chapter  2
25 Pages

2The Multi Fibre Arrangement

As is well known, the post-war international trade regime was shaped decisively by the failure to ratify the 1947 Havana Charter, which would have established the International Trade Organization (ITO) as the ‘third pillar’ of the Bretton Woods economic order. Instead, the GATT emerged as a ‘temporary’ legal instrument for both facilitating multilateral negotiations and monitoring the subsequent liberalization of trade. The problem with this, however, was that the GATT lacked the organizational structure necessary to ensure that the key principles of the post-war trading system – reciprocity and nondiscrimination – were applied consistently. The institutional deficiencies of the GATT also had a number of more specific consequences. The first of these was that it lacked a legally robust enforcement mechanism whereby contracting parties could be brought to account for treaty violations. The second consequence was that, while the GATT was relatively successful in securing liberalization through tariff cuts (at least for industrial goods), this was in a number of cases offset by a rapid increase in non-tariff barriers, including voluntary export restraints and other quantitative restrictions. The third and most substantive consequence of the GATT’s weak organizational structure was that the pattern of liberalization was highly skewed in favour of the developed countries, with the result that trade in areas of economic interest to developing countries (especially T&C but also agriculture) was effectively excluded from the postwar multilateral trading system. The ultimate outcome of this was that a parallel system of trade governance emerged in

these sectors, which was both highly discriminatory and nonreciprocal.