BUSI 617 Ch 3

BUSI 617 Ch 3 - Chapter 3 The World Trade Organization and...

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Chapter 3 The World Trade Organization and GATT General Agreement on Tariffs and Trade (GATT) – a treaty among nations whose governments whose governments agree, at least in principle, to promote trade among members GATT was intended to be a multilateral, global initiative, and GATT negotiators did succeed in liberalizing world merchandise trade GATT was also an organization that handled 300 trade disputes – many involving food – during its half century of existence GATT itself had no enforcement power (the losing party in a dispute was entitled to ignore the ruling), and the process of dealing with disputes sometimes stretched on for years Some critics referred to GATT as the “General Agreement to Talk and Talk” World Trade Organization (WTO) – successor to GATT – came into existence in 1995 From its base in Geneva, the WTO provides a forum for trade related negotiations among its 150 members The WTO’s staff of neutral trade experts also serve as mediators in global trade disputes The WTO has a Dispute Settlement Body (DSB) that mediates complaints concerning unfair trade barriers and other issues between the WTO’s member countries During a 60 day consultation period, parties to a complaint are expected to engage in good faith negotiations and reach an amicable resolution If that fails, the complainant can ask the DSB to appoint a 3 member panel of trade experts to hear the case behind closed doors After convening, the panel has 9 months within which to issue its ruling The DSB is empowered to act on the panel’s recommendations The losing party has the option of turning to a 7 member appellate body If, after due process, a country’s trade policies are found to violate WTO rules, it is expected to change those policies If changes are not forthcoming, the WTO can authorize trade sanctions against the loser Trade ministers representing the WTO member nations meet annually to work on improving world trade It remains to be seen whether the WTO will live up to expectations when it comes to additional major policy initiatives on such vexing issues as foreign investment and agricultural subsidies Preferential Trade Agreements The GATT treaty promotes free trade on a global basis – in addition, countries in each of the world’s regions are seeking to liberalize trade within their regions Preferential Trade Agreement – mechanism that confers special treatment on select trading partners By favoring certain countries, such agreements frequently discriminate against others For that reason, it is customary for countries to notify the WTO when they enter into preferential trade agreements Free Trade Area Free Trade Area (FTA) – formed when 2 or more countries agree to eliminate tariffs and other barriers that restrict trade When trading partners successfully negotiate a free trade agreement (also FTA) , the ultimate goal of which is to have 0 duties on goods that cross borders between the partners, it creates a free trade area
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This note was uploaded on 02/22/2012 for the course BUSI 617 taught by Professor Staff during the Fall '11 term at UNC.

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BUSI 617 Ch 3 - Chapter 3 The World Trade Organization and...

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