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Adv Int Bus Mira SW1-13 > Week 5 > Flashcards

Week 5 Flashcards

1
Q

What is the most frequent form of Non-tariff measures (NTMs)

A

Technical regulations because of safety reasons. It is affecting 40% of product lines and about 65% of world import.

Example story: Tianjin port city 2015 big explosion because of certificates which were not correct.

Anyone importing dangerous chemical shall hold an unexpired, unsuspended and unrevoked permit issued by the Ministry of the Environment.

  • Measures such as those restricting substances, ensuring food safety and preventing the dissemination of diseases or pests.
  • measures relating to product characteristics such as technical specifications and quality requirements; related processes and production methods; and measures such as labelling and packaging in relation to environmental protection, consumer safety and national security.
  • export taxes, export quotas and export
    prohibitions.
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2
Q

How to keep track of measures including Tariffs, Duties, Non-Tariff Measures (NTMs) etc.?

A

Global Trade Alert (GTA) is an independent initiative that monitors and reports on various forms of government-imposed trade restrictions and other interventions that may affect international commerce.

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3
Q

Norms: A form of protectionism? A non-tariff barrier?

A

There are different norms and standards in Switzerland and the EU as example in the kitchen. This gives different pros and cons. Swiss companies have less competition but also limited options to export their products. The Swiss customers instead need to buy the products in Switzerland and have difficulties in importing these products.

Country which was most affected by harmful interventions;
* China

Sectors most affected by harmful intercetnons
* Productos of iron or steel
* cereals
* fabricated metal products
* motor vehicles
* basic organic chemicals

Rates higher than 100% only apply to agriculture, mainly in vegetables (HS 07), meat (HS 02), and dairy products (HS 04).

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4
Q

What important event in Europe has happend in 2004 and 2007 in terms of Trade Agreements?

A

In 2004, a significant event related to trade agreements occurred in Europe with the enlargement of the European Union (EU). On May 1, 2004, ten new member states joined the EU in what is often referred to as the “2004 EU Enlargement.” These new member states included:
- Cyprus
- Czech Republic
- Estonia
- Hungary
- Latvia
- Lithuania
- Malta
- Poland
- Slovakia
- Slovenia

In 2007, another important event related to trade agreements in Europe was the accession of two new member states to the European Union:
- Bulgaria
- Romania
On January 1, 2007, both countries became full members of the EU.

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5
Q

What are the benefits of Swiss Free Trade Agreements (FTAs)?

A

Swiss (FTAs) provide benefits like:

  • Easier Market Access: Swiss businesses get preferential entry to partner markets, boosting exports.
  • Economic Growth: FTAs fuel economic expansion and diversify trade partners.
  • Competitive Edge: Swiss firms gain an edge in global competition.
  • Attracting Investment: FTAs make Switzerland appealing for foreign investment.
  • Lower Input Costs: Industries benefit from cheaper imports.
  • Innovation and Tech Transfer: FTAs encourage knowledge exchange.
  • Job Creation: Increased trade can lead to more jobs.
  • Services Trade: Expands opportunities for Swiss service providers.
  • Diplomatic Ties: FTAs strengthen international relations.
  • Support for SMEs: Provisions help smaller businesses access global markets.

In short, Swiss FTAs enhance economic growth, boost trade, and strengthen Switzerland’s global standing.

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6
Q

What are Regional trade agreements (RTAs)?

A

Reciprocal trade agreement between two or more partners. Including free trade agreements (FTAs) and customs unions.

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7
Q

Examples for Free Trade Area?

A

–> removing tariffs and non-tariff barriers

e.g.:
- NAFTA (Japan - Singapore)
- TFTA
- TPP
- TTIP

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8
Q

Examples Customs Union?

A

–> Free Trade Area + adoption of a common set of policies towards imports of countries from other regions

e.g.:
- EU-Turkey
- Switzerland - Liechtenstein
- MERCOSUR

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9
Q

Examples for Common Market?

A

–> FTA + CU + free movement of labour and capital within the regional partnership

–> in progress CARICOM, COMESA and MERCOSUR

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10
Q

Examples for Economic Union?

A

–> FTA + CU + CM + adoption of a common currency and / or harmonization of monetary, physical, and social policies

e.g.:
- EU

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11
Q

When do measures become barriers?

A
  • Lack of transparency
  • Discriminatory treatment (MFN or NT)
  • More restrictive than necessary
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12
Q

What is classified as dual use?

A

if the product or compliments can be used for military services

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13
Q

Switzerland in comparison with Singapore and China in terms of Trade (% of GDP)

A

Trade is relevant for Switzerland but not as relevant as for Singapore. China does not depend so much on trade since they have a much higher domestic market.

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14
Q

Top 20 Swiss Trade Partners (Exports)

A
  1. Germany
  2. USA (without existing FTA)
  3. France
  4. Italy
  5. China
  6. UK
  7. Japan
  8. Spain
  9. Netherlands
  10. Austria
  11. Hong Kong
  12. Singapore
  13. Belgium
  14. Canada
  15. South Korea
  16. Slovenia
  17. Russia (without existing FTA)
  18. Emirates Arab.
  19. Poland
  20. Australia (without existing FTA)
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15
Q

Top 20 Swiss Trade Partners (Imports)

A
  1. Germany
  2. Italy
  3. France
  4. China
  5. USA (without existing FTA)
  6. UK
  7. Austria
  8. Emirates Arab.
  9. Ireland
  10. Spain
  11. Netherlands
  12. Belgium
  13. Japan
  14. VIetnam (without existing FTA)
  15. Czech Republic
  16. Poland
  17. Singapore
  18. India (without existing FTA)
  19. Turkey
  20. Hungary
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16
Q

Why is it impossible to have free trade agreement with the USA?

A

Because of disagreement in agricultural sector policies.

However, the free trade agreement is not even so important because the trade is working also good without agreements. And nowadays USA is even more important export partner for CH than Germany.

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17
Q

Preferential trade arrangements (PTAs)?

A

Unilateral trade preferences. Including Generalized System of Preferences (GSP) schemes (under which
developed countries grant preferential tariffs to imports from developing countries), as well as other nonreciprocal preferential schemes granted a waiver by the General Council.

Is usually discriminatory and stand against the MFM that you need to treat everybody the same.

Half of world trade is already subject to zero MFN tariff rates.

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18
Q

Swiss-Chinese FTA in force since July 2014

A

Switzerland and Island are the only countries who have such a deal with China.

CH and China had 8 rounds of negotiations (average).

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19
Q

RTAs: Political Motivations

A
  1. Building confidence and avoiding conflicts: Examples ECSC (eventually becoming the EU) and ASEAN
  2. Security of regional partners against threats from outside: SADCC (reduction of dependency on South
    Africa during Apartheid)
  3. Enhance bargaining power towards transnational corporations and trading partners: Andean Pact
    of 1969, e.g. region-wide industrial licencing. Pooling of diplomatic resources might give LDCs a stronger voice in
    negotiations, e.g. CARICOM.
  4. Increase attractiveness to potential investors: Commitments made within a regional forum can be more
    attractive to potential investors, than those made in global institutions
  5. Facilitation of negotiations and implementing agreements: Far easier to negotiate with a few partners on
    regional level, than with many on a global level
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20
Q

RTAs: Economic Motivations

A
  1. Choosing regionalism over multilateralism:
    − Regionalism enables a continuing protection of sectors that would not survive in global
    competition, e.g. EU tariff peaks for agricultural products.
    − Regional agreement could also be used to reform inefficient domestic sectors and expose them
    to global competition.
    − Regionalism provides opportunities for ‘deeper integration’, also known as “WTO Plus”, e.g.
    US, Singapore, Chile, Australia. Topics: Investment, Environment, Anti-trust, intellectual property.
    NAFTA and TTIP are examples.
  2. Preferring regionalism to unilateralism or the status quo:
    − Larger (home) markets and increased foreign investment
    − E.g. After Mexico joined NAFTA in 1994 FDI inflow in Mexico increased dramatically. Similar observations once
    ASEAN became a free trade area
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21
Q

The Swiss FTA Network

A

The most agreements are through EFTA (see page 37) just five bilateral FTAs which are:
- EU (1972)
- Faeroe Islands
- Japan (2009)
- PR China (2014)
- UK (2021)

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22
Q

UK joins CPTPP

A

On 16 July 2023, the United Kingdom signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), becoming the first new party to the treaty since its establishment.

