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POL 4410: Week Five

POL 4410: Week Five. Trade Treaties. Structure. Theories of Trade Treaties History of Global Trade Treaties Regional Trade Treaties. Trade Theories. Neoclassical Economic Theory Interest Group Theory Realist / Mercantilist Theory. AUTARKY. FREE TRADE. Cloth. Cloth. Soap. Soap.

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POL 4410: Week Five

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  1. POL 4410: Week Five • Trade Treaties

  2. Structure • Theories of Trade Treaties • History of Global Trade Treaties • Regional Trade Treaties

  3. Trade Theories • Neoclassical Economic Theory • Interest Group Theory • Realist / Mercantilist Theory

  4. AUTARKY FREE TRADE Cloth Cloth Soap Soap Britain Britain 16 24 0 4 Italy Italy 0 3 2 8 TOTAL TOTAL 24 19 8 6 Neoclassical Theory • Comparative Advantage vs. Absolute Advantage

  5. Interest Groups • Losers from trade may try to block free trade and to impose tariffs. • ‘Protection for sale’ • Treaties as commitment devices

  6. Realism / Mercantilism • States sign treaties for two reasons:(1) To bully other weaker states(2) Because treaties don’t matter

  7. Types of Trade Policy • Unliateral Policy • Bilateral Deals • Multilateral Institutions

  8. Trade Treaties pre-WWII • Cobden Chevalier in 1860 • MFN • Reciprocal Trade Agreements Act in 1934

  9. GATT • Founded in 1948 with 23 members • Based on reciprocity and MFN - many exceptions made • Series of rounds

  10. WTO • Founded in 1995 with 76 members, now 149. • Has Dispute Settlement Body • Consensus and negotiations • EU / US trade disputes

  11. European Union • European Coal and Steel Community in 1951 • European Economic Community in 1957 • European Union in 1992 • Tripartite structure: Commission, Council of Ministers, European Parliament

  12. NAFTA and CAFTA • 1994 NAFTA founded • Chapter 11 and Chapter 19 • CAFTA signed 2005

  13. Other regional treaties • Asia Pacific economic Cooperation group • Mercosur • Andean Pact • Australia-New Zealand

  14. Lomborg: Anderson • Static Gains: inter / intra industry • Dynamic Gains: knowledge; faster growth from imported capital goods • Why protectionism? • What reduces protectionism? Info; tech; foreign openness; trade agreements • Costs: social and environmental?

  15. Anderson (2) • 1) Free trade; (2) Doha + and APEC (MFN); (3) FTAs (non-MFN); (4) PTAs with ex-colonies. • Binding? ; MFN? ; Reciprocal? • Free trade = 2*(Doha) = 24 * (FTAA) • Trade diversion vs. trade augmentation • Bananas and trade diversion $1 / -$1 / -$13

  16. Anderson (3) • Gross effects versus net effects • Economic costs of reducing tariffs and subsidies. • Private and social costs. Concentrated costs and diffuse benefits • Poverty, environment, climate change, conflict

  17. Pronk • Positive effects of trade on other areas (poverty, health, environment) depend on ‘sustainability conditions’. • Trade policy and domestic policy interact • Gradualism vs. shock therapy. Sticky costs. • Is WTO actually slowing free trade? Two-track liberalization.

  18. Bergstein • Bicycle must keep moving • Big is beautiful • Bulding blocks, not stumbling blocs • Money is central • Leadership is essential

  19. Ruggie • What is ‘embedded liberalism?’ • Power and purpose • Move from classical liberalism to neoliberalism

  20. Wallace • What is Europeanization? Magnetic / Heineken analogies. • Importance of history and goeography • Neofunctionalism • Multi-level governance • Territorial, Functional, Affiliational Integration • Multiple modes of interaction • Impact on domestic politics

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