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Limitations: Model originally assumes only two countries, two goods, and no capital flow, making it outdated.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)
ODA
Overseas Development Assistance (OECD)
OECD
Organization for Economic Co-operation and Development
The Global Partnership for Effective Development Co-operation (GPEDC) purpose
An inclusive forum for sharing best practices and learning about effective aid (similar to the UN Global Compact for corporate responsibility).
Ensures accountability between donors and recipients.
The Global Partnership for Effective Development Co-operation (GPEDC) challenges
While some indicators of aid effectiveness have improved, overall targets have not been realized.
The reasons for these shortfalls are often not critically examined.
A problematic focus on results may lead to short-term gains over sustainable impacts.
3 Problems with Aid Effectiveness (Analyzed Through a GPE Lens)
Power in the Post-Washington Consensus Regime (PWCR)
Aid as Power
Power of Selectivity
Power in the Post-Washington Consensus Regime (PWCR) Issues
Fails to connect current poverty with Structural Adjustment Programs (SAPs) implemented in the past.
Promotes “trade, not aid,” overlooking significant barriers in the WTO’s Doha Development Round.
Neglects the limitations of Foreign Portfolio Investment (FPI) versus Foreign Direct Investment (FDI) under the New International Financial Architecture (NIFA).
Business Case for Development
Aid as Power
DAC Donors (Development Assistance Committee, OECD): Aid policies reflect asymmetrical power dynamics, favoring donor priorities over recipient needs.
Strategies are often framed as consensus-based, but not all stakeholders wield equal influence
Aid is tied to donor national interests, limiting its neutrality.
Aid Donor Types
DAC Donors: Traditional governmental donors (e.g., OECD countries).
Private Donors: Philanthropic organizations and corporations.
Non-DAC Donors (NDD): Emerging economies and countries outside traditional donor frameworks.
Global Aid as a Regime
A set of rules and power dynamics governing aid flows.
Aid Effectiveness Solution
Emphasized through the GPEDC’s focus on accountability and results.
Power in Aid
PWCR: Overlooks structural historical causes of poverty.
Aid as Power: Maintains asymmetrical donor-recipient relationships.
Power of Selectivity: Prioritizes measurable results, often at the expense of equitable aid distribution.
