UNIT 1-7 (incomplete) Flashcards
why countries trade
- trade was driven by comparative rather than absolute costs (of producing a good).
A country would still benefit from trading according to its comparative
advantage—exporting products in which its absolute advantage was greatest,
and importing products in which its absolute advantage was comparatively less
(even if still positive).
Globalization, Import & Export
Economic “globalization” is a historical process, the result of human innovation and technological progress.increasing integration of economies around the world, particularly
=through the movement of goods, services, and capital across borders.
A core element of globalization is the expansion of world trade through the
elimination or reduction of trade barriers, such as import tariffs.
Free Trade vs Fair Trade
Free trade assumes there are no barriers to trade between countries.- The prices paid for all goods and services are determined by the balance between what the producer wants for the goods and services and what the consumer is
prepared to pay. * Whether the producer or the consumer has most influence over the final price
varies. * If a commodity is scarce then the producer has most influence. Conversely, if
there is a glut, then the consumer can drive the price down.
Fair trade differs from standard trade in six principal ways:
- focus on trading with poor and marginalized producer groups, to help them develop skills and sustainable livelihood through trade.
- pays fair price that covers full cost of producion and provides livign wage to producer
- provides credit for producers,
- premium can be paid to provde funds for social developemtn work in producer communities
- fair treatment of all workers
- develops long term relationships than short term contracts
NAFTA
trading with poor and marginalized producer groups, to help them develop skills and sustainable livelihood through trade. which would then pressure countries to reduce their environmental and labour standards in order to keep or attract jobs
- so then nafta parties agreed on rules prohibiting selective enformcenet of labour+environmental laws
- unsured that free trade agreements could be fair
trading with poor and marginalized producer groups, to help them
develop skills and sustainable livelihood through trade.
Free Trade Agreements (FTAs):
is an agreement between two or more countries
where the countries agree on certain obligations that affect trade in goods and
services, and protections for investors and intellectual property rights, among
other topics.
* The main goal of trade agreements is to reduce barriers to exports, protect a
country’s interests competing abroad, and enhance the rule of law in the FTA
partner country or countries.
* Currently, India has 13 FTAs and 6 Preferential Trade Agreements.
bretton woods conference, 1944
official known us UN Monetary and financial conference - to agree upon a series of new rules for the post-WWII international
monetary system.
Accomplished= creation of IMF and International Bank for
Reconstruction and Development (IBRD).**also recommended the establishment **of a
complementary institution to be known as the International Trade Organization (ITO),
The policies adopted by governments to combat the Great Depression - high
tariff barriers, competitive currency devaluations, discriminatory trading
blocs - had contributed to creating an unstable international environment
without improving the economic situation.
* This experience led international leaders to conclude that economic cooperation was the only way to achieve both peace and prosperity, at home and abroad.
IMF and the IBRD
IMF was charged with the maintenance of a system of fixed exchange rates cantered on the U.S. dollar and gold. and to
assist in short term financial assistance to countries experiencing temporary deficits in their balance of payments;
IBRD, meanwhile, was responsible for providing financial assistance for the reconstruction of war-ravaged nations and the economic development
of less developed countries.
GATT (General Agreement on Tariffs and Trade)
United States and the United Kingdom took the initiative at the newly formed United Nations to draft a charter for the proposed International Trade Organisation.
* These negotiations concluded with the signing of the Havana Charter in March of 1948.
* The Havana Charter never entered into force, primarily because the U.S. Senate failed to ratify it.
* As a result, the ITO was stillborn.
* Meanwhile, parallel negotiations were conducted on a multilateral
agreement for reciprocal reductions in tariff barriers.
* These negotiations resulted in the signing of the GATT on November 30, 1947.
The GATT survived the ITO’s demise, but it lacked a coherent institutional structure, since the negotiators had expected the agreement to be subsumed under the ITO’s umbrella.
STILL- deficiencies, the GATT managed to function as a de
facto international organization, sponsoring eight rounds of multilateral trade negotiations.
WTO
The Uruguay Round, conducted from1987 to 1994, culminated in
the Marrakesh Agreement, which established the World Trade Organization (WTO).
CAME INTO EXISTENCE 1 Jan 1995
* The WTO incorporates the principles of the GATT and provides a more
enduring institutional framework for implementing
it is a Negotiating forum and set of rules that helps settle disputes. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects — because this is important for
economic development and well-being.
The rules have to be transparent and predictable - that partly means removing
obstacles.
Governing Principles of the WTO
- Trade Without
Discrimination- Most favoured nation- treating other people with equality + National Treatment - Freer Trade
* Lowering trade barriers - customs duties (or tariffs) and
measures such as import bans or customs duties - Predictability: Through
Binding and Transparency - Promoting Fair Competition
- Encouraging Development and
Economic Reform
Article III of the Marrakesh Agreement - Functions
- Facilitates implementation, administration, and operation of Multilateral and Plurilateral Trade Agreements.
- Serves as a forum for negotiations on multilateral trade relations and implementing outcomes.
- Administers the Dispute Settlement Understanding (DSU).
- Oversees the Trade Policy Review Mechanism (TPRM).
- Cooperates with IMF, World Bank, and affiliated agencies for global economic policy coherence.
Functions of the WTO
- Trade Negotiations
*Provides a framework
to structure the agreements, as well as providing dispute resolution mechanisms. - Implementation and
Monitoring
*Once the agreements are negotiated, the WTO ensures that the signatory countries adhere to their commitments in practice. - Dispute Settlement
*The members of the WTO can file complaints against other member states if they feel the trade and
economic policies of a country are divergent from their commitments under one of the agreements of the WTO.
