International Trade Agreements

Modes of Policy Diffusion (four)

Coercion, competition, learning and emulation

Race to the Bottom

Companies seek lower costs in search of better profit conditions. Countries compete to be the most desirable to FDI. To be more 'attractive' they lower the minimum wages, have loose labor and environmental laws, have low taxes/tariffs. A phrase used to describe the way that MNC's move to the country that offers the lowest tax rates or the weakest environmental controls. In order to hold on to their MNC's each country will offer them successively more advantageous terms at the expense of their own economy or environment, until the potential benefits of having an MNC are outweighed by the costs. The term "race to the bottom" refers to the phrase most commonly used by fair trade supporters and anti-globalization activists. It is a social economic theory that is occurs between countries, states, territories, and etc. as a consequence or result of globalization. Governments are given increased incentive to cut labor standards, business regulations, business taxes, and environmental standards when the competition over a specific sector of production and/or trade becomes intense between different geographic areas.

Trade can help diffuse what norms and standards?

Democracy, labor rights and environmental protections

Trade is good for economic growth because...

Trade increases productivity and lowers costs for consumers

Liberal Peace Theory

Trade promotes international peace and cooperation.

Typical topics about trade

Why so much protectionism in trade? Are RTA's building blocks or stumbling blocks to multilateralism? Does trade foster race to the top or bottom? What is the purpose of non-trade conditions in trade agreements do they work?