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GATT/WTO: Main Objective

GATT/WTO: Main Objective. To provide a legal framework for incorporating the results of negotiations directed toward “ reciprocal and mutually advantageous exchange of market access commitments on a non-discriminatory basis .”

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GATT/WTO: Main Objective

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  1. GATT/WTO: Main Objective To provide a legal framework for incorporating the results of negotiations directed toward “reciprocal and mutually advantageous exchange of market access commitments on a non-discriminatory basis.” • Typically, such an outcome is obtained through reductions of tariffs and other barriers to trade.

  2. Is free trade an explicit objective of the GATT/WTO? “The WTO does not tell governments how to conduct their trade policies. Rather, the WTO is a ‘member-driven’ organization.” In reality, free trade (or freer trade) depends on what countries are willing to bargain with each other. - NO -

  3. GATT/WTO Negotiation Rules • Governments negotiate only if they want and what they want. • Consensus rule: if all agree, agreement is implemented; otherwise, it is not. Bottom line: All countries have a voice.

  4. Why is There a Need for Trade Negotiations? • Typically, governments care primarily about the residents of their own country.  Whenever possible, they try to shift the cost of their policies to other countries. • This is especially easy to do with trade policies.

  5. “Beggar-thy-Neighbor” A government increases tariffs in a certain sector  local price rises   domestic supply (S) ; domestic demand (D)   import demand (M = D – S) 

  6. The Effects of a Tariff on World Prices pw E t pw0 M pwt Mt E, M

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