Int. Econ Ch. 6

In 1998, US replaced term "most favored nations" with?

"normal trade relations"

Countervailing Duty-

-WTO views export subsidies as unfair competition -Importing countries can therefore retaliate by levying countervailing duty >limited to amount of the foreign export subsidy >objective is to increase price of imported good to its fair market value

Today tariff laws represent less than _____ of total federal revenues

1%

Does WTO harm the environment? Two arguments that trade liberalization harms environment.

1. Fosters "race to the bottom" in environmental standards 2. trade liberalization encourages some practices that are unacceptable to some people (like catching dolphins in tuna nets or intensification of logging that damages ecosystem)

What happened in the 1980's regarding GATT/multilateral trade negotiations?

1. GATT weakening 2. need to include protection of intellectual property, services and agriculture 3. more attention needed to developing countries

US Safeguards limit surging imports of textiles from China, how? (4)

1. Multifiber Arrangement (MFA) - restricted competition from developing exporting countries with low cost labor to industrialized nations 2. negotiated each year on per country basis 3. as the arrangement ended in 2005, China gained unfair advantage due to low costs 4. to protect domestic production, US imposed safeguard quotas restricting Chinese imports

MFN Exceptions (3)

1. countries can establish free trade agreement that applies only to goods traded within the group or 2. provide developing countries special access (low tariffs) or 3. can increase trade barriers against goods traded unfairly

WTO dispute mechanism (3)

1. guarantees formation of dispute panels, sets time limits -decision of panel may be appealed but not blocked -important to US because US most frequent user of GATT dispute mechanism

Two arguments that trade liberalization improves the environment

1. trade stimulates economic growth, a key factor in societies' demand for cleaner environment, tougher environmental laws 2. trade and growth leads to development and dissemination of environmentally friendly production techniques

Future of WTO (cont.) - trade liberalization proceeds along 2 tracks

1. with trade, attempts to enforce environmental labor & IP protections (favored by US) 2. emphasizes decreasing tariffs outside sensitive sectors (favored by China)

WTO made up of? what is is/where established? multilateral trading system? what did it administer?

159 nations 87% of world trade, international organization headquartered in Geneva Switzerland, trading system in trade services intellectual property and investment, administers unified package of agreements to which all nations are committed, watch dog of international trade

Cheap foreign labor argument in the late _____, which tariffs? by _____ tariffs of 46%?

1800's, McKinley and Dingley tariffs, 1897 - 46%

Tariff of Abomination in _____ (date) & ____ (%) duties

1828, 45% duties

Compromise tariff of _____ (date), did what?

1833, reduced tariffs

Walker tariffs during the _____'s and _____'s (dates), _____ %, did what?

1840's and 1850's, 23%, made to eliminate budget surplus

Civil War era Morill Tariffs off ____, _____, _____, why?

1861, 1862, 1864, means of paying for the Civil War

by ______, high tariffs returned

1870

Payne-Aldrich Tariff of _____ (date), what was it?

1909, turning point against rising protectionism

Underwood Tariff of ______, did what?

1913, reduced duties to 27%

in the early ______'s, which tariff concept appeared? and the Fordney-McCumber Tariff in _____? tariff rates at ____%?

1920's, the scientific tariff, 1922, 38%

Smoot-Hawley Act of _____

1930

President Roosevelt in _____ (date) - _______ dismantled Smoot-Hawley Act with _______

1932, democrats, caution,

Reciprocal Trade Agreements Act of ______ (date), what did it do? 2 things

1934, transferred authority from congress to president, led to lower tariffs and set stage for wave of liberalization

negotiated 32 bilateral agreements between ______ to ______, tariffs fell about _____ from 1934 level

1935-1947, half

1st round of multilateral negotiation - date? reduced by _____%, during the ______ to _____ there were protectionst pressures due to _____ so little reduction in tariffs

1947, 21%, 1940-1950's, WWI

Kennedy Round - date? (3 factors)

1964-67 1. focus shifted from product-by-product to across-the-board format 2. tariffs negotiated on broad categories of goods, rate reduction applied to entire group 3. tariffs on manufactured goods cut by average of 35% to ad valorem level of 10.3%

Tokyo Round - date? (2 factors)

1973-79 1. Tariff rates cut across board from 7% to 4.7% 2. Tariffs so low that they're not longer a barrier of trade in industrial countries

Uruguay Round - date? (3 factors)

1986-1993 1. tariff cuts for industrial countries averaging 40% 2. tariffs eliminated entirely in several sectors 3. many nations agreed to bind or cap significant portions of their tariffs

What did GATT turn into? In what year?

