Transcript International Trade Policy Economic Integration and Regionalism Major Trade/Economic Agreements • NAFTA: The North American Free Trade Area (1994) • EU: The European Union (1957) • Mercosur: Argentina,

International Trade Policy
Economic
Integration and
Regionalism
Major Trade/Economic
Agreements
• NAFTA: The North American Free Trade Area
(1994)
• EU: The European Union (1957)
• Mercosur: Argentina, Brazil, Paraguay, Uruguay
(1991)
• ASEAN: Association of Southeast Asian Nations
(1967)
• Andean Community: Bolivia, Colombia, Ecuador,
Peru, Venezuela (1973)
What is a trade agreement?
• A special agreed upon preferential arrangement
among a group of nations governing their
trade/economic relationship
• Trade/economic agreement cover matters related to
some or all of the following:
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Tariffs and other trade barriers
Trade with other countries
Factor movements
Economic policies
» Banking and Monetary policies
» Fiscal policies
• Economic institutions: laws and regulations governing
economic activities and property rights
• Foreign policy
Types of Agreements
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Preferential trade arrangements
Free trade area
Customs Union
Common Market
Economic Union
Regional agreement
Measuring Trade
• International trade is commonly measured in
terms of the value of the goods (and services
than cross borders: Value of exports plus values
of imports
• About two-third of international trade take place
among industrial countries.
• Countries that belong to established
(functioning) trade blocks (treaties) tend to do
significant shares of their trade within their
blocks—e.g., EU, NAFTA, ASEAN
Measuring Trade Flows
• A relative measure: World Trade Share
• Regional share of trade relative to the total share
• Share of a trade block relative to the world trade
• Trade concentration ratio of the trade block
Impacts of Trade Pacts on Trade
• Trade creation:
Increases in trade among members of the pack as a
result of the lowering of removal of tariffs and
other trade barriers
• Trade diversion:
Diversion of trade (imports) from more efficient
nonmembers (whose products are subject to higher
tariffs) to less efficient members (whose products)
are subject to lower tariffs or no tariffs)
Trade Diversion
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SC +t
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Sc
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q2 q1
A
o
q2
B
o
q1
C
Trade Creation
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Sa
Sxb
Po+t
Pf
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Sw
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Country A
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Multilateralism
• Most Favored Nation (MNF)
• GATT (General Agreement on Tariffs and Trade)
(From Tokyo to Uruguay1993)
• WTO (World Trade Organization) 1995
• GATS (General Agreement in Trade in Services);
the e-commerce dilemma
• Countervailing Measures to correct unfair
practices
• Overlapping agreements: APEC (Asia and Pacific
Economic Cooperation