WORLD TRADE AND INTERNATIONAL LAW: A HISTORICAL PERSPECTIVE
Master’s Thesis
Submitted by:
Roi Darrieux Raposo 12860417
Thesis Supervisor Dhr. Dr. Geraldo Vidigal
2 Submitted to the University of Amsterdam in fulfilment of the requirements for the Program of International Trade and Investment Law (LL.M).
Table of Contents
INTRODUCTION ... 4
CHAPTER I: AGREEMENTS BEFORE GATT 1947 ... 5
Historical background of trade and globalization. From the Ancient Era to the Middle Ages. ... 5
Trade during the Modern Era: Imperialism and a new approach to Trade. ... 8
The “Cobden – Chevalier Treaty” and its impact on Trade Agreements. The blossom of Free Trade. ... 9
From 1870 to the Great War: A step back for free traders and a step forward for the State. ... 11
From the Great War to WWII: Army and economics. ... 13
CHAPTER II: THE GATT 1947 AND THE XX CENTURY. ... 15
The birth of a New World Order: The UN and Bretton Woods... 15
The impact of 1947 GATT and the Bretton Woods Institutions: Free Trade is back. ... 17
Reviewing the System in 1971: The Arrival of FIAT Money. ... 19
The End of History: 1980s – 1990s. ... 20
CHAPTER III: FROM THE FALL OF THE COMMUNISM TO THE FALL OF LEHMAN BROTHERS. ... 20
The 1990s and the Fall of Communism: reshaping the map and ideologies. ... 21
The New Millennium: The Popular Republic of China joins the WTO. ... 27
Trade trends from 2000 to 2009: a new boom in Free Trade Agreements. ... 28
CHAPTER IV: FROM 2008 TO THE CURRENT DAY ... 29
From 2008 to 2016: Financial Crisis and World Trade ... 29
The Institutions of the World at stake: The Greek Crisis Case. ... 30
Trade Agreements between 2008 and 2016 ... 31
From 2016 to this day: A new wave of Protectionism?... 32
The last shake to International Commerce: The Trade War Between the USA and China . 35 CONCLUSION ... 36
3
Abstract
This piece describes Trade History and its trends, analyzing their structure depending on the geopolitical situation and the different interests that have risen during these years: new resources, new political and economic powers, new markets, new trade routes… This data will be used in order to ascertain its relationship with the ratification of Free – Trade Agreements and the creation of new vehicles and legal framework in order to promote Commerce.
Key Words
Trade Law, Trade Agreements, History of Law, Comparative Law, Economic History, International Law
Word Count
4
INTRODUCTION
Trade between individuals exists as an Institution since the very beginning of humankind. It is difficult to track all the human transaction over goods and services that had occurred during History, above all in its early stages and first written pieces. However, as soon as Humans developed the skill for writing, they used it for trading purposes too.
From Egypt to Rome, passing through Phoenicia and several other places, Trade is widely recorded in Ancient History. Its approach from the different Empires, as it will be discussed further below, was very different from the one that reigns over the current Major Economies in the World. Nevertheless, in a very primitive way, it started to make its way and get leverage over the governments and individuals, creating new Trade Routes that will become a new way of taxation and to get revenue for the Governments.
These Routes will explode after the Fall of the Roman Empire, most of them towards the West, reaching China and the Asian sub – continent, creating a primitive and raw globalization amongst the “Known World” at that time. With the Discovery of the Americas and the new modern States trade will boost, above all between Metropolis and Colonies, making Governments focusing on expansionism to explode resources rather to perform better in trading.
After the Industrial Revolution, Trade underwent a massive change during the years. Western European countries and the newborn USA experienced a boost in their productivity, making changes in the supply and demand looking for new products and new opportunities within the new Free Trade Economy framework reigning in the Western culture. Charcoal was abandoned in order to embrace oil, plastics started to play an important role in every single part of the economy and the new war machinery required new and more sophisticated materials, most of them only able to be found abroad. Thus, countries realized that agreeing on trade was a
win/win rather than a zero-sum game, looking for the acquisition of commodities at cheaper
prices and to get rid of the taxation of their exported products. The very first known Trade Agreement as such comes from 1860, the Cobden-Chevalier Treaty, between Great Britain and France1. This Treaty was the first outcome of the free trade policy adopted by Great Britain
since 1846, because this freedom, in their opinion, was as necessary for the state as it was for
1 International Monetary Fund Research Dept. (1997). World Economic Outlook, May 1997: Globalization:
5 the individuals. The principle of reciprocity2, meaning that duties must be the same amongst the treaty members, was established firstly here.
Since that Treaty, the number of Regional Free Trade Agreements in force (including Bilateral and Multilateral) reached the number 3033, while typing these words. That means that the Cobden-Chevalier Treaty planted a seed that ended up being a tree full of branches. However, as it will be studied later on, the progression of the signature of these Treaties was far from lineal. Different episodes of History shaped the amount and the content of the different Agreements depending on diverse circumstances. Wars, stagnation, time for recovery, economic booms, globalization, new markets… All of them play a major role drawing the evolution of the matter.
In this piece, it will be described and analyze Free Trade Agreements by eras. Subsequently, within the same time – frame category, it will be described the content and the number of members, determining whether we are facing a multilateral, regional or bilateral Treaty, and why is drafted in such a way. The first chapter will cover Trade History (and its background) and those Agreements signed before GATT 1947, focusing on the impact of both Wars and the economics behind them. The second chapter will cover from 1947 to the 1990s, when the globalization is deemed to start, and the Communist World crumbled. The third chapter will focus on the time span between 1990 and 2008 and the fourth and last from 2008 to the current day.
CHAPTER I: AGREEMENTS BEFORE GATT 1947
Historical background of trade and globalization. From the Ancient Era to the Middle Ages.
International Trade has existed since the beginning of the humankind. From the Phoenicians to Wall Street, commerce has been a companion towards a better world. Indeed, Phoenicia is considered the first trading Superpower, covering most of the Mediterranean shoreline. These people faced the problem Free Trade Agreements try to solve: duties4. This was not a trivial
2 A.A. Iliasu, The Cobden-Chevalier Commercial Treaty of 1860, The Historical Journal, Vol. 14, No.1 (Mar.
1971), page 68
3 WTO Regional Trade Agreements Data base.
6 issue, given the fact that Phoenicians were traders that had markets all over the Mediterranean shoreline and also the Atlantic, facing several duties and taxes from different “Administrations” when doing their business. Following the fall of the Achaemenid and Greek Empires, merchants were trading with both East and West and, of course, with the following trading Superpower: Rome. The Roman Empire was not only an export power, but they also created internal market within its provinces. However, this was still far from being considered “Free Market” because romans had to bear with higher burdens than Phoenicians, both in terms of bureaucracy and taxation. The Imperial Period established a great control over the economy, in order to guarantee supply (the Annona system) and having their own state-owned fleet, replacing the subsidies system (vecturae) to promote private shipowners. Moreover, the state taxed the movement of goods between provinces and also controlled many local markets (nundinae)5, so the State had a huge influence over the commerce flows of the Empire, both inside and abroad.
