Transcript Unilateral and Multilateral Approaches to Trade

Unilateral and
Multilateral
Approaches to Trade
Omarana Ejaz
ITRN 701
Professor Malawer
October 16, 2008
Overview
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Unilateral Trade
Multilateral Trade
 World
Trade Organization (WTO)
 2 different trade approaches
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Free Trade
Fair Trade
Presidential Candidate Position on Trade
Problems with Trade
 Proposal
and Solution
Unilateral Trade
A narrow way of looking at trade
 Can impact one country heavily over the
other country
 Ideas and rules can suppress one country
from economical and global gains
 Not such a frequent way of doing trade
business today
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Multilateral Trade:
World Trade Organization (WTO)
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World Trade Organization (WTO) — An organization that deals with
the rules of trade between nations at a global level
place where member governments go to negotiate all matters, may
it be trade problems or the agreements themselves
Most countries now use the WTO as a way of conducting trade.
This is the major multilateral trade approach used today amongst
the global economies
WTO tries to have member governments to negotiate on both freer
and fairer trade.
This multilateral trade organization is not only looking out in the
interest of the developed countries, but also the less developed and
developing countries
Multilateral Trade:
Free Trade Approach
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Not a zero-sum game
Multilateral trade expansion outweighs the cost associated with
multilateral trade policies
Institute for International Economics (IIE) measured benefits of trade
liberalization
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Concluded that since the end of World War II multilateral trade from
1945 to now generated economic benefits anywhere from $800 billion to
$1.45 trillion per year in added output.
 This equates to about an added per capita benefit between $2,800 and
$5,000, which means an addition of somewhere between $7,100 and
$12,900 per American household
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Free trade allows economies to increase economic output while
holding inputs constant; making it a win-win arrangement for the
participating economies
Multilateral Trade:
Free Trade Approach continued
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Free trade causes increased competition within the same sector
production, which eventually can benefit the consumer
Open global economy expands market opportunities for both the
exporters and the importers, which will eventually force firms to
increase efficiency
Freer trade is also an approach the United States can use to
alleviate global poverty because free trade is an engine for
economic growth in the developing world.
Trade is a mean to raising incomes, expanding consumer choice,
helping poor countries develop, promoting the rule of law, and
advancing American foreign policy
Multilateral Trade:
Fair Trade Approach
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Some items that are valued besides maximizing national
income are community stability and income security
Fair trade is a way to include all safeguards to protect
job losses from import competition
Fair trade slows down the number of bilateral free trade
agreements signed with developing countries
Fair trade means that the U.S. will rely more on
“managed trade” arrangements and unilateral trade
sanctions to promote U.S. exports
Multilateral Trade:
Fair Trade Approach continued
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Advocates of a fair trade approach argue
that free trade does not look at the
individual and the burden of cost on the
individual who might loose their job
because of free trade
Presidential Candidates’ Views
John McCain
 Pro free trade and pro WTO
 Free trade is a means to open
“closed societies” in the Middle
East
 Free trade is “the future of
America’s economy” and
warned against protectionism
Barack Obama
 Would like to renegotiate free
trade agreements with Canada
and Mexico, and if not
renegotiated he will pull the
U.S. out of the agreement
 NAFTA is a “bad” deal
 Generally supported free trade
policies however has some
reservations on it when it
comes to labor and
environmental protection
regulations
Some Problems with Trade
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Major issue with trade and the desire to advance
in global trade and trade approaches is the
public’s perception.
 In
the last five years, support for free trade has
declined
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Americans have always been suspicious of trade
and do not tend to agree with any type of trade
agreements or approaches the United States
comes up with
Some Problems with Trade
continued
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For example, in the last decade more than 80
per cent of Americans have continuously told the
Chicago Council on Foreign Relations that
America’s priority should be protecting jobs of
the American workers
According to a poll conducted July 2004 by the
German Marshall Fund of the United States
concluded that only 4 per cent of Americans
supported the North American Free Trade
Agreement (NAFTA)
Some Problems with Trade
continued
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There are three major reasons why Americans
have now gone to support fair trade more versus
free trade
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major reason for Americans to not like trade
approaches that offer “free trade” is because during
economic uncertainty any job losses to free trade due
to import competition cause the public to see trade as
an unpleasant vehicle
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Even there is no proven correlation between trade and
employment
Some Problems with Trade
continued
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The second reason why a trade approach such as free
trade is not accepted too much amongst Americans is
because it is an election year in the United States.
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Those who will be affected by trade in a way they will not be able
to reap benefits but instead see an increase in costs will be the
ones who contribute to campaigns and vote on the issues
In this aspect politicians will try to include protectionist rhetoric to
win votes and group support
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Example: the offshore outsourcing sparked outcry amongst
Americans and politicians and politicians urged that the United
States government take actions to keep the jobs inside the United
States
Some Problems with Trade
continued
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The third reason for the public being suspicious of free
trade is because it is seen as a zero-sum game
Americans feel that their jobs and wages are threatened
with the free trade sphere. Even though the probability
for losing a job from import competition or offshore
outsourcing is small, however the concern of lost jobs is
enough to provoke concern in Americans
When compared to other countries, Europeans are more
open to international trade policies than Americans
Solutions
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Educating Americans will show them the approach to
trade is not a zero-sum game and that there is some
benefit in it for everyone, globally as well as domestically
The government has to make sure they instill trust in its
citizens to believe that as the United States goes into a
more global and open market that everyone will see its
benefits
Trade relations will start to flourish if Congress can give
each president the “fast-track” authority for securing
trade deals
Sources
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Drezner, Daniel W. U.S. Trade Strategy: Free versus Fair. September 2006
Zoellick, Robert B. Unleashing the Trade Winds: A Building-block Approach. United States Trade
Representative. http://usinfo.state.gov/journals/itps/0803/ijpe/pj81zoellick.htm.
“McCain hails NAFTA and Canada's role in Afghanistan,” CBC News,
http://www.cbc.ca/world/usvotes/story/2008/02/29/mcain-nafta.html, February 29, 2008.
Council on Foreign Relations, http://www.cfr.org/publication/14762/, July 30, 2008.
Council on Foreign Relations, http://www.cfr.org/publication/14762/#republican, July 30, 2008.
Council on Foreign Relations, http://www.cfr.org/publication/14762/#democratic, July 30, 2008.
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact1_e.htm.
“Free vs. Fair Trade: Council Report Presents Two Paths for U.S. Policy.” Council on Foreign
Relations. http://www.cfr.org/publication/11373/free_vs_fair_trade.html. August 30, 2006.
International Trade: The United States Needs an Integrated Approach to Trade Preference
Programs. General Accounting Office Reports & Testimony.
http://www.allbusiness.com/trade-development/economicdevelopment/11508859-1.html.
August 1 2008.