Trade Liberalization

1
Trade Liberalization

• International Approach
• GATT
• WTO
• Regional Approach
• EU
• NAFTA

2
The International Approach

• General Agreement on Tariffs and Trade
• The Agreement
• MFN Clause
• No Quotas
• Settlement of Trade Disputes
• Sponsorship of Multi-national Tariff Reduction
  Negotiations

• The World Trade Organization
• Rules and Standards for Trade Policy
• Settlement of Trade Disputes
• Sponsorship of Multi-national Tariff Reduction
  Negotiations

3
Avg. Cuts in Tariffs 1934 - 1993

• Pre-GATT 1934-1947 33.2
• First Round 1947 21.1
• Second Round 1949 1.9
• Third Round 1950-51 3.0
• Fourth Round 1955-56 3.5
• Dillon Round 1961-62 2.4
• Kennedy Round 1964-67 36.0
• Tokyo Round 1974-1979 29.6
• Uruguay Round 1986-1993 33.3

4
The World Trade Organization

• The WTO was created in 1995 to act as a forum
  for trade negotiations and serve as an impartial
  international court to resolve trade disputes.
• The WTO has had trouble with both roles
• The big boys (U.S. and E.U.) cant agree.
• The little guys feel cheated

5
The Regional Approach

• The regional approach to trade liberalization
  requires some degree of economic integration.
• Economic integration is the process of
  abolishing discrimination among economic units
  belonging to different states by forming trade
  blocs.

6
Types of Economic Blocs

• A Free Trade Area
• Tariffs among the participating countries are
  abolished, but each country retains its own
  tariffs against nonmembers. NAFTA
• A Customs Union
• Tariffs among the participating countries are
  abolished, and tariffs against nonmembers will be
  equalized.

7
Types of Economic Blocs

• A Common Market
• Tariffs among the participating countries are
  abolished, a common set of external restrictions
  is adopted, and restrictions on factor movements
  are abolished.
• An Economic Union
• Combines the suppression of restrictions on
  commodity and factor movements with some degree
  of harmonization of national economic policies.
  The European Union (EU)

8
Types of Economic Blocs

• Total Economic Integration
• Requires not only the unification of monetary,
  fiscal, social, and countercyclical policies but
  also the establishment of a supra-national
  authority whose decisions are binding for the
  member states. The United States of America