Economics » Globalization and Protectionism » How Trade Policy Is Enacted: Globally, Regionally, and Nationally

The World Trade Organization

How Trade Policy is Enacted: Globally, Regionally, and Nationally

These public policy arguments about how nations should react to globalization and trade are fought out at several levels: at the global level through the World Trade Organization and through regional trade agreements between pairs or groups of countries.

The World Trade Organization

The World Trade Organization (WTO) was officially born in 1995, but its history is much longer. In the years after the Great Depression and World War II, there was a worldwide push to build institutions that would tie the nations of the world together. The United Nations officially came into existence in 1945. The World Bank, which assists the poorest people in the world, and the International Monetary Fund, which addresses issues raised by international financial transactions, were both created in 1946. The third planned organization was to be an International Trade Organization, which would manage international trade. The United Nations was unable to agree to this. Instead, the General Agreement on Tariffs and Trade (GATT), was established in 1947 to provide a forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade. In 1995, the GATT was transformed into the WTO.

The GATT process was to negotiate an agreement to reduce barriers to trade, sign that agreement, pause for a while, and then start negotiating the next agreement. The rounds of talks in the GATT, and now the WTO, are shown in the table below. Notice that the early rounds of GATT talks took a relatively short time, included a small number of countries, and focused almost entirely on reducing tariffs. Since the 1970s, however, rounds of trade talks have taken years, included a large number of countries, and an ever-broadening range of issues.

The Negotiating Rounds of GATT and the World Trade Organization

YearPlace or Name of RoundMain SubjectsNumber of Countries Involved
1947GenevaTariff reduction23
1949AnnecyTariff reduction13
1951TorquayTariff reduction38
1956GenevaTariff reduction26
1960–61Dillon roundTariff reduction26
1964–67Kennedy roundTariffs, anti-dumping measures62
1973–79Tokyo roundTariffs, nontariff barriers102
1986–94Uruguay roundTariffs, nontariff barriers, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO123
2001–Doha roundAgriculture, services, intellectual property, competition, investment, environment, dispute settlement147

The sluggish pace of GATT negotiations led to an old joke that GATT really stood for Gentleman’s Agreement to Talk and Talk. The slow pace of international trade talks, however, is understandable, even sensible. Having dozens of nations agree to any treaty is a lengthy process. GATT often set up separate trading rules for certain industries, like agriculture, and separate trading rules for certain countries, like the low-income countries. There were rules, exceptions to rules, opportunities to opt out of rules, and precise wording to be fought over in every case. Like the GATT before it, the WTO is not a world government, with power to impose its decisions on others. The total staff of the WTO in 2014 is 640 people and its annual budget (as of 2014) is $197 million, which makes it smaller in size than many large universities.

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