An analysis of The World Trade Organisation as the international institution responsible for the development and monitoring of trade rules, as well as the adjudication of trade disputes when they arise.

University Degree Business and Administrative studies

Patrick Leslie

14118122

BA (PPE)

1) An analysis of The World Trade Organisation as the international institution responsible for the development and monitoring of trade rules, as well as the adjudication of trade disputes when they arise.

2) The reasoning behind the collapse of the ministerial trade talks in Cancun, September 2003.

Assignment two

Political Science 222

Global Political Economy (GPE)

Index:

Introduction

The World Trade Organisation (WTO) is an international organization designed to supervise and liberalize world trade, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947. (Britannica: 2004). The foundations of GATT where created at the Bretton Woods conference of 1944. At the conference allied leaders, “tried to create a new economic order that would prevent many of the interwar economic conflict and problems that led to World War ІІ.” ( Balaam, Veseth: 116). The GATT was founded on the expectation that it would soon be replaced by a specialized agency of the United Nations which would be called the International Trade Organization (ITO). (Balaam, Veseth: 116). The ITO never succeeded the GATT as the latter proved surprisingly successful in liberalizing the world’s trade. Another reason for the ITO never materializing was due to protectionist interests within the U.S congress at the time. By the mid-1990s there were calls for a stronger multilateral organization to monitor international trade and resolve international disputes. (Britannica: 2004).

The WTO came into being on Jan. 1, 1995, with 104 countries as its founding members. (Britannica: 2004). The WTO represents “a multinational effort to manage the entire international trade system without the necessity of a national hegemon imposing order on the system”. (Balaam, Veseth: 121). Recently the WTO’s functions have shifted from bringing down barriers to setting the terms of global competition. (Balaam, Veseth: 121). At present the organization has several responsibilties including; policing member countries’ adherence to all prior GATT agreements, including those made at the Uruguay Round (1986), and negotiating and implementing new trade agreements. (Britannica: 2004) The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference’s policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference (Britannica: 2004).

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To understand why the ministerial trade talks failed in Cancun in 2003, many factors need to be analyzed. The result of the Cacun talks was a culmination of factors, contributed by many institutions and actors. Judgement of the WTO’s management in the Cancun talks cannot be given without a firm understanding of its function. Apart from the above functions the WTO assists Less Developed Countries in trade policy issues by technical assistance and training programmes. (Balaam, Veseth: 121). This function will be scrutinised in retrospect of the disagreements of the fifth ministerial conference in Cancun.

The failure of ...

This is a preview of the whole essay

The failure of the Cacun round will be analysed closely to a question from Balaam and Veseth on the ability of the WTO to produce new agreements that cover not only old and new trade items but that also deal with the connection between trade and such topics as investment, competition policy, the environment, workers’ rights, and an assortment of human rights and other ethical issues. (Balaam, Veseth: 121)

Events leading to an insecure foundation in Cancun.

The Uruguay round of talks showed industrialised developed states making an effort to involve developing states in trade negotiating processes, and entrench the countries in the international trade system. (Balaam, Veseth: 122) Many analysts believe that the increase in developed countries interest in LDC’s was the result of: fear of losing Third World export markets. Desire to gain more access to LDC resources and raw materials. (Balaam, Veseth: 123). These ideologies continued into the Cancun rounds, as many LDC’s still consider Northern developed countries’ policies to result in economic growth for the few, often at the expense of political liberal values in many places. . (Balaam, Veseth: 123)

The November 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar, provided the mandate for negotiations on a range of subjects, and other work including issues concerning the implementation of the “Doha” agreements. (Doha: 2001) The following subjects where central in the Doha agreement. I have not mentioned all 21 points of negotiation. The agreement declared mandates on these fundamental subjects: Agriculture Market access for non-agricultural products. Trade-related aspects of intellectual property rights (TRIPS). Interaction between trade and competition policy. Relationship between trade and investment. Trade facilitation. Transparency in government procurement. Dispute Settlement. Understanding Trade and environment. Trade, debt and finance.(Doha: 2001) These topics where aimed for research by the WTO’s chosen committees and further presentation and discussion of the research was meant for the Cancun rounds, thereafter final decisions on the subjects would be presented on the first of January 2005. (Doha: 2001) Between 2001, (the year that committees for research and insight where specifically fixed) and 2003 participants in the WTO disputed over the subjects that would be negotiated at the Cancun round. (Doha: 2001).

Most importantly a poor foundation was created in Singapore (1996), when most Ministers had been shut out of the negotiations as only 30 countries were invited to the Green Room that operated throughout the meeting. (Patrick: 2003) The uninvited Ministers were angry when they were told at a last informal plenary that they should agree to a Declaration they had no hand in drafting. They reluctantly agreed only after the Director General promised that exclusionary meetings would not happen again. (Third World Network: 2004)

Why did the Cancun round fail?

