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World trade
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Background: the world trade system
Technological progress in the fields of communication and production are opening up borders between countries at an ever quicker pace and reducing the effectiveness of trade policies whose objective is to make a distinction between home and abroad. This is especially evident in the case of "transportable" services such as software development. Practically any location in the world could serve as a potential production site or sales market. Be it development, accounting, marketing, sales or production, the relocation of entire businesses to new sites or the outsourcing of individual units has become standard procedure today - depending on where wage costs are lowest, where well-qualified personnel is available or where revenues are biggest.
The globalisation of trade is also coming on apace: while the volume of global trade was 124 billion US dollars in 1948, that figure rose to around 20,670 billion US dollars in 2005.
In 2006 worldwide direct investments by foreign providers of capital were valued at 1,306 billion US dollars. Some 30 per cent of these investments (379 billion US dollars in 2006) are today going to developing and transition countries. Investments made by these countries alone now go to make up around 14 per cent of the global investment volume.
Problems developing countries face
The liberalisation of world trade has not led to the improvements most developing countries had hoped for. Small and poor developing countries are largely being excluded from the growth in trade. In order to become attractive for investors they are forced to make compromises in the global competition for business locations, which is why they set up free trade zones or lower taxes, for example. However, such measures mean that governments forfeit income which they urgently need to invest in education, health, social systems and infrastructure.
Often businesses in developing countries are not yet able to compete with foreign competitors. Because many countries have not yet been able to develop an effective export economy, opening up the market quickly does not help either - it is impossible to successfully establish an export economy without a certain amount of protection vis-à-vis outsiders. The strong fluctuations in global market prices, especially when it comes to commodities, make matters worse, jeopardising economic stability in many developing countries. And the subsidies paid in industrialised countries, especially in the agricultural sector, mean that many products from less developed regions do not stand a chance on the world market.
Rules for fair global trade
After the end of World War II the victorious powers tried to establish a new international financial, monetary and trade system. The World Bank and the International Monetary Fund (IMF) were set up to stabilise and finance this reconstruction. The International Trade Organisation (ITO) was charged with reviving world trade. The idea came to nothing, however. Instead, the General Agreement on Tariffs and Trade (GATT) was adopted. Its aim was to eliminate customs duties and fees in international trade and to establish a procedure for solving trade conflicts. Customs duties were reduced step by step in a total of eight rounds of negotiations lasting several years each; negotiations were also held on reducing subsidies.
During the last round of GATT negotiations, known as the Uruguay Round (1986 to 1994), agreements on services (GATS) and intellectual property (TRIPs) were added to those on trade in goods.
The World Trade Organization (WTO) was established as a successor organisation in 1995. It is based on the GATT and has become the most important forum on world trade. The WTO sets out rules on how goods, services and intellectual property are to be handled at international level. These rules affect practically every person in the world. The GATT remained as one of the most important agreements on international trade within the WTO and is being developed further.
The Doha Round
The WTO reaches its agreements in what are known as trade rounds. Negotiations on various topics are held in parallel and all negotiations are completed by one appointed date. The current negotiations are being termed the Doha Round. It was called by industrialised countries as a "development round", beginning after the WTO Ministerial Conference in Doha, Qatar in 2001 and was originally to be completed by 21 December 2004. However, on account of far-reaching differences between the interests of industrialised countries and those of developing countries, the round has yet to be completed after several unsuccessful negotiations. High agricultural export subsidies from Europe and the United States are the main contentious issue. It is currently not clear when negotiations will resume.
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