International Production and Trade

8/13/2019 International Production and Trade

1/33

International Production and

TradeAbueva, Banal, Calatrava,Confesor, Manalili, Molina


2/33

Production and Trade Structure

set of relationships between and among statesand international organizations, internationalbusinesses and non-government organizationsthat influence and manage international rulesand norms related to what is produced, where,

why, how, for whom and at what price


3/33

Trade Trade is always politicalRobert Kuttner Friedman

transformation of the production processassociated with globalization

Use of sophisticated technology andcommunication systems

Mass production of industrial goods Shift of the production process fromassembly lines to the use of computers

Fragmentation of production process whichled tospecializationand outsourcing


4/33

International Trade

a process that occurs when goods and servicesnational 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 alsocreate tension and conflict among different states

Growth of international Trade

Reflection of increased demand for goods and servicesthat do not exist or cannot be produced locally

Reflects the growing globalization of production


5/33

Three Perspectives onInternational Trade


6/33

Economic Liberals

the rational thing for states to do is to agree on acommon set rules and regulations that willmaximize the gains from trade

Law of Comparative Advantage

Opportunity cost

Free trade increases efficiency


7/33

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 theywill 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


8/33

Structuralists

Trade helps imperialist industrialized nationssubjugate the of people in developing regions of

the world Patterns of international trade are determined

by an international division of labor betweencore, semi-peripheral, and peripheral states

Integration global markets and free tradepolicies are extensions of the economic motivesimperialist powers during the 19thand 20thcenturies


9/33

GATT and the Liberal PostwarTrade Structure


10/33

Post-WWII

Trade largely reflected the interests of thedominant 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 UStrade.

In 1934, USA supported and officially supported freetrade policy, until then routinely protecting most of itstraded items.


11/33

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 reducetariffs, subsidies, and other protectionist measures,offsetting domestic protectionist and mercantilisttendencies.)


12/33

General Agreement on Tariff and Trade (GATT)

Became the primary organization responsible forthe liberalization of international trade, at which the

worlds main trading nations would each agree toreduce 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 treatedthe same whereby imports from one nation could not be givenpreference over those from another.


13/33

Keep in mind, GATT was not a set of rules that couldbe enforced by the organization but depended on the

members to fulfil multilateraltrade obligations withone another.


14/33

Mercantilism on the Rebound


15/33

1960s & 1970s, pace at which the Westernindustrialized economies had grown after war began to

slow appreciably 1973, OPEC oil crisis began and soon resulted ineconomic recession in many of the Westernindustrialized 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 theirexports and otherwise limiting imports.


16/33

1973-1979, Tokyo round of the GATT gotunderway, the level of tariffs on industrial products

had decreased to an average of 9%. It tries to dealwith the nontariff barriers (NTBs) that manybelieved that shifting world trade.

1980s, trade accounted for increasingly higherpercentages of GDP in the industrialized countries.

Trade policy continued to be a serious source oftension and disagreement among the industrializednations, reflecting their increasing dependence ontrade to help generate and maintain economicgrowth.


17/33

JAPAN (1970)

Benefited from the liberal international trade

system while erecting domestic trade and otherprotectionist policies

Its exported-led growth trade strategy began tobear fruit.

Its Ministry of International Trade and Industryhelped pick corporate winners that it and othergovernment officials felt would prosper in theinternational economy from assistance.


18/33

Strategic trade policiesbecame synonymouswith the state efforts to stimulate exports or

block foreign access to domestic markets andincluded the use of threats, promises, and otherbargaining techniques in order to alter the

trading regime in ways that improve the marketposition and increase the profits of nationalcorporations.


19/33

Free Tradewas slowly replaced as the centralprinciple by the notion of Fair Trade or Level

playing Field,where as sought to enact policies tocounteract as much but not more than those of theirtrading partners.

Under conditions of increasing protectionism but

also in an effort to benefit more from trade, it wasUS during Reagan administration that firstsought to reassert the liberal vision of free trade.Thus was born Uruguay round of the GATT.


20/33

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 theinternational trade network was reinforced by the surgeof foreign direct investment and trade

Established policies in limiting protectionist measureslike dumping (selling goods below fair market price)

Made working groups in covering trade issues like(TRIPS) or trademarks on intellectual property rightsand (TRIMS) trade-related investment measure

Extensive discussion on agriculture


21/33

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 theDispute Settlement Panel 4) Review national trade policies 5) Technical assistance and training in the trade

policies of developing nations


22/33

The Doha Development Round The DOHA round was also known as the

Development Round due to the growing

importance of developing nations and theirplight to be much integrated in the internationalcommunity

Issues tackled:

Agriculture Access to patented Medicine Special and Differential Treatment Implementation Issues


23/33

Doha in the Dumps

Officials have stated that it was difficult tointegrate two-thirds of the world population into

an established set of trade rules and regulations.

Officials argued that the integration of thedeveloping countries in the WTO created more

agendas that made it harder for all to make aconsensus on trade policies.


24/33


25/33

Regional Trade Blocs Mercantilist and liberal economic critics of the

Doha round suggest:

instead of multilateral talks, US and other statesought to pursue bilateral and regional tradeagreements 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 toreconcile conflicting interests on a geographicalregional level


26/33

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 blocwhile retaining trade barriers with nonmembernations

Intraregional Trade Blocs e.g. APEC attempts to integrate 18 Pacific and Asian

nations into a nonbinding arrangement that wouldgradually remove trade barriers among members in2020


27/33

Are RTAs good for Trade?

RTAs violate the GATT and WTO principle ofnondiscrimination, 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 morecompletion form outside industries


28/33

North and South Trade Issues

G-20 resistance to some of the measures of theDoha round

Group of 77 (G-77)coalition of developingnations that demanded an entirely newinternational economic order (NIEO)

demands included major changes in trade policiesthat permitted more access of their primarycommodities into the heavily protected markets ofthe Northern industrialized regions of the world


29/33

TNC Code of Conduct

to assure developing nations control over their

own resources along with a stronger voice inGATT decision making

Structural adjustment policies ( SAPs)

conditions the IMF and World Bank requireddeveloping nations to adhere to if and when theyborrowed money from these institutions toovercome their long-term debt or short-termfinancial crises


30/33

For economic liberals: trade also served as anideological justification for the globalization

campaign Economic liberals continue to support the

objectives of the Doha trade round, especiallytrade policies that include and ensure the successof developing countries


31/33

Structuralist and Mercantilist reactions toeconomic liberal trade

NGOs and Economic Liberals criticize WTO Race to the bottom

TNC move out of the country and search a countrywith cheap labor and few regulations.

Fair Trade Movement

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


32/33

Trade as a Foreign Policy Tool

Used as an instrument or weapon to achieve anycombination of political, social, and economic

objectives. Political Leaders being exposed in Trade through

their Foreign Policy

States, especially those who are key players inInternational Trade impose sanctions

Trade sanctions can be in the form of boycotts,import restrictions, and embargoes


33/33

Documents

International Production and Trade