PSCI 3221 International Political Economy

Sector Model

-Ricardo Viner model (industry-specific preferences) -Factors of production are tied to their industry of employment. Skilled labor and unskilled labor employed in the import-competing industry will always be employed (or unemployed) in the import-competing industry. The same goes for un/skilled labor in the exporting industry.

Ministerial Conference (WTO)

-includes the Doha round from 2001 -last for multiple years -usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.

Hegemonic Stability Theory

-rests on public good (non-excludable and non-rivalry) provision

Smoot-Hawley

1930 - logrolling; made Great Depression worse; U.S. and world wide tariffs go up; Hoover was more of a protectionist. U.S. legislation that raised import duties by as much as 50%, adding considerable strain to the worldwide economic climate of the Great Depression. Despite a petition from 1,000 economists urging Pres. Herbert Hoover to veto the act, it was passed as a protective measure for domestic industries. It contributed to the early loss of confidence on Wall Street and signaled U.S. isolationism. Other countries retaliated with similarly high protective tariffs, and overseas banks began to collapse. In 1934 Pres. Franklin D. Roosevelt signed the Trade Agreements Act, which reduced such tariffs.

TPA

1974:Trade promotion authority or "fast track" -exclusive negotiation powers granted to White House -no amendments (no Congress) -simple majority vote

Doha Round

2001 to present: tariff reductions; agriculture subsidies; localitional goods; "Singapore Issues": trade restrictoin, government procureement (favor domestic industry); FDI; and competition policies (no monopolies) A series of negotiations under the World Trade Organization that began in Doha, Qatar, in 2001. It followed the Uruguay Round and has focused on agricultural subsidies, intellectual property, and other issues.

Bundling

Bundling refers to selling more than one product at a single price. Pure Bundling: Consumers must buy both goods together; the choice of buying one good without buying the other is NOT given.

enforcement problem

In the anarchic international state system, governments cannot be certain that other governments will comply with the trade agreements that they conclude. As a consequence, governments are reluctant to enter into such agreements. This problem complicates all forms of international cooperation and has been used to understand the need for the WTO.

Feedback Effects

The effects which a change in the money supply will have (because it affects the interest rate, planned investment, and the equilibrium GDP) on the demand for money which is itself directly related to GDP

Heckscher-Ohlin Trade Theory (HO)

a country's comparative advantage arises from the relative abundance/scarcity of its different factors of production -countries have different factor endowments (labor, land, capital, human capital, etc.) -abundant factors are cheaper and some goods take more to produce so some countries can produce certain goods at a cheaper price than other goods -U.S. should export capital-intensive goods and import labor-intensive ones

Tit-for-Tat

a long-run strategy that promotes cooperation among participants by mimicking the opponent's most recent decision with repayment in kind

Dependency Theory

a model of economic and social development that explains global inequality in terms of the historical exploitation of poor nations by rich ones

Prisoner's Dilemma

a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial; way out is tit-for-tat

The "Spaghetti Bowl"

a system's concern crisscrossing PTA, causing in turn the miss-mash of preferential trade barriers

Experiments

a technique that tests predicted relationships among variables in a controlled environment

Mercantilism

an economic system (Europe in 18th C) to increase a nation's wealth by government regulation of all of the nation's commercial interests. IN trade and state power are linked; trade is zero sum; trade regulation is a must to ensure states receive benefits: "favorable balance of trade"; promote good (exports make money from manufacturing; import raw materials to process) vs bad trade. made attractive due to nationalism; good for manufacturers. Bad: countries (b) that tariffs are placed on lose funds to by tariff placing country (a); hurts agriculture and primary producers

Customs Union

eliminates trade barriers between member countries and adopts a common external trade policy

Stopler-Samuelson Ricardo Viner

factor based sector based

economic pluralism

framework where economics is part of political groups in society; market power; propensity to overcome

New New Trade Theory

free trade benefits an only a small minority of firms, but improves economic efficiency through a process of natural selection Stylized factors: individual firms vary in productivitiy etc.; exporting requires overcoming a large amount of fixed costs; only most productive cane export; only a small amount of firms benefit from free trade Natural selection:

Sociotropism

how/what is best for my nation (society...etc. Trump on trade)

Globalization

implies increasing integration of national economies in terms of trade, capital, and migration. (What drives trade: tech & state policy)

Selectorate

in non-democratic regimes, a subset of the population that chooses and removes the leader or leaders

Trade Creation

increase in the level of trade between nations that results from regional economic integration

IPP

intellectual property rights: major in Doha Round 2001

Specific Factors

is one that is stuck in an industry or is immobile between industries in response to changes in market conditions. A factor may be immobile between industries for a number of reasons.

Procedural Rules

under the Administrative Procedure Act or other legislation, the process that an administrative agency must follow for its actions to be valid.

