International Trade

To export these goods you have to have an organization which deals with the rules of trade between nations. Such an international organization is the World Trade Organization (WTO). The goal is to help producers of goods and services, exporters, and importers conduct their business.

Result: - is assurance

- Consumers and producers know they can enjoy secure supplies and greater choice of the finished products.

- Producers and exporters know that foreign markets will remain open to them.

Heart of the system are the:

- WTO's agreements

- The agreements are negotiated and signed by governments. They have to be ratified in their parliaments.

World Trade Organization (WTO)

- came into being in 1995

- deals with rules of trade between nations

- the agreements are signed by the governments

- It is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War

- It has more than 140 members and the top decision making body meets at least once every two years

The 3 main purposes of WTO:

- trade flow as freely as possible

- means removing obstacles.

- also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be "transparent" and predictable.

- to serve as a forum for Trade

negotiations

- dispute settlement

Trade relations often involve conflicting interests. Contracts and agreements often need interpreting. The best way to solve these differences is based on an agreed legal foundation.

Principles of the trading system

The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities.

They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, intellectual property, and much more.

Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property).

The trading system should be ...

without discrimination -- a country should not discriminate between its trading partners (they are all, equally, granted "most-favoured-nation" or MFN status); and it should not discriminate between its own and foreign products, services or nationals (they are given "national treatment").

freer -- with barriers coming down through negotiation

predictable -- foreign companies, investors and governments should be confident that trade barriers (including tariffs, non-tariff barriers and other measures) should not be raised arbitrarily; more and more tariff rates and market-opening commitments are "bound" in the WTO.

more competitive -- by discouraging "unfair" practices such as export subsidies and dumping products at below cost to gain market share.

more beneficial for less developed countries -- by giving them more time to adjust, greater flexibility, and special privileges.

- Most developed countries opposed free trade.

- They wanted to industrialize in order to counteract what they rightly saw as an inevitable fall in commodity prices.They practised import substitution and imposed high tariff barriers to protect their industries.

- Nowadays many developing countries have

huge debts with Western commercial banks

on which they are unable to pay their

interests.

- Under these conditions the IMF imposes severe conditions usually including the obligation to export as much as possible.

The case for open trade

- Tariffs on industrial products have fallen; now about 4% in industrialized countries.

- After the war world economic growth

averaged about 5% per year.

That was partly the result of lower trade

barriers.

- World trade grew even faster, averaging about

8% during the period.

- Abandoning all sectors in which a country

does not have a comparative advantage is

likely to lead to structural unemployment in

the