1. International Trade System

2. About the ITS System of exchange of goods & services bt. countries
2 Types:
Merchandise trade
Primary goods
Foods, fuels, fibers, minerals, water
Manufactured goods
Finished products
Service trade
Direct relationship: buyer <--> seller
Foreign commercial presence
Goods & Services
1913
$20 B
= $55 K/ day
2016
$18 T
= $50 M/day

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

4. Export-Driven Economies
What it is
Exports over domestic demand
For GS, way to develop
Weak or small domestic sector
Heavily rely on production for export
Cash crops
Primary goods
Labor in export industry
Tourism
Many lack diversified market
GN as buyers of goods, source GS labor

5. What are China’s production advantages?
Internal issues, but…
Low-cost manufacturing model
Factory Asia
Regionalism
Linchpin of demand
Domestic market
Contractor supply
Centralized policy control

6. Why can’t other GS follow China’s model?
Lack large economy
Fewer jobs out of manufacturing
Require more diverse production
Lack policy control
Lack infrastructure, education

7. GN Dominance Post-CW Industrial Revolution Post –WWI Post-WWII
European, US
Post –WWI
Protectionism
Post-WWII
US economic hegemony in ‘free world’
Post-CW
EEs brought into loop with G-20
Rest of GS lags
Uneven trade~25% dominate

8. Agreements & Institutions

9. GATTWTO General Agreement on Tariffs & Trade (GATT) (1947)
Eliminate tariffs, non-tariff barriers (NTBs)
Principle of Nondiscrimination
‘Normal trade relations’= same treatment
Pressure on US as hegemon
Japan, Germany, then also EU bloc
CW ends, more members
Created WTO

10. GATT WTO World Trade Organization (1995) Formal organization
Director General
Dispute Settlement Body
Tend to comply
164 members (23 observers)
= 98.2% world trade
China, Russia
Doha Round- (2001)
Still in 1st Round
Objective: Open trade
Challenge: All states self-interested
Eliminate tariff, non-tariff barriers (NTBs)
Roberto Azevêdo,

11. WTO Challenges Why use tariffs and NTBs? Protectionism Re-election
Retaliation
Leverage
‘National security concerns’ WTO clause

12. The US Tariffs What is the rule-based system?
Int’l norms and procedures for cooperation
Why is the rule-based system in grave danger?
Protectionist policies
Tit-for-tat escalation
US uses obscure ‘National Security’ out
WTO under strain
Policies v. dispute resolution
Zero-sum view of trade
Pick & choose
Canada, MX, EU, SK, BZ, AUST, Argentina = 2/3 of US steel imports by value
Economist Espresso 3/23

13. The US Tariffs (cont.) What are the consequences of less cooperation?
Less competition
Undermines est. global trade foundation
Special-interest trade policy
↓ US political influence
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14. WTO Challenges (cont.) Service sector GS adherence difficulties
Intellectual Property Rights (IPRs)
Patents
India
Trademarks
Copyrights

15. WTO Challenges (cont.)
More covert policies: Non-tariff barriers (NTBs)
Quotas
Japanese autos to US
Set standards
GMOs
Domestic/local content rules
Canada’s renewal energy DS412
Joint venture requirements
China, India
Subsidies

16. WTO Challenges: Subsidies
Agriculture
Industry
Automaker bailouts
Solar panels
Steel
Country
Market price
Subsidy
Farmer’s income US $2 $1 $3
Brazil $0

17. The Sugar Dispute The Dispute Issues:
Tariffs
Quotas
Subsidies
Dumping
How do these tactics affect free trade?
U.S. prices higher
U.S. companies, consumers end up paying more
MX stuck with sugar
Undermines NAFTA terms
John Oliver on Sugar Subsidies

18. Disputes Trade wars EU- US ‘Banana War’ EU- US ‘Beef War’
1991 (Pre-WTO) to 2009
EU- US ‘Beef War’
Hormones v. mad cows
Russia –US; India, China- U.S.
Steel tariffs
China-US
Solar panel subsidies
US-EU
Airbus subsidies
Mexico & Canada v. US
Meat labeling by country; $3 B
US-SK (DS464)
Washing machines

19. WTO Dispute Resolution
Use WTO to file complaints
524 dispute cases filed since 1995
Overwhelming majority GN, EEs
WTO has power to enforce decisions
Sanctions, fines
Antigua and Barbuda v. U.S. DS 285

20. WTO Dispute Resolution: Antigua Case
What is at issue?
US gambling site protection
Antigua’s claims
WTO enforcement
Compliance
Status: Open case
9/17, Antigua wants $250 M to settle

21. Free Trade Agreement (FTA) Types
Bilateral
Multilateral FTAs IGOs
US FTAs- 20 countries EU
EU FTAs
WTO
Multilateral
NAFTA, CAFTA-DR, ACFTA,
Lomé- ACP-EU, Comprehensive & Progressive Agreement for TPP

22. Regional FTA IGO European Coal & Steel Community (ECSC)
Regional IGO (1951) of 6 states
Purpose: Promote regional trade
Present-day EU-now 28…
…until UK leaves
Significance to IMS
Eurozone- 19 members
Significance to II&F
Uniform investment rules

23. Regional Economic IGOsEU
SAARC
ECOWAS
ASEAN
EAC
SADC
Mercosur

24. 4 Most Important ITS Things
Trade in goods & services
ITS is highly interdependent
GN dominates
Bilateral, multilateral FTAs