WTO member countries. What gave Russia five years of WTO membership. Contradictions between WTO member countries
Russia celebrated the fifth anniversary of dubious membership in the WTO in August this year. The answer to the question of how much Russia needed to become a member of the World Trade Organization was obvious back in 1994, when the application was submitted. He left no doubts in 2012, when we were accepted. And there are absolutely no illusions about the expediency of WTO membership in five years.
IS IT NECESSARY?
From 1994 to 2011, Russia waited for the world to take pity and the WTO to embrace it. In 2012, we became full members of this organization. Putin, arguing about the expediency of this decision, then said that Russia has more pluses than minuses from joining the WTO. Recognizing that there are disadvantages, he strove with all his might to join the WTO, membership in which, in his opinion, carried a number of positive aspects:
It was supposed to help create a favorable investment climate: “it is very important for a foreign potential investor to know whether a country is a member of the WTO or not”;
Non-application to Russian exporters of non-market methods of regulation and restriction of activities in the market of third countries. Russia received legal instruments of protection. If translated into simple language, the WTO was supposed to change the state of export industries, that is, the oil and gas sector, for the better.
On this, according to the president, the pluses ended and the minuses began, which turned out to be not so few, and they are also connected with the domestic manufacturing industry, which, against the background of lower customs duties, had to face increased competition: “there are not so many of them, but they are. This is, for example, the automotive industry, where the level of customs protection is rapidly declining, including in the production of passenger cars, the production of footwear, agricultural engineering, etc. He also pointed out that after joining the WTO, animal husbandry, engineering, food and light industries will be in the most risky position. At the same time, the president acknowledged that joining the WTO is a serious challenge. An almost verbatim quote is as follows - "whether the WTO will bring benefit or harm to Russia - this is fifty-fifty." In other words, having estimated the probability of harming the country at 50%, Putin went for it. I wonder if he would fly a plane if he was told that there was a 50% chance of an accident?
Would they let their daughter into the park late at times if they knew that there was a 50% chance of a maniac there? Of course, this story is not about villainy, but about complete professional unsuitability.
He then took this step, despite the fact that even without the WTO, export industries did not need protection, unlike domestic production. It is symbolic that when talking about WTO membership, Putin made a slip of the tongue and instead of defending national interests, he said "we have lagged behind and will lag behind." It is difficult to disagree with this while Putin and his team are at the head of the state. He knows exactly what Russia will be like under him.
However, Russia did not see any protection measures through the WTO institutions. As a result, in 2015, Putin admitted that with the WTO “we were deceived”, the structure is politicized: “The restrictions imposed on us are the rejection of the basic principles of the WTO, the principle of equal conditions for access to markets for goods and services is violated, the principle of free competition is ignored. It's being politicized." Did it really take 18 years of preparation for the WTO and another 5 years of membership to realize such an obvious truth?
FIVE YEARS OF WTO MEMBERSHIP
Russia is still in the transition period and is gradually moving towards the fulfillment of all its obligations. But even now it can be stated that WTO membership has made its own adjustments to the state of the domestic economy.
INVESTORS
Contrary to the aspirations of the Kremlin, Russia's membership in the WTO has not brought the desired influx of foreign investment. And it's not even about the sanctions. The balance of foreign investment, including direct investment, was already negative in 2013, which indicates systemic problems in the economy, in which even as a WTO member Russia did not attract a foreign investor too much (Fig. 1).
Rice. 1. Direct investments of the Russian Federation (balance of payments), according to the Central Bank
The sanctions of 2014 and the restriction of investment in the Russian economy only accelerated the trend of foreign investors leaving the country. The main reason for the “fear” of a foreign investor lies in the unpredictable rules of the game, when the security forces can simply squeeze out business. Or, for example, not the security forces, but the state itself will review the results of the privatization deal and then give the returned asset for privatization to a company close to the president, as was the case with Yevtushenkov and his Bashneft asset. Or Putin's Russia will start to fight, and as a belligerent country, it is certainly not an object for investment.
Attracting foreign investment to Russia was the main argument of supporters of WTO membership. Five years have passed, and we can safely state that this plus was only hypothetical. And the failure of the liberals' plans is a reality.
IMPORT DUTIES
According to the commitments made when joining the WTO, Russia during the transition period had to reduce the rates of import duties, which in turn gave preferences to foreign manufacturers. The formula was simple and obvious: let's turn Russia into a sales market for the countries of the world, primarily the West. The transition period averaged three years, but for the most sensitive goods - cars, helicopters, civil aircraft, as well as some food products, including fish and pork, this period is set at five to seven years.
The reduction in duties was supposed to average 5-10%. For example, for the import of passenger goods, they should be reduced from 25% to 15%, for household electrical appliances and electronics from 15% to 7–9%.
