Chapter 6 – Trade

Trade as a Collaboration Problem

• States should work together

• Everyone is better off if they agree on the same thing

• However, I have incentives to work alone

• Work to having open trade to everyone

Dealing with Violations

• Compensation Perspective- The Compensation Perspective suggests that when a country violates international law, it should provide compensation to the affected party to make up for the harm caused. This compensation aims to restore justice by addressing the losses incurred. It ensures that the responsible party takes accountability for its actions through financial or other reparative means.

• Appeals to Exception Perspective

  • When states decide that they are gonna violate the rules

    • Compensation Method: Required to compensate everyone impacted by that barrier, since they are getting hurt

    • Tool for powerful states to pay their way out of following the rules 

  • Responding to unfair trading practices

    • Dumping: selling exports way below market value 

    • Support to domestic industries to make them more competitive

      • Canada sells logging rights to domestic states for more power at a lower exporting value

GATT and WTO

GATT- multilateral treaty in 1947 to promote trade liberalization → now WTO

• Dispute Settlement Process in the WTO

  • The GATT Dispute Settlement Process in the WTO resolves trade disputes between member states. Countries first attempt to resolve disputes through consultations, and if unsuccessful, a panel is established to investigate and issue a ruling, which can be appealed to the Appellate Body. If the losing party does not comply, the WTO may authorize retaliation, ensuring fair enforcement of trade rules.

Preferential Trade Agreements and their Rise

• PTA, International trade agreement with limited membership, like bilateral and regional agreements

• Explicitly under GATT/WTO rules

Barriers to Trade

• Tariffs

• Non-Tariff Barriers- Policy that is not a tariff, but that restricts trade. These can include quantitative restrictions, technical barriers to trade, and restrictions on government procurement.

  • Quantitative Restrictions- either a ban of a particular good or a quota which limits the amount of a particular good that can be imported into a state

  • Technical Barriers- “government regulations and standards that obstruct trade”

  • Government Procurement- Rules can be non-tariff barriers if they limit purchases of imported goods and services by businesses and government agencies

Standards of Treatment

• Most-Favored Nation

  • Better discount on tariffs on certain states 

  • WTO- everyone needs to have a common policy. Must extend same policy to everyone else

  • All have to be equal in percent

• National

  • How are products treated?

  • Once trade is in your borders, you need to treat it exactly as your own domestic products

Exceptions to Prohibition of Barriers to Trade

• Responding to Unfair Trade Practices

  • Subsidies- “any form of income or price support” provided by a government”

  • Dumping- selling good at less than normal values in foreign markets

• Unexpected Import Shocks- raising their tariffs during economic emergencies

• Competing Values- sometimes trade laws allow states to restrict trade to protect competing values.

  • USA getting into a dispute with Antigua and Barbuda on online gambling platforms

    • Need to put stricter barriers since it goes against USA morals

      • Put your money in a good place, not gambling

    • So this way they put an excuse to not trade with those things

• National Security

  • USA might justify using tariffs

  • “GATT/WTO allows its members to violate their major legal obligations to preserve national security.”