The very first Roman Trade Partner were the leftovers of the Greek Empire, and its first traded item was art. Nevertheless, Roman’s approach to commerce is very different from todays. They did not care about imbalances or net exports or imports, they only cared about the flow or trade by itself, creating and establishing new routes. After the instauration of Christianism as official religion of the Empire, Christian territories enjoyed a more favorable treatment in taxation terms, due to the leverage of The Church. However, trade could never support the Roman economy by itself, due to, in part, because of the lack of interest towards Roman products in the Far East and Indian subcontinent, where there can be barely found Roman products6. However, this does not mean that between Roma and China, the other Major Empire at that time, there were no trade. The trade was in between the route from Rome to China, as will be explained later.
Regarding China, this historical major superpower started trading way before Roma and the Greek Polis. Historically, China reached an expertise in agriculture, manufacturing and marketing not achieved by any other country until the 1800s7. Thus, trading with China was
very interesting for both States and merchants, able to collect taxes out from the profits from the merchants, whose products brought from the far East had an incredible demand amongst
5 Cartwright, M. Trade in the Roman World, Ancient History Encyclopedia, Article, June 2017.
6 Clark Northrup, C. Encyclopedia of World Trade, Vols. 1 – 4, Routledge – Taylor and Francis Group, London
– New York, 2015, pp. 790 - 798
7 Schirokauer, C. A Brief History of Chinese Civilization. Belmont, CA: Wadsworth/Thomson Learning, 1991. Pp
7 Mediterranean and European markets. However, like the Roman Empire, trade was neither the most important source of income for the State nor something to embrace, like modern free
traders, overseas trade was forgone, indeed8. Thus, neither Empires like Rome or China had a special interest in agreeing on trade with any other nation, given the possibility of just invade and annex that territory and exploit its resources by themselves.
The abovementioned relations between Roma and the Greek Polis and the connection between East and West created by Alexander the Great paved the way for a more important trade route that would last during centuries involving China. The Silk Road was born. However, that name amounts to a different number of routes (generally from Venetia to coastal China, crossing through the Xinjiang and Central Asia) involving new cities profiting from their location halfway, becoming new commercial hubs, like Samarkand or its consolidation as a hub – toll cities, like Constantinople. Also new agents appeared, normally acting as middlemen or couriers given the risk of carrying luxurious goods all the way from Eastern China to Europe, above all silk, of course, but not only that commodity, which also was used as a currency because it was widespread accepted9. All kinds of goods were traded all over this path, even between cities in Central Asia and the Arab Peninsula. This trading task was fulfilled by the Turks, Mongols and Arabs, due to the location of their territory, or just for being the owners of the whole Route, like Mongols from 12th to 15th century10. This involved loads of paperwork when crossing borders between all the tribes and states that were on the route, imposing tolls and duties over the traders, rather than agreeing amongst themselves in order to facilitate and to make cheaper the whole procedure11.
The Silk Road became the very first intercontinental and interregional route in the World, moving from East to West and vice versa a huge amount of information, culture, religion, and, of course, trade. Nevertheless, as stated, there was no agreement between the different people living on the cities of the Route in order to facilitate the trade. Border controls, taxation, passports and red tape were involved. The Silk Road finished when new Trade Routes were discovered and went most of the products imported from China started to be manufactured in Europe. A grey era began for those in Central Asia and the Xinjiang. The world now had a new
8 Twitchett, D., and John K. Fairbank, eds. The Cambridge History of China. New York: Cambridge University
Press, 1996. PP 321 – 436
9 Hansen, V. The Silk Road: A New History. Oxford University Press, 2012. Pages 113 – 141. 10 de Graaf, W.J. The Silk Road in the Mongol Era, Tilburg University, 2018. Page 11.
11 Liu, X. Silk and Religion: An Exploration of Material Life and the Thought of People, A.D. 600–1200. Oxford:
8 vast territory in the West: America was discovered, and it changed the game and overhauled the whole system.
When the Spaniards accidentally arrived in America, a new overwhelming territory full of resources was on the market. This meant that most of the Eurasian trade routes became old fashioned almost overnight. Cities like Kashgar, Samarkand or Constantinople lost most of their leverage regarding the movement of world products. Now, the Western European ports and the Caribbean Sea became the epicenter of trade from the 15th century until the 1800s.
Trade during the Modern Era: Imperialism and a new approach to Trade.
The very first major player in World Trade concerning American territory was the Spanish Empire. They had a mercantilist approach, basically exploiting gold and silver sources in order to obtain cheap currency and buy those products that were not manufactured in mainland Spain (Castilla and Aragón Crowns, respectively, at that time), rather than a pre-capitalism mindset of savings and investment12. Suddenly, all the European Powers looked towards the West in order to obtain new benefits. Great Britain, France, Spain and Portugal made their way into the New World, exploiting these new territories to benefit the Mainland Empire, rather than re – investing in American – local economies, at least from 15th to late 18th Centuries13. Those years were dominated by The Spanish and The British Empire, with vast territories, huge merchant fleets, but both with different approaches to commerce. While Spain decided to rule directly over commerce and prices, Britons bet on free trade, at least amidst the relationship Metropolis – Colony. For example, a good source of revenue for the Spanish Crown were the so – called “Rentas de Indias”, a duty to be paid in Spanish – American commercial ports. Great Britain also applied duties and tariffs on imports, but they were less strict than the Spanish ones. Of course, there were tariffs between the Superpowers during those years, like a 10% tariff ad hoc by the British Crown for Spanish products14. However, everything started to change in the late
18th century. Spain was unable to compete in industrial terms with Great Britain and, due to a 1797 Decree, Spanish colonial territories were allowed to trade with other nations, destroying
12 McCusker, J. J. Mercantilism and the Economic History of the Early Modern Atlantic World. Cambridge:
Cambridge University Press. 2001. Pp. 225 – 226.
13 Clark Northrup, C. Encyclopedia of World Trade, Vols. 1 – 4, Routledge – Taylor and Francis Group, London
– New York, 2015. Page 313.
14 Cuenca – Esteban, J. Statistics of Spain’s Colonial Trade, 1747 – 1820: New Estimates and Comparisons with
Great Britain. University of Waterloo, Journal of Iberian and Latin American Economic History, Year XXVI. 2008 winter. Nº3: 323 – 354.
9 the Spanish monopoly over those territories15. The time for Great Britain and to the newborn United States of America arrived.
With the independence of the United States of America from the British Crown and the French Revolution, humankind entered into a new era for every single field of knowledge, and trade, commerce and State structure were not far behind. Mass production, factories and engineering led the economy towards a different path rather than exploiting raw materials thousands of kilometers away. Now the value was in manufacturing at home those now cheap raw materials widely available in all the European and American markets and export them to the rest of the world: the seed of globalization. Industrial Revolution amounted to a vast increase in labor productivity and the amounts of goods and services produced reached numbers like never before having, of course, its social, economic and political impact on the scene.
