Trade 4.3 & 4.4

I. Economic Integration Multilateral vs bilateral Free Trade Area/Trading Bloc Customs Union Common Market Economic Union Common Currency

50 years of tariff reductions GATT/WTO: 50 years of tariff reductions Tariff reduction of industrial countries for industrial products, excluding petroleum Implementation period Round covered Weighted tariff reduction 1948–63 First five GATT rounds (1947–62)  –36 1968–72 Kennedy Round (1964–67)  –37 1980–87 Tokyo Round (1973–1979)  –33 1995–99 Uruguay Round (1986–94)  –38 Note: Tariff reductions for the first five trade rounds refer to US only

Creation vs Diversion Trade Creation Trade Diversion If member states would not normally trade with each other Trade Diversion If joining an FTA results in loss of comparative advantage

Various Free Trade Areas

EU

EU

Schengen

Flag of Europe

History

EFTA

Eurode Business Center Germany - Holland

Holland-Belgium

Germany-Holland

Basel

EU-MEFTA

GAFTA

NAFTA

CAFTA

MERCOSUR

APEC

ASEAN

Flag of OPEC

World Trade Organization GATT Uruguay Round Removal of Trade Barriers “Precautionary Principle” NO Sanctions Globalization Neoliberalism Race to the bottom Control by MNCs

Pros & Cons of FTAs Trade Diversion Competition from foreign producers Trade Creation Potential for larger exports More choice for consumers Lower prices Attraction of foreign companies Political stability with trade allies Trade Diversion Competition from foreign producers Exclusive deals for members only Loss of sovereignity Trade alliances with dictatorships/regimes