Politics of International Trade: Multilateral Trade System Nakures Awobitio. Pole om Lmnpact Vd Tuchitie National economies are increasingly integrafed into a global economy 25 governments are}. ¢ losing their control on domestic economic policies. GATT + We Governments are forced to open up their economies for for goods and services paving “a the way for integration of thesgé national economics into global economy. Now goods, services and capital move freely across national borders and citizens of any country can use commodities produced in several foreign countncs: Thus, reign a increasingly integrated Production, trade and consumption of goods and services have been globalized, Intemational trade has increased significantly since the end of the second World Wagfand creation of a liberal international ezonomic system in the post war Pe iod. ‘The world has witnessed an average inerease of 06 percent per Year I0 international trade since 1950, The volume of international trade ir 2000 and $ 14 trillion in 200% The growth in international trade remaine: ‘A large share of world production and employment depends “The growth in intemational trade has been made possible by cerpted in 1947 nereased from $84 bil 1S. tgeelbies ew higher than growth in world production. on international trade. the multilateral trade system Evolution of Multilateral Trade System (0 create and maintain it. is a hegemonic power (state) fh pean states, International distributed among various Euro} kA, also gave rise to a liberal international economic {A liberal international system need When power was roughly equally economic system was protectionist gp ‘The rise of Great Britaifyin ‘the 19" century. system. By the end of the First World War, the relative power of Great Britain had declined and it oy unable to sustain/maintain the liberal intemational economic system. By then USA had merged asa potential hegemonic power which could perform the role of'a hegemonic power to maintain free-trade system « RYE OS eo 1 poe eye In fact USA was protectionist till mid 1930s (1934). Resultantly, the world economy became increasingly more and more protectionist characterized by ereation of competing regional blocs during the inter war period. In order to bring an end to the & renewed protectionist trend in the inter war period, the league of nations had organized the first world economic conference in May 1927. 27 states including the main industrialized countries had attended the conference. 1hod he participants agreed to an international convention nd balanced muti-lateral trade agreements tot was also Signed in 1947, ete With democratic party coming into power and having majority both in Senate Commons'USA also changed its policy and favored free trade. 5 fence sstito In 1934, US congress passed Reciprocal Trade Agreement (RTAA) which a ae President the powers to conclude agreements with foreign governments to cut tar a5 50 % on reciprocal basis. ninutely detailer, vas the most 1 y me of the GATT a pre-cursor and House of wns and destruction of world war The economic cri 93 iltant political tensio ic crises of 1930s and resultant pol ane had convinced the US government about the importance of a free and open inte economic system to be created at the end of the World War-Il . : Thus, in early 1940s, the US in close collaboration with Great Britain designed international institutions to provide the necessary supporting infrastructure for the postwar liberal global economy. Consequently 4 states met in Breteny Ne Hampshire, USA, in 1944 (late Summer) on US initiative, and decided) form’ fistilutions (collectively known as Brettenwoods institutions) in order to provide institutional structure for free economic system. The institutions such as IMF, World Bank and GATT/WTO collectively form Borettenwoods system. Why did America Play the Role of Creating MTS? American believed that: A free and open trade system was essential for international peace and prosperity. Role of a hegemonic power was vital to create and maintain free trade system. US economy was strong enough fts products can compete with foreign products in domestic and international markets. As such, free trade would serve American economic interests. MULTILATERAL TRADE SYSTEM: Multilateral Trade System (MTS) is an international political system which was created in 1947, MTS has two aspects: a) political process, and b) a set of political institutions to regulate international trade. Political Process: As a process it involves negotiations among national governments of member states on trade issues which Is resulted in framing, through interational/mulilateral agreements, of rules and principles governing governments policies related to international trade, 2Je for the creation of M.TS.9.% tate, both rich and poor. Itig ralism which advocate rade maximizes welfare A Market Liberalism: i provided the very rational / Provides/assumes that free trade is in the interest ye based on the assumption of economic internationalts! ; free t Temoval of all barriers to international trade believing that one gains thorough free Peis aes wel lege ier cee ee ae y : izes wel ‘ trade, It improves world standard of living as it maximizes alt pI disor ~inelus} deeimating sor B. Non-Diseriminationf: This principle prevents its eae ee ‘against others, It ensures that each WTO member get equal and identical a aiceneae trade with other members, In simple words, this principle prohibits mem! ear fom working trade policies to provide benefits to some members at Pa p others. This principle takes two forms i) MEN Status and ii) national treatment. 1) Most Favored National (MEN) Status: This principle restricts member states fom aiving certain trade concessions to some members and denying them to others Artcle-| of GATT described it in theses words “any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.” ts In simple words it means that each/Must reat all WTO members the same way as treagits favourite trading partner. It ensures that all members get equal access to foreign markets However, there are some exceptions to this princi le, a) RTAs — b) GSP A) Regional Trade Arrangements (RTAs): WTO regime exempt states from this principle if they become members of RTAS, ie. free trade areas and custom unions prrfertasing » 9 B) Generalized System of Preference (GSP): Second exem enacted in late 1960s, which allowed indus goods of developing states (former colonies) tha developed countries. tion was provided by the GPS, ized countries to impose lower tariffs on in those applied on the same products of 2) National Treatment: It provides that government must giv foreign goods as they do to domesticaxes regulations and oth Products in order to give undue bengfits to local goods, € the same treatment to et policies, against foreign