Where is the multilateral trading system going – Part I

For some time now, it has been felt and felt that the multilateral trading system represented by the WTO must be reformed to take into account the concerns of both developing and emerging economies. It is an attempt to draw attention to the future of the WTO in the changing scenario seen with the emergence, especially of emerging economies.

International Economic Relations in Historical Perspective

Historically, international economic relations have gone through three major phases.

  1. The first phase of global economic relations spanned the entire 19th century until the onset of the Great Depression. This period was marked by steady progress towards global economic integration, characterized by the free movement of goods and factors of production across national borders. In this system of free market economy, a simple pattern of international division of labor operated between the metropolitan countries and the peripheral countries. The latter exchanged raw materials and foodstuffs with the former for industrial goods.

This mode of international specialization has, however, deprived the underdeveloped countries of the advantages of the free market and subjected their economies to the repercussions of the growth in progress in the industrial countries, as the Swedish economist Gunnar Myrdal has pointed out.

The advent of machine-made consumer goods in underdeveloped countries led to a decline in the demand for handicrafts, laying off artisans in large numbers from their jobs, who then had no alternative but to turn to the primary sector, i.e. agriculture as unskilled wages. employees.

The exposure of underdeveloped countries to industrial economies has thus led to great economic and social dislocation. Coupled with this dislocation, the emergence of the United States as the world’s leading industrial power has further disadvantaged the underdeveloped countries. The huge resource base of the United States and the protectionist policy followed by it resulted in sluggish demand for the products of the underdeveloped countries.

  1. After World War I and the Great Depression, and in the face of continued international economic dislocation, Western states began to take action to defend their national economies. This marked the second phase nationalist economic policies around the world. This discouraged demand for primary exports from underdeveloped countries, thus keeping their terms of trade depressed. The nationalist and protectionist policies of the welfare state in the industrialized countries have thus further weakened the economic ties between the developed and underdeveloped parts of the world.
  2. A dominant feature of the third stage was the conscious international effort to organize world economic relations into three main areas, trade, investment and commerce. The confrontation between the industrially advanced countries and the underdeveloped countries (CDU) became explicit during the Bretton Woods and Havana conferences held to discuss and finalize the post-war international economic organization. Although the Bretton Woods Conference refused to entangle the IMF in CDU issues, the World Bank, as a compromise, included in its article agreements, development of facilities and productive resources in least developed countries. developed, as one of its objectives.

The UDCs, however, partially won their point of view in Havana, where the charter of the International Trade Organization (ICO) authorized, under certain conditions and in the interest of the industrial development of the UDCs, protectionist measures such as subsidies and quantitative restrictions.

The ITO, however, was never created due to the refusal of major Western nations to ratify the ITO Charter. The Havana Conference, however, provided an opportunity for the UDC to push for a careful examination of mainstream economic theories.

Besides the fact that the WTO is institutionally structured to favor the powerful, it is also dominated by the theoretical discourse of neoclassical laissez-faire economics, with its commitment to trade liberalization.

In its Declaration of Principles, the WTO pledged to open national markets to international trade on the assumption that free markets will enable nations, acting on the basis of their competitive advantages, to achieve growth in gross domestic product. This implicit belief in the benevolence of free trade is fundamentally flawed, however, which has led to its failure to promote trade that helps development.

Empirical evidence indicates that trade liberalization does not lead to sustainable growth. In fact, it is pointed out that developing countries that adopt protectionist trade policies actually grow faster than those that liberalize their economies.

It should be noted that when today’s developed countries were developing their infant industries, they had imposed protectionist tariffs to prevent foreign competition. It was not until these economies grew that they began to advocate free trade for other nations, a policy called free trade imperialism.



The opinions expressed above are those of the author.


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