1995 GATT turned into WTO (World Trade Organization)

In _____ GATT turned into WTO. What did WTO do?

1995, governs conduct of trade relations among members, WTO members bind their commitments (adhere to GATT rules, broad range of trade pacts that have been negotiated under GATT auspices in recent decades), DATABASE - trade measures and statistics

Doha Round - date? (3), led to what?

2002 1. little progress despite significant agenda 2. developing countries refused to accept central bargain: large reductions in their industrial tariffs in exchange for greater access to agricultural markets of rich nations 3. talks faltered in 2003, ended in 2008 led to more regional trade negotiation meetings

Smoot Hawley Act of 1930 - Average tariffs raised to ____%, sparked ______ by 25 _______, many nations ran _____ by _________ imports, breakdown of the _______, US exports ______ by nearly ____/____

53%, retaliation, trading partners, surpluses, reducing, international trading system, decreased, two-thirds.

What is GATT?

Agreement among member nations to decrease trade barriers and put all nations on equal footing in trade relations

Generalized Tariff Reductions - MOST FAVORED NATION clause?

Agreement between two nations to apply tariffs to each other at rates as low as those applied to any other nation having MFN status

US did not grant normal trade status to _____ or _____________, US Tariffs on imports from these countries from ___ -___ times higher, US granted temp MFN status to countries like _______ and ______

China, Cuba, 3-4 higher, Russia and Vietnam

Should Retaliatory Tariffs be used for WTO enforcement?

Critics say - system based on tariff retaliation places smaller countries at disadvantage because its more costly for them to initiate bc they're unable to obtain favorable movements in terms of trade

Does WTO reduce national sovereignty?

Critics say yes - WTO settles disputes, not US. Supporters say no - decision of WTO dispute panel cannot force US to change laws

National Treatment Principle

GATT members must treat domestically produced goods and imported goods equally, once imported goods have entered the market

GATT? date?

General Agreement on Tariffs and Trade, 1947

Smoot Hawley Act of 1930 - onset of ______ it was an effort to divert national demand away from _____ and toward ________ goods (protectionism)

Great Depression, imports, domestically produced

MFN Principle

If GATT Member grants another member lower tariff rate, must do the same for all GATT members

GATT - 2 PILLARS OF NONDISCRIMINATION PRINCIPLE?

MFN principle (normal trade) and National Treatment Principle

Future of the WTO?

Major barrier to multilateral trade deals is evolving balance of world economic power -BRIC (Brazil, Russia, India, China) see themselves as poor enough to need protection -rich countries consider BRIC major competitors

During Fast Track Authority...

Pres actively consults with Congress and private sector through negotiations, when negotiations complete, outcome subject to up-or-down vote without amendment in both houses of Congress within 90 legislative days

To prevent that, TPA/FTA granted to _________

President, pres notifies Congress of intent to enter negotiations with another country, congress then has 60 legislative days to permit or deny "fast track authority" -if approved, prez has limited time to complete negotiations; extensions permissible

GATT- Predictability: Through Binding & Transparency (3)

Promising not to increase trade barrier as important as reducing one -businesses had clearer view of future opps When GATT members opened their markets up for trade, they'd agree to "bind" to commitments -bindings acted as a ceiling and only changed after negotiatons Countries were required to disclose trade policies

Alexander Hamilton in 1791 wrote

Report on Manufacturers

Tariff of Abominations (1828) provoked the ______ because

South, wanted low duties for its imported manufactured goods

WTO Rules against China's hoarding of rare earth minerals, What did China do? WTO's decision?

