Module: Unit V – International Trade Agreements and Organizations and Regional Integration
Local Purchase Requirements
Identify Other NTBs: Certain countries may impose local purchase requirements, mandating that a certain percentage of goods or services used in local projects must be sourced domestically. This can disadvantage foreign suppliers and limit their market share.
Product and Testing Standards
Identify Other NTBs: Different countries may impose specific product standards and testing requirements to ensure the safety, quality, and compatibility of imported goods.
Public Sector Procurement Policies
Identify Other NTBs: Public procurement policies may favor domestic suppliers and restrict foreign firms' participation in government procurement processes. This can hinder fair competition and limit foreign companies' access to government contracts.
Investment Controls
Identify Other NTBs: Some countries impose restrictions on foreign direct investment in specific industries or sectors, limiting foreign companies' ability to establish a significant presence in the local market.
Restricted Access to Distribution Networks:
Identify Other NTBs: Some countries may restrict access to distribution networks or favor domestic companies in distribution channels. This can limit the ability of foreign firms to reach consumers effectively and compete in the local market
Regulatory Controls
Identify Other NTBs: Stringent regulatory controls, including labeling, packaging, and environmental standards, can create barriers for foreign products to enter a market. Complying with these regulations can e time-consuming and costly.
Product and Testing Standards
Identify Other NTBs: These standards can vary across nations, creating challenges for exporters who need to meet multiple sets of regulations.
Factor Productivity
Identify the Effects of Integration: Integration can influence the productivity of factors of production, such as labor and capital. By allowing factors to move more freely across borders, regions can tap into resources that contribute to increased economic efficiency.
Production and Consumption Shifts
Identify the Effects of Integration: Integration encourages production to shift towards more efficient industries, benefiting from comparative advantages within the region. Additionally, consumers within member countries tend to shift towards consuming cheaper substitute products from other member countries due to reduced trade barriers.
Increased Competition and Economies of Scale
Identify the Effects of Integration: Integration fosters competition among member countries' industries, motivating them to improve efficiency and quality to stay competitive. This can lead to economies of scale, where larger production quantities reduce average costs.
Cross-Cultural Understanding
Identify the Effects of Integration: The process of integration involves increased interaction and collaboration among member countries. This fosters cross-cultural understanding, as nations exchange ideas, practices, and experiences, leading to greater cultural enrichment and cooperation.
Administering Trade Agreements
Identify the key activity of WTO: The WTO administers a set of multilateral trade agreements that cover a wide range of trade-related issues. These agreements provide a framework for member countries to establish rules and commitments that guide international trade, covering areas such as tariffs, non-tariff barriers, agriculture, services, and intellectual property rights.
Cooperating with Other International Organizations
Identify the key activity of WTO: The WTO collaborates with other international organizations, such as the International Monetary Fund (IMF) and the World Bank, to ensure coherence in global economic policies and address trade-related issues in a comprehensive manner
Reviewing National Trade Policies
Identify the key activity of WTO: The WTO conducts regular reviews of its member countries' trade policies to promote transparency and provide opportunities for dialogue. This process helps member countries understand each other's trade policies and identify areas where improvements can be made.
Settling Trade Disputes
Identify the key activity of WTO: The WTO operates a dispute settlement system to address trade conflicts among member countries. It provides a legal framework for resolving disputes through consultations, mediation, and arbitration, ensuring that trade-related conflicts are resolved in a fair and transparent manner.
Acting as a Forum for Trade Negotiations
Identify the key activity of WTO: The WTO serves as a platform for member countries to engage in trade negotiations aimed at reducing trade barriers, enhancing market access, and achieving mutually beneficial outcomes. Negotiations take place during ministerial conferences and focus on addressing various trade related challenges
Assisting Developing Countries
Identify the key activity of WTO: The WTO supports developing countries by offering technical assistance, capacity-building programs, and training to help them effectively participate in global trade. This assistance aims to help these countries integrate into the global trading system and realize the benefits of international trade.
International Monetary Fund (IMF)
Is an international financial institution established in 1944 with the goal of promoting global monetary cooperation, exchange rate stability, balanced international trade, and economic growth among its member countries.
General Agreement on Tariffs and Trade (GATT)
It aimed to foster economic growth by eliminating tariffs, quotas, and discriminatory trade practices. Through rounds of negotiations, countries worked together to negotiate tariff reductions and address trade disputes.
Tariff-rate Quota
It allows a specified quantity of goods to be imported at a lower tariff rate, while any quantity above the quota limit is subject to a higher tariff.
Tariff-rate Quota
It combines elements of a quota and a tariff.
Compound Tariff
It combines elements of both specific and ad valorem tariffs.
Non-tariff barriers (NTBs)
It encompass a wide range of obstacles that can hinder the smooth flow of goods and services across borders.
Compound Tariff
It involves a fixed amount of tax plus a percentage of the value of the imported goods.
