International Trade System

4 Most Important ITS Things 1. About the ITS 2. The ITS is Highly Interdependent 3. The ITS is GN-Led 4. About the Agreements & Institutions

About the ITS International Trade System (ITS) System of exchange of goods & services between countries Based around two types of trade 1. Merchandise trade Primary goods Raw materials: foods, fuels, fibers, minerals Manufactured goods Finished goods 2. Service trade Requires direct relationship between the buyer and seller Requires commercial presence in foreign markets

ITS is Highly Interdependent

The ITS is Highly Interdependent About World Trade 1913-world trade in exports of goods & services totaled $20 B world trade in exports of goods & services totaled $4.148 T Increase of ~$200 B over 2010 exports Increased Trade over Time Due to: Industrial Revolution Resource requirement Transportation Materialism Free trade philosophy

The ITS is Highly Interdependent Trade in Goods & Services World Merchandise Trade 2010 World Merchandise Trade 5 countries accounted for 1/3 of world service trade in 2010 US, Germany UK, China, Japan World Service Trade 2010 World Service Trade Merchandise flow (p.3) Merchandise flow

GN-Led ITS Evolution Comparative Advantage

GN-Led ITS Mirrors IMS evolution, exception--no IMF equivalent British domination, European colonization Post –WWI: Protectionist policies Post-WWII: US economic hegemony in ‘free world’ Agreements & Institutions criticized for free trade push

GN-Led ITS Trade in goods and services not even ~25% of countries dominate world trade GN built a comparative advantage over the GS Early industrialization Colonization Cold War capitalist development and investments Formed and led global trade institutions

GN-Led ITS Trade in goods and services not even EEs brought into loop Need to export finance capital Need to expand markets Need for cheap labor Rest of GS lags behind

Agreements & Institutions GATT  WTO Regional Trade Organizations

Agreements & Institutions Post-WWII Agreement General Agreement on Tariffs & Trade (GATT) Est out of ITO proposal Came out of Havana Charter US Senate did not ratify proposed treaty Based on Principle of Nondiscrimination through 'normal trade relations’

Agreements & Institutions US initiated GATT Trade Round talks to reduce tariffsGATT Trade Round Offered way to promote stability and development First 5 rounds: All focused on tariff reduction These 5 rounds  overall tariffs reduced 73% Next 3 Rounds lasted several years Kennedy, Tokyo, Uruguay Moved beyond just tariffs With Uruguay Round realized need for formal institution

Agreements & Institutions Pressure on US as Hegemon Similar to IMS situation with US as Central Banker Japan, Germany, then also European Union bloc Needed formal institution World Trade Organization 1994 World Trade Organization Director General – Pascal Lamy since 2005

Agreements & Institutions Update GATT  Form WTO Nontariff Barriers (NTBs) Quotas, standards, licenses Quotas Agriculture Agriculturehttp:// Service Intellectual Property Rights (IPRs) Intellectual Property Rights Environmental issues related to trade Regionalism Dispute Resolution Mechanism Electronic commerce Investment, Trade & Competition Independent International Actor

Agreements & Institutions WTO Conferences GATT rounds were replaced by ministerial conferences Current conference is Doha Development Round Trade Representatives US Trade Agreements- USTR Ron Kirk US Trade Agreements European Union Trade Commissioner- Jean-Luc Demarty The same WTO issue from the US and EU perspectivesUS EU “Both the European Union and the United States claimed victories in the latest ruling. European leaders said on Monday that they were delighted that the appeals judges confirmed that the United States had improperly subsidized Boeing’s aircraft development, while American officials maintained that the subsidies were smaller than those Europe had provided to Airbus.” subsidies.html?partner=rss&emc=rss subsidies.html?partner=rss&emc=rss

Agreements & Institutions Disputes Trade wars much more common EU- US beef war: hormones v. mad cows US –China tires v. chickens Russia –US steel v. chickens Use WTO to file complaints 430 dispute cases filed since dispute cases WTO has power to enforce decisions Sanctions often applied during dispute resolution WTO allows for sanctions to combat misconduct WTO levies fines paid between parties

Agreements & Institutions Countries have multiple Free Trade Agreements Bilateral US FTAs EU FTAs Multilateral NAFTA, APEC, EU’s ACP relations Countries form IGOs= Formal institutions Global: WTO, Organization for Economic Cooperation & Development (OECD)Organization for Economic Cooperation & Development OECD members = 78% world’s GDP Regional Promote intra-regional trade Many modeled after ECSC

EU ASEAN Mercosur SADC SAARC Regional Economic IGOs ECOWAS EAC

4 Most Important ITS Things 1. About the ITS 2. The ITS is Highly Interdependent 3. The ITS is GN-Led 4. About the Agreements & Institutions