For Malaysia it is quite nice since this was the only country with which UK didn’t have an agreement before.

  • UK agreed one of the biggest trade deal of all time after month of negotiations
  • The CPTPP is a trade agreement between 11 countries (Australia, Canada, Japan, Malayisia, Mexico)
  • give acess to tariff free trade with some of the fastest growing economies

Before CPTPP:
* Bristish car makers had to pay tariffs of about 30% to export to Malaysia -> now 0% tariff
* access to countries with a combine GDP of 11 trillion pounds

23
Q

What does the TPP have to do with free trade?

A
  1. Plurilateral, voluntary, geographically defined
    = a regional club with preferential realtions among members
  2. Corpus of (hard and soft) legislation
    - Abolishment of tariffs (in sensitive areas over 10 years or more), improved market access
    - Body of new, extended or amended rules
    - “WTO-plus”, “GATS-plus”, “GPA-plus”, +TRIPS-plus”

dual nature: Liberalization + common rules

24
Q

Who is part of the TPP-12, also known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?

A
  • Australia
  • Brunei
  • Canada
  • Chile
  • Japan
  • Malaysia
  • Mexico
  • New Zealand
  • Peru
  • Singapore
  • Vietnam
    (- USA)
    The United States was initially part of the negotiations for the Trans-Pacific Partnership (TPP), but withdrew from the agreement under the Trump administration.
    The remaining 11 countries renegotiated and signed the agreement in March 2018, forming the CPTPP. Please note that there might have been further developments after September 2021, which I would not be aware of.

Please note that the TPP is based on 30 Chapters which need to be fulfilled. There are 4 topics which e.g. China can not meet (state owned, enterprises, transparency and anti corruption, environment and labor).
Furthermore as soon as one Country of TPP has a Veto the nominated Country can not join / enter the agreement.

25
Q

Current situation in global trade - according to the economist

A

Main driver after the pandemic was the increased demand in having enough storage in order to prevent bottleneck.

Example in the video was that the demand for computer chips increased.

26
Q

Why Are Pickups So Expensive? Blame the Chicken Tax

A
  • According to the U.S. Bureau of Labor Statistics, prices for new cars and trucks in January were up 12% from a year earlier and prices for used vehicles up a whopping 40%.
  • A 25% tariff on pickup trucks that dates back to a trade dispute with Europe in the 1960s. When the European Economic Community raised tariffs on imported chicken from the U.S., President Lyndon Johnson retaliated with a 25% “chicken tax” on imported trucks and other items. The tariff was originally aimed at vehicles made by Volkswagen in West Germany, but even though the original issue over chickens has been resolved, and Germany no longer makes light trucks for the U.S. market, the tariff remains in place out of political inertia.
27
Q

Why Are Pickups So Expensive? Blame the Chicken Tax -> government reaction

A
  • Instead of trying to repeal the tariff to make trucks more affordable, the U.S. government in recent years has been moving in the wrong direction. A 2011 U.S. free trade agreement with South Korea was supposed to allow light trucks made in that country to be imported to the United States duty‐​free starting in 2021, but the Trump administration strong‐​armed the Koreans into postponing the tariff elimination until 2041.
  • The Trump administration also renegotiated the 1994 North American Free Trade Agreement, replacing it with the U.S.-Mexico-Canada Agreement (USMCA). The revised agreement tightens the rules of origin to require that 45% of the parts in trucks be made by North American workers who are paid more than $16 an hour. This no‐​Mexicans‐​need‐​apply provision will make it more costly to manufacture pickup trucks in Mexico for duty‐​free shipment to the United States.
  • The Biden administration is fighting to make the rules even more restrictive.
28
Q

Trade: The populist advantage -> future outlook industrial countries

A

It is hard not to be pessimistic nowadays. In industrial countries, the pendulum has swing from excessive faith in the liberal orthodoxy to faith in populist policies, until their deficiencies become obvious once again. The best we can hope for is that, unlike what seems to be happening in Argentina, it will not then swing too far back toward the other extreme, and that we will have learned some lessons along the way.

