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IPE > Week 6 > Flashcards

Week 6 Flashcards

1
Q

What are the historical blocs of PTA ?

A
  1. zollverein = trade coalition from German state 1834 (preceding unification in 1871)
  2. Franc zone = franc-based paper currency aera in North and South Africa since 1901, strenghten in 1928
  3. imperial preference = preferential rates for members of Commonwealth, from 1920s-1932
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2
Q

Are the PTA allowed within the GATT ?

A

Yes they are legally justified by the article XXIV.

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3
Q

What is the enabling cause of the GATT ?

A

It allows countries to give lower tariffs to countries from the developping world > this is an instrument of integration to GATT.

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4
Q

When did the PTA developped in the european region ?

A

From 1950

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5
Q

Explain the historical phases of the european regionalism

A 
1950-60 = establishement of ECSC then EEC (first steps in the european integration)
1980s = EU deepening (Single European Act) + NAFTA/CUFTA
1990s = further regional deepening and bilateral agreement worldwide + creation of EMU
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6
Q

When did the number of PTA piked ?

A

In 1990s, after the end of the Cold war (1991)

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7
Q

How can we classify the different PTA ?

A

With their members and their depth:

members: regional / intercontinental; bilateral / multiple countries; North-North, South-South, North-South
depth: partial economic cooperation; free trade area; customs union; common market; economic, monetary union

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8
Q

Give an example for each of these agreements:

  • partial economic cooperation
  • free trade area
  • customs union
  • monetary union
A

partial economic cooperation = bilateral agreement CH-US + ECSC (= coal and steel)
free trade area = NATFA (same tariff inside the area)
customs union = MERCOSUR (same tarrif outside the union)
common market = monetary union = common currency

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9
Q

Give the theories that try to explain the increase of PTA

A
  1. Demand side = neofunctionalism
  2. Supply side = intergovernmentalism
    Economic explanation
  3. gravity = economic sense
  4. capital-labor ratio
  5. economies of scale
    International politics explanation
  6. WTO stagnation
  7. geopolitical interests = mercantilist trading strategy (fear of exclusion)
  8. standard setting
  9. domino theory = exporter discrimination
    Development explanation
  10. commitment to stability
  11. macroeconomic credibility
  12. political risk
  13. economic reform
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10
Q

Explain the neofunctionalism’s theory about the increase of PTA

A

Who actually benefits from it and why do they demand more integration ?
According to the neofunctionalists the increase is explained by the bottom up process through spill-over: -> Interest groups -> Partial economic integration -> spillover (to have economies of scales)
The actors are the interests groups, the firms and the citizens. Moreover they are motivated by : economic gains, transaction costs, uncertainty and economies of scale.

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11
Q

Explain the intergovernementalism’s theory about the increase of PTA

A

According to the intergovernementalists, the PTAs are not driven by societal actors but by the government ! Thus there is a top-down process through bargaining:
Government -> solve the Issue of the day to not loose sovereignty -> EMU (Kohl)
The actors are the governments and the policymakers. Moreover they are motivated by: political gains/leadership and want to solve the issue of the day.

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12
Q

Explain the historical evolution of the WTO

A

At the beginning, there were 23 countries (decision making by consensus), now there are +163 members. With the time there is a growing heterogeneity (regional associations; sectoral associations; LDCs; transition countries) and a growing complexity (sectors; trade restrictions (NTBs, IPRs); institutional procedures).

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13
Q

Explain the Doha Round

A

The Doha Round was launched in 2001. Since there have been 9 ministerial conferences however we observe temporary collapse of negotiations. The topics in focus are agriculture; services; environment; trade facilitation.
In this Round there are cleavages : EU vs. U.S. vs. BRICs
(leading developing countries).

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14
Q

Explain the power competition within the international trade system

A

The power competition will bring us to a more mercantilist world. After an agreement is adopted there is directly a reaction from the countries excluded. However this does not develop within the WTO but outside. The motivations = geopolitical interests, mercantilist trading strategy, discrimination and fear of exclusion.

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15
Q

What are the 2 different standard settings ?

A
  1. CETA, TPP, TTIP

2. RCEP (=Regional Comprehensive Economic Partnership)

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16
Q

Explain the CETA, TPP and TTIP as standard settings

A

These agreements cover the CAN-US-EU-Asia (without India and China. The main topics are trade; environment; governance; labor standards; regulation; investment arbitration.

17
Q

Explain the RCEP as a standard setting

A

This agreement covers ASEAN - China, India, Australia, Japan, South Korea, New Zealand. The main topics are : trade; investment; economic and technical cooperation; IPR, competition; dispute settlement.