The WTO limits Russia's ability to protect domestic producers through import duties and other instruments that the WTO recognizes as discriminatory. This already hit some industries in 2013 when duties started to come down. But since 2014, the gradual reduction in import duties has been offset by the devaluation of the ruble, which has made imported goods more expensive, even despite the reduction in duties. As a result, by 2017, imports decreased by 43% compared to the level of 2012. Thus, the effect of WTO membership in terms of reducing import duties will be noticeable later. When the market adapts to the new course, the effect of the reduction in duties will be manifested in a decrease in the competitiveness of domestic products.
EXPORT QUESTIONS
Russia decided to reduce export duties on a number of goods, but the terms of the game remained unchanged for the oil and gas sector. The export duty on gas remained at the level of 30%, while for oil and oil products the mechanism for determining the duty by the government based on the average price of Urals oil in the world markets remains. It was expected that the WTO would play in favor of export industries, since, according to the rules of the organization, export duties are also reduced, which opens up more opportunities for domestic producers abroad. But was it really impossible to reduce export duties without the WTO? Do you really need the instructions of some organization for this?
Since 2012, Russia has indeed increased the supply of food and engineering products. Let us analyze several commodity items, which are put forward by a number of experts as an example of increasing exports thanks to WTO instruments (Table 1).
Table 1. Physical volume of exports, according to the Federal Customs Service
As can be seen from Table 1, the export of tractors and cars to non-CIS countries from 2014 to 2015 more than doubled.
Export growth was driven by the ruble's own devaluation, which began in 2014 and had nothing to do with the WTO. Pork exports also increased 10 times at the time of the devaluation, increasing 4 times the following year. Although the export of poultry and pork increased immediately after joining the WTO, but not on such a scale as during the devaluation. It is unambiguously impossible to say that the WTO helped the domestic manufacturer to develop new markets, since the main determining factor was the reduction in the cost of exported goods from Russia against the backdrop of devaluation. It was necessary to sell everything that was possible for the influx of foreign currency into Russia. An effect like the last years of the Gorbachev USSR. Because there could not be any serious import substitution with gross savings of less than 15% of GDP and did not happen.
AGRICULTURE
As part of the commitments made by Russia, by 2018 the allowable amount of rural subsidies for 2018 should be $4.4 billion. When the government approved this decision, it meant a significant reduction in even those unacceptably low subsidies for agriculture. For example, in 2012 they were $9.1 billion. However, after the devaluation, when the ruble almost halved in value, the volume of state support for agriculture almost fit into this “Procrustean bed” of WTO commitments (Fig. 2).
Rice. 2. Government spending on agriculture, according to Rosstat
In 2016, total spending on agriculture amounted to about $5.4 billion, although at the exchange rate of 2012 they would have been equal to $10.9 billion. Next year, Russia will either have to reduce agricultural spending or devalue again ruble. In any case, the impact on agriculture will be inflicted, since in the future the volume of support for farmers will be determined by the obligation to the WTO, and not by the needs of the industry and the country. Yes, and this commitment provides next year for the reduction of financial support to the sector, which should be a priority in the import substitution program. Well, what can I say!
TRADE DISPUTES
When Russia joined the WTO, the Kremlin claimed that membership would help us defend our interests in court, which, by the way, we note, is a costly procedure. To date, Russia is party to four lawsuits against the EU and Ukraine:
In connection with the use in the EU of the methodology of "energy adjustments" in anti-dumping investigations against Russian goods;
In connection with the European Third Energy Package, which obliges companies to separate the business of extracting and transporting energy resources, which does not suit Gazprom;
In connection with a significant increase in the duty on the import of ammonium nitrate into the European Union and Ukraine from the Russian Federation;
In connection with the cancellation by the European Commission of duties on the import of Ukrainian welded pipes and the introduction of duties for manufacturers from Russia, China and Belarus.
However, Russia itself became a defendant in four cases:
Claim by the EU and Japan in response to the Russian recycling fee on cars, introduced by federal law on September 1, 2012;
EU lawsuit over import duties on commercial vehicles imposed by the Eurasian Economic Commission (EEC) on May 14, 2013;
Claim by Ukraine in connection with restrictions on the supply of Ukrainian railcars and turnouts.
Time will tell how the lawsuits will end, but at the moment Russia has already lost several cases in the framework of WTO trade disputes. In 2016, the WTO court found that Russia's duties on the import of paper, refrigerators and palm oil do not fulfill obligations under the WTO. As a result, Russia fully brought duties on part of these goods in accordance with its obligations.
The second loss was in relation to the EU lawsuit dated April 8, 2014, in which Russia was required to lift the ban on the import of pork, introduced in January 2014 by the Rosselkhoznadzor due to the African swine fever (ASF) epidemic detected in Lithuania and other European countries . The court found the ban inconsistent with the WTO agreements.