29
Q

Trade: The populist advantage -> example raising capital requirements

A

Raising capital requirements may have made banks safer after the global financial crisis; but to continue raising them will only increase banks’ costs of funding and reduce their activities, leading to a migration of risk into the unregulated, opaque shadow financial sector.

30
Q

Trade: The populist advantage -> example poverty in rural India

A

Trade liberalization had slowed the rate of poverty reduction in rural India. While theoretical papers showing that freer trade could have such adverse effects were acceptable, studies that demonstrated the phenomenon empirically were met with skepticism.

31
Q

Trade: The populist advantage -> example replacing chinese supplier

A

Replacing a supplier from China with one in a friendly country would seem to make a supply chain more resilient to a potential China-US conflict; but it also may create a false sense of security, considering that many friendly suppliers still rely on China for key inputs.

32
Q

Trade: The populist advantage -> simplistic poilcies / old liberal orthodoxy

A
  • Since the 2008 global financial crisis discredited the old liberal orthodoxy, the door has been open for simplistic policies, in part because most people tend to focus only on a policy’s first-order effects. .
  • After the old orthodoxy was found wanting, and after its proponents had lost the public’s trust, the door opened to unorthodox solutions. But while thinking outside the box can produce good outcomes, policy prescriptions also need to be easily understood by the untrusting layperson.
  • for every complex problem, there is an answer that is clear, simple, and wrong.”
  • “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
  • The temptation to pursue unorthodox populist policies remains strong, especially now that rich industrialized countries have embraced them.
33
Q

When do non-tariff measures measures become barriers?

A

WTO:
* Lack of transparency
* Discriminatory treatment (MFN or NT)
* More restrictive than necessary

34
Q

WTO: “Half of world trade is already subject to zero MFN tariff rates”

A
35
Q

Switzerland: Evolution of RTAs
1. Why was Switzerland late into the game?
2. What RTA was concluded in 1972?

A

!!!

36
Q

Who is using RTAs?

A
37
Q

Most-favoured-nation (MFN) at the WTO

A

Under the WTO agreements, countries cannot normally discriminate between their trading partners.
* Grant someone a special favour and you have to do the same for all other WTO members.
* This principle is known as MFN treatment.
* It is valid for all three pillars of the WTO:
GATT
GATS
TRIPS

38
Q

Benefits of the Japan-Switzerland FTEPA (2009)

A
  • 88% of Swiss exports are already tariff-free, without utilizing the bilateral FTA in effect, including pharma, almost
    all machinery, instruments, and watches.
  • 6% of Swiss exports conducted successfully under the FTA
  • The textile and food industries benefit most, especially
    beverages, dairy products incl. cheese, coffee, chocolate,
    and certain chemical and plastic products.
39
Q

Losing Most-Favored-Nation Status

A

On 15 March 2022, The EU, along with other G7 countries and “likeminded
partners” (such as Albania, Australia, South Korea, and New Zealand), announced revocation of Russia’s MFN status following earlier action by Ukraine and Canada

Such a move would mean imposing tariffs – border taxes paid by importers
– on Russian products such as vodka and other goods. Designed to raise the price of goods to discourage trade, tariffs hit exporters but can also add to consumer costs.

The US currently only excludes two countries from “permanent normal trading relations”, Washington’s version of MFN status: Cuba and North Korea. Rather than tariffs at the current applied rate in the US of about 3% on average across Russian goods, the border tax would increase to more than 10 times that level.

40
Q

GATT Article XXIV

A

Free trade agreements account for more than three-quarters of all PTAs in
force. GATT Article XXIV requires that

import duties are to be eliminated on substantially all trade among the members of customs unions and free trade areas.

However, products are often excluded: A recent study of PTAs involving four major trading countries and their partners shows that about 7% of tariff lines in the sample are excluded, either temporarily or permanently. These products are mainly agricultural or food items, and labor-intensive manufactured
products such as footwear and textiles.

