The international trading system today incorporates a much broader range of economic issues, rules, disciplines, and commitments than did the pre-1994 regime of the General Agreement on Tariffs and Trade (GATT). Due to the expanded scope of World Trade Organization (WTO) agreements, topics such as services and trade-related aspects of intellectual property rights – whose international dimensions were previously handled through sector- or subject-specific agreements and arrangements – have now been brought within the scope of multilateral trade policy. As a result, not only goods but also the cross-border movements of services, and the protection of intellectual property are now included in the overall agenda of national, regional and international trade policy.
Moreover, what were once considered non-trade issues (such as labour practices, environmental
standards, and even human rights) are now being linked to market access conditions, particularly as part of the formation of a plethora of regional trade agreements (RTAs) and preferential trade agreements. Governments, enterprises and civil society are thus called upon to be more comprehensively and cooperatively involved in trade policy formulation and implementation as part of holistic development strategies and policies.
The development processes in developing countries are being comprehensively affected by the rules of the trading system, in addition to the trade policies of their major partners. Developing countries need to strategically manage and balance many more variables in the trade and development policy matrix than ever before. Added to this is the challenge of calibrating and using national policy space vis-à-vis the growing panoply of international commitments and disciplines.
The evolving multilateral trading system
Since 1995, the international trading system has undergone a number of major changes. In the preUruguay Round environment, the multilateral trading system was focused mainly on border
measures in trade in goods. It recognized the structural and economic challenges faced by
developing countries, and provided them with some special and differential treatment. This took the form principally of non-reciprocity in trade concessions, such as preferential market access, the most important of which were the generalized system of preferences (GSP) negotiated in UNCTAD and the Lomé Convention granted by the EU to African, Caribbean, and Pacific countries. It also comprised the dispensation from trade rules constraining domestic policy action. In essence, these related to the flexibility to use import controls to protect infant industries and to deal with balance of payment problems, since contracting parties to the GATT were not obliged to become signatories to all or any of the issue-specific agreements or disciples on trade-related domestic (behind the border) policies.
These included the pluri lateral approach adopted in the Tokyo Round codes which allowed many
developing countries to opt out from trade disciplines.
The pre-Uruguay Round GATT multilateral trade system was also accompanied by a series of
international commodity agreements for coffee, sugar, rubber and tin, concluded under the aegis of the UN through UNCTAD, as well as for dairy and bovine meat, concluded within the GATT.
Essentially, these agreements were multilateral undertakings on prices and supplies between the
main exporting and importing countries.
The post-Uruguay Round trading environment differs in several ways. The vast majority of
developing countries, as well as countries with economies in transition, have now joined the World Trade Organization (WTO). Established in 1995 as a result of the Uruguay Round of multilateral trade negotiations under the GATT, the WTO has brought about a profound transformation in the world trading system. As compared to the GATT 1947, the scope of the trading system was extended to agriculture, textiles and clothing, services, trade-related investment measures, and trade related aspects of intellectual property rights. As tariffs were lowered and as trade disciplines were extended to development policies and measures previously falling exclusively within the domestic jurisdiction, the national policy space for developing countries contracted. On the other hand, the rule of law represented by the strengthened rules in the WTO worked to their advantage in several areas. In particular, the strengthened, quasi-judicial and automatic dispute settlement system that underpins the compliance of WTO members to negotiated disciplines and commitments has provided effective trade justice avenues to them. Some developing countries are making effective use of the dispute settlement mechanism all though fuller utilization and benefit is constrained by factors like the lack of capacity of developing countries to ensure the enforcement of decisions.
The multilateral trading system and the WTO
Global trade relations and the bulk of world trade are now governed largely by the WTO agreements forming the multilateral trading system (MTS). Since the WTO agreements were based on the principle of a single undertaking, all members of the WTO are obliged to be party to all the agreements which cover a wider set of border as well as domestic policy issues than the
These have reduced the extent of domestic policy space previously available to developing
countries.
Although developing countries still receive some form of special and differential treatment (SDT), these are mostly on the basis of temporary exemptions from some provisions of the new agreements and longer implementation periods (that have mostly expired). As a result of a stricter application of the reciprocity principle, developing countries are now generally expected to have national trade regimes as open as those of developed countries. Thus, the new underlying logic in the trading system’s approach to trade and development is equality in trade opportunities for developed and developing countries alike (despite inequalities in capacity), rather than providing more meaningful responses to the specific structural problems of developing countries.
LDCs have been granted a substantively greater degree of special and differential treatment under WTO agreements. However, unilateral trade liberalization and domestic market deregulation
(undertaken since the 1980s as a condition for access to multilateral finance) have left many of them with some of the most open national trade regimes.
There is no doubt that the freer trade enabled by the GATT/WTO system in the last six decades has contributed to expanding world trade, made for a buoyant global economy, as well as advanced trade-driven globalization. The extensive scope of WTO agreements in particular has had implications for the ability of developing countries to pursue proactive development strategies as well as to explore and experiment with various policy options. The broad coverage, scope, and depth of WTO agreements have increased the impact of the trading system disciplines to various governmental policies as well as measures taken for development purposes.
WTO Agreements in areas such as agricultural and industrial subsidies, services, trade-related
investment measures, and trade-related aspects of intellectual property rights have had a major
impact on development efforts. Some industrial policy tools – which were used extensively and
successfully by developed countries in their industrialization and catch-up processes – were
foreclosed indefinitely as viable policy options for developing countries. This has highlighted the need and importance of adequate and balanced policy space and flexibility in remaining trade policy measures. In this regard, SDT provisions and the less-than-full reciprocity principle constitute enabling tools for the progressive and sustained, integration of developing countries into the world economy.
Titany answered the question on November 24, 2021 at 11:36