Globalization and Trade: Reciprocity, Protectionism, and International Trade Agreements - , Study notes of International Business

Download Globalization and Trade: Reciprocity, Protectionism, and International Trade Agreements - and more Study notes International Business in PDF only on Docsity! INTL 3200 Final- Study Guide Alliances: the institutions that help their members cooperate militarily in the event of war -Institutions that enhance member’s power by pooling military responsibilities -Enhance deterrence in the case of defensive alliances -Alliance agreements set the terms of military cooperation -Specify the conditions for joining a war -Allocate the military burden -May establish peacetime military cooperation and training -Why do states form alliances? (3 motivations) 1. Balance of power—a situation in which the military capabilities of two states or groups of states are roughly equal -Causes of the balance of power -Premise—the most stable system is one in which no country has the upper hand -Individual states will form alliances against the most powerful state (or coalition) -Through the actions of individual states, a balance will emerge in the international system -Balancing: Europe 1815-1914 -Prior to 1815—Europe was united against Napoleonic France -1815-1822—concert of Europe -Collective security system -1822-1854: loose concert, Crimean war -1854-1870: rise of Germany -1870-1949: emergence of tight alliances: -Britain, France and Russia -Germany and Austria 2. Balance of threat -Alternate version of the balance of power -States seek security, so they are concerned with threatening states, not powerful ones -The degree to which a state is threatening depends on power, intentions and geography -Prediction is that states will balance against the most aggressive state, not necessarily the most powerful 3. Bandwagoning- a strategy in which states join forces with the stronger side in a conflict -Dealing with a threatening state by allying with it, rather than against it -This is risky, since it depends on the goodwill of an aggressive, expansionist state -Why bandwagon with an aggressor? -If you are a small state -If you’re in close geographic proximity to the aggressor -Gain a share of the conquest Nuclear Proliferation -3 reasons for proliferation 1. Security -nuclear deterrence -norms help sometimes 2. Domestic politics -executive might want -prestige -popularity -diversionary -interest groups—bureaucratic parochialism -military -scientists- industry -norms -national pride -symbol of modernism technologically 3. Modernism -International prestige, symbol of national status Terrorism—the use or threatened use of violence “against noncombatant targets” by individuals or nonstate groups for political ends -defining terrorism -why do terrorists target civilians -why do groups resort to terrorism -why do terrorists resort to suicide bombings? -Problems of defining terrorism -Differentiating it from the actions of state militaries -Armies often kill civilians -Some governments try to install terror -Differentiating it from the actions non-state actors in civil wars -Similar tactics -Similar objectives (coercion) -Terrorism as coercion -Limits on Coercion -Different motivations for terrorist attacks: what can be gained by the group? -Hallmarks of terrorism -Politically motivated violence by non-state actor -Usually in the context of a struggle between a nonstate actor and a government -Primarily directed at civilians -Aim is to influence an “audience” through coercion -Terrorism and bargaining failure -Terrorism can be seen as a bargaining tactic in a dispute over some issue -The IRA vs the United Kingdom over northern Ireland -Tamil tigers vs sir Lankan government over Tamil independence -Hamas and Islamic jihad vs Israel over Palestine -Terrorists resort to violence due to the inability to reach a compromise -Thus, terrorism can be seen as coercion: attempt to extract concessions by harming civilians -Other motives for terrorist attacks -Provocation -Provoke aggression by the target government against the home population, thereby mobilizing moderates against the target government -Spoiling -Spoil a peace agreement between moderates and the target government -Outbidding -Gain support among home population Collective Security -Collective security organization—broad-based institutions that promote peace and security among their members—the League of Nations and the UN -What is collective security? -Collective response to aggression by all states -Collective security organizations -Concert of Europe—1815-1852 -League of nations—1919-1939 -United nations—1946 to present -Unlike alliances, collective security organizations promote peace among their own members -United Nations Article 1 -The purposes of the UN are -Maintain intl peace and security -CO2global warming -CFCsdamage to the ozone layer -Oil spills and oil pollutions from tankers -Common pool resources—goods that are available to everyone, such as open ocean fisheries; it is difficult to exclude anyone from using the common pool, but one user’s consumption reduces the amount available for others -Question—how are common-pool resources different from public goods? -They are NON-EXCLUDABLE but RIVAL in consumption -Tragedy of the commons—over consumption of common pool resources -Examples -The commons—public pasture for grazing -Results in degradation of the grass -Fish stocks -Overfishing will cause the collapse of a species -Rivers and other sources of freshwater that cross national borders -Consumption by one state reduces the amount available to others -The Collective Action Problem -Reducing pollution and limiting the consumption of common pool resources are generally costly -Combined with non-excludability, this creates an incentive to free-ride on the effort of other states -Similar situations -The prisoner’s dilemma and collective security -Factors affecting the severity of collective action problems -Group size -Small number of actors make coordination easier -Time frame (shadow of the future -The more current or visible the problem is, the greater the political motivation to act -Solutions -Issue-linkage—link cooperation on the environment to cooperation on economic issues -Economic sanctions or economic rewards -Privileged