Global Trading System: Session 1

14.09.2009

Global Economy

• How Big is GWP?

o $50 trillion
o Highly concentrated


o Issues of measurement: PPP, underground economy
• Splices through Global economy
o OECD/non OECD
o N/S
o Geography Asia/Europa/Africa
o Marginalized Portion of Global economy
• How Big is trade?
o $12 trillion
o concentrated in manufactures
o key commodoties: oil
o trade in agriculture/services (banking, telecoms) much smaller
• Growth in trade
o pre-crisis: trade grows more rapidly than income
o 1945-1990: trade growth 2x income growth
o 1990-2007: 3x income growth
• Role of trade in growth:
o Nurkse (Princeton): 1940's question
o trade handmaiden of growth or engine of growth?
o trade growth: 10-12%
o in crisis -> trade went down
• Foreign Direct Investment
o Purchase of foreign assets by non-residents
o Portfolio or direct
o FDI pre-crisis, growth 2x trade growth
• Global trading system
o System of Rules / cooperation which applies to interventions to
regulate trade
o Own country level - use of many instruments
 tariff - Canada tariff avg 2-3%
• very high in agriculture
  standards apply to trade - product - process
 trade measures CVD-AP
o International cooperation
 GATT/WTO
 1944: Bretton Woods
• Plan structure of postwar global economy
o Keynes
• International cooperation focused on 3 institutions
o finance/exchange rate: IMF
o reconstruction/development: IBRD/WB
o trade GATT(1947)/WTO(1994) multilateral
o regional trade agreements
 EU/NAFTA/bilateralism
o Key Rules/Principles
 Non-discrimination / MFN (Most Favored Nation)
 Reciprocity
• History of Trade arrangements
o 19th century in Europe
 Unilateral trade moves to free trade
• Corn laws 1840s
 1870s treaty network bilaterally among countries
• Cobden-Chevallier Treaty system
• Spread of MFN
o Treaty Arrangements in 1920s
o Great Depression: tariff retaliation
o 1933: US initiated negotiations to reduce barriers based on reciprocity
o 1940s: GATT
o 1990s: WTO
• GATT/WTO System
o 3 Key Parts
i. Rules/Principles/Articles (38)
ii. Process of ongoing negotiations (Round) => Doha (9th)
iii. Enforcement/Dispute settlement (Panels)
• Contingent Protection
o Protect domestic industry
o if contingencies arise => dumping - AD (Anti-dumping)
o subsidization => CVD (Countervailing duties)