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Questions and Answers
What are the main reasons for trade restrictions according to economic theories?
What are the main reasons for trade restrictions according to economic theories?
Which organization is primarily responsible for regulating international trade agreements?
Which organization is primarily responsible for regulating international trade agreements?
What is a common critique of free trade regarding income inequality?
What is a common critique of free trade regarding income inequality?
Which perspective emphasizes the need for self-sufficiency for defense purposes in trade policies?
Which perspective emphasizes the need for self-sufficiency for defense purposes in trade policies?
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How does free trade theoretically contribute to environmental concerns?
How does free trade theoretically contribute to environmental concerns?
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In terms of impact on the middle class, what is a potential negative effect of increased free trade?
In terms of impact on the middle class, what is a potential negative effect of increased free trade?
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What is one argument for the promotion of trade in an economic context?
What is one argument for the promotion of trade in an economic context?
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What theoretical perspective suggests trade can lead to the diffusion of technology?
What theoretical perspective suggests trade can lead to the diffusion of technology?
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What has been a major institutional challenge for the WTO due to increased membership?
What has been a major institutional challenge for the WTO due to increased membership?
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How has trade liberalization impacted wages according to recent research?
How has trade liberalization impacted wages according to recent research?
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What is the main philosophical argument presented by the WTO regarding trade and the environment?
What is the main philosophical argument presented by the WTO regarding trade and the environment?
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What political climate has contributed to the backlash against free trade?
What political climate has contributed to the backlash against free trade?
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What does the Elephant Chart illustrate regarding income inequality?
What does the Elephant Chart illustrate regarding income inequality?
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What issue has the WTO faced in relation to its broad remit since 1995?
What issue has the WTO faced in relation to its broad remit since 1995?
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What impact did recent political policies, such as those under Trump and Biden, have on trade debates?
What impact did recent political policies, such as those under Trump and Biden, have on trade debates?
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What recent data has suggested about trade trends?
What recent data has suggested about trade trends?
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What was one significant economic effect of the Smoot-Hawley Act of 1930?
What was one significant economic effect of the Smoot-Hawley Act of 1930?
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What role did the Reciprocal Trade Agreements Act of 1934 play in U.S. trade policy?
What role did the Reciprocal Trade Agreements Act of 1934 play in U.S. trade policy?
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Which of the following best describes the main function of GATT established in 1947?
Which of the following best describes the main function of GATT established in 1947?
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After WWII, what percentage of global trade did the U.S. account for by 1950?
After WWII, what percentage of global trade did the U.S. account for by 1950?
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Which of the following factors contributed to the growth of the global trade regime since 1945?
Which of the following factors contributed to the growth of the global trade regime since 1945?
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What was a notable trend in European trade policy during the 1870s due to competition from American products?
What was a notable trend in European trade policy during the 1870s due to competition from American products?
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How did the U.S. influence international trade rules after WWII?
How did the U.S. influence international trade rules after WWII?
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Which component is NOT part of the global trade regime developed since 1945?
Which component is NOT part of the global trade regime developed since 1945?
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Study Notes
The Evolution of the Global Trade Regime
- Trade is the exchange of one commodity for another. International trade happens when goods or services cross national borders.
- Governments often restrict trade across national borders.
- Key trade concepts include tariffs (taxes on goods entering a market), quotas (quantity restrictions on goods), and subsidies (support for a sector or industry).
- Theoretical perspectives on trade include liberal (positive sum game, comparative advantage), mercantilist (infant industry, national security), and critiques (environmentalists, feminists).
Today's Lecture
- Topics included free trade, protectionism, GATT, and WTO.
Trade
- Trade is the exchange of one commodity for another.
- International trade involves exchanging goods or services across national borders.
- Governments often restrict trade across borders.
Key Concepts
- Tariffs - Taxes or duties imposed on goods entering a market.
- Quotas - Quantity restrictions on goods.
- Subsidies - Support given to a particular sector or industry (e.g., cash grants, tax reductions).
Theoretical Perspectives
- Liberals - Believe trade is a positive sum game, emphasizing comparative advantage.
- Mercantilists - Focus on infant industries and national security.
- Critics - Environmentalists and feminists argue about potential negative consequences of trade.
Campaign for Free Trade
- Originated in Britain during the mid-19th century.
- Featured a brief period of free trade between France and Britain (1830s-1870s), primarily benefiting the British economy.
