INBU FINAL-CH 8
CETA: The Comprehensive Economic and Trade Agreement
"CETA is helping to create jobs, strengthening economic relations and boosting Canada's trade with the world's second-largest market" • •CETA is a free trade agreement which covers virtually all sectors and aspects of Canada-EU trade in order to eliminate or reduce barriers •CETA entered into force provisionally on 21 September 2017, meaning most of the agreement now applies
Levels of Regional Integration
1. Free Trade Area 2. Customs Union 3. Common Market 4. Economic Union 5. Political Union
Five Key EU Institutions
1.The European Commission •responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states 2.The European Council •Represents the interests of member states •The ultimate controlling authority within the EU as draft legislation can only become EU law if the Council agrees •Composed of one representative from the government of each member state 3.The Council of Ministers •Study legislations proposed by the European commission 4.The European Parliament •Directly elected by the populations of the member states •debates legislation proposed by the commission and forwarded to it by the Council of Ministers 5.The Court of Justice •the supreme appeals court for EU law
European Free Trade Association (EFTA)
A free trade association including Norway, Iceland, Liechtenstein, and Switzerland. §Feared lost sovereignty §Feared destructive rivalry §Desired free-trade gains §Cooperates with EU
Closer Economic Relations Agreement
Australia and New Zealand created the Closer Economic Relations Agreement in 1983 to advance free trade and further integrate their economies. •They eliminated all tariffs and quotas in 1990, five years ahead of schedule. •Each nation allows goods and most services sold in the other nation to be sold within its borders. •Each nation also recognizes the professional certifications of people allowed to practice in the other country.
Regional economic integration in Europe
Europe has two trade blocs 1.The European Union (EU) with 28 members 2.The European Free Trade Area (EFTA) with 4 members
North American Free Trade Agreement (NAFTA)
Includes the United States, Canada, and Mexico •Established in 1994. •abolished tariffs on 99% of the goods traded between members •removed barriers on the cross-border flow of services •protects intellectual property rights •removes most restrictions on FDI between members •allows each country to apply its own environmental standards •establishes two commissions to impose fines and remove trade privileges when environmental standards or legislation involving health and safety, minimum wages, or child labor are ignored
Regional Economic Integration
Regional economic integration: agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other
Benefits of regional economic integration
Trade creation Political power Political cooperation
Levels of Regional Integration: Political union
a central political apparatus that coordinates the economic, social, and foreign policy of member states Example: the EU is headed toward at least partial political union, and the U.S. is an example of even closer political union
Levels of Regional Integration: Free trade area
eliminates all barriers to the trade of goods and services among member countries Examples: European Free Trade Association (EFTA) North American Free Trade Agreement (NAFTA)
Levels of Regional Integration: Customs union
eliminates trade barriers between member countries and adopts a common external trade policy Example: Andean Community
Levels of Regional Integration: Economic union
free flow of products and factors of production between members, a common external trade policy, a common currency, a harmonized tax rate, and a common monetary and fiscal policy Example: EU
Levels of Regional Integration: Common market
no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production Example: Mercosur
Drawbacks of Regional economic Integration
trade diversion, shifts in employment, loss of national sovereignty
Is The North American Free Trade Area Beneficial? Critics of NAFTA claimed that
§jobs would be lost and wage levels would decline in the U.S. and Canada §pollution would increase due to Mexico's more lax standards §Mexico would lose its sovereignty
Andean Community
ØColombia, Ecuador, Peru, and Bolivia Øformed in 1969 using the EU model Øhad more or less failed by the mid-1980s Øwas re-launched in 1990, and now operates as a customs union Ørenamed the Andean Community in 1997 Øsigned an agreement in 2003 with Mercosur to restart negotiations towards the creation of a free trade area
Brexit
•A public vote was held in June 2016, when 17.4 million people opted for Brexit. (The UK leaving the EU) •The Leave side 52%, compared with 48% for Remain. •The UK formally left the EU on 31 January 2020. A transition period will allow the terms to be set •The transition period will give both sides some breathing space while a new free trade agreement is negotiated between the UK and EU
The US - China Trade deal: Phase One
•China has committed to purchase $200 billion worth of goods and services by 2021 •The pact is intended to open Chinese markets to more U.S. companies, increase farm and energy exports and provide greater protection for U.S. technology •U.S exports covered by the deal include agriculture, seafood, and forest and automotive products •The agreement preserves the bulk of tariffs that the U.S. has imposed on Chinese goods
The USMCA: Key changes in new deal
•Country of origin rules: Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA). •Labor provisions: 40 to 45 percent of automobile parts must be made by workers who earn at least $16 an hour by 2023. •Dairy: US farmers get more access to the Canadian dairy market •Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). •Sunset clause: The agreement adds a 16-year sunset clause — meaning the terms of the agreement expire, or "sunset," after 16 years.
ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)
•Created on 27 February 2009 •A free trade area between ASEAN nations, Australia and New Zealand
What is the Euro?
