Week 7, 8, 9 Trade (2).ppt PDF

The Evolution of the Global Trade Regime Department of Government  Today’s Lecture Free Trade Protectionism GATT WTO Department of Government  Trade “is an exchange of one commodity for another” (O’Brien and Wi...

The Evolution of the Global Trade Regime Department of Government  Today’s Lecture Free Trade Protectionism GATT WTO Department of Government  Trade “is an exchange of one commodity for another” (O’Brien and Williams 2010: 147) International trade takes place when goods or services are exchanged across national borders. Governments often restrict trade across national borders Department of Government  Key Concepts (O’Brien and Williams 2010) Tariff is a tax or duty which is imposed on a good entering a market Quotas are a quantity restriction on goods being produced or entering a market Subsidy is a support given to a particular sector or industry (cash grant, tax reduction) Department of Government  Theoretical Perspectives Liberals (positive sum game, theory of comparative advantage) Mercantilists (infant industry, national security) Critics (environmentalists- Ekins, Morris; feminists – Fontana, Joekes and Masika) Department of Government Give reasons why trade might be restricted? Department of Government  Free Trade Costs and Benefits Infant industry (case for Comparative advantage, protectionism) specialisation Defence – countries Trade is an engine of should be self sufficient growth Social justice critique, Leads of a diffusion of unequal gains of free trade knowledge, technology (Marx, environmental and new techniques advocates) Evidence suggests that those involved in free trade have made greater technological progress Department of Government  Campaign for Free Trade Began in Britain in the mid C19th – Brief period of free trade was achieved between the French and the British from the 1830s- 1870s – Benefited the British economy most – Was the ongoing policy of British governments til after WWI – See (Condliffe 1950) Department of Government  Protectionism From the 1850s, the US emerged as a powerful economy, first in agricultural products and later in manufactured goods. The Americans were able to produce products at lower cost and sell at lower prices than Europeans Results in pressure on European producers and Governments responded in the 1870s by placing tariffs on imports. Germany moved to a protectionist policy and this resulted in most European nations following suit. Department of Government  Reciprocal Trade Agreements Act - 1934 US emerged as the world’s largest trading nation after WWI. In 1930 (Smoot Hawley Act) the US raised tariffs even higher than they already were and this resulted in a major fall off in world trade (66% decline). The RTAA (1934) empowered the president to lower tariffs and marked a major departure in international trade politics. The act was important because it represented a major change on international attitudes to protectionism Department of Government  Post WWII The political and economic power of the USA was very evident in the aftermath of WWII. The US became the dominant player in three economic areas, international monetary payments, trade and foreign investment. By 1950, the US accounted for 17% of global trade and this figure increased over the decade. As a result of American dominance the values and structures which were developed internationally reflected American attitudes to trade and international rules. Department of Government  Global Trade Regime O’Brien and Williams (2016: 108): Two major developments since 1945 Growth in volume of world trade Growth in the governance or world trade Based on three components: – Trade – National regulations – International agreements Department of Government  GATT General Agreement on Trade and Tariffs was the rules based system of international trade which was put in place in 1947. This was a liberal pro-business, anti government framework which would regulate international trade. Based on multilateralism and non discrimination between countries. Department of Government  The Rules of GATT Operated on a set of 35 articles but the most important aspect is known as the Most Favoured Nation Principle “required GATT contracting parties to extend to all signatories the benefits of any agreement that it might reach with any other country” Ravenhill: 145 The practical result of this principle was that once a tariff agreement was reached with one country on a product, the same rules on that product would be applied to all other countries with whom you trade with on that product. Department of Government  Trade Negotiations The purpose of GATT was to liberalize the international trading regime In 1947 GATT began its first “round” of multi- lateral trade negotiations. 