International Trade Organizations and Agreements Enjoy Widespread Popular Support

[29] See e.B ibid., at p. 54: “The theory of comparative advantage assumes that trade is balanced (i.e., exports have equal value) and that labour is fully employed … If trade is not balanced, the surplus country will have to export certain goods where it does not have a “real” comparative advantage. [7] A good explanation for this theorem, which shows a hypothetical trade relationship between two countries, is available at This trend has increased considerably over the past twenty-five years, and this cross-border trade now takes place in virtually every industry. Many products will have parts and materials from many countries; For example, a new suit may contain cotton from West Africa, which was turned into fabric in Bangladesh and sewn into a suit in China, along with the buttons imported from India. And then the combination can be exported to the United States. Another example is the first wide-body Airbus 380, which had parts and components from more than 1,500 suppliers in twenty-seven countries. Many companies today have global supply chains and source parts and materials from all over the world. Each specific part or material in the value chain comes from the country that can produce the cheapest part, either because of its endowment of factors of production or because of special incentives such as tax exemptions. Of course, to succeed in a neo-mercantilist strategy, a country needs access to other markets, which has allowed the gradual liberalization of trade barriers within the framework of the GATT/WTO.

Neo-memerarchtilists typically focus on key industries chosen by the government, a strategy known as industrial policy. A successful industrial policy requires a far-sighted government. Japan had an extremely competent group of officials in the Ministry of Industry and Trade (MITI), which oversaw its industrial policy and was basically immune to political pressure. While the MITI has had many successes, it has also made some missteps. For example, in planning to develop a world-class auto industry in the 1950s, MITI officials initially believed they had too many automakers and urged Honda to merge with another company. Instead, Honda decided to invest in the United States and became a leading automaker. More than three-quarters of WTO members are developing countries and countries in transition to a market economy. During the seven-and-a-half years of the Uruguay Round, more than 60 of these countries have autonomously implemented trade liberalization programmes. At the same time, developing countries and countries with economies in transition have been much more active and influential in the Uruguay Round negotiations than in any previous round, and they are even more active in the current Doha Development Agenda. Third, Ricardo and other early economists based their theories on commodity trade, and they did not examine trade in factors of production. Today, however, basic factors of production such as labor, capital, and technology are exchanged.

The implication of trade in factors of production is that factor balancing will take place entirely in a shorter period of time than would be the case only in the case of trade in goods. However, many economists believe that the dynamic benefits of free trade may be greater than the static benefits. Dynamic benefits include, for example, the pressure on firms to be more efficient in the face of foreign competition, the transfer of skills and knowledge, the introduction of new products and the potential positive effects of greater adoption of commercial law. Thus, trade can influence both what is produced (static effects) and how it is produced (dynamic effects). In addition, as part of the trade diversion, the importing country loses the customs revenue it had collected for imports that now come duty-free from its block partner. The consumer of the importing partner wins because the imported goods no longer have to bear the customs costs; However, the consumer`s profit is necessarily less than or equal to the lost customs income, so the nation as a whole is less prosperous. Thus, the diversion of trade harms both the importing country and the rest of the world. These losses are greater than the gains for the bloc member earning exports due to trade diversion. It was also said that consensus is not necessarily popular, but that it is the least bad alternative for both developed and developing WTO Members. Developed countries fear being put in a minority, while developing countries fear being presented with a fait accompli.

[48] These agreements constitute the legal basis for world trade. Essentially, these are treaties that guarantee important trade rights to WTO members. They also require governments to maintain their trade policies that are transparent and predictable, which benefits everyone. The reason for these significant deviations from the original model is that the modern world of free trade is so different from the original historical environment of free trade models. Today, no one clearly determines the best economic outcome based on natural national advantages. Today`s global economy does not highlight a single better result achieved through international competition, in which each country best serves the interests of the world by producing the very goods that it can, of course, produce most efficiently. On the contrary, there are many possible outcomes that depend on what countries actually choose, what natural or artificial capabilities they actually develop. [25] [13] Increase prosperity for all, protect comparative advantage instead of creating distortions in the form of trade diversion. The rules on non-discrimination in most-favoured-nation treatment and national treatment aim to ensure a level playing field.

The same applies to dumping (exporting below cost in order to gain market share) and subsidies. The issues are complex and the regulations seek to determine what is right or wrong and how governments can respond, including by imposing additional import duties calculated to compensate for the harm caused by unfair trade. Another, equally incomplete, explanation for the strong adherence to consensus can probably be found in the human tendency to inertia. By this we mean the widespread preference to continue to do things as they have always been done, rather than trying something new and foreign, especially when we do not know what the consequences might be. For this and other reasons, many WTO members` delegates in Geneva are likely to encounter this level of risk aversion, many of which have become acquainted with the WTO by observing its practices and have a strong sense of maintaining institutional traditions. If you do not read the WTO Agreement, the Rules of Procedure or the few existing official decision-making documents, you cannot be sure that you will come across the fact that the WTO Agreement talks about votes. [63] Votes have taken place, but only systematically on decisions on exceptions under Article XXV(5) and accessions under Article XXXIII of the GATT 1947. With regard to other matters, parties generally did not take a formal vote to take decisions, but the Chair accepted the purpose of the meeting.

[25] Even with regard to derogations, votes have very often been preceded by consensus in the GATT Council. Notable exceptions prove this rule, and such a situation occurred in 1990 at the annual meeting of the Contracting Parties, when the EEC requested a roll-call vote on a derogation from the German Democratic Republic`s trade preferences for the countries of the former Soviet bloc. Despite the surprise and confusion this caused to many delegates who did not even have time to ask for instructions, the Chair, undeterred, applied the existing procedures and immediately proceeded to a roll-call vote. In its public relations work, the WTO also praises consensus as more democratic than majority rule. [49] At this stage, we do not intend to enter into a theoretical political debate. However, there are some doubts about this fine argument for democracy when one thinks of the situation in which a decision supported by an overwhelming majority of MPs is blocked by one or more governments, and perhaps by governments that lack democratic legitimacy at the national level. As a result, companies in certain industries, such as electronics and chemicals, became multinational companies and began to buy and produce more and more parts and materials in a number of countries. Whenever these parts and materials cross a border, an international commercial transaction has taken place; and then, when the final good is exported, another international commercial transaction has taken place. .