International Trade Agreements PDF

1- The economic and political rationales for trade agreement: \- A variety of economic and political rationales for trade agreements have been advanced. A compelling political economy argument for such agreements is that they enable countries to enlist export-oriented industries, through improved...

1- The economic and political rationales for trade agreement: \- A variety of economic and political rationales for trade agreements have been advanced. A compelling political economy argument for such agreements is that they enable countries to enlist export-oriented industries, through improved access to foreign markets, as a counterweight to domestic political constituencies in import-impacted industries through the reciprocal exchange of binding trade concessions or commitments with other countries. Second, by including these commitments in international treaties, which were not viewed as easily revoked, governments could provide security and certainty (credible commitments) to investors who would be shielded, to some extent, from the shifting winds of domestic politics (a form of hands-tying strategy). Third, trade agreements can help resolve terms-of-trade driven Prisoners' Dilemma problems in international trading relationships where major trading powers might otherwise engage in mutually destructive high tariff policies. 2- The Agreement Establishing the World Trade Organization (WTO Agreement) The Agreement Establishing the World Trade Organization (WTO Agreement) sets out various provisions for adjusting WTO commitments over time. The WTO treaty, like other treaties, only binds states that have signed and ratified it. Similarly, amendments to the WTO treaty only bind states that have signed and ratified the amendment. Article X:1 of the WTO Agreement requires that any proposal to amend a WTO Agreement must be tabled for a minimum of 90 days before the agreement can be amended. Amendments to WTO agreements are voted on by the Ministerial Conference of the WTO. Article X:2 sets out specific provisions of WTO agreements that can only be amended by unanimous agreement of all members. All other provisions can be amended by a two-thirds majority of the Ministerial Conference; however, such amendments are only binding on the members who have voted in favour of the amendment (Article X:3). This feature of the WTO Agreement is subject to Article X:5, which stipulates that the Ministerial Conference may decide by a three-fourths majority that an amendment is of such a nature that any member which has not accepted it within a period specified by the Ministerial Conference in each case shall be free to withdraw from the WTO or or to remain a member with the consent of the Ministerial Conference. 3- Tariffs Tariffs are taxes imposed at the border on imports. They generally vary according to the type of product, as reflected in the importing country's tariff schedule. Tariffs were first instituted in order to raise revenue for government, but with the invention of the income tax, tariffs became a much less important source of revenue in developed countries. 4- Preferential trade agreements (PTAs) Preferential trade agreements (PTAs) are treaties between two or more countries granting preferential market access to each other's markets. PTAs may be bilateral, regional, or cross-regional. The National Treatment principle The National Treatment principle, requiring that imports be treated on an equivalent legal footing as domestically produced goods (except for the application of tariffs) is designed to assure equality of conditions of competition for imports in the internal product regulation and taxes of the importing state. 6- Trade remedy or contingent protection regimes The most widely invoked of a trilogy of trade remedy or contingent protection regimes: anti-dumping laws; countervailing duties; and safeguards 7- Subsidy Scenarios It is useful to keep in mind three basic subsidy scenarios: 8- Alternatives to safeguards Alternatives to safeguards 1 Industrial subsidies In general, industrial subsidies have not been effective in avoiding the ultimate need for adjustment by uncompetitive domestic industries or moderating its severity. Pure output-sustaining subsidies have been the least effective in this respect. Other forms of industrial subsidies have been designed to facilitate the modernization of obsolete capital, but obsolete plants are often the result and not the cause of loss of international competitiveness and if an adequate return could be made on new fixed assets, presumably private capital markets would provide the funds required to make this investment. Less frequently, industrial subsidies have been provided to ease exit costs, where, as in the case of Japan, government plays an active role in managing contraction in demand for a domestic industry's output, perhaps through recession cartels, active promotion of mergers or specialization agreements, or compensation for scrapping physical capacity, although such active involvement by government in orchestrating an industry's future shape and size raises questions about both institutional competence and the potential risks of facilitating anti-competitive forms of industry collusion under the guise of industry-wide coordination of efforts at restructuring. 