Int'l Trade - Ch 8

International Trade

8.1 Policies Interfering with Free Trade

• Types of Policies

  • Protectionist policies: Tariffs, quotas, and subsidies that limit international competition.
  • State intervention: Governments may interfere in trade to protect domestic industries.

• Economic and Political Dimensions

  • International trade constitutes approximately $19 trillion annually, accounting for one-sixth of global economic activity.
  • Trade is driven by countries' interests, and political conditions influence trade negotiations and regulations.
  • Trade through multinational corporations alters state levels of economic leverage.

8.2 Current Impasse in WTO Negotiations

• Doha Round Stalemate

  • Failure to finalize agreements due to disagreements between developed and developing countries.
  • Key issues: Agricultural subsidies, market access, and intellectual property rights continue to block progress.

• Pressure on Governments

  • Domestic industries lobby for favorable terms, often leading to reluctance in international negotiations.
  • Global public backlash against perceived unfair trade practices hampers negotiations.

8.3 Resistance to Global Trade

• Ways Resistance Occurs
  • Strong public sentiment against globalization seen in many regions.
  • Labor unions and human rights organizations advocate for policies that ensure fair working conditions and environmental protections.
  • Political movements resulting in anti-globalization sentiment, driven by job losses in domestic industries faced with international competition.

Economic Theories in Trade

• Liberalism vs. Mercantilism

  • Liberalism promotes cooperation for mutual gains, while mercantilism emphasizes relative gains to enhance state power.
  • Comparative advantage underlies the belief that countries should specialize in what they produce most efficiently.

• Protectionism

  • Protectionist policies aim to shield domestic industries, often at the cost of consumers (higher prices).
  • Various methods include tariffs, quotas, and subsidies to favor local industries.

Economic Integration and Trade Regimes

• World Trade Organization (WTO)
  • Formed in 1995 to replace the General Agreement on Tariffs and Trade (GATT), overseeing international trade regulations.
  • Focuses on resolving disputes and maintaining trade equilibrium among member states.
• Bilateral and Regional Agreements
  • Regional free-trade agreements proliferate, such as NAFTA and EU trade policies, which can lead to conflicts or confusion in global trading norms.

Cartels and Their Impact

• Functions of Cartels

  • Cartels manipulate market prices by controlling supply, with OPEC being the most notable example.
  • Efforts to stabilize prices can lead to collective goods problems when members exceed quotas.

• Global Trade Networks

  • Elimination of trade barriers promotes market competition and can enhance economic growth.
  • However, regional preferences create inequalities in international trade practices, especially against non-member states.

Globalization and its Challenges

• Economic Globalization
  • Induces interdependence among nations, enhancing trade opportunities but also increasing vulnerabilities.
  • Nationalism and protectionist policies emerge as responses to perceived threats from foreign market influences.

Summary of International Trade Dynamics

• Current Trends
  • Trade negotiations are increasingly complex and extended, requiring the consensus of many nations.
  • Continuous battles over trade agreements reflect deeper issues of global economic justice and fairness, creating tensions on various political levels.