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The Political Economy of International Trade

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다인 김

on 10 April 2014

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Transcript of The Political Economy of International Trade

Team3 : Ji Hoon, Tae Gyu, Da In, Yu Ri, Ji Hyun, Gaetan, Julie
Monday, April 7, 2014
Traiff
Part1.
The Political Economy of International Trade
Instruments of Trade Policy
Subsides
Quota
Dupping
Tariff

A SPECIFIC tariff, is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs are vulnerable to changes in the market or inflation unless updated periodically.
A REVENUE tariff is a set of rates designed primarily to raise money for the government. A tariff on coffee imports imposed by countries where coffee cannot be grown, for example, raises a steady flow of revenue.
A PROHIBITIVE tariff is one so high that nearly no one imports any of that item.
A PROTECTIVE tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition (see also effective rate of protection,) especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports.
An environmental tariff, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-tariff', and is placed on products being imported from, and also being sent to countries with substandard environmental pollution controls.

Tariff

Tariff

Subsidies
What is tariff ?
*Important keyword

- International trade
- Between the nation
- Tax
- Protect
- Government
- Manage domestic operation
Why?
Why government enforce the system ?

Subsidies
Subsidies is…..
A subsidy is a form of financial or in kind support extended to an economic sector generally with the aim of promoting economic and social policy

Subsidies
Quota
Voluntary Export Restraint(VER)
Dumping
WTO
: EXPERIENCE TO DATE
For example of subsidies
For example from NGOs or implicit subsidies. Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, or payments to factors of production. Consumer/Consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water.

Whether subsidies are positive or negative is typically a normative judgment. As a form of economic intervention, subsidies are inherently contrary to the market's demands. Thus, they are commonly used by governments to promote general welfare (eg. housing, tuition, sustenance). However, they can also be used as tools of political and corporate cronyism.

What the quota is?
Screen quota is a policy that enforces a minimum number of screening days of domestic films on the theater each year to protect the nations film.

Quota
Tariff rate quota.
For certain products, such as beef, pork, poultry, tariff rate quotas (TRQs) would be applied. Imports entering the market within the quota will face lower tariffs while higher duties will be applied to products imported outside the quota.

VER is a quota on trade imposed by the exporting country, typically at the request of the importing country’s government.

Dumping
What the dumping is?
A definition of dumping is the act of charging a lower price for the like goods in a foreign market than one charges for the same good in a domestic market for consumption in the home market of the exporter.
This is often referred to as selling at less than "normal value" on the same level of trade in the ordinary course of trade.

Normal value
of the exporting
market
Export price
Impact on the domestic country
More than 94% of the U.S. imports of frozen
concentrated orange juice came from Brazil
during the 1980s. Responding to the petition
filed by Florida Citrus Mutual, an association
of orange growers, the U.S. Commerce
Department imposed 2.655% of import deposit
on all imports from Brazil. An estimated 80%
of Brazilian shipment of frozen concentrated
orange juice to the United States was
consumed by manufacturers such as Coca-
Cola, Procter & Gamble, Tropicana, and Pasco.
An anti-dumping measure, in this case,
resulted in losses on the part of the United
States in the forms of higher production costs
and higher prices for consumers.
Part2.
Development of
the World Trading System
WTO
GATT
&
WTO
The Uruguay Round
WTO - A bit of history
Based on the classical theories of Free Trade

Economic interdependence = Peace

1947 : GATT

Eliminate barriers takes time

What is the Uruguay Round?
8th round of multilateral trade negotiations
undertaken by the GATT

It took more than 7 years

123 countries

Creation of the WTO

Main objectives:

to reduce agricultural subsidies
to lift restrictions on foreign investment
to begin the process of opening trade in services like banking and insurance.
Agreements
The Uruguay Round
the General Agreement on Trade in Services (GATS)
the Agreement on Agriculture (AoA)
the Agreement on Textiles and Clothing (ATC)
the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
The Uruguay Round
The involved commitments to reduce regulations restricting international trade in services.
GATS
The involved commitments to eliminate the quota system established in the 1970s on textile and apparel products.

ATC
The involved some modest commitments to reduce support for the agricultural industry.

AoA
The agreement involved commitments to standardize the treatment and enforcement of intellectual property rights.
TRIPS
GATT
What was it?

Evolution of World trade
How does the WTO work?
Member countries contribute to the budget
Same number of votes, regardless its contribution
How does the WTO work?
« Most favored nation » clause
Part3.
WTO – Settling disputes
Video Clip about WTO & GATT
WTO
: EXPERIENCE TO DATE
1. WTO as Global Police
More than 370 trade disputes

¾ had been resolved by informal consultations

Just 196 cases handled by the GATT

CONFIDENCE
in the organization’s dispute resolution procedures

2. Expanding Trade Agreement
Role of brokering future agreement
Encompass regulations governing foreign direct investment
Reform the global telecommunication
* Allow foreign operators to purchase ownership stakes in domestic telecommunication providers
* Allow to establish a set of common rules for fair competition
* 68 countries pledged to start opening their market
Reform financial services industries
* 102 countries pledged to open to varying degrees their banking.
* Covers foreign direct investment
* Asian countries allow significant foreign participation in their financial services sectors

WTO
: EXPERIENCE TO DATE
Where is it?
WTO
: EXPERIENCE TO DATE
3. The WTO in Seattle
WTO
: EXPERIENCE TO DATE
WTO
: EXPERIENCE TO DATE
Oppositionist
The Millennium Round
reducing barriers to cross- border trade and investment.
Ended without any agreement being reached
Friction between the US and the EU
VS
politically
powerful farm
lobby and long
history of farm
subsidies
The elimination
of subsidies to
agricultural
exporters

3. The WTO in Seattle
Efforts by the US to write "basic labor rights"
VS
US
Developing Nations
To impose tariffs on goods imported from countries that did not abide by what the US saw as fair labor practices

An attempt by the US to find a legal way of restricting imports form poorer nations

Diverse collection of organizations oppose free trade
“WTO is an undemocratic institution”
Environmentalists
Human rights activists
* Free trade in agricultural products might have on the rates of global deforestation

* The adverse impact that some WTO rulings have had on environmental policies
* Outlawing the ability of nations to stop imports from countries where child labor is used

* American workers are losing their job

WTO
: EXPERIENCE TO DATE
Supporters
WTO
: EXPERIENCE TO DATE
Supporters opinions were ignored by
WTO
: EXPERIENCE TO DATE
WTO exists to serve the interests
Poor countries cannot pass strict environmental laws and law supporting argue

Free trade can raise living standard
PASSAGE OF LAWS

* Shutting down the
opening ceremonies
of the WTO

* Sparking violence
in the peaceful
streets of Seattle
600 demonstrators arrested
Millions of dollars in property damaged
WTO
: EXPERIENCE TO DATE
What happened in Seattle have been a watershed
Anti-dumping Actions
*Global trend issues
toward free trade
moved to center stage
in the popular consciousness
* The merits of free trade and globalization have become mainstream.

Part4.
THE FUTURE OF THE WTO
: UNRESOLVED ISSUES
AND THE DOHA ROUND.
1. Unresolved Issues
Anti-dumping Actions

Protectionism in Agriculture

Protecting Intellectual Properties

Market Access for Non-agricultural goods and Services

WTO rules allow countries

to impose anti-dumping duties

on foreign goods that are being sold cheaper than at home,

or below their cost of production,

when domestic producers can show that they are being harmed.

Anti-dumping Actions
To protect domestic producers

Unfortunately, the rather vague definition
of what constitutes “dumping” has proven to be exploiting loophole that many countries are to pursue protectionism.

1) Cheaper than at home
2)Below their cost of production
Protectionism in Agriculture
High tariffs to import agricultural products and subsidies to export agricultural products

Protectionism in Agriculture
on Non-agriculture and Agriculture products
Tariffs
Protectionism in Agriculture
Percentage of on domestic products
Subsidies
Protecting Intellectual Properties
Trade Related Intellectual Properties in Doha round

Why we have to protect Intellectual property?

- Example : India’s medicine

Protecting Intellectual Properties
It reduces the export opportunities in India for the original innovator in the U.S

The Indian producer is able to export its pirated imitation to additional countries, it also reduces the export opportunities in those countries for the U.S inventor.
Protecting Intellectual Properties
Intellectual properties
Reducing piracy rates in areas would have a significant impact on the volume of world trade and increase the incentive for producers to invest in the creation of intellectual property.

