THE MULTILATERAL TRADING SYSTEMPAST, PRESENT AND FUTURE The World Trade Organization came into being in 1995.

One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. So while the WTO is still young, the multilateral trading system that was originally set up under GATT is well over 50 years old. The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The last round the 1986-94 Uruguay Round led to the WTOs creation. The negotiations did not end there. Some continued after the end of the Uruguay Round. In February 1997 an agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round. In the same year, 40 governments successfully concluded negotiations for tariff-free trade in information technology products, and 70 members concluded a financial services deal covering more than 95% of trade in banking, insurance, securities and financial information. In 2000, new talks started on agriculture and services. These have now been incorporated into a broader work programme, the Doha Development Agenda (DDA), launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.The agenda adds negotiations and other work on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, intellectual property, and a range of issues raised by developing countries as difficulties they face in implementing the present WTO agreements. WTO AGREEMENTS How can you ensure that trade is as fair as possible, and as free as is practical? By negotiating rules and abiding by them. The WTOs rules the agreements are the result of negotiations between the members. The current set were the outcome of the 1986-94 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the WTOs principal rule-book for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some 30,000 pages consisting of about 30 agreements and separate commitments (called schedules) made by individual members in specific areas such as lower customs duty rates and services marketopening. Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its

exports will be treated fairly and consistently in other countries markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments. GOODS It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the General Agreement spelt out important rules, particularly non-discrimination. Since 1995, the updated GATT has become the WTOs umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping. SERVICES Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods. These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how open those markets are. INTELLECTUAL PROPERTY The WTOs Intellectual Property Agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets intellectual property should be protected when trade is involved. DISPUTE SETTLEMENT The WTOs procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially-appointed independent experts are based on interpretations of the agreements and individual countries commitments. The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is borne out by the number of cases brought to the WTO more than 300 cases in ten years compared to the 300 disputes dealt with during the entire life of GATT (1947-94). TRADE POLICY REVIEW The Trade Policy Review Mechanisms purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat. DEVELOPING COUNTRIES DEVELOPMENT AND TRADE Over three-quarters of WTO members are developing or least developed countries. All WTO agreements contain special provision for them, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, provisions

requiring all WTO members to safeguard their trade interests, and support to help them build the infrastructure for WTO work, handle disputes, and implement technical standards. The 2001 Ministerial Conference in Doha set out tasks, including negotiations, for a wide range of issues concerning developing countries. Some people call the new negotiations the Doha Development Round. Before that, in 1997, a high-level meeting on trade initiatives and technical assistance for least-developed countries resulted in an integrated framework involving six intergovernmental agencies, to help least-developed countries increase their ability to trade, and some additional preferential market access agreements. A WTO Committee on Trade and Development, assisted by a Sub-Committee on Least-Developed Countries, looks at developing countries special needs. Its responsibility includes implementation of the agreements, technical cooperation, and the increased participation of developing countries in the global trading system. TECHNICAL ASSISTANCE AND TRAINING The WTO organizes hundreds of technical cooperation missions to developing countries annually. It holds on average three trade policy courses each year in Geneva for government officials. Regional seminars are held regularly in all regions of the world with a special emphasis on African countries. Training courses are also organized in Geneva for officials from countries in transition from central planning to market economies. The WTO has set up reference centres in over 100 trade ministries and regional organizations in capitals of developing and least-developed countries. These centres provide computers and internet access to enable ministry officials to keep abreast of events in the WTO through online access to the WTOs immense database of official documents and other material. Efforts are also being made to help countries that do not have permanent representatives in Geneva. Assisting developing countries in trade policy issues, through technical assistance and training programmes Cooperating with other international organizations THE ORGANIZATION FUNCTIONS predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies STRUCTURE The WTO has 153 members, accounting for almost 95% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTOs predecessor, the General Agreement on Tariffs and Trade (GATT). The WTOs top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council.

Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. SECRETARIAT The WTO Secretariat, based in Geneva, has around 625 sta_ and is headed by a directorMembers themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given. The Secretariats main duties are to supply technical support for the various councils and committees and the ministerial conferences, to provide technical assistance for developing countries, to analyze world trade, and to explain WTO is a to the public and media. The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. The annual budget is roughly 189 million Swiss francs. FACT FILE The WTO Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1986-94) Membership: 153 countries (on 23 July 2008) Budget: 189 million Swiss francs for 2009 Secretariat staff: 625 Head: Director-General, Pascal Lamy Functions: Administering WTO trade agreements Forum for trade negotiations Handling trade disputes Monitoring national trade policies Technical assistance and training for developing countries THE LIMITED BUT IMPORTANT ROLE OF THE WTO The World Trade Organization is in many ways similar to the splitting of the atom. Both have great potential for productivity and destruction. The limited role of the WTO is that it cannot save us from us. The WTO cannot establish new values or agendas for future trade officials. The scope and future of the WTO are limited by the vision, imagination, courage, and conscience of the trade community. The WTOs goal and function are to remove tariff and nontariff barriers and provide a mechanism for solving disputes between member states. However, the WTO has limits. Two of the forces forming these limits are consensus and expertise. Consensus is still the watchword for the WTO. Consensus has had a positive impact on restraining those who would turn the WTO into an economic sanctions-granting version of the United Nations, and consensus keeps the membership focused on the serious business of trade. Expertise and the recognition of the limits of the areas of expertise is another limiting force on the WTO. The General Agreement on Tariffs and Trade was also limited in addressing many areas of the global economy or addressed them only on a piecemeal basis. The old version of the GATT

created limited, carte agreements on government procurement and subsidies and engaged only a limited number of parties. The WTO has improved upon the GATT regime and now addresses agriculture, investment, services, and intellectual property. Not bad for only 50 years of work. The WTO is not like the old Ed Sullivan Show. It does not have an act to please every audience. Since its inception, efforts have been made to hijack the train of trade in the name of the environment, labor, global ethics, and sovereignty. Why are these new trade-come late lies coming to the WTO to pursue their agenda? For the same reason Willie Sutton robbed banks: cause thats where the money is. If these trade terrorists cannot gain control at the WTO, they would just as soon destroy it. The protests and massive disruptions of traffic in Seattle illustrated that these demonstrators are more interested in press coverage than meaningful debate and dialogue. Rules on international trade are highly developed, reflecting 50 years of GATT/WTO negotiations. In the multilateral trading system, the environment, labor, and competition policy are new factors that threaten to burden the WTO. Newer areas of trade should properly be studied and addressed at the WTO. But the goal of studying these issues should be to remove barriers, not create new trade barriers. Those who advocate linking trade and labor or the environment at the WTO are not interested in promoting world trade. They are interested in the leverage of trade to promote their often statist views. They seek not the spirit of the WTO but its perceived power and prestige. The answer the detractors seek is usually trade sanctions. According to them, we should not trade with states that have environmental or labor standards that differ from those of the United States or the European Union. They believe the WTO should establish minimum standards in these and other areas. States failing to meet these standards could be hit with either countervailing duties or trade sanctions. Coming up with new reasons to block trade is not the spirit or intent of the WTO. Denying access to the U.S. market because of our environmental or labor values opens the floodgates to a host of morality-driven trade restrictions, jeopardizing the multilateral trading framework. In addition, we must recognize that the trade principle of division of labor should apply to the choice of forum. Although well suited to handle trade disputes, the WTO is primarily a trade forum and lacks expertise in assessing environmental or labor standards. The United Nations should continue to address global environmental issues. Similarly, the International Labor Organization, a longstanding body of labor, states, and firms, is best suited to handle labor concerns. Issues such as competition policy and corporate conduct belong in the Organization for Economic Cooperation and Development, not the WTO. To allow the WTO to become saddled with these issues would be inefficient. Relying on nongovernmental organizations (NGOs) such as Greenpeace to set standards would also thwart global trade. Governments and environmental NGOs for whom trade is not a primary goal are unlikely to take a balanced perspective when evaluating trade and the environment. Dispute settlement is what the WTO does best. Trade disputes are brought before the WTO at approximately three times the rate that had typically been handled by the GATT. In the past four years, the United States has been the greatest proponent of this system. Approximately 40 cases have been brought by the United States seeking compliance with trade agreements and market access. The United States has had a good deal of success in this forum, winning a large majority of its cases. U.S. trade advocates have gained market access in areas ranging from agriculture to information technologies. In contrast, the WTOs predecessor, the GATT, often derided as the Gentlemans Agreement to Talk and Talk, failed to resolve many disputes and lacked credibility as a mechanism for resolving trade disputes. Parties to a GATT dispute could simply reject and block