Regional Integration
It involves the coordination of policies, regulations, and institutions among participating countries to facilitate increased cooperation, trade, and integration within a specific geographic region.
Embargo
It is a complete ban on trade (import or export) of specific goods or services between countries. It is typically imposed for political, economic, or security reasons.
Specific Tariff
It is a fixed amount of tax levied on each unit of imported goods.
Ad Valorem Tarif
It is a percentage of the value of the imported goods.
Voluntary Export Restraint (VER)
It is an agreement between two countries where the exporting country agrees to limit its exports of a specific product to the importing country.
World Trade Organization (WTO)
It is an international organization that oversees and regulates international trade among its member countries.
Prohibitive Tariff
It is set at an extremely high level, effectively making the importation of certain goods economically unviable.
World Trade Organization (WTO)
It provides a platform for member countries to negotiate trade agreements, settle trade disputes, and ensure the smooth flow of trade across borders. Its primary goal is to promote fair, open, and predictable trade relations globally.
Absolute Quota
It sets a specific quantity limit on the import or export of a particular product.
World Trade Organization (WTO)
It was established on January 1, 1995, replacing the General Agreement on Tariffs and Trade (GATT).
World Bank
Its primary purpose is to provide financial and technical assistance to developing countries for development projects that promote economic growth, poverty reduction, and infrastructure improvement.
Prohibitive Tariff
Its purpose is to completely restrict the entry of specific goods into a country's market.
Voluntary Export Restraint (VER) Embargo
Key Aspects of Numerical Export Control:
Credit Tranche
Member countries could also borrow additional amounts beyond their gold deposit value, up to their total quota (contribution) to the IMF's resources.
Gold Tranche
Member countries had the right to borrow amounts up to the value of their gold deposit.
False
T or F: GATT is an organization, not an agreement.
True
T or F: WTO is an institution not an agreement.
1. Promote Trade Flows by Encouraging Nondiscriminatory Policies 2. Reduce Trade Barriers Through Multilateral Negotiations 3. Establish Impartial Dispute Resolution Procedures
The World Trade Organization (WTO) operates with three primary goals:
Common Foreign Policy
The arrangement includes rules and mechanisms to encourage foreign ministers of member countries to collaborate and agree on major external issues.
Bretton Woods Conference
The primary objective of this conference was to establish a new international monetary and financial framework after the disruptions caused by World War II.
Global Agreements
These agreements are designed to benefit all countries
Embargo
These are often used as diplomatic tools to pressure a country into changing its behavior or policies. They can have severe economic implications for both the embargo imposing country and the target country.
Quota/s
These are quantitative restrictions placed on the quantity or value of specific goods that can be imported or exported during a specified period.
Voluntary Export Restraint (VER)
These are usually established through negotiations and are temporary in nature.
Price-based Constraints
These constraints primarily revolve around tariffs, which are taxes imposed on imported goods to influence their prices.
Numerical Export Controls
This category encompasses measures that restrict the quantity of certain goods that can be exported from a particular country.
Voluntary Export Restraint (VER)
This measure is often initiated by the exporting country to appease the concerns of the importing country, avoid more severe trade barriers, or maintain good trade relations.
Non-Discrimination
This principle advocates treating all trading partners equally.
Reciprocity
This principle encourages countries to engage in negotiations to achieve a balanced trade relationship
Global Agreements
This type of arrangement is rooted in the ideal that nondiscrimination is best for everyone and thus follows the liberal tradition of comparative advantage theory
reciprocity, non-discrimination, and transparency
Three fundamental principles of the GATT are:
1. Absolute Quota 2. Tariff-rate Quota
Types of Quotas:
1. Specific Tariff 2. Ad Valorem Tarif 3. Compound Tariff 4. Prohibitive Tariff
Types of Tariffs:
Customs Union
What Level of Economic Integration According to Bela Balassa: A __________ goes beyond a free-trade area by establishing a common external tariff for non-member countries. Member countries coordinate their trade policies and apply the same tariffs to goods imported from outside the union. The European Union (EU) is an example of a customs union.
Common Market
What Level of Economic Integration According to Bela Balassa: A ___________ includes the elimination of trade barriers, as in a free-trade area and customs union, but also allows for the free movement of labor and capital among member countries. This level of integration aims to create a single market with a higher degree of economic coordination. The European Economic
Free-Trade Area
What Level of Economic Integration According to Bela Balassa: In a __________ member countries agree to eliminate tariffs and other trade barriers on goods traded among themselves. However, each country maintains its external trade policies with non-member countries.
Complete Economic Integration (Political Union)
What Level of Economic Integration According to Bela Balassa: This level of integration involves the highest degree of coordination and integration among member countries. It includes a unified economic policy, a single currency, a common central bank, and a high degree of political coordination.
European Commission
acts as the executive branch of the EU. It proposes and enforces EU laws, manages the EU budget, and implements policies. Each member state appoints a Commissioner, collectively forming the Commission, which operates independently and in the general interest of the EU.
