translated from Spanish: Changes in international trade on the offing

The creation in 1994 of the World Trade Organization, WTO, gave rise to the hope that international trade would forever be governed by universally accepted rules, thus eliminating centuries of history in which economic, commercial or financial relations between states were governed only by the law of the strongest. The rules and agreements with which the WTO was born were not perfect, but they had the virtue of being accepted and eventually respected by all parties and, furthermore, because mechanisms were established, equally consensual, on the basis of which to resolve trade disputes that arose between states. The strong idea that presided over all the WTO’s founding agreements was that free trade was the goal towards which all the efforts of the international community should be directed, and that this policy would enable everyone to achieve higher levels of production, productivity and well-being.
But after more than 25 years of existence of this international body, there is reason to think that things have not moved along the optimistic path that was envisaged in 1994. On the one hand, developed countries have chosen to prioritize bilateral or multilateral trade agreements – between themselves or with developing countries – outside the institutional framework of the WTO. This allows them to generate a set of trade rules that are only valid among the signatory countries, and that are much more favourable to the interests of developed countries and large transnational companies than any rule that was generated within the framework of the WTO. Although the WTO has never been an organisation that favours protectionism, it has been much slower in its decision-making process, not least because each country has one vote there and decision-making requires unanimity, thereby diluting the weight of the great powers. The devastating advance of economic liberalism has therefore essentially been on the road to free trade agreements, which every day include, in addition to strictly commercial matters, a series of commitments on labour, the environment, finance, investments, government procurement, etc., which imposes on developing countries a network of globalising relations from which it is difficult to get out.
In addition to this search for rules outside the WTO, there has been growing social dissatisfaction in developing countries, and even in the developed countries themselves, with the results of this type of globalization, as inequalities and income concentration have deepened – between and within countries – together with an increase in marginalization and poverty in vast sectors of the wto. contemporary humanity.
In addition to the above, developed countries, with the United States at the forefront, allow themselves economic actions and decisions that are outside the spirit and letter of the WTO agreements and ftas.  Thus, for example, the US allowed itself in 2018 to impose higher tariffs on hundreds of products from China. The United States, together with European and Asian countries, also arrogates to itself the right to impose economic and commercial sanctions on countries such as Belarus, Iran, Venezuela, Cuba and even China, based on criticism of the prevailing policy in each of these countries, fundamentally those related to respect for human rights and the policy regarding the development of nuclear energy. While such criticisms may be true, the view that trade relations should be based on universally accepted standards is being abandoned. If each country arrogates to itself the right to establish and promote trade sanctions on the basis of its particular political criteria, then the whole situation goes back to the situation before 1994.
Furthermore, today, the G20 countries are preparing to adopt rules to force large companies to be taxed in the countries where their profits are generated and for that taxation to be at least 15%. A measure of this nature, being undoubtedly positive, will involve, first of all, changes in the universally accepted accounting systems, since it is not easy to identify how much of a company’s profits are generated in a given territory.  The contracting of credits and the purchase of inputs, technologies and consultancies with related companies – with the corresponding accounting of high transfer pricesa and intra-business convenience – nowadays they allow companies to locate their profits in the country with the lowest tax rates, which always turn out to be, obviously, tax havens. The same goes for the selling prices of what is produced – which become lower than in the market – when that is done between related companies.
How to solve these problems?
Will it be possible to establish maximum prices to be accounted for for interest payments, purchases of inputs and raw materials, and for payments for technology, brands and consultancies?
Will it be possible to establish minimum reference prices for the purposes of the international sale of what has been produced?
Will it be possible to regulate the interest rates that can be charged between related companies, so that they are related to those prevailing in the international financial system?
Will the companies concerned not consider that this reduces their expectations of profits, and therefore can they sue the countries that proceed in that regard, in accordance with the treaties currently in force on the promotion and protection of investments?
If there is sufficient political will, we can overcome all these difficulties and create a situation that would be favourable to the interests of both developed and developing countries, since companies that currently make their profits appear in tax havens where they are not taxed or are taxed very little in the countries where productive activity is carried out. A new generation of agreements would be needed that distance themselves from the liberal conception that prevails today in the vast network of free trade agreements that prevail throughout the globe. I welcome all that, if it is true, but all this will mean substantially modifying the agreements on the protection and promotion of investments currently in force, and certainly not continuing to sign others of the same nature.
 
The content of this opinion column is the sole responsibility of its author, and does not necessarily reflect the editorial line or position of El Mostrador.

Original source in Spanish

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