1949 - Annecy 1951 – Torquay 1956 – Geneva 1960-1 – Dillon Round 1963-7 – Kennedy Round 1973-9 – Tokyo 1986-93 – Uruguay 2002 20** - Doha – 2015 Nairobi package for Africa Department of Government  Name Dates Number of Countries Participating Geneva 1947 23 Annecy 1949 13 Torquay 1951 38 Geneva 1956 26 Dillon 1960-1 26 Kennedy 1964-7 62 Tokyo 1973-9 102 Uruguay 1986-93 123 Department of Government Source: O’Brien and Williams (2016: 113) Department of Government  The Kennedy Round First major renegotiation after GATT had been established in 1947 Led to: a much larger reduction in tariffs, the anti-dumping code An international grain agreement Department of Government  Dumping Selling a product in another country for less that it is sold in the exporting country Gatt rules are based on a comparison of price in the export country and the import country Dumping is under selling There has been a sharp increase in cases of dumping within the WTO Department of Government  Tokyo Round Non tariff barriers were first considered New international codes of behaviour were established. – Effort was made to integrate the national trade codes of individual countries into an effective set of rules and principles of international trade. This round of negotiations took place against the backdrop of very serious international economic problems and it reinforced the multilateral approach to trade. Department of Government  The Uruguay Round – 1986 -1994 Four principal categories were covered in the Uruguay round. Market access (including agriculture and textiles) Reform of Gatt rules Institutional changes required in the Gatt Services, intellectual property and investment Department of Government  Uruguay Agreements Established the World Trade Organisation and the Dispute Settlement Understanding The WTO became an international organisation and agreements negotiated were integrated into a single legal framework Led to greater integration of the trade regime The agreement covered rules of trade, agriculture, intellectual property, barriers to trade, etc Department of Government  Developing Countries Have always been marginal in the process of international trade and the governance of it Many developing countries pursue policies of self sufficiency, using protectionist barriers to foster indigenous industry Up until Uruguay, developing countries had a limited role in the GATT The principle of a single understanding gave greater power to the developing countries and the agreements were favourable especially in areas of agriculture and textiles. Department of Government Why was Uruguay so important? It established that the trading system would be governed by rules. This reduced the role of trading power in the system. A formal dispute settlement system was established The World Trade Organisation was established The Developing World was integrated into the global system. Department of Government  WTO A formal organisation with binding legal rules in the form of global commercial trade codes Continues the “rules based system” of global trade Based on the consensual approach to trade which had been established in the GATT processes Occupies the same legal basis as the IMF and World Bank but with a substantially smaller staff and organisation. The main work of the WTO is conducted in small committees. In essence, the WTO is an international legal framework that guarantees formal equality between nations Each of the WTO’s member nations has an equal vote Department of Government  GATT to WTO World Trade grew 22 fold between 1950 and 2000 The General Agreement on Tariffs and Trade (GATT) was the international organisation given responsibility for trade in the aftermath of WWII In reality GATT was a series of international agreements – GATT operated as a series of loose negotiating rounds GATT was the forum for negotiating lower tariffs and quotas on goods Department of Government  Main Structure Ministerial Conference (every two years) General Council (which can also sit as a dispute settlement body) Three councils in the areas of goods, services and intellectual property. Committees and working groups See Ravenhill (2017: 161-162) Department of Government Department of Government  From GATT to WTO https://www.youtube.com/watch? v=fWmHHfimLvw Department of Government  WTO in 2024 166 members (see link for list, last member joined August 2024) http://www.wto.org/english/thewto_e/whati s_e/tif_e/org6_e.htm There are a series of countries still active in accession negotiations including: Algeria, Comoros, Ethiopia Department of Government  What does it do? Trade Negotiation Implementation and Monitoring Dispute Settlement Building Trade Capacity Initiatives ongoing include gender equality in trade, environmental sustainability, plastics pollution (see www.wto.org for more) Responds to global challenges: patents on Covid-19 vaccines were waived after agreement at the 12th WTO Ministerial Conference in June 2022. Department of Government  Single Undertaking Countries agreed to accept the entire outcomes of a negotiating round All elements of the final agreement would have to be integrated into national law Cherry picking had been allowed under Tokyo Consequence – more difficult to achieve final agreement on a single unified trade deal It gave clarity to members on the obligations that they were entering when agreeing a deal. Department of Government  Dispute Settlement