24%20International%20Trade%20Agreements

24%20International%20Trade%20Agreements - International...

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1 1 International Trade Agreements • Multilateral Trade Agreements – The Logic of Multilateral Trade Agreements –A Br ief H is tory – A Brief History of Trade Rounds • Preferential Trading Agreements 2 International Trade Agreements • When countries seek to reduce trade barriers between themselves, they enter into a international trade agreement . Multilateral trade agreements occur among a large set of countries, such as the members of the World Trade Organization. 3 Logic of Multilateral Agreements Assumption #1: Two large countries. –T h e U . S . a
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2 5 Logic of Multilateral Agreements S S D D P P T P W P W1 S 0 S 1 D 1 D 0 Q D 0 D 1 S 1 S 0 Q The U.S. China 6 Logic of Multilateral Agreements Change in : Consumer surplus = Producer surplus = Government revenue = Net effect on U.S.’s welfare = 7 Logic of Multilateral Agreements Change in : Consumer surplus = Producer surplus = Government revenue = Net effect on China’s welfare = 8 Logic of Multilateral Agreements The U.S. No Tariff Tariff No Tariff Tariff China
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3 9 Logic of Multilateral Agreements Multilateral trade agreements help to mobilize support for freer trade. 1. Import-competing producers are usually better informed and organized than consumers. 2. Consumers are usually not politically effective in opposing trade restrictions even if it is costly to them. 3. Domestic exporters can serve as a counter- weight to import-competing producers. 10 International Trade Agreements A Brief History: – Internationally coordinated tariff reduction as a trade policy dates back to the 1930s after the U.S. passed the Smoot-Hawley Act which raised tariff rates steeply. 11 International Trade Agreements A Brief History: – To reduce tariff rates, reductions needed to be linked to some concrete benefits for exports. • The initial solution to this political problem was bilateral tariff negotiations . • However, bilateral negotiations do not take full
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24%20International%20Trade%20Agreements - International...

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