International trade organizations are established to facilitate trade between nations. This facilitation takes place in three stages. Firstly, the organizations have to help member countries negotiate for trade agreements. Secondly, it has to be seen that all members have accepted the agreements made in the negotiations. The third stage is the longest because it lasts as long as the agreements last. In this latter stage, trade organizations serve as a go-between among member countries; it is here that call complaints are reported and resolved. Management in these organizations serves as professionals advising nations on the best courses of action regarding trade matters.
Among the world’s many trade organizations is the World Trade Organization (WTO) which is tasked with the responsibility of facilitating the development of global trade deals among all countries. This body could be served as the most useful and among other trade organizations. In addition, WTO is superior to other regional or intercontinental bodies, because it can overrule trade agreements made in all other bodies. This has happened on several occasions. For instance, WTO recently ruled that preferential trade agreements between European countries and their former colonies in ACP (Africa, Pacific, and the Caribbean) were illegal. This resulted in the ratification of trade agreements between the EU and ACP countries.
WTO was established in the mid-1990s as a replacement of GATT (Generally Agreed Tariff and Trade) that had been in place since the 1940s after the end of World War II (Rosen 128). GATT had been established as a mechanism for world countries to agree on tariffs to be charged on various imported goods. This was necessitated by increased trade barriers and protectionism that had characterized individual world countries. The economic ideology of import substitution, which held that local industries had to be protected from foreign competition, had become the foundation for economic policies in many countries. This led to increased protectionism characterized by exorbitant tariffs on imports. However, it did not take long for countries practicing trade protectionism to feel the painful consequences of their policies, which is why GATT was established.
The reduction of tariffs was to be done gradually until member countries were satisfied. By the mid-1990s, shortly after the fall of socialist experience in Eastern Europe and subsequent return to a market economy, GATT member countries were satisfied with tariff levels in the world. This was however taken to mean that GATT had finally achieved the intended goals. However, the global economy continued to experienced greater trade barriers other than tariffs that had been controlled under GATT. Other than continue working under GATT frameworks, members saw it fit to establish a new organization to deal with global trade issues, the new framework came to be WTO. Membership has been increasing as countries become friendlier to the market economy they had detested for long. The latest entry into WTO includes Russia and China, and there is hope that countries such as North Korea and Cuba that are continuing with their ineffective communist economic systems experiences will one day embrace market economy and subsequently join WTO.
Developed nations tend to use international trade organizations when negotiating with developing nations (Cohn 328); bilateral agreements are used when negotiating with each other. This has resulted in notions that developed nations disregard the importance of these organizations. A prime example is seen with the ongoing Doha trade negotiations. Managed by WTO, the Doha trade negotiations are supposed to eradicate trade barriers between developed and developing nations, popularly being referred to as South (developing) and North (developed). Southern nations want Northern ones to eradicate trade barriers related to an agricultural product, based on the fact that the former has a comparative advantage in the production of agricultural commodities. However, lobbying from farmers and interest groups in developed nations would hear none of that, which has caused the North to resist the move. On the other hand, Northern countries want the South to eradicate trade barriers in relation to manufacturers, which is based on the fact that developed nations have a comparative advantage in the production of industrial goods. However, developed nations are seeing this move as a way of flooding their markets with cheap products from developing nations, meaning that mushrooming local industries would be eradicated by the increased competition. These talks have resulted in each group ganging up in order to marshal their proposals.
WTO thus focuses on trade negotiations between all countries in the world. A large number of interests in such negotiations mean that agreements take a long time, even years, to reach conclusions. Developed nations have therefore preferred to use bilateral agreements in their negotiation process, and have been successful in achieving agreements. Countries using this route include the European Union, United States, Canada, and Japan—popularly referred to as the QUAD. Successes that have been achieved in reaching agreements between themselves are slowly being applied in negotiating with fast-rising countries, especially with BRICS (Brazil, Russia, India, China, and South Korea). Individual QUAD countries have also started employing bilateral agreements with some developing nations, an example being United States’ AGOA (African Growth Opportunity Act) with African countries.
Developed countries enter trade negotiations with higher bargaining power when negotiating with developed nations. This is caused by the economic powers which force Southern countries to rely heavily on Northern markets for foreign exchange through export. NAFTA provides the best example of that scenario. As it happens, both Canada and United States constitute the biggest markets for Mexican exports, including labor. These rich neighbors have thus retorted to claiming that Mexicans are the ones to benefit most, and therefore force them to make more concessions in the name of making the resulting trade more beneficial to all members.
Trade relations among developed countries are nowadays characterized by reciprocity. Countries would only open their markets for foreign goods when source markets do the same. This tit-for-tat tendency is increasingly becoming the basis for a bilateral trade agreement; quarreling countries get forced to the negotiation table where agreements regarding future trading are developed. Awkwardly, it is developed countries that are making use of this negotiation tool.
As mentioned in the essay, trade organizations mean little to developed countries, the reason being that quicker results could be achieved through bilateral trade agreements. It has also been illustrated that developed nations prefer using international trade bodies when dealing with developing nations, but use bilateral negotiations when negotiating among themselves. On the other hand, developing nations usually place their hope in trader agreements developed through international organizations. Conflict of interest between the two players has meant that negotiations at the international level will continue to be slow in developing solutions. Should developed countries continue to disregard international trade organizations in favor of bilateral agreements, the world has a far way to go before free trade among all countries is achieved.
Cohn, Theodore. Global Political Economy., New York, Longman, 2000.
Rosen, Ellen. Making Sweatshops. Berkeley, University of California, 2002.