acceptance of the panel report. The case could be reargued numerous times until the parties tired of it and an agreement was reached. The definition of winning and losing at the WTO departs from the traditional notion of victory. If the WTO supports the United States in a market-opening initiative, the United States wins. In other cases, victory may come from the pressure that follows initiation of an action. Many of our trading partners, mindful of the significance of a WTO decision and not willing to be viewed as protectionists, settle the disputes before the case is adjudicated. The newest WTO enforcement provisions have been useful in gaining favorable results short of the courthouse door of the approximately 120 disputes brought before the WTO, one quarter have been settled before WTO panel decisions. At the risk of sounding like a Zen master, I submit we can also win by losing at the WTO. The United States is the most often named defendant in WTO disputes. WTO panels provide an opportunity to test U.S. practices and laws to see if the United States is truly an open economy, dedicated to free trade. An examination of our policies by impartial panels of experts tests the validity of many laws and evaluates how we may be engaging in market-distorting activities while preaching free trade to others. Another limit of the WTO involves the limits of its power. Contrary to all those who bemoan the surrender of sovereignty to the WTO, we must bear in mind that the WTO does not have the power it is perceived as having. First and foremost, we must recognize that the WTO has no enforcement powers. The WTO cannot rewrite U.S. laws or levy taxes on violators. Leading constitutional law scholars have joined in debunking the notion of a powerful WTO. Former U.S. Court of Appeals Circuit Judge Robert H. Bork, the eminent U.S. constitutional law scholar, has concluded that the sovereignty issue is merely a scarecrow. Under our constitutional system, he says, No treaty or international agreement can bind the United States if it does not wish to be bound. Congress may at any time override such an agreement or any provision of it by statute (quoted in Kantor 1996). Professor John H. Jackson of Georgetown University School of Law, perhaps the nations leading GATT expert, joins in dismissing the sovereignty claims as ludicrous. Professor Jackson concludes that the WTO has no more real power than that which existed for the GATT under the previous agreements (Jackson 1994). The confusion over the power of the WTO system stems from a flawed understanding of U.S. power under the old GATT system. Traditionally, under the GATT states could veto decisions of dispute panels. Historically, this power of a state to block acceptance of a GATT ruling was popular when a decision went against the United States, but less so when the United States was the complaining party. As a leading plaintiff in WTO complaints, the United States has a substantial interest in seeing that the determinations of dispute settlement panels are accepted. The WTO dispute resolution mechanism is still based on the old GATT principles of negotiation, conciliation, mediation, and arbitration. If this mechanism is unsuccessful, an impartial panel hears the case and renders a finding. If the measure in question is found to be inconsistent with WTO rules, the offending state has the option of changing the WTO- inconsistent measure or offering trade compensation in the form of lower tariffs or increased market access to the aggrieved nation. In the unlikely event that the parties cannot come to any agreement at this stage, the complaining party may take retaliatory measures equal to the amount of the offending action against the offending nation. This action would have the approval of the WTO. The dispute settlement system of the WTO is intended to provide security and predictability to the entire multilateral trading system.

