A Multilateral Alternative - The WTO

• Author: Edwin Laurent
• Pages: 30-41

30 Understanding International Trade

Origins and Evolution

The conceptual origins of the World Trade Organization can be traced

back to 1947. The previous decade had witnessed a most severe global

economic depression followed by a world war of unprecedented horror and

devastation, for which the mercantilist policies that had characterised

international trading relations were partly to blame.

The leaders of the major non-communist nations who were behind this

initiative were determined to avoid repetition of the chain of disastrous events

that led to the war. This would be achieved by a new approach to economic

relations among States that would be based on rules. Negotiations were then

launched to create a regulator; the International Trade Organisation (ITO).

The ITO was expected to regulate trade, employment, restrictive business

practices, commodity agreements, investment and services and prevent

protectionism.

Whilst negotiations for the ITO were still ongoing, 23 countries decided

that they should reduce tariffs on a range of imports and committed themselves

not to raise them in the future i.e., to “bind” them. They called this the

General Agreement on Tariffs and Trade (GATT) and it came into force on

1st January 1948. Three months later, the ITO Charter was signed in Havana,

Cuba. It however made no further. In 1950 the USA, the world’s foremost

trade and economic power, announced that it would not be ratifying the

ITO’s Charter. It was the GATT (under an “interim ITO” that would manage

trade rules and whose principles would shape the evolution of the multilateral

system for the next half a century.

It was the ambitious mandate of the ITO that anticipated what eventually

became the World Trade Organization (WTO) on 1st January 1995. The

A MULTILATERAL ALTERNATIVE –

THE WTO

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