- Continued as a policy for British governments until after World War I.
Protectionism
- The US emerged as a powerful economy in the 1850s, first in agriculture and later in manufacturing.
- American producers could undercut European prices.
- European governments responded with tariffs in the 1870s.
- Germany adopted protectionist policies, pushing other European nations to follow suit.
Reciprocal Trade Agreements Act (1934)
- The US became the world's largest trading nation after World War I.
- The Smoot-Hawley Act (1930) raised tariffs, causing a major decline in world trade (66% decline).
- The RTAA (1934) allowed the president to lower tariffs, significantly shifting international trade policy towards greater liberalization.
Post-WWII
- The US became a dominant force in international monetary payments, trade, and foreign investment.
- US accounted for almost 17% of global trade by 1950.
- International institutions and structures reflected US attitudes about international trade.
Global Trade Regime
- Two major developments since 1945 include growth in world trade volume and growth in world trade governance.
- The global trade regime is composed of three components: trade, national regulations, and international agreements.
GATT
- The General Agreement on Tariffs and Trade (GATT) was established in 1947.
- It was a rules-based system for international trade established to liberalize trade.
- GATT operated on a set of rules (e.g., Most-Favored Nation Principle).
Trade Negotiations
- GATT initiated several significant rounds of multilateral trade negotiations, including Annecy (1949), Torquay (1951), Geneva (1956), Dillon (1960-61), Kennedy (1964-67), Tokyo (1973-79), Uruguay (1986-94), and Doha (2001).
- Information on round details (dates, participating countries) is available in the text.
The Kennedy Round
- First major renegotiation after the establishment of GATT.
- Led to larger tariff reductions, an anti-dumping code, and an international grain agreement.
Dumping
- Dumping is selling a product in another country for less than it's sold in the exporting country.
- GATT rules compare export and import prices to deter dumping.
- Cases of dumping increased.
Tokyo Round
- First round that considered non-tariff barriers.
- Established new codes of behavior for individuals, integrating national trade codes into an effective international trade rule system.
The Uruguay Round (1986-1994)
- Four key categories were addressed: market access, reforms to GATT rules, institutional changes, and services, intellectual property, and investment.
Uruguay Agreements
- Established the World Trade Organization (WTO) and the Dispute Settlement Understanding.
- Consolidated trade agreements into a single legal framework.
- Led to greater trade regime integration.
- Included rules on trade, agriculture, intellectual property, and other trade barriers.
Developing Countries
- Developing countries have historically played a marginal role in international trade and governance.
- Many pursue domestic policies to foster indigenous industries (self-sufficiency).
- Until the Uruguay Round, developing countries had limited roles in GATT.
- The single understanding principle gave greater power and more favorable agreements to developing countries (especially in agriculture and textiles).
Why was Uruguay so important?
- The trading system was governed by explicit rules instead of power, reducing the role of trade power in the system.
- A formal dispute settlement mechanism was established.
- Development of the WTO enabled integrated the developing world into the global trade structure.
WTO
- A formal organization with binding rules for global trade, continuing the consensual approach.
- Operates on the same legal basis as the IMF and World Bank but has a smaller staff organization.
- Work is conducted in smaller committees, guaranteeing legal equality between nations. Each member has an equal vote.
GATT to WTO
- World trade increased significantly between 1950-2000.
- GATT was a series of negotiating rounds, establishing a forum for lower tariffs and quotas.
Main Structure of WTO
- Features a Ministerial Conference (every two years), a General Council (with dispute settlement powers), three councils (goods, services, intellectual property), and committees and working groups.
WTO in 2024
- The WTO consists of 166 members (last member joined August 2024).
- Some countries are still negotiating to join the WTO.
What Does the WTO Do?
- Negotiates trade rules.
- Monitors trade relations (implementation, monitoring trade rules).
- Resolves trade disputes (dispute settlement).
- Builds trade capacity (capacity building).
- Current initiatives include gender equality, sustainability, plastics pollution, addressing Covid-19 vaccines.
Single Undertaking
- Countries committed to accepting the entire set of outcomes of a negotiating round instead of picking and choosing (cherry-picking).
- Gave members clarity about obligations.
- More difficult to reach a final unified deal.
Dispute Settlement
- Complainant countries can request dispute settlement panels under specific circumstances.
