In 1948, after years of negotiations, more than 50 nations signed the Havana Charter to create the International Trade Organization (ITO). But in the 1950s, President Truman decided not to resubmit the ITO charter to Congress for ratification, due to perceived threats to national sovereignty and the danger of too much ITO intervention in markets (Guide, 1994). The result was the much more limited General Agreement on Tariffs and Trade (GATT), which brought rules and regulations to world trade.
A breakthrough occurred in 1994. Negotiators conceived of a totally new organization, which the Uruguay Round (1986-1994) negotiations agreed on—the World Trade Organization (WTO). The crucible of the WTO’s formation and success was how it would be able to manage the changes that had occurred in international trade and its public sector structure since the Havana Charter of 1948. The context at the time of the Charter’s passage was that of a gradual increase in overall trade, combined with several powerful macro- and microeconomic shifts such as increased globalization, the emergence of new regional and plurilateral trade initiatives, and the global activities of Asia. As a key trade driver, financial flows overtook trade flows in determining exchange rates.
Since 1948, world trade has grown very rapidly, with trade in goods growing yearly by an average of 6 percent a year in real terms (WTO, 2016). In 1948, total world trade was valued at just above $58 billion, with the United States accounting for 34 percent of free world trade flows. Japan’s imports exceeded U.S. exports by 160 percent (Yearbook 1956). By 1994, world trade exceeded $4 trillion and the United States had a share which had declined to 12 percent. Almost twenty years later, in 2013, total world trade in goods and services amounted to $20 trillion. The United States held a world market share of 19 percent at $3,848 billion, heavily influenced by a high level of imports. Germany’s share was 13 percent and Japan’s $1,547 billion represented a share of 7 percent (OECD, 2014). The United States, the European Union and China have been the three largest global players for international trade since 2004 when China passed Japan (Eurostat, 2016).
On the microeconomic front, there had been exponential transformations of computer technology, expanded communication via the Internet, and major supply chain extensions. Also considered, but questionable even at the peak of the momentum and optimism surrounding the Uruguay Round, was whether the WTO could effectively handle social issues including labor laws, competition, and emigration.
Today, with aspiring provisions and a rejuvenated framework of multilateralism enabled by global political shifts brought on by the fall of communism, the WTO seeks to reduce tariffs, eliminate trade barriers and quotas, and expand coverage of services, intellectual property, foreign direct investment, and agriculture.
In light of recent changes in the trade context and decreased multilateralism, the WTO should become more inclusive, introduce smaller and more limited negotiation events based on subject areas, and transition into a more social-network based platform to include civil society and private sector in rule-making and agenda setting of future trade agreements.
Professor Michael R. Czinkota, Georgetown University Washington D.C., USA
Professor Valbona Zeneli, Marshall Center, Garmisch, Germany
Full article can be found at: http://www.sciedupress.com/journal/index.php/jbar/article/view/9672