International business 5th griffin chapter 10

General Agreement on Tariffs and Trade• Developed as part of the Havana, Cuba, conference in 1947 • Provided forum for trade ministers to discuss barriers to international trade... Goa

General Agreement on Tariffs and Trade

• Developed as part of the Havana,

Cuba, conference in 1947

• Provided forum for trade ministers

to discuss barriers to international trade

The Role of the GATT

The GATT’s goal was to promote a free and competitive international trading environment benefiting efficient producers by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff

Table 10.1 GATT Negotiating Rounds

Most Favored Nation (MFN) Principle

The most favored nation principle

requires that any preferential treatment granted to one country

must be extended to all countries

Exceptions to the MFN Principle

• Members permitted to lower tariffs to

developing countries without lowering them for more developed countries

• Regional arrangements promote

economic integration (e.g., EU and NAFTA)

Goals of the World Trade Organization (WTO)

• Promote trade flows by encouraging

nations to adopt nondiscriminatory,

predictable trade policies

• Reduce remaining trade barriers through multilateral negotiations

• Establish impartial procedures for resolving trade disputes among members

Differences between WTO and GATT

• GATT focused on promoting trade in

goods; WTO’s mandate includes

– trade in goods – trade in services – international intellectual property protection – trade-related investment

• WTO’s enforcement powers are stronger

Figure 10.1 The WTO’s Principles of the

Trading System

Enforcement of WTO Decisions

• Country failing to live up to the

agreement may have a complaint filed against it

• WTO panel evaluates complaint

• If found in violation, the country may be asked to eliminate the trade barrier

Rice producers would likely benefit if trade barriers

were eliminated in this market.

The world market for rice is distorted

by high tariffs, ranging from 20-

43 percent

Forms of Economic Integration

Free Trade Area

Common Market

Economic UnionCustoms Union

Figure 10.2 Forms of Economic Integration

European Union (EU)

• Most important regional trading bloc

• 25 member countries

• 455.3 million population

• Combined GDP of $12.7 trillion

Map 10.1 The European Union

Governing Organizations

of the EU

• The Council of the European Union

• The European Commission

• The European Parliament

• The European Court of Justice

The first meeting of the European Commission after the enlargement of the

EU to 25 members.

Figure 10.3 The Co-Decision

Procedure

Three Pillars of the Maastricht Treaty

• A new agreement to create common foreign and defense policies among members

• A new agreement to cooperate on police,

judicial, and public safety matters

• The old familiar European Community, with new provisions to create an economic and monetary union among member states

Components of the Treaty for Europe

(Treaty of Amsterdam)

• A strong commitment to attack the EU’s

chronic high levels of unemployment

• A plan to strengthen the role of the

European Parliament by expanding the number of areas that require use of the co-decision procedure

Treaty of Nice

• Sought to reduce the risk of political

gridlock as the number of members increase

– reduced number of areas where unanimity is required for Council approval

– adjusted number of votes assigned to each Council member

Major Regional Trade Associations

Map 10.2 Free Trade Agreements in

Central and South America

and the Caribbean

Map 10.3 The ASEAN Members

Map 10.4 Asia-Pacific Economic Cooperation Initiative (APEC)

Map 10.5 Free Trade Agreements

in Africa