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The study of international trade trade theory empirical studies of trade trade policy seeks fundamental insights through the rigorous application of structural.

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Presentation on theme: "The study of international trade trade theory empirical studies of trade trade policy seeks fundamental insights through the rigorous application of structural."— Presentation transcript:

1 The study of international trade trade theory empirical studies of trade trade policy seeks fundamental insights through the rigorous application of structural formalism and tightly specified assumptions test the propositions of trade theory or attempt to garner insights from the statistical evidence pertaining to trade flows and related economic indicators deals with the economic effects of direct or indirect government intervention that alters the environment under which international transactions take place general equilibrium partial equilibrium

2 Trade policy deals with the winners and losers that arise from government intervention in markets

3 Institutions for International Trade Policy ► Bretton Woods (1944): IMF, IBRD, ITO ► General Agreement on Tariffs and Trade (GATT) (1948) ► World Trade Organization (WTO) (1995)

4 GATT ► Signed by 23 countries on 1 Jan ► Purpose: "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." ► Based on unconditional MFN status among members.

5 ► Geneva Round ( )  signing of GATT  45,000 tariff concessions ► Annecy Round (1949)  5,000 tariff concessions ► Torquay Round ( )  8,700 tariff concessions  1948 tariff levels cut by 25%

6 ► Geneva II Round (1956)  $2.5 bn. in tariff reductions ► Dillon Round (Geneva) ( )  tariff concessions worth $4.9 bn. of world trade  involved negotiations related to the creation of the EEC. ► Kennedy Round (Geneva) ( )  tariff cuts worth $40 bn  Anti-dumping measures

7 ► Tokyo Round ( )  Tariff reductions worth more than $300 bn  NTBs arising from customs valuation, standards, government procurement, etc  Anti-dumping measures ► Uruguay Round ( )  to reduce agricultural subsidies  to put restrictions on foreign investment, and  to begin the process of opening trade in services like banking and insurance.  copyright violation and other forms of intellectual property rights.

8 ► Uruguay Round  123 countries  Finalized by Marrakesh Agreement in April 1994  WTO replaced the GATT  agreements for each of the three broad areas of trade: ► Goods and investment: GATT and TRIMs ► Services: GATS ► Property rights: TRIPs  Dispute settlement mechanisms  Major reductions in agricultural subsidies  Agreement on Textiles and Clothing

9 ► Non-discrimination ► Reciprocity ► Transparency ► Enforceable commitments ► Safety valves Principles of the WTO

10 Non-discrimination ► MFN Treatment: a product made in one member country be treated no less favorably than a “like” (very similar) good that originates in any other member country ► National Treatment: foreign goods, once they have satisfied whatever border measures are applied, be treated no less favorably, in terms of internal taxation than like or directly competitive domestically produced goods

11 Reciprocity ► Reciprocal concessions in negotiations Transparency ► Trade Policy Review Mechanism Enforceable commitments ► Dispute settlement procedures

12 Safety valves ► In case of; (a) articles allowing for the use of trade measures to attain noneconomic objectives; (b) articles aimed at ensuring “fair competition”; and (c) provisions permitting intervention in trade for economic reasons ► Provisions and countervailing duties on imports

13 Trade Related Investment Measures (TRIMs) ► more frequently used by developing countries than developed countries for regulating FDI and protecting infant industries.  Local content requirements (LCRs)  Trade balancing requirements  Foreign exchange balancing requirements  Export performance requirements (EPRs)  Technology transfer requirements  Joint venture requirements

14 General Agreement on Trade in Services (GATS) ► Liberalization of the services sectors. ► 4 Modes of Supply:  Mode 1: Cross-border supply: services flows from the territory of one Member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail);  Mode 2: Consumption abroad: consumer (e.g. tourist or patient) moves into another Member's territory to obtain a service;  Mode 3: Commercial presence: a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member's territory to provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains);  Mode 4: Presence of natural persons: persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers).

15 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) ► Protecting IPRs ► Copyright, Patent Rights and Trademarks ► Geographical Indicators (e.g. Champagne, Scotch, Roquefort) ► Enforcement ► Transition Periods ► Case of Medicines!

16 Agreement on Agriculture (AoA) 3 Pillars: ► Domestic support ► Market Access ► Export subsidies also includes references to non–trade concerns, listed as food security, the environment and special and differential treatment for developing countries

17 AoA: Domestic Support Green Box Blue Box Amber Box payments linked to environmental programs, pest and disease control, infrastructure development, and domestic food aid. direct payments to producers if those payments are linked to a fixed, historic base period government payments to income insurance and emergency programs supports that require farmers to limit production all domestic support measures considered to distort production and trade that governments have to reduce but not eliminate measures to support prices, or subsidies directly related to production quantities.

18 AoA: Market Access Tariff Reductions:  Developing Countries: 36% average reduction, with a minimum per tariff line reduction of 15% over 6 years.  Developing Countries: 24% average reduction, with a minimum per tariff line reduction of 10% over 10 years.  LDCs: exempt from tariff reductions, but either have to convert non–tariff barriers to (tariffication) or bind their tariffs

19 AoA: Export Subsidies  AoA required developed countries to reduce their export subsidy spending by 35% over five years in value terms, with a reduction of at least 21% in the volume of products.

20 Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures constraints on member-states' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (phytosanitary) about imported pests and diseases.

21 Agreement on Technical Barriers to Trade (TBT) ensures that regulations, standards, testing, and certification procedures do not create unnecessary obstacles to trade. prohibits technical requirements created in order to limit trade, as opposed to technical requirements created for legitimate purposes such as consumer or environmental protection.

22 Doha Round 3 ministerial meetings: Doha (2001), Cancun (2003), Hong Kong (2005) Negotiations: Geneva (2004), Paris (2005), Geneva (2006), Potsdam (2007), Geneva (2008)

23 WTO Ministerial Meeting of 1996 in Singapore Singapore Issues: transparency in government procurement trade facilitation (customs issues) trade and investment trade and competition Seattle “Millennium Round” failed (1999) 9/11 Attacks to the US Increasing bilateralism Before Doha

24 Doha Round ► 3 documents for future guidance:  Ministerial Declaration – Doha Development Round – broader negotiations in agricultıre and services, industrial tariffs, topics of interest to developing countries, changes to WTO rules, and other provisions  Declaration on the TRIPS Agreement and Public Health  Implementation-Related Issues and Concerns  negotiations would be concluded not later than January 1, 2005

25 Cancún Ministerial (2003) Reasons for failure: ► Singapore issues ► Wide differences in developen and developing groups (especially on agriculture) ► Complicated agenda Hong Kong Ministerial (2005) ► Last opportunity before the expiration of US Trade Promotion Authority - “Fast Track” ► July 2006: Suspension of WTO talks

26 Future of WTO? Bilateralism instead of Multilateralism? Impacts of economic slowdown. Stances of developed and developing countries.


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