With this new environment, policies concerning trade took a u – turn. New economic ideas promoting the benefits of free trade and comparative advantage ruled over the approach to trade. Names like David Ricardo or Adam Smith or the popular movement against the English Corn Laws shaped the legislation in the West, embracing free trade even more, and leaving behind their primitive colonial economy in order to focus on a more sophisticated ways of producing goods and how to sell them and profit. Subsequently, governments looked for lower taxes between them and agreeing on tariffs over imports and exports. It was January 23rd, 1860 when the very First Trade Agreement between independent sovereign nations was signed and ratified: the so – called “Cobden–Chevalier Treaty” between Great Britain and France16.
The “Cobden – Chevalier Treaty” and its impact on Trade Agreements. The blossom of Free Trade.
As stated, this is considered the First Treaty concerning Trade in order to promote it in a freer way amongst nations. It lasted only ten years, until 1870, when the “Golden Era” of the free trade in Europe in that century came to an end, given that a war time period and decolonization
15 J. Pearce, A. British Trade with the Spanish Colonies, 1788 – 1795. Institute of Latin American Studies,
University of Liverpool. Bulletin of Latin American Research, Vol. 20, No. 2 (Apr. 2001). Page 233.
10 began to take place17. However, the footprint of this Treaty will overcome several difficult times and will last until our days.
The most remarkable point of this Treaty, besides being the very first by itself purely over Trade18, is the provision of a Most Favorable Nation (“MFN”) clause, having a twofold impact on History19. This clause implies that any treatment more favorable with a third party concerning any matter covered by the Agreement, shall apply between the parties, provision contained in the very first Article our current General Agreement on Trade and Tariffs20. The
impact of this Treaty was also noticeable just after its enforcement, indeed. During the next 10 years, 56 similar PTAs in Europe were ratified liberalizing trade21.
Table 1: Intra-European Agreements signed between 1860 – 1870 (inclusive)
Table 2: European Agreements with other Countries between 1860 – 1870 (inclusive)
17 Krasner, S. D. State Power and the Structure of International Trade. World Politics Journal. Vol. 28, No. 3.
1976. Pp 317–347
18 There are more International Treaties previous to the “Cobden – Chevalier Agreement”. However, this is the
only one just focused on Trade and tariffs amongst sovereign countries.
19 Lazer, D. The Free Trade Epidemic of the 1860s and Other Outbreaks of Economic Discrimination. World
Politics, Vol. 51 No. 4, July 1999. Pp. 447 – 483.
20 Article I General Agreement on Trade and Tariffs, 1994.
21 Lampe, M. Explaining Nineteenth-Century Bilateralism: Economic and Political Determinants of the
11
Source: Hallaert, J-J. Insights from the 19th Century Wave of Bilateral Trade Agreements for the WTO Era. Trade, Law and Development Journal, Vol. 7, No. 2, National Law University, Jodhpur, 2015. Pp. 360 – 361
All these events involved an important reduction on tariffs on goods around the world, meaning that humankind departed from taxing goods within the same territory (Roman Empire), to agree on lowering taxes amongst neighbors and countries overseas. In this point, we can state that this 1860 – 1870 decade shaped the framework for Trade Agreements for the future, as it will be discussed below. Despite a future with also a good amount of Regional Trade Agreements, rather than Bilateral Agreements like the “Cobden – Chevalier Treaty”, this is doubtless the seed for the future framework in Trade drafting, and its first evidence is the amount of Treaties ratified during those years based on this one. However, a new era of protectionism was about to begin.
From 1870 to the Great War: A step back for free traders and a step forward for the State.
12 Wars, volatile markets and the decolonization period for some countries hit hardly the economy, leading towards protectionist politics all over the world, from 1870 to the end of the Great War. Moreover, those abovementioned ideas praising free trade economy were flawing amidst difficult times. With no safety net for those unable to thrive during recession times, protectionist theories start to take place on the mindset of both citizens and politicians. Germany, then Prussia, was the first country to bet on Trade Protectionism. With the parallel boom of industrialization and with a labor productivity just skyrocketing, their main economic focus departed from trade to arrive at local industries22. Moreover, there was found a positive
correlation between import tariffs and economic growth across countries from 1875 to 191423.
Most of the nations closed themselves to foreign and free trade in a stadium conjugating autarchy and mercantilism. The structure of the States was undergoing major developments towards modern concepts, aided by technology and philosophy; and the Armies all over the planet were able to get access to resources and means never imagined before, and politicians were aware of that.
Most of the new manufacturing industries were focused on the production of weapons and army equipment due to the political uncertainty after the Franco – Prussian War between 1870 and 1871 and the cheaper and more modern firepower available24. Also, it is important to bear in mind that, after the French Revolution, the Nation – State was born and, since then, States became more powerful and they now also cared about the concept of “Nation”, something above the concept of State by itself. With the new high revenues from the increase of productivity and the tariffs from imports, most of the European States focused their economy in industrial production, weapons for the army and developing a welfare state, in order to keep people productive and ready for work; States invested their treasury on their population for produce military goods and hold agriculture for local consumption25. This was the economic
leitmotiv for most of the major superpowers during the years before the Great War, besides
dealing with internal affairs. Given that, focusing on international trade in a free way through lowering tariffs did not seem a priority at all for most of the Governments. Mistrust towards
22 Dormois, J-P and Lains, P. Classical Trade Protectionism 1815 – 1914. Routledge Explorations in Economic
History, 2006. P 195.
23 Clemens, M. A., Williamson, J. A Tariff Growth Paradox? Protection’s Impact on the World Around 1875 –
1997. NBER Working Paper, 8459.
24 Clark Northrup, C. Encyclopedia of World Trade, Vols. 1 – 4, Routledge – Taylor and Francis Group, London
– New York, 2015, P. 961
25 Briggs, A. The Welfare State in Historical Perspective. European Journal of Sociology. Vol. 2, No. 2. 1961. Pp
13 neighbors became the normal rule in the European continent. Only Great Britain (and a part of the United States of America) still believed in Free Market Economies. As a consequence, there is a lack of new Free Trade Agreements during all this period until (at least) the previous and posterior years after the Great War, mostly focused on exploiting resources in the Second Era of Colonialism in Africa26.
From the Great War to WWII: Army and economics.
With the outbreak of the Great War, regionalism and protectionism went deeper into the roots of the Governments, even until the end of WWII, despite some attempts to restore a Free Trade Order during the aftermaths of the Great War, like the League of Nation's World Economic Conference in 192727. Focusing on the Great War period of time, and its previous years, Powers around the globe, above all in Europe, were focusing their economies in the New Colonialism and using all the industrial knowledge being discovered to focus on the army: from protecting their merchant fleets against other Nations and Pirates to protect mainland territory during the turbulent political years after the Franco – Prussian War28. Trade and exports went down, then had a recovery to previous WWI levels to shrink again in WWII.
Table 3: World Exports, 1870 – 2010. Focus on 1914 – 1945 period.
26 Shafaeddin, M. How Did Developed Countries Industrialize? The History of Trade and Industrial Policy: The
Cases of Great Britain and the USA. UNCTAD Discussion Papers, No. 139. 1998. Page 14
27 Brown, A. G. Reluctant Partners: A History of Multilateral Trade Cooperation, 1850-2000. Studies in
International Economics, University of Michigan Press, 2003. Pp 123 – 152.
