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International Trade System
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About the ITS
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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 2017 $17.43 T = $47.8 B/day
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Factors Why has trade has increased between countries?
Industrial Revolution Resource requirement Transportation, communication Materialism Free trade philosophy Absolute versus comparative advantage
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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
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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
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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
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GN Dominance Post-CW Industrial Revolution Post –WWI Post-WWII
European, US Post –WWI Protectionism Post-WWII US economic hegemony in ‘free world’ Instituted rules-based system Post-CW EEs brought into loop with G-20 Rest of GS lags Uneven trade~25% dominate
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US Tariffs & the Rules-Based System
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
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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 _source=newsletter&utm_medium= &utm_campaign=Daily_Dispatch&utm_term=
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Agreements & Institutions
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GATTWTO General Agreement on Tariffs & Trade (GATT) (1947)
Eliminate trade barriers 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
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GATT WTO World Trade Organization (1995) Formal organization
Director General Dispute Settlement Body Tend to comply 164 members (23 observers) = 98.2% world trade Doha Round (2001) Still in 1st Round Objective: Open trade Challenge: All states self-interested Eliminate tariff, non-tariff barriers (NTBs) Roberto Azevêdo,
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WTO Challenges Why use tariffs and NTBs? Protectionism Re-election
Retaliation Leverage ‘National security concerns’ WTO clause
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WTO Challenges (cont.) Service sector GS adherence difficulties
Intellectual Property Rights (IPRs) Patents India Trademarks Copyrights
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WTO Challenges (cont.) 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
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WTO Challenges: Subsidies
Agriculture UK to match CAP $4 B to farmers to 2022 Industry Automaker bailouts Solar panels Steel Country Market price Subsidy Farmer’s income US $2 $1 $3 Brazil $0
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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
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WTO Dispute Resolution
Use WTO to file complaints Wide variety of disputes Bananas to beef; steel to solar panels 581 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
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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
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Free Trade Agreement (FTA) Types
Bilateral Multilateral US FTAs- 20 countries CAMUS, CAFTA-DR, ACFTA, CPTPP, Lomé- ACP-EU, EU FTAs EU-Japan Economic Partnership Agreement $200 B in trade goods Multilateral FTAs IGOs EU Lower tariffs on European wine, meat and cheese; cars and vehicle parts WTO
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Regional Economic IGOs
EU SAARC ECOWAS ASEAN EAC SADC Mercosur
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4 Most Important ITS Things
Trade in goods & services ITS is highly interdependent GN dominates Bilateral, multilateral FTAs
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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
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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
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