This question is answered fully in a letter representing 29 LDC’s which was addressed to Mr. Pettygrew, the facilitator for the Singapore issues at the Cancun Ministerial Conference, on the 12 of September 2003. (Letter1, 2003) The Singapore issues where four of the 21 issues raised in Doha, 2001: Relationship between trade and investment. Transparency in government procurement. Trade facilitation. Interaction between trade and competition policy. (Letter1, 2003)

The letter states the following; the 29 delegations “have concerns about the impact of multilateral rules on the four new issues on their domestic policies and consider that they have yet to fully comprehend the implications of having WTO rules on these issues. These concerns include among others the implications on domestic policies and availability of resources. These delegations also consider that many developing countries do not have the capacity to implement obligations arising out of commitments such multilateral rules will entail, and there were also doubts on the benefits of WTO frameworks on the new issues. Hence, we note that there is no explicit consensus on the modalities for negotiations as per the Doha mandate.” (Letter1, 2003)

The letter also included that the delegations have concerns about the process through which the above issues have been brought to the Cancun ministerial without any prior discussion on the modalities. (Letter 1, 2003) The letter poses the solution that negotiation on the Singapore issues should be discontinued as there is an absence of explicit consensus. The subjects should be referred to a working group, and negotiations should continue under explicit consensus is the final statement. (Letter1, 2003) This letter was the culmination of joint ideologies of LDC’s. The heavy disagreements on the Singapore issues caused the Cancun negotiations to collapse. Importantly this topic was not the single cause of the negotiations failure.

For the first three days, the conference focused mainly controversial agricultural issues, with the main protagonists being the EU and US on one side, and the G21 developing countries led by Brazil and India on the other side, and a grouping of 32 other developing countries emerging as an Alliance for Special Products and Special Safeguard Mechanism championing stronger S and D elements. (Third World Network: 2004). LDC’s expected to negotiate on agriculture and start the long process of reforming the current regime that has licensed the devastation of the livelihood of their rural communities, undermined their comparative advantages and distorted global production and trade. (Epha, 2003) In particular, many in Africa had expected some progress on the issue of cotton subsidies. (Epha, 2003) Tariffs on LDC’s exports was the core of the debate, the LDC’s felt that present and past tariffs had decreased the economic growth and agricultural influence that LDC’s have.

A revised Text, issued on the Saturday of negotiations, intensified rather than reduced the polarization in the Conference. (Epha, 2003) The LDC’s were unhappy that the agriculture text did not answer their concerns. They were outraged that views and formal proposals from 70 of them had been swept aside. The LDC’s where also outraged at the poor treatment of the cotton initiative (which had attracted widespread support) in the text. (Epha, 2003)

The issue of the manipulative decision-making process, particularly in the drafting of texts, came to the fore. This issue clarified the WTO’s untransparent and non-participatory decision-making process that caused the “unmanageable situation” that led to the collapse of the Cancun Ministerial. (Third World Network: 2004)

The above issues all show exactly what caused the Cancun conference to crumble. The issues that where never going to be resolved in Cancun where; agriculture, focusing on competition with regard to subsidies and tariffs, and the four Singapore issues.

Conclusion

As seen above the essay emphasises the foundation of the Ministerial conference in Cancun. The poor foundations made, resulted in high-quality outcomes being unattainable. The WTO promotes democratic and liberal ideologies but was undemocratic and exclusive in its attainment of issues that where to be discussed in the conference.

One of the functions of the WTO is to assist Less Developed Countries in trade policy issues by technical assistance and training programmes. If the WTO had fulfilled this function 29 nations would not have signed a letter stating that they cannot fully comprehend the implications of having WTO rules on the Singapore issues. (Letter1, 2003) The nations would have understood the implications on domestic policies and availability of resources and would have had the capacity negotiate on the specified topics. (Letter1, 2003)

The issue of the result of the Cancun Ministerial conference is an G.P.E issue as analysing the result requires the interdisciplinary, multi-level IPE approach.(Balaam Veseth: 12)

On a personal level I must agree that the WTO has done many positive things for international trade since 1995. On the other hand one must question their ability to incorporate the views of its LDC members. As stated in Balaam and Veseth, because the WTO incorporates so many functions and actors it is difficult to determine how successful the WTO’s efforts have been to liberalize trade.

I believe the WTO’s main concern is how to incorporate LDC’s that join the institution in expectancy of economic gain that results from the liberalization of trade. Another problem is the WTO’s inability to incorporate all the actors in international relations, such as NGO’s. I must deduct that the W.T.O will subdivide into independent institutions which will meet and negotiate on related topics. The reasoning behind this deduction is that new requirements of the WTO are not sufficiently handled by the organisation’s traditional functions.

Bibliography

Balaam, D.N. and Veseth, M. 2001. Introduction to International Political Economy. Prentice-Hall: New Jersey.

Britannica, 2004. GATT and WTO.22 April 2004. <www.britainica.com/>

Doha 2001, DOHA WTO MINISTERIAL 2001: SUBSIDIES AND COUNTERVAILING MEASURES, WTO, 23 April 2004. < http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_scm_e.htm>

European Public Health Alliance October1st 2003, The Cancun Ministerial conference of the WTO: What went wrong? 23 April 2004. < http://www.epha.org/a/747>

Letter1, September 12, 2003 Cancun Diary: Day three: For a change, pressure on the EU and the US is growing 24 April 2004.
< http://www.focusweb.org/index.php?option=news&task=viewarticle&sid=118>

Patrick, R.W. II. 2003. Does the WTO actually affect trade? 23 April 2004. < econ.ucsb.edu/~mcauslan/Econ191/ StudentPapers/RobertWTO.pdf >

Third World Network 2004, ACP and African Union role in Cancun, TWN Online, 23 April 2004. <http://www.twnside.org.sg/title/5423a.htm>