2 Labour market adjustment policies (LMAPs) The normative case for such policies seems much stronger than for industrial subsidies, where workers are often less able to diversify the risks of future shifts in comparative advantage than investors in domestic firms. Comparative evidence on the effectiveness of LMAPs across various industrial countries yields however very mixed results. LMAPs can be arrayed along a spectrum from passive (safety nets that help minimize losses to workers through income support such as employment insurance) to active (trampolines that help displaced workers to re-enter the job market such as retraining and job search assistance). Excessive reliance on passive LMAPs in both the Anglo-Saxon and the Continental models have proved largely inadequate, with the former leaving workers with an unacceptable share of the costs of displacement, and the latter creating excessively rigid labour markets that cannot adjust to economic shocks. The Nordic flexicurity model based on more active LMAPs with high employment security and low job security has instead been held out as a compelling alternative. In general, active LMAPs have been more effective in mitigating adjustment costs than purely passive forms of unemployment insurance, and a stronger emphasis on active labour market policies is a superior response to protectionist policies in addressing the costs of job displacement and economic transitions.20 **9. Normative rationales for agricultural exceptionalism** 1\. Ensuring access to affordable food In 2018, the World Food Programme estimated that, globally, 821 million people, most of whom reside in developing countries, did not have enough to eat.2 Thus, assuring access to affordable food -- food security -- is a priority for many governments. Food security presents caused by droughts, floods or pestilence as well as longer-term trends that suggest declining domestic capacity in some countries to produce food; temporary price volatility; and potential future price increases as a result of climate change. For example, the 2007/8 global food crisis resulted in maize (corn) prices nearly tripling, wheat prices increasing by 127 per cent, and rice prices rising by 170 per cent, globally.4 Over the period 2003--2008, the real price index of agricultural commodities globally almost doubled. Price increases on this scale can have highly adverse impacts on nutrition among poor populations. Governments intervene in a variety of ways in furtherance of the objective of ensuring stable, affordable food prices for consumers. These are often, though not always, trade restrictive or trade distorting. The three most common interventions of this nature are price stabilization measures, food stockpiling, and self-sufficiency targets. Beyond price stabilization and food stockpiling, many countries have adopted food self-sufficiency targets to combat food insecurity. However, trade restrictive measures are often not the first best policy to address food price instability, as the short-term benefits induce greater long-term costs. While price support policies are commonly utilized, trade distortive versions of these policies may undermine the objective of stabilizing prices. More specifically, protectionist measures meant to insulate domestic markets from spikes in international prices may actually add substantially to rising international prices: this was found to be the case during the 2007/8 world food price crisis with regards to wheat, maize, rice, and oilseeds.7 Price hikes were exacerbated because when other governments imposed export restrictions "to insulate somewhat their consumers from the price rise, \[this\] pushed international prices even higher and drove more exporting countries to follow suit."8 An alternative strategy for achieving food security without employing trade restrictions might entail the provision of consumer subsidies for essential food products, such as food stamp programs or other kinds of means-tested income transfers. Aside from avoiding the negative effects of reciprocal trade restrictions, consumer subsidies that are based on means testing can more narrowly target poor consumers, and avoid the food spoilage and corruption often involved in stockpiling programmes. While the impacts of recent price spikes on poor consumers, especially in developing countries, raise legitimate concerns, these impacts need to be put into a longer-term perspective. As Charles Kenny points out in Getting Better, 50 years ago more than half the world's population struggled with getting enough daily calories. By the 1990s, this figure was below 10 per cent. Over the second 50 years of the twentieth century, food prices fell by 50 per cent in real terms. Again, in most countries, over this period, life expectancy has increased dramatically and infant and maternal mortality rates have fallen sharply. Whether recent price spikes portend a radical disruption of these long-term trends is far from clear. Moreover, as Amartya Sen has famously argued, famines historically have not been the result of absolute shortages of food, but the lack of responsive equitable distribution. 2 Ensuring a livable income for farmers While this objective is in obvious tension with the first objective, the imperative of ensuring a livable income for farmers is often justified on two grounds: distributive justice considerations and the view that some forms of support to farmers may boost long-term competitiveness in the agricultural sector. Many farmers, particularly across the developing world, are poor and struggle to support themselves and their families. Indeed, most of the poor people in the world rely on agriculture as the primary source of income: three out of four impoverished individuals worldwide are dependent on often small-scale, subsistence agriculture as the main occupation of the head of the household. Governments therefore often intervene in the agricultural sector for the purpose of ensuring that farmers are able to earn a livable income or to create jobs by encouraging employment in the agricultural sector. These objectives reflect broader distributive justice goals of ensuring an equitable distribution of resources in society, through reduction of poverty and income inequality. Moreover, income supports for farmers are seen as a way to boost the competitiveness of the agricultural sector: when farmers cannot earn enough to expand their businesses or purchase key inputs, this leads to the underdevelopment of the sector, as has been a key challenge in many parts of Sub-Saharan Africa. Capital market imperfections, such as incomplete crop insurance or futures markets and limited access to credit may constrain productive investments. However, in developed countries the importance of supporting agricultural income as a means of poverty reduction is much lower than in many developing countries. Moreover, protectionist measures aimed at increasing farm income can also have a negative distributional effect for consumers. For developed countries in which few poor people rely on income from agriculture, increased food prices are likely to outweigh any distributional benefits from income supports for farmers. Poor individuals are the most sensitive to food prices as they spend proportionally more of their income on food. Even in developing countries, the benefits of policies designed to augment poor farmers' incomes through price supports and trade restrictions must be weighed against the negative effects of higher prices on often equally or more impoverished urban consumers, suggesting means-tested consumption subsidies (e.g. food stamps) or cash transfers as an alternative policy. 