•EU adopted a single currency January 1, 1999 •created the second largest currency zone in the world after that of the U.S. dollar •used by 19 of the 28 member states •Britain, Denmark, and Sweden opted out
Central America Free Trade Agreement (CAFTA) &(CAFTA-DR)
•Free trade agreement, signed 2005 •It is a treaty under the international law, not the US law •Members: United States and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua (CAFTA), the Dominican Republic (DR) joint later
Asia-Pacific Economic Cooperation (APEC)
•Group of 21 nations ringing the Pacific Ocean that accounts for over half of world trade 1.Not designed as a free-trade bloc 2.Strengthen multilateral trade system 3.Liberalize trade and investment rules
The Euro as a common currency
•Key Advantages 1.Price transparency - easier to compare prices 2.Lowering transactions costs - avoid costs of changing currencies 3.Increasing trade within the Eurozone 4.Eliminate exchange rate fluctuations •Key Disadvantages 1.Countries lose their ability to control fiscal and monetary policy 2.EU is not an optimal currency area •An optimal currency area is the geographic area in which a single currency would create the greatest economic benefit.
Canada-United States softwood lumber dispute
•Lumber I (1982) •Lumber II •(1986) •Lumber III •(1991) •The Softwood Lumber Agreement (1996-2015) •The main claim is that the Canadian lumber is unfairly subsidized the provincial and federal governments •By November 2017, the U.S. International Trade Commission decided to levy heavy anti-dumping duties on Canadian lumber •In March 2018, Canada escalated the dispute to the WTO
Mercosur
•Member nations include: Brazil, Argentina, Paraguay and Uruguay •originated in 1988 as a free trade pact between Brazil and Argentina •was expanded in 1990 to include Paraguay and Uruguay and in 2005 with the addition of Venezuela •may be diverting trade rather than creating trade, and local firms are investing in industries that are not competitive on a worldwide basis •initially made progress on reducing trade barriers between member states, but more recently efforts have stalled
Association of Southeast Asian Nations (ASEAN)
•Members: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Since then, membership has expanded to include Brunei, Cambodia, Laos, Myanmar (Burma), and Vietnam. •wants to foster freer trade between member countries and to achieve some cooperation in their industrial policies •ASEAN Free Trade Area (AFTA) •the ASEAN Economic Community (AEC) adopted by the leaders in 2015 and it is moving the nations into more integration
Is The North American Free Trade Area Beneficial? Supporters of NAFTA claimed that
•Mexico would benefit Øfrom increased jobs as low cost production moves south and will see more rapid economic growth as a result •the U.S. and Canada would benefit from Øaccess to a large and increasingly prosperous market Ølow cost labor and the ability to be more competitive on world markets Øthe lower prices for consumers from goods produced in Mexico Øincreased imports by Mexico
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
•The CPTPP is a major trading bloc comprising 11 countries representing 495 million people and a combined GDP of $13.5 trillion. •Trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. •For Canada, market access for goods has markedly expanded. Canadian pork, beef, wheat, fish, lumber, and many industrial goods are expected to make significant gains with Japanese, Vietnamese, and Malaysian buyers. •Formally signed by all original TPP signatories except US on Mar 8, 2018 in Santiago, Chile •On Dec 30, 2018 the agreement entered into force for the initial six signatories: Mexico, Japan, Singapore, New Zealand, Canada and Australia. And on Jan14, 2019 for Vietnam.
The European Union: Quick facts
•The European Union was formed November 1, 1993 •The EU is an economic and political union involving 28 European countries. • It allows free trade, which means goods can move between member countries without any checks or extra charges. •The EU also allows free movement of people, to live and work in whichever country they choose.
Brexit: Trade Advantage for UK?
•The UK has not been allowed to hold formal trade negotiations with countries like the US and Australia while it remained an EU member •The UK will now be able to start talking to countries around the world about setting new rules for buying and selling goods and services.
The European Union (EU): the formation
•The devastation of two world wars on Western Europe prompted the formation of the EU •The members wanted lasting peace and a stronger presence on the world's stage A series of agreements led to the current EU agreement: •The European Coal and Steel Community (1951) •The European Economic Community (1957) was formed at the Treaty of Rome with the goal of becoming a common market •The Single European Act (1987) committed the EC countries to work toward establishment of a single market by December 31, 1992
The US - China Trade deal: Implications
•The risk is that Canada will suffer as a result of China directing imports from Canada to the U.S. (where goods have the same landed cost) •The deal has been criticized for not dealing with the issue of Chinese subsidies to many of their industries that have created an unfair playing field •The new U.S. - China deal is not compliant with WTO rules The "most-favoured nation" principle •the WTO requires each member country to provide equal treatment to all other members
CETA: The Reality
•Uncertainty surrounding UK leaving the EU •Canada Agriculture exporters have argued that they have encountered a number nontariff barriers •Italy (2017) - implemented country of origin rules •Barriers that include restrictions on pesticides, disputes over biotechnology and food safety rules