International Trade Mechanism After World War 2

Throughout the modern economic history, there have been Great Powers shaping the universal economic order including trade rules by exerting their influence on secondary powers particularly in the last two centuries. After WWI, these Great Powers; such as Germany, France, and the UK, had strived to spread their economic policy across the world, which means that protectionism was in the ascendant in the 19th and 20th centuries (Balaam and Dillman, 2014, p. 133). However, that protectionism had onerous trade barriers leading to that the Great Powers had difficulty to overcome destructive effects of the Great Depression pushed the major economic powers to found international liberal order through Bretton Woods conference in 1944 (Balaam and Dillman, 2014, p. 134). There were various initiatives to prevent protectionist measures in the international trade. Firstly, the International Trade Organization was established; nonetheless, the ITO could not function in long-run process due to the US Congress, and then President Truman pioneered to found General Agreement on Trade and Tariffs ensuring to prevail liberal order over protectionism in 1948. Diverse countries ranging from the UK to Japan decided that protectionist measures must be diminished through rounds to spread liberal order (Balaam and Dillman, 2014, p. 134). The GATT had two fundamental features, both of which are reciprocity and non-discrimination, and MFN treatment was implemented that domestic products and import products must be equal in the market. Despite the fact that the principle of reciprocity forced the member countries to decrease in protectionist measures via rounds, they also agreed on unilateral and bilateral treaties with their trade partners; since, The GATT’s decisions implemented by diplomacy and trust so voluntarily was not binding apart from agriculture and textile leading to shortage in Europe (Balaam and Dillman, 2014, p. 135). The Tokyo Round of the GATT had enacted numerous implementations including non-tariff barriers (NTBs) so as to trigger international economic growth after the Oil Crisis in 1973. For instance, Japan utilized this international liberal order and grow its economy enormously. However as mentioned above, countries had tried to refrain from the implementation of the principle of equivalent between import products and domestic products, which illustrates through an agreement between the US and the EU called voluntary export restraints (VERs) to strangle the expansion of Japanese car brands in their markets (Balaam and Dillman, 2014, p. 136). This proved that the protectionist measures are inevitable in the international trade, and countries ratified trade legislations by preserving their national interests and agreed on multilateral or bilateral treaties. Besides the widespread of protectionism across the globe and to prevent the hegemony of the Soviet Union in the Third World, Reagan administration strived to stimulate liberal order again in the whole world. Therefore, the Uruguay Round was initiated in 1986 and lasted to 1993. Economic liberals reckoned that the Round was successful; since, it implemented new regulations against protectionism, and brought about rise in international liberal policy by eliminating trade barriers, diminishing export subsidies (Balaam and Dillman, 2014, p. 136). Moreover, working groups had been arranged in order to conduct agricultural issues as well as intellectual property rights in the international market. The substantial attribute of the Round is that the notion of agriculture was tackled with its extensive scope for the first time. Countries involving the US, the EU countries, and Australia reached a deal disposing of agricultural export subsidies gradually, and in the Uruguay Round WTO was systematized and institutionalized; also the Trade-Related Aspects of Intellectual Property Rights Services asserting to minimize protection of copyrights or patents and the General Agreement on Trade in Services aiming to decentralize various services were enacted, which attributed to the Uruguay Round’s reformative feature (Balaam and Dillman, 2014, p. 137). The advent of the WTO in 1995 based in Geneva, the GATT became an integral part of the GATS, and the WTO’s primary duties comprise of implementing the GATT, the GATS, the TRIPS agreements. Furthermore, the WTO undertakes the solving of trade disputes, as well as initiating new trade treaties, and assurance of technical assistance; also, the decisions are made by a consensus including the Secretariat, General Council, Ministerial Conference and disputes are solved by Dispute Settlement Panels regarded as enforcement mechanism, which constitutes the prime difference between the GATT having non-binding deals and the WTO (Balaam and Dillman, 2014, p. 138). The first round after the foundation of the WTO is the Doha Round beginning in 1999; however, the Round could not maintain by virtue of riots demonstration, and protests arguing antiglobalization in Seattle against WTO’s decisions and policies and the Round was moved to Doha; moreover, farmers from diverse developing countries avowed that they struggled a lot owing to the decisions of the Uruguay Round causing to reduce in agricultural export subsidies, and worsened socioeconomically after WTO’s rules; and developing countries demanded to be involved to the negotiations in the Doha Round latterly named Development Round (Balaam and Dillman, 2014, p. 139). The US, Japan, and the EU forced developing countries to open their markets to developed ones and to diminish their tariffs for non-agricultural imports such as industrial products; however, developing countries decided not to implement both these requests and WTO’s rules, also they demanded the EU, the US, and Japan to legalize to cut agricultural subsidies in their countries; since these agricultural subsidies results in overproduction, which aggravates the situation of the farmers in the developing nations (Balaam and Dillman, 2014, p. 139). Eventually, the US and the EU compromised on the request of developing countries to lower the agricultural export subsidies in the summit of G20 in 2005; nevertheless, the Doha Round was not accomplished and virtually terminated in 2008; also, the TRIPS transformed to a contentious and controversial circumstance, since the WTO could not constitute a consensus concerning cultural products and generic drugs (Balaam and Dillman, 2014, p. 139). Consequently, although the Doha Round is not yet finalized, it is assumed the Round will not be successfully completed by virtue of its complicated structure and disagreements among various countries. Based on explanations above, these conclusions can be driven that the GATT played an essential role that both developed countries and developing countries strived to accomplish the joint international trade mechanism based on liberal order by eliminating protectionist measures including tariff obstacles and agricultural export subsidies; nonetheless, they failed to reach these goals owing to national interests. The Uruguay Round was milestone for the GATT; since, diverse regulations to liberalize international trade were enacted. The WTO, the GATT’s predecessor, differentiates from the GATT thanks to its enforcement mechanism named DSP and institutionalization structure; though, it did not accomplish to conduct and complete the Doha Round and it halted in 2008 due to issues on agricultural export subsidies between developing and developed countries, thus it was not a successful round.