International Trade Organization

TheInternational Trade Organization(ITO) was the proposed name for aninternational institutionfor the regulation of trade.

Led by theUnited Statesin collaboration with allies, the effort to form the organization from 1945 to 1948, with the successful passing of theHavana Charter,eventually failed due to lack of approval by theUS Congress.Until the creation of theWorld Trade Organizationin 1995,international tradewas managed through theGeneral Agreement on Tariffs and Trade(GATT).

History

Proposal of an international trade institution

TheBretton Woods Conferenceof 1944, which established an international institution formonetary policy,recognized the need for a comparable international institution for trade to complement theInternational Monetary Fundand theWorld Bank.Bretton Woods was attended by representatives of finance ministries and not by representatives of trade ministries, the proposed reason why a trade agreement was not negotiated at that time.

In early December 1945, the United States invited its wartimealliesto enter into negotiations to conclude a multilateral agreement for the reciprocal reduction oftariffson trade in goods. In July 1945, the US Congress had granted PresidentHarry S. Trumanthe authority to negotiate and conclude such an agreement. At the proposal of the United States, theUnited Nations Economic and Social Committeeadopted aresolution,in February 1946, calling for a conference to draft a charter for an International Trade Organization.

A Preparatory Committee was established in February 1946, and met for the first time in London in October 1946 to work on the charter of an international organization for trade; the work was continued from April to November 1947.

General Agreement on Tariffs and Trade

At the same time, eight countries that had negotiated the GATT signed the "Protocol of Provisional Application of the General Agreement on Tariffs and Trade".Those eight countries were the United States, theUnited Kingdom,Canada,Australia,France,Belgium,theNetherlands,andLuxembourg.

Havana Charter

The founding document of the ITO was negotiated in Cuba from November 1947 to March 1948.The Havana Charter (formally the "Final Act of theUnited Nations Conference on Trade and Employment") provided for the establishment of the ITO and set out the basic rules for international trade and other international economic matters. It was signed by 56countries on March 24, 1948. It allowed for international cooperation and rules against anti-competitive business practices.

The Charter, proposed byJohn Maynard Keynes,was to establish the ITO and a financial institution called theInternational Clearing Union(ICU), and an internationalcurrency;thebancor.The Havana Charter institutions were to stabilize trade by encouraging nations to "net zero", withtrade surplusandtrade deficitboth discouraged. Thisnegative feedbackwas to be accomplished by allowing nationsoverdraftequal to half the average value of the country's trade over the preceding five years, withinterestcharged on both surplus and deficit.

Failure in United States Congress

The Charter never came into force, in part because in 1950 the United States government announced that it would not submit the treaty to theUnited States Senateforratification.While repeatedly submitted to the US Congress, the charter was never approved. The most usual argument against the new organization was that it would be involved into internal economic issues.On December 6, 1950, President Truman announced that he would no longer seek Congressional approval of the ITO Charter.Because of the American rejection of the Charter, no other state ratified the treaty. Elements of the Charter would later become part of theGeneral Agreement on Tariffs and Trade(GATT).

Individual trade agreements and World Trade Organization

In the absence of an international organization for trade, countries turned, from the early 1950s, to the only existing multilateral international institution for trade, theGATT 1947,to handle problems concerning their trade relations. Therefore, the GATT would over the years "transform itself" into ade factointernational organization. It was contemplated that the GATT would be applied for several years until the ITO came into force. However, since the ITO was never brought into being, the GATT gradually became the focus for international governmental cooperation on trade matters.

Seven rounds of negotiations occurred under GATT before the eighth round—theUruguay Round—concluded in 1994 with the establishment of theWorld Trade Organization(WTO) as the GATT's replacement. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them.

See also

• Bretton Woods system

References

• Bossche, Peter van den (2005). "The Origins of the WTO".The Law and Policy of the World Trade Organization: Text, Cases and Materials.Cambridge University Press.ISBN0-521-82290-4.
• Jackson, John H. (1994). "Managing the Trading System: The World Trade Organization and the Post-Uruguay Round GATT Agenda". In Peter B. Kenen (ed.).Managing the World Economy: Fifty Years after Bretton Woods.Institute for International Economics.ISBN0-88132-212-1.
• Kenen, Peter B. (1999) [1994]. "The Evolution of Trade Policy".The International Economy (Volume I)(in Greek). Translated by Andreas Sokodimos (Third ed.). Athens: Papazisis (in English: Cambridge University Press).ISBN960-02-1365-8.
• Palmeter, N. David; Mavroidis, Petros C. (2004). "Overview".Dispute Settlement in the World Trade Organization: Practice and Procedure.Cambridge University Press.ISBN0-521-53003-2.

External links

Havana Charter

• Text of the Havana Charter- WTO official website
• Pages 5 and 6 of an economics paper
• Pages two and three of a paper concerning agricultural trade
• Page 1
• [1]
• The WTO: An Historical, Legal, and Organizational Overview
• Global FractureArchived2009-02-13 at theWayback Machinea book by Michael Hudson that insightfully documents how developing countries have organized since the 1940s to restructure the global economic system, and failed every time.
• Procurement from Indian Manufactures