Trade Liberalization

Multilateral and bilateral/regional agreements were the main instruments for liberalizing trade.

Multilateral Agreements: There have so far been nine multilateral trade rounds resulting in significant liberalization of trade (Table 13.1), the first eight under the auspices of GATT. The ninth (Doha) Round launched in 2001 with an explicit focus on addressing the needs of the developing countries has not yet concluded, with major disagreements between the North and the South on freer trade in industrial goods and services, continuation of agricultural subsidies, and treatment of intellectual property rights.

Bilateral or Regional trading Arrangements: These agreements widened markets, deepened integration and promoted economies of scale for the participants. However, they were inherently discriminatory as they diverted trade and deprived excluded countries (most often the weak states from the South) of income.

Overall, the multilateral trade liberalizations and the resultant globalized production processes have economically benefitted the developing regions (Table 13.1). But, the distribution of the dividends of globalization has been biased towards the North.

Poverty reduction

In September 2019, the World Poverty Clock (World Data lab 2019) estimated that 8 percent of the world’s population was living on less than $1.90 a day (extreme poverty), down from nearly 36 percent in 1990 (World Bank, 2018). Extreme poverty is now becoming concentrated in Sub-Saharan African (World Bank, 2018).

Poverty reduction impacts of the BWIs are unclear and difficult to disentangle because aid accounts for a relatively small share of financial flows to the South. Aid seems to have a positive impact on growth in countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies (Burnside and Dollar, 2000). Where political institutions are weak, aid transfers are vulnerable to expropriation and may lead to capital flight, undermine growth and strengthen the hand of the political elite. Nevertheless, Easterly (2003) concluded that, “The goal of having the high-income people make some kind of transfer to very poor people remains worthy one despite disappointments of the past”. But the goal needs to be modest.

TABLE 13.1 GATT and the WTO Trade Rounds

Name

Start

Duration

Countries

Issues

Results

Geneva

1946

7 months

23

Tariffs

Signing of GATT, 45,000 tariff concessions affecting $10 billion in trade

Annecy

1949

5 months

13

Tariffs

Countries exchanged 5000 tariff concessions

Torquay

1950

8 months

38

Tariffs

Countries exchanged 8700 tariff concessions, cutting 1948 tariff levels by 25%

Geneva II

1956

5 months

26

Tariffs, admission of Japan

$2.5 billion in tariff reductions

Dillon

1960

11 months

26

Tariffs

$4.9 billion in tariff concessions

Kennedy

1964

37 months

62

Tariffs, anti-dumping

$40 billion in tariff concessions

Tokyo

1973

74 months

102

Tariffs, non-tariff measures, framework agreements

$300 billion in tariff reductions

Uruguay

1986

87 months

123

Tariff, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO

Creation of WTO, about 40% reductions in tariffs, major reductions in agricultural subsidies, agreement to allow full access for textiles and clothing front developing countries, extension of intellectual property rights

Doha

(WTO)

2001

141

Tariffs, non-tariff measures, agriculture, labour standards, environment, competition, investment, patents, transparency

The Round is not yet concluded.

Source: Various GATT and WTO documents

 
Source
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