14
Source: Broadberry and Harrison (2018), Chapter 20, Figure 3. Frame added by the author.
Given this data, it is possible to say that trading and balancing the current account was not an issue or, at least, a preference to focus on for the Governments. Their priorities were clearly others, related with war and colonial – expansionist ways of acquiring wealth29.
Despite not being a Trade Agreement per se, it is important to focus on Versailles Treaty and its impact on commerce, given the failure of the newborn League of Nations in order to organize a multilateral Trade System or even try to promote Trade Agreements amongst Nations that had been recently fighting against each other30. Versailles Treaty exemplifies the opposite of what a Trade Deal should be. Imposing high burdens, tariffs and quotas unilaterally against a Party, the so – called “Reparations” ended up having a catastrophic outcome. Discriminatory Trade took place between two sides, with the Western (Allied) Countries trading among themselves and Germany trading with the East, moving from protectionism towards a discriminatory bilateral Trade Agreement framework31.
29 Broadberry, S. Harrison, M. The Economics of the Great War: A Centennial Perspective. CEPR Press. 2018.
Pp 27 – 67.
30 Ibid. Pp 169 – 172.
15 Even countries like the United States of America enclosed themselves raising tariffs, like the Smoot – Hawley Act, that led other countries to follow the same path of increasing the duties at the border32. However, in the 1930 this trend changed, and Trade Agreements started to flow again but, as abovementioned, in a discriminatory – regionalist manner. The very first block, created in 1930, was the “Dutch – Scandinavian Economic Pact” ratified by the Netherlands, Denmark, Norway and Sweden. Four years later, The Congress of the USA enacted the “Reciprocal Trade Agreement Act (“RTAA”)”, enabling the President to ratify bilateral tariff reduction agreements. With this authority, originally granted for three years and subsequently renewed, the government concluded more than 20 trade agreements in the 1930s, initially with Latin American countries, but later with Britain and Canada. By directly tying lower foreign tariffs to lower domestic tariffs, the RTAA encouraged exporters to organize in opposition to high tariffs and in support of trade agreements 33. However, 1936 brought the end of the Spanish Civil War and the beginning of WWII. Once again, priorities moved, displacing trade from being a priority at all but in the weapon industry. After one of the most terrible episodes of humankind, Nations realized that their Governments should focus on the wellness of their populations and to promote trade. The United Nations was born and, with it, the 1947 General Agreement on Trade and Tariffs.
CHAPTER II: THE GATT 1947 AND THE XX CENTURY.
The birth of a New World Order: The UN and Bretton Woods.
During the aftermath of WWII, victorious Powers rushed to create a new and better version of the failed “League of Nations”. However, as stated by Sir Winston Churchill, the World was divided by an “Iron Curtain”: Free – Trade Democracies in one side and Communist Dictatorships in the other, something that will have an enormous impact on trade, given that the flagships of both sides were the major superpowers at the moment, the United States of America (“USA”) and the United of Soviet Socialist Republics (“USSR”). Even in a more likely environment for trade and commerce, like that one, geopolitics will have an important impact on shaping the Trade Agreement Network that was about to be created.
32 Ibid. P. 115
33 Irwin, D. A. U.S. Trade Policy in Historical Perspective. National Bureau of Economic Research Working
16 The United Nations were born backed by an Agreement between the USA, the USSR and their allies and those called non – aligned (also known as “Third World”). 50 states agreed on the creation of this supra – national body in order to settle disputes pacifically rather than suffering such an event as WWII again. However, not all the existent sovereign countries joined: some of them either for pressure by either USA or the USSR or because of being an isolated dictatorship without geopolitical relevance. Is within this new legal framework were the GATT was born.
1947 GATT is the first International Agreement establishing a legal framework for International Trade. It did not only lay down the basics for commerce amongst its Members, it also shaped how bilateral or regional Trade Agreements should be drafter in order to promote fair competition within it. Basically, 1947 GATT is the cornerstone of the legal acquis we enjoy today. All the important provisions that we all deem as essential in international trade relations are directly influenced by this Agreement. Most Favored Nation (this one also coming from the 1860 Cobden – Chevalier Treaty, as abovementioned), Schedules of Concessions, National Treatment on Internal Taxation and Regulation, Freedom of Transit, Anti – Dumping and Countervailing Duties, Valuation for Customs Purposes, Marks of Origin, General Elimination of Quantitative Restrictions, Subsidies, General exceptions, Security Exceptions and the framework for the creation of Free – Trade Areas and Custom Duties through new Agreements34 under GATT are, amongst other, the key points that make a real difference between GATT and any other Trade Agreement drafter until that date.
But GATT 1947 is one of the different outcomes of the Monetary System introduced in 1944, just after the world, named the “Bretton Woods” system, inside the new UN system. Bretton Woods aimed to establish an International Economic (and not only for Trade) Framework based on norm predictability and Rule of Law. This involved the creation of several Institutions like the World Bank (“WB”) or the International Monetary Fund (“IMF”). The World Bank is an UN Corporation focused on reducing poverty, gathering data over World Economics and providing financing, policy advice, and technical assistance to governments of developing countries in order to thrive. The WB pursuits long – term goals. By contrast, the International Monetary Fund, the other major public corporation created at that time, has a similar but somewhat different task, focusing mostly on the payment balance of developing or middle – developed economies but focusing on short – term or urgent operations. Amongst other tasks
17 the IMF aims to promote trade, but there is an activity that has the biggest stake on IMF’s duties: being a last – instance lender. As its name states, the IMF is a Fund provided with money from wealthy countries in order to provide Public Aid to Governments undergoing difficult situations and unable to obtain hard currency in the Primary Markets for Sovereign Bonds35. Finally, there was a last and less important new Corporation that was the seed for the
actual World Trade Organization: The International Trade Organization (“ITO”), which would oversee the administration of an open and non – preferential multilateral trading order. However, there is another major change that is not embodied in a Corporation as such, but will have a major impact over economies and giving to the United States of America the first place in this New World Order: the “Gold Standard” and the “United States Dollar” (“USD”) as primary currency in the World. This meant that the price of the USD was backed by gold, creating a new currency – back gold standard that would be indexed to most to the assets, commodities and other currencies around the globe36.
With all this new framework, and the provision contained in GATT 1947 giving an international – multilevel legal framework to agree on Trade with legal security, the boom on Agreements just began. Free trade theories came back supporting those new agreements, drafted in very different ways depending on the degree of integration that the parts were eager to agree on. This is something absolutely new, given that historically, Trade Agreements were made on a bilateral basis and only agreeing on quotas and tariffs, but that was about to change. The only exception was the abovementioned “Reciprocal Trade Agreement Act (“RTAA”)”, that had some traces of multilateralism, but nothing to do with the new trends. However, regionalism remained as the major trend among countries, who rushed to ratify and created not only Bilateral Trade Agreements, but Regional Trade Agreements on goods.
The impact of 1947 GATT and the Bretton Woods Institutions: Free Trade is back.