3 Preserving traditional rural lifestyles and communities Policies aimed at the protection of small family farms, rural communities, and the traditional rural way of life relate in some ways to the distributive justice objectives referred to above, but are mainly justified on communitarian notions of a duty to preserve traditional ways of life or traditional rural landscapes. They are often rooted in notions about traditional family lifestyles associated with ancestors or early settlers. Policy measures that aim to protect small-scale family farms and the rural way of life may entail tariffs to protect uncompetitive agricultural products and other policies aimed at ensuring sufficient income to sustain these farming communities and prevent further depopulation of rural areas. They may also, more specifically, involve subsidies paid to small-scale farmers on the basis of, for example, traditional land holdings. In some cases, protectionist policies may achieve the goal of preserving traditional rural lifestyles. However, protectionist measures meant to insulate small-scale farmers from international competition or to subsidize farmers are unlikely to produce a sustainable situation in which these traditional forms of agriculture become economically viable.15 Developed countries that adopt these policies have long ago shifted to industrial economies where most of the workforce is employed in the manufacturing or service sectors. Furthermore, the traditional image of the small family farm is often already out of step with the actual structure of farming in developed countries, especially the movement to large scale commercial agriculture. Trade restrictive policies may mostly benefit larger, wealthier producers. **10 Measures of protectionism in agriculture** Protectionism in agriculture may be effectuated through an array of instruments. However, the three primary categories are border measures; price supports and domestic subsidies for producers; and production restrictions. 1 Border measures Particularly among developed countries, tariffs are often several times higher for agricultural products than for manufactured products, on average, while particular agricultural products can be subject to extremely high tariffs, sometimes running to several hundred per cent. In some cases, border measures take the form of import quotas or tariff-rate quotas where typically high tariffs apply to imports above the quota. Most of the potential gains from agricultural liberalization would come from reducing import barriers.20 9.4.2 Price supports and domestic subsidies 2- Price supports and domestic subsidies The second type of protectionist measure utilized in agriculture comprises price supports and domestic subsidies for producers. The European Union's *Common Agricultural Policy* (CAP) offers a prominent example of measures to farmers based on domestic price control. The CAP has traditionally set minimum prices for sales within the EU, which are then combined with guaranteed sales (the government purchases oversupply) and variable import tariffs to prevent the minimum prices being undercut by imports. Many other countries also set minimum prices for various crops. Subsidies can also entail direct payments. Often these payments are output-based. Subsidies can vary in the extent to which they distort trade or production decisions. There has been a shift in some countries towards using less distortive domestic subsidies such as income support policies and subsidies to crop insurance. An OECD study found, for OECD and non-OECD countries studied, an overall reduction in the potentially most trade distortive forms of support, from 16 per cent in 1995--1997 to 11 per cent in 2010--2012.21 3- Production restrictions Governments sometimes implement production restrictions, referred to as supply management or quota schemes to raise prices and to deal with the problem of overproduction that can arise from price support systems standing alone, although such schemes typically need to be supported by import restrictions to prevent them from being undermined by imports. 11- Four modes of supply of international trade in services Article I of the General Agreement on Trade in Services (GATS) Agreement defines four modes of supply of international trade in services: a\) from the territory of one member into the territory of another member (Mode 1 cross-border supply); b\) in the territory of one member to the service consumer of any other member (Mode 2 consumption abroad); c\) by a service supplier of one member, through commercial presence in the territory of another member (Mode 3 commercial presence); and d\) by a service supplier of one member, through the presence of natural persons of a member in the territory of any other member (Mode 4 presence of natural persons). 13-FDI In their early post-independence years, many former colonies viewed FDI with skepticism, and in some cases outright hostility, as it was perceived to be a new form of economic imperialism (reflected in dependency theories of development that were influential in many developing countries in the 1950s and 1960s). More recently, many developing countries have come to see FDI as having at least the potential for making significant contributions to their economies -- as a source of investment in infrastructure, as a source of technology transfers and spillovers, as a source of investment in human capital and skills upgrading, as a source of investment in major natural resource extraction projects, and as a major source of local employment in low-wage, low-skilled manufacturing activities.4 Foreign direct investment can substitute for or complement trade, depending on context and application. In this respect, it is useful to distinguish between horizontal and vertical FDI.5 If, for example, a manufacturer in North America wishes to access China's market to sell its products, it can export its products from North America to China or set up a replica manufacturing facility in China to service domestic customers in the Chinese market (horizontal FDI). Where host countries have large protected domestic markets, FDI may be the most effective way of accessing these markets behind prevailing tariff walls and avoiding transportation costs -- particularly the case with host countries with large growing populations and hence significant potential demand for the goods or services that foreign investors can produce. In this case, FDI is a substitute for trade. 