41
Q

How preferential is trade today?

A

Trade among PTA members is not all preferential on account of the fact that a
significant portion of intra-PTA trade is MFN duty-free.

In a sample covering imports of the 20 largest importers from all their trading
partner countries – accounting for 90% of world merchandise trade in 2008 –
only 16% qualified as preferential trade, assuming full utilization of
preferences.

In other words, despite the explosion of PTAs in recent years, 84% of world merchandise trade still takes place on a non-discriminatory MFN basis. This is firstly because half of world trade is already subject to zero MFN tariff rates. Secondly, PTAs tend to exempt high
MFN-tariff items from preferential treatment and continue to trade these products at MFN rates

42
Q

Swiss-Chinese Free Trade Agreement

A

About 95% of Swiss exports to China will benefit from a reduction of customs duties

Actual reduction obtained will vary considerably from one sector to the next:

  • 99% for the textile industry (which represents 1.3% of Swiss exports to China).
  • 78% for the mechanical and electrical industries (30% of exports).
  • 77% for the chemical and pharmaceutical industries (24% of exports).
  • 64% for precision instruments, watchmaking and jewelry (21% of exports).

For a whole series of products, including some measurement instruments, duties will be eliminated immediately after the agreement comes into force. But this is the exception. For most Swiss exports, duties will be eliminated only in part, and after a transition period of between 5 and 10 years.

  • Swiss Surplus of $ 19.7 billion with gold
  • Chinese Surplus of $ 3.8 billion excluding gold
  • Both surpluses based on customs import data
43
Q

How to measure trade relationship?

A

Only import data provides reliable figures about a trade relationship

44
Q

homeland economics

A

a protectionist, highsubsidy, interventionheavy ideology administered by an ambitious state.

45
Q

Swiss Perspective on the Mega Regionals in Asia Pacific

A
46
Q

Mega Regionals and their share of “World GDP”

A
47
Q

TPP-12 Becomes Reality at the End of 2015

A
48
Q

Who is part of TPP-12?

A
49
Q

From TPP-12 (2015) to TPP-11 (2017)

A
50
Q

TPP-11 (2017) becomes CPTPP (2018)

A
51
Q

Proactive Leadership by Japan

A

Having gone through difficult TPP negotiations and prepared measures to help those who held concerns about negative effect of liberlization, Japan came to be able to move in a more agile and strategic way.

I belive those results are the greatest highlights in the history of Japan which for a long time after WW 2 had only been a taker of the regime established by Western countries.

The trust Japan has thus earned in its leadership will be an important asset in creating a new economic order in a world that is increasingly chaotic.

52
Q

What does the TPP have to do with free trade?

A

What’s in a „partnership“?
1. Plurilateral, voluntary, geographically defined
= a regional club with preferential relations among members
2. Corpus of (hard and soft) legislation

Abolishment of tariffs (in sensitive areas over 10 years or more), improved market access

Body of new, extended or amended rules

«WTO-plus», «GATS-plus», «GPA-plus», «TRIPS-plus»…

Dual nature: Liberalization + Common rules

53
Q

How to join CPTPP?

A

We support growing the value of CPTPP through accession and warmly welcome the interest shown by several economies to accede to the CPTPP by showing their willingness to meet the Agreement’s high standards.”

-> New members not permitted to reopen
existing legal texts.
-> Possibility to discuss additional rules or
expanded trade rules beyond what
currently exists.
-> Most time and resources needed for
negotiating new member scheduling and,
potentially, side letters.

54
Q

How serious is China about CPTPP?

A

Long Yongtu, who negotiated China’s entry to the WTO, says presence of Singapore and Vietnam in Pacific trade pact is good sign for China: “Vietnamand Singapore, they also have very strong state-owned industries, if they can meet the terms of CPTPP, why not China?”

Please note that the TPP is based on 30 Chapters which need to be fulfilled. There are 4 topics which e.g. China can not meet (state owned, enterprises, transparency and anti corruption, environment and labor).

-> Xi Jinping at APEC Summit, in November 2020: “China is ‘actively considering’ joining CPTPP”

Adv Int Bus Mira SW1-13 (14 decks)

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