The world trade organization: A flawed conception

Kenneth Surin
2000 Workplace   unpublished
The 1944 Bretton Woods agreement sought to prevent the recurrence of the economic situation that had prevailed in the Depression-permeated 1930s by laying down the framework for a more adequately regulated international economic order. The agreement originally stipulated that oversight of the world economic system was to be in the hands of three institutions: the International Monetary Fund (which was charged with overseeing exchange rates and the balance of payments), the International Bank
more » ... ternational Bank for Reconstruction and Development, better known as the World Bank (which was to be responsible for economic development), and the International Trade Organization (whose brief was the supervision of the world trading system, with a particular responsibility for mediating trade disputes, promoting tariff reduction, and eliminating trade wars). However, when the US Congress objected to the formation of the International Trade Organization, the agreement was modified to exclude the ITO provision, and a looser organization, the General Agreement on Tariffs and Trade (GATT) took its place. GATT was basically a forum constituted by agreement among signatory nations, and with a limited administrative machinery to undertake oversight of the world trading system and the trade liberalization arrangements it sponsored, GATT's effectiveness was always going to be circumscribed, and it was superseded in 1995 by the World Trade Organization (WTO). GATT's regulatory framework was based on four primary principles (Held et al., 164): non-discrimination: i.e. acceptance of the most favored nation principle, (so that the trade preferences, such as a tariff reduction, granted by one country to its most favored trading partner will be extended to all its other trading partners); reciprocity: a country's tariff reductions should be matched by its trading partners; transparency: trade standards and measures should be clear; fairness: unfair trade practices (dumping of goods at below market prices, etc.) were to be discouraged, and countries were allowed to protect themselves against them. Some exceptions to these rules were allowed, such as measures taken to safeguard a country's balance of payments. Despite GATT's obvious structural limitations-in particular the lack of a judicial procedure that would enable it to intervene in trade disputes, and the fact that countries could bypass its provisions if they their domestic economic interests were perceived by their governments to warrant such a step-the seven rounds of multilateral tariff reductions sponsored by GATT did succeed in bringing tariff levels down to their lowest levels in centuries. GATT's effectiveness was also reduced by factors that were