Introduction to Trade Policy Centre for Trade Policy and Law University of Ottawa Faculty of Law January

International trade policy is understood as the system of rules that govern how states regulate international commercial transactions. 2

International trade encompasses the exchange of goods and services. In 2009, total international goods trade amounted to $12 trillion USD. – European Union $4.6 trillion – China $1.2 trillion; and – USA $1.1 trillion In 2009, services trade amounted to $3.3 trillion USD – European Union $1.5 trillion – U.S.A. $470 billion – China $129 billion 3Source: The WTO Report

International trade also encompasses foreign direct investment (FDI). – Note: There is no comprehensive multilateral agreement governing FDI. As of the Uruguay Round of trade negotiations and the establishment of the WTO global trading rules also cover trade related aspects of intellectual property. 4

The Economics of Trade Adam Smith’s Wealth of Nations Ricardo’s theory explaining gains from comparative advantage. Krugman – productivity/specialization Porter – Clusters of excellence enhancing international competitiveness. New New Trade Theory – Trade takes place at the firm level – Who succeeds and why The impact of globalization on trade – Innovations in communications and transportation – Integration of research, development and production – Movement of skilled peoples Limitations imposed by geography and politics 5

Trade Policy Interfaces Foreign policy International security Trade and development Trade and labour Human rights Environment 6

The Relationship to Domestic Economic Policy Success in international trade is dependent on domestic economic fundamentals. – Fiscal, monetary and tax policies must be right Domestic policy fundamentals promote productivity and competitiveness. 7

Contribution of Exports and Imports Exports generate economic activity and jobs. Exports increase foreign exchange earnings. Imports lower costs for Canadian producers using foreign made inputs. Imports lower costs to consumers. 8

The Conduct of International Trade The role of Government – International agreements among trading nations Multilateral/plurilateral/bilateral The role of the private sector – Commercial transactions: trade in goods; trade in services; investment. – Stakeholders: business; consumers; NGOs and other interested parties. 9

Evolution of the Global Trading System The Bretton Woods Framework. The General Agreement on Tariffs and Trade (GATT) contract. A multilateral trade institution: the WTO – The WTO Agreements – The WTO’s relationship to other international organizations 10