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Flashcards in Trade Agreements and Global Governance (KEMENY) Deck (20):
1

Rational reasons for anti-trade sentiments

1. Freer trade raises distributional costs
2. Free trade agreements may not be fair,
• Not a level playing field for poorer countries?
• Undermine democracies in favour of corporations?

2

What is the Stolper–Samuelson theorem

A basic theorem in Heckscher–Ohlin trade theory.
It describes the relationship between relative prices of output and relative factor rewards—specifically, real wages and real returns to capital.

3

At the end of the Atlantic economy

– Politics trumps liberalization
• Slam the gates shut on labour mobility
• Agricultural prices fall, spurring demands for protectionism

– Lack of global coordination thought to have exacerbated political tensions (via exchange rates)

– Major trade barriers through the end of WWII

4

Post-WWII Economic Order

Two conflicting imperatives

1. Interdependence without so much politics – ie more ‘liberal’ integration
2. National interests must be given voice

5

Bretton Woods

• 1944 conference of world leaders in a resort in New Hampshire (US)
• System that emerges enshrines this attempt at ‘balance’ between liberalization and national sovereignty
• Manages global economic interdependence until around 1970

6

Multilateralism:

- the principle of participation by three or more parties, especially by the governments of different countries.
– creating and enforcing rules would happen through institutions, rather than through political muscle-flexing
– Ok didn’t quite get to the ideal (US is already emerging as super power), but better before

7

Bretton Woods Institutions

1. International Monetary Fund (IMF) – Manage exchange rates
– Later becomes major lender
2. International Bank for Reconstruction and Development
– Initially funds the rebuilding of Europe
– Later broadens mandate and becomes the World
Bank
3. General Agreement on Tariffs and Trade (GATT)
– Precursor to WTO

8

Bretton Woods and Prosperity

• 1945-1970
– Major period of prosperity
• Ie GDP/capita rising in many countries
– Rise of the middle class in many developed economies
– Large growth in trade (>7%/year)
• Commonly called the ‘golden age’

9

What's GATT?

General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade.

10

What’s GATT got to do with the ‘golden age’?

Possibly not that much
– Trade rising, but how much because of GATT and how much because of
• Innovation leading to declining transport costs • General economic growth
• Overall international economic stability

11

Bretton Woods ends (complex reasons) in 1971

– So does fast growth in world prosperity
– (Correlation not equal to causation!)
– We are still all waiting for a return to golden age growth (uh oh)

12

World Trade Organization

WTO formed in 1995 (after long negotiations through 1980s) as a replacement for GATT
– A member-driven and governed organization – 161 member countries (as of April 2015)
– Still about multilateralism and MFN

13

Aims of WTO

– ‘Liberalize’ trade rules
– Forum to negotiate trade agreements
– Settler of disputes

14

Deep vs Shallow Integration

• WTO aims to make national priorities subservient to international integration
– Of goods and services, not labour!

• Not just about WTO here but also WB and
IMF
– IMF and WB: loans conditional on ‘Washington Consensus’ ideology: exporting neoliberalism

• WTO gets mired in conflict, bilateral agreements multiply, but with same features/ problems

15

Problems with WTO

These deals are increasingly not all that focused on trade!
– Trade becomes an entry into bigger set of rules about the global economy

Along with trade comes requirements for broad liberalization of poorer economies
– Often much stricter than the ones that most richer countries have
– and definitely much more than rich countries had at comparable development levels

– Little concern for broader policy impacts in these poorer countries – health, environment etc

Concerns about loss of sovereignty/ democracy

16

WTO dispute resolution: The Beef War

• 1989: EU enacts rules forbidding sale of beef with growth hormones in them
– Partly fears rooted in mad cow disease of 1980s – Americans exporters become shut out of EU
market
• US says countries had been using hormones for decades – no evidence hormones harm
– Attempts to get international institution to weigh on safety of hormones
– GATT ruling blocked by EU

• Along comes WTO Appellate Court – 1998 ruling in favour of the US
• No scientific evidence is found to support the ban
– EU supposed to change it laws to allow US beef
• But it does not
– Basically it gets away with it because it is big
and has complicated links to the US

17

India, Malaysia, Pakistan and Thailand vs USA
– 1973 US Endangered Species Act

‘Shrimp-Turtle’

Prohibits shrimp imports where catches made without ‘turtle-excluder device’ (TED)
– 1997 joint complaint
• WTO rules against US

Ruled against US because US did not apply rules fairly to all WTO members
• Caribbean nations got transition periods and technical and financial assistance
• Complainants did not
• Violation of MFN principles

In practice it is VERY hard to exercise these rights
• For instance: You first need to have negotiated with ALL potentially affected
• By this time, will all the turtles be gone?

18

Shallow integration

Reduction or elimination of tariffs, quotas, and other barriers to trade in goods at the border, such as trade-limiting customs procedures.

19

Deep integration

Means trade agreements which not only contain rules on tariffs and conventional non-tariff trade restrictions, but which also regulate the business environment in a more general sense.

20

Kemeny view on Deep vs Shallow Integration

The role of WTO as facilitator of multilateralism and neutral arbitration are good, but I favor a shallower kind of integration with more room for varieties of capitalism to flourish.