This would boost economic and social welfare and global economic growth rates.

Although WTO did make headway with the TRIPs agreement in UR, still these requirements do not go far enough and further commitments are necessary
Market Access forNon-agricultural
goods & Services
High tariffs to selected goods

- Ex : high tariffs to transportation equipment in Australia and South Korea

- high tariffs to some goods from developing countries

High tariffs to Services

2. A New Round of Talks : Doha
Part4.
THE FUTURE OF THE WTO
: UNRESOLVED ISSUES
AND THE DOHA ROUND.
Anti-dumping actions, trade in agricultural products, better enforcement of intellectual property laws, and expanded market access were four of the issues the WTO wanted to tackle at the 1999 meetings in Seattle.
Breakdown
In late 2001, the WTO tried again the meeting, about liberalizing the global trade and investment framework.
The place of the meeting is Doha in the
Persian Gulf state of Qatar, no doubt with
an eye on the difficulties that anti-globalization
protesters would have in getting there.
To date, the conclusion being discussed.
The agenda agreed upon at Doha
Cutting Tariffs on industrial goods and services.
Phasing out subsidies to agricultural producers.
Reducing barriers to cross-border investment.
Limiting the use of anti-dumping laws.
Position on the Doha Round
Potential winners
Low-cost agricultural producers in the developing world and developed nations such as Australia and the United States.
Because
Agricultural producers these nations will ultimately see the global markets for their goods expand.
Developing countries to obtain benefits.
Because of the removal of trade barriers in developed countries.
Position on the Doha Round
Clear losers
The sick and poor of the would also benefit from guaranteed access to cheaper medicines.
EU and Japanese farmers, U.S. steelmakers, environmental activists, and pharmaceutical firms in the developed world.
Agricultural subsidies in the EU and Japan is a difficult position.
Because farmers'
political orientation of
the two countries is strong.
The U.S. bowed to pressure from every other nation to negotiate revisions of anti-dumping rules, which the U.S. had used to protect its steel producers from foreign competition.
Position on the Doha Round
Clear losers
Environmental
activists
Pharmaceutical firms
in the developed world
Developing nations that see environmental protection policies as trade barriers by another name.
The world's poorer nations that they can make or buy generic equivalents to fight such killers as AIDS and malaria.
If Doha Round is successful,
The Doha Round of negotiations could significantly raise global economic welfare.
Doha Round would raise global incomes by as much as $300 billion annually, with 60% of the gain going to the world's poorer nations, which would help to pull 150 million people out of poverty.
Yearly progress
Thank you
2003
2004
2009
2003
2004
2009
Meeting held in Cancun, Mexico
Breakdown
Because there was no agreement on how to proceed with reducing agricultural subsidies and tariffs
VS
EU, U.S., and India,among others, proved less than willing to reduce tariffs and subsidies to their politically important farmers.
Brazil and certain West African nations wanted free trade as quickly as possible.
In early 2004
The U.S. and EU have agreed to restart talks.
2004 Mid
In mid-2004 both seemed to commit themselves to sweeping reductions in agricultural tariffs and subsidies.
In fact, there is no progress
in the talks were suspended.
Because of
disagreements over how deep the cuts in subsidies to agricultural producers should be.
The Goal
To reduce tariffs for manufactured and agricultural goods by 60% to 70%
To cut subsidies to half of their current level
But, getting nations to agree to these goals proved exceedingly difficult.
The Uruguay Round resulted in numerous trade agreements
among member countries, including for example:
GATT : General Agreement on Tariffs and Trade

A treaty organization formed in 1947 in Geneva to to reduce the barriers of international trade

It was supposed to become a part of the International Trade Organization (ITO)

In 1994, GATT was replaced by the WTO.

GATT: 8 rounds
A round: a rule-based multilateral trading system for trade in both goods and services through a series of negotiations

From 1947 to 1962 : 5 rounds focused on reducing tariffs

From 1964 to 1994 : 3 rounds with wider objectives

The last round: the Uruguay Round
Full transcript