Wto regional business and trade agreements bilateral

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Unformatted text preview: trade agreements (FTAs): Among several countries - often among countries in a certain region 3/9/2014 Page: 23 Reducing trade barriers to member countries to zero (but not to non-member countries) Allowed by WTO if: • Internal barriers drop to zero • Barriers to nonmembers do not rise on average GUY SHANI , 2014 - STRATEGY 310 - THE WORLD ECONOMY - SESSION 10 3. WTO, regional, business and trade agreements Trade blocks – Preferential trade agreements Free-trade area Free trade among members CAFTA, NAFTA, Bilateral FTAs 3/9/2014 Page: 24 Customs union Common external tariffs Mercosur, ASEAN Economic union Common market Free movement of factors of labor and capital Harmonization of all economic policies European common market (prior to 1992) EU (after 1992) GUY SHANI , 2014 - STRATEGY 310 - THE WORLD ECONOMY - SESSION 10 12 3. WTO, regional, business and trade agreements WTO vs bilateral and regional agreements • What are the arguments in favor of bilateral and regional FTAs over the multilateral WTO? Slow progress of WTO negotiations Developed countries want access to high growth markets Developing countries had limited trade partners locked in by bilateral agreements What are the arguments against PTAs (preferential trade agreements)? 3/9/2014 Page: 25 GUY SHANI , 2014 - STRATEGY 310 - THE WORLD ECONOMY - SESSION 10 3. WTO, regional, business and trade agreements Potential problems with PTAs Smaller country has less negotiation power • Negotiation staffing, knowledge, leverage Trade diversion E.g., Argentina buying lower quality cars from Mercosur partners, just because of the lack of tariffs Extra complexity: “Rules of origin” – extra custom checks to avoid bypassing (by non-member countries) 0% (NAFTA) 5% (Standard tariff) 3/9/2014 Page: 26 GUY SHANI , 2014 - STRATEGY 310 - THE WORLD ECONOMY - SESSION 10 13 3. WTO, regional, business and trade agreements Businesses and trade agreements • Why is the WTO important to businesses? • Consequences for future strategy • Stalemate increases uncertainty • How does the WTO constrain what businesses can do? • • • • • Labor and environmental requirements Management of global supply chains Differentiation from current and future...
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