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41 Cards in this Set
- Front
- Back
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IBUS Ch. 8 Learning Objectives
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After studying this chapter, you should be able to:
make the case for global economic integration understand the evolution of the GATT and the WTO, including current challenges describe the advantages and disadvantages of regional economic integration understand regional economic integration efforts in Europe, the Americas, Asia Pacific, and Africa participate in two debates on global and regional economic integration draw implications for action |
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Regional economic integration
[Global Economic Integration] |
efforts to reduce trade and investment barriers within one region
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Global economic integration
[Global Economic Integration] |
efforts to reduce trade and investment barriers around the globe
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benefits
[Global Economic Integration] |
global economic integration raises incomes, generates jobs, and stimulates economic growth
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flaws
[Global Economic Integration] |
environmental impact and unequal distribution of the fruits from more trade and investment among the haves and have-nots in the world
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Benefits of Global Economic Integration
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Political Benefits:
Promote peace by promoting trade and investment Build confidence in a multilateral trading system Economic benefits Disputes are handled constructively Rules make life easier and discrimination impossible for all participating countries Free trade and investment raise incomes and stimulate economic growth |
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General Agreement on Tariffs and Trade (GATT)
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Bretton Woods Conference introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II
GATT's main objective was reduction of barriers to international trade through reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements. GATT was a treaty, not an organization The functions of the GATT were taken over by the World Trade Organization (WTO) which was established during the final round of negotiations in the early 1990s |
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World Trade Organization (WTO)
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World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations
At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments The goal is to help producers of goods and services, exporters, and importers conduct their business |
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nondiscrimination
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a country cannot discriminate among its trading partners
Every time a country lowers a trade barrier, it has to do the same for all WTO member countries (except when giving preference to regional partners) |
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Six Main Areas of the WTO
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Umbrella-Agreement Establishing the WTO
Three main areas- Goods (GATT), Services (GATS), Intellectual Propery (TRIPS) Dispute setllement- Dispute Settlement Mechanisms Transparency-Trade Policy Reviews |
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Trade Dispute Settlement
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GATT mechanisms experienced long delays, blocking by accused countries, and inadequate enforcement
WTO addresses all three problems: sets time limits for a panel, consisting of three neutral countries, to reach a judgment removes the power of accused countries to block unfavorable decisions WTO recommends that losing countries change their laws or practices and authorizes winning countries to use tariff retaliation to compel offending countries’ compliance with WTO rulings |
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General Agreement on Trade in Services (GATS)
[WORLD TRADE ORGANIZATION: 1995–PRESENT] |
services currently account for over 60% of global production and employment, but represent no more than 20% of global trade
GATS was stimulated by the same objectives as GATT in merchandise trade: creating a credible and reliable system of international trade rules ensuring fair and equitable treatment of all participants (nondiscrimination) stimulating economic activity through guaranteed policy bindings promoting trade and development through progressive liberalization |
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Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Areas of intellectual property covered: [WORLD TRADE ORGANIZATION: 1995–PRESENT] |
copyright and related rights (rights of performers, producers of sound recordings and broadcasting organizations)
trademarks including service marks geographical indications including appellations of origin industrial designs patents including the protection of new varieties of plants layout-designs of integrated circuits undisclosed information including trade secrets and test data |
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Doha Development Agenda
[WORLD TRADE ORGANIZATION: 1995–PRESENT] |
launched in the aftermath of the 9/11 attacks
strong resolve to make free trade work around the globe to defeat the terrorist agenda to divide and terrorize the world first round in the history of GATT/WTO to specifically aim at promoting economic development in developing countries Goal: make globalization more inclusive and help the world’s poor |
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free trade area (FTA)
[Types of Regional Economic Integration] |
group of countries that remove trade barriers among themselves while each still maintains different external policies regarding nonmembers
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customs union
[Types of Regional Economic Integration] |
imposes common external policies on nonparticipants to combat trade diversion
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common market
[Types of Regional Economic Integration] |
permits the free movement of goods and people
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economic union
[Types of Regional Economic Integration] |
members coordinate and harmonize economic policies (in areas such as monetary, fiscal, and taxation) to blend their economies into a single economic entity
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Types of Regional Economic Integration
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Free Trade Area
Customs Union Common Market Economic Union Political Union Integration of political and economic affairs Common economic policies Free movement of goods, people, and capital Common external tariff Removal of intragroup tariffs |
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European Union
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European Union (EU) - set up in the aftermath of WWII to bring peace, stability and prosperity to Europe
Restrictions between member countries on trade and free competition have gradually been eliminated, with the result that standards of living have increased. Some sectors of the economy (public services) are still subject to national laws Individual EU countries still largely have the responsibility for taxation and social welfare The single market is supported by a number of related policies put in place by the EU over the years which help ensure that market liberalization benefits as many businesses and consumers as possible |
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EU Member Countries
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--1957--
Six Founding: Belgium France Germany Italy Luxembourg Netherlands |
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EU Expansion in the 1970s
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--1973--
Denmark Ireland United Kingdom |
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Expansion in the 1980's
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--1981--
Greece --1986-- Portugal Spain |
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Expansion in the 1990's
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--1995--
Austria Finland Sweden |
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Expansion in the 2000's
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--2004--
Cyprus Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovenia --2007-- Bulgaria Romania |
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Benefits and Costs of Adopting the Euro
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Benefits:
Reduce currency conversion costs Facilitate direct price comparison Impose monetary discipline on governments Costs: Unable to implement independent monetary policy Limit the flexibility in fiscal policy (in areas such as deficit spending) |
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North American Free Trade
Agreement (NAFTA)
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free trade agreement between Canada, Mexico, and the United States
tariffs on half of the exports and imports among members removed immediately remaining tariffs phased out by 2010 |
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trade between Canada and the United States grew twice as fast as it did before NAFTA
US exports to Mexico grew threefold, from $52 billion to $161 billion US FDI in Mexico averaged $12 billion a year, three times what India took in Mexico’s US-bound exports grew threefold, and its GDP rose to become 9th in the world, up from 15th in 1992 Mexico’s GDP per capita rose 24% during 1993–2003 to over $4,000, several times China’s |
trade between Canada and the United States grew twice as fast as it did before NAFTA
US exports to Mexico grew threefold, from $52 billion to $161 billion US FDI in Mexico averaged $12 billion a year, three times what India took in Mexico’s US-bound exports grew threefold, and its GDP rose to become 9th in the world, up from 15th in 1992 Mexico’s GDP per capita rose 24% during 1993–2003 to over $4,000, several times China’s |
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Andean Community and Mercosur
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Customs unions in South America:
Andean Community (1969) – covers western side of South America Mercosur (1981) – covers eastern side of South America Both regional initiatives have not been effective, in part because only 5% - 20% of members’ trade is within the Andean Community and Mercosur, respectively Their largest trading partner, the United States, lies outside the region |
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CAFTA
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United States-Dominican Republic-Central America Free Trade Agreement (CAFTA) 1995
Modeled after NAFTA, five Central American countries: Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica plus the Dominican Republic |
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FTAA
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as a result of NAFTA all Latin American countries (except Cuba) launched negotiations with Canada and the United States for a possible Free Trade Area of the Americas (FTAA)
in 2005, Argentina, Brazil, Paraguay, Uruguay, and Venezuela announced that they opposed FTAA, thus undermining the chances that FTAA would ever be set up |
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Regional Economic Economic Integration in South America
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CAFTA: Chile, Belize, El Salvador, Costa Rica, Nicaragua, Honduras, Dominican Republic
Andean Community: Bolivia, Peru, Ecuador, Columbia Mercosur members: Argentian, Uruguay, Paraguay, Brazil, Venezuela |
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Australia-New Zealand Closer Economic
Relations Trade Agreement (CER)
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removed tariffs and NTBs
both countries agreed not to charge exporters from the other country for “dumping” citizens from both countries can also freely work and reside in the other country |
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Association of Southeast Asian Nations (ASEAN)
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ASEAN’s main trading partners, the United States, the European Union, Japan, and China, are outside the region
In 2002, ASEAN and China signed an ASEAN-China Free Trade Agreement (ACFTA) to be launched by the early 2010s Similar FTAs are being negotiated with Japan and South Korea |
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Asia-Pacific Economic Cooperation (APEC)
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largest regional integration grouping by geographic area and by GDP
21 member economies span four continents home to 2.6 billion people contribute 46% of world trade ($7 trillion) command 57% of world GDP ($21 trillion) |
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Regional Economic Integration in Asia Pacific
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APEC & ASEAN members: Cambodia, Vietnam, Brunei, Malaysia, Singapore, Philippines, Indonesia
ASEAN-only: Myanmar, Laos APEC-only: China, Australia, Russia, Canada, Mexico, Peru, Chile, Japan |
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Regional Economic Integration in Africa
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relatively little trade within Africa (amounting to less than 10% of the continent’s total trade)
protectionism often prevails frustration with a current regional deal often leads to a new deal, usually with a different set of countries virtually impossible to understand the various African regional deals |
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Regional Economic Integration in Africa (Chart)
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COMESA:
Djibouti Egypt Eritrea Ethiopia Sudan CBI, COMESA: Burundi Rwanda Comoros Madagascar EAC, CBI, COMESA: Kenya Uganda EAC, CBI, COMESA, SADC: Tazania EAC, CBI, COMESA, SACU: Nambia Swaziland SACU, SADCC: Botswana Lesotho South Africa CBI, SADC: Mozambique SADC |
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Building Blocks or Stumbling Blocks
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In the absence of global economic integration, regional economic integration is often regarded as the next best thing to facilitate free trade—at least within a region.
However, another school of thought argues that regional integration has become a stumbling block for global integration. |
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Does the WTO Really Matter?
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Frustration associated with the collapse of the Doha Round and other WTO initiatives hinges on a crucial assumption that the WTO actually matters.
However, this assumption itself is now subject to debate. Academic research has failed to find any compelling evidence that the WTO (and the GATT) has a significantly positive effect on trade. |
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Implications for Action
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Think regional, downplay global
Understand the rules of the game and their transitions at both global and regional levels |
