Trading blocs and the WTO (L4) Flashcards
how can trade be liberalised
on a global/regional basis/ unilaterally
problems with international trade in the first half of 20th cent
high degree of protectionism
no trade dispute settlement mechanism
problems with GATT (general agreement on tariffs and trade)
only a treaty so not permanent
trade dispute mechanism was flawed
WTO (world trade organisation)
permanent institution
sets rules for international trade replaces GATT
formal mechanism to resolve trade disputes
trade bloc
group of countries that mutually agree to remove/reduce trade barriers
FTA
free trade agreement/area
can be bilateral/multilateral
reduce trade barriers below world price levels so tariffs n quotas are removed
FTA pros n cons
(+)
competitive sectors benefit, more choice, less administration costs for gov n firms, increased foreign direct investment,trade creation, more efficient allocation of resources
(-)
decline of uncompetitive sectors,risk of structural unemployment
lack of bargaining power=hard to get advantageous trade deals
other members may find ways to improve competitiveness of rival firms/industries
trade diversion
low production cost producer to high production cost producer
trade creation
opposite of trade diversion
customs union
free trade union imposing restrictions on non members
commons external tariffs
trade policy agreed by the member of a customs union that sets identical restrictions on trade to non-members
advantages of custom union
increased bargaining power when negotiating trade deals
ability to set common external tariff to protect industries
cons of custom union
loss of independent trade policy
trade restrictions in FTAs and customs unions on goods
firms have to modify products based on countries standards
checks of goods and paperwork
remaining trade restrictions in FTAs and custom unions on services
workers still need visas to travel through blocs
countries set different standards on qualifications