Dispute Settlement is very powerful and has caused much controversy A complainant country can request the establishment of a DS panel (change from GATT) – Countries are required to implement the outcomes of the adjudication process in their countries – An appeals process is in place – Unilateral measures are specifically precluded – All areas of trade are covered – See Van der Ven and Luke (2023) for a longer discussion. The costs of litigation are a severe problem for developing countries both in terms of the legal costs but also the staff requirements. Keeping delegations in Geneva is very expensive. – Difficult to force major powers to implement the terms of a settlement, some fear retaliation by donor countries – Very few African states have been involved in disputes (Tunisia, Egypt, South Africa) Department of Government  Dispute Settlement Case Study Venezuela (and Brazil at a later date) versus the US in relation to gas chemical standards http://www.wto.org/english/thewto_e/whati s_e/tif_e/disp3_e.htm Department of Government Department of Government Department of Government Department of Government  Politics and the WTO Dispute Settlement – Countries are required to implement the outcomes of the adjudication process in their countries – But the costs of litigation are a problem for developing countries – And large states often ignore the outcomes (USA) – The US has been refusing to allow appointments to the WTO appellate body since the Obama administration In more recent years, it has been difficult for the WTO to advance new negotiations. The biggest challenge lies in reaching a deal which will accommodate developed countries and developing countries. Department of Government  China and World Trade Concerns were aired for some years that China was not respecting WTO trade rules (non-tariff barriers, lack enforcement of intellectual property rights, investment subsidies Trump initiated a ‘trade war’ against China in 2018 in retaliation for these and other grievances. The US file a case against China at the WTO and imposed tariffs on China The Biden administration expanded the sanctions against China and rejected the decision of WTO Dispute Settlement Body which found that it had violated its obligations The EU has also become more assertive and Ursula von der Leyen has discussed ‘de-risking’ Europe’s trade relations with China Hannah and Ravenhill (2024: 7-9) Department of Government  Critics of the WTO Argue that the WTO does not treat rich and poor countries equally Poor countries, UN institutions and global social movements have all criticised the operation of the WTO suggesting that the WTO focuses too much on poor countries’ protectionist policies while ignoring similar actions on the part of rich countries Academics have suggested that in embracing the neo-liberal framework, the WTO is in effect embedding global inequality. They believe that in advocating free trade and market efficiency, they are ignoring labour standards and environmental damage (Goods produced by child labour cannot be banned in favour of those produced under good working conditions) Susan George http://www.youtube.com/watch?v=NQ952ba75Yk Department of Government  Critics of Free Trade Anti-free trade positions have grown strongly since the Great Recession Protectionist measures are on the increase – http://www.globaltradealert.org/ monitors trade measures introduced by states And the Covid-19 pandemic turbo charged this dynamic » Countries sought to control access to vaccines for their own populations » There was growing awareness of vulnerabilities in supply chains especially with China which had a longer longdown than most countries and which caused major problems in 2022 » ‘Re-shoring’ operations because a major conversation » ‘Techno-nationalism’ which refers to the idea of using legal barriers to protect major technological developments re-emerged (US CHIPS and Science Act, semi-conductors) Developing world countries have struggled even more in the post- pandemic period. In 2020, the number living in poverty increased for the first time in C21st (Hannah and Ravenhill, 2024: 9). Department of Government  Critics of Free Trade Public concerns about globalisation mostly relate to trade and migration. The debate about financial globalisation is more muted despite the immense impact of the global financial crisis – See Greg Mankiw (2008) in The New York Times http://mobile.nytimes.com/2008/03/16/business/16view.html?_r=2&ref=business& oref=slogin&referer=https://t.co/OCFxNbOe63 – Growing evidence that trade liberalisation has depressed wages (Hakobyan and McLaren, 2016) – Branko Milanov (2008) Elephant Chart, Department of Government The Elephant Chart Department of Government And maybe this is also happening within countries https://twitter.com/conradhackett/status/93 2360644548026369/video/1 Elephant chart dynamics in the US and other major economies. The relative position of the middle classes has fallen. Although income inequality did fall during the Biden term. Longer term data needed to make a final assessment. Department of Government  WTO Serious Challenges Institutional – Membership has increased enormously and this is putting pressure on the institutional structures of the WTO Policy - The WTO has a broad remit since 1995 and this is proving challenging to implement – Serious challenges in relation to agriculture, environment and intellectual property (see clip for a discussion on IP- http://www.youtube.com/watch?NR=1&v=KiXj02bpL1g – Some recent 2016 data has suggested that trade may no longer be rising http://www.nytimes.com/2016/10/31/upshot/a-little-noticed-fact-about-trade-its-no- longer-rising.