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International Trade System

International Trade System. 4 Most Important ITS Things . About the ITS The ITS is Highly Interdependent The ITS is GN-Led About the Agreements & Institutions. About the ITS. International Trade System (ITS) System of exchange of goods & services between countries

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International Trade System

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  1. International Trade System

  2. 4 Most Important ITS Things • About the ITS • The ITS is Highly Interdependent • The ITS is GN-Led • About the Agreements & Institutions

  3. About the ITS International Trade System (ITS) • System of exchange of goods & services between countries • Based around two types of trade • Merchandise trade • Primary goods • Raw materials: foods, fuels, fibers, minerals • Manufactured goods • Finished goods • Service trade • Requires direct relationship between the buyer and seller • Requires commercial presence in foreign markets

  4. ITS is Highly Interdependent

  5. The ITS is Highly Interdependent About World Trade • 1913-world trade in exports of goods & services totaled $20 B • 2011- world trade in exports of goods & services totaled $4.148 T • Increase of ~$200 B over 2010 exports • http://stats.oecd.org/index.aspx?queryid=167 Increased Trade over Time Due to: • Industrial Revolution • Resource requirement • Transportation • Materialism • Free trade philosophy

  6. The ITS is Highly Interdependent Trade in Goods & Services • World Merchandise Trade 2010 • 5 countries accounted for 1/3 of world service trade in 2010 • US, Germany UK, China, Japan • World Service Trade 2010 • Merchandise flow(p.3)

  7. GN-Led ITS Evolution Comparative Advantage

  8. GN-Led ITS Mirrors IMS evolution, exception--no IMF equivalent • British domination, European colonization • Post –WWI: Protectionist policies • Post-WWII: US economic hegemony in ‘free world’ • Agreements & Institutions criticized for free trade push

  9. GN-Led ITS Trade in goods and services not even • ~25% of countries dominate world trade GN built a comparative advantage over the GS • Early industrialization • Colonization • Cold War capitalist development and investments • Formed and led global trade institutions

  10. GN-Led ITS Trade in goods and services not even • EEs brought into loop • Need to export finance capital • Need to expand markets • Need for cheap labor • Rest of GS lags behind

  11. Agreements & Institutions GATT WTO Regional Trade Organizations

  12. Agreements & Institutions Post-WWII Agreement • General Agreement on Tariffs & Trade (GATT) • Est. 1947 out of ITO proposal • Came out of Havana Charter • US Senate did not ratify proposed treaty • Based on Principle of Nondiscrimination through 'normal trade relations’

  13. Agreements & Institutions US initiated GATT Trade Round talks to reduce tariffs • Offered way to promote stability and development • 1947-1961 First 5 rounds: All focused on tariff reduction • These 5 rounds  overall tariffs reduced 73% • Next 3 Rounds lasted several years • Kennedy, Tokyo, Uruguay • Moved beyond just tariffs • With Uruguay Round realized need for formal institution

  14. Agreements & Institutions Pressure on US as Hegemon • Similar to IMS situation with US as Central Banker • Japan, Germany, then also European Union bloc • Needed formal institution • World Trade Organization 1994 • Director General – Pascal Lamy since 2005

  15. Agreements & Institutions Update GATT Form WTO • Nontariff Barriers (NTBs) • Quotas, standards, licenses • Agriculturehttp://www.economist.com/node/21530130 • Service • Intellectual Property Rights (IPRs) • Environmental issues related to trade • Regionalism • Dispute Resolution Mechanism • Electronic commerce • Investment, Trade & Competition • Independent International Actor

  16. Agreements & Institutions WTO Conferences • GATT rounds were replaced by ministerial conferences • Current conference is Doha Development Round Trade Representatives • US Trade Agreements- USTR Ron Kirk • European Union Trade Commissioner- Jean-Luc Demarty • The same WTO issue from the US and EU perspectives “Both the European Union and the United States claimed victories in the latest ruling. European leaders said on Monday that they were delighted that the appeals judges confirmed that the United States had improperly subsidized Boeing’s aircraft development, while American officials maintained that the subsidies were smaller than those Europe had provided to Airbus.” http://www.nytimes.com/2012/03/13/business/global/trade-group-upholds-ruling-on-boeing-subsidies.html?partner=rss&emc=rss

  17. Agreements & Institutions Disputes • Trade wars much more common • EU- US beef war: hormones v. mad cows • US –China tires v. chickens • Russia –US steel v. chickens • Use WTO to file complaints • 430 dispute cases filed since 1995 • WTO has power to enforce decisions • Sanctions often applied during dispute resolution • WTO allows for sanctions to combat misconduct • WTO levies fines paid between parties

  18. Agreements & Institutions Countries have multiple Free Trade Agreements • Bilateral • US FTAs • EU FTAs • Multilateral • NAFTA, APEC, EU’s ACP relations Countries form IGOs= Formal institutions • Global: WTO, Organization for Economic Cooperation & Development (OECD) • OECD members = 78% world’s GDP • Regional • Promote intra-regional trade • Many modeled after ECSC

  19. Regional Economic IGOs EU SAARC ECOWAS ASEAN EAC SADC Mercosur

  20. 4 Most Important ITS Things • About the ITS • The ITS is Highly Interdependent • The ITS is GN-Led • About the Agreements & Institutions

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