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Free Trade and Globalization. What is the state of world trade? Does it support the globalization thesis? Arguments in support of globalization thesis economic, political, ideological Alternative thesis: increasing lines of fracture undermining free trade competing national capitalisms
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Free Trade and Globalization • What is the state of world trade? Does it support the globalization thesis? • Arguments in support of globalization thesis • economic, political, ideological • Alternative thesis: increasing lines of fracture undermining free trade • competing national capitalisms • rising regionalisms • September 11
Evolution of Free Trade • Logic of free trade • comparative advantage • formulated by David Ricardo, 19th century economist • Basis for General Agreement on Tariffs and Trade (GATT) regime • 4 cornerstones of GATT • tariff concessions; no quotas; MFN; national treatment • evolution of GATT
Free Trade Summary • Scope of liberalization greater • tariffs lower; trade freer; more areas covered • Broader geographic scope • Greater institutionalization with WTO • Is it that simple?
Competing National Capitalisms • Undermine rules of free trade • Use of “strategic trade policies” • states pick winners and protect industries without violating GATT • Example 1 - China • transitional economy with state trading enterprises • Example 2 - Japan • strong state with concentrated industrial structure
Rising Regionalism • Preferential Trade Areas (PTAs) create tension for GATT/WTO system • Free Trade Areas and Customs Unions • violate MFN but permitted by exception • Examples: EU, NAFTA, Mercosur, ASEAN • Problems caused by PTAs • trade diversion; political tensions; protectionist regional blocks
The Future of Free Trade • Will multilateral free trade system survive and thrive, or fragment? • Will we see globalization and harmonization, or increasing fracture and growing national/regional differences? • Trends • WTO law; national trade laws; regional trade law
Impact of September 11 • Reasons to expect trade, investment and migration to grow less quickly • But is globalization at risk? • US withdrawal; rising transaction costs; globalization associated with US • New technologies and organizational changes can enhance security and minimize disruptions