World Trade Organization - Harvard Model United Nations

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World Trade Organization initiative at the global level, the donor level, and the recipient country level, ensuring that differences in priorities are reconciled so that aid for trade programs can be as effective as possible. This initiative is the brainchild of the WTO, and represents the core of the WTO. The success of this initiative means sustainable economic growth for developing countries, leading to improved health and education, alleviation of poverty, and improved standards of living. The WTO will be one step closer to fulfilling its stated mission if Aid for Trade can successfully revolutionize aid to developing countries. Emergence of Aid for Trade Aid for Trade first emerged as an issue at the Doha Development Round, one of the WTO’s trade-negotiation rounds that began in 2001. Although the issue became prominent only in the past decade, the underlying problems that led to a discussion of Aid for Trade are traced back to the Uruguay Round, WTO’s 1986 trade-negotiation round. The Uruguay Round was a comprehensive re-evaluation of all the original GATT articles and sought to extend the trading system into new areas including trade in services and in intellectual property. Participating countries also discussed reforms in agriculture and textiles. The theme of the Round was trade liberalization and many commentators believed that liberalizing trade would provide significant benefits for all, especially developing countries, and assumed that it could not be harmful. 3 While the Uruguay Round created an international trade dispute settlement system, the Trade Policy Review Mechanism (which provided for the first systematic, comprehensive, and regular review of national trade policies of GATT members), and a built-in agenda that set timelines for further negotiations, it also created new problems. Complaints emerged from developing countries about the high costs of compliance to international rules about intellectual property and stricter customs rules. 4 After the signing of the Uruguay Round Agreement, Africa trade ministers meeting in Tunis in October 1994 urged the international community for more cooperation The Doha Development Round started in 2001 and continues today. and help in creating trade policies that would promote trade and economic growth and help them integrate into the new Multilateral Trading System. The WTO, United Nations Conference on Trade and Development, and the International Trade Center responded by establishing the Joint Integrated Technical Assistance Program (JITAP), a trade capacity-building program. 5 JITAP The JITAP’s three objectives are: “build national capacity to understand the evolving MTS and its implications for external trade; adapt the national trading system to the obligations and disciplines of the new MTS; seek maximum advantage from the new MTS by enhancing the readiness of exporters.” To accomplish these, the three Geneva organizations set up an elaborate system of technology, human, and communication power. These include: 1) national networks of trainers and experts in WTO-trade related issues that would advise low- and middle-income countries on policymaking; 2) “Internet-based Communication and Discussion Facility” that would lower the cost of communication between countries and the Geneva organizations; 3) simultaneous implementation of programs in several countries to maximize efficient use of resources through large scale management implementations. 6 The Integrated Framework In 1996, the WTO took further steps to strengthen least-developed countries’ trade capacities through the creation of the Integrated Framework for Trade-Related Technical Assistance to the Least Developed Countries. The Integrated Framework is a multi-agency, multi donor program assisting least developed countries (LDCs) that “supports LDC governments in trade capacity building and integrating trade issues into overall national development strategies” (IF website). By bringing together various agencies and LDCs, the IF ensures a coordinated approach to tackling the most pressing trade-related issues of the LDCs. (IF explained). The core agencies of the IF are the International Monetary Fund (IMF), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Program (UNDP), the World Bank, and the World Trade Organization (WTO). 7 6 Specialized General Assembly Agencies
The Integrated Framework consists of four parts: 1) Raises awareness of the importance of trade in development among LDCs; 2) LDCs participate in a Diagnostic for a Trade Integration Strategy (DTIS) to identify constraints on trade, areas for improvement and growth, and a plan of action for integrating into the world trading system; 3) Integrate the IF plan with that of the national development plan; 4) implementing the plan with the help of developed partners. The plans usually involve making trade policy the core of the national development plans and the delivery of trade related assistance from the development partners and agencies to the LDCs. These steps aim to incorporate trade related assistances into the dialogue between LDC governments and development partners/agencies. 8 As of August 2010, 35 LDCs have validated their diagnostic studies and 1 country, Equatorial Guinea, is now going through technical review before embarking onto the third stage of the IF process. It will take several more years before sufficient evidence will be available to judge the effectiveness of IF. 9 The Integrated Framework is significant because it shows that despite major trade reforms, countries still face many supply-side constraints that can only be tackled with “coordinated, integrated, and demand-driven responses” from the international community. 10 Doha Development Agenda On November 14, 2001, participants in the Doha Development Round issued the Doha Ministerial Declaration. The Declaration emphasized the need for greater trade-related technical assistance and capacity building for developing countries (WTO trapo). In February 2005, the G-7 Ministers called on the World Bank and IMF to develop proposals that would further give technical assistance to developing countries so that they could better adjust to trade liberalization and integrate themselves in the world market (WTO Tratop). Consequently, in December 2005, the Aid for Trade Initiative was officially launched at the Hong Kong Ministerial Conference. The Conference created a WTO work program and a task force to provide recommendations on how to proceed with aid for trade. 11 Why Aid for Trade is Needed The poor trade performance of the low-income countries can be attributed to political and structural factors. Civil conflicts and political purges have resulted in significant damage to infrastructure and domestic social stability, resulting in the withdrawal of foreign General Assembly World Trade Organization investments and the emigration of well-educated and skilled workers who seek foreign places to safeguard their lives and wealth. Furthermore, the commodities-heavy characteristics of some low-income countries’ exports have made them far too dependent on foreign demand for raw goods and have detracted them from investing in domestic institutions and infrastructure. Other low income countries that export mainly agricultural goods face high tariffs and “non-tariff barriers.” 12 Domestic policies of low-income countries also contribute to their poor performance. Poor macroeconomic policymaking has led to currency overvaluations that reduce the competiveness of domestic goods in overseas markets. High tariffs that are meant to protect domestic goods from foreign import competition have made low-income countries uncompetitive as richer countries retaliate with trade-restrictive measures against low-income countries. Other policies regarding government spending also exacerbate entrenched problems. The focus of government spending on the export sector means less money for improvements and creation of a modern infrastructure system. As a result, there are high costs of telecommunications, electricity, transportation, which are made inhibitors of economic growth. The lack of a strong infrastructure system also deters foreign direct investment. 13 The importance of strong institutions and adequate infrastructure is so significant that even if trade liberalization measures were pursued, there will not be any significant economic growth without the presences of those two factors. For example, India is a country that has failed to take full advantage of liberalized trade in some sectors like horticulture. It has a strong comparative advantage in the sector, but is not competitive due to poor trade logistics in maritime and air transport. According to the IMF, if India could reduce these costs by onefifth through better infrastructure and better logistics, prices of Indian horticulture goods would be 12 percent cheaper in overseas markets, making them much more competitive. 14 Studies have provided evidence suggesting the validity of the theories described above. The Diagnostic Trade Integration Studies (DTIS) by the Integrated Framework for Trade-Related Technical Assistance (which focuses on providing resources and policy recommendations for least-developed countries) found that exports remained slow in some low-income countries despite significant trade reform and more macroeconomic stability. One of the primary constraints the studies found was on the 7
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