From the GATT to WTO (I)

"Commerce, that enriched British citizens, contributed to make them free, and this liberty then spread commerce"

Voltaire (1694-1778)

In the beginning, the General Agreement on Tariffs and Trade, created just after the Second World War in 1946, reflected a desire to draw a lesson from the conflicts of the interwar period. It was widely understood that the war resulted from the rise of nationalism, the exacerbations of mercantilist tensions, and the attempt at economic self-sufficiency by warlike nations. The German war economy tended toward autarchy. Germany refused to rely on the countries it would later attack. Some will argue that such an economy managed to reduce unemployment. But at what price? No one is unemployed in a prison; unemployment (that was then called idleness) was forbidden in the USSR. What is important is not jobs but the freedom to create wealth. It was widely held that the interwar fragmentation of the world economy degenerated into armed conflict. The attempt to create an open trade environment, it was believed, would be conducive to more pacific international relations.

The GATT emerged as the means of promoting “free trade”, deemed to be essential to peace. Its purpose was to persuade countries to dismantle their protectionist systems (each country was willing to do so only if ensured that the other ones would do the same). And it worked rather well. The post war period was peaceful and trade, as well as growth, increased. Europe was rebuilt and caught up with the US, as did Japan, a country that became one of the wealthiest in the world within 30 years. The emerging countries (NIC) showed, as they took part to international trade, that poverty was no Southern fatality and growth no Western property. In fact, the same people who, in the West, deplore poverty in the South, became apprehensive when such countries got wealthier (will they steal our industry and jobs?). GATT acted step by step: the “Kennedy Round” (achieved in 1967), the “Tokyo Round” (achieved in 1979) and more recently the “Uruguay Round” (achieved in 1993). From negotiation to negotiation (these “Rounds”) tariffs reduced gradually but substantially in many industrial sectors, and more countries joined the agreement.

Difficulties arose when negotiations reached such sensitive subjects as agriculture and services. During such conferences as Punta del Est (September 1986) and Montreal (1988) States became more involved in regulating trade even though they were supposed to reduce their influence in international trade according to the GATT. Agriculture, for example, is widely considered to be a State matter since this sector gets subsidized and prices are controlled by the national administrations. When the GATT was transformed into World Trade Organization—a body designed to regulate international trade–it was a step toward mercantilism. The goal was not to bring about free trade but rather to set up a mechanism of enforcement that would tempt countries toward reprisal and regimentation and litigation. But the very idea of regulating trade leads to complicating international relations.

Today, activist groups constantly inveigh against the WTO, on grounds that it represents a  “savage liberalism” that Washington would impose on the global economy. Were the world truly liberal, such organisations—which are really “international administrations” financed by public money—would never exist. They are part of the general impulse to “regulate” the world economy. From an economist's point of view, such administrations are not necessary; exchange alone will regulate the economy. Exchanges enable opposing interests –buyers vs. sellers, employers vs. employees, lenders vs. borrowers--to coordinate supply and demand. Such equilibriums are as dynamic history. Economic actors' interests inevitably appear in conflict in the short run: what is given to the wage earner at a time t is simultaneously being taken from the share-holder or the owner. Yet, they turn out to be complementary in the long run: in order for one to be employed, enterprises must be created; to create enterprises, people have to contribute their skills or capital. ...