W3: International Trade: WTO en EU's Single Market Flashcards
Lecture 3 & Book §9
WTO
‘organisation for trade opening,
forum for governments to negotiate trade agreements,
place to settle trade disputes,
operates a system of trade rules’
–> WTO is ‘ place where member governments try to sort out the trade problems, they face with each other’
Single Market of EU
ensures free movements of goods, services, capital and persons in a single EU internal market, by removing technical, legal and bureaucratic barriers –> EU allows citizens to trade and do business freely
MAKING SENSE OF COMMERCIAL LIBERALIZATION – WHY FREE TRADE?
Classical trade theories
Smith, Ricardo
- division of labor –> specialise and benefit from trade
- export goods for which you have advantage, import where less of an advantage
MAKING SENSE OF COMMERCIAL LIBERALIZATION – WHY FREE TRADE?
for an economy as a whole free trade is almost always …
beneficial
remains underlying idea of many trade theories
what happens to incentives not to engage in free trade
there are losers - pressure for potection instead of free trade
need some sort of institution to enhance broader socio-economic development rather than sticking to narrow ‘advantage’; giving up sovereignty; need IO why?
***
- create shared rules, monitoring and enforcement mechanisms
- create perspective of continuing cooperation, enhance predictability, build trust
- ensure collective gain against individual incentives to defect
international trade
buying and selling goods & services across national borders
HOW TO FREE TRADE?
agreement to eliminate/reduce barriers to trade in goods and services
3 points
- barriers at borders, in particular tariffs and quantitative restrictions
- non-tariff barriers (NTB) - licensing, regulations/standards
- may take shape of IO, e.g. with secretariat, court-like body, etc.
Typical forms of regional or bilateral agreement
Free trade agreement (FTA)
- no tariffs or quantitative restrictions among members
- serperate management of relations with non-members
Typical forms of regional or bilateral agreement
Customs union
- no tariffs or quantitative restrictions among members
- common external trade policy
Typical forms of regional or bilateral agreement
Common market = customs union PLUS
- free movement of factors of production (labor, capital)
- work towards overcoming differences in regulation (required characteristics to be lawfully marketed)
“bicycle theory”
- if the bicylce stops moving, it falls over
- need to keep negotiating towards further liberalisation
C. Fred Bergsten
GLOBAL FREE TRADE: WTO
Great Depression and WW2: Years of …
Protectionism
GLOBAL FREE TRADE: WTO
Created 1 jan 19??, 164 members, secretariat in ??????
‘95, Geneva
WTO as IGO
decision-making by consensus
- progress based on intergovernmental negotiation rounds
- WTO structure: all members in all councils, comittees and other bodies equal
WTO as IGO
Basic principles (from orginal GATT)
- non-discrimination
- Most favored nation: advantage granted to one shall be granted to all contradicting parties
- national treatment: after entering the territory, imports must be treated like domestic products
- principles of reciprocity, transparency, tariff reduction through negotiation
WTO as IGO
not really all equal
- leverage (thourgh market size e.g.) and resources
- institutional power: ability to use institutional settings and mechanisms to one’s advantage
WTO as legalised institution
Main agreements
- General Agreement on Tariffs and Trade (GATT) (on trade in goods)
- General Agreement on Trade in Services (GATS)
- Trade-related Aspects of Intellectual Property Rights (TRIPs)
WTO as legalized institution
legalisation
“obligation, precision and delegation”
WTO as legalised institution
Other ‘less important’ agreements
- agreements on specific product groups (agriculture, textiles, sanitary, etc.)
- agreements on legitimate barriers to trade (anto-dumbing, anti-subsidies)
- trade related investment Measure Agreement (TRIM)
- “pluri-laterals” (not all WTO members; dairy products, civil aircraft, etc)
WTO: dispute settlement
Under old GATT:
postitive consensus (including parties to dispute) required –> slow, highly politicized
WTO: dispute settlement
Under WTO:
negative consensus at all stages:
1. consultatoins between parties to dispute
2. panel stage - panel of experts
3. appeal - Permanent Appellate Body
–> faster legalised to significant extent
EU in the WTO
In which way members of WTO?
EU countries members of WTO, but EU itself is also seperate member.
EU in the WTO
the highly integrated Common Commercial Policy
4 points
- exclusive competence of EU, including foreign direct investment since Lisbon Treaty (2009)
- the Commission as sole negotiator for trade deals, on the basis of ‘mandate’ by MSs
- single set of rules on imports into EU
- MS decide at qualified majority vote (55% of MS representing 65% of population)
EU in the WTO
internal division and contestation
2 points
- free traders vs. more protectionsist-minded MSs
- intra-EU politics: distrust of commission
single-market in EU
Treaty of Rome (1957)
“common market”
single-market in EU
Treaty of Lisbon (2007)
“internal market” (TFEU, art. 3(3))
single-market in EU
1960s: impressive progress - …
1970s: stagnation over …
… customs union completed by 1968
… non-tariff barriers
HOW HAS EVOLUTION of European Common Market BEEN EXPLAINED?
Intergovernmental perspective
- MS retain great influence, in particular in treaty revisions, but also informally and through coalitions
- business lobbies also continue to target national governments
HOW HAS EVOLUTION of European Common Market BEEN EXPLAINED?
supranational dynamics - neo-functionalist perspective
- supranational decision-making provided for from the very beginnings
- e.g., central role of the european Commission, qualified majority voting amongst MS –> gives much more importance to MS than concensus
- But also: transnational business coalitions and their lobbying efforts
single-market in EU
1985: the relaunch of integration process
* Dooge report
* Commission paper “Completing the internal market”
- more supranational mechanisms, complete common market
- 300 proposals to complete common market by ‘92, fiscal, physical, technical barriers to trade, most progress on technical barriers
HOW HAS EVOLUTION BEEN EXPLAINED?
Negative to postivie integration
- negative integration - eliminate barriers to cooperation -> eliminate tariffs amongst participating states
- positive integration - develop common policies -> common policies on trade, competition, transport, agriculture, fisheries, as well as “approximation of laws”
MUTUAL RECOGNITION
Cassis de Dijon case (1979)
“there is therefore no valid reason why, provided that they have been lawfully produced and merketed in one of the MS, alcoholic beverages should bot be introduced into any other MS; the sale of such products may not be subject to a legal prohibition on the marketing of beverages with an alcohol content lower than the limit set by the national rules.”
MUTUAL RECOGNITION
Mutual recognition as a tool of integration:
- if a good respects all relevant regulations in one MS, all others recognise this as a valid and sufficient for sale on their markets
- integrated in SEA
competing forces in practice
REACH Regulations
(on Registration, Evaluation and Authorisation of Chemicals)
- extensive lobbying effort by industry coalitions - European Parliament as main target
- Crucial impact of ‘leader states’ via seconded national (expert) officials as the Commission
competing forces in practice
Services (Blokestein) Directive
- which regulations of service providers have to respect when abroad: those of home country or those of host country?
- fierce competition between old and new EU members
- transnational industry coalitions internally fragmented
common market today
Goods: …
Capital: …
Services: - … -…
Persons: - … - …
Goods Impressive progress of ‘ 1992’ program
Capital limited until 1990, since then almost complete
Services - comparatively slow, despite many efforts and Services Directive
- Financial services, fairly advanced, based on series of directives since 2004
Persons - mutual recognition of professional qualifications, non-discrimination. Freedom of establihsment since Rome Treaty
- implementation: role of ECJ, role of Schengen