Russian WTO legislation is still very young. Russia does not have specialists of such a level to win disputes in the WTO. And the moment of politicization of the structure cannot be overcome by any highly professional lawyer. Therefore, in terms of trade disputes, the WTO for Russia is an institution of voluntary renunciation of its national interests without the ability to actually defend them.
RUSSIA AND SANCTIONS
Contrary to the Kremlin's hopes, the WTO has not protected the country from sanctions. The organization did not recognize these actions as illegal, did not impose restrictions on the EU. On the contrary, there was an attempt to consider the Russian food self-embargo as violating WTO rules. Thus, the protection that Putin's Russia hoped for has not been received.
CONCLUSIONS
Has WTO membership harmed Russia over the past five years? It could have hurt even more if devaluation and sanctions had not intervened, which, behind the WTO, dealt a blow to the domestic sector of industry. However, already in 2018, agriculture will experience all the consequences of sabotage - entry into the WTO, when the state, within the framework of its obligations, will reduce assistance to farmers. Later, when the market gets used to the ruble exchange rate, and when all duties are brought to their fixed values, the domestic industry will feel the growth of external competition, especially against the backdrop of high interest rates on loans. But if there were not as many minuses as could be, and even then only because even more traumatic decisions were taken for the economy, have we achieved the pluses that the president, his team and experts spoke about?
Firstly, Russia has never defended its rightness in the WTO court, that is, the defense of the national manufacturer through the court has failed so far.
Secondly, a foreign investor did not come to Russia, but on the contrary, against the backdrop of sanctions and the deteriorating economic situation, he preferred to reduce investments.
Thirdly, our product has really become more competitive. But this happened against the backdrop of the devaluation of the ruble, which reduced its cost for a foreign buyer, but hit the population, critical import-dependent industries, including defense.
Fourth, the promised increase in competition in the financial market did not materialize. Lending rates, which experts predicted, did not decrease. On the contrary, the Central Bank increased the interest rate, and now it is higher(!) than the level when Russia joined the WTO. Not to mention the fact that access to foreign lending for Russia in the past five years is closed.
Fifth, the WTO did not save Russia from restrictive measures. If in November 2012, 18 countries used protective measures against Russian goods, and a total of 73 measures were in effect, then as of August 1, 2015, the number of countries using restrictive measures against Russian goods increased to 27, and the number of measures taken - up to 112 • The number of ongoing investigations has increased from 5 to 22.
Sixth, for Russians, imported products did not become cheaper due to lower import duties, but, on the contrary, became more expensive due to devaluation. But, according to analysts, it was WTO accession that provoked an increase in domestic gas prices.
Seventh, by membership in the WTO, the government has made life much more difficult, now trying to circumvent its obligations. For example, in order to restrict imports in the automotive industry, the country's Ministry of Industry and Trade has set scrappage rates; to protect the agricultural sector, a ban was introduced on the import of live cattle and small cattle from Europe; protective measures against unscrupulous competitors and technical regulation measures in the chemical industry are applied.
Eighth, the WTO did not ensure the positive dynamics of export-import transactions (Fig. 3). However, this is the fault of devaluation and falling energy prices.
Rice. 3. Volumes of exports and imports of Russia, according to Rosstat
If WTO membership has not brought us any advantages, why should we continue to fulfill our obligations to the organization and at the same time pay contributions in the amount of 4.6 million US dollars a year? But of course, the primary question is, why did we need to move to the WTO with a resource-based economy at all? What did the Kremlin expect? Did you count at all? And, in principle, are they able to calculate the consequences of their rule?
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On the evening of January 23 Andrey Evdochenko On the air of Belarus 1 TV channel, he said that the expectations from the negotiation process were confirmed. According to him, the parties confirmed their mutual interest in Belarus' accession to the WTO.
Intex-press figured out what kind of organization it is, why it is worth joining it and what needs to be done for this.
What is WTO?
The World Trade Organization (WTO) is an international economic organization dealing with multilateral regulation of trade in goods, services and intellectual property.
The organization performs the following functions: monitoring the implementation of trade agreements, resolving trade disputes between members of the organization, monitoring the trade policy of members of the organization, organizing and ensuring trade negotiations on new WTO rules, admitting new members.
How many countries are in the WTO?
The WTO has 164 member countries. Of these, 11 post-Soviet countries. The first of the post-Soviet countries to join the WTO was Kyrgyzstan (1998), and the last one was Kazakhstan (2015). Four post-Soviet countries remain outside the organization: Belarus, Azerbaijan, Turkmenistan and Uzbekistan.
How long has Belarus been negotiating with the WTO?
Belarus has been negotiating to join the WTO since 1993. From the same year Belarus has an observer status.
When can Belarus join the WTO?
Possibly in 2017.
