WTO Flashcards
(11 cards)
What Does the WTO Do
- Organisation attempts to facilitate, monitor and enforce global trade agreements between countries.
- It aims to promote trade liberalisation.
- It tries to reduce the barriers or restrictions to trade by negotiating the reduction of the tariffs or taxes around trade.
- Does this by encouraging countries to sign free trade agreements, which are written agreements to tariff-free trading between countries
4 key principles
Non-discrimination - a country should not discriminate between its
trading partners, and it should not discriminate between its own and
foreign products or services.
Opening trade - Lowering trade barriers to encourage trade; these
barriers include tariffs) and measures such as import bans or quotas.
Fair competition - Discouraging “unfair” practices, such as export
subsidies and dumping products at below normal cost to gain market
share.
Protection of the environment - The WTO permit members to take
measures to protect not only public, animal and plant health but also the
environment. However, members must not use environmental protection
measures as a means of introducing discriminatory trade barriers
2 key principles
eliminate tariffs and other trade restrictions on ‘substantially all the trade’
in goods between the member countries, and
eliminate substantially all discrimination against service suppliers from
member countries.
FI Benefit 1 Benefit #1 – S-I gap and economic activity
Benefit #1 – S-I gap and economic activity
IForeign investment fills Australia’s savings–investment (S–I) gap.
Allows higher investment than domestic savings alone.
Investment is part of GDP → boosts economic activity, jobs, income, and living standards.
Raises long-term economic growth.
Higher growth increases tax revenue:
Income tax (more jobs)
Corporate tax (higher profits)
GST (more spending)
Fi Benefit 2 Benefit #2 – Productivity, costs and international competitiveness explanation
Foreign investment increases physical capital (e.g. infrastructure, mining, agriculture).
This expands productive capacity and shifts the PPF outward.
More capital raises aggregate supply → boosts growth and lowers prices.
Improved productivity and lower costs make Australian exports more competitive.
FI Cost 1 Costs #1 – Australian assets, control and security. “Loss of economic sovereignty
Costs #1 – Australian assets, control and security. “Loss of economic sovereignty
Costs of foreign investment relate to foreign ownership and foreign debt (“twin evils”).
Equity inflows raise concerns over loss of control of Australian assets (economic sovereignty).
Foreign-owned firms may act against national interests and send profits overseas.
New risks involve foreign control of critical infrastructure.
Example: Darwin Port leased to a Chinese company for 99 years (2015), raising national security concerns due to Navy use.
FI Cost 2 - Interest burden on foreign debt
Most foreign investment in Australia is now through borrowing, increasing foreign debt.
Large foreign debt can burden the economy.
Rising interest rates may make debt servicing unsustainable and affect future generations.
Interest payments on foreign debt are Australia’s biggest income balance debit.
If borrowing funds productive capacity, debt servicing shouldn’t be a problem.
Principle 1
Non-discrimination - a country should not discriminate between its
trading partners, and it should not discriminate between its own and
foreign products or services.
Principle 2
Opening trade - Lowering trade barriers to encourage trade
Principle 3
Fair competition - Discouraging “unfair” practices, such as export
subsidies and dumping
Principle 4
Protection of the environment - The WTO permit members to take
measures to protect not only public, animal and plant health but also the
environment. However, members must not use environmental protection
measures as a means of introducing discriminatory trade barriers