US and others complained that by restricting exports of nine Rare Earth Metals, China was engaging in discriminatory protectionism -china said export restrictions were made to conserve a natural resource WTO ruled that China has no legal rights to impose these restrictions

But...GATT lacked authority to enforce recommendations from the ______________ ________. So, _____ was formed.

conciliation panel, WTO

Reciprocal Trade Agreements Act of 1934 - congress to pres - who wanted what?

congress favored domestic import-competing producers, president considered national interest in trade policy

Fast Track Authority is instrumental to major trade agreements, but efforts to renew it face stiff opposition:

congress says theres too much authority to pres dispute over goals of US trade negotiations

In 1999 WTO began new round in Seattle - why was it called "Battle in Seattle"

developing nations believed they were "taken to the cleaners" and were determined to achieve more favorable terms, disagreements between developing and industrial nations were a major factor in breakdown of talks

National treatment principle (2)

domestic regulations and internal taxes cannot be biased against foreign products - (Canada levied tax on US mags to protect Canadian culture - discriminatory taxes are violation of GATT)

US Trade Policy marked my

fluctuations

Why implement "Trade Promotion Authority ("fast track authority")" ?

if international trade agreements were subject to congressional amendments, no agreement would be achieved

Safeguards >> THE ESCAPE CLAUSE: Emergency protection from imports

in addition to WTO rules on unfair trade practices, US has trade remedy laws... Escape Clause - temporary safeguard -temporary relief: pres may terminate trade or modify agreement to prevent injury to US firms countervailing duty antidumping duties protection against unfair trading practices - section 301

Granting or denying MFN status used as

instrument of foreign policy

The protective argument

keep money at home

WTO Settling trade disputes - major objective

major objective of WTO is to strengthen GATT mechanism for settling trade disputes -bc GATT dispute mechanism was characterized by delays, blocking decisions of panels, and inadequate enforcement

US granted MFN status to _________ nations which it trades

most

WTO is not a _________. It's an org where... It oversees.... it reverses policies of.... settles....

not a government, org where individual nations are free to set own appropriate levels of environmental, labor, health and safety protections oversees implementation of tariff cuts and reductions in non-tariff barriers reverses policies of protection in certain "sensitive areas" settles trade disputes

Reciprocal Trade Agreements Act of 1934 - NEGOTIATING AUTHORITY?

prez obtained unprecedented authority to negotiate bilateral tariff-reduction agreements with foreign governments without congressional approval

Multilateral Trade Negotiations

prior to GATT all negotiations were bilateral, but now they're multilateral amongst all members, GATT sponsored a series of multilateral negotiations to reduce tariff and non-tariff barriers

World War I: _________ pressures returned

protectionist

As revenue argument for tariffs weakened...

protective argument gained strength

Dominant motive behind early tariff laws was to

provide tax revenue: first tariff law 1789, followed by 12 more tariff laws by 1812

Tariff _______ made on a ___________ basis

reductions, nondiscriminatory

GATT - Promoting Freer Trade by _____? How has it improved dispute resolution process? GATT members also required members to use _______ instead of _______ to protect domestic industry

settling trade disputes, by formulating complaint procedures and providing conciliation panel, tariffs instead of quotes

Higher tariffs opposed by _________ _______ which has no ______ and _________ many products with high tariffs

southern states, manufacturing, imported

by 1820's, protectionist sentiments in the U.S were well established in

the northern states

How with caution? - Pursued _________ ______________ through __________ ______ rather than _________-____-________ tariff ____________

trade liberalization, reciprocal trade agreements, across-the-board, concessions

President Hoover, protectionist trap - refused to ______ __________, wanted to honor ______ platform proposing _____ to aid ____________ _______ economy

veto Smoot-Hawley Act, Republican, tariffs, weakened farm

Report on Manufacturers proposed

young industries of the US be granted import protection until they could grow and prosper (infant industry argument)