Factor Model

underlying changes in income generate factor-based model of trade preferences (tend to be against) Stopler-Samuelson assumes perfect factor-mobility (seamlessly moved from on areas to the others). Factors are non-specific; costless to physically move, and no attachment with current industry (should preferences be expected to be the same when factors are relatively immobile? -Stolper-Samuelson's Key Assumption Factors of production can shift without cost between industries. This means that if the owner of skilled or unskilled labor is displaced from the import-competing industry, it can immediately be re-employed in the exporting industry. Likewise, if an owner of either factor becomes unemployed in the exporting industry, he/she can shift employment to the import-competing industry. suggests that the debate over trade policy is a conflict over the distribution of national income between American labor and American business. (Underlying changes in income generate factor-based model of trade preferences)

Altruism

unselfish concern for the welfare of others

Regression Table

used to identify and explain causal relationships ( x results in y) How to read: identify the IV 2) is the coefficient/slope - or + 3)is it statically significant

Collective Action Problem

when actors have incentives to collaborate but expect other the bear the cost -non-excludable goods -individual contribution to mass efforts are small -consumers struggle more than interest groups

Pareto Suboptimal

Pareto efficiency or Pareto optimality is a state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse o

MFN

(Most-favored nation status) receives exceptions for general trade agreements and generalized system preferences.

Salience

(for the purpose of individual preference aggregation through democratic elections of representatives) is the extent to which a voter's utility for a candidate is affected by a candidate's position on an issue -tendency to act a certain way

GATT Article XXIV

(interim agreements): Customs unions, free-trade areas, and interim agreements leading to the formation of a customs union or free-trade area, to be consistent with Article XXIV, must satisfy, inter alia, the provisions of paragraphs 5, 6, 7 and 8 of that Article.

Golden Age of Globalization

(1870-1914) high FDI; colonization: forced migration & indentured servitude); migration structure (easier); money: gold (no need to exchange due to gold standard)

Market Liberalism

A core principle of the WTO that asserts that an open or liberal international trade system raises the world's standard of living. Every country gains from liberal trade, and these gains are greatest when cross-border trade is not restricted by tariffs and other barriers.

Factor Endowments

A country's endowment with resources such as land, labor, and capital.

firm heterogeneity

A distributional implication as a result of NNTT (new new trade theory): within sectors makes a slightly different predictions about domestic preferences workers of productive firms: protrade lowskiled workers of a nonproductive firm: protectionist high skilled at nonproductive: depends

Rules of Origin

A system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region

GATT Article XX

ATT Article XX on General Exceptions lays out a number of specific instances in which WTO members may be exempted from GATT rules. Two exceptions are of particular relevance to the protection of the environment: paragraphs (b) and (g) of Article XX. Pursuant to these two paragraphs, WTO members may adopt policy measures that are inconsistent with GATT disciplines, but necessary to protect human, animal or plant life or health (paragraph (b)), or relating to the conservation of exhaustible natural resources (paragraph (g)). is the WTO legal basis for the Generalized System of Preferences (GSP). Under the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to products originating in developing countries.

GPA

Agreement on Government Procurement The GPA is a plurilateral agreement within the framework of the WTO, meaning that not all WTO members are parties to the Agreement. At present, the Agreement has 20 parties comprising 48 WTO members. Another 34 WTO members/observers participate in the GPA Committee as observers. Out of these, 10 members are in the process of acceding to the Agreement. The fundamental aim of the GPA is to mutually open government procurement markets among its parties. As a result of several rounds of negotiations, the GPA parties have opened procurement activities worth an estimated US$ 1.7 trillion annually to international competition (i.e. to suppliers from GPA parties offering goods, services or construction services).

proportional representation

An electoral system used throughout most of Europe that awards legislative seats to political parties in proportion to the number of votes won in an election.

Consumption Indifference Curve

An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curveindicates that a consumer is indifferent between the two and all points give him the same utility.

CAFTA

Central American Free Trade Agreement

opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Depth vs Width

Depth: Liberalization Width: number of parties more members means higher transaction costs

DSM

Dispute Settlement Mechanism

Factor-Price Equalization

Factor price equalization is an economic theory, by Paul A. Samuelson (1948), which states that the prices of identical factors of production, such as the wage rate, or the rent of capital, will be equalized across countries as a result of international trade in commodities.

Factor based vs Sector Based models

Factor: capital vs labor Sector: export vs import oriented sectors Commonalities: actors (how does it affect them?) and they think they're rational Differences: distinguishing factors from one another; non-linear effects; Haimueller and Hiscox (2006) show this might not be true

"Favorable" Trade Balance

Favorable balance of trade is a positive situation where a country exports more goods and services than what it imports. It is an economic term that refers to the existence of a surplus in the nation's balance of trade.