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0 Political- Trade has become an extremely politicized policy area (Brexit, Trump (and Biden) policies re China and hostility to multilateralism – Has led to the emergence of mainstream debates on the reversal of free trade (see 2016 pieces from NYT http://www.nytimes.com/2016/03/14/opinion/the-era-of-free-trade-might-be-over-thats-a-good-thing.html?smpr od=nytcore-iphone&smid=nytcore-iphone-share ) – http://www.nytimes.com/2016/09/29/business/economy/more-wealth-more-jobs-but-not-for-everyone-what-fue ls-the-backlash-on-trade.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0 Department of Government  WTO and the Environment Main philosophy put forward by the WTO is that trade liberalization will increase wealth and the wealth results in higher environmental standards. Poorer countries do not invest in environmental protection at the same level as wealth countried In 1999, the WTO moved towards an acknowledgement that environmental damage was a global threat and they hosted a conference on trade and the environment Several initiatives ongoing (plastics pollution) but evaluation is very mixed. Department of Government  Mainstreaming Environmentalism WTO Trade and the Environment Report Argued that the environmental consequences of trade are 1. Trade changes industrial activity and therefore can result in pollution 2. Increases the overall scale of economic activity 3. Changes production technology which may or may not have a damaging effect. – The report claimed that it was therefore not possible to say that trade caused environmental damage, the relationship was indeterminable. – This position is untenable in 2023. Department of Government  Environmental Arguments Against the WTO Trade causes environmental degradation The WTO argues that it is pollution but of course pollution arises from poor processing practices WTO policies reduce governments’ abilities to control trade police and implement sustainable economic policies http://www.youtube.com/watch?v=ktHLrz09g cs&feature=related Jagdish Bhagwati discusses the link between trade and the environment Department of Government  Doha Development Agenda November 2001 declaration on development Agriculture and services were at the core of the agenda Initial deadline of January 2005 was set No agreement reached yet Agriculture policy is a key area and the aim is to achieve a reduction of the $300bn per year spent in industrial countries on food subsidies These are seen as distortionary and artificially lowering world food prices Argued that they depress incentives for production in developing countries Department of Government  Doha Commitments 50 decisions clarifying the obligations of developing country member governments with respect to issues including agriculture, subsidies, textiles and clothing, technical barriers to trade, trade-related investment measures and rules of origin. Without prejudging the outcome, member governments commit themselves to comprehensive negotiations aimed at: – market access – substantial reductions in exports subsidies: reductions of, with a view to phasing out, all forms of these domestic support: substantial reductions for supports that distort trade http://www.wto.org/english/thewto_e/whatis_e/tif_e/doha1_e.htm (list of items for negotiation in the Doha round Department of Government  Doha Agri Targets Critical aspect is agreement on agriculture to establish a fair and market-oriented trading system through a programme of fundamental reform. The programme encompasses strengthened rules, and specific commitments on government support and protection for agriculture. The purpose is to correct and prevent restrictions and distortions in world agricultural markets. But not everyone is enthusiastic; Joe Stiglitz op ed in New York Times on food policy (2013) http://opinionator.blogs.nytimes.com/2013/11/16/the-insanity-of-our-f ood-policy/?