World Trade Agreements

AGENDA

• Students will be able to identify key components of world trade agreements.

• Students will summarize the basic terms of agreements• Students will determine the economic benefits and consequences of

producers and consumers

NAFTA North American Free Trade Agreement• Participating Nations: Canada, United States, and Mexico

NAFTA North American Free Trade Agreement• Terms of Agreement: • The goal of NAFTA was to eliminate barriers to trade and investment

between the U.S., Canada and Mexico. The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of Mexico's exports to the U.S. and more than one-third of U.S. exports to Mexico.

NAFTA North American Free Trade Agreement• Economic benefits to Producers/Consumers:• Canada received a modest positive economic benefit as measured by

GDP (Gross Domestic Product)• One of NAFTA's biggest economic effects on U.S.-Canada trade has

been to boost bilateral agricultural flows• Mexican factories that take in imported raw materials and produce

goods for export have become the landmark of trade in Mexico. These are plants that moved to this region from the United States.

• Mexico has provided a growing market for meat for the U.S., leading to an increase in sales and profits for the U.S. meat industry.

NAFTA North American Free Trade Agreement• Economic Set-backs• In the United States, as economist Robert Scott details, NAFTA has

eliminated some 766,000 job opportunities-primarily for non-college-educated workers in manufacturing.

• Mexico wages, benefits, and workers’ rights are deliberately suppressed-are isolated from the rest of the Mexican economy. The workers are paid much less to perform job duties.

• Canadians saw an upward redistribution of income to the richest 20% of Canadians, a decline in stable full-time employment, and the tearing of Canada’s social safety net.

NATO: North Atlantic Treaty Organization• Participating Nations: Military or defense alliance formed in 1949 by 12 countries in Western Europe and North America today there are 28.An alliance of nations with shared values. All members are democracies.

NATO Members:

• Albania, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark Estonia, France, Germany, Greece Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Turkey, United Kingdom, and United States

NATO: North Atlantic Treaty Organization• Basic Terms of Agreement:• Original purpose – to protect its members from a possible attack from

the Soviet Union • Agreed if one member is attacked, they will all support and help

militarily. • Has been the most important U.S. alliance for the past (almost) 60

years

NATO: North Atlantic Treaty Organization• Economic Benefits: NATO membership not only reduces the chances of conflict but -- because NATO commits its members to a free-market economy -- it reduces risk factors like nationalization and expropriation. Risk-averse foreign investors, they say, will respond by pumping in more money.

NATO: North Atlantic Treaty Organization• Economic Set-Backs:• NATO entry will only burden government budgets and force huge

investments in military hardware of dubious economic value.

UN United Nations• Participating Members

  African Group  Asia-Pacific Group  Eastern European Group  Latin American and Caribbean Group (GRULAC)  Western European and Others Group  UN member not in any voting group  Non-UN state or territory

five permanent members: China, France, Russian Federation, the United Kingdom, and the United States,and ten non-permanent members elected for two-year terms by the General Assembly (with end of term date):Argentina (2014)Australia (2014)Chad (2015)Chile (2015)Jordan (2015)Lithuania (2015)Luxembourg (2014)Nigeria (2015)Republic of Korea (2014)Rwanda (2014)Non-Council Member StatesMore than 60 United Nations Member States have never been Members of the Security Council.

UN United Nations

Basic Terms of Agreement: • to maintain international peace and security;• to develop friendly relations among nations;• to cooperate in solving international problems and in promoting

respect for human rights;• and to be a center for harmonizing the actions of nations.

UN United Nations

• Economic Benefits: The UN provides technical assistance and other forms of practical help to countries around the world. In cooperation with the UN, they help formulate policies, set standards and guidelines, foster support and mobilize funds. The World Bank, for example, provided more than $38.2 billion in development loans in fiscal year 2008 to nearly 100 developing countries.

UN United Nations

Economic Set-Backs:• Because of financial hardships, rich countries are failing to

deliver on pledges. “We cannot afford to create a lost generation of children who have been deprived of their chance for an education that might lift them out of poverty.”

• Rich countries and international and financial institutions are exaggerating how much aid they provide to help poor countries cope with the financial crisis.

OPEC: Organization of the Petroleum Exporting Countries

• Participating Nations: The Organization has a total of 12 Member Countries.Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Later joined by Qatar (1961), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), and Angola (2007).

OPEC: Organization of the Petroleum Exporting Countries

OPEC: Organization of the Petroleum Exporting Countries

• Basic Terms of Agreement:• OPEC agrees to coordinate and unify the petroleum policies of its

Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

OPEC: Organization of the Petroleum Exporting Countries

• Economic Benefits: A sharp decline in oil prices benefits oil importing nations and hurts oil exporters. For importers, lower oil prices act similarly as a tax cut, increasing consumer disposable income. This allows for looser monetary policy, and hence lower interest rates with lower inflation and stronger economic growth (as in the case of the US).

OPEC: Organization of the Petroleum Exporting Countries

• Economic Set-Backs• Sharper oil prices, on the other hand, have been identified as a major

cause in seven out of eight post WW II recessions in the US.

CAFTA: Central America Free Trade Agreement

• Participating Nations: CAFTA was created to expand corporate rights to the poorest countries in Central America, including Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras, and the Dominican Republic.

CAFTA: Central America Free Trade AgreementBasic Terms of Agreement: CAFTA immediately eliminates all tariffs on 80 percent of U.S. manufactured goods, with the remainder phased out over a few years. Importantly, the agreement is not limited to manufactured goods, but covers virtually every type of trade and commercial exchange between these countries and the United States. It also strengthens regulatory standards and environmental protections in Central America and the Dominican Republic and provides for independent, outside monitoring.

CAFTA: Central America Free Trade Agreement• Economic Benefits: • Computer, electronic, aerospace, and information technology

products account for over a third of all U.S. exports to Central America and the Dominican Republic. Medical devices and pharmaceuticals, as well as agricultural products, account for a large share of American sales to the six countries, as do textiles and apparel.

• A rapidly growing market is growing even faster and yielding greater opportunities for U.S. companies

CAFTA: Central America Free Trade AgreementEconomic Set-Backs• Corporations now have more freedom than ever before to relocate to

whatever countries will provide the lowest wages and the loosest regulations, lowering their costs to increase their profits. The textile and apparel industry has taken advantage of this new dynamic like few others.

• Loss of jobs for Americans

GATT: General Agreement on Tariffs and Trade• Participating Nations: 160 members as of June 26, 2014

  members   Draft Working Party Report or Factual Summary adopted  Goods and/or Services offers submitted  Memorandum on Foreign Trade Regime submitted  observer, negotiations to start later or no Memorandum on FTR submitted  frozen procedures or no negotiations in the last 3 years  no official interaction with the WTO

GATT: General Agreement on Tariffs and Trade• Basic Terms of Agreement:• WTO (World Trade Organization)• It’s an organization for liberalizing trade. It’s a forum for governments

to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules.

GATT: General Agreement on Tariffs and Trade• Economic Benefits: Favors United States, United Kingdom, Europe Union, and JapanBig Corporations, Big Banks

GATT: General Agreement on Tariffs and Trade• Economic Set-Backs• Weaker 3rd World countries have to pay large notes for banks to bail

them out when the WTO tells them not to charge a tariff. The farmers can not make a profit to put back into the economy, so the nation needs money to sustain.

Discussions:

•Why do we need trade regulations?

•What are the benefits and consequences for consumers and producers?

•How can we as a society improve trade?