This was reported Vladimir Ulakhovich, Chairman of the Belarusian Chamber of Commerce and Industry in the Main Air program on Belarus 1: “It is always a thankless task to name dates, but I do not exclude that before the end of this year. The next round of negotiations will take place very soon, I think after that we will be able to talk more precisely about the timing.”
What needs to be done to join the WTO?
To join the WTO, a state must submit a memorandum through which the WTO reviews the trade and economic policy of the organization concerned.
Vladimir Ulakhovich said: “In many ways, we are already working on the principles of the WTO, because the Eurasian Economic Union is built on the same principles.” The only thing that, according to the chairman of the BelCCI, needs to be done is to take all transitional measures to protect financial institutions, agricultural producers, as is done in all countries that are members of the WTO. Vladimir Ulakhovich believes that there are no big barriers for Belarus' accession to the WTO now.
While Belarus is only negotiating, it is difficult to specifically say what conditions the country will have to fulfill in order to become a WTO member. The conditions for Russia's accession to the WTO have been discussed for 18 years. The main obligations that she had to fulfill were the following:
facilitating the access of goods of WTO member countries to the Russian market by reducing import tariffs for industrial and agricultural products;
opening of the domestic market of services for foreign competitors;
providing equal protection to owners of intellectual property rights through the legal procedures adopted in the WTO;
elimination or mitigation of restrictions on attracting foreign investment to the country, as well as expanding opportunities for Russian investors in WTO member countries.
In addition, Russia has carried out a full-scale reform of foreign trade legislation.
Why would it be beneficial for Belarus to join the WTO?
According to the Deputy Minister of Economy Anton Kudasov, with accession to the WTO, the export of Belarusian goods will increase, investments will come to the country.
The country's enterprises believe that joining the World Trade Organization will contribute to the economic development of Belarus. Enterprises expect the industry in which they operate to become more attractive for foreign direct investment.
Director of the Department for Admission of New WTO Members Chiedu Osakwe in an interview with Naviny.by, he noted that the WTO is a brand. And when a country joins the organization, it becomes a “brand” itself. “Therefore, the biggest benefit of WTO membership is that it improves the business climate,” the director said.
What troubles can Belarus expect?
Head of the Department of Economic Theory of the Academy of Management under the President of Belarus Irina Novikova last March, she told Naviny.by that when joining the WTO, entire industries could collapse:
“If we join the WTO, we will have cheap imported goods, but we may not have jobs to pay for them. Entire industries can collapse.
According to her, first of all, we are talking about agriculture and engineering.
WTO membership will radically change and worsen the situation of agriculture in Belarus, says Grodno State University professor Arkady Moroz.
According to him, the level of assistance to agriculture in our country was lower than in developed countries. As a result of accession to the WTO, this gap will not decrease.
And this means that when the country's food market opens for imports, it will be very difficult for our agricultural producers to compete with foreign suppliers, the professor believes.
Image copyright Getty Images Image caption Experts assess the consequences of Russia's accession to the WTO as neutral
This Tuesday marked the fifth anniversary of Russia's accession to the World Trade Organization. On August 22, 2012, after 18 years of negotiations, Russia became the 156th WTO member.
Moscow then assumed a number of obligations, which it had to gradually fulfill in subsequent years. Among them is the reduction of customs duties on agricultural products, manufactured goods, foreign medicines and medical equipment, chemical products, cars and other goods.
In response, the countries that are members of the WTO had to remove or reduce restrictions on the import of Russian products.
Five years ago, officials had rather positive expectations about the consequences of Russia's accession to the WTO. The Ministry of Economic Development predicted a decline in prices for many food products, medicines, clothing, furniture, cars and other goods. Andrey Belousov, then Minister of Economic Development, argued that joining the organization would improve Russia's business relations with many countries, such as China.
Aleksei Kudrin, head of the Civil Initiatives Committee and former Russian Finance Minister, explained that joining the organization would help increase the competitiveness of the country's economy and stimulate its development.
The BBC Russian Service asked experts to tell how five years of Russia's membership in the WTO affected the Russian economy. For the most part, experts note that the effect was not very noticeable, as other factors prevailed - the war of sanctions with Western countries, the fall in oil prices and the devaluation of the ruble.
This opinion is confirmed by the Ministry of Economic Development of Russia. “In the medium term, no major changes, negative consequences for industries in connection with WTO membership were predicted. What happened. The situation in the economy was determined by other factors, and this will continue in the future,” said the director of the Trade Negotiations Department of the Ministry of Economic Development in an interview with RIA Novosti Maxim Medvedkov.
Alexey Portansky, professor at the National Research University Higher School of Economics and leading researcher at IMEMO RAS:
"The question of the consequences of Russia's accession to the WTO cannot be considered outside the question of the current state of the Russian economy. This state, as we know, is quite difficult.
