1. International Organizations and Trade
Adjunct Professor Milos Jankovic
Sciences Po Paris, Reims

2. Preferential trade & multilateralism
Multilateral Friendliness of an RTA
Stepping Stone
Economic undertaking
Market opening
European Economic Community (EEC) customs union (1958– 68) occurred in tandem with the Dillon and Kennedy Rounds
US-Canada preferential deal, the 1965 Auto Pact (Kennedy Round) and Canada United States Free trade Agreement (Uruguay Round)
Preferential and multilateral tariff-cutting went hand in hand again in 1973— EEC and Tokyo Round
Stumbling Block
Political undertaking
Market preferences
Kennedy Round versus EEC trade-diversion
Trans-Atlantic Trade and Investment Partnership (T-TIP)
Trans Pacific Partnership (TPP)
A Trojan Horse
Under Article 24 of GATT/WTO rules, preferential arrangements were and are permissible as long as preferences:
GATT Article XXIV permits the establishment of free trade areas and customs unions, despite their inconsistency with the GATT’s most-favoured nation (MFN) cornerstone
are 100 percent
cover substantially all trade
do not raise protection against third countries
have a definite timetable for implementation

3. Doha Development Agenda
Plurilateral and bilateral trade as a stumbling block
Origins of T-TIP and TPP
With the exception of the first, none of these effects can occur without affecting the behaviour of foreigners. To say that a tariff reduces American auto imports from Japan is the same as saying that it reduces Japanese auto exports to America. It is nonsense to advocate the one and oppose the other. An American tariff on autos is likely to be defended with language that obscures the nature of the undertaking. Thus, "we want to help American workers," not "we want to hurt Japanese workers"; "we want to improve America's terms of terms-of-trade," not "we want to harm Japan's terms-of-trade"; "we want to reduce American imports," not "we want to reduce Japanese exports"; "we want to increase employment levels in America," not "we want to depress employment levels in Japan.
Security Externalities
Negative right of veto (Hirschman 1980)
Importing countries, as opposed to exporters, generally hold the balance of advantage in international economic relations (Chin and Jiang 2009)

4. Motives for Bilateralism Moderate, normal globalization
Impulses for PTAs
Motives for Bilateralism
On Bilaterals
(Hirschman 1980)
Economic
Benign
Positive economic nationalism
Political
Malign
Negative economic nationalism
Joseph Grieco
“The fundamental goal of states in any relationship is to prevent others from achieving advances”
Free trade and protectionism should not be considered as mutually exclusive policies
Both can be of service to the state
Domestic
International
Ideas
Material
Deep integration
Shallow integration
Hyperglobalization
Moderate, normal globalization
Environmental linkages
Labour linkages
Human rights linkages
Voluntary business codes

5. Doha Development Agenda
Preference Erosion
GATT boomerang blowback
Graphical illustration
Neo-Colonialism
Preferences coupled to tariff escalation coupled to variable geometry shackles developing economies
Multilateral trade barriers have been reduced, and as negotiations proceed toward reducing them further, developing countries see themselves losing their markets to other developed countries previously not favoured
Natural Trading Partners
South-South Trade
North-North Trade

6. Doha Development Agenda
Africa and Regional Trade Agreements
What are African states preoccupied by?
Preference erosion
Residual interest in import substitution
Policy space
Special and differential treatment
What do African states need?
Improved infrastructure
Further liberalization in some areas Investor protection
Trade facilitation
Rationalized regional arrangements Competition policy
Stronger institutions
“Aid for trade”

7. Doha Development Agenda
Regime shifting
Regime change
Best Alternative to a Negotiated Agreement
Forum change
1960s and 1970s
The Third World created an organization separate from the GATT - the United Nations Committee on Trade and Development (UNCTAD)

8. Doha Development Agenda
Effects from preferential trade
3 elemental effects from PTAs
Classic discussion of trade diversion and creation can be fond in Viner (1950)
Haberler’s Spillover
Trade diversion
Nations excluded from the preferences see lower export prices (they lower prices to remain competitive even though they still pay the tariff) and thus export less to the preference-granting nation. Excluded nations (and especially their exporters) lose from this “trade diversion”.
Smith’s Certitude
Trade creation
Nations that receive tariff preferences see a higher export price and thus export more to the preference giving nation. The preference-receiving nation (and especially its exporters) gains from this “trade creation”.
Viner’s Ambiguity
The preference-granting nation might or might not gain for the simple reason that preferences create a new distortion (tax discrimination among foreign suppliers) while removing another (tax discrimination between firms in the preference-granting and preference-receiving nations).