The Move to Freer Trade

Trade Agreements

A Move to Freer Trade• Post-war Re-building (1946). A international

financial structure was needed to deal re-building• International Monetary Fund (IMF), the World

Bank, and the General Agreement on Tariffs and Trade (GATT) were born.

• GATT (1947-1993) was a multilateral trade treaty that granted “most favoured nation” status to its member countries (153). • set of rules agreed upon by nations• Goal was to reduce tariffs on the trade of goods• 9 major round of negotiations (conferences)

A Move to Freer Trade• Favoured Nation means new members trading with

Canada, for example, would get the same trade terms Canada got on its “best” deal.

• World Trade Organization (WTO 1995). Replaced GATT. WTO is a treaty and an organization that:• Regulates trade between countries• Negotiates and formalizes trade agreements• Dispute resolution (Panels, Arbitrators)• Deals with goods, services and intellectual

property rights• 153 member countries, Canada & USA• Covers 97% of the world’s purchasing power

A Move towards Freer Trade• Canada-US Free Trade Agreement (1987). Is a bilateral trade treaty

between Canada and USA• Goal was to reduce tariffs on the trade of goods, services

and intellectual property• Established world largest free trade area, included in NAFTA• Effective procedures for dispute resolution

• Asia-Pacific Economic Cooperation (APEC 1989)• 21 member countries including Asia, Australia, Canada, USA• Goal economic cooperation (reduce transaction costs; visa-

free travel zone for business)• Free trade area being considered• Raise living & Educational Standards• 57% of the world’s purchasing power

A Move towards Freer Trade• European Union (1957). Is a multilateral treaty that

created a union of state (27 European states)• Goal economic stability free from war• Has its own parliament and judicial system• free movement of people, goods, services, and

capital. Passport controls have been abolished• Maintains common trade policies• A monetary union, the eurozone, was

established in 1999 and is currently composed of 17 member states.

• 20% of the world’s purchasing power

A Move towards Freer Trade• North American Free Trade Agreement (1994) - A

trilateral trade agreement between Canada-USA-Mexico

• Signed by Prime Minister Brian Mulroney, Mexican President Carlos Salinas, and U.S. President George H.W. Bush

• formed the world's largest free trade area• Objective: – Elimination of tariffs (duty) on goods and services traded

between its member countries– promote conditions of fair competition– increase investment opportunities

Agreement Provisions• Government Procurement. NAFTA gives

immediate and access to Government contracts

• Land Transportation. NAFTA opens the Mexico market to Canadian motor carriers.

• Safeguards. NAFTA provides protection for domestic firms and workers against surges in imports. NAFTA permits the Canada to reimpose original tariff rates for up to 3 years - or 4 years for certain sensitive goods.

Agreement Provisions

• Standards. Countries can adopt standards that protection human and environmental health.

• Business Travel. NAFTA guarantees access to US and Mexican markets by business persons.

• Dispute Resolution and Trade Remedies. Chapter 19 – Anti Dumping - Bi-national panel settles

disputes. Ruling are binding (e.g. lumber). Chapter 20 – General Disputes (interpretation and

application of NAFTA) settle through consultation Chapter 11 – Individual and corporations can sue

governments for compensation due to adverse effects. Settled by arbitration or host country's judicial system