4.Building Trade Capacity
*The WTO runs special programs to support developing countries by helping them build the capacity to participate in free trade with more developed countries.
Outreach
*The WTO carries out lobbying and outreach across the world as a part of its larger objectives to promote free trade.
bodies of wto
The Ministerial Conference
General Council
* Council on Goods
* Council on Services
* TRIPS Council
Dispute settlement body+ Trade Polcy review body
Ministerial Conference
topmost decision-making body of the WTO is the Ministerial
Conference, which usually meets every two years. It brings together
all members of the WTO, all of which are countries or customs
unions.
The Ministerial Conference holds the authority to make decisions on any aspects of all multilateral agreements made under the WTO.
The General Council
the WTO’s highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO.
* It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the Ministerial Conference.
Its job is to carry out the implementation and monitoring function of the WTO.
* The General Council is further divided into multiple councils
- At the next level, the Goods Council, Services Council and Intellectual Property
(TRIPS) Council report to the General Council
The General Council
also meets as the Trade Policy Review Body and the Dispute Settlement Body.
*
Indian ambassador – Mr. Brajendra Navnit, Ambassador & Permanent
Representative of India to the World Trade Organisation Geneva, Switzerland.
Dispute Settlement Body
- deal with disputes between WTO members. disputes may be regarding anything contained in the final act of the uruguay round - and subject to the Understanding on Rules and Procedures Coverning the Settlement of disputes (DSU)
The DSB has authority to establish dispute settlement panels, refer matters to arbitration, adopt panel, Appellate Body and arbitration reports,maintain surveillance over the implementation of recommendations and
rulings contained in such reports, and authorize suspension of concessions in the event of non-compliance with those recommendations and rulings.
Trade Policy Review Body
trade policy review mechanism (TRPM)
a peer review mechanism,
with its mandate set out Annex 3 to the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement). It enables regular analysis of the trade policies of all WTO members. carried out on a cyclical basis.
4 biggest traders= EU, US, China, Japan reviewed every 3 years
16 biggest traders= reviewed every 5 years,
rest= every 15 years
The TPRs are based on a WTO Secretariat Report (produced on its own
responsibility) and a Government Report from the member.
Membership of WTO
- ➢By accession:
Article XII- accession to wto is “on terms agreed” between wto and acceding govt
Any state or customs territory having full autonomy in the conduct of its trade policies may become a member (“accede to”) the WTO, but all WTO members must agree on the terms.
Following the establishment of a working party for the accession
process, bilateral, plurilateral and multilateral negotiations take place in parallel.
The successful conclusion of these negotiations leads to the drafting
of an accession package (“terms of accession/entry”),which needs to be adopted by workung party and wto gc or ministerial conference
then–> the acceding govt will accept the “terms of entry” through signature or ratificiation= and becomes WTO member 30 days after notifying protocol accession to wto director general
Decision making process of the WTO
- All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva)
- decisions normally taken by consensus - reaching consensus among around 150 members can be difficult. Its main advantage is that decisions made this way are more acceptable to al members.
Tokyo Round (1973 – 1979)
significant shift, 120 nation global commitment to trade liberalization.
Key Features:
1.Reduction in Tariffs: Negotiations resulted in tariff reductions worth over $300 billion in trade. Average tariffs in industrialized nations on industrial products fell from 7.7% to 4.7%.
2. Non-Tariff Measures (NTMs): This round was pivotal for addressing NTMs, such as technical standards and import licensing
3. Codes of Conduct:: subsidies, anti-dumping measures, government procurement, voluntary and not universally adopted
Impact:
partial adoption of its agreements- highlighted need for integrated framework and a ambigious uruguay round
Uruguay Round (1986 – 1994)
the most comprehensive trade negotiation
under GATT, 123 countries- BEYOND tarrifs and discussed agri, ip, trade investment
Key Features:
1.Agriculture:Agreements were made to reduce export subsidies
and domestic support, increasing market access.
2. Services: The General Agreement on Trade in Services (GATS) was
introduced, creating a framework for trade in services, a growing
segment of global trade.
3. TRIPS was established
4. Dispute Settlement: The Dispute Settlement Understanding (DSU) was created
5. formation of WTO replacing gatt as instutional structure was introduced
Doha Development Round (2001 – Present)
Key Objectives:
1. Agricultural Subsidies: Reduce and eventually eliminate agricultural subsidies, which distort global markets and disadvantage developing
countries.
2. Market Access: Lower tariffs on industrial goods and services to improve market access for all, especially developing nations.
3. Special and Differential Treatment: Provide developing countries with greater flexibility in implementing trade rules.
4. Trade Facilitation: Simplify customs procedures to reduce trade costs, particularly for smaller economies.
CHALLENGES:
disagreements between developed and developing countries
Developed nations seek greater access to markets for industrial goods and services, while developing countries demand substantial cuts to agricultural subsidies and greater market access in agriculture.
Major roadblocks: U.S. and EU farm subsidies, India’s concerns over food security, and China’s role in global trade.
- negotiations remain deadlocked
some aspects have been discussed in 2013 trade facilitation agreement
Often referred to as the “Doha Development Agenda,” its primary goal is to enhance global trade equity by tackling barriers that disproportionately
affect less developed nations.
members of wto
Types of WTO Members
The World Trade Organization (WTO) has two main categories of participants:
Full Members
These are sovereign states or customs territories that have completed the accession process and fully participate in WTO agreements.
As of now, 164 members are part of the WTO.
Observer States
Some countries or customs territories hold observer status, meaning they can attend WTO meetings but do not have voting rights.
Currently, 25 observers, including countries** like Iran, Iraq, and Bhutan.**
Observers must begin negotiations to become full members within five years of obtaining observer status.
