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C LASS N OTES FOR : 2J03 P OLI S CI
McMaster University, Fall 2013
W EDNESDAY , JANUARY 29, Y
- Barriers to trade
- Liberal, economic nationalist, critical
- Growth and protectionism
o Different trends going on at the same time
o Overall trend is towards more liberal trade at the same time with the persistence of
protectionism in particular areas
o Magnitude and impact
Large growth with an equally large impact on countries are the world
Growth and trade has been greater than the growth in countries’GEP
Of the overall growth trading with other people is a significant percentage; trade
has become more important for each country in terms of its general economic
o TRENDS IN GROWTH
Geographic concentration in the West
• The vast majority of trade is circulating amongst “rich” countries…
Composition (manufacturers to services)
• Changing composition of trade
• The most noticeable element has been a gradual shift from manufactured
goods to services
• Services are becoming more important as a trade object
• Financial / legal services
• Educational services, health etc.
• These shadow the transformation of economies in advanced
industrialized worlds from manufacturing to services.
Overtime the patterns have changed, most of the trade between the north and the
south was commodities. North absorbing goods now from the south?
Rise in intra-industry trade
• Trade between a particular industry
• Cars producing and exporting cars to each other
• The United States exporting Fords to Europe and Europe exporting
Mercedes to the United States
• Exchange the same kinds of products? Consumers differentiate products
on the basis of taste! Increasing rise in this kind of trade due to different
Rise in intra-firm trade
• Trade between the same company
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• Moving different parts of the production across the world
Rise of NICs
• Newly Industrializing Countries and the growth of manufacturing in these
• LatinAmerican countries like Mexico and Brazil, EastAsian countries
like South Korea and Taiwan, China. The rise of manufacturing industries
in these countries has shifted some of the world trade to these countries as
they make manufactured goods relatively cheaply.
• The old protectionism was basically tariffs, putting a tax on goods
coming into the country.
• In the 1800s and a good chunk of the 1900s, tariffs were good for
countries to protect industries and to generate money
• The GATT and WTO have been able to lower tariff levels, countries that
still want to protect their industries have to think of new methods of
o Quotas, subsidies, dumping and trade laws, administrative, etc.
- Changing institutional structure
o ITO (International Trade Organization) - after the WWII ended, the allies got together to
think of making an institutional arrangement to govern’
TRADE SIDE ITO was going to be set up, but it never saw the light of day! It
was negotiated and agreed upon, but the Americans never entered into the ITO.
Since theAmericans were not going to join, no one else was going to join.
Many felt that the ITO was not liberal enough, so it was not approved by
o GATT (GeneralAgreement on Tariffs and Trade) Created in 1948~ agreement that will
lower tariffs between them. Because the ITO failed, they get stuck with GATT.
Temporary agreement - a series of treaties that are constantly negotiating one
treaty after another. Main goal was reducing tariffs and reducing tariffs on
Limited reach (embedded liberalism) - It does not let the international
commitment disrupt or disturb domestic programs.
Weak dispute settlement, it only covered manufactured goods, did not cover
services, property rights and so on.
It set up some key principles as to how International Trade should be covered.
• MFN (Non-Discrimination) - Principle was that if you gave a trade
concession to ONE country, you should give the concession to all
• Reciprocity - if someone gives you a concession, you should give him or
her a concession! The notion of give and take!
• Transparency - If you are going to protect an industry, you should do it
with tariffs and be open about what you are doing so that everyone else
• Multilateralism - trade policy should include a large number of countries.
There should be a limited amount of bilateral and regional trade deals, but
aspiring to global trade deals!
o WTO (World Trade Organization - replaced in 1995)
WTO contrast with the GATT, built on what it was but different from the GATT.
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Complete International Organization