1. International Trade System

2. About the ITS Goods & Services
System of exchange of goods & services bt. countries
2 Types:
Merchandise trade
Primary goods
Foods, fuels, fibers, minerals, water
Manufactured goods
Finished products
Service trade
Direct relationship: buyer <--> seller
Foreign commercial presence
Goods & Services
1913
$20 B
= $55 k/ day
2013
$18 T
= $50 k/day

3. Factors Why has trade has increased between countries?
Industrial Revolution
Resource requirement
Transportation, communication
Materialism
Free trade philosophy
Absolute versus comparative advantage

4. Export-Driven EconomiesGS
Lack domestic sector
Heavily rely on production for export
Cash crops
Labor as comparative advantage
Tourism
Many lack diversified market
GN as buyers of goods, source GS labor

5. What are China’s production advantages?
Internal issues, but…
Low-cost manufacturing model
Factory Asia
Regionalism
Linchpin of demand
Domestic market
Contractor supply
Centralized policy control

6. Why can’t other GS follow China’s model?
Lack large economy
Fewer jobs out of manufacturing
Require more diverse production
Lack policy control
Lack infrastructure, education

7. Dominance Post-CW Industrial Revolution Post –WWI Post-WWII
European, US
Post –WWI
Protectionism
Post-WWII
US economic hegemony in ‘free world’
Post-CW
EEs brought into loop with G-20
Rest of GS lags
Uneven trade~25% dominate

8. Agreements & Institutions

9. Free Trade Agreement (FTA) Types
Bilateral
US FTAs- 20 countries
EU FTAs
Multilateral
NAFTA, CAFTA-DR, Lomé, TPP, TTIP EU
WTO

10. Regional FTA IGO European Coal & Steel Community (ECSC)
Regional IGO (1951) of 6 states
Purpose: Promote regional trade
Present-day EU-now 28…
…until UK leaves
Significance to IMS
Eurozone- 19 members

11. Regional Economic IGOsEU
SAARC
ECOWAS
ASEAN
EAC
SADC
Mercosur

12. GATTWTO General Agreement on Tariffs & Trade (GATT) (1947)
Eliminate tariffs, non-tariff barriers (NTBs)
Principle of Nondiscrimination
‘Normal trade relations’= same treatment
Pressure on US as hegemon
Japan, Germany, then also EU bloc
CW ends, more members
Created WTO

13. GATT WTO World Trade Organization (1995) Formal organization
Director General
Dispute Settlement Body
Tend to comply
162 members
China, Russia
Doha Round- (2001)
Still in 1st Round
Objective: Open trade
Challenges: Eliminate non-tariff barriers
Roberto Azevêdo,

14. WTO Challenges Service Intellectual Property Rights (IPRs) Patents
India
Trademarks
Copyrights

15. WTO Challenges (cont.) All members try to cheat Sometimes tariffs
More covert policies: NTBs
Quotas
Set standards
Domestic content rules
Joint venture requirements
Subsidies

16. WTO Challenges: Subsidies
Agriculture
Industry
Automaker bailouts
Solar panels
Steel
Country
Market price
Subsidy
Farmer’s income US $2 $1 $3
Brazil $0

17. Sugar Subsidies
How does the U.S. government protect its sugar industry?
Direct tariffs on imports, quotas
Except from Mexico- NAFTA
How is Mexico protecting its sugar industry?
Subsidizing its industry
‘Dumping’ cheap sugar in U.S.
How do these tactics affect free trade?
U.S. prices higher
U.S. companies, consumers end up paying more
NAFTA- U.S. HFCS to Mexico; Excess MX sugar to U.S.
John Oliver on Sugar Subsidies

18. Disputes Trade wars EU- US ‘Banana War’ EU- US ‘Beef War’
1991 (Pre-WTO) to 2009
EU- US ‘Beef War’
Hormones v. mad cows
Russia –US; India, China- U.S.
Steel tariffs
China-US
Solar panel subsidies
US-EU
Airbus subsidies
Mexico & Canada v. US
Meat labeling by country; $3 B

19. WTO Dispute Resolution
Use WTO to file complaints
524 dispute cases filed since 1995
Overwhelming majority GN, EEs
WTO has power to enforce decisions
Sanctions, fines
Antigua and Barbuda v. U.S. DS 285

20. WTO Dispute Resolution: Antigua Case
What is at issue?
US online gambling ban
Violated trade treaties
Antigua’s recourse
Approval to suspend IP rules
10 years later!
Why did the WTO make this decision?
Enforcement
What factors determine whether the US will comply?
Status: Open case

21. 4 Most Important ITS Things
Trade in goods & services
ITS is highly interdependent
GN dominates
Bilateral, multilateral FTAs