Globalization is the growing
integration of economies and societies around the
world.

Q: Is there a global economy?

If so, is this good?
Globalizers (Integrationists) : Yes!
1. Increased integration has brought a
higher volume of trade. This means
more goods and services for most
of the world.
2. Increased GDPs and overall
standard of living for those that
participate

World and India Exports of goods and

services (% of GDP)
35

30

25

20

15

10

Components of
Globalization?
Economic globalization
Political globalization
Cultural globalization

Integration of Economies
The increasing reliance of economies
on each other
The opportunities to be able to buy
and sell in any country in the world
The opportunities for labour and
capital to locate anywhere in the
world
The growth of global markets in
finance

Integration of Economies
Made possible by:
Technology
Communication networks
Internet access
Growth of economic cooperation
trading blocs (EU, NAFTA, SAARC etc.)
Collapse of communism
Movement to free trade

What is the WTO?

Wellwhat is it???
A place?
Today at the WTO

A law?
Based on the WTO Regulation

A group of people?
Members of the WTO agreed

A meeting?
The WTO meeting was held in

The idea of the WTO can seem a bit

abstract

What is the WTO?

The WTO is an organization that
deals with rules of trade between
nations
Functions include acting as:
An organization for liberalizing trade
A forum for trade negotiations
A set of rules
A system to settle disputes

An Organization for Liberalizing

Trade

Liberalism in economics refers to an

ideology that supports the individual
rights of property and free contract
In the context of the WTO it means the
removal of trade barriers
Goes with the idea that the hands-off approach
to markets is the most efficient in the long-run

WTOs Stated Aim:

Promote Free Trade
Stimulate Economic Growth

A Forum for Trade

Negotiations
A place where member governments
go to try to sort out trade problems
Members start by talking it out
WTO acts as a mediating body

The WTO as a Set of Rules

WTO Agreements
Signed by most of the worlds trading
nations
The legal framework for international
commerce
Contracts for governments to maintain
certain trading policies

Purpose is to help exporters and

importers, while making sure
governments meet social objectives
The WTO oversees the
implementation, administration and

A System to Settle Disputes

Conflict of interests exists in trade
relations
Trade agreements need interpreting

WTO is meant to be a neutral party

to help settle trade disputes

History
After World War II many nations had
adopted a protectionist stance on
trade
Many felt closed-protectionist
positions was a cause of WWII
Victor nations set up economic
institutions to prevent this from
happening again

History
Bretton Woods System of 1946
International Monetary Fund (IMF)
World Bank
International Trade Organization (ITO)

The General Agreement on Trade and

Tariffs (GATT) was signed into place in 1947
The ITO did not fly
The US said it was unfair

GATT took the place of the ITO

History

GATT: main purpose was to reduce

barriers to international trade
GATT was an agreement, not an
organization
Became the de facto organization for
international trade

History - GATT
Trade Rounds negotiation meetings
First 6 rounds reduced tariffs from ~50%
to ~12%
7th, the Tokyo Round of the early 70s was
first major effort at trade reform
Mainly about non-tariff barriers to trade, such
as:

Subsidies
Quotas
Foreign exchange controls
Import bans
Restrictive licensing

History GATT
The 1986 Uruguay Rounds of trade
negotiations covered new trade topics
Trade in services and intellectual property
Sensitive subjects, like textiles and
agriculture

GATT was expanded by adding:

General Agreement on Trade in Services
(GATS)
Agreement on Trade Related Aspects of
Intellectual Property (TRIPS)

Complexities of globalization strained

the effectiveness of GATT

History WTO
Uruguay Round ended in 1994 with
the formation of the World Trade
Organization
Jan. 1, 1995 WTO was born
GATT, GATS and TRIPS still exist as the
framework for the WTOs operations

History
Current Round Doha
Began November 2001

Ambitious agenda to make globalization

more inclusive of the worlds poor
Talks have been contentious
No agreements have been reached
July 2006 talks were suspended by Director
General, Pacel Lamy, but may go forward at
anytime

Principles of the Trading

System
Nondiscrimination

1.
2. Reciprocity

Meant to prevent Free-riders

3. Binding and Enforceable

Commitments

Ensures predictability

4. Transparency

Member nations are required to publish trade

regulations and report changes

5. Safety Valves

Governments can prevent trade for, say,

health reasons

Formal Structure Highest Level

-Ministerial Conference
Meets at least every two years
Brings together all members of WTO
Can make decisions on all matters
under any multilateral trade
agreement

Formal Structure Second Level

-General Council
Meets regularly
Made up of representatives from all
member nations
Has the authority to act on behalf of
the Ministerial Conference
Also acts as:
Dispute Settlement Body
Trade Policy Review Body

Formal Structure Third Level

-Councils for Trade

Works under the General Council

Made up of three councils
1. GATT Council
2. TRIPS Council
3. GATS Council

These councils are charged with

overseeing the functioning of their
various trade agreements

Formal Structure Fourth Level

-Subsidiary Bodies
These are sub-councils under the
three councils for trade
Examples include:
Textiles Monitoring Body, under the
GATT Council
Information Technology Agreement
Committee, under the TRIPS Council
The Services Council, under the GATS
Council

Benefits from the WTO

1.
2.
3.
4.
5.
6.
7.
8.

The system promotes peace

Disputes are handled constructively
Rules make life easier for all
Freer trade cuts the costs of living
It provides more choices of products
Trade raises incomes
Trade stimulates economic growth
The basic principals make life more
efficient
9. Governments are shielded from lobbying
10. The system encourages good government
Source: www.wto.org