Regional Integration
aims to achieve mutual benefits by reducing barriers to trade, harmonizing policies, and fostering collaboration on various economic, political, and social issues
Bretton Woods Conference
also known as the United Nations Monetary and Financial Conference, was a historic gathering of representatives from 44 Allied nations that took place in Bretton Woods, New Hampshire, in July 1944.
European Council
consists of the heads of state or government of EU member states and the President of the European Commission. It sets the overall direction and priorities of the EU and provides guidance on political and strategic matters.
Transparency
emphasizes openness and predictability in trade relations. Countries are encouraged to make their trade policies, regulations, and measures public and accessible to other members. This allows for a clear understanding of trade rules and helps prevent trade practices that could disadvantage other countries
most-favored-nation (MFN) treatment
ensures that any trade advantage granted to one country must be extended to all member countries.
General Agreement on Tariffs and Trade (GATT)
established in 1947 with 23 industrialized countries as founding members, played a pivotal role in reducing trade barriers and promoting liberalized trade among nations.
Court of Justice of the EU
interprets and ensures the consistent application of EU law across member states. It resolves legal disputes and issues preliminary rulings on matters of law referred by national courts. Its decisions contribute to the uniform interpretation of EU law.
Regional Economic Integration
involves a group of countries within a specific geographic area forming a unified economic bloc. This integration aims to eliminate trade barriers, promote economic cooperation, and create a common market that encourages the free movement of goods, services, capital, and labor among member states.
Bilateral Economic Cooperation
involves collaboration between two countries. It focuses on strengthening economic ties and trade relations between these two countries.
Multilateral Economic Cooperation
involves the collaboration of multiple countries, often within a regional or international framework. This type of cooperation aims to promote economic integration, enhance trade flows, and foster mutual development among participating countries.
General Agreement on Tariffs and Trade (GATT)
is a foundational international trade agreement that has guided global trade relations.
Economic and Monetary Union (EMU)
is a key component of the European Union's arrangement. It involves the adoption of a common currency, the euro (€), by participating member states.
Reciprocity
is a principle in which countries agree to lower trade barriers and tariffs in a mutually beneficial manner. In other words, if one country reduces tariffs on certain products from another country, that country is expected to reciprocate by reducing tariffs on products from the first country.
International Finance Corporation (IFC)
is dedicated to promoting private sector development in developing countries. It supports initiatives that contribute to economic growth, job creation, and poverty reduction.
European Court of Auditors
is responsible for examining the EU's financial management and ensuring transparency and accountability in the use of EU funds. It assesses whether financial operations comply with relevant regulations and standards.
European Central Bank
is responsible for monetary policy within the eurozone. It formulates and implements policies to maintain price stability and support economic growth.
Bretton Woods Conference
marked a significant turning point in the international monetary system, laying the foundation for post-war economic stability and cooperation among nations.
World Bank
officially known as the International Bank for Reconstruction and Development (IBRD), is an international financial institution established in 1944 as part of the Bretton Woods Conference.
International Development Association (IDA)
provides concessional loans, often referred to as "soft loans," to the world's poorest countries. These loans have favorable terms, including lower interest rates and extended repayment periods.
International Monetary Fund (IMF)
provides financial assistance, policy advice, and technical assistance to member countries facing balance of payments problems or seeking to implement economic reforms.
Regional Integration
refers to the process by which neighboring countries come together to form a closer economic and political relationship.
European Parliament
represents the citizens of the EU member states and plays a crucial role in the legislative process. Its members are elected directly by EU citizens and participate in shaping EU laws, policies, and budget decisions. The Parliament serves as a forum for debates on various issues affecting the EU.
ational treatment
requires that foreign products be treated no less favorably than domestic products once they enter a country's market.
World Trade Organization (WTO)
serves as a central pillar in promoting global trade and ensuring its smooth operation through various functions. Its overriding objective is to facilitate trade that is smooth, free, fair, and predictable.
Multilateral Investment Guarantee Agency (MIGA)
supports foreign direct investment (FDI) in developing countries by offering political risk insurance and credit enhancement.
Western European Union (WEU) and NATO
was conceived as the defense arm of the EU, operating in coordination with the North Atlantic Treaty Organization (NATO).
General Agreement on Tariffs and Trade (GATT)
was created after WW II for the principal purpose of reducing tariffs and removing non-tariff barriers to international trade. These objectives were originally planned in the creation of a "supposed to be" organization called the International Trade Organization (ITO) which was never established.
Council of the European Union
Also known as the Council of Ministers, this institution represents the governments of EU member states. It shares legislative power with the European Parliament, discussing and adopting EU laws and policies.
International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD)
At the Bretton Woods Conference, key agreements were reached to create two important institutions:
1. Price-based Constraints 2. Quota 3. Numerical Export Controls 4. Non-Tariff Barriers (NTBs)
Categories of Trade Barriers:
most-favored-nation (MFN) treatment and national treatment
GATT embodies two concepts of non-discrimination: