Trade Liberalization Flashcards
Trade Liberalization
Removing barriers like tariffs and non-tariff barriers to allow free trade between countries.
Methods of Trade Liberalization
- Most-Favored Nation Principle: Treating all trading partners equally.
- National Treatment: Treating foreign products the same as local products once they enter the market.
Historical implementations of trade liberalization
GATT (General Agreement on Tariffs and Trade): Key in Bretton Woods Regime (BWR), 1944-1971/3.
WTO (World Trade Organization): Founded in 1995, central to the Post-Washington Consensus Regime (PWCR).
Benefits of Trade Liberalization
- Raises incomes: Increases development through global trade.
- Economic growth: Stimulates economies.
- Good governance: Encourages anti-corruption, transparency, and rule of law.
David Ricardo’s Theory
Countries benefit by specializing in and trading products they produce most efficiently, creating a “win-win” scenario.
Example: If one country excels at producing coffee and another at producing cars, both gain by focusing on these products and trading.
Critiques of Comparative Advantage
Limitations: Model originally assumes only two countries, two goods, and no capital flow, making it outdated.
Distribution Issues: Who benefits within each country, and how is wealth distributed?
Power Dynamics: The “win-win” scenario is questioned, especially by Global South and BRICS countries.
Role of WTO
Regulates global trade with 164 member countries, focusing on goods, services, and intellectual property.
Challenges & Criticisms of trade liberalization
- Legitimacy Crisis (ex. Protests like the 1999 Seattle WTO protests)
- Doha Development Round (DDR): aimed to make trade fairer and reduce poverty. Stalled due to lack of agreement, especially with powerful emerging markets (e.g., BRICS).
- Global Disparities: Wealthier countries often benefit more from trade liberalization, while developing countries face challenges (e.g., agriculture subsidies in rich countries hurt farmers in the Global South).
Three Key Disadvantages for the Global South
Negotiation & Rule Enforcement: Developing countries have less power in negotiations and face high costs in disputes.
Bias Against Primary Exports: Prices of primary goods (like agriculture) are lower, disadvantaging Global South countries reliant on these exports.
Regional Trade Agreements (RTAs): Growing number of RTAs can bypass WTO principles, benefiting wealthier nations and sidelining smaller economies.
Critique of Moyo’s Dead Aid
Simplistic Analysis
Overemphasis on Entrepreneurs
Political Oversight
Zombie Economics
Critiques of Busan Outcomes
Implementation Challenges
Power Imbalances Persist
Overemphasis on Results
DAC
Development Assistance Commi1ee (of the OECD), forum for the largest providers of aid (32 members)
GNI
Gross National Income: represents the total income – over a set period of Dme, such as a year - received by a country from its residents and businesses regardless of whether they are in the country or abroad, thus capturing overseas investments and actives (e.g., transnational corporations).
GPEDC
Global Partnership for Effective Development Co-operation (OECD initiative)
NDD
Non-DAC Donors (e.g., China, Cuba, Turkey)