The Singapore Issues

Four issues introduced to the WTO agenda at the December 1996 Ministerial Conference in Singapore: trade and investment, trade and competition policy, transparency in government procurement, and trade facilitation.

FTA

Free Trade Agreement. Free trade is a system in which the trade of goods and services between or within countries flows unhindered by government-imposed restrictions (inconsistent with GATT principles is allowed an amendment)

FTA vs PTA vs Customs unions vs RTA

Free Trade Area: A special form of preferential trade systems. is a PTA for which barriers on trade between members are reduced or eliminated, and the term usually suggests other policy measures in addition to discriminatory trade preferences. FTA members may elect to impose a common external tariff (CET) for each product; a CET may be imposed with or without the continued use of internal customs controls. Preferential Trade Agreements: Bilateral and Plurilateral Treaties; Difference between reciprocal and unilateral preferences in trade agreements Customs Unions: A higher form of trade integration between nations. is an FTA with a CET, in which internal customs controls have been eliminated, so that goods imported from third countries may circulate freely throughout the territory of the customs union. Regional Trade agreements: is used to refer to an agreement between two or more countries to apply lower trade policy barriers to goods and services imported from the members than to those imported from third countries.

GATT

General Agreement on Tariffs and Trade; international trade organization that encourages free trade by lowering tariffs and other trade restrictions

GATS

General Agreement on Trade in Services; addresses international copyright violation and free access to foreign markets

GSP

Generalized System of Preferences (GSP) ... GSP is the largest and oldest U.S. trade preference program. Established by the Trade Act of 1974, GSP promotes economic development by eliminating duties on thousands of products when imported from one of 119 designated beneficiary countries and territories.

ISI

Import substitution industrialization (ISI) is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. 1) Protective tariffs 2. Preferences for domestic firms importing capital goods for new industries 3. Preferential import exchange rates for raw materials 4. Cheap loans by govt development banks for favored industries 5. Govt funded infrastructure to support favored industries 6. Direct participation of govt in certain industries, when there is a need for the good and nobody is willing to invest (e.g. steel)

"Natural" Trading Partners

In fact, the natural trading partner hypothesis identifies those characteristics -tradecomplementarity, geographic proximity and high initial trade volumes- that countries should share prior to the formation of a FTA in order to foster greater economic outcomes

Stopler-Samuelson Theorem

In the long run, changing exposure to IN will raise (lower) the real return of the factor used intensively in the rising-price (falling-price industry) The theorem that protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin approach: if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization. (In the long run, changing exposure to IN will raise (lower) the real return of the factor used intensity in the rising-price (falling-price industry) the classic economic treatment of the income effects of trade that predicts that trade openness benefits those who owning factors of production with which their economy is relatively well endowed (those with high skill levels in the advanced economies) and hurting others (low skilled and unskilled workers); expected distributional effect of trde

"Knife-edge" Comparative Advantage

Knife-Edge Equilibrium. A condition in which something must either be at a precise equilibrium, or else tumble way into catastrophe. In some cases, such as something that really is balanced on a knife's edge, it's an accurate description. However, in models of (say) economic growth, it's a severe flaw in the model.

Micro-level

Microeconomics is a branch of economics that studies the behaviour of individuals and firms

OEP

Open Economy Politics: predicts outcomes moving from the micro to the macro level. Micro actors: what do they want (domestic institutions and trade lowers consumer prices) Pros: generates clear predictions that can be tested empirically; rests on theoretical deduced assumptions; bridges gap between units of analysis Cons: can switch directions; audience costs: voters who don't like leaders who don't follow through; IN agreement can change how voters change their views on promises "feedback effect"; domestic preferences: come from economic theories and models (derives people's preferences for trade... etc.)

NTBs

Non-Tariff Barriers (NTBs) refer to restrictions that result from prohibitions, conditions, or specific market requirements that make importation or exportation of products difficult and/or costly.

NAFTA

North American Free Trade Agreement; allows open trade with US, Mexico, and Canada. 2018 Trump admin brought forth a replacement USMCA after further legislation

PAC

Political Action Committee

PTA

Preferential Trade Agreement: examples are TTIP and TTP (Mega-PTAs) -deal with tariffs and non-tariff barriers to trade -pro: harmonizing and setting "good" standards; create a level playing field (lower standards equal better comparative advantage); first-mover advantage (adjustment cost) -con: disguised protectionism through non-tariff trade barriers; "progressive imperialism"; better than nothing but not as good as the WTO

Nondiscrimination

Principle that goods produced by all member states should receive equal treatment, as embodied in the ideas of most favored nation (MFN) and national treatment.

Procedural rules vs Substantive Rules

Procedural Law vs. Substantive Law. Procedurallaw consists of the set of rules that govern the proceedings of the court in criminal lawsuits as well as civil and administrative proceedings. ... Substantivelaw is a statutory law that deals with the legalrelationship between people or the people and the state.