The dispute settlement mechanism has limits that have been challenged by WTO members. The U.S.-Japan film distribution dispute was not a pure market-access dispute. The United States attempted to challenge the antitrust laws and enforcement of these laws by Japan. The WTO panel correctly recognized that competition policy is not subject to WTO review. Most important, the WTO did not accept the claims of no violation and nullification asserted by the United States. Such an interpretation could leave a host of domestic laws subject to WTO challenge. It is significant to note that the parties did not appeal the decision and Japan announced plans to amend some of the challenged laws. In summary, the system worked. J apan slaws were scrutinized by the world, and the Japanese voluntarily decided to make changes. Each side gained. We have seen WTO disputes with the European Union spill over into street fights. This reflects another limit of the WTO.WTO dispute settlement procedures are designed to produce consensus, not additional disputes or trade tension. At any point in the dispute settlement process, the parties are free to mediate a resolution to the dispute. The only sanction under the WTO process is the suspension of WTO trade-agreement-based concessions against the offending country. Under the WTO agreement, this relief should be requested only as a last resort. Unfortunately, in recent disputes the United States has been forced to retaliate against valued trading partners. I am not an advocate of trade sanctions, but to preserve the integrity of the WTO both at home and abroad we have had to impose sanctions on the European Union. If we failed to impose sanctions, WTO critics around the world could rightly say that the GATT was back. To quote Napoleon, It is better to kill one thousand and appear harsh than to appear to be too lenient and then have to kill ten thousand as a result of that first mistake. WTO-sanctioned trade retaliation is a second-best option. The old time-honored GATT rule of consensus has not disappeared. Parties are bound to accept panel or appellate body reports. But bound does not mean the WTO can or will enforce the decision. Enforcement is a coercive act, and the United States has not agreed to surrender sovereignty to the WTO or any other body. One case often mentioned to illustrate that the WTO weakens U.S. sovereignty is the first case decided by a WTO panel a case involving U.S. Environmental Protection Agency rules on imported gasoline. This case, brought by Venezuela and Brazil, challenged EPA regulations on reformulated gasoline which require that imported fuel quality be pegged to a 1990 U.S. baseline standard rather than to individual refinery baselines. Venezuela asserted that the guidelines placed imports at a disadvantage in U.S. markets. The WTO panel agreed that the U.S. gasoline regulations discriminated against foreign refiners. In this early test of compliance with WTO reports, the EPA issued new pollution rules for imported gasoline. Pursuant to the new regulations, foreign refiners will have more flexibility in meeting the overall guidelines for reducing pollution-causing chemicals in conventional gasoline and will be allowed to maintain the same level of pollutants as U.S.-refined gas. The EPA did not change the U.S. rules on cleaner burning reformulated gas despite a determination by the WTO that the rules were similarly discriminatory. Because the reformulated gas rules expired at the end of 1997, the EPA had no need to rewrite the rules. The United States took 15 months to carry out that partial implementation. There was no threat to U.S. environmental standards in this case. Similar environmental concerns have been raised in the WTO shrimp-turtle dispute. Here, U.S. environmental regulations prohibited the importation of shrimp harvested without sea turtle excluder devices. The WTO found that the United States had the legal right to engage in

conservation measures to protect wildlife under Article XX of the GATT, the WTOs charter. But the WTO Dispute Panel concluded that the method employed was arbitrary, was not the least trade-restrictive, and constituted in effect an economic embargo. The shrimp-turtle case has changed the way we view environmental trade disputes at the WTO. The appellate review of the case opens the door for more environmental issues to be decided before the WTO and with more involvement by NGOs. Several NGOs filed amicus briefs with the WTO, further politicizing the dispute process. The WTO has been accused of weakening or threatening U.S. national security. Trade disputes with the European Union have been raised due to the Helms-Burton Act. The Helms-Burton law calls for a variety of sanctions against companies that have purchased property in Cuba that was stolen from its rightful pre-Castro owners. Even though the act is economically unsound and frankly does not enhance national security, a WTO panel would not undermine the act. Article XXI of the GATT acknowledges each members right to act as it deems necessary for the protection of its essential security interests in time of war or other international emergency. Helms-Burton is legal and would survive WTO review. Article XXI explicitly recognizes that countries can act unilaterally in the name of essential security. But it declines to define exactly what constitutes essential security. In an earlier dispute involving U.S. export restrictions on Czechoslovakia, the GATT determined that each country is the final judge on questions relating to its own security.WTO members have recognized this principle for over 35 years, and that a countrys security interest may be threatened by a potential as well as actual danger. Similarly, in 1985, our embargo on Nicaragua relied on the GATT security exception. The trade community accepted this and so did the International Court of Justice. The WTO cannot solve all of our ills. It cannot grow hair, bring about world peace, or whiten your smile. But the economic prosperity of a stable multilateral framework can improve the standards of living around the globe. 10 benefits of the WTO trading system

From the money in our pockets and the goods and services that we use, to a more peaceful worldthe WTO and the trading system offer a range of benefits, some well-known, others not so obvious
The 10 benefits 1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

The system helps to keep the peace Sales people are usually reluctant to fight their customers
This sounds like an exaggerated claim, and it would be wrong to make too much of it. Nevertheless, the system does contribute to international peace, and if we understand why, we have a clearer picture of what the system actually does.

Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces. History is littered with examples of trade disputes turning into war. One of the most vivid is the trade war of the 1930s when countries competed to raise trade barriers in order to protect domestic producers and retaliate against each others barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2. Two developments immediately after the Second World War helped to avoid a repeat of the pre-war trade tensions. In Europe, international cooperation developed in coal, and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was created. Both have proved successful, so much so that they are now considerably expandedone has become the European Union, the other the World Trade Organization (WTO). HOW DOES THIS WORK? Crudely put, sales people are usually reluctant to fight their customers. In other words, if trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely. Whats more, smoothly-flowing trade also helps people all over the world become better off. People who are more prosperous and contented are also less likely to fight. But that is not all. The GATT/WTO system is an important confidencebuilder.The trade wars in the 1930s are proof of how protectionism can easily plunge countries into a situation where no one wins and everyone loses. The short-sighted protectionist view is that defending particular sectors against imports is beneficial. But that view ignores how other countries are going to respond. The longer term reality is that one protectionist step by one country can easily lead to retaliation from other countries, a loss of confidence in freer trade, and a slide into serious economic trouble for allincluding the sectors that were originally protected. Everyone
loses. Confidence is the key to avoiding that kind of no-win scenario. When governments are confident that others will not raise their trade barriers, they will not be tempted to do the same. They will also be in a much better frame of mind to cooperate with each other. The WTO trading system plays a vital role in creating and reinforcing that confidence. Particularly important are negotiations that lead to agreement by consensus, and a focus on abiding by the rules

The system allows disputes to be handled Constructively

Countries in dispute always aim to conform with the agreements

As trade expands in volume, in the numbers of products traded, and in the numbers of countries and companies trading, there is a greater chance that disputes will arise. The WTO system helps resolve these disputes peacefully and constructively.

There could be a down side to trade liberalization and expansion. More trade means more opportunities for disputes to arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes. Before World War 2 that option was not available. After the war, the worlds community of trading nations negotiated trade rules which are now entrusted to the WTO. Those rules include an obligation for members to bring their disputes to the WTO and not to act unilaterally. When they bring disputes to the WTO, the WTOs procedure focuses their attention on the rules. Once a ruling has been made, countries concentrate on trying to comply with the rules, and perhaps later renegotiating the rulesnot on declaring war on each other. Around 300 disputes have been brought to the WTO since it was set up in 1995. Without a means of tackling these constructively and harmoniously, some could have led to more serious political conflict. The fact that the disputes are based on WTO agreements means that there is a clear basis for judging who is right or wrong. Once the judgment has been made, the agreements provide the focus for any further actions that need to be taken. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout the world, the GATT/WTOs expanding membership and the fact that countries have faith in the system to solve their differences. Sometimes the exchanges between the countries in conflict can be acrimonious, but they always aim to conform with the agreements and commitments that they themselves negotiated.

A system based on rules rather than power makes life easier for all
Smaller countries enjoy more bargaining power, and life is simpler for bigger countries The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners

Decisions in the WTO are made by consensus. The WTO agreements were negotiated by all members, were approved by consensus and were ratified in all members parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal right to challenge each other in the WTOs dispute settlement procedures. This makes life easier for all, in several different ways. Smaller countries can enjoy some increased bargaining power. Without a multilateral regime such as the WTOs system, the more powerful countries would be freer to impose their will unilaterally on their smaller trading partners. Smaller countries would have to deal with each of the major economic powers individually, and would be much less able to resist unwanted pressure. In addition, smaller countries can perform more effectively if they make use of the opportunities to form alliances and to pool resources. Several are already doing this. There are matching benefits for larger countries. The major economic powers can use the single forum of the WTO to negotiate with all or most of their trading partners at the same time. This makes

life much simpler for the bigger trading countries. The alternative would be continuous and complicated bilateral negotiations with dozens of countries simultaneously. And each country could end up with different conditions for trading with each of its trading partners, making life extremely complicated for its importers and exporters. The principle of non-discrimination built into the WTO agreements avoids that complexity. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. And these agreed rules give governments a clearer view of which trade policies are acceptable.

Freer trade cuts the cost of living

We are all consumers. The prices we pay for our food and clothing, our necessities and luxuries, and everything else in between, are affected by trade policies.

Protectionism is expensive: it raises prices. The WTOs global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living. There are plenty of studies showing just what the impacts of protectionism and of freer trade are. These are just a few figures: FOOD IS CHEAPER When you protect your agriculture, the cost of your food goes upby an estimated $1,500 per year for a family of four in the European Union; by the equivalent of a 51% tax on food in Japan (1995); by $3 billion per year added to US consumers grocery bills just to support sugar in one year (1988). Negotiating agricultural trade reform is a complex undertaking. Governments are still debating the roles agricultural policies play in a range of issues from food security to environmental protection. But WTO members are now reducing the subsidies and the trade barriers that are the worst offenders. And in