As stated, the main trend in trade during the Post – WWII period was regionalism, deeply influenced by the new Political Blocks and their allies and enemies. Moreover, there is considered to be three waves of regionalism since 1947: 1950 – 1960, mid 1980s – late 1990
35 Factsheet: “The IMF and the World Bank". IMF. 21 September 2015. Retrieved 1 December 2015.
36 Uzan, M. Bretton Woods: The Next 70 Years. Econometrics Laboratory - University of California, Berkeley.
18 and from mid 2000s to our days37, waves that will be discussed within its own circumstances considered.
The outcome of this first wave of regionalism came 3 years after the GATT ratification. With Continental Integration on European Western Democracies’ Government’s mind, the Economic Coal and Steel Community was born. A Regional Trade Agreement focused on one sector of the economy, the agreement covering all economic fields was also about to come38.
However, that Agreement is not considered as a Regional Trade Agreement under the GATT 1947. The very first Regional Trade Agreement notified and ratified under the GATT 1947 framework was signed December 6th, 1948 between South Africa and Southern Rhodesia
Customs Union, a Bilateral - Customs Union on Goods39. The second Agreement was, this time, a Bilateral Free Trade Agreement on Goods between El Salvador and Nicaragua. The GATT had to wait until 1956 to receive a notification for another Free Trade Agreement, for the Central American Free Trade Area, a Regional Free Trade Area that remains inactive today, because it was never ratified, like the two previous Agreements, showing a lack of interest from countries to agree under the GATT. Thus, during the first 9 years of GATT, there were only 3 inactive Agreements as an outcome. However, the first Agreement to be in force, signed in 1957 was not an ordinary Agreement: The EC Treaty, a Regional Customs Union on Goods and Services, providing an example for the rest of the world with an Agreement covering several areas, going beyond a simple agreement on tariffs. This Treaty provided, under the GATT framework, one of the most successful and sophisticated Customs Unions existing in the world, with a degree of integration never reached before, even while typing these words. So, the EC Treaty by itself almost ended up being the root of a quasi – Confederation amongst several sovereign nations that transferred sovereign competences (not only regarding Trade) to a Supra – National body for administrate them.
The EC Treaty and its Communities, are the seed of today’s European Union, providing a strong evidence regarding how well the GATT was drafted in terms of supporting economic integration. Next year, the newborn EC agrees with some neighbor countries to create the EFTA, a Plurilateral Free Trade Agreement and for Economic Integration that also remains active while typing these words. However, the regional trend remained during these years. That year was also signed, but remains inactive, the Equatorial Customs Union – Cameroon
37 World Trade Report. Historical backgrounds and current trends. WTO, 2011. Pp 51 – 54.
38 Winters, L. A.; McCulloch, N. and McKay, A. Trade Liberalization and Poverty: The Evidence So Far. Journal
of Economic Literature. 2004. Vol 42 No. 1. Pp 72-115.
19 Association, a Plurilateral Free Trade Agreement amongst decolonized African countries. Until 1971 only 21 RTA agreements were in force, most of them between neighbors, keeping the abovementioned regionalist trend alive. As of 1970, would be possible to say that the GATT framework for providing legal basis to Free Trade Agreements was not as successful as expected but for the EC Treaty and EFTA. However, an overhaul of the Bretton Woods system was about to come.
Reviewing the System in 1971: The Arrival of FIAT Money.
Despite not being this piece a study on Economic History, it is worth mentioning an event that took place on August 15th, 1971 and had impact both in Trade and in the UN internal
functioning system. On that date, U.S. President Richard Nixon unilaterally announced the "temporary" suspension of the dollar's convertibility into gold. That meant that since that moment, world’s reference currency was not backed by US Federal Reserve’s gold, but by the trust of their tenders on the issuing government, the United States of America. In 1973, all currencies in the world (that decided to do so) were floating against each other, creating turbulent times for Trade given the oil crisis already taking place40. However, 1973 was the year with more notifications of Trade Agreements on Goods in a single year (5) until 1993 (6). The first of this five Agreements is the Caribbean Community and Common Market (“CARICOM”), a Plurilateral Customs Union and Economic Integration Agreement on both Goods and Services, still in force today and ratified by 11 (four of them considered as “Founders”) Caribbean Countries that went further than agreeing on a Common Market and creating supra – national Institutions to oversee the enforcement of the Agreement41. The
second is the EU (then EC) Trade Agreement on Goods with Iceland (still in force). The EU was also one of the parts of the third and fourth Treaty of the that year, a similar Trade Agreement but this time with Norway by one side, and with Switzerland and Liechtenstein by the other. Finally there was also ratified a Protocol on Trade Negotiations (“PTN”) a document signed by Bangladesh, Brazil, Chile, Israel, Republic of Korea, Mexico, Pakistan, Paraguay, Perú, Philippines, Romania, Tunisia, Turkey, Egypt, Uruguay and the Socialist Federal
40 Kirshner, O. The Bretton Woods-GATT System: Retrospect and Prospect After Fifty Years. Routledge. 1996.
Chapters 4 and 7.
41 Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the CARICOM Single
20 Republic of Yugoslavia; a soft – law document still in force. From this framework there is possible to arrive to two conclusions: Free Trade Agreements were not very popular into the International Scene and its Partners were (almost) always neighbors, maintaining the already existent regionalism. From 1973 to 1981 there were only signed two inactive Free Trade Agreement on Goods, the EC with Algeria and EC with Morocco (both inactive) and the EC with some future Member States42.
The End of History: 1980s – 1990s.
However, since 1981 the trend changed. Four new Agreements in a single year gave hope for the GATT text when promoting Free Trade Agreements. There were ratified two inactive Trade Agreements and two still in force today. The Gulf Cooperation Council, a Plurilateral Customs Union and the Convention of Lomé, a Plurilateral Trade Agreement on Goods, are those two inactive. However, the Latin American Integration Association, a Plurilateral Trade Agreement on Goods, has now 13 Latin – American Member States and enjoys several Internal Institutions of Economic Integration. The other successful outcome that year was the South Pacific Regional Trade and Economic Cooperation Agreement (“SPARTECA”) a Plurilateral Trade Agreement on Goods amongst 15 sovereign nations from the Pacific Ocean. Again, the preference towards regionalism was noticeable in both Trade Agreements. However, it is important to recall the little amount of Free Trade Agreements until that data, so it is logic that the very first Trade Blocks were ratified amongst neighbors, because normally are already Trade Partners and the logistics involved are easier. This was basically the trend during the 1980s: in 1981 were 11 Trade Agreements in force and in 1989 were 2243. Of course, in relative terms is a 100% increase in less than a decade, but the fall of both the Berlin Wall and the Soviet Union opened a new window and the numbers from 1990 started to skyrocket. A new era of Globalization was about to come.
CHAPTER III: FROM THE FALL OF THE COMMUNISM TO THE FALL OF LEHMAN BROTHERS.
42 WTO Database about RTA. 43 Ibid.
21
The 1990s and the Fall of Communism: reshaping the map and ideologies.
The Fall of the Berlin Wall did not only bring the Reunification of Germany and the independence of several Soviet Republics, but also a good amount of new countries (some) eager to engage into the Capitalist World and the flows of hard currency and, as an outcome, a new amount of Free Trade Agreements and Accessions to the previous ones. As it will be deeply studied later on, the decade with most Trade Agreements is the 2000s. However, 1991 (the year of the Official dissolution of the USSR), was a year with a major impact, paving the way for the new exponential increase in trade in the world.