- Countries are expected to implement rulings.
- Unilateral actions are limited, as disputes are determined under WTO guidelines.
- Litigation costs are a major challenge for developing countries.
- Some powerful states sometimes choose to ignore dispute settlement outcomes.
Dispute Settlement Case Study
- Venezuela and Brazil have raised disputes about gas chemical standards with the US.
Merchandise Exports/Imports (Data)
- Data on trade per capita and trade shares are available, displaying trade patterns by country and area.
Politics and the WTO
- International political pressures (e.g., Brexit, Trump policies re China) influence WTO operations/negotiations.
China and World Trade
- China's trade practices and policies have been a source of contention.
- US initiated a trade war in 2018 due to China's trade imbalances, property rights, and investment practices, resulting in tariffs.
- The Biden administration continued several trade sanctions against China.
Critics of the WTO
- WTO criticized for not treating rich and poor countries equally.
- Some academics argue that the WTO's embrace of neo-liberalism and free trade leads to inequalities.
- WTO criticism focuses on labor standards, environmental damage, and potential for creating unequal outcomes.
Critics of Free Trade
- Increased protectionist measures following the Great Recession.
- Covid-19 raised vulnerabilities in supply chains, especially regarding China.
- Discussions about 'reshoring' and 'technonationalism' emerged.
- Negative impacts on developing countries post-pandemic.
The Elephant Chart
- Illustrates the changing global income distribution between 1988-2008.
What about workers' rights?
- The NYT noted concerns about working conditions of Chinese workers in relation to the WTO.
References
- A variety of articles and reports are listed as sources of information related to the topic.
Cancun Talks
- Negotiations on trade, agriculture, and other matters within the WTO collapsed in late 2003.
Geneva 2004
- Geneva talks produced a framework agreement on opening global trade.
- US, EU, Japan, and Brazil agreed to reduce export/agricultural subsidies and lower tariff barriers.
- Developing nations gained the right to protect key industries.
Paris, Hong Kong, Geneva, Potsdam
- Multiple attempts to reach agreements for reductions in export subsidies, specifically agricultural subsidies, proved challenging.
- Factors like congressional action and other negotiations played roles in the ongoing situation
Doha
- Doha Development Agenda: A set of WTO trade negotiations focused on development issues, launched in 2001, with specific targets (Doha Agri Targets).
- The Doha agreement emphasized agriculture, but achieving comprehensive outcomes has proven challenging.
- Doha has been criticized for a lack of progress on its targets.
Doha Commitments
- Agreements on issues crucial to developing countries (agriculture, textiles, subsidies, technical barriers).
- Acknowledgement of market access and reduction/elimination of export subsidies.
Nairobi 2015
- WTO achieved commitments for agriculture, cotton, and issues related to least-developed countries.
- Agreements included abolishing export subsidies for certain farm exports, decisions on public stockholding and extended waivers for services.
What Happens if Doha Fails?
- Possible consequences of trade talks breakdown include impacts on global trade dynamics and development.
World Trade Deals Today
- Recent information about the Doha Development Agenda, updated information, and related reports are shared.
Conclusion
- The WTO remains an important international organization, despite its modest beginnings.
- Its institutional structure is prominent in global trade.
- It operates on the consensual rules-based framework.
Article Reviews
- Summaries of key articles discussing WTO legitimacy, increase in trade, and the impacts of free trade agreements.
Dani Rodrik
- A variety of articles and viewpoints on free trade are described.
WTO Serious Challenges
- Increasing pressures on the WTO institutions.
- Political challenges (Brexit, Trump/Biden policies toward China.
WTO and the Environment
- The WTO's main philosophy maintains that trade liberalization increases wealth, leading to improved environmental standards.
- Poorer nations might not prioritize environmental protection at the same level as wealthier countries.
- WTO efforts toward environmental protection are noted.
Mainstreaming Environmentalism
- A report argued that the environmental consequences of trade are complex.
- Various trade-related actions/decisions could have negative, positive, or neutral effects.
Environmental Arguments Against the WTO
- Trade can cause environmental degradation.
- WTO policies might make it difficult for countries to manage sustainable practices.
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Description
Test your knowledge on the main reasons for trade restrictions, the organizations regulating trade, and critiques of free trade. This quiz covers economic theories related to trade, technology diffusion, and the impact on income inequality and the environment.
