Ch. 3 - The Global Trade Environment

Ch. 3 - The Global Trade Environment - LECTURE ON CHAPTER 3...

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THE GLOBAL TRADE ENVIRONMENT: REGIONAL MARKET CHARACTERISTICS AND PREFERNTIAL TRADE AGREEMENTS This chapter examines the environment for world trade, focusing on the institutions and regional cooperation agreements that affect trade patterns. The multilateral World Trade Organization, created in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), provides a forum for settling disputes among member nations and tries to set policy for world trade. The world trading environment is also characterized by preferential trading agreements among smaller numbers of countries on a regional and subregional basis. These agreements can be conceptualized on a continuum of increasing economic integration. Free trade areas such as the one created by the North American Free Trade Agreement (NAFTA) represent the lowest level of economic integration. The purpose of a free trade area is to eliminate tariffs and quotas. A customs union (e.g., Mercosour) represents a further degree of integration in the form of common external tariffs. In a common market such as Central American Integration System (SICA), restrictions on the movement of labor rand capital are eased in an effort to further increase integration. An economic union, such as the European Union (EU), the highest level of economic integration is achieved by unification of economic policies and institutions Other important cooperation arrangements include the Association of Southeast Asian Nations (ASEAN); the Cooperation Council for the Arab States of the Gulf (GCC); the Economic Community of West African States (ECOWAS); and the South African Development Community (SADC). After the WTO riots that took place in the Seattle, you may be interested to learn more about what the WTO does. Here’s an explanation of how WTO functions. You can also read a Seattle Weekly article (book excerpt) describing the WTO riots in Seattle . The World Trade Organization (WTO) is the successor to GATT. Based in Geneva, the WTO has a dispute-settlement body (DSB) representing all member countries that mediates trade complaints concerning unfair trade barriers and other issues. During a 60-day consultation period, parties to a complaint are expected to engage in good-faith negotiations and reach amicable resolution of a given issue. Failing that, the complainant can ask the DSB to appoint a three-member panel to hear the case. After convening, the panel has nine months within which to issue its ruling. The DSB is empowered to act on the panel’s recommendations. The losing party to a dispute can turn to the seven-member appellate body. If a country’s trade policies are found to violate WTO rules, it is expected to change those policies and negotiate compensation via lower tariffs with the winning country. If appropriate changes and compensation are not forthcoming, the WTO can authorize trade sanctions against the loser. The U.S. settled a case concerning Korean measures of the shelf life of imported meat. 1
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This note was uploaded on 04/19/2008 for the course BUS 3548 taught by Professor Schlee during the Spring '08 term at Seattle Pacific.

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Ch. 3 - The Global Trade Environment - LECTURE ON CHAPTER 3...

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