A view on global trade

A great responsibility lies ahead of WTO for future global trade and economic development for expansion of regionalism and multilaterlism which are growing together. For the last three decades, RTAs have been growing in which half of the world nations are participants which reiterates that without WTO and GATT guidelines promotion of global trade is almost impossible.

The lexicon meaning of regionalism is “actions by governments to liberalize or facilitate trade on a regional basis, sometimes through free-trade areas or customs unions”  WTO is of the opinion that RTAs is a cornerstone for building Multilateral Trading System as agreements have no barrier of geographic location whereas there are specific conditions to meet with for liberalization of trade as prescribed by GATT rules. The modern RTAs are being welcomed with  more sophistication of trade policy mechanisms, especially in the areas of investment, competition, environment and labor.

In other words,  RTAs are being made more comfortable and with ease in global trade to encourage fast pace economy at international level whereas although there are cautions that RTAs enable a departure from MFN principle and falling more to the side of development of Multilateral Trading System. The scope of RTAs is limited to WTO and there are no outbound capacity for RTAs to act beyond the WTO and GATT guidelines and this has been made possible only due to the fact that WTO is a multilateral organisation.

The basic rules of goods are provided in Article XXIV of GATT 1994 which detail the contracting parties to abide by the Agreement, terms and conditions  provided therein in accordance with WTO rules which if acted beyond the capacity of Agreement would lead to dispute between the contracting parties involving WTO panel of judges for settlement of dispute. Therefore, it is very important for contracting parties to clearly understand the Article XXIV before entering into an RTA.

The increasing number of RTAs between the nations, is another indication that WTO together with GATT are endeavoring towards global trade liberalization which includes from agriculture based goods, textiles, clothing and even industrial goods to easily be available in open market for consumers. Here it is important to take note that WTO is drawing a dual benefit from RTAs, the first being to increase access to goods and services to poor nations and second being strengthening the economy of developed nations by freeing and expanding the access to global market which is advantageously been utilized by developed nations.

In fact, the present Agenda of WTO is expansive for several years from now, which has no place for New Issues. Some of the highlights of WTO Agenda are : (a)    An in detail work out on problems of existing agreements. (b)    “built-in-agenda” for agriculture and services. (c)    A review on TRIPS and TRIMS. (d)    Discussion on investment, competition and government procurement. (e)    Regular work of WTO which includes committees, trade reviews and disputes.

The overall principles of WTO and GATT are to ensure free trading of goods, removal of hindrances, assisting companies, governments and even individuals to have a clear understanding about trade rules and regulations around the world, and the required legal compliances in international commercial transactions. There following are the common goals of WTO and GATT. ?    Trading without discrimination ?    Enabling free trade ?    Policies that are predictable in order to encourage Member States to stay committed to policies.

?    Open and free fair competition and discouraging “unfair” or “malpractices”  in EXIM. ?    Providing special provisions and benefits to developing nations. According to Economist, Joseph Stiglitz, there developed few  areas in global trade, which are taking a wrong diversion in global trade system, as the meetings of Seattle, Doha, Cancun were not so successful proving a fact that there is a crop of wrong theories and facts. Some of the facts are, the last trade negotiation  at Uruguay, had left a worsened effect on poorest countries.

Developing countries are hard laboring to open up markets to eliminate subsidies, advanced developed countries have subsidized agriculture and have implemented trade barriers against those products which are focusing centrally to the economies of developing world. The theoretical aspect is, trade liberalization is good for all nations which is benefiting in several aspects. Opposing trade liberalization leaves nations behind the technological times,  and political scenario changes liberalization.

It can be discussed in detail here that each nation has certain economic strengths and certain drawbacks on issues of labor market, employment, wage rate, investment, local market competition, population and infrastructure and basing on these, categorized as developed, developing and underdeveloped / poor nations. There is a specific mark on characteristics of each nation and requirements in specific spheres where the nations are endeavoring to grow and expand towards development and no two nations requirements are similar.

