WTO and NAFTA summary

History of the Global Now
The WTO and NAFTA
Terese Howard
9/17/09

In this brief paper I shall summarize the workings of the WTO and NAFTA. I shall conclude with a brief summary of the free trade logic of these international trade organizations.

The WTO (World Trade Organization) was founded in 1994 as a result of “negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT)” (www.wto.com). GATT had mainly dealt with trading goods whereas the WTO expanded to dealing with “trade in services, and in traded inventions, creations and designs (intellectual property)” (www.wto.com). GATT started in 1947 as another of the Bretton Woods post war international development efforts. The WTO, following on that track, was created to address the rise of globalization which GATT was not prepared to address.

The WTO’s website defines it as follows:
“The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.” (www.wto.com)
The website also describes the WTO as essentially about talking. WTO member country leaders meet every year or so to discuss issues of trade. Ultimately, these discussions are intended to end in “agreements” which then have legal weight across national borders. Agreements are “the legal ground-rules for international commerce” (www.wto.com). The goal in all this is to “help producers of goods and services, exporters, and importers conduct their business” (www.wto.com). This generally is enacted by reducing restrictions on trade to make it easier. The website states, “overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects” (www.wto.com). One way this is done is through taking away tariffs on trade. The WTO generally supports treating imported and local good equally.

NAFTA was also founded in 1994 and was “preceded by an agreement between Canada and the United States called the U.S-Canada Free-Trade Agreement (FTA) which was effective on January 1, 1989, and is now suspended due to NAFTA” (http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta). “NAFTA created the world's largest free trade area, which now links 444 million people producing $17 trillion worth of goods and services” (http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta). Under NAFTA the US, Canada, and Mexico are a trading bloc. This means trade follow almost freely through these countries.

Like the WTO, NAFTA is focused on increasing trade and doing so under agreed upon rules. Under the creating of NAFTA almost all tariffs were dropped between the US, Canada, and Mexico. Unlike the WTO, NAFTA does not base its work off of yearly meetings as much as regular contact, probably mostly because of the countries proximity. NAFTA was implemented in the US after the “House of Representatives approved NAFTA …by a vote of 234 to 200” (http://en.wikipedia.org/wiki/NAFTA). Canada and Mexico had even more opposition to the creating of NAFTA. The countries governments are the main players in decisions regarding NAFTA.

Free trade logic
The WTO and NAFTA are based on the logic of free trade. In short, this can be described as the idea that, “liberal trade policies — policies that allow the unrestricted flow of goods and services — sharpen competition, motivate innovation and breed success” (www.wto.com). Competition is the heart if free trade logic. It is through competition that stimulus is provided to make more products and make improvements on those products. International competition enables the competition to expand beyond independent corporations to countries. This creates a unifying force for countries along with the stimulus toward growth resulting from further competition. In this logic, competition and innovation go hand in hand. The WTO website states that, “countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, and then by trading these products for products that other countries produce best” (www.wto.com). Innovation makes the most profit the free trade if it is specialized. By mass producing a product that is most prevalent in one’s own country, and thus is cheaper to attain, that country can easily make a profit on their investment costs. This profit is deemed success. Free trade, as opposed to restricted trade, enables competition between countries and thus more nitch production creating which is sold and in turn the capital is then put back into the market, ultimately creating a larger market for all countries involved.

www.wto.com
http://en.wikipedia.org/wiki/NAFTA
http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta