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International Trade

International Trade

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International Trade

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  1. International Trade

  2. 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 Women’s 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;

  3. 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

  4. 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

  5. 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 Historical Alternatives

  6. Levels Trade Openness

  7. 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

  8. 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)

  9. 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

  10. Liberal Trade Policies • Reduce tariffs • Eliminate/reduce non-tariff barriers • “Washington Consensus”

  11. Conditions for an Open World Order

  12. 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?

  13. 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?

  14. 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?

  15. 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?

  16. 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

  17. 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 Trade Institutions

  18. WTO: Current Issues

  19. 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?

  20. 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