Friday, 18 December 2020

Bilateral Free-Trade Agreements (FTAs) and World Trade Organization (WTO)

Failure of the Doha Round of free-trade talks

The Doha Round of free-trade talks languished during the first years of the twenty-first century.

This was primarily because of the reluctance of rich countries to lower barriers to trade on agricultural goods, bowing to their farmers' insistence on having protected markets.

These policies, however, ended up destroying the possibility for farmers from poor countries to increase agricultural exports and earn the income they needed to survive.

Another cause for the failure of the Doha Round was the growing reluctance of developing-world countries to open their markets to manufactured goods in order to protect inefficient local industries.

Bilateral Free-Trade Agreements (FTAs)

In the end, most countries decided to start small, by signing bilateral free-trade agreements (FTAs), which are easier to negotiate and easier to sell to isolationist electorates because 

  • the benefits are more tangible and 
  • domestic businesses don't necessarily have to give up their subsidies.

World Trade Organization (WTO)

Once FTAs are in place, some sort of mechanism is needed to ensure that countries respect the promises they have made.  

Commissions were set up to monitor bilateral trade.  

A worldwide trade watchdog, the World Trade Organization (WTO) resolves disputes in an organized forum based in Geneva, Switzerland.  

The role of WTO is actually quite limited.  

  • The WTO was never meant to be more than a global round table where disputing parties could meet to air their grievances and try to resolve trade disputes.
  • All WTO decisions are made by consensus, with the member nations working together to decide which countries are allowed to impose sanctions.  
  • The WTO has no power to force a country to do anything against its own national interests.  
  • Its real power lies in permitting countries that have suffered from trade barriers that exceed those authorized by existing trade agreements to erect barriers of their own, usually in the form of tariffs.

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