When Russia joined the WTO, the negotiating delegation had the feeling that serious economic reforms were about to begin, and the old economic model, based mainly on the exploitation of natural resources, had outlived itself. You do not need to be a member of the WTO to export oil and gas.
After the crisis of 2008-2009, we had the most serious drop in foreign trade turnover among the twenty countries. The consumption of hydrocarbons in the world has decreased, and we have drastically sank in exports.
The then head of the Ministry of Economic Development, Elvira Nabiullina, said that if we want to have a positive trade balance, we need to produce and export high value-added goods.
That is, we need a change in the economic model, the development of high-tech. Only in this case it was possible to benefit from WTO membership. At that time, it was said that significant positive consequences for exports could be felt already in 7-10 years after the entry. But so far, unfortunately, we do not even foresee this effect.
So far, we have seen only small benefits. In particular, from the disappearance of restrictions on certain export items (for example, steel or transport services) in foreign markets: in the European Union, in China, in the USA. But the main effect is felt when a country begins to export and develop new markets.
We also began to participate in the multilateral negotiations of the Doha Round within the WTO. At the last ministerial conferences - in Bali in 2013 and in Nairobi in 2015 - we were quite productive and contributed to reaching a compromise between the participants.
It is hardly possible to talk about the negative consequences of joining the organization, since all the reasons for the current state of the Russian economy are inside, and the WTO has no effect.
Trade disputes with Russia that have been initiated since accession are a normal business process for WTO members. At the same time, there are dozens of disputes between the EU and the United States for billions of dollars: for example, over the civil aviation industry. This is a normal routine thing, there is no politics here."
Alexander Knobel, Scientific Director of the International Trade Research Laboratory, RANEPA
“The consequences of joining the WTO are minimal: neither a big plus, nor a big minus. Accession itself did not greatly change the obligations of Russia, which it already assumed.
Preparations for the WTO stretched over 20 years and already included a large number of changes in trade policy. With direct accession, they were partially supplemented. Therefore, no significant effects could be expected from this, although the overall effect is positive. It can be estimated at a few tenths of a percentage point of GDP.
In the context of WTO sanctions, it has become a limitation for partners to introduce more significant protective measures, since Russia can now challenge measures that clearly contradict the norms of the organization. If Russia were not a member of the WTO, then, in my opinion, there would be much more trade restrictions.
Western sanctions and Russian counter-sanctions are amended by an article of the general agreement on tariffs and trade, which states that, for reasons of national security, states have the right to impose restrictions. It's just that this article is usually not abused. But in this case, both Europe and Russia refer to it, and no one even disputes these sanctions. That is, the WTO says that if some things are caused by political issues, then it does not interfere in this matter."
Sergei Zhavoronkov, Senior Research Fellow, E.T. Gaidar Institute for Economic Policy
“It is rather difficult to sum up the results. In recent years, there have been events that are significantly more important than Russia's accession to the WTO, namely sanctions, falling oil prices, and so on. In sum, this is more than a positive or negative assessment of Russia's accession to the WTO.
I would assess Russia's accession to the WTO as neutral - neither positive nor negative. Indeed, joining the WTO gives pluses to metallurgists, who make up about 10% of Russian exports, which, in general, is quite a lot. This allows them to better defend their interests, avoid arbitrary sanctions, and any claims against them for quotas can be dragged out in courts for years.
On the other hand, Russia is losing in agriculture, because it entered into very unfavorable conditions for itself. On the condition that Russia's possible support for agriculture is lower than in some Switzerland with a significant difference in population.
Nevertheless, one must understand that for Russia, as an exporter of raw materials, the WTO problem is of secondary importance. It is important for countries that sell something tangible to the foreign market - engineering products, machine tools, metals. Russia's 70% of its exports are crude oil and gas.
In this sense, if we intensely competed with Germany in the export of machinery and machine tools, then WTO membership could be seriously important for us. But since we sell crude oil and gas, this is not particularly interesting.
I do not want to say that WTO membership is not necessary. I want to say that this is a deeply secondary factor."
The World Trade Organization (WTO) is now clearly in crisis. However, history shows that international trade agreements have always been difficult: too often personal ambition is put at the forefront at the expense of common sense.
SERGEY MINAEV
October 30, 2017 marks the 70th anniversary of the predecessor of the modern WTO - the General Agreement on Tariffs and Trade (GATT). In 1947, when the agreement was signed, a press release stated that "the most grandiose negotiations in the history of world trade have been held." The British weekly The Economist remarked: "This is the longest and most complex document ever published - a document that is the hardest to understand on a record." And the British newspaper The Daily Express put it this way: "A big bad deal has been made."
The complexity of the agreement was quite in line with the level of problems in global trade at the time, generated by the protectionist policies of the 1930s, which prevented the Great Depression from being overcome.
