POL 4410: Week Five

Trade Treaties

Structure

1.Theories of Trade Treaties

2.History of Global Trade Treaties

3.Regional Trade Treaties

Trade Theories

1.Neoclassical Economic Theory

2.Interest Group Theory

3.Realist / Mercantilist Theory

Neoclassical Theory

•Comparative Advantage vs. Absolute Advantage

AUTARKY

Cloth Soap

Britain 16 4

Italy 3 2

TOTAL 19 6

FREE TRADE

Cloth Soap

Britain 24 0

Italy 0 8

TOTAL 24 8

Interest Groups

•Losers from trade may try to block free trade and to impose tariffs.

•‘Protection for sale’

•Treaties as commitment devices

Realism / Mercantilism

•States sign treaties for two reasons:

(1) To bully other weaker states

(2) Because treaties don’t matter

Types of Trade Policy

1.Unliateral Policy

2.Bilateral Deals

3.Multilateral Institutions

Trade Treaties pre-WWII

•Cobden Chevalier in 1860

•MFN

•Reciprocal Trade Agreements Act in 1934

GATT

•Founded in 1948 with 23 members

•Based on reciprocity and MFN - many exceptions made

•Series of rounds

WTO

•Founded in 1995 with 76 members, now 149.

•Has Dispute Settlement Body

•Consensus and negotiations

•EU / US trade disputes

European Union•European Coal and Steel

Community in 1951

•European Economic Community in 1957

•European Union in 1992

•Tripartite structure: Commission, Council of Ministers, European Parliament

NAFTA and CAFTA

•1994 NAFTA founded

•Chapter 11 and Chapter 19

•CAFTA signed 2005

Other regional treaties

•Asia Pacific economic Cooperation group

•Mercosur

•Andean Pact

•Australia-New Zealand

Lomborg: Anderson

•Static Gains: inter / intra industry

•Dynamic Gains: knowledge; faster growth from imported capital goods

•Why protectionism?

•What reduces protectionism? Info; tech; foreign openness; trade agreements

•Costs: social and environmental?

Anderson (2)•1) Free trade; (2) Doha + and APEC

(MFN); (3) FTAs (non-MFN); (4) PTAs with ex-colonies.

•Binding? ; MFN? ; Reciprocal?

• Free trade = 2*(Doha) = 24 * (FTAA)

•Trade diversion vs. trade augmentation

•Bananas and trade diversion $1 / -$1 / -$13

Anderson (3)•Gross effects versus net effects

•Economic costs of reducing tariffs and subsidies.

•Private and social costs. Concentrated costs and diffuse benefits

•Poverty, environment, climate change, conflict

Pronk

•Positive effects of trade on other areas (poverty, health, environment) depend on ‘sustainability conditions’.

•Trade policy and domestic policy interact

•Gradualism vs. shock therapy. Sticky costs.

•Is WTO actually slowing free trade? Two-track liberalization.

Bergstein

1.Bicycle must keep moving

2.Big is beautiful

3.Bulding blocks, not stumbling blocs

4.Money is central

5.Leadership is essential

Ruggie

•What is ‘embedded liberalism?’

•Power and purpose

•Move from classical liberalism to neoliberalism

Wallace• What is Europeanization? Magnetic / Heineken

analogies.

• Importance of history and goeography

• Neofunctionalism

• Multi-level governance

• Territorial, Functional, Affiliational Integration

• Multiple modes of interaction

• Impact on domestic politics