Cambridge Model United Nations 2018 WTO: The Question of Free Trade Agreements in a Changing World

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1 1 Study Guide: The Question of Free Trade Agreements in a Changing World Committee: World Trade Organisation Topic: The Question of Free Trade Agreements in a Changing World Introduction: The WTO aims to create a multilateral trade system in which no WTO member should be discriminated against by another member s trade regime. With increased globalisation and economic development across the world, free trade amongst member states is a more pressing topic than ever. Progress is being made, for example trans-continental FTAs, especially with China and India, are becoming increasingly sought after. Yet in today s political climate there are also increased difficulties. With Donald Trump s America First isolation policy, Brexit and many national movements developing in Western states many long-standing agreements are crumbling. Similarly free trade agreements have been critiqued for compromising human rights and consequently many developing countries are less keen to partake in free trade with economic powerhouses. Definition of Key Terms: Free Trade - the idea that countries can freely import and export goods to each without economic barriers Free Trade Area - when trade within a group is duty free but members set their own tariffs on imports from non-members (e.g. NAFTA). Free Trade Agreement - an agreement which establishes a free trade area where commerce in goods and services can occur without tariffs or hindrances. Often establishes a uniform tariff on trade with non-member countries. Tariffs - a tax on goods and services entering or leaving a country Non-tariff barriers - methods of limiting the amount of foreign goods and services that enter a country without using tariffs (for example, quotas) Open Market - an unrestricted market with free access by and competition of buyers and sellers Protectionism - the practice of shielding a country's domestic industries from foreign competition by taxing imports. Contextual Information: The WTO strives to encourage and establish free trade agreements between member states, but only under a principal of non-discrimination. This means no member state can offer trade agreement with another country on preferential terms to other member states. There are two

2 2 exceptions to this principle: 1) where a member is party to a free trade area or customs union 2) where there is positive discrimination towards developing countries. The WTO promotes FTAs under a principle of neoliberalism; they are intended to liberalise the global economy by improving efficiency and making it easier to facilitate the exchange of goods and services across borders. They are favoured by most mainstream economies because they increase prosperity for participating countries, and therefore nearly all member states are party to at least one FTA. However, there are many obstacles. At the moment most free trade agreements are regional trade agreements, between countries in close proximity (for example, the North American Free Trade Agreement), which necessarily means that other member states are excluded. This undermines the multilateral trade system and so the WTO must find ways of striking a balance between the pros of these regional free trade agreements and the negative effects they have on the aim of global trade. The new political climate is also impeding the WTO s aims in free trade. The recent election of Donald Trump has meant America has adopted an isolationist and protectionist country, with the highest tariffs of all member states. This has led to their withdrawal from their Trans- Pacific Partnership. This is a huge knock to the advancement of free trade, as the TPP promised to create a single market for roughly 40% of the world s economic output. The TPP was a massive deal involving a collective population of 800 million, double the single market of the EU. The USA is showing similar signs of hostility to the TTIP (Transatlantic Trade and Investment Partnership). The Member states of the WTO must now decide how to proceed in light of America s new stance. Similarly the EU is becoming increasingly unstable: the withdrawal of Britain due to Brexit is part of a revival of nationalism. Parties seeking protectionist policies and questioning their countries own role in the EU have grown in recent months. The National Front and Alternative for Germany to name but a few examples. Furthermore although the EU s single market is a highly successful example of free trade, its exclusive membership is a hinderance to the WTO s aim of universal free trade, and consequently the WTO seeks to encourage greater membership to the EU (as it helped Croatia to join in 2013). In contrast the continued economic growth of Asia, especially China, India and Japan has led to a greater wish and need for transcontinental free trade agreements. Since 2013, the administrations of these three member states have been more receptive to negotiations in free

3 3 trade. For example, China is currently negotiating deals with the UK, US and France, and by extension the EU. However, the negotiations are slow, with many pit-falls and new political tensions between the UK and EU means trade deals with Asian are fiercely competitive. The WTO must work to promote these trade deals and advocate non-discriminatory free trade. The development of intellectual property and technological advances has changed the meaning of trade. In this modern age we can trade in ideas and digital goods, as much as physical goods and services. The TRIPS agreement was part of the Uruguay Round which founded the WTO and therefore regulations for intellectual property were intrinsic to the founding of the WTO. However, with greater developments in Artificial Intelligence, Pharmaceuticals and technology this regulations need clarifying and ways of sharing these advancements need to be found. Similarly, clauses addressing the sharing of information and the alliances of various intelligence agencies should be considered by the WTO. In recent years, the WTO has been criticised for failing to fulfil its principal of positive discrimination to developing countries, and actually hindering the human rights of workers from countries involved in FTAs. These concerns were largely addressed in a UN report entitled The realisation of Economic Social and Cultural Rights: Globalisation and its impaction the full enjoyment of human rights (J. Oloka-Onyango and Deepika Udagama). This report concluded that the WTO is a veritable nightmare in regards developing countries. Critics of FTAs have long agreed that developing countries are at the greatest risk from free trade as they cannot protect their infant industries and often have to export large quantities of raw materials, that means they cannot be used for their domestic development. Some argue that free trade just advocates a race to the bottom in which developing countries are forced to continually lower their standards and prices, at the cost of their workers or the environment, just to maintain the terms of an agreement. In fact, workers rights in the advanced industrial countries can also threatened by free trade, as countries could have to dismantle their internal regulations on industries which could compromise worker s positions. Furthermore the WTO as a non-partisan institution should be encouraging ethical practises in FTAs and not encouraging the trading of goods produced in slave-labour or sweatshop conditions. Some of the conditions used in member states should not be endorsed by the WTO and they must ensure free trade does not impinge on the human rights of any member state s populations. Major Countries and Organizations Involved: Committee on Regional Trade Agreement (CTRA) - a committee of the WTO responsible for

4 4 examining individual regional agreements and their systemic implications for the multilateral trading system. ASEAN - an Asian regional trading group involving Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam MERCOSUR - a Latin American regional trading group involving Argentina, Brazil, Paraguay, Uruguay The European Union (EU) - a cohesive economic and political bloc with 28 members (although the UK will soon exit). Promotes free trade within member states, but maintains protectionist policy to those outside. The Economic and Social Committee of the UN (ECOSOC) - the primary world organisation for trade rules, which has close working relationship with WTO. Have power to veto FTAs if they are in contention with UN principles or aims in other sectors China - a key member state involved in many new FTAs, especially with Western countries America - new protectionist policy means they are not keen to become involved in free trade agreements and have increased tariffs, altering the development of free trade United Kingdom - after withdrawing from the EU, the UK is looking to create free trade agreements with many member states and therefore is key member of WTO India - India has notified the WTO of 15 trade agreements and is currently negotiating another 11 agreements in various forms, so is key member. Canada - a keen supporter of free-trade, with 75% of their trade conducted under FTAs Timeline of Events: Date: Oct 1947 Event: General Agreement on Tariffs and Trade (GATT) - a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas.

5 5 Date: 1990s Event: TRIPS Agreement - an international legal agreement between all the member nations of the World Trade Organization. It sets down minimum standards for the regulation by national governments of many forms of intellectual property as applied to nationals of other WTO member nations. Date: Jan 1994 Event: North American Free Trade Agreement - an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. Date: Jan 1995 Event: WTO organisation established - essentially the successor of GATT, the WTO was set up to reduce tariffs and promote free trade. Established as a result of the Uruguay Round Agreements, which was signed by 123 nations in Marrakesh on April 14, Date: Nov 2001 Event: The Doha Round - the latest round of trade negotiations among the WTO membership, aiming to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules and covering about 20 areas of trade. Date: Aug 2014 Event: Comprehensive Economic and Trade Agreement (CETA) - free trade agreement between Canada and EU Date: Feb 2016 Event: Trans-Pacific Partnership - Free Trade Agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam. Date: Jan 2017 Event: America withdrew from the Trans-Pacific Partnership. Agreement being renegotiated by remaining states Date: March 2017 Event: Article 50 triggered, starting the process of the UK s withdrawal from the EU

6 6 Relevant UN Treaties and Events: Date: Oct 1947 Event: General Agreement on Tariffs and Trade (GATT) - a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. Date: Nov 2001 Event: The Doha Round - the latest round of trade negotiations among the WTO membership, aiming to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules and covering about 20 areas of trade. Possible Solutions: When looking into resolutions delegates must be aware of the political tensions between nations and their geopolitical relations which could limit the support of particular ideas. The large member states, such as the USA or China, will wish to protect their own interests and will perhaps compromise little. Similarly member states already in FTAs agreements are likely to work in alliance and to stop an resolution that may affect or undermine the commerce between them. The EU is the prominent such example. Delegates should find ways to use alliances and existing deals to their advantage when writing resolutions. The failure of the Doha Rounds and the reasons for this should also be considered by delegates. This was mainly due to the member states struggling to compromise of large issues and consequently delegates should try to come up by with innovative, fresh compromises. Resolutions could focus on how the WTO can improve its reputation in human rights, protecting the interests of workers and developing countries. Clauses could refer to ways to promote the principle of positive discrimination and encouraging developed countries to revert some of their aid roles to roles as trading partners and helping business flourish in the Third World. Delegates may choose to focus resolutions on the issue of intellectual property and intelligence and how free trade in these areas can be encouraged. Such resolutions may choose to focus on petitioning particular countries or groups to become involved in the sharing on information or may prefer to regulating the sharing of this information and protecting the rights of the creator.

7 7 Bibliography: Simple explanation of the TPP and significance of America s withdrawal: Good Article on the Doha Rounds: Explanation of the Doha rounds and their failure: WTO website: Article on intellectual property rights: Lots of information of free trade and FTAs: EU website: GATT: UN Treaty Collection Search Engine: A clear explanation of free trade in the context of the UN, from a previous MUN conference (slightly outdated though): CRTA: The WTO and their principles of free trade: