International Production and Trade

Abueva, Banal, Calatrava, Confesor, Manalili, Molina

Production and Trade Structure

set of relationships between and among states and international organizations, international businesses and non-government organizations that influence and manage international rules and norms related to what is produced, where, why, how, for whom and at what price

Trade
Trade is always political Robert Kuttner Friedman transformation of the production process associated with globalization Use of sophisticated technology and communication systems Mass production of industrial goods Shift of the production process from assembly lines to the use of computers Fragmentation of production process which led to specialization and outsourcing

International Trade
a process that occurs when goods and services national boundaries in exchange for money or the goods and services of another nation Binds countries together thus generating economic, political and social interdependence but it can also create tension and conflict among different states Growth of international Trade
Reflection of increased demand for goods and services that do not exist or cannot be produced locally Reflects the growing globalization of production

Three Perspectives on International Trade

Economic Liberals
the rational thing for states to do is to agree on a common set rules and regulations that will maximize the gains from trade Law of Comparative Advantage
Opportunity cost Free trade increases efficiency

Mercantilists
Trade is an instrument to increase a nations wealth and power Challenges the assumption that comparative advantage benefits all parties engaged in trade States can create comparative advantages in the production of goods and services by adopting strategic trade policies In democratic nations it is the states duty to protect society and businesses from the negative effects of trade NO guarantee that even when states advocate free trade they will adopt any form protectionism for their goods and services Rational thing for states to do is to be prepared to act in their own interest by protecting themselves

Structuralists
Trade helps imperialist industrialized nations subjugate the of people in developing regions of the world Patterns of international trade are determined by an international division of labor between core, semi-peripheral, and peripheral states Integration global markets and free trade policies are extensions of the economic motives imperialist powers during the 19th and 20th centuries

GATT and the Liberal Postwar Trade Structure

Post-WWII
Trade largely reflected the interests of the dominant states, especially Great Britain. Despite the economic liberal ideas prevailed, Protectionism was obligatory. Trade Rules were enforced
Eg. In 1860s, US forcing Japan to open its door to US trade. In 1934, USA supported and officially supported free trade policy, until then routinely protecting most of its traded items.

 In 1940s, Breton Woods conference in New Hampshire established the capitalist worlds political economy. Protectionist trade policies had been on the rise as the major powers raced to stimulate industrial growth. International Trade Organizations establishment was promoted by the US. (To oversee new liberal trade rules that would gradually reduce tariffs, subsidies, and other protectionist measures, offsetting domestic protectionist and mercantilist tendencies.)

General Agreement on Tariff and Trade (GATT)

Became the primary organization responsible for the liberalization of international trade, at which the worlds main trading nations would each agree to reduce their own protectionist barriers). Its principles were:
Reciprocity- to discourage industry or prevent nations from enacting unilateral trade barriers. Non-discrimination. The Most Favored Nation (MFN) trading status required that imports from all countries be treated the same whereby imports from one nation could not be given preference over those from another.

 Keep in mind, GATT was not a set of rules that could be enforced by the organization but depended on the members to fulfil multilateral trade obligations with one another.

Mercantilism on the Rebound

 1960s & 1970s, pace at which the Western industrialized economies had grown after war began to slow appreciably 1973, OPEC oil crisis began and soon resulted in economic recession in many of the Western industrialized nations. Throughout this period, International trade continue to grow but not at the rate at which it had earlier. Many nations reduced their tariff barriers and devised new and more sophisticated ways of protecting their exports and otherwise limiting imports.

 1973-1979, Tokyo round of the GATT got underway, the level of tariffs on industrial products had decreased to an average of 9%. It tries to deal with the nontariff barriers (NTBs) that many believed that shifting world trade. 1980s, trade accounted for increasingly higher percentages of GDP in the industrialized countries. Trade policy continued to be a serious source of tension and disagreement among the industrialized nations, reflecting their increasing dependence on trade to help generate and maintain economic growth.

 JAPAN (1970) Benefited from the liberal international trade system while erecting domestic trade and other protectionist policies Its exported-led growth trade strategy began to bear fruit. Its Ministry of International Trade and Industry helped pick corporate winners that it and other government officials felt would prosper in the international economy from assistance.

 Strategic trade policies became synonymous with the state efforts to stimulate exports or block foreign access to domestic markets and included the use of threats, promises, and other bargaining techniques in order to alter the trading regime in ways that improve the market position and increase the profits of national corporations.

 Free Trade was slowly replaced as the central principle by the notion of Fair Trade or Level playing Field, where as sought to enact policies to counteract as much but not more than those of their trading partners. Under conditions of increasing protectionism but also in an effort to benefit more from trade, it was US during Reagan administration that first sought to reassert the liberal vision of free trade. Thus was born Uruguay round of the GATT.

The Uruguay Round

The Uruguay round or also known as the eighth round of the GATT in 1986 at Uruguay The idea of states as internationally dependent in the international trade network was reinforced by the surge of foreign direct investment and trade Established policies in limiting protectionist measures like dumping (selling goods below fair market price) Made working groups in covering trade issues like (TRIPS) or trademarks on intellectual property rights and (TRIMS) trade-related investment measure Extensive discussion on agriculture

The World Trade Organization (WTO)

Created during the end of the Uruguay Round Started with 146 members; headquarters at Geneva, Switzerland Its main role in international trade is to;
1) Implement the latest GATT agreement 2) Act as a forum for negotiating new trade deals 3) Resolve trade disputes with its DPS or the Dispute Settlement Panel 4) Review national trade policies 5) Technical assistance and training in the trade policies of developing nations

The Doha Development Round

The DOHA round was also known as the Development Round due to the growing importance of developing nations and their plight to be much integrated in the international community Issues tackled:
Agriculture Access to patented Medicine Special and Differential Treatment Implementation Issues

Doha in the Dumps

Officials have stated that it was difficult to integrate two-thirds of the world population into an established set of trade rules and regulations. Officials argued that the integration of the developing countries in the WTO created more agendas that made it harder for all to make a consensus on trade policies.

 Doha lite- a water down compromise that do not require states to give up too much out of fear that not reaching an agreement will undermine the WTO as an institution. With the US as a national hegemon who failed to give compromise in trade barriers, expert now have doubts in the capabilities of the WTO in its pursuance of its economic liberal objectives

Regional Trade Blocs

Mercantilist and liberal economic critics of the Doha round suggest:
instead of multilateral talks, US and other states ought to pursue bilateral and regional trade agreements with different nations

Regional Trade Agreement (RTA)

E.g. NAFTA, APEC RTAs have less bureaucracy and more room to account for idiosyncrasies of partner states or to reconcile conflicting interests on a geographical regional level

 Regional Trade Blocs

formal intergovernmental collaboration between two or more states in a geographical area promote a mix of economic liberal and mercantilist trade policies, reducing barriers within the trade bloc while retaining trade barriers with nonmember nations

Intraregional Trade Blocs

e.g. APEC attempts to integrate 18 Pacific and Asian nations into a nonbinding arrangement that would gradually remove trade barriers among members in 2020

Are RTAs good for Trade?

RTAs violate the GATT and WTO principle of nondiscrimination, but they are nonetheless legal entities sometimes RTAs generate more efficient production within the bloc, either while infant industries are maturing or in response to more completion form outside industries

North and South Trade Issues

G-20 resistance to some of the measures of the Doha round Group of 77 (G-77)coalition of developing nations that demanded an entirely new international economic order (NIEO)
demands included major changes in trade policies that permitted more access of their primary commodities into the heavily protected markets of the Northern industrialized regions of the world

 TNC Code of Conduct

to assure developing nations control over their own resources along with a stronger voice in GATT decision making

Structural adjustment policies ( SAPs)

conditions the IMF and World Bank required developing nations to adhere to if and when they borrowed money from these institutions to overcome their long-term debt or short-term financial crises

 For economic liberals: trade also served as an ideological justification for the globalization campaign
Economic liberals continue to support the objectives of the Doha trade round, especially trade policies that include and ensure the success of developing countries

 Structuralist and Mercantilist reactions to economic liberal trade NGOs and Economic Liberals criticize WTO
Race to the bottom
TNC move out of the country and search a country with cheap labor and few regulations.

Fair Trade Movement

Higher prices for certified goods (coffee, timber, etc.) in developing countries.

Trade as a Foreign Policy Tool

Used as an instrument or weapon to achieve any combination of political, social, and economic objectives. Political Leaders being exposed in Trade through their Foreign Policy States, especially those who are key players in International Trade impose sanctions Trade sanctions can be in the form of boycotts, import restrictions, and embargoes

 After the first Persian Gulf War- use of sanctions has lost popularity as a foreign policy tool There is more to the use of sanctions than simply using trade to punish or reward a state. Trade remains a tool many states use to help discipline or send a distinct message to another state.