World Trade Organization and Free Trade

게시 날짜: 7월 9, 2010, 카테고리: International Political Economy


The World Trade Organization represents the political economy of free trade, and even though the free trade has significant influence and meaning of its own, some might argue that it is actually a misleading charade to hide the real agenda behind it.

The World Trade Organization (WTO) is an international organization designed by its founders to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1947. The World Trade Organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986-1994). The organization is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world’s population.

One can only mention the basic idea of WTO as simple as it can be: ‘principles for free trade’. The question is in what method we can do the free trades. WTO sets 5 self-defining rules: non-discrimination (including MFN and national treatment), reciprocity, binding and enforceable commitments, transparency, safety valves. It is apparently based on neo-liberalist (or neo-classical economics) ideas. In the view of pure neo-classical economists, the government meddling is not an option. The term ‘free trade’ means that the role of state should be diminished in order to achieve effectiveness in world economics. And to some extent, this may be true. When the Great Depression struck the world in 1930s, many governments depended on extreme measures such as protectionist tariffs, currency control, exchange rate control, quotas, and etc. They created their own regional blocs and tried to survive within. They were desperate measures indeed, but nonetheless they taught us a valuable historical lesson; when some nations feel left alone, blocked outside by the rest of the world, they can threaten the whole structure of world economy. Therefore, the very idea of free trade itself is viable and natural in the most obvious sense of basic economics.

Especially, these movements of free trade came with the globalization of other aspects such as culture, environmental protection, and defense. Since it started out as an economical collaboration, most of the newly created globalized culture meant ‘commercial culture’ produced by multinational corporations. Of course, there is ‘counterculture’ which rose against the mass-produced commercial culture. However according to [The Rebel Sell: Why cultures can’t be jammed] by Joseph Heath and Andrew Potter, countercultural movements have failed, and that they all share a common fatal error in the way they understand society; thus counterculture is not a threat to “the system”. This rise of newly created mass-consumable culture is being supported by the institutional order represented by WTO system. The similar goes to the environmental protection and international security cooperation. Because their economic privileges are on the line, actors globalize and regionalize the issues and tend to cooperate more. One can say that the major aspect in all of these matters is the increasing power of non-governmental actors, and relatively diminishing power of the state.

Nevertheless, The WTO system cannot avoid a serious criticism, which points out that the system was forced into being by the highly developed countries and the whole idea of ‘free trade’ is just a charade to cover up what is actually going on (despite the fact that the term ‘free trade’ comes into our minds in the most fascinating way). According to Ha-Joon Chang, the author of [Kicking Away the Ladder: Development Strategy in Historical Perspective](2002) and [Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism](2008), all the major developed countries used interventionist (protectionist) economic policies in order to get rich and then tried to forbid other countries from doing similarly. He argues that this so-called institutional ‘ladder-kicking’ (WTO, IMF, World Bank, etc.) is the fundamental obstacle to poverty alleviation in the developing world. In other words, all the rich countries developed in the past used mercantilist policies (which apparently was quite effective), but now they want free trade in order to sell their products to developing countries with price competitiveness, and interfere with the economical development of those countries.

The same debate was observed at the 2009 United Nations Climate Change Conference (COP15), which agreed to take note on the ‘Copenhagen Accord’. It was supposed to be a binding successor to the Kyoto Protocol concerning carbon emissions, but did not pan out. The developing countries represented by China and India claimed that, it is not fair that US and EU nations are forcing developing countries to cut down carbon emissions (which means less industrial development) just as well. The infrastructure of US and European nations has shifted to service industries, and their sacrifice in cutting down the emission is not as great as in developed countries, where the industry still requires large amounts of carbon emission. Though the Copenhagen Accord stated that financial compensations will be made to the developed countries, many people considered it to be a failure in an overall sense.

These arguments assert valid points, and we have to consider the need of difference principle in enacting or executing the rules and norms that consist our global institutions. However, even though the original intensions and agendas are controversial, the very importance and need of free trade is still viable. Though some scholars argue that unregulated international trade has rarely succeeded in producing economic development compared to interventionist policies, there has been definitely positive growth effect in the world economy. Whether that development is attributed to free trade movements or other factors is not quite certain, but I still believe that the basic guideline of world trade should be that of lower intervention.

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