bg 14 471.23 fall 2015. world trade 0 5 10 15 20 0% 25% 50% 75% 100% 196019701980199020002010...
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BG
14
471.23
Fall 2015
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World Trade
0
5
10
15
20
0%
25%
50%
75%
100%
1960 1970 1980 1990 2000 2010
exports(as % of GDP)
Canada
exports(trillions US$)
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Politics & International Trade
Baron ch 17
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Trade Theory
2 countries• X
• Y
each has 12 units of labour
each produce 2 goods• A
• B citizens like to have both
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Trade Theory
2 countries• Xanadu
• Yalta
12 people each• each works 1 person-year
each produce 2 goods• Apples
• Bananas everybody likes to have both apples & bananas
X$1 = 1 apple = 1 banana
X$ = Y$Y$1 = 1 apple = 1 banana
Xanaduzians1 Apple: 2 person-years1 Banana: 1 person-year
Yaltans1 Apple: 1 person-year1 Banana: 2 person-year
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No Trade
goods
Apples Bananas
countries
Xanadu
Yalta
Xanaduzians1 Apple: 2 person-years1 Banana: 1 person-year
Yaltans1 Apple: 1 person-year1 Banana: 2 person-year
6(12 person
-years)
6(12 person
-years)
12(12 person
-years)
12(12 person
-years)
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No Trade
goods
Apples Bananas
countries
Xanadu
Yalta
Xanaduzians1 Apple: 2 person-years1 Banana: 1 person-year
Yaltans1 Apple: 1 person-year1 Banana: 2 person-year
6(6 person -
years)
6(6 person -
years)
3(6 person -
years)
3(6 person -
years)
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No Trade
goods
A B
countries
X
Y
X1 A: 2 ul (units of labour)1 B: 1 ul (units of labour)
Y1 A: 1 ul (units of labour)1 B: 2 ul (units of labour)
6
6 ul
6
6 ul
3
6 ul
3
6 ul
mix
2/1
1/2
wealth
9
9
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Trade
goods
A B
countries
X
Y
X1 A: 2 ul (units of labour)1 B: 1 ul (units of labour)
Y1 A: 1 ul (units of labour)1 B: 2 ul (units of labour)
6
6
3
3
mix
2/1
1/2
wealth
9
9
12
12
6
6
6
6
1/1
1/1
12
12
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Disadvantaged Y
goods
A B
countries
X
Y
X1 A: 2 ul (units of labour)1 B: 1 ul (units of labour)
Y1 A: 3 ul (units of labour)1 B: 4 ul (units of labour)
mix
1/.75
1/2
wealth
3.5
9
No Trade
2
6 ul
6
6 ul
1.5
6 ul
3
6 ul
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Disadvantaged Y
goods
A B
countries
X
Y
X1 A: 2 ul (units of labour)1 B: 1 ul (units of labour)
Y1 A: 3 ul (units of labour)1 B: 4 ul (units of labour)
2
6
1.5
3
mix
1/.75
1/2
wealth
3.5
9
4
8
2
6
2
2
1/1.5
1/1
10
4
Trade
2
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Why?
If free trade is better for everyone,
why do so many people object?
• economic model = unrealistic assumptions everybody has the same amount of power everybody has same info
» accurate & complete consumers & producers accept price
» given & fixed goods undifferentiated
» identical transaction costs
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Why?
If free trade is better for everyone,
why do so many people object?
• economic model = unrealistic assumptions no economy of scale no cost of entry or exit no learning curve
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Why?
If free trade is better for everyone,
why do so many people object?
• economic model: human beings are “logical”
• doesn’t account accurately for short-term benefits domestic concerns preference for local benefits & harms differently dispersed
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US Trade Policy
4 arenas cabinet departments regulatory agencies Congress President
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Trade Policy “Process”
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Final exam
requests: Brooks & Stritch, ch. 7: Business Organization and
Lobbying Taylor, et al., ch. 10: The Current State of Business-
Government Relations Taylor, et al., ch. 13: Government Dealing With
Business (2 requests) Baron, ch. 7: Formulating Nonmarket Strategies for
Government Arenas Baron, ch. 11: Environmental Protection: Economics,
Politics and Management (2 requests)
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US Trade Laws & Treaties
1922 Fordney-McCumber Act
1930 Tariff Act• Smoot-Hawley
1934 Reciprocal Trade Agreements Act
1946 Bretton Woods
1947 GATT established
1947-61 GATT rounds 1-5
1962 US Trade Expansion Act
1964-67 GATT round 6: Kennedy Round
1974 Trade Act
1986-94 GATT: Uruguay Round: 23,000 pages
2001- GATT: Doha Round
http://www.wto.org/english/thewto_e/minist_e/min98_e/slide_e/slide002.htm
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US Trade Laws
provisions temporary safeguards
• temporary relief for domestic industries seriously injured by increased imports
• no unfair trade practice is required
Presidential retaliation• against countries that restrict imports of US goods
or subsidize exports to US
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US Trade Laws
provisions antidumping
• LTFV
• imposition of duties
countervailing duties• duties against countries that subsidize domestic
industries
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US Trade Laws
provisions intellectual property
• retaliation against countries violating US patents copyrights protected trade secrets
Trade Adjustment Assistance• assistance for those injured by imports
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WTO
World Trade Organization
153 member countries
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WTO
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WTO
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WTO
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WTO
agreements GATT GATS TRIPS
Dispute settlement Trade policy reviews Agricultural Agreement Agreement on government
procurement
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WTO
roles system of agreements
• help trade move more freely
forum for trade negotiations
dispute settlement mechanism
• resolve trade disputes in a timely manner
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WTO
principles MFN
Most-Favored Nation
• all members treated as well as best trading partner
national treatment• domestic & foreign goods equal
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WTO
GATT General Agreement on Tariffs & Trade signed after World War II
• modified in “rounds”
push down trade barriers• tariffs
• quotas
• non-tariff barriers
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WTO
GATS General Agreement on Trade in Services MFN & national treatment
• in services
transparency• regulations
• conditions of service
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WTO
TRIPS Trade-Related Intellectual Property Rights MFN & national treatment
• lots of exemptions
even more controversy• copyright
• drug patents
• transitional economies
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Other Trade Agreements
NAFTA ASEAN Asia-Pacific Economic Cooperation EC of Central African States Gulf Cooperation Council Open Skies EU
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Other Trade Agreements
EU• within EU
reduced tariffs harmonize rules
• from outside tariffs quotas