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14944 - COMMENTARY The World Trade Organisation and...

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COMMENTARY July 10, 2010 vol xlv no 28 EPW Economic & Political Weekly 24 The World Trade Organisation and Preferential Agreements Agneshwar Sen Agneshwar Sen ( [email protected] ) is with the Ministry of Commerce and is based in Kolkata. As more trade takes place on preferential terms than on most favoured nation terms, the World Trade Organisation needs to reinvent its approach towards preferential trade agreements so that the two can coexist meaningfully. While the existing transparency mechanism has had some success in this respect, the threat of marginalisation of the WTO in framing rules governing global trade still remains. Instead of binding obligations which are often breached, developing best practices or guidelines on various aspects of the PTA s stands a better chance of success. These will impose moral pressure on members to not deviate from the general approach of the WTO membership. T he relationship between the multi- lateral trading system ( MTS ) gov- erned by the World Trade Organi- sation ( WTO ) and the preferential trade agreements ( PTA s) 1 has always been tenu- ous. The problem is also a growing one; as with changing times, the nature and con- tent of PTA s have tremendously grown encompassing all the current elements of international trade relations. In 1947, when the General Agreement on Tariffs and Trade ( GATT ) was negotiated, PTA s covered preferential tariffs only of trade in goods. In the 1980s trade in services started appearing in these agreements. Today the newer PTA s cover issues like standards, environmental issues, intellec- tual property, and even issues like labour and labour rights. Consequently, today more trade takes place on preferential terms than on most favoured nation ( MFN ) terms. There are a variety of esti- mates about the volume of world trade taking place on preferential terms. Amongst these even the most pessimistic places a number of more than 60%, and growing, of world trade as taking place on preferential terms, and governed by the various PTA s. While PTA s have always been WTO - plus, i e, participating countries have undertaken greater commitments than those in the WTO , the new PTA s are argu- ably being signed to go around tacit understanding on certain issues in the WTO . In the Jordan-United States ( US ) FTA , 2 environmental and labour-related obligations are included. This brings one to the question: How should the WTO react to this trend? Leaving it unattended will certainly lead to the marginalisation of the WTO and raise the question: Is it at all meaningful for members of the WTO to invest time and effort on an organisa- tion that has little or nothing to offer insofar as defining the actual trade rules under which global trading regime actually operates? Given the cumbersome decision- making process of the WTO and the gener- al apathy of members to circumscribe, in any way, their present freedom in enter- ing into and implementing PTA s, what could be the acceptable structure of the relationship between these two sets of in- ternational treaties that would enable them to meaningfully coexist?
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