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Trade
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From the course by Universiteit Leiden
Political Economy of Institutions and Development
101 оценки
From the lesson
International organizations
International organization. What role do they play in the world economy?
Meet the Instructors
Richard Thomas GriffithsProf. dr.
Faculty of Humanities
Hello again, in the last video,
we looked at the origins of the current international global order.
We saw how, after the first World War, the hopes for peace and prosperity that had
been based on the creation of the League of Nations had been shattered.
We also saw how American policymakers, already used to government intervention in
their own domestic economies, were willing to consider the creation of stronger and
better global organizations to manage the world economy.
So in this video, we're going to see how they translated these ambitions into
reality on the governance of international trade.
We will examine the achievements of this policy, and
the evolutions of the institutions responsible.
It's important to realize that the initial American ambitions in the field of trade
were far more ambitious than the eventual outcome.
In 1947, the Economic and Social Committee of the United Nations convened
an international conference on trade and employment to be held in Havana.
It's interesting note that international trade was deliberately linked to
considerations for maintaining domestic full employment and
promoting industrial development among poorer nations.
The conference, indeed,
reached an agreement on an ambitious set of rules governing tariffs, quotas,
subsidies, state trading, cartels and international commodity agreements.
And governing the whole structure was to be an international trade organization
with its own investigative arm and policy decisions taken by majority voting.
In March 1948, this agreement was actually signed by 53 countries.
But it was then that things started to go wrong.
Although for the Americans the agreement had been negotiated by a Democratic
administration, Congress was under the control of the Republicans.
And they were resentful about sacrificing such sweeping power,
especially Congress' own powers, to a international organization.
So as a result, the administration held off from presenting the agreement for
ratification.
And as long as the United States was unwilling to ratify its own creation,
everyone else waited, and waited, and waited.
And when a Republican, President Eisenhower was elected, the plans for
ratification were quietly forgotten.
The International Trade Organization was never formed.
Instead, the world had to wait until 1995 for
a permanent organization to govern world trade.
Meanwhile, in1947, a provisional framework for agreeing tariffs had been negotiated.
And in January 1948, it came into effect for 23 founding countries.
The General Agreement on Tariffs and Trade provided for
non-discrimination among its members.
And created procedures for negotiating tariff reductions and rules for
the creation of free trade areas and customs unions.
The tariff reductions are usually conducted on the rounds
under what they call the principal supplier rule.
Basically, what this involves is that the largest suppliers of goods
will approach representatives of their main markets, and
ask for improved access in the form of lower tariffs.
And then they'll make concessions in return.
In this way, a network of provisional bilateral agreements will be concluded
among the major trading partners.
And when these are all folded into each other,
and their benefits extended to all member states regardless of their participation
under the nondiscrimination principle, you have an agreement.
The United States generally joined in by Congress granting the President a limited
time mandate, usually three years, to take part in negotiations.
By the early 1960s, the argument began to gain ground.
The development in the so called terms of trade.
In other words, the failure of commodity prices to keep up with those of
manufactured goods meant that the less developed countries were losing out
from the growth of international trade.
The initial International Trade Organization had had a mandate to tackle
such problems.
But that did not.
So the underdeveloped countries pressured the United Nations
to call a special conference on trade and development, UNCTAD.
And this met in Geneva in 1964.
Now aside from granting GATT members the opportunity to offer trade preferences to
poorer countries, and obtaining some extra borrowing facilities from the IMF.
The meeting agreed to establish UNCTAD as a standing conference,
coming together every four years.
Now, aside from an early success in creating non-reciprocal preference
arrangements for the poorest countries.
UNCTAD conferences soon degenerated into confrontations
between mutually antagonistic clubs of rich and poor or North and South.
Meanwhile, it's not as though GATT had done nothing.
On the contrary, since the 1960s it had contributed to a significant reduction in
industrial tariffs especially among developed industrial countries.
However, many problems remained.
Agricultural protection remained pervasive and
new import restrictions often remained in sectors of textiles and electronics.
Non-trariff barriers became more important in trade policy.
Preferences towards poorer countries removed the pressure on them to reduce
tariffs.
This, by the way, didn't stop them from condemning the GATT as a rich man's club.
And in addition, huge swaths of the economy,
including purchases by governments, and
the whole service sector, seemed to escape the pressure to become more open.
And finally, trade disputes, especially between the United States and
Europe were allowed to fester without being resolved.
Now it's partly because of these difficulties that the GATT was replaced by
the World Trade Organization in 1995.
One important change was to establish the WTO as a permanent organization
with a permanent structure and a supervisory function.
It also established a dispute settlement mechanism
with a possibility of imposing sanctions and penalties.
This mechanism is being relatively under used.
And the debate is still ongoing whether simply having in there is a threat might
possibly have made a difference.
And finally, the WTO's remit was extended to cover trade and services and
trade related implications of intellectual property rights.
Even so, the new organization has its problems.
Not the least of which is the effort to conclude the Doha round of trade talks
that started in 2001.
The only result of the merge so far was an agreement reached in Bali in
December 2013 for reduction in bureaucratic barriers to trade.
All the other problems bedeviling the GATT seemed to have carried over into the WTO.
In addition, it's much less ambitious in its remit
than the original failed International Trade Organization.
And trade policy still tends to be seen as separate from other concerns,
such as employment, development, and the environment.
So let's sum up, then.
In this lecture, we've looked at the emergence of an international trade
organization after the war.
And we've seen how its ambitions were never realized.
In its place, world trade came under the aegis of the GATT,
which did succeed in reducing industrial protection, but not much else.
The effort of the less developed countries to link trade concerns
with questions of development in the UNCTAD also failed.
And then we saw the emergence of the WTO with a wider remit and
stronger capacities than the GATT.
But it still has to demonstrate its capabilities.
In the next video, we'll turn our attention to the world's financial system.
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