International trade

INTERNATIONAL TRADE

1. Introduction

• Trade = exchange, buy and sell, import and export...

• Influence of new IT (international trade), fast transportation, lowering tariffs and cloud computing (stockage informatique)

• After WW2 (1945): new institutions and laws to regulate trade and promote peace.

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• Free trade (libre échange) :

• Definition (OECD, Organisation for Economic Co-operation, and Development): goods and services can be bought and sold between countries or sub-national regions without tariffs, quotas, or other restrictions.

• Expression coined (inventée) by British economist John Stuart Mill (1806-1873): “trade barriers are chiefly (principalement / surtout) injurious to the countries imposing them.

• Without international trade, we would all be poorer and we would have fewer resources   → no pineapples, no coffee, no cotton clothes, no foreign holidays...

 International trade benefits all participating countries.

• Yet, totally free trade → problems to countries or to groups of people living in those countries.

Many people are in favor of restricting trade.

1. History

• 1930s: Great Depression

• restriction of imports by the use of tariffs and quotas =  protectionism +++

• dramatic fall in world trade

• After WW2 (1945): desire to reduce trade restrictions

1. Bretton Woods Agreement

• 1944: delegates from 44 countries met to reorganise the world's international financial system.
• Objective of US President Franklin D. Roosevelt and British Prime Minister Winston Churchill = ensure post-war prosperity through economic co-operation

• Goals of the meeting:

- ensure a foreign exchange rate system

- prevent competitive devaluations

- promote economic growth

• 2 main issues:

- how to establish a stable system of exchange rates to prevent competitive devaluation.

- how to pay for rebuilding the war-damaged economies of Europe.

• 2 international organisations were established:

- the International Monetary Fund (IMF) to control exchange rates and lend reserve currencies to nations.

- the International Bank for Reconstruction and Development (the World Bank) to provide financial assistance for countries during the post-war reconstruction phase.

• 1971: end of the Bretton Woods system.

The US put an end to convertibility of the US dollar to gold.

2.2 GATT: General Agreement on Tariffs and Trade (accords general sur tariff douaniers et commerce)

• signed in Geneva by 23 countries, 30th October 1947.

• took effect on 1st January 1948.

• Implemented (mis en oeuvre) to boost economic recovery.

→"substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." = increase international trade by eliminating or reducing various tariffs, quotas and subsidies and maintaining regulations at the same time.

• April 1947 - September 1986: eight “rounds”.

→The 8th round:

- in Uruguay.

- many more topics beyond tariffs were included in the main agenda, including intellectual property, agriculture and dispute settlement.

- led to the creation of the WTO.

1. WTO: World Trade Organization

• created in January 1995.
• deals with the trade in goods and services and in inventions and designs (i.e. intellectual property).
• Its main function = help producers of goods and services, so exporters and importers better protect and manage their businesses.

• WTO agreements (accords) = contracts → legal framework (cadre) for conducting business among nations.

• July 2016: 164 member countries ~ 98% of world trade.

WTO rules:

→non-discrimination = the principle of most-favoured-nation (MFN) treatment.

• trade concession a country makes to one member must be granted (accordée) to all signatories. Exception: free-trade areas and customs unions (unions douanières)(e.g. EU)

→reciprocity

→quotas are prohibited

→fair competition: discouraging unfair trade practices (e.g. dumping and export subsidies).

→binding tariffs (droits de douanes obligatoires)

• The WTO can impose sanctions on countries breaking trade agreements.

• The WTO settles disputes (installe des conflits) between member nations: if an offending (offensive) country continues to impose trade restrictions, the WTO will give other countries the permission to retaliate (imposer des représailles)

e.g. March 2002, USA - tariffs on steel imports into the US (imports d’acier)

• the EU and other countries referred the case to the WTO
• December 2013: tariffs = illegal.
• the EU and other countries were allowed to impose retaliatory
• tariffs on US products.
• steel tariffs were abolished.

→  criticism of WTO laws has emerged:

- the WTO is undemocratic: it favours large corporation profit to the detriment of local economies.

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