The scale of the GATT was impressive: the agreement was signed by 23 countries, which accounted for 70% of world trade. They agreed to reduce existing customs tariffs and refrain from introducing new ones. So it was a multilateral foreign trade system based on at least some rules.
This sweet freedom of trade
For 48 years, the GATT was a preliminary agreement; in 1995, the WTO was formed on its basis. However, many GATT issues have not lost their significance to this day. The main one is the contradiction between ambition and practicality. In 1947, American negotiators had in mind the possibility of an International Trade Organization (ITO) with more members and more commitments. This plan collapsed just under the weight of personal ambitions.
Another problem is the contradiction between control and cooperation. For example, today Brexit supporters believe that Britain needs to regain control of its own economy. Donald Trump speaks in the sense that the existing US foreign trade agreements do not provide the country with the main positions in this area. When the GATT negotiations were underway, the famous British economist John Keynes expressed doubt that the UK should give up the possibility of using customs tariffs to stimulate employment, although he admitted that a general reduction in tariffs in the world would do more good than harm.
The American negotiator at the conclusion of the GATT, Undersecretary of State for Economic Affairs Will Clayton, believed that the agreement should primarily help American manufacturers. He offered to break off negotiations with Great Britain after the latter refused to eliminate the reduced tariffs for its dominions and colonies. However, Clayton was instructed to continue negotiations. The White House believed that GATT would help the post-war reconstruction of Europe and strengthen the geopolitical influence of the United States. Thus, he made it clear that GATT is something more than just an agreement on the size of customs tariffs.
American negotiator at the conclusion of the GATT, Will Clayton, listened to the opinion of the White House on the need to strengthen the geopolitical influence of the United States
In a famous speech at Baylor University in March 1947, President Harry Truman declared, “We are the giant of the economic world. And whether we like it or not, the future of international economic relations depends on us.” He also stated that he was “not an advocate of free trade, but of freer trade” and that this very demand would be put forward at the first multilateral foreign trade negotiations, which were just beginning in Geneva. The outcome of the negotiations must be consistent with "our spirit of free enterprise - the very essence of everything that we call American," said President Truman.
Will Clayton, the head of the US delegation in Geneva, considered the State Department's leading proponent of free trade, in truth believed that it was not so much trade negotiations that mattered as the implementation of the Marshall Plan to overcome the post-war economic crisis in Europe. As Clayton stated at a meeting at the State Department in May 1947, “In general, the initiative to implement this plan should come from European countries. But America has to run the show. And you should start right now.”
The "Marshall Plan" symbolized the US bet on foreign trade, although not all Europeans were delighted with this.
As Clayton's biographer points out, GATT "became an unprecedented treaty in terms of the amount of tariff cuts and the number of goods and countries involved in the history of the industrial world.
Moreover, it became the basis of flexible bilateral and multilateral trade negotiations, and the very procedure of these negotiations ensured the political supremacy of the rich countries and the global dominance of the United States.
The agreement created the conditions for the subsequent liberalization of the world economy and equal treatment of national and foreign investors. Although it allowed to maintain temporary mutual foreign trade restrictions, which the United States and Great Britain agreed on in the summer of 1947.
After that, American foreign trade strategy was no longer called an open door policy and, as before, was determined by what was called domestic influence. But this influence more and more required the expansion of the American model of capitalism to the whole world (primarily to ensure the free movement of capital), so the following presidential administrations moved along the path of foreign trade liberalization (with the exception of special cases that came under the jurisdiction of Congress, which took into account individual interests some branches of the American economy).
All of this meant gradually opening up the American market even to those countries that protected their markets with tariffs, subsidies, or undervalued national currencies. The American economic strategy relied on foreign trade - first in relation to Europe (under the Marshall Plan), and then in various forms in relation to Japan, South Korea and Taiwan.
The Kennedy administration, in the face of freer trade, paid special attention to stimulating American exports. In 1962, Congress passed a trade law that allowed the administration to cut import tariffs by 50% in connection with a new round of GATT negotiations that began in 1963 (and lasted until 1967) (it was called the Kennedy Round).
In addition, the law emphasized that food aid to developing countries should be treated as loans, for which the recipients must pay in dollars.
The share of such assistance in American food exports, which was 35% in the early 1960s, dropped to 5% in 1975. Be that as it may, developing countries have been signaled to move towards policies to stimulate foreign direct investment and develop export industries - simply to have the dollars they need to pay for the food aid program.
Regarding the mentioned International Trade Organization, whose functions were taken over by the GATT, it should be said that its history is in some way connected with the IMF and the World Bank, in the creation of which the USSR took an active part. The American press reported that at a conference in American Bretton Woods on July 22, 1944, it was announced that the IMF would amount to $8.8 billion, including $1.2 billion from the USSR.
