WTO – a Paper Tiger? Part III

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5: International driving rules

In many ways, the GATS agreement is an unfinished agreement where the countries have not thought through a number of issues related to regulation and public services. On the other hand, internationalization and increased trade are something that happens for a number of services, and there is therefore a need for an international agreement such as GATS. However, the sale of financial services is completely different from the sale of fish and t-shirts, and liberalization in the field of services should be accompanied by stronger requirements for clear international driving rules. Among professionals, there is a high degree of agreement that the liberalization of financial services should only take place when a country is sufficiently mature for it – for example, it should have a solid financial system that can prevent liberalization from leading to chaos. For international education, it is not the right to travel abroad that is central, but rather questions about the content and quality of education – how comparable are, for example, diplomas across national borders? – and who pays.

For the development of common international driving rules in the service area, there are basically only two methods that are relevant

  • common rules and standards, or
  • mutual recognition where one trusts the rules of the other countries.

Within European integration, both approaches are used. Globally, however, it is difficult to agree on comprehensive common regulations, and the differences between countries are also so great that mutual recognition is often not a good solution. Such large differences are – together with conflicts of interest – one reason for the slow pace of service in the WTO. The GATS negotiations in the Doha Round have been overshadowed by agriculture and industry, but the lack of progress here is a serious dilemma for the WTO.

6: WTO legal system

At the same time as WTO negotiations have become more complex and unmanageable, WTO policies are gradually evolving through the dispute settlement system adopted in the Uruguay Round. While developing countries are finding it difficult to get their demands for liberalization of trade in agricultural goods in the Doha Round successful, developing countries have won important victories in (disputes – “lawsuits”) trade disputes with the EU and the US in the field of agriculture (sugar, cotton, bananas). While it is often difficult to reach agreement in negotiations between all WTO members, the dispute resolution system can sometimes contribute to further clarification of the regulations. In this way, WTO policy can be developed gradually, even if the Doha negotiations are slow.

7: The way forward

Success and failure every other year: This has been roughly the decision of the WTO since 1999.

  • In Seattle in 1999, WTO countries failed to agree on plans for a new round of negotiations.
  • In Doha (Qatar) in 2001, in the wake of the terrorist attacks in New York, they nevertheless agreed on such plans.
  • When the plans for concluding the round of negotiations were to be adopted in Cancun, Mexico in 2003, the result was another failure.

Although the countries managed to “patch the patient together” in Geneva in the summer of 2004, the problems were not solved. On the scale between success and failure, the Hong Kong summit in December 2005 is a “well” – success is more cosmetics than reality. The parties avoided a breakdown, but without resolving the main remaining issues.

Although the WTO faces difficult challenges, the distance between the parties is hardly greater than it is possible to reach an agreement on whether the will is present. The question is thus whether such a will exists. The time is long gone when the largest industrialized countries could operate through an agreement. Developing countries play a key role and agreement is needed across the divide between rich and poor countries .

Central developing countries such as India and Brazil are, however, ambivalent about free trade, although they themselves would like better market access. The same applies to many other developing countries. These would like free trade for their exports to rich countries, but are less convinced that developing countries can profit from free imports to their own countries. As developing countries have the highest barriers to trade, this is an important brake on the WTO. In addition, the negotiation process has become more complex than ever , due to the large number of members and many new subject areas.

8: Doha Round

The Doha Round should actually have ended in 2004. The hope is now that this will happen in 2006. There is still hope. The WTO is, to a greater extent than other intergovernmental organizations, a negotiating system rather than a bureaucracy. The success and vitality of the WTO depend on the confidence in this system not being put to the test. It is therefore highly likely that the WTO will move forward at a slow pace. Thus, free trade agreements will be a more attractive strategy, as we already see clear signs of today.

Before, free trade agreements were mostly entered into between countries within the same geographical regions. More and more agreements are currently being concluded between distant countries – and then outside the framework of the WTO. EFTA already has agreements with Chile, Mexico, Korea and Singapore, and more are on the way. Global trade issues are thus increasingly being resolved outside the WTO. Little progress in the WTO negotiations will reinforce this tendency. According to Acronymmonster, EFTA stands for European Free Trade Association.

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