9. The system shields governments from narrow interests

The GATT-WTO system which evolved in the second half of the 20th

Century helps governments take a more balanced view of trade policy.

Governments are better-placed to defend themselves against lobbying

from narrow interest groups by focusing on trade-offs that are made in

the interests of everyone in the economy.

One of the lessons of the

protectionism that dominated the

early decades of the 20th Century

was the damage that can be caused

if narrow sectoral interests gain an

unbalanced share of political

influence. The result was

increasingly restrictive policy

which turned into a trade war that

no one won and everyone lost.

Governments are better placed

to ward off powerful lobbies

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Superficially, restricting imports looks like an effective way of

supporting an economic sector. But it biases the economy against other

sectors which shouldn’t be penalized – if you protect your clothing

industry, everyone else has to pay for more expensive clothes, which

puts pressure on wages in all sectors, for example.

Protectionism can also escalate as other countries retaliate by raising

their own trade barriers. That’s exactly what happened in the 1920s and

30s with disastrous effects. Even the sectors demanding protection

ended up losing.

Governments need to be armed against pressure from narrow interest

groups, and the WTO system can help.

The GATT-WTO system covers a wide range of sectors. So, if during a

GATT-WTO trade negotiation one pressure group lobbies its

government to be considered as a special case in need of protection, the

government can reject the protectionist pressure by arguing that it

needs a broad-ranging agreement that will benefit all sectors of the

economy. Governments do just that, regularly.

10. The system encourages good government

The rules reduce opportunities for corruption

Under WTO rules, once a commitment has been made to liberalize a

sector of trade, it is difficult to reverse. The rules also discourage a

range of unwise policies. For businesses, that means greater certainty

and clarity about trading conditions. For governments it can often

mean good discipline.

The rules include commitments not to backslide into unwise policies.

Protectionism in general is unwise because of the damage it causes

domestically and internationally, as we have already seen.

Particular types of trade barriers cause additional damage because they

provide opportunities for corruption and other forms of bad

government.

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One kind of trade barrier that the WTO’s rules try to tackle is the

quota, for example restricting imports or exports to no more than a

specific amount each year.

Because quotas limit supply, they artificially raise prices, creating

abnormally large profits (economists talk about “quota rent”). That

profit can be used to influence policies because more money is

available for lobbying.

It can also provide opportunities for corruption, for example in the

allocation of quotas among traders. There are plenty of cases where

that has happened around the world.

In other words, quotas are a particularly bad way of restricting trade.

Governments have agreed through the WTO’s rules that their use

should be discouraged.

Nevertheless, quotas of various types remain in use in most countries,

and governments argue strongly that they are needed. But they are

controlled by WTO agreements and there are commitments to reduce

or eliminate many of them, particularly in textiles.

Many other areas of the WTO’s agreements can also help reduce

corruption and bad government.

Transparency (such as making available to the public all information

on trade regulations), other aspects of “trade facilitation”, clearer

criteria for regulations dealing with the safety and standards of

products, and non-discrimination also help by reducing the scope for

arbitrary decision-making and cheating.

Quite often, governments use the WTO as a welcome external

constraint on their policies: “we can’t do this because it would violate

the WTO agreements”.

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TASKS

Task 1. Transcribe:

To focus, decade, superficial, to bias, disastrous, to reject, to argue,

broad-ranging, discipline, artificial, arbitrary, loose, to lose.

Task 2. Define the following terms:









GATT

trade-off

corruption

quota

Task 3. Match the following words with their definitions:

1. arbitrary

2. restrictive

3. superficial

4. to eliminate

5. to reject

6. to backslide

7. to ward off

8. to reverse

9. to escalate

10. to gain

11. to penalize

a) only outwardly apparent rather than genuine

or actual

b) prejudiced

c) tending to keep within certain often specified

limits

d) to inflict a handicap or disadvantage on

e) to acquire (something desirable); obtain

f) to refuse to accept

g) to lapse into bad habits

h) to turn aside or repel; to avert

i) to remove; to get rid of

j) to increase in extent, intensity, or magnitude

k) to change into something contrary

Find words in the text which collocate with the words of this exercise.

Task 4. Translate using the text:

1.

2.

3.

ограждать правительство от узконаправленных интересов

сформировать взвешенное мнение

ущерб, который может быть причинен в случае, если узкие

интересы одного сектора экономики приобретут

неправомочно большое политическое влияние

71

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

выиграть / проиграть войну

на первый взгляд, ...

настраивать против кого-л./чего-л.

оказывать давление

обостряться, усугубляться (о конфликте, положении)

отвечать (на агрессию, обиду и т. п.)

катастрофические последствия

Система ГАТТ-ВТО охватывает различные отрасли

экономики.

держать (кого-л.) на расстоянии

поощрять / не одобрять

способствовать / препятствовать развитию коррупции

распределение квот среди торговых компаний

обещания снизить или снять квоту

принятие предвзятых решений

внешнее ограничение

нарушать соглашения

Make up sentences with the new vocabulary.

Task 5. Correct mistakes in the following text:

The sistem sheelds governments of narow interests and helps to

give a more balanced view of trade politics. Governments are better

placed to defend themself against lobbing by focussing on trade-ofs

that is made in the interests of everione in the economy. Restricting

imports baises the economy in front of other sectors.

The sistem also encurages good government, as countrys make

comitments not to backslide towards unwise policies. The WTO

reduses opportunities for corruption by ileminating quotes which create

unnormally large profits. Clearer criterias for regulations dealing with

the safety and standards of products also help by redusing the scale for

arbitrary desision-making. So governments often use WTO as a

welcome external constraint to their policies.

Task 6. Be ready to answer the following questions:

1. What happens if narrow sectoral interests gain an unbalanced

share of political influence?

72

2. Restricting imports is an effective way of supporting a certain

economic sector, is it not?

3. What can trigger escalation of protectionism?

4. What can a government say if some pressure group lobbies it to

be considered as a special case?

5. How does the WTO system ensure that governments do not

backslide into unwise policies?

6. Can raising trade barriers escalate corruption?

7. Why does the WTO try to persuade governments to reduce or

eliminate quotas?

8. Why is the WTO a welcome constraint for some governments?

Task 7. Speaking: Act as a private eye and tell us a story of how you

managed to solve a mysterious crime.

Grammar Review

Exercises