The same amount, according to the press, expressed the alleged Soviet share in the capital of the International Bank for Reconstruction and Development (a total of $ 9.1 billion), created to stimulate long-term investment. As a result, the USSR backed down.
The Bretton Woods Conference of 1944 came up with not only the IMF and IBRD, but also the International Trade Organization
The role of the third pillar of the post-war world order was proposed by the International Trade Organization, designed to revive world trade. Negotiations in Geneva in 1947 were supposed to go just about the creation of the MTO. However, the US administration has shown a rare lack of enthusiasm in this matter. However, when Truman decided that one should not ask Congress to ratify the WTO charter, he took into account not only the position of the administration and not only the sharp opposition in Congress from the opposition (which advocated a policy of protectionism), but also the mood of the largest American capitalists - so to speak, internationally. oriented.
The American Council of the International Chamber of Commerce has determined: "The Charter of the ITO is a dangerous document that considers as a long-term goal the provision of economic development and employment throughout the world."
In essence, the complaints about the WTO charter were that it did not contain provisions that would talk about opening the markets of other countries for American direct investment, as well as about protecting these investments. That is, what became the basis of American bilateral agreements with other countries in the 1950s.
Fighting disappointment
Already in the 1970s, the GATT ceased to suit the United States. The report of the Commission on Foreign Trade and Investment (the chairman of the commission was the head of IBM), addressed to the president, said:
"The US has not been rewarded for tariff concessions to other countries - they are finding ways to block access to their markets other than customs tariffs."
Non-tariff barriers primarily concerned American financial services, and the American authorities pinned special hopes on their exports in solving problems of the current balance of payments. The US has had to contend with thousands of laws, regulations, and regulations in other countries, including those related to price controls or subsidies. In general, with everything that was defined as "dishonest foreign trade practice."
In contrast to the area of customs tariffs, agreements relating to financial services, foreign investment and the protection of intellectual property rights required a major review of legislation and enforcement.
During the negotiations of the so-called Tokyo Round of GATT in the 1970s, the United States emphasized non-tariff barriers, but did not succeed due to the opposition of Japan and European countries. However, in the 1980s it was overcome. Protectionist statements have become louder and louder in the US Congress, cases of US anti-dumping duties have become more frequent - and the Japanese and Europeans are worried. In the end, Ronald Reagan managed to convince Japan to impose "voluntary export restrictions" on cars and increase their production in the United States itself.
Japan's willingness to pursue a free trade strategy ensured the success of the Uruguay round of GATT negotiations, which began in 1986 (according to the plan, it was supposed to start in 1982). This success was expressed, in particular, in the Free Trade Agreement between the United States and Canada, concluded in 1989. In 1911, Canada refused to sign such an agreement, because a significant part of the country's citizens feared "annexation by the United States." This time, Canadian capitalists played a decisive role in the fate of the document, fearing that their goods and investments would be considered foreign by American congressmen, who were clearly in the grip of protectionist sentiments.
The North American Free Trade Agreement between the United States, Canada and Mexico was an example in the creation of the WTO
It is worth saying that this document became the basis for the 1994 North American Free Trade Agreement between the United States, Canada and Mexico. American business associations spent $50 million to lobby Congress, the most expensive foreign trade policy project in US history.
American verdict
The mechanism for resolving foreign trade disputes within the framework of the North American Agreement has become in many ways a model for the WTO, the creation of which in 1995 can be attributed to the merits of the Uruguay Round of negotiations within the framework of the GATT. The basis of success here was the position of the US and European countries, which simply threatened to close the two largest markets in the world for countries that do not sign multilateral agreements, primarily on financial services and the protection of intellectual property rights. (You can, of course, note that the developing countries agreed to join the WTO also because of the huge debt owed to the industrial countries.)
The most important significance of the WTO lies in the fact that it was the first to propose a judicial mechanism for resolving foreign trade disputes.
Of course, the US itself was now forced to abandon the selective application of foreign trade measures that it had practiced under GATT. Nevertheless, the share of foreign trade (exports plus imports) in US GDP rose from 11% in 1970 to 23% in the second half of the 1990s.
One way or another, we can say that the creation of the WTO has become the most important event in the history of the formation of global capitalism since the time of the failed WTO.
Now the situation with the WTO leaves much to be desired. The organization is called upon to resolve disputes, as well as to develop agreements, and all 164 members of the WTO must support the new development. Such unanimity seems unattainable. If WTO members cannot agree on new rules, they must follow the existing ones - as interpreted by the organization's judges. Even if the members do not like the rules, others are not yet in sight.
The legal function of the WTO is under threat. The organization's appellate court shall consist of seven judges. By 2018, four remained (three had expired), but the Americans are slowing down the procedure for electing new judges, citing “systemic difficulties.”
