International Trade

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International Trade
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Exam Concepts from Student Presentation

• Security Council Reform
• Why is SC reform on the UN agenda?
• Which four countries are considered for permanent
  membership?
• CEDAW Convention Is the US a signatory? Why?
  Role in Womens Rights Issues
• ICC When was it established?
• What kind of crimes does it prosecute?
• Is the US a party and why? Are EU countries
  parties?
• Similarities and differences with tribunals
  (Yugoslavia, Rwanda)
• Terrorism policy options for dealing with
  international terrorism pros and cons of each

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Political Economy

• Studies the relationship between economics and
  politics (Gilpin 1975)
• Politics shape the framework of economic
  transactions
• Economic activities generate and redistributes
  wealth
• Reshapes power and politics among groups

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Logic of Economic Liberalism

• Adams Smith (1723-1790) and David Ricardo
  (1772-1823)
• Gains from trade
• Comparative advantage
• Specialization and economies of scale
• Trade consume more at a lower price
• Gains from trade common but asymmetrical

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Historical Alternatives

• Mercantilism
• Trade serves political purposes
• Accumulate surplus and money
• Augment military power

• Marxism
• Capital gains from markets and trade while labor
  is exploited
• Market driven imperialism
• Dependency of the South to the North

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• Levels Trade Openness

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Autarky

• Albania 1970s, 1980s
• Communist country
• Broke rang with the USSR and the Council for
  Mutual Economic Assistance (CMEA)
• Strategy of self reliance
• Largely closed to trade
• Outcomes technological backwardness, poverty,
  inefficiency, weakened power

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Protectionism

• Protect certain domestic industries from foreign
  competition
• Objectives
• Self-sufficiency and security (agriculture,
  military equipment)
• Protect infant industry
• Predictability, less dependency, social stability
• Satisfy political lobbies
• Respond to predatory dumping on the part of
  trading partners
• Generate direct government revenue (if tariffs
  used)

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Protectionist Instruments

• Quotas
• Quotas on textile imports
• Multifibre Arrangement (1974)
• Tariffs
• US tariffs over 9 canned tuna, frozen orange
  juice, rubber footwear, non-athletic women's
  footwear, ceramic tiles, etc.
• Subsidies
• U.S. government support for sugar cane, cotton,
  corn subsidies
• Korean steel and electronics 1980s
• Other non-tariff barriers
• EU ban on hormone-treated beef, US ban on Mexican
  tuna, Canada requirement of reusable beer
  containers

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Liberal Trade Policies

• Reduce tariffs
• Eliminate/reduce non-tariff barriers
• Washington Consensus

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• Conditions for an Open World Order

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Hegemonic Stability Theory

• Interests and power shape trading regimes
• Hegemonic states as guarantors of free trade
• Gain most
• Less vulnerable to social disruption
• Less vulnerable to cheating
• Power to persuade others to join
• Examples?

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Liberal Institutionalism

• Robert Keohane After Hegemony (1986)
• Even hegemonic states need institutions to
  achieve reciprocity and reduce transaction costs
• Institutions are sticky persist even after
  decline of hegemon, or despite short-term
  interest of the hegemon
• Examples?

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US Steel Tariffs

• US imposes 30 steel tariffs in 2002
• EU challenged the US in the WTO
• WTO rules against steel tariffs in 2003
• President Bush removed the tariffs in 2004.
• Why?

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Liberalism and Domestic Politics

• Trade redistributes wealth
• Creates losers and winners
• Consumers win
• Import-competing sectors loose export sectors
  win
• Does labor loose or win?
• Who looses and who wins from higher steel
  tariffs?

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Trade Institutions

• The GATT (General Agreement on Tariffs and
  Trade), 1947
• Facilitate negotiations to reduce tariffs and
  NTBs
• Average tariffs dropped from 40 of the goods
  value in 1945 to 3 of the goods value in 2002
• Rounds of negotiations
• -The Kennedy round (1960s)
• -Doha Round (2001) under the WTO
• Dispute resolution mechanism

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Trade Institutions

• The WTO (World Trade Organization), 1995
• Replaced GATT
• International organization with a staff of
  approximately 500
• Expanded menu of cooperation
• Trade in services, intellectual property rights
• Adjudicates disputes
• Trade and environment, labor rights, human rights

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WTO Current Issues
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Current Issues Agricultural Trade

• Developing countries comparative advantage in
  agricultural products
• Industrial countries heavy agricultural
  subsidies
• The Doha (2001) round and the road ahead?
• Negotiations broke down in Cancun
• EU faces pressures for internal reform of the
  Common Agricultural Policies
• But liberalization opposed by strong domestic
  lobbies in industrial countries
• What to do?

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Intellectual Property Rights

• Piracy of software, music, films
• WTO International Treaty on Trade Related
  Intellectual Property Rights (TRIPS) (1994)
• Issues of domestic enforcement
• Patents on drugs and biotechnology contentious
• HIV/AID drugs