Why Trade? The WTO and Trading Blocs 5 th March 2010

The Global Economy WTO and Trading Blocs Influences on Exchange Rates Factors Influencing Competitiveness Measures of Inequality Debt, Corruption and Civil War Public Expenditure Attractiveness to Foreign Investors Revision

Lesson Objectives By the end of the lesson students will be able to: Describe the role of the WTO in international trade liberalisation Describe the role of trading blocs in international trade

Sample Essay Questions ‘Trading blocs are the most significant factor contributing to globalisation.’ To what extent do you agree with this statement? Evaluate the possible economic effects of the introduction of a single currency by a trading bloc Discuss whether or not the formation of trading blocs such as the European Community contributes to an increase in economic welfare

Trading Bloc Anagrams WTO – World Trade Organisation NAFTA EMCCA CAN ASEAN SACU EEA CARICOM

Trading Bloc Anagrams WTO - World Trade Organisation NAFTA - North American Free Trade Area EMCCA - Economic and Monetary Community of Central Africa CAN - Andean Community of Nations ASEAN - Association of Southeast Asian Nations SACU - Southern African Customs Union EEA - European Economic Area CARICOM - Caribbean Community

What do you know about the WTO?

The role of the WTO? Formed from the GATT in 1995 following implementation of the Uruguay round. China joined in 2001 GATT sought to reduce protectionism on trade in goods WTO also deals in trade in services, agriculture and intellectual property Negotiating Forum: Doha round began in 2001 and ground to a halt in 2008 – may be restarted but unlikely until end of recession Rules & Disputes: It operates a system of rules and helps to settle disputes between nations

Criticisms of the WTO Often seen as promoting the interests of multinationals over rights of poor workers Small, poor countries have equal vote but little influence on decisions Exploitation of developing countries and their workers Still high levels of agricultural protection Environmental degradation Intellectual property rights make it expensive for developing countries to get access to medicines

Key Terms Trade creation occurs when a new trading bloc has been set up and businesses begin to take advantage of the opportunities arising from free trade between member countries. Because there are fewer trade barriers, new markets open up and businesses will try to extend into them. There will be increased specialisation and more trade. Trade diversion takes place because some member countries of a trading bloc will shift to buying more from other member countries rather than from non- member countries. For example, when the UK joined the European Union, it began to buy more butter from France and less from New Zealand. The absence of trade barriers between member countries and the common external tariff give people an incentive to switch

The routes of trade Questions What are the benefits of trade? What does the WTO look at that GATT didn’t Which countries have the most votes on the WTO General Council?

Free Trade Area A group of countries which allow free trade amongst themselves but retain a separate set of trade barriers against other countries North American Free Trade Area: Canada, Mexico, USA

Customs Union A group of countries which agrees to trade freely within their borders and imposes a common external tariff on imports from outside the area South African Customs Union: South Africa, Botswana, Lesotho, Swaziland, Namibia

Common Market An area within which there is free trade and free movement of people and capital Community of Andean Nations: Bolivia, Columbia, Ecuador, Peru

Economic and Monetary Union A single market with a common currency

Trade Conflicts Questions What was the impact of the protection on Venezuela? How did the WTO intervene

Why haven’t all members of the EU joined the Euro?

Doha Australia, New Zealand & Developing countries wanted cuts in tariffs on imports to US and EU countries & an end to export subsidies which were leading to dumping Further reductions in tariffs were negotiated Trying to reduce non-tariff barriers in services (e.g. bidding for government contracts) First World countries wanted to tighten up intellectual property rights Tightening up of the role of the WTO in settling trade disputes