14- Subjects of TRIPS Agreement Subjects of Trade Related Intellectual Property Rights (TRIPS) Agreement \- Copyright and related rights \- Trademarks \- Geographical indications \- Industrial designs \- Patents 15-protection for copyrighted works The basic obligations of the Berne Convention are incorporated into TRIPS. Computer programs and databases are included as literary works. The minimum term of protection for copyrighted works is 50 years from the initial date of authorized publication or 50 years from the making of the work. 16- Trade policy and domestic health and safety regulation With the progressive liberalization of border barriers to trade over the post-war period, internal or "beyond the border" regulatory divergences from one country to another, including domestic regulation of health and safety standards, have become an increasing source of tension in international trading relations. Exporting countries often complain that these regulations constitute a non-tariff barrier to trade, and even where they are not intended as a disguised form of protectionism, impose disproportionate burdens on small exporting countries, particularly developing countries, in facing multiple compliance costs in many of their export markets. Importing countries, in turn, complain of lax standards in exporting countries that create health and safety risks for their citizens, as well as constituting a form of unfair trade to the extent that firms in exporting countries face lower compliance costs than competing firms in importing countries.1 **The SPS Agreement** SPS measures covered by the SPS Agreement11 include measures applied to protect animal or plant life or health within the territory of a member from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms; and to protect human or animal life or health within the territory of the member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs. **TBT Agreement** The TBT Agreement covers all technical product regulations and standards not covered by the SPS Agreement. The TBT Agreement also contains National Treatment and MFN obligations, which generally apply cumulatively with GATT Article III. 17-Trade policy, labour standards and human rights The idea of using international labour standards to protect workers from economic exploitation was first promoted by individual social reformers in the first half of the nineteenth century in the early stages of the Industrial Revolution. The work of these reformers was taken over by various non-governmental organizations, including various international organizations (in particular, international associations of trade unions) in the second half of the nineteenth century. Intergovernmental actions to promote international labour standards began to be reflected in international conferences beginning in 1890 and culminated in the establishment of the **International Labour Organization (ILO)** by the Treaty of Versailles in 1919. The ILO, a tripartite organization of government, employer and worker representatives, has mostly pursued its mandate by setting minimum international standards through Conventions and Recommendations, subject in the former case to ratification by member states and promoted by investigation, public reporting and technical assistance, but not formal sanctions. In 1998, the ILO adopted the Declaration of Fundamental Principles and Rights at Work providing that all members have an obligation to respect and promote certain core labour standards (CLS): 1\) freedom of association and the right to engage in collective bargaining; 2\) the elimination of forced labour; 3\) the elimination of child labour; and 4\) the elimination of discrimination in employment. This Declaration parallels, in many respects, references to -international labour standards in the UN Universal Declaration of Human Rights (1948), -the UN Covenant on Civil and Political Rights, and -the UN Covenant on Economic, Social and Cultural Rights that came into force in 1976. 18-Developing countries There are four main sources of external revenue for developing countries:exports, FDI, foreign aid, and remittances. Developing country merchandise exports have risen from \$599 billion in 1980 to almost \$6.9 trillion in 2016. Over this period, developing countries' share of world merchandise exports rose from about 29 per cent to 57 per cent (however, this increased relative share of world merchandise exports was largely attributable to China). In 2016, foreign direct investment flows to developing countries reached \$670 billion, up from \$7.4 billion in 1980, and official development assistance flows (foreign aid) about US \$146 billion (with about another \$40 billion from NGOs). Remittances from emigrants from developing countries to relatives and friends in their home countries are currently running at around \$500 billion per year. Thus, export earnings are by far the most important source of external revenues for developing countries, followed by FDI and remittances; in comparison, the volume of foreign aid is much smaller. International trade is therefore of critical importance to developing countries. However, many developing countries face special challenges in competing in an increasingly global economy, leading to early recognition by GATT members that various dispensations were justified in accommodating their needs within the multilateral