The problem is exacerbated by the fact that in recent years, trade disputes have increased dramatically in number and are becoming increasingly complex. The Court of Appeal deals with many cases at the same time, and each takes a lot of time. For example, what the European Union initiated in relation to the Airbus concern was considered for a year. By the end of 2019, the terms of three more judges will expire. Will be alone. And it takes three to make decisions, and if the vacancies are not filled, the WTO legal system will collapse.
In September 2017, US Trade Representative Robert Lighthizer complained that WTO judges were biased (interpreting the rules against the United States) and that the WTO was imposing obligations on the country that it did not assume when joining the organization. Back in 1996, Lighthizer, as an adviser to presidential candidate Bob Dole, said that WTO claims against the United States should be considered in independent American courts. Robert Lighthizer now speaks with praise of the pre-WTO system in which countries could disobey dispute decisions.
Lighthizer expressed doubts that the WTO will objectively consider a complaint about China's violation of the rules of the organization or introduce any rules to ensure the fairness of decisions at the ministerial conference in Buenos Aires in December 2017.
US Trade Representative Robert Lighthizer Recorded the Failure of the Ministerial Conference in Buenos Aires in December 2017
The WTO conference in Buenos Aires (already the 11th in a row) really ended in failure. The delegates could not even agree on the text of a joint statement - let alone the conclusion of trade agreements.
In fact, before the conference, there were almost no hopes for its success, and in the course of the event, these expectations disappeared altogether.
Robert Lighthizer represented the US view that multilateral trade negotiations are useless and the WTO legal system is deeply flawed.
Delegates from many countries complained that the United States, having lost its former leadership in the WTO, would only be happy about the failure of the negotiations, they say, this is another proof of the senselessness of the organization.
The delegates arrived in Buenos Aires with a weight of deep divisions and never got over them. For example, India complained about restrictions on the right to distribute food supplies among the population. The United States objected, India threatened to retaliate by withdrawing from the agreement banning subsidies for illegal fishing. European Trade Commissioner Cecilia Malmström called the move "monstrous".
In general, the WTO repeats the difficult path of its predecessors. At first, states create a global trading system with pomp, and then refuse to give up a bit of self-interest for the sake of its prosperity.
Location: Geneva, Switzerland
Founded: January 1, 1995
Created: Based on Uruguay Round negotiations (1986-94)
Number of members: 164
Staff of the Secretariat: about 640 employees
Chapter: Robert Kovalho de Azvevedo
Goals and principles:
The World Trade Organization (WTO), which is the successor to the General Agreement on Tariffs and Trade (GATT) that has been in force since 1947, began its activity on January 1, 1995. The WTO is designed to regulate trade and political relations of the Organization's members on the basis of a package of agreements of the Uruguay Round of Multilateral Trade negotiations (1986-1994). These documents are the legal basis of modern international trade.
The Agreement Establishing the WTO provides for the creation of a permanent forum of member countries to resolve issues affecting their multilateral trade relations and to monitor the implementation of the Uruguay Round agreements and arrangements. The WTO functions in much the same way as the GATT, but oversees a wider range of trade agreements (including trade in services and trade-related aspects of intellectual property rights) and has much greater powers due to improved decision-making and implementation by members organizations. An integral part of the WTO is a unique mechanism for resolving trade disputes.
Since 1947, the discussion of global problems of liberalization and the prospects for the development of world trade has been held within the framework of multilateral trade negotiations (MTP) under the auspices of the GATT. To date, 8 rounds of the ICC have been held, including the Uruguayan one, and the ninth is ongoing. The main goal of the WTO is to further liberalize world trade and ensure fair competition.
Fundamental principles and rules GATT/WTO are:
- mutual granting of the most favored nation treatment (MFN) in trade;
- mutual granting of national treatment (NR) to goods and services of foreign origin;
- regulation of trade mainly by tariff methods;
- refusal to use quantitative and other restrictions;
- transparency of trade policy;
- resolution of trade disputes through consultations and negotiations, etc.
The most important functions WTO are:
- control over the implementation of agreements and arrangements of the package of documents of the Uruguay Round;
- conducting multilateral trade negotiations between interested member countries;
- resolution of trade disputes;
- monitoring the national trade policy of member countries;
- technical assistance to developing states within the competence of the WTO;
- cooperation with international specialized organizations.
General benefits of WTO membership can be summarized as follows:
- obtaining more favorable conditions for access to world markets for goods and services based on the predictability and stability of the development of trade relations with WTO member countries, including the transparency of their foreign economic policy;
- elimination of discrimination in trade by accessing the WTO dispute settlement mechanism, which ensures the protection of national interests in case they are infringed by partners;
- the possibility of realizing their current and strategic trade and economic interests through effective participation in the ICC in the development of new rules for international trade.