PPF

Production possibilities frontier: a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. -production causes opportunity costs due to: limited resources and loss of potential gains if another alternative is chosen

Seattle Protests

Protested the World Trade Organization and increasing globalization. 1999

Anti-Dumping

Selling goods a lower price than the cost of production with long term goal of running competitors out of business and monopolizing Legislation to protect an economy against the importing of a good at a price below its unit cost of production.

Appellate Body

The Appellate Body consists of 7 individuals that hear the appeals of reports brought to the DSU. Although the DSU has proven to be extremely slow and ineffective, Goldstein & Steinberg argued that the AB has allowed for the rise of judicial liberalization by filling in gaps where there is no legal text and clarifying ambiguities in existing text. They show a tendency towards liberalism (with the exception of consumer/environmental protectionist measures) and have seen a 95% compliance rate

Substantive Rules

Substantive rule is an administrative rule created by a government agency's exercise of delegated quasi-legislative authority. It is adopted by government agencies in accordance with the notice and comment requirements of the Administrative Procedure Act. These rules have the force of law.

EU-Canada Seal Products Case

The EU ban on seal products was implemented in 2010 on the notion that it had caused pain and distress to the animals.[1] Regulations of the European Union ("EU Seal Regime") generally prohibiting the importation and placing on the market of seal products, with certain exceptions, including for seal products derived from hunts conducted by Inuit or indigenous communities (IC exception) and hunts conducted for marine resource management purposes (MRM exception). Canada and Norway filed a complaint before the WTO seeking to overturn the ban, but the ruling upheld the ban.

MIP

The Macroeconomic Imbalance Procedure (MIP)[1] was introduced by the European Union in autumn 2011 amidst the economic and financial crisis, and entered into force on 13 December 2011. It is designed to prevent and correct risky macroeconomic developments, such as high current account deficits, unsustainable external indebtedness and housing bubbles. The MIP is part of the EU's so-called 'six-pack' legislation, which aims to reinforce the monitoring and surveillance of macroeconomic policies in the EU and the euro area.

Trade Adjustment Policy

The Trade Adjustment Assistance (TAA) Program is a federal program established under the Trade Adjustment Assistance Reauthorization Act of 2015 that provides aid to workers who lose their jobs or whose hours of work and wages are reduced as a result of increased imports.

Antigua vs US Gambling Case

The United States' efforts to prosecute foreign-based suppliers of online gambling services prompted Antigua to file a complaint in the WTO, in which it claimed that the United States had violated its GATS commitment to free trade in recreational services (2003)

Consumer Surplus

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

Producer Surplus

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

Import-Competing Sector

The group that represents the owners of capital and workers employed in labor intensive sectors in advanced industrialized countries. In other words the scarce factor group. Refers to an industry that competes with imports. That is, in a two-good model with trade, one good is the export good and the other is the import-competing good. A limit on the number of products in certain categories that can be imported

Majoritarianism

The idea that the majority prevails not only in elections but also in policy determination

Hegemon

the dominant power in the global economy

Factor Mobility

the ease by which factors of production can be moved around

National Treatment

The principle of nondiscrimination between foreigners and locals

TPP

Trans-Pacific Partnership is a regional trade agreement originally between the USA, and 11 countries of the Pacific-Rim. These countries account for around 25% of all world trade. Along with the more recent Trans-Atlantic Trade and Investment Partnership (TTIP), TPPformed a key part of recent US economic policy towards the global economy.

"Single Undertaking"

Under WTO rules, there is a requirement for members to accept or reject the outcome of multiple multilateral negotiations as one package of reforms, rather than only choosing those parts with which they are most happy. Make it different from other multilateral organizations

reciprocity

the exchange of resources, goods, and services among people of relatively equal status; meant to create and reinforce social ties

egocentrism

the inability to see the world through anyone else's eyes

IPE

Who are the relevant domestic actors? How are interest aggregated in national policy? What factors effect how competing national interests are reconciled in international negotiation?

Legalization economics

the process of removing a legal prohibition against something which is currently not legal.

Excludability

the property of a good whereby a person can be prevented from using it

NGO

non-governmental organization

enabling clause

officially called the "Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries", was adopted under GATT in 1979 and enables developed members to give differential and more favorable treatment to developing countries. GATT article xxiv

Gravity Model

predicts bilateral trade flows based on the economic sizes and distance between two units.

RTAA

reciprocal trade agreements act- • authorized pres. to negotiate bilateral treaties - was not a turn to pure free trade -strengthens exports and made Republicans more free trade -simple majority vote so easier to pass trade agreements and hard raise tariffs • most significant thing- Congress realized higher tariffs were a problem and not a solution

Absolute Advantage

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources. -

Comparative Advantage

the ability to produce a good at a lower opportunity cost than another producer in other countries

Balance of Trade

the difference between a country's total exports and total imports