Macro Week 10: Multilateralism vs. Regionalism PDF

*Multilateralism vs Regionalism* Multilateralism is going the global route, trade talks involving many countries representatives across the world. Regionalism is striking trade deals between two or more countries which are geographically close to each other. *Globalisation* Economic globalisatio...

*Multilateralism vs Regionalism* Multilateralism is going the global route, trade talks involving many countries representatives across the world. Regionalism is striking trade deals between two or more countries which are geographically close to each other. *Globalisation* Economic globalisation\ Flows\ - Trade\ - FDIs (Foreign direct investments)\ - PF Investment (Portfolio investments)\ - Income payments (Migrants sending money back to home country)\ Restrictions\ - Tariffs\ - Trade barriers\ - Capital controls Social globalisation\ Personal contact\ - Telephone\ - Transfers\ - Tourism\ - Letters\ Information Flows\ - Internet users\ - TV\ - Newspapers\ - Cultural Political globalisation\ - Embassies\ - International organisation membership\ - International treaties\ - Participation in UN security council missions *Economic Globalisation* A trend towards greater integration of - Trade in goods - Capital, especially FDI - People, but labour restrictions remain SOEs tend to have higher amount of openness\ Larger economies tend to have less trade relative to its GDP because of internal trading. First wave of globalisation from 1870s, not a steep slope, examples like the silk road. Second wave post World War 2 in the 1950s, much steeper rapid globalisation. Institutions like the GATT propelled the globalisation because of its work to remove tariffs and facilitate trade. Also improvements in transport. Containerisation\ 1956 Malcom Mclean created Ideal X which was a ship loaded with 58 35-foot containers and sailed from Newark to Houston, the first of the large container ships. Modern container ships have become the primary form of transport for trade. Reducing costs and reducing time between countries. *International Trade Institutions* - General Agreement on Tariffs and Trade (GATT)\ Signed by 23 countries in 1947\ Aimed to reduce tariffs and barriers to trade of goods\ Most favoured nation (MFN) principle, non-discrimination so all countries experience the same tariffs etc. - World Trade Organisation (WTO)\ GATT's successor in 1995, 164 members\ Oversight on investment, trade related investment measures\ General agree on trade in services, insurance, legal industry, banking industry\ Trade relative aspects of intellectual property, oversight on patents, copyrights and trademarks WTO Aims:\ - Reduce tariffs, reduce barriers, manage/facilitate goods, services, investment and IP\ - Most favoured nation principle (Non-discrimination agreement)\ MFN exceptions\ - Retaliation in the case of dumping\ - Infant industries in newly industrialising countries\ - Industries of strategic importance (National security for example)\ - Prevent import glut and balance of payment problems\ - Regional trade agreements Multinational trade negotiations (MTNs)\ - Reduce tariff rates via MTNs\ - Binding tariffs, cannot be raised in the future\ - Prevent non-tariff barriers such as quotas and subsidies\ - Exceptions, agric subsidies and market disruptions Promoting free trade through mobilising exporters by expanding markets, producing for larger markets can allow you to lower your average costs, market efficiency and improved competition. Avoiding trade war arising from political interests, acting as a forum for discussion. *Rounds of MTNs* 1. Geneva Tariff Conference, 1947 2. Annecy Tariff Conference, 1949 3. Torquay Tariff Conference, 1950-51 4. Geneva Tariff Conference, 1955-56 5. Dillon Round, 1960-61 6. Kenedy Round, 1963-67 (Most successful to date, reducing tariffs by 1/3) 7. Tokyo Round, 1973-79 8. Uruguay Round, 1986-94 (The most complex and ambitious trade talks to date, this round brought about the rebranding to the WTO with its focus on IP, investment and services) 9. Doha Development Agenda, 2001-2013 The Doha Development Agenda, 12 years of negotiations Sticking points - Rich countries, export subsidies on agricultural goods - Poor countries, market access and food security Doha revival, 2013 Bali Declaration Trade facilitation agreement, simply customs and goods clearance *Regionalism* Regional trade agreement (RTA) which can be a oppose to the MFN principle. - Free trade area (FTA), eliminate import tariffs and quotas between member countries eg NAFTA - Customs union (CU), additionally impose a common external tariff eg EU Regional integration post WW2 Key features\ - Most RTAs are most often FTAs\ - Mainly cover mechanised goods, recent trade deals also cover services\ - EU is the most long lasting RTA History of EU\ - 27 member countries\ - Widening integration as more countries join\ Founding members, BEL, FRA, DEU, ITA, LUX, NLD (EEC 1958)\ 1973, DNK, IRL and UK join\ 1981, GRC\ 1986, PRT and ESP\ 1995, AUS, FIN and Swe\ 2004, CYP, CZE, EST, HUN, LVA, LTU, MLT, POL, SVK and SVN\ 2007, BGR and ROM\ 2013, HRV(Croatia)\ 2020, UK leaves\ Poorer countries gained a lot from integration funding such as IRL at the time and ROM.\ - Deepening integration\ European coal and steel community (ECSC, 1952)\ European Economic Community (EEC, 1958) launched by treaty of Rome in 1957\ Single European Act (1986)\ EU formed under Maastricht Treaty (1992) ASEAN (Association of South Eastern Asian Nations)\ Foster peace, stability, social growth and progress. COMESA (Common market of Eastern and Southern Africa)\ Geographically the largest RTA.\ Liberalise trade, eliminate tariffs and remove barriers. In Americas:\ NAFTA, CARICOM, CACM, ANDEAN, MERCOSUR RTAs and National Welfare (Viner, 1950)\ Free trade -- Comparative advantage and cheaper imports\ Trade creation -- Low cost of imports from other RTA countries replace high cost domestic production\ Trade diversion -- High cost of imports from countries outside the other RTA countries replace low costs of imports from non RTA members\ Harmonise on goods standards and taxes\ Reduced social conflict\ Ease of negotiations between a few members rather than globally\ Less multilateralism\ Inward looking\ New protectionism? Top left -- Home country\ Top right -- RTA member country\ Bottom -- Rest of the world\ Top left demand shifts left as domestic demand decreases\ Top right supply shifts right as export demand increases\ Bottom demand decreases as no demand outside RTA members