18
Q

Explain the domino theory by Baldwin

A

IV: Foreign PTA -> affects my trade -> less exports to this country although I have same tariffs! -> don’t want to be discriminated -> mobilization for an own PTA!
DV: PTA!
According to this theory, one PTA leads to many more! The constituencies are the export and the import-competing industries. The status quo is protectionnism because it pleases to import-competers.

19
Q

Explain the theory of the diffusion of agreements by Baccini and Dür

A

IV: Agreement in trading network (Dyad) -> DV: Trade agreement
The probability of having another year without an agreement decreases! (Time until Dyad signs an agreement) We can also say that it depends on Competition (EU doesn’t care if Mali and Chad sign an PTA!).
This theory is a test of the Domino Mechanism!

20
Q

Explain what we observe in the development strategy

A

Pattern = Crisis/failure of import-substitution (1982 L.A American Debt crisis / Asian Crisis 1997) -> change of dev. Strategy -> industrialization -> PTA’s
The time is a consistency Problem (-> economic stability).
The gov. of a country promises a firm to not take it over so the firm invests BUT then gov. has an incentive to cheat! -> Solution? -> International Agreement (PTA to not cheat!)
According to this strategy the PTA reduces risks of Expropriation, Economic Instability, Imposition of Trade Barriers etc. !

21
Q

What are the risks that PTA reduces, and how ?

A

Expropriation => Include clauses to protect property rights
Regularity takings => Clauses on regulatory transparency and non discrimination
Local content quota; employment of locals; minimum exports => Include clauses to protect property rights
Economic instability => Give home country a stake in the host’s economy
Imposition of trade => Lock in zero tariffs of host
barriers
Loss of export markets => Lock in zero tariffs of home Thomas

22
Q

Which author studies the answer to the following question: When do leaders sign international agreements?

A

Baccini and Urpelainen developped a theory of the economic reform:
IV: New leader and Democratization -> PTA -> DV: economic reform
A new leader wants economic reform, but cannot overcome domestic opposition, just with a PTA! -> leads to economic reform!
PTA can give compensation opportunities for domestic loosers.
The advantages of the economic reform = binding rules; enforcement provisions; compensation opportunities for domestic losers

23
Q

Which author studies the answer to the following question: How do PTA affect political risk associated with a country?

A

Büthe and Milner developped the Political risk theory:
IV: PTA -> DV: more FDI
When there is a PTA with Investment clause -> then we should see more investments.
Mechanism: PTA provides commitment mechanism that domestic reforms cannot provide!

24
Q

Which authors studied the investment climate ?

A

Kenyon and Margalit (Investment Climate) = firm-level behavior
IV: Signature of PTA -> DV: Investment Decisions of firms
PTA increases credibility of an developing country

25
Q

Which authors studied the seal of approval ?

A

Gray (Seal of Approval) = credibility
IV: Sign PTA -> DV: improve Credibility
EU = PTA -> Slovakia has a credibility problem due to transition economy -> make PTA and join EU improves the Credibility for investments. Because the EU has a lot of information -> Evidence -> drops in interest rates on sovereign debt!

26
Q

What was the purpose of the

  • Zollverein
  • Franc zone
  • Imperial preferences ?
A
  • Zollverein = promotion of trade > cooperation
  • Franc zone = competition
  • Imperial preferences = competition
27
Q

When were created ?

  • ECSC
  • EEC
  • Single european act
  • EMU
A
  • ECSC = 1952
  • EEC = 1957
  • Single european act = 1986
  • EMU = 1992
28
Q

When did the Cold war occur ?

A

1985-1991

29
Q

How can a country benefit from a PTA ?

A
  • compensation tool after an economic reform
  • commitment mechanism (FDI)
  • participate to the investment decision of firms
  • improve credibility of a state
  • avoid exclusion (mercantilist trading strategy)
30
Q

What are the challenges created by a PTA ?

A

WTO system: The WTO system must provide alternatives to multilateralism. Partially discriminatory agreements tend to be not only trade-creating, but can also have trade-diverting effects.
Regulation: There is a regulatory race to the bottom. It is a threat to national standards and regulatory cultures.
Developing countries: The bargains between industrialized and developing countries is asymmetrical. There is overburdening of small countries, and FDI competition is detrimental to South-South integration.

31
Q

So who are the winners and the losers of these PTAs?

A

The winners are (mostly northern) multinational corporations with global supply chains, and suppliers from North and South.
The losers are import-competing firms, and small and middle-sized firms without global supply chains.

IPE (14 decks)

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