The World Trade Organization is the most recent result of international efforts to reduce barriers to trade. It is an institution in which membership is voluntary, but it is also an organization with legal status. I will explain more about this later. In this paper I will explore the history, structure, and function of the WTO. In the 1920s and 1930s, governments engaged in a race toward protectionism. When the U.S. passed the Smoot-Hawley Tariff Act of 1930, many countries followed suite and raised tariffs. According to Bagwell and Staiger, in The Economics of the World Trading System, “under this act, average U.S. tariffs rose from 38 to 52 percent (43).” Although there were many attempts at international cooperation over trade measures during the time period, the 1920s and the 1930s were ultimately eras of protectionism, with drastic consequences – i.e. an economic depression that lasted years and which was felt in countries around the world. Bagwell and Staiger characterize this period as one in which “realism” drove government policy, and they describe the failure of trade agreements in this era:
[...] The purpose of the WTO with regard to those nations that may be economically classified as “developing,” therefore, is not as simple as it seems, for while the stated goal of the organization may be to integrate these nations into the world trading order and help them develop economically, the WTO is also an international organization based on consensus, and those members with the most wealth end up having the most power. Another major function of the WTO is cooperation with other international economic organizations. [...]
[...] The links between trade and financial or macroeconomic policies are important because inappropriate macro policies may give rise to protectionism The WTO is also connected to other trade organizations, though the collaboration is in these cases less prominent: [other economic bodies besides the IMF and the World Bank] that have the closest links with the WTO include UNCTAD [United Nations Conference on Trade and Development], the International Organization for Standardization the Brussels-based World Customs Organization (WCO) and the World Intellectual Property Organization.” In this paper I have presented an overview of the World Trade Organization by focusing on its technical aspects. [...]
[...] Of these early rounds (excluding the 1947 round), Hoekman and Kostecki, in The Political Economy of the World Trading System, From GATT to WTO, write: “None of these rounds had as large an impact in terms of reductions in average tariffs as the 1947 meeting did For example, for the United States, the average cut in its tariffs achieved in 1947 was 21.1 percent, whereas cuts in the next three rounds were only and 3.5 percent, respectively As they state, with the significant early advances made in 1947 (and 1934), much progress had already been made toward the goal of reducing tariffs on a transnational level. [...]
[...] Trade Policy: History, Theory, and the WTO, comments on the voting system and the system of arbitration within the WTO: “Voting for most purposes in the WTO is by majority, with one country/one vote In addition, WTO dispute resolution panels come close to mandatory arbitration. Thus [for example], if the U.S. invokes Section 301 unfair trade practice proceedings (the strongest weapon in U.S. trade law), countries that feel disfavored can challenge this process and convene a WTO dispute settlement panel However, agreements are typically by consensus, and the voting system is rarely used, except to vote in new members (http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr02_e.htm). [...]
[...] It is charged with facilitating the implementation and operation of the Multilateral Trade Agreements; providing a forum for negotiations on already covered or new issues; administering the Understanding on dispute settlement and the TPRM [Trade Policy Review Mechanism]; and, finally, co-operating with the World Bank and the IMF to achieve ‘greater coherence in global economic policy-making' (Article III WTO) For the rest of this paper, I will focus on two of the functions just mentioned: ->the role of the WTO in the “developing world” the relationship of the WTO to other economic institutions. [...]
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