POL 5032 WEEK IV

Last year I wrote:

“The post-World War II order on trade really begins at Bretton Woods where the United States promoted the notion of an International Trade Organization (ITO) that would serve as an international counterbalance to domestic tendencies toward protectionism.   The ITO would keep trade lines open, which would offset mercantilist tendencies.  

Protectionist interests in Congress killed the ITO and President Harry Truman advanced the idea of GATT as a temporary alternative.  In 1948 GATT became the primary organization responsible for the liberalization of international trade, through a series of rounds.

GATT was based on the principles of reciprocity and non-discrimination.  Trade concessions were reciprocal as all states agreed to lower barriers together.  Non-discrimination meant that imports from all countries would be treated the same way. 

At the Uruguay Round, held in 1993, GATT gave way to the World Trade Organization (WTO), now headquartered in Geneva.  The WTO has been dogged by a lack of progress, however,  and the DOHA round has been singularly unsuccessful in opening up further trade concessions.  As a result, nation states are turning more and more to bi-lateral agreements as the mercantilist impulse continues to fuel protectionism within certain states and to drive discriminating agreements that are often at odds with the spirit and practice of the WTO.

Moreover, the bargain between developed and developing states over TRIPS has not materialized as both Europe and the United States continue to protect their agricultural interests.  The core premise, although unstated, has to turn on whether agriculture remains a strategic interest or not.”

Now, recent criticism by economists turns on the fact that the WTO is still focusing on reducing tariff rates, rather than addressing economic distortions, because reducing rates simply maintains existing distortions and even exacerbates such distortions.

As a result, developing nations have been working to shield themselves from unfair competition from developed countries by filing anti-dumping claims at the WTO. “In the 1980s developed countries were the major filers of anti-dumping suits; by the late 1990s developing countries filed two-thirds of all claims’ (Amsden) 

In addition, the developing world relies on tariff revenue for a large share of government revenue and expenditure. Slashing tariffs may not only restrict the ability of developing countries to foster 

new industries so they may integrate into the world economy, it could also prohibit them from obtaining funds to conduct industrial policy and to maintain social programs for the poor.

Least developing countries rely on tariffs for more than one quarter of their tax revenue. For smaller nations with little diversification in their economies, tariff revenues provide the core of government budgets. In the Dominican Republic, Guinea, Madagascar, Seirra Leone, Swaziland, and Uganda tariff revenues are more than 40 percent of all tax revenue in their countries (South Centre, 2004).

Is the WTO still acting in the developing world’s interest?