Developing nations and poor nations would like to have details about how a fast pace financial growth  can be made to boost its economy and GDP per capita income for which these nations look for trade and overseas financial assistance from developed nations with a view to expand business economy as well lower its internal problems. As a matter of fact, there are only three strong developed nations which can provide economic as well infrastructural assistance to other parts of the world viz.

, United States, European Union and Japan. The other part of world is still on the brink of growth and it takes many more years to move out of recession period especially for few nations in Asia and Africa. From the period 1990 – 2000 and hitherto global trade is made easier through development of computer technology which is providing an easy access to global products, marketability and even expansion of business such as opening business branches and research centers.

Internet technology has even reduced the cost of business negotiations,  with the usage of emails, access to websites, purchase of products through credit card and debit cards which means that global trade development is made possible through Internet and computer technology which is enabling inter exchange of goods and services, availability of job opportunities, an upliftment in living standards, access to education and many investment opportunities.

Countries like India and China have fostered maximum GDP growth with the development Information Technology and other South East Asian Nations are maximizing the advantages to its benefit in banking sector, industrial sector, agriculture sector in many other areas capitalization. In a seminar held in the year 2003 on Regional Trade Agreements, WTO addressed the following major questions. 1. Does an RTA is in line with MTS? If so to what extent? 2. RTAs are effective in promoting economic development and in integrating developing nations into the global economy?

3. Effects of RTAs in trading functions in international trade relations? 4. How can RTAs be maximized for growth of MTS ? Further, the guest speakers and senior academics were of the opinion that “RTAs can potentially hinder the objective of a coherent and transparent multilateral trading system (MTS) by discriminating against third parties, distorting trade flows, and by detracting limited resources from multilateral to regional and bilateral trade negotiations.

As their number and scope expand to include complex regulatory trade provisions, trade in services and investment-based activity, the importance of improving the formal and substantive links between RTAs and the multilateral trading system (MTS) is becoming apparent” . (Seminar on RTA and WTO, 2003)

With the increasing number of RTAs coming into effect, there has been a substantial imbalance and non-compliances of RTAs rules  which has lead in creating a great tension among WTO members which is why, Doha round of negotiations were concentrated on changing the pattern and rules for RTAs  which is promoting MTS towards trade liberalization and economic development.

UNCTAD,  meeting held in Geneva in March 2007, by Ad-hoc Expert Group on development of Multilateral Trading System and Regional Trade Agreements, it was stated that  Regional Trade Agreements (RTAs) have been prioritized in modern day international trade environment. It is also expected to continue affecting multilateral trading system with various development strategies enabled by developing countries that are opening to have foreign marketability with strong working on international trade in order to achieve economic growth.

This has further necessitated the countries to negotiate regional trade agreements as it is evident in Doha round discussions. The meeting further discussed about the recent developments and trends in RTAs and its implications. How to gain access to marketing of goods and services in regional trade negotiations and what are the regulatory provisions which include intellectual property rights, investments and competitive policies.

The interconnectivity between RTA and MTS and how each is competing with the other. Regional Trade Agreements (RTAs) are building blocs for development of multilateral trading system (MTS) with the fact that over three decades of RTAs inception, there has been a constant improvement in global trade, international and open market trade policies, a marginal improvement in world economy and the increasing number of RTAs which are being notified to WTO and GATT.

Adding to this, increasing  number of WTO member nations is also an encouraging factor and evidence that RTAs are helping nations to have access to various products and goods, services with reasonable prices. However, there is much scope for WTO to program international trade policies to endear and make prosper the poor nations which are also covered under WTO monitoring.

In general, nations economy grows big easily by synergising nation’s business and as a responsible organization WTO has been working constantly and it has succeeded to a great extent in spreading global economy. Although the hurdles of disputes in RTAs are encountered with, these can be resolved under GATT rules and by taking extra measures of safety in international trading.


  • Ad-Hoc Expert Group Meeting on the Development Interface between the Multilateral Trading System and Regional Trade Agreements Reviewed 15 September 2007  http://www.asil.org/insights/insight2.htm