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The Multilateral Trade SystemLecture 17
Snapshot of U.S. TradeHow Much?1998: $1,587.4 Billion Imports and Exports of Goods and Services1998 GDP $8,760.0 BillionOpenness: 18.1%Source: Economic Report of the President, 2000
Top Ten Trading Partners($U.S. Billions, August 2000)Total: 898.4
Top Ten Deficits($U.S. Billions, August 2000)
Top 9 Surpluses, 2000($US Billions)Source: U.S. Bureau of Economic Analysis
US Exports and Imports ($Million)Source: U.S. Department of Commerce
Why Accept Hegemonic Role?Altruism: Created the Postwar Economy Because it was Needed and No Other Country Could.Security: Created the Postwar Economy Because U.S. Security Interests Necessitated it (Liberalism).Materialistic: Created the Postwar Economic System Because American Economic Actors Stood to Realize Large Benefits From Open Trade and Stable Exchange Rates.
Why the GATT/WTO?Mercantilism versus Trade TheoryTrade Theory: Imports Good, Exports Bad.Mercantilism: Exports Good, Imports Bad.Trade Liberalization Possible Only By Exchanging ConcessionsYou Open Your Market to My Exports, I Open My Market to Your Exports.Anarchic System Makes it Difficult to Enforce Trade Agreements (Prisoners Dilemma).GATT/WTO Provide Enforcement MechanismRules Increase Transparency (Whos Cheating?)Dispute Settlement Mechanism Provides Neutral 3rd Party to Examine and Resolve Disputes.
Three Principles of the GATT/WTONon-Discrimination Embodied in Most Favored Nation (MFN) (Article I)Reciprocity and Progressive Tariff ReductionsDomestic SafeguardsIn 1994, the GATT Transformed in the World Trade Organization (WTO)
The GATT/WTO ProcessGATT Bargaining RoundsEight Rounds Between 1947 and 1994; 9th UnderwayKennedy Round (1962-1967) is High Water Mark of Tariff Reductions.Uruguay Round (1986-1993) Brings Institutional Change (World Trade Organization).Developing Countries Were Very Reluctant Participants:Didnt Believe That Free Trade Worked to Their AdvantageBelieved GATT Bargaining Process Biased Against their Exports
Consequences of the GATT
1. Tariff Reductions
2. Growth of World Trade
Chart5
225.8
258.4
299.7
335.9
399.9
556.1
829.1
850.7
958.7
1086.3
1257.6
1625
1940.8
1924.2
1765.5
1734.5
1840.6
1872
2046.4
2401.4
2742
2981.5
3395.3
3489.1
3730.2
3730.7
4244.8
5079.4
5079.4
5546
$US Billions
World Trade, 1968-1997
Chart2
Chart3
00.1052632
0.11111110
0.10.0952381
00
0.18181820.0869565
00.04
0.15384620.0384615
-0.06666670
0.14285710.037037
0.1250.0714286
0.05555560.0333333
0.05263160.0645161
0.10.0606061
0.13636360.0571429
0.040.0540541
0.11538460.0512821
0.03448280.0487805
0.10.0465116
0.12121210.0666667
0.10810810.0416667
0.07317070.06
0.06818180.0566038
0.12765960.0714286
0.05660380.0166667
-0.07142860
0.11538460.0655738
0.03448280.0461538
0.050.0294118
0.0476190.0428571
0.0303030.0136986
00.0135135
-0.02941180.0133333
0.0303030.0263158
0.07352940.0512821
0.02739730.0365854
0.040.0235294
0.06410260.0344828
0.07228920.0444444
0.06741570.0425532
0.05263160.0204082
0.040.01
0.03846150.009901
0.04629630.0098039
0.09734510.0194175
0.08870970.0190476
0.05185190.0280374
0.10563380.0272727
Annual Change in Exports
World GDP Growth
Annual Percent Change
Figure 2.X: Growth of Trade and World GDP
Chart4
Sheet1
XvolumeWRLDGDPchexchgdp
1950919
195192100.1052632
195210210.11111110
195311230.10.0952381
1954112300
195513250.18181820.0869565
1956132600.04
195715270.15384620.0384615
19581427-0.06666670
195916280.14285710.037037
196018300.1250.0714286
196119310.05555560.0333333
196220330.05263160.0645161
196322350.10.0606061
196425370.13636360.0571429
196526390.040.0540541
196629410.11538460.0512821
1967225.830430.03448280.0487805
1968258.433450.10.0465116
1969299.737480.12121210.0666667
1970335.941500.10810810.0416667
1971399.944530.07317070.06
1972556.147560.06818180.0566038
1973829.153600.12765960.0714286
1974850.756610.05660380.0166667
1975958.75261-0.07142860
19761086.358650.11538460.0655738
19771257.660680.03448280.0461538
1978162563700.050.0294118
19791940.866730.0476190.0428571
19801924.268740.0303030.0136986
19811765.5687500.0135135
19821734.56676-0.02941180.0133333
19831840.668780.0303030.0263158
1984187273820.07352940.0512821
19852046.475850.02739730.0365854
19862401.478870.040.0235294
1987274283900.06410260.0344828
19882981.589940.07228920.0444444
19893395.395980.06741570.0425532
19903489.11001000.05263160.0204082
19913730.21041010.040.01
19923730.71081020.03846150.009901
19934244.81131030.04629630.0098039
19945079.41241050.09734510.0194175
19955079.41351070.08870970.0190476
199655461421100.05185190.0280374
19971571130.10563380.0272727
Sheet1
$US Billions
World Trade, 1968-1997
Sheet2
Sheet3
3. Growth of Foreign Direct Investment
Chart1
39
43.2
168
187
234
$US Billions
Foreign Direct Investment Flows, 1975-1995
Sheet1
197539
198043.2
1985168
1990187
1995234
Sheet1
$US Billions
Foreign Direct Investment Flows, 1975-1995
Sheet2
Sheet3
4. Global Division of Labor
Chart4
1611763
1257761
692191
268611
243653
154425
139031
128486
100322
88366
81196
73295
64417
60111
$US Millions
Largest Manufacturing Countries
Sheet1
NorthSouth
1953964
1963955
19709010
19808515
19908614
19958119
Sheet1
North
South
North-South Shares of World Manufacturing
Sheet2
United States1,611,76326.9
Japan1,257,76121
Germany692,19111.6
France268,6114.5
Great Britain243,6534.1
Brazil154,4252.6
China139,0312.3
Italy128,4862.2
Canada100,3221.7
Argentina88,3661.5
Spain81,1961.4
Taiwan73,2951.2
Australia64,4171.1
Switzerland60,1111
Sheet2
$US Millions
Largest Manufacturing Countries
Sheet3
manprod prcnt of total
South Korea2.7
Brazil2.6
China2.3
Argentina1.5
Taiwan1.2
Thailand0.8
Mexico0.8
Indonesia0.5
India0.4
Singapore0.3
Malaysia0.3
Hong Kong0.2
Philippines0.2
Rest LDC6.2
Sheet3
Distribution of Manufacturing Production
Chart1
964
955
9010
8515
8614
8119
North
South
North-South Shares of World Manufacturing
Sheet1
NorthSouth
1953964
1963955
19709010
19808515
19908614
19958119
Sheet1
North
South
North-South Shares of World Manufacturing
Sheet2
United States1,611,76326.9
Japan1,257,76121
Germany692,19111.6
France268,6114.5
Great Britain243,6534.1
Brazil154,4252.6
China139,0312.3
Italy128,4862.2
Canada100,3221.7
Argentina88,3661.5
Spain81,1961.4
Taiwan73,2951.2
Australia64,4171.1
Switzerland60,1111
Sheet2
$US Millions
Largest Manufacturing Countries
Chart6
2.7
2.6
2.3
1.5
1.2
0.8
0.8
0.5
0.4
0.3
0.3
0.2
0.2
6.2
Distribution of LDC Manufacturing Production
Sheet3
manprod prcnt of total
South Korea2.7
Brazil2.6
China2.3
Argentina1.5
Taiwan1.2
Thailand0.8
Mexico0.8
Indonesia0.5
India0.4
Singapore0.3
Malaysia0.3
Hong Kong0.2
Philippines0.2
Rest LDC6.2
Distribution of LDC Manufacturing
Chart2
2.7
2.6
2.3
1.5
1.2
0.8
0.8
0.5
0.4
0.3
0.3
0.2
0.2
6.2
Sheet1
NorthSouth
1953964
1963955
19709010
19808515
19908614
19958119
Sheet1
North
South
North-South Shares of World Manufacturing
Sheet2
United States1,611,76326.9
Japan1,257,76121
Germany692,19111.6
France268,6114.5
Great Britain243,6534.1
Brazil154,4252.6
China139,0312.3
Italy128,4862.2
Canada100,3221.7
Argentina88,3661.5
Spain81,1961.4
Taiwan73,2951.2
Australia64,4171.1
Switzerland60,1111
Sheet2
$US Millions
Largest Manufacturing Countries
Sheet3
manprod prcnt of total
South Korea2.7
Brazil2.6
China2.3
Argentina1.5
Taiwan1.2
Thailand0.8
Mexico0.8
Indonesia0.5
India0.4
Singapore0.3
Malaysia0.3
Hong Kong0.2
Philippines0.2
Rest LDC6.2
Sheet3
North-South Distribution of Foreign Direct Investment
Chart4
982
973
964
955
9010
North
South
Percent of Total
Chart1
128959
61322
55491
50755
49530
38453
26801
26510
21769
16775
$US Billion
Foreign Direct Investment in Developing Countries
Sheet1
ctryFDI Stock
China128,959
Mexico61,322
Singapore55491
Indonesia50755
Brazil49530
Malaysia38453
Argentina26801
Saudi Arabia26510
Hong Kong21769
Thailand16775
Rest LDC217034
Sheet1
Sheet2
NorthSouth
1960982
1975973
1985964
1990955
19959010
Sheet2
North
South
Percent of Total
Sheet3
Distribution of LDC FDI
Chart2
128959
61322
55491
50755
49530
38453
26801
26510
21769
16775
217034
Chart1
128959
61322
55491
50755
49530
38453
26801
26510
21769
16775
$US Billion
Foreign Direct Investment in Developing Countries
Sheet1
ctryFDI Stock
China128,959
Mexico61,322
Singapore55491
Indonesia50755
Brazil49530
Malaysia38453
Argentina26801
Saudi Arabia26510
Hong Kong21769
Thailand16775
Rest LDC217034
Sheet1
Chart3
982
973
964
955
9010
North
South
Percent of Total
Sheet2
NorthSouth
1960982
1975973
1985964
1990955
19959010
Sheet3
The Global Division of LaborAdvanced Industrialized CountriesComparative Advantage in Capital and Human Capital Intensive GoodsPharmaceuticals, Computers and Software, Telecommunications Systems, Aircraft.Asian Newly Industrializing CountriesComparative Advantage in Mature Capital Intensive GoodsSteel, Semiconductors, Autos.Other Developing CountriesComparative Advantage in Labor Intensive Goods (Apparel & Footwear; Assembly) and in Primary Commodities.