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The Short But Significant Life of The International Trade Organization: Lessons For Our Time

Daniel Drache

CSGR Working Paper No. 62/00

December 2000




Along with the World Bank and the IMF, the International Trade Organization (ITO) formed the centrepiece of new kind of international organization in the late 40s. At the time, what was particularly novel about the Havana Charter was that it was not simply or mainly a trade organization like the WTO, its latter day descendent. At its core, the countries of the world rejected the idea that it was possible to maintain a firewall between trade, development, employment standards and domestic policy. Its most distinctive feature was the integration of an ambitious and successful program to reduce traditional trade barriers, with a wide-angled agreement that addressed investment, employment standards, development, business monopolies and the like. It pioneered the idea that trade disputes had to be settled by consultation and mediation rather than with legal clout. Further it established an institutional linkage between trade and labour standards that would effect a major advance in global governance. Finally it embedded the full employment obligation, along with "a commitment to free markets" as the cornerstone of multilateralism.

Despite these accomplishments, the US Congress refused to ratify the Havana Charter even though it had signed it. As a direct consequence, the ITO's collapse represented a significant closure of the full employment era internationally. In the end, it's demise made possible the rapid return of the free trade canon that increasingly, would impose its authority and ideology on all international organizations and on the practice of multilateralism. As this essay concludes, its history compelling because whatever its apparent shortcomings, governments, economists and ordinary people demanded that trade, employment goals and developmental needs should reinforce each other in the world trading system.

Keywords: global trade, governance, free trade, labour standards, postwar consensus and trade liberalization.

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