Table 4: Cumulative number of PTAs in force, 1950-2010, notified and non-notified PTAs, by country group
Source: WTO Secretariat
Table 5: Average number of PTAs in force per country, 1950-2010, notified and non-notified PTAs, by country group
22
Note: In this figure the total number of PTAs is divided by the present number of countries in the respective groups.
Source: WTO Secretariat.
Table 6: RTAs currently in force (by year of entry into force), 1948 – 2020
Note: Notifications of RTAs: goods, services & accessions to an RTA are counted separately. The cumulative lines show the number of RTAs/notifications currently in force.
23 As stated, the year 1990 marks the beginning of a New Era regarding Global Trade and Commerce, thanks to a new global approach towards Trade: from those countries coming from the Communist block it created new opportunities that were impossible under their previous legal framework. From those developing countries the idea of engaging into an even more connected world was promising44, following the steps (in economic terms) of South Korea,
Taiwan and Singapore45.
During the 1990s, the EU (then EC) also played a very important role, expanding its borders towards the East, gaining new Member States, and expanding its markets, gaining new Trade Partners. The first step was to ratify Preferential Trade Agreements with the newborn East and Central European Countries, like Bulgaria, the Czech and Slovak Republics, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovenia; all of them countries that ended up being EU Member States with full rights. During these years, the EU also concluded a number of bilateral agreements with countries in the Middle East – (with Israel, Jordan, Lebanon and the Palestinian Authority) and North Africa (with Algeria, Egypt, Morocco and Tunisia) with the intention of forming an open trade area similar to the North American Free Trade Agreement (NAFTA)46. However, the Middle – East new EU Partners never moved from thar role: EU Trade Partner.
But the EU expansion was not the only remarkable event of the decade. On the other side of the Atlantic Ocean, a Trade Agreement covering the three northern countries of America was about to be created, aiming for having an impact both in the Continent and in the whole world: the North American Free Trade Agreement (“NAFTA”). This Agreement came into force on January 1st, 1994, creating one of the biggest trade blocks in the World at that moment47 and
remaining so until this day, between the United States of America, Canada and the United States of Mexico. NAFTA involved the elimination of restriction and/or barriers, the lowering of tariffs amongst their partners and the creation of several institutions, like an Investor – State Dispute Settlement Body48. This Agreement gave a major push for Agreements under the
44 Mukhopadhyay, K., Thomassin, P. J. Economic and Environmental Impact of Free Trade in East and South
East Asia. Springer Dordrecht Heidelberg London New York. 2010. Page 6.
45 World Bank Database.
46 World Trade Report 2011. Historical Background and Current Trends. WTO. 2010. Page 52.
47 Kennedy, K.C. North American Free Trade Agreement (NAFTA). IEL Intergovernmental Organizations.
Wolters Kluwer. 2010. Pp 44 – 62.
48 Menaker, A. J., Greenwald, B. K. International Litigation in Practice, The Rules, Practice and Jurisprudence
24 GATT framework, that changed the same year, being an example of the use of this mechanism by one of the major superpowers in the world: The United States of America.
There is another important event during this decade, this time legal rather than factual: the review of the General Agreement on Trade and Tariffs 1947 in 1994. New possibilities under the new text boosted the promotion of the already existent trend to expand the network of Trade Agreements worldwide, proving that multilateralism, mostly regionalism, and bilateralism were able to coexist in a modern economic world49. Given how the trading network was
expanding, it seemed (and proved) a necessity to provide a more suitable and specific framework for the new Agreements to come. As a result, the number of Free – Trade Agreements raised from 22 in 1990 to 83 in 2000, being 1995 the year with more notifications: 950.
However, NAFTA is not the only relevant Free – Trade Agreement from the Decade. In Latin America, they also joined forces creating a Regional Plurilateral Customs Union and Economic Integration Area called Southern Common Market (“MERCOSUR” in Spanish) out from the Treaty of Asunción in 1991 and the Protocol of Ouro Preto in 1994. This Customs Union have 4 members, 7 associated, 2 observers and 1 suspended51. This Economic block, as the EU or NAFTA, also involves several supra national Institutions created in order to administrate those sovereign competences transferred to the Institution52.
Another important outcome from these years in the creation of the biggest Customs Union in the African Continent. Finally, the Free – Trade Agreement trend made his way to Africa to promote liberalization of trade amongst those newborn countries eager to join the train for development. Despite its existence since 1981, The Common Market for Eastern and Southern Africa (“COMESA”), replaced the previous Preferential – Trade Agreement between several African nations in order to provide a more modern legal framework to the Region.
Moreover, there are several other Trading Blocs created through the 1990s that are worth mentioning, as a pure evidence of how the regionalist trend kept upwards under the GATT rules. The Association of Southeast Asian Nations ASEAN Free Trade Area (“AFTA”), a Regional Plurilateral Free Trade Agreement on Goods amongst 10 Southeast Asian countries;
49 Westhoff, F. K.; Yarbrough, B. V., Yarbrough, R. M. Preferential Trade Agreements and the GATT: Can
bilateralism and Multilateralism Coexist? KYKLOS, Vol. 47, No. 2. 1994. Pp 179 – 195.
50 WTO Database about RTA. 51 MERCOSUR Database. 52 Treaty of Asunción, Chapter II.
25 the Commonwealth of Independent States (“CIS”), a Plurilateral Regional Free Trade Agreement in Goods ratified by 11 former Soviet Republics in Eastern Europe, Central Asia and the Caucasus (including the Russian Federation); The Economic Community of West African States (“ECOWAS”), a Regional Customs Union between 15 West African Nations and The South Asian Preferential Trade Arrangement (“SAPTA”) a Regional Partial – Scope Agreement on Goods ratified by 7 nation of the Asian Sub – Continent and where both India and Pakistan are parties53.
As stated, this was a decade with an important emphasis on openness towards trade and on creating regional trade blocs, probably as a first step into a full global integration. However, also bilateral Agreements remained increasing, focusing on concrete investment and cash flows between economies with a comparative advantage, amongst other possibilities. As an outcome, the figures on world GDP and exports skyrocketed between 1990 and 1999, giving humankind a great leap forward towards wellness
Table 7: Growth in the volume of world merchandise exports and production by major product group, 1990-99
Annual percentage change
Source: WTO Secretariat, World Trade in 1999 – Overview. Page 17
Note: World merchandise production differs from world GDP in that it excludes services and construction.
Table 8: Growth in the volume of world merchandise trade by selected region, 1990-99
26
Annual percentage change
Source: WTO Secretariat, World Trade in 1999 – Overview. Page 17 Note: Excluding Mexico throughout this report.
Table 9: Growth in the value of world merchandise trade by region, 1999. Billion dollars and percentage
Source: WTO Secretariat, World Trade in 1999 – Overview. Page 18 Note: Excluding Mexico throughout this report
27
Table 10: Growth in the value of world trade in commercial services by selected region, 1999
Billion dollars and percentage
Source: WTO Secretariat, World Trade in 1999 – Overview. Page 18 Note: Excluding Mexico throughout this report
As it can be inferred from the data, Free Trade Agreements and Customs Union played an important role in order to promote that increase and the amount and value of goods during the 1990s helping the world to achieve better living conditions. However, the WTO lacked a Country that became a major player during these years: China.
