1. The Role of the GATT
Goal: to promote a free and competitive international trading environment benefiting efficient producers
Accomplished by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff barriers
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2. Most Favored Nation (MFN) Principle
Sought to ensure that international trade was conducted on a nondiscriminatory basis
Requires that any preferential treatment granted to one country must be extended to all countries
If the US cut the tariff on imports of British trucks to 20%, it also had to reduce tariffs on imported trucks from all other members to 20%
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3. Exceptions to the MFN Principle
Members permitted to lower tariffs to developing countries without lowering them for more developed countries
Generalized system of preferences in U.S. Tariff Code
Regional arrangements promote economic integration (e.g., EU and NAFTA)
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4. World Trade Organization (WTO)
Headquartered in Geneva, Switzerland
Began January 1, 1995
Included 146 members and 30 observer countries as of June 2003
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5. Goals of the WTO
Promote trade flows by encouraging nations to adopt nondiscriminatory, predictable trade policies
Reduce remaining trade barriers through multilateral negotiations
Establish impartial procedures for resolving trade disputes among members
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6. Differences between WTO and GATT
GATT focused on promoting trade in goods; WTO’s mandate includes
trade in goods
trade in services
international intellectual property protection
trade-related investment
WTO’s enforcement powers are stronger
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7. Figure 10.2 The WTO’s Principles of the Trading System
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8. WTO Challenges The Cairns Group Multifibre Agreement
General Agreement on Trade in Services (GATS)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Trade-Related Investment Measures Agreement (TRIMS)
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9. Enforcement of WTO Decisions
Country failing to live up to the agreement may have a complaint filed against it
WTO panel evaluates complaint
If found in violation, the country may be asked to eliminate the trade barrier
If country refuses, WTO will allow complaining country to impose comparable trade barriers on the offending country
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10. The WTO’s success in lowering trade barriers has attracted protests
The WTO’s success in lowering trade barriers has attracted protests. Many believe the WTO ignores the impact of its policies on human rights, the environment, and the wages and job security of workers
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11. Forms of Economic Integration
Free Trade Area
Customs Union
Common Market
Economic Union
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12. Figure 10.3 Forms of Economic Integration
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13. European Union (EU) Most important regional trading bloc
15 member countries
377 million population
Total GDP $7.9 trillion
10 additional members in 2004
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14. Creation of EU
Motivated by desires of war-weary Europeans to promote peace and prosperity through economic and political cooperation
Treaty of Rome, 1957
France
West Germany
Italy
Benelux Nations (Belgium, the Netherlands, and Luxembourg)
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15. Map 10.1 The European Union
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16. Governing Organizations of the EU
The Council of the European Union
The European Commission
The European Parliament
The European Court of Justice
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17. Three Pillars of the Maastricht Treaty
A new agreement to create common foreign and defense policies among members
A new agreement to cooperate on police, judicial, and public safety matters
The old familiar European Community, with new provisions to create an economic and monetary union among member states
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18. Components of the Treaty for Europe (Treaty of Amsterdam)
A strong commitment to attack the EU’s chronic high levels of unemployment
A plan to strengthen the role of the European Parliament by expanding the number of areas that require use of the co-decision procedure
Establishment of a two-track system
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19. Treaty of Nice Effective February 2003
To reduce the risk of political gridlock as the number of members increase,
reduced number of areas where unanimity is required for Council approval
adjusted number of votes assigned to each Council member
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20. Map 10.2 Free Trade Agreements in Central and South America and the Caribbean
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21. Trade among Andean Pact members has been hindered by rough terrain of the Andes Mountains
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22. Map 10.3 The ASEAN Members
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23. Map 10.4 Asia-Pacific Economic Cooperation Initiative (APEC)
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24. Map 10.5 Free Trade Agreements in Africa
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