lecture 2 - WTO, barriers to trade, regional trade agreements Flashcards

Question

WTO retaliation process ineffective: Antigua vs US

Answer 1

2003: Antigua and Barbuda dispute US measures relating to gambling and betting services 2004 panel reports find US is violating WTO law on trade in services Appellate Body largely upheld panel decision in 2005 Antigua and Barbuda won right to $21 million annually in compensation until US laws are changed US refuses to pay Antigua got right to use trade sanctions to recoup losses it would hurt Antiguan econ more than it would hurt the US -> Antigua didn't retaliate

Answer 2

- WTO lets you lose (easy way to shift blame away from politicians onto the WTO + lets politicians avoid scorn of special interest lobbies) - states can get creative with retaliation - WTO makes exceptions, if it requires too much, states can defect = rational design of international institutions (you need some flexibility so that states comply)

Answer 3

did it increase trade? we don't know how it would be in a world without WTO members do engage in more international trade states bring relatively few cases to the WTO -> maybe not that important? or deterrent effect and countries abide the rules?

Answer 4

appellate body necessary to conclude dispute settlement cases usually has 7 members, appointed by WTO countries, 3 per appeal US has been blocking appointments since 2018 (Trump), now has 0 members -> essentially defunct long standing issues between US and Appellate Body: AB's interpretation of the antidumping/countervailing duties agreement

Answer 5

1. cooperation is hard bc anarchy of the international system 2. the WTO aids trade cooperation by providing a forum for bargaining, monitoring behavior and an enforcement mechanism through institutional reciprocity 3. WTO progress has been stalled because of diverse interests and domestic politics

Answer 6

global bodies are limited and require cooperation and consent of many members -> states may seek regional trade agreements with more important trade partners instead - most trade is concentrated with a few partners past two decades (late 1990s,2000s) = explosion of regional trade agreements two types: 1. Free Trade Agreement = most common e.g. NAFTA (US, Canada, Mexico), CPTPP (pacific countries) eliminate tariffs among members, separate trade policies with non members 2. Customs Unions = EU eliminate tariffs among members PLUS agree on common trade policies with countries not part of the costum union (common external tariff) -> EU negotiates free trade agreements with other regions, not individual countries regional trade agreements can be bilateral, but trend towards more mega-regional deals (TPP,RCEP) easier to implement because they require fewer members -> more members is harder to negotiate -> powerful states have a lot of say, can shop around for the best deal (if state doesn't get what it wants in the WTO, it can get RTAs to get better deal with smaller nr of states) benefit RTA = easier to ease into free trade policy (opening up to a limited amount of states) + sometimes more acceptable than joining WTO for domestic reasons that were first protected

Answer 7

does global trade increase or decrease as RTAs increase? we don't know: both positive and negative: problem = trade diversion: - could shift trade away from non-RTA members (e.g. from China-US to Mexico-US) -> prevents full realization of comparative advantage (maybe China had the comparative advantage) - favors states with strong bargaining position - biases trade rules in favor of states with large markets (EU, US) states can exercise "outside options" -> perhaps played role in failure Doha round (why would they compromise if they had outside option) benefit = trade creation - create new trade that wouldn't have occurred before - might be stepping stones to multilateral agreements (megaregional agreements -> network that covers a lot of the coutries -> smaller step to go to the WTO bc you already have so many tariffs and combined rules) we don't know which effect dominates, we don't know what the world would look like without the WTO

Answer 8

mega-regional agreements mentioned frequently in the textbook TTIP (Transatlantic Trade and Investment Partnership) was meant to be between US and EU TTP (Trans-Pacific Partnership) was meant to be between US and bunch of other pacific countries (Asia, Oceania, American continent) negotiations 2013, would be completed in 2016 neither of them went into force, although TPP was turned into CPTPP without the US (UK recently joined) what happened? TRUMP didn't like the agreements, came up in the 2016 campaign + also: - protests all across the world - TTIP already put on ice before Trump entered into office - Sister Agreement CETA (EU-Canada) had to be renegotiated bc of a referendum in Wallonia (Belgium) problem: liberalization would go beyond tariffs (tariffs were already low: around 5%) agreements meant to: - harmonize standards and regulations - introduce controversial rules to further investment (could sue countries for expropriation: new regulations, taking investments away) - introduce stricter intellectual property rights protections (good for pharmaceutical industry, but probably not for consumers) WTO also critized by environmentalists and consumer groups for its rules, but RTAs often go much further

Answer 9

EU afraid of same rules for food as the US had: opposed to potential harmonization with US standards on food safety might have been protectionist, but also legitimate concern about standards we want in our own jurisdiction

Answer 10

= cooperation bc one dominant actor can shoulder the burden of enforcement for all - benovelently: they think it is the right thing to do for the world - selfishly: serves the interest of the hegemon to set the rules and to enforce them most recent case hegemon = US, before it was the UK empire US benefits from trade liberalization after WW1 -> willing to incur the costs of mobilizing and monitoring enforcement of the rules now: US power declines -> no one state that is willing to provide the public good of trade liberalization -> suggests we are entering a period of less free trade (seems to be the case: more tariff wars) bc: collective action problem: countries have to coordinate

Answer 11

is hard: only two periods with hegemony (UK and US) we should see that with relative hegemony (one dominant actor), trade and other eco flows should be freer than during times without one clear dominant power is this the case? C19 UK dominant power -> much trade by the end of C19, end it declined despite the fact that the US was then the dominant power C20 before + after WW2 dominant power until 70s-80s -> after WW2 rise in trade (GATT negotiations), no decline in trade as the US relative power declines (rise of China doesn't seem to have a clear effect on trade volumes) - visible decline is bc eco crisis look at policies: early C19 (no hegemon) openness, interwar (US dominant) less openness, as US is dominant openness increase, but openness policies does not decline as US power declines SO: evidence is not that consistent with hegemonic stability theory (HST) -> too few data points to properly test the theory -> it is plausible, but not sure 2000s onwards = no clear hegemon

Answer 12

- cooperation and bargaining problems can prevent trade cooperation even if states want to cooperate, + even though economists agree that trade is better for everyone - international institutions can help alleviate some of these problems - global institutions are limited, states are seeking more regional agreements (less efficient and controversial) - not clear whether hegemonic stability theory is correct, but trade may increasingly fragment/become regionalized in a multipolar world (breakdown in current relative openness)