Lec 28: Global Trade Institutions and Agreements Flashcards
At the beginning of the 20th century, there are high levels of trade, with many bilateral trade agreements.
What happens during the great depression (1930s)?
What does this set off?
Nation-states adopt protectionist policies during the great depression, setting off trade wars with other countries.
In US: Smoot-Hawley Tariff Act in US (1930) raises tariffs on imported products
What are the objectives of the Bretton Woods Agreement?
Principal objectives = stabilize international
financial situation and rebuild war-damaged
economies
What 3 main institutions come about through the BWA?
○ World Bank (reconstruction of war-torn countries)
○ IMF: focuses on monetary policy around member countries
○ International Trade Organization (ITO): never saw the light of day, because countries couldn’t decide on regulations surrounding its creation
§ Instead: GATT. 23 member countries
What is the GATT?
General Agreement on Tariffs and Trade (GATT,
1947)
- Multilateral negotiations: moving away from bilateral negotiations ○ Binding conditions ○ Reducing tariffs done by rounds of negotiation
What was the GATT’s focus on before the 1960s?
- Essential focus before 1960s: reduce tariffs between member countries, primarily developed countries
○ Once UNCTAD is signed: inclusion of more developing countries
How has the GATT evolved?
- # of member countries increases over time
- Length of negotiation rounds increases (9 since its creation)
What are 3 important GATT rounds?
○ Kennedy Round: accord the board cuts in tariff reductions
○ Tokyo round: countries talk about not only tariffs, but also subsidies
§ Make it hard for developing countries to participate
○ Uruguay: GATT becomes WTO (1994)
How is the WTO different from the GATT?
1) WTO full-fledged international organization. GATT, in comparison, was a provisional organization
2) WTO has trade rules on services, GATT only on goods
3) WTO looks at international property rights (ex patent protections)
4) WTO has a trade tribunal
- If a country deems that it’s being unfairly treated, it can file an appeal to the trade tribunal
What has been the big point of discussion during the Doha Round?
- Big point of discussion: subsidies in agricultural sector
- Developing countries want developed countries to scale back subsidies- By 2003 in Cancun: initial discussions backtracked
- 2013 Bali: initial concessions about agricultural sector back on table
What are the 3 types of regional trade agreements?
i. free-trade agreements
ii. customs unions
iii. common markets
What is a free trade area?
Until recently, what was the world’s largest FTA?
i. Free trade area: member countries agree to reduced tariffs with other member countries, but can also negotiate their own trade agreements with non-member countries
- Until recently NAFTA was world’s largest FTA
What is a customs union?
What is the difference between a customs union and a FTA?
Give an example
ii. Customs union: a FTA area in which the member
countries agree to establish a common trade policy
with the rest of the world
ii. Customs unions: difference is what member countries can and cannot do. No longer able to negotiate own free-trade agreements with other non-member countries. Need approval from all other member countries to do so
Ex: Mercosur
What is a common market? give an ex
iii. Common market: customs union that also has free
movement of labor and capital among its members
the EU or ASEAN
What is the guiding principle of NAFTA?
National Treatment: governments cannot discriminate
on the basis of a firm’s nationality
What are 3 main points provided by NAFTA provisions?
Other provisions include:
elimination of tariffs by 1999
trade restrictions are “grandfathered” or have
“sunset” clauses
- Grandfathered: exemptions, some products won’t have to abide by the same trade exemptions
- Sunset clause: some products have long periods to integrate tariffs. Allows industries more time to adjust
some goods remain subject to non-tariff trade
restrictions (such as cultural industries in Canada)
