3.0 HISTORY AND EVOLUTION OF THE MULTELATERAL TRADING SYSTEM By the end of World War II [1939-1945], the World was in total political and social-economic disorder. It quickly occurred to the major powers that there was urgent need to establish and build institutions to assume global governance. The United Nations [UN] was founded on the belief that there was need for collective action at the global level to cause and guarantee political stability. In the same belief the International Monetary Fund [IMF] was conceived to ensure fiscical and monetary stability while the International Bank for Reconstruction and Development [IBRD] (commonly referred to as the World Bank) had to finance reconstruction and development worldwide. The latter two were established by the Bretons woods Agreement and came to be commonly known as the Briton woods Institutions. Having established the World Bank in 1944 and the IMF in 1945, the idea of constructing an International trading system based on ‘free-trade’ was brought to the forefront. The third pillar of the post-war international economic system was therefore proposed to be the International Trade Organization [ITO]. The ITO was to be embodied in the Havana Charter, which included many other provisions with a comprehensive mandate and programme. The US Senate rejected the Havana Charter and it did not come into effect and therefore the ITO was not established. However, the provisions relating to tariffs and other matters on import and export had been finalized earlier in the preparatory process for the Havana Conference. These provisions were contained in the General Agreement on Tariffs and Trade [GATT], which was given effect through a Protocol of Provisional Application, and the GATT came into operation provisionally from 1 January 1948. Since then, the GATT continued until December 1994, after which it was annexed to the Marrakech Agreement establishing the WTO and it became part of GATT 1994. The main objectives of the GATT, which to a large extent were achieved, were to conclude reciprocal and mutually advantageous arrangements with a view to significantly reducing customs tariffs on goods and other barriers to trade as well as eliminating discrimination in international trade. One major Round in the history of Trade Negotiations was the Uruguay Round [UR] of negotiations, launched in Punta del Este, a sea resort in Uruguay, towards the end of 1986 and concluded in 1995 with the formation of the World Trade Organization and the signing of the Final Act embodying the results of the Uruguay Round of Multilateral Trade Negotiations at Marrakech, Morocco. The GATT/WTO system was expanded to incorporate new areas, viz: Services regulated by the General Agreement on Trade in Services [GATS], Intellectual Property by the Agreement on Trade Related Aspects of Intellectual Property Rights [TRIPS], and investment by the Agreement on Trade Related Investment Measures [TRIMS]. New disciplines were also instituted in agriculture and textiles trade.
Other new features of the GATT/WTO are that decisions are taken on consensus and all agreements are part of a ‘single understanding’. Thus in a Round of negotiations, nothing is agreed until all has been agreed by all members. The Dispute Settlement Mechanism [DSM] was also set up to enforce rules, although negotiations of it are not part of the single understanding. Furthermore, whereas the GATT system made multilateral rules that only affected members’ tariffs and non-tariff measures [or trade policies ‘at the border’], many of the WTO agreements now involve the domestic policies of members as well, thus limiting members’ policy space to make home-grown domestic policies to respond to their development needs and realities.(Nathan N. 2005).
3.1 INTERNATIONAL TRADE UNDER W.T.O REGIME
International trade is exchange of capital, good and services across international bonders or territories. It refers to exports...