_r=0 Department of Government  Doha http://www.youtube.com/watch?v=Y8PKvDy eSoY&feature=related Department of Government Department of Government  Cancun According to The Economist Talks collapsed after 3 days of negotiations in 2003 amid angry recriminations The North South divide was most prominent on issues of agriculture The G20 (led by BRIC) were prominent in negotiating for the developing world. They argued specifically against US and EU agriculture subsidies Department of Government  Geneva 2004 Geneva talks achieved a framework agreement on opening global trade. The U.S.A, EU, Japan and Brazil agreed to end export subsidies, reduce agricultural subsidies and lower tariff barriers. Developing nations agreed to reduce tariffs on manufactured goods, but gained the right to specially protect key industries. Important agreements were reached on cotton Department of Government Paris, Hong Kong, Geneva, Potsdam Multiple attempts were made to agree a framework for the reduction of agri subsidies However agreement was not reached. Situation is further complicated from 2007 as the agreement of Congress in the US is required for the US to complete a deal. February 8/2008 a new draft for negotiations was circulated to WTO members January 2011 – efforts made once more to restart the negotiations Department of Government  Lamy (September 2012) discusses how Doha is not dead but deadlocked http://www.economist.com/blogs/freeexchange/20 12/09/pascal-lamy-world-trade A world w/out WTO? Prof Bhagwati warns that world trade would resemble wrestling vs cricket bit.ly/w05rMS (YouTube) OECD interview Sutherland and Bhagwati (2011) report on the future of Doha http://www.number10.gov.uk/wp-content/uploads/ doha-round-jan-2011.pdf Department of Government  Nairobi 2015 six ministerial decisions on agriculture, cotton and issues related to least-developed countries commitment to abolish export subsidies for farm exports decision on Public Stockholding for Food Security Purposes Extended waivers for least developed countries on trade in services Department of Government  What Happens if Doha Fails http://www.youtube.com/watch?v=UcW87kxC7S4&feature= related Big question now is whether the momentum is gone out of the trade talks? Has it been surpassed by the financial crisis and now the Covid19 pandemic? What are the consequences of a failure to achieve agreement on Doha? A Post Doha World http://www.youtube.com/watch?v=MoczT-_daOw&feature=r elated Department of Government  World Trade Deals Today Doha - Progress to date and what is being negotiated https://www.wto.org/english/tratop_e/dda_e/update_e.htm Updated view Dec 2016 https://www.socialeurope.eu/2016/11/wto- bicycle-falling-needs-new-push/# See also Rodrik (2016) for a wider view https://www.socialeurope.eu/2016/12/dont-cry-dead-trade-agreements/ The Politics of Trade, Politics and Governance special issue 2020 https://www.cogitatiopress.com/politicsandgovernance/issue/view/169 Department of Government  Conclusion Deese (2008) argues that despite its modest staff and beginnings, the WTO is arguably the most important of the Ios. This remains true nearly twenty years on. It has established a significant and powerful institutional structure and embedded itself at the heart of the global trading system It has unprecedented influences relative to other IOs It operates on a consensual rules based framework. Department of Government  Article Reviews Kevin Watkins, ‘Is the WTO Legit’, Foreign Policy Andrew K. Rose, ‘Do We Really Know That the WTO Increases Trade’ The American Economic Review Baier and Bergstrand, Do Free Trade Agreements actually increase members international trade? Department of Government Dani Rodrik Free Trade – what does it really mean and do we support it http://www.project-syndicate.org/commentary/rodrik 68/English No Time for Free Trade Fundamentalism (2016) https://www.socialeurope.eu/2016/10/no-time-for- trade-fundamentalism/ Krugman on regional trade deals (2014) http://www.nytimes.com/2014/02/28/opinion/krugm an-no-big-deal.html?_r=0 Department of Government  What about workers’ rights? New York Times piece on conditions for Chinese workers. http://www.nytimes.com/2012/03/30/ business/apple-supplier-in-china-pledges- changes-in-working-conditions.html? _r=1&hp Department of Government  References http://www.wto.org/english/tratop_e/devel_e/a4t_e/aid4trade_e.htm Clapp, J., (2004) ‘WTO agricultural trade battles and food aid’ Third World Quarterly Hartwick, E., and Peet, R., (2003) ‘Neo-liberalism and Nature: The Case of the WTO’, Anals of the American Academy of political Science and Social Science. Kaushik, A., (2008) ‘Dispute Settlement System at the WTO’, Economic and Political Weekly. Sutherland, Bhagwati report 2011 http://www.voxeu.org/reports/doha- round.pdf Beef farmers and trade 2016 http://www.politico.eu/article/ireland- michael-creed-eu-commissioner-phil-hogan-beef-farmers-stick- knives-into-europe-trade-agenda/ Luke, D. (ed.) 2023. How Africa Trades. London: LSE Press. DOI: https://doi.org/10.31389/lsepress.hat Department of Government  References J. Ravenhill, Global Political Economy, Chapter 4. J. Bhagwati, Protectionism. D. Balaam and M. Veseth, Introduction to International Political Economy. Bisley, N., Rethinking Globalization Deese, D.A., (2008) World Trade Politics. Watkins, K., (2002) ‘Is the WTO Legit’, Foreign Policy. Rose, A.K., (2004) ‘Do We Really Know that the WTO Increases Trade’ The American Economic Review. Judith Goldstein (2017), “Trading in the Twenty-First Century: Is There a Role for the World Trade Organization?,” Annual Review of Political Science (20):545-564. Department of Government