1. Explain the reasons for trade restrictions. What are trade restrictions and what do you think about them?

2. Why are the following three arguments fallacious or questionable?

a) Trade restrictions are needed to protect domestic labour against cheap foreign labour.

b) Scientific tariff rates could make the price of imports equal to domestic prices and allow domestic producer to meet foreign competition.

c) Protection is needed to reduce domestic unemployment and to cure a deficit in the nation’s Balance of Payments or trade deficit.

3. Outline the major results of the Uruguay Round. Why should the GATT and the WTO be established?

4. What is the relationship between GATT 1947 and GATT 1994?

5. What happened to the ITO?

6. Was the GATT/Is the WTO an international organization?

References

1. Robert H. Folsom, International Trade and Investment in a Nutshell (2nd ed., St. Paul, Minn.: West Pub. Co., 2000)

2. Jackson, World Trade, Principles, IV EPIL (2000), p. 1529-1542

3. John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (2nd ed., Cambridge, MA: MIT Press, 1997). p.. 32-36, 82-84, 103-105.

4. Trading into the Future – WTO, 3rd edition, Revised August 2003. p. 7-20.

Lecture 2. WTO – structure, aims and principles

1. Objectives, main functions, principles

Objectives.

The objectives of the WTO include the followings:

- To raise standards of living

- To ensure full employment of members’ economies

- To promote the steady growth of real incomes and effective demand in their markets

- To expand the production of and trade in goods and services

- Sustainable development and environmental protection

- To ensure developing countries, and especially the least developed to secure a share in the growth in international trade commensurate with the needs of their economic development

Main functions.

There are five main functions of the WTO:

To facilitate formulation, implementation, administration and operation of the covered Agreements

Modern market economy must rely on international regulations or standardized global economic operations. Who should be the one to formulate these regulations? Should it be the US simply because of its strong economy? No single country is appropriate to make the rules. Only an international organization, like the GATT in the past and now in the form of the WTO, should formulate rules through many rounds of negotiations. Once the regulations and rules are set, there must be an organization to supervise and facilitate the implementation, administration and operation of these regulations and rules.

To provide the forum for negotiations on multilateral trade

The WTO provides the forum for negotiations on multilateral trade relations in matters covered by its various agreements. It may also, on decision by the Ministerial Conference, provide a forum for further negotiations, and a framework for the implementation of their results, on other issues arising in the multilateral trade relations among its Members. To put it simply, this is a matter of opening up the market. The founding of GATT in 1948 was based on the historical lessons of World War I and II, with the purpose of avoiding fighting for resources and market shares as a result of countries being divided up by different groups and because of closed markets. It was believed that opening market to each other could avoid the breakout of new wars. So far, this opening process has been extended from trade in Goods to trade in Services (finance, banking, insurance, securities, telecommunications, air shipment, accounting, law, and tourism), trade-related aspects of intellectual property rights, and trade-related investment measures or mutual opening of the investment market. The WTO is the direct result of multilateral negotiations, and will provide the forum for further negotiations on multilateral trade.

To administer the integrated dispute settlement system.

Along with increasing international exchanges, countries cannot avoid frictions in their trade business, and disputes will also become more frequent. For a long time, the situation was that big countries bullied the small ones that had no means to go to court to win their cases. This is why the US often used the “special clause 301”and “super-301”(introduced in 1988, under which the US could unilaterally find other countries’ trade practices as ‘unfair’ and impose trade sanctions if the offending country did not reach a satisfactory settlement with the US Trade Representative) to solve disputes. Now, the WTO has provided a more effective dispute settlement system.

To review national trade policies (see p.14. TPRM).

To achieve greater coherence in global economic policy-making by cooperating with the IMF and with the World Bank