The New Millennium: The Popular Republic of China joins the WTO.
On September 17th, 2001 negotiations with China were finally concluded and, 30 days later,
The Popular Republic of China (“China”) formally became a WTO member on December 11th,
2001. This case in particularly unique due to the fact that China had been one of the 23 original contracting parties to the General Agreement on Tariffs and Trade (GATT) in 1948. However, the application process for readmission to the multilateral trading system took 15 years from its submission in July 1986, making it easily the longest and most arduous accession negotiation in the history of the GATT/WTO. This is because its Civil War and the change of regime after the Communist Revolution, something that completely changed the concept of
28 “Republic of China” from “Popular Republic of China”54, dealing with nomenclature with
Taiwan until the present day. Since 2003, China has ratified 20 Free – Trade Agreements so far, either Bilateral or accessions to already existent Multilateral Free – Trade Areas.
Table 11: Free – Trade Agreements with China, 2003 – 2020
Source: WTO Regional Trade Agreements Database
As it will be studied later on, the impact of China within the WTO framework was enormous. An economy of 1.4B population incredibly growing in macroeconomic terms was about to start playing a major role in the World Trade System.
Trade trends from 2000 to 2009: a new boom in Free Trade Agreements.
As it can be inferred from Table 6, 2000 marked the beginning of the Golden Age of the notification and entrance into force of Free – Trade and Customs Union Agreements within the (now) WTO/GATT 1994 legal framework. Year 2000 started with 83 RTAs in force and 12 new notifications: 11 in goods and 1 in services. 2009 finished with 201 RTAs in force and 37 new notifications: 21 in goods and 16 in services55. The blossom during these years is more than remarkable, breaking new records every single year. Trends during these years remained
54 Gertler, J. L. What China’s WTO Accession Is All About. China and the WTO. World Bank and Oxford
University Press, 2004. Pp 21 – 22.
29 the same but somehow different. Regionalism remained as the main trend, but there was an increase in Bilateral Agreements during these years, rather than the conventional Multilateral Agreements created until the New Millenia. However, this could be due to the fact that those Plurilateral Trade Agreements already exist and/or the fact of that Bilateral Agreements provides also a more specific framework for Trading once big blocks already are in place. As it can be inferred from the following Table, the increase of GDP from 2000 to 2009 was more than remarkable, despite the beginning of the 2008 Crisis, that will be studied the next chapter.
Table 12: World merchandise exports, production and gross domestic product, 2000 – 2009
Source: WTO – International Trade Statistics 2011, Appendix: Historical Trends. Page 202
CHAPTER IV: FROM 2008 TO THE CURRENT DAY
From 2008 to 2016: Financial Crisis and World Trade
The 2008 financial crisis marked the end of an Era for the ratification of new Free Trade Agreements as it can be seen in Table 6. The outcomes from this crisis were not only economical, but also political and that would also have an impact over the approach to trade and its path towards liberal globalization. A new and strong anti – globalization movement and pro – economic protectionism started to grow all over the world, putting at risk all the previous liberal framework creating after years of hard negotiations. As a result, the number of notifications of new Free – Trade Agreements started to decrease, even though remaining high
30 if we have a complete look at the historical chart (Table 6), departing from 201 Regional Free – Trade Agreements in force to 303 while typing these words. It is of course an important increase in the numbers, but it also shows that the skyrocketing trend from the begging of the Decade cooled down, above all in new notifications: from 24 in 2010 (15 in Goods and 9 in Services) to 8 in 2019 (5 in Goods and 15 in Services)56. That is the data to pay attention to,
given the shrink on new notifications during the 2010s decade.
The Economic Data from 2008, 2009 and 2010 are frightening. The annual growth rate in global output fell from about 4 per cent during the period 2006 – 2007 to 1,6 per cent in 2008. The rate of growth in output dropped even further in 2009, to – 2 per cent, when 95 countries experienced declines in average per capita income. Unemployment rose sharply to 205 million people in 2009 from 178 million in 2007. These facts also involved an increase in vulnerability in household, above all in developing countries without a proper Social Security or Safety Net for Economic Recessions. Various estimates suggest that between 47 million and 84 million more people fell into, or were trapped in, extreme poverty because of this financial crisis57. This situation easily made its way into politics. A lot of new ideologies got into the debate as well as the comeback of some old ones. Even departing from those who defend the System, considered that a debate was needed58. From ethical considerations, to even more economic and “scientific” approaches blossomed in the mainstream ideology as never before59. Those
against the proliferation of the creation of new Free – Trade Areas were back and also bringing with them some new ideas regarding Ecologism and some new ways of providing the sources needed different from globalization and Free Trade Areas and Customs Unions60.
The Institutions of the World at stake: The Greek Crisis Case.
Despite the existence of a vast amount of different cases for taking as an example of what happened during the years from 2009 to 2015, The Greek Republic (“Greece”) best exemplifies in political terms the first outcome of the collapse of the financial system. Ruled by two centrist
56 WTO Regional Trade Agreements Database
57 UN – Report on the World Social Situation 2011. The Global Social Crisis. UN – New York. 2012. Pp. 1 – 3 58 As an example, former French President Nicolas Sarkozy calling for an overhaul of Capitalism.
59 Badcock, G. D., God and the Financial Crisis: Essays on Faith. Cambridge Scholar Publishing. 2016. Pp. 21 –
26.
60 Ciccaglione, B.; Strickner, A. Global Crises: The Need to Go Beyond Transnational Solidarity in the Struggle
Against the Expansion of Free Trade Agreements. Globalizations, Vol. 11, No. 1. Routledge Taylor and Francis Group. 2014 Pp. 148 – 153.
31 pro-system parties during years (Social – Democrats and Conservatives), after the economic crisis those parties had no longer the leverage and presence they used to have. As of 2010, Greece (and several southern European Countries) was undergoing a noticeable increase in the cost of borrowing money for their sovereign funds (due to perception of the Financial Market of a possible Greek default) and was receiving money from the EU and the IMF with the condition of applying important modifications and cuts in the Greek State and its National Budget61. Other European Countries, such as Portugal, Spain, Italy or Ireland were struggling as well, but not as much as Greece. As a result, a new wave of protests against Classical Liberal Institutions for Free – Trade, like Sovereign Debt, hard currencies (like Euro), Central Banks and the Banking System itself were flowing amongst Greek voters creating new Anti – System parties in the first democracy of World’s History. Since 2012 elections, the regime started to disappear: Syriza, a leftist anti – system party that came out from the protests during the early years of the crisis, made its way until the Parliament, being a government in waiting62. Finally, in 2015 they reached the Government. From that moment, a strong political view against Free Trade was reigning over one of European Union’s Member States. During 2015, relations between the EU (last – resort lender for Greece) and the Greek Government became as harsh as possible. The Greek Government even dared to threaten with defaulting on their obligations before abiding by the conditions established in the three – previous bail – outs. On July 2015, this government held a referendum on accepting EU conditions for lending money. Those conditions were rejected by Greek citizens by a 61% on that referendum, but the Government realized that had no option but to accept those conditions: defaulting was worse. Since that moment, the leftist movement against the incumbent institutions started to decline, and not only in Greece63. At this point, Greece is no longer under the control of the EU and aiming to thrive under their new free conditions. However, the anti – Free Trade movement was not over yet, Protectionism was about to come.
