International Trade System

1. About the ITS 2. Highly Interdependent 3. GN-Led 4. Agreements & Institutions

About the ITS System of exchange of goods & services between countries Based around two types of trade 1. Merchandise trade Primary goods Raw materials: foods, fuels, fibers, minerals Manufactured goods Finished goods 2. Service trade Direct relationship: buyer seller Foreign commercial presence ¤

ITS is Highly Interdependent

Interdependence 5 countries accounted for 1/3 of world service trade in 2010 US, Germany UK, China, Japan ; Goods & Services $20 B= $55,000/ day 2013$18.3 T= $50 B/day

Factors Why has trade has increased between countries? Industrial Revolution Resource requirement Transportation Materialism Free trade philosophy Absolute versus comparative advantage ¤

interdependence GS- export-driven markets countries whose markets are export-driven, in that they rely heavily on producing goods for export to earn much-needed foreign currencyResource requirement GS- cash crop dependence, labor as comparative advantage Reliance on GN to buy goods, source labor Lack diversified market ¤

GN-Led ITS

GN Domination Factors Industrial Revolution European and American advantage European colonization  map

GN Domination Factors Post –WWI Protectionist policies Post-WWII US economic hegemony in ‘free world’ Encourage global capitalism MNC investments in allies Foster trade ties Neoliberal approach criticized Uneven trade  ~25% of countries dominate world trade ¤

GN Domination Factors EEs brought into loop Finance capital Expand markets Cheap labor Rest of GS lags ¤

Agreements & Institutions GATT  WTO Regional Trade Organizations

GATT General Agreement on Tariffs & Trade (GATT) Est ITO proposal - Havana Charter Not ratified by U.S. Principle of Nondiscrimination through 'normal trade relations’ Same treatment All members All goods ¤

GATT Trade Rounds Geneva through Dillon First 5 rounds Focus: Reduce tariffs Reduced by 73% Kennedy through Uruguay Non-tariff barriers Uruguay  create WTO Pressure on US as hegemon Similar to IMS situation with US as Central Banker Japan, Germany, then also European Union bloc ¤

GATT  WTO World Trade OrganizationWorld Trade Organization (1995) 3:22 Formal organization Director General Dispute Settlement Body WTO structure 159 members China, Russia Objective: open trade Challenges: eliminate non-tariff barriers Doha st WTO Round Still ongoing ¤ Roberto Azevêdo,

WTO Challenges: Tariffs & Quotas Traditional trade regulation tactics Less likely to use Countries respect WTO dispute rulings Countries adopt covert policies All guilty of this ¤

WTO Challenges: NTBs Nontariff Barriers (NTBs) Set standards Environment Safety Licenses Domestic content rules Joint venture requirements Security ¤

WTO Challenges: NTBs (cont.) Subsidies Agriculture Industry Automaker bailouts Solar panels ¤ CountryMarket price SubsidyFarmer’s income US$2$1$3 Brazil$2$0$2

Sugar subsidies video, article Subsidies Sugar Subsidies; John Oliver on Sugar Subsidies Sugar Subsidies ¤

WTO Challenges: New Issues Service Intellectual Property Rights (IPRs) Patents India Trademarks Copyrights

WTO Challenges: New Issues (cont.) Environmental issues Standards legitimate? Labor issues GS comparative advantage Regionalism EU, NAFTA, etc. Electronic commerce Dispute Resolution Mechanism Create body with formal process and power ¤

Disputes Trade wars much more common EU- US ‘Banana War’ 1991 (Pre-WTO) to 2009 EU- US ‘Beef War’ Hormones v. mad cows Russia –US Steel tariffs China-US Solar panel subsidies Europe banned US apples. Their potential carcinogen risk is too high, the European FSA says.the European FSA says ¤

WTO Dispute Resolution Use WTO to file complaints 474 dispute cases filed since 1995 WTO has power to enforce decisions Sanctions Fines Antigua and Barbuda v. U.S. DS 285DS antigua-and-barbuda-turn-from-internet-gambling-to-legalized-piracy/ antigua-and-barbuda-turn-from-internet-gambling-to-legalized-piracy/ ¤

WTO Dispute Resolution: Antigua Case Why is Antigua upset with the US?Antigua Online gambling as IP piracy US wants to stop int’l gambling by US citizens Lots of $ at stake What did the WTO rule in 2013? WTO ruled in favor of Antigua US violated trade treaties Gave US 1 year to comply On 1/28/14- WTO allowed Antigua to suspend US copyrights on all IP for non-compliance Why did the WTO make this decision? Will the US comply?

Free Trade Agreement (FTA) Types FTAs under IGOs Global: WTO WTO consensus article Regional Promote intra-trade ECSC as model Trans-Pacific Partnership Proposed o12 members Anti-China FTA? ¤

Free Trade Agreement (FTA) Types WTO consensus articles WTO's Consensus Principle India and US Reach WTO Breakthrough over Food ¤

Free Trade Agreement (FTA) Types (cont.) Bilateral US FTAs- 20 countries US FTAs EU FTAs Multilateral NAFTA, CAFTA-DR Lomé ¤

EU ASEAN Mercosur SADC SAARC Regional Economic IGOs ECOWAS EAC

Benefits of FTAs How do you benefit from an FTA between US-EU? Cheaper shoes Cheaper drugs EU cars cheaper, more available Dairy availability Standardize products Headlights issue Gas exports to EU ¤

Fair Trade

Objective: livable wage, invest in community Trade over aid NGOs certify Req. differ Monitoring issue Fair trade ≠ violate free trade Consumer demand Int’l protocol to end child slave labor Protect source for consistent flavor MNCs have leverage Fair trade agriculture demand v. handicrafts Mass production ¤

4 Most Important ITS Things 1. About the ITS 2. The ITS is Highly Interdependent 3. The ITS is GN-Led 4. About the Agreements & Institutions 5. Fair trade