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Monday, May 18, 1998 Published at 13:08 GMT 14:08 UK

Biz: The Economy: Economy Reports

The guardian of free trade
image: [ The World Trade Organisation is based in Geneva in Switzerland ]
The World Trade Organisation is based in Geneva in Switzerland

The World Trade Organisation is celebrating 50 years of attempts to break down trade barriers between countries all over the world.

[ image: The WTO believes protectionism leads to bloated inefficient companies]
The WTO believes protectionism leads to bloated inefficient companies
The Geneva-based organisation helps to promote free trade by persuading countries to abolish import tariffs and other barriers to open markets.

It was set up in 1995 and was preceded by another international organisation known as the General Agreement on Tariffs and Trade (GATT).

GATT was formed in 1948 in the Cuban capital of Havana and was the result of 23 countries getting together to sign an agreement to reduce customs tariffs.

Membership of the WTO has now mushrooomed to 132 countries with 30 more nations, including China, waiting to join.

It has evolved into a complex web of agreements covering everything from farm goods and textiles to banking and intellectual property.

The WTO is the only international agency overseeing the rules of international trade.

It helps trade to flow smoothly, settles trade disputes between governments, and organises trade negotiations.

Advocates of free trade say the economic benefits are indisputable.

Since 1950, world trade has grown 14 times to more than £4,000bn ($6,500bn) in 1997.

[ image: Critics of the WTO say the poor have just got poorer as a result of free trade]
Critics of the WTO say the poor have just got poorer as a result of free trade
In the same period the proportion of world economic output attributed to trade has increased from 8% to 26%.

But critics of the system say it encourages the exploitation of workers in poorer countries.

They say that the rich countries have maintained protectionist policies, and that poor countries do not have the type of manufacturing infrastructure to enjoy the benefits of free trade.

However supporters point to the World Bank's forecast that developing countries will grow twice as fast as industrialised countries over the next decade.

They say the WTO is a powerful protector of poorer nation's interests.

Reggiero Renato, the director General of the World Trade Organisation, is keen to ensure the trade remains as free as possible despite the financial and political crises currently rocking Asia.

Key events in the 50-year history of the General Agreement on Tariffs and Trade and its successor 132-member World Trade Organization.

  • Back in 1947, with the Second World War just ended, countries met in Geneva to try to give an early boost to trade liberalisation.

  • Some 23 countries decided to negotiate to reduce customs tariffs.

  • On October 30, 1947, they signed the General Agreement on Tariffs and Trade (GATT).

  • The first round of trade negotiations resulted in 45,000 tariff concessions affecting one fifth of total world trade.

  • In November, delegates from 56 countries met in Havana to start negotiating the charter of a proposed International Trade Organization.

  • It was signed in March 1948 but governments did not commit themselves to ratify it, leaving the GATT as the only international instrument governing world trade.

  • The GATT entered into force on January 1.

  • The second GATT round of trade talks was held at Annecy in France in 1949 where countries exchanged some 5,000 tariff concessions.

  • The southern English seaside town of Torquay hosted the third GATT round in 1950 during which countries exchanged some 8,700 tariff concessions, cutting 1948 tariff levels by 25%.

  • 1955-56 - The next trade round completed in May 1956 produced some $2.5 billion worth of tariff reductions.

  • 1960-62 - Fifth GATT round named in honor of US Under Secretary of State Douglas Dillon who proposed the negotiations. It yielded tariff concessions worth $4.9 billion of world trade and involved negotiations related to the creation of the European Economic Community.

  • 1964-67 - The Kennedy Round, named in honor of the late US President, achieved tariff cuts worth $40 billion of world trade.

  • 1973-79 - The seventh round, launched in Tokyo, Japan, saw GATT reach agreement to start reducing not only tariffs but trade barriers as well, such as subsidies and import licensing. Tariff reductions worth more than $300 billion achieved.

  • 1986-93 - GATT trade ministers launched the Uruguay Round in Punta Del Este, Uruguay, embarking on the most ambitious and far-reaching trade round so far.

  • 1994 - Trade ministers meet for the final time under GATT auspices at Marrakesh, Morocco to establish the World Trade Organization and sign other agreements.

  • 1995 - The World Trade Organization is created in Geneva.

  • The main differences between the WTO and the GATT are that GATT was a provisional legal agreement, whereas the WTO is an organization with permanent agreements.

  • The WTO has members, GATT had only contracting parties. GATT dealt only with trade in goods, the WTO covers services and intellectual property as well.


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