international trade system. 1. about the its 2. highly interdependent 3. gn-led 4. agreements &...
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International Trade System
International Trade System
1. About the ITS2. Highly Interdependent3. GN-Led4. Agreements & Institutions
About the ITSSystem of exchange of goods & services
between countriesBased around two types of trade1. Merchandise trade
Primary goods Raw materials: foods, fuels, fibers, minerals
Manufactured goods Finished goods
2. Service tradeDirect relationship: buyer <--> sellerForeign commercial presence¤
ITS is Highly Interdependent
Interdependence
5 countries accounted for 1/3 of world service trade in 2010
US, Germany UK, China, Japan http://stats.oecd.org/index.aspx?queryid=167 ;
http://www.wto.org/english/res_e/statis_e/its2012_e/its12_toc_e.htm
Goods & Serviceshttp://www.bbc.co.uk/news/business-22093304
1913 $20 B = $55,000/ day
2013 $18.3 T
= $50 B/day
FactorsWhy has trade has increased between countries?
Industrial RevolutionResource requirementTransportationMaterialismFree trade philosophy
Absolute versus comparative advantage¤
interdependenceGS- export-driven markets
countries whose markets are export-driven, in that they rely heavily on producing goods for export to earn much-needed foreign currencyResource requirement
GS- cash crop dependence, labor as comparative advantage
Reliance on GN to buy goods, source laborLack diversified market¤
GN-Led ITS
GN Domination Factors
Industrial RevolutionEuropean and American advantageEuropean colonization map
http://qed.princeton.edu/index.php/User:Student/Empires_and_Patterns_of_World_Trade_1880-1914
GN Domination Factors
Post –WWIProtectionist policies
Post-WWIIUS economic hegemony in ‘free world’
Encourage global capitalismMNC investments in alliesFoster trade ties
Neoliberal approach criticizedUneven trade~25% of countries dominate
world trade¤
GN Domination FactorsEEs brought into loop
Finance capitalExpand marketsCheap labor
Rest of GS lags¤
Agreements & Institutions
•GATT WTO •Regional Trade Organizations
GATTGeneral Agreement on Tariffs & Trade (GATT)Est. 1947
ITO proposal - Havana CharterNot ratified by U.S.Principle of Nondiscrimination through
'normal trade relations’Same treatment
All members All goods
¤
GATT Trade RoundsGeneva through Dillon
1947-1961 First 5 roundsFocus: Reduce tariffsReduced by 73%
Kennedy through Uruguay1964-1994Non-tariff barriersUruguay create WTO
Pressure on US as hegemonSimilar to IMS situation with US as Central BankerJapan, Germany, then also European Union bloc
¤
GATT WTO
World Trade Organization (1995) 3:22
Formal organizationDirector GeneralDispute Settlement BodyWTO structure159 members
China, RussiaObjective: open tradeChallenges: eliminate non-tariff barriers
Doha- 20011st WTO Round Still ongoing
¤
Roberto Azevêdo, 2013-2017
WTO Challenges: Tariffs & Quotas
Traditional trade regulation tacticsLess likely to useCountries respect WTO dispute rulingsCountries adopt covert policies
All guilty of this¤
WTO Challenges: NTBsNontariff Barriers (NTBs)
Set standardsEnvironmentSafety
LicensesDomestic content rulesJoint venture requirementsSecurity
¤
WTO Challenges: NTBs (cont.)
SubsidiesAgricultureIndustry
Automaker bailoutsSolar panels¤
Country
Market price
Subsidy
Farmer’s income
US $2 $1 $3
Brazil $2 $0 $2
http://www.worldbank.org/en/publication/global-economic-prospects/policy/structural
Sugar subsidies video, article
SubsidiesSugar Subsidies; John
Oliver on Sugar Subsidies
¤
WTO Challenges: New IssuesServiceIntellectual Property Rights (IPRs)
PatentsIndia
TrademarksCopyrights
WTO Challenges: New Issues (cont.)
Environmental issues Standards legitimate?
Labor issuesGS comparative advantage
RegionalismEU, NAFTA, etc.
Electronic commerceDispute Resolution Mechanism
Create body with formal process and power¤
DisputesTrade wars much more common
EU- US ‘Banana War’1991 (Pre-WTO) to 2009
EU- US ‘Beef War’ Hormones v. mad cows
Russia –US Steel tariffs
China-USSolar panel subsidiesEurope banned US apples. Their
potential carcinogen risk is too high, the European FSA says.
¤
WTO Dispute ResolutionUse WTO to file complaints
474 dispute cases filed since 1995WTO has power to enforce decisions
SanctionsFinesAntigua and Barbuda v. U.S. DS 285
http://www.bbc.co.uk/news/technology-21193634 http://www.forbes.com/sites/markgibbs/2013/01/29/pirates-of-the-caribbean-antigua-and-barbuda-turn-from-internet-gambling-to-legalized-piracy/
¤
WTO Dispute Resolution: Antigua Case
Why is Antigua upset with the US?Online gambling as IP piracyUS wants to stop int’l gambling by US citizensLots of $ at stake
What did the WTO rule in 2013? WTO ruled in favor of Antigua
US violated trade treatiesGave US 1 year to comply
On 1/28/14- WTO allowed Antigua to suspend US copyrights on all IP for non-compliance
Why did the WTO make this decision?Will the US comply?
Free Trade Agreement (FTA) Types
FTAs under IGOsGlobal: WTOWTO consensus articleRegional
Promote intra-tradeECSC as modelTrans-Pacific Partnership
Proposed o12 members
Anti-China FTA?¤
Free Trade Agreement (FTA) Types
WTO consensus articlesWTO's Consensus PrincipleIndia and US Reach WTO Breakthrough over
Food¤
Free Trade Agreement (FTA) Types (cont.)
BilateralUS FTAs- 20 countriesEU FTAs
MultilateralNAFTA, CAFTA-DRLomé¤
http://en.wikipedia.org/wiki/File:African,_Caribbean_and_Pacific_Group_of_States_member_nations_map.svg
EU
ASEAN
Mercosur
SADC
SAARC
Regional Economic IGOs
ECOWAS EAC
Benefits of FTAs
How do you benefit from an FTA between US-EU?
Cheaper shoesCheaper drugsEU cars cheaper, more available Dairy availabilityStandardize products
Headlights issueGas exports to EU
¤
Fair Trade
Fair TradeObjective: livable wage, invest in community
Trade over aidNGOs certify
Req. differMonitoring issue
Fair trade ≠ violate free tradeConsumer demandInt’l protocol to end child slave laborProtect source for consistent flavorMNCs have leverageFair trade agriculture demand v. handicrafts
Mass production ¤
4 Most Important ITS Things
1. About the ITS2. The ITS is Highly Interdependent3. The ITS is GN-Led4. About the Agreements & Institutions5. Fair trade