Trade Agreements between 2008 and 2016
Table 6 evidences the decrease of the ratification of new Free – Trade Agreements since 2009. Notifications of new Free – Trade Agreements under GATT dropped from 37 (21 in Goods 16
61 Coy, J. M. Impact of the Greece crisis on corporate exposure to the euro. Journal of International Business
Research. Vol. 12, Issue 1. Jordan Whitney Enterprises, Inc. 2013.
62 Ovenden, K. Syriza: Inside the Labyrinth. Pluto Press. London. 2015. Pp 21 – 65. 63 Costas, L. The Left Case Against the EU. Medford: Polity. 2018. Pp 83 – 113.
32 in Services), a historical maximum, to 22 (11 in Goods and 11 in Services) in 2015 and 5 accessions to already existing ones. The trend started to change, given that there are no new remarkable Free – Trade Areas or Customs Unions and most of the Agreements are Bilateral64. However, the worst was yet to come.
From 2016 to this day: A new wave of Protectionism?
Until this day, a remarkable number of events against Free – Trade took place in politics all over the World. From Brexit, to the election of Donald Trump and the rise of several far – right parties in Europe started to hit Globalization from the right side of the political spectrum, rather than from the left, as studied before. Now, the problems exposed by politicians were no longer the Classical Institutions, but other traders due to the new flows of investment and outsourcing. These means that the approach to post – crisis anger was no longer focused on the System by itself, but how others profited from it in detriment of others. A new wave of Nationalism and Protectionism over the developed world was taking place during these years. However, the developing world still believed in Globalization and Free Trade. As it can be inferred from the following Table, the so – called “Developed World” decreased its interest on Globalization and some countries remained skeptical about the concept, still being part of World Trade. Those countries profiting from outsourcing increased its interest on the concept, even not being big players on World Trade.
Table 13: Changes in perception towards globalization between 2008 and 2018
33
Source: Cabolis, C. Have the perceptions on globalization changed? IMD World Competitiveness Center. 2018
As an outcome, the number of new Free – Trade Agreements dropped severely since 2016. That year there were only 15 new notifications of Free – Trade Agreements (10 in Goods and 5 in Services) with no new accessions to already existent ones. 2017 had even less notifications: 13 (8 in Goods and 6 in Services) and 2 accessions. The following two years recorded 1990s numbers, evidencing the down trend in the creation of new Agreements. Year 2018 marked a 20 years record in this trend with only 7 new notifications (3 in Goods and 4 in Services), the same number of 1997. In the end, 2019 recorded 8 new notifications (5 in Goods and 3 in Services). Neither 2018 nor 2019 recorded a single accession to an already existent Free Trade Agreement. Also, it is remarkable the fact that the vast majority of this Agreements are Bilateral and they are ratified by the so – called “Developing Economies”, proving the lack of interest of the “Developed Economies” these years in ratifying new Agreements, but the EU, who is still agreeing with other economies around the world on a Bilateral basis.
34
Source: WTO Regional Trade Agreements Database.
Probably one of the most remarkable reality/fact is the approach of Donald Trump’s Administration, on behalf of the United States of America, towards International Trade. The very first step that his Administration did was the withdrawal of the USA from both the Trans-Pacific Partnership Agreement (“TPP”) and the Transatlantic Trade and Investment Partnership (“TTIP”). The United States of America, one of the major promotors of Free Trade across the World in Historical terms, made an U – Turn on its International Trade Policy65, not only involving the “last – minute” withdrawal from those Agreements, but also increasing tariffs on imports and litigating before the World Trade Organization Dispute Settlement Body (“WTO – DSU”). However, the USA is not the only Economy doing so, but it is the most palpable one. Other Governments with less leverage on International Affairs are also turning towards protectionism and avoiding imports and outsourcing. Countries like Brazil, Hungary, Poland, Turkey or Russia are some examples amongst the great variety of Protectionist Governments currently holding Power. This directly involved a new protectionist approach towards trade and its current trends, blocking new Agreements and delaying the accessions to the already existent ones and, thus, having an empirical impact on World’s economy due to this new wave of politics66. However, there is an event that absolutely represents the current stage of International Trade at this moment: The Trade War between the USA and China. This
65 Dovgal, O. A. and Serdiuk, H. V. Modern US Trade Protectionism and the Prospects for the Functioning of the
Integration Association of NAFTA. Problemi Ekonomiki. Vol. 37 No. 3. Research Centre for Industrial Problems of Development of NAS of Ukraine. 2018. Pp. 6 – 12.
66 Georgiadis, G. and Gräb, J. Growth, Real Exchange Rates and Trade Protectionism since the Financial Crisis.
35 relationship has always been difficult since China’s accession to WTO67, but now it will take
a step further.
The last shake to International Commerce: The Trade War Between the USA and China
Donald Trump arrived in the White House with a wide assortment of new measures against the policies drawn by his predecessors. With a Protectionist an Isolationist mind, somehow similar but different to 1920s USA policy, he is focused in one country in particular: China. As one of the pillars of his campaign’s speech, the relationship between USA and China should be overhauled. The main argument is the trade deficit for the United States with China, about 419.2 Billion USD in 201868 and that China was playing unfairly devaluating its currency, The Chinese Yuan. Those facts were put together with his anti – globalization policies to start raising tariffs against goods coming (not only) from China and taking measures within the WTO framework for Dispute Settlement.
In April 2018, the Trump administration introduced its first trade threats. In mid-June and late August followed the 25 percent tariff on $34 billion and $16 billion of Chinese exports, respectively. As China took retaliation by levying 25 percent tariff on $34 billion of U.S. exports on July 6 and another $16 billion on August 23, the U.S.-China trade war entered a more serious phase. The early impact of China’s tariffs on U.S. exports was likely to prove greater than that of U.S. tariffs on China’s exports: $50 billion represents 38 percent of U.S. exports to China, but only 10 percent of Chinese exports to the United States. Since spring 2018, the United States has imposed three rounds of Section 301 tariffs on imports from China. By late 2018, China had responded by imposing retaliatory tariff hikes on U.S. goods valued at $110 billion69. As of 2020 the situation remains complicated between these two countries, with ongoing disputes under the WTO – DSU and diplomatic ones in the purely political field. Moreover, other Customs Unions and Countries also suffered US Protectionism, even within NAFTA, recently modified by its Member States.
67 Loridas, K. United States-China trade war: signs of protectionism in a globalized economy? Suffolk
Transnational Law Review. Vol. 34, No 2. Suffolk University Law School. 2011. P. 403 – 423.
68 US – China Trade Facts. Office of the United States Trade Representative.
69 Steinbock, D. U.S. – China Trade War and Its Global Impacts. China quarterly of international strategic studies.
