Бшет № 15 International Trade Organisations

The GATT system

The General Agreement on Tariffs and Trade (GATT) was established in 1948. It provided the basis for trade negotiations since the end of the World War II. The original agreement was signed by more than 40 countries. Later the number of signatories increased to about 100, which together accounted for more than 80 per cent of the world trade. The GATT had a secretariat and headquarters in Geneva.

The fundamental purpose of the GATT was to achieve free and fair trade through reduction of tariffs and elimination of other trade barriers. GATT operated on the basis of three principles: 1) non-discrimination, multilateralism and the application of the Most-Favoured Nation Principle to all signatories; 2) expansion of trade through the reduction of trade barriers; 3) unconditional reciprocity among all signatories. GATT's goal was to establish a world trade regime or universal rules for the conduct of commercial policy.

GATT was not only a set of rules, it was also a forum in which countries could discuss their trade problems. GATT’s most important activity was in the rounds of talks held since 1948. Trade negotiations within the framework of the GATT led to considerable decline of tariff barriers and growth in world trade. The Kennedy Round (May 1964 - June 1967) was of major importance in the movement toward trade liberalization. It employed a new method of tariff negotiations which resulted in tariff reduction of 35 per cent on 60.000 products.

By the late 1970s several changes started to erode the GATT system of trade liberalization. As tariff barriers within the GATT fell, non-tariff barriers appeared. Barter or countertrade, especially in respect of the less developed countries, increased from 2-3 to 25-30% of the world trade. Government intervention in trade relations to protect home economy became a norm.

In the 1980s it became evident that the era of successive rounds of multilateral trade negotiations ended. Transformations of the global pattern of international trade stimulated the development of a new international trading regime.

World Trade Organization (WTO)

The successor to the GATT is the World Trade Organization (WTO). It has more than 130 members which account for over 90 per cent of the world trade. Over 30 others are negotiating membership.

The WTO’s objective is to help trade flow smoothly, freely, fairly and predictably. This is achieved by: 1) administering trade agreements; 2)acting as a forum for trade negotiations 3) settling trade disputes; 4)reviewing national trade policies; 5) assisting developing countries in trade policy issues through technical assistance and training programmes; 6) cooperating with other international organizations.

Decisions are made by the entire membership. This is typically by consensus. The WTO agreements have been ratified in all members’parliaments. The WTO top-level decision making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council which meets several times a year in the Geneva Headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level the Goods Council, Services Council and Intellectual Property Council report to the General Council.

The WTO rules - the agreements - are the result of negotiations between the members. The current agreements are the result of the 1986- 94 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT).

GATT is now the WTO’s principal rule-book for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews The complete set consists of about 60 agreements and separate commitments (called schedules), made by individual members in specific areas such as lower customs duty rates and services market- opening.

Through these agreements, WTO members operate a non- discriminatory trading system that establishes their rights and their obligations. Each country receives guarantees that its exports will be treated fairly in other countries’ markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments.

Some countries feel that their economies will be strengthened if they establish trade agreements with other countries in the same region. Some of these agreements involve forming producers’ cartels and common markets.

Producers⁹ cartels are organizations of commodity-producing countries. They are formed to stabilize or increase prices, optimizing overall profits in the long run. The most obvious example today is OPEC (Organization of Petroleum Exporting Countries).

A Common Market is a regional group of countries that have no internal tariffs. Common markets have a common external tariff and a coordination of laws to facilitate exchange. Vivid examples are the European Economic Community (EEC), the Central American Common Market (CACM) and the Caribbean Common Market (CCM).

There are many more such arrangements including negotiating groups that join together to negotiate trade agreements, commodity associations that bring together countries concerned with specific commodities', commodity agreements which are multilateral agreements among buyers, and sellers to stabilize prices and more.