group/leadership/hegemony -Lead state (or group) pays a larger share of costs and takes charge of enforcement -Domestic Politics and the Environment -Interest groups and preferences -Political organizing as a collective action problem -Role of the future and time horizons -Hierarchy of needs—more industrial bare most of the costs, because they are responsible International Law -Sources of intl law—treaties and conventions -Binding on signatory states only (with a few exceptions) -Treated as the highest law of the land in signatory countries (once they are ratified) -Treaties are binding on successor governments and successor states -Second source—custom -For conduct to be a customary law it has to be -A repreated practice over a long period of time -By a majority of states -Without major inconsistencies -Customary law is binding on all states -Starting in the 20th century, many customary obligations were codified in formal conventions -When a custom is written into a treaty, that custom is binding on states that aren’t parties -Examples of customary law -Law governing the oceans and navigation -Diplomatic immunity -The laws of war -Jus ad bellum—when it is permitted to go to war -Jus in bello—how war is to be conducted -Other sources of international law -General legal principles -Ex—self0defense, prohibition of murder, prohibition of slavery and piracy -Preemptory norm (jus cogens): fundamental norm that cant be overturned by a treaty -Judicial decisions -Can guide interpretation of law when its unclear -Scholarly opinion -Institutions that adjudicate international law -Domestic courts -Interlational courts of justice -Specialized organizational courts -EU—eurpoean court of justice -WTO—dispute settlement mechanism -International criminal tribunals -Nuremburg -ICTY and ICTR -Compliance with international law -There is no international court system to enforce it. It must be “self-enforced” by states -It is often violation with impunity -Reality—most states obey international law most o the time -We only pay attention to rare, high profile violations: war, genocide, ethnic cleansing -Enforcement of international law is rare because violations are rare -Even if enforcement is imperfect, law still matters Why obey international law? -To maintain an orderly system -What does this mean? (hint—we’ve already talked a lot about this motive) -Positive reciprocity -States benefit when other states obey international law -Comply in order to maintain the legitimacy or a treaty or custom -Sanctions -States can punish other states for violating IL (negative reciprocity) -Two categories of sanctions -Retorsion—lawful acts that punish violations of IL -Example—denial of foreign aid -Reprisals—acts against a violator that are normally illegal but are made legal due to the proginal violation of law -Example—trade sanctions for violating WTO obligations -Problem with sanctions—collective action -Other motives -Reputation -States want to keep a reputation for being reliable -Habit -Observation becomes routine for a government/bureaucracy -Domestic politics -Domestic interest groups push governments to uphold international obligations Customary laws of war—the just war doctrine -Origins in ancient Greek and Roman tradition -Developed by Christian thinkers in the Middle Ages (the peace of God) -Systematically written down by Hugo Grotius in the 17th century) -Jus ad bellum—laws of war -When and how war is to be started -When it is permitted -In self-defense or -To assist other states in self-defense but fighting an aggressor and -Only as a last resort -War is to be declared PUBLICLY by a LIGITIMATE AUTHORITY -Jus ad Bello—laws in war -“laws in war”—how war should be conducted -discrimination—non-combatants are to be protected -proportionality—force should only be a strong as need to win, and should end once the war aims have been achieved -Jus in bello—treaties -geveva conventions -1864—treatment of battlefield causalities -1906—extended the principles from the first convention to apply also to war at sea -1929—treatment of prisoners of war -1949—treatment of civilians during wartime International Criminal Court -What crimes does the ICC prosecute? -Genocide -Crimes against humanity -War crime -Under what conditions does the ICC depend on? -Is it good for other countries for us to join the ICC? -What is Kissenger’s views? -It would be used as a political weapon -Roths objections? -Wedgewood concerns for the ICC -we need military force Globalization -Increasing interconnection of national economies with each other (economic interdepen- dence) -Loosening of national barriers to access of three primary markets: – -The product market (international trade) -The capital market (international investment) -The labor market (international migration) -Other (Critical) Meanings of “Globalization” that we are not focusing on -The spread of capitalism: “Corporate Globalization” -The spread of global threats to ecology and health: climate change and disease Trade and Trade Policy -Trade policy— -protrectionism—the imposition of barriers to restrict imports. Commonly used protectionists devices include—tariffs, quantitative restrictions (quotas) and other nontariff barriers -free trade— -trade barrier—any government limitation on the international exchange of goods. Tariffs, quantatice restrictions (quotas), import licenses, requirements that governments buy only domestically produced goods, and health and safety standards that discriminate against foreign goods. -A state’s trade policy can alternate along a spectrum of being open to imports (free trade) to being closed (protection). -Tariffs: taxes set at the border -Non-tariff barriers: health, environment, and safetesy regulations -Summary of the Ricardian theory -the effect of free trade on a country’s wealth is always a net positive -gains come in the form of lower process and access to a wider variety of goods -the benefits of trade come from IMPORTS -the distribution of the gains from trade is uneven -the benefits are spread out among consumers -the costs are highly concentrated in industries that have a comparative disadvantage -international trade is about competitiveness between firms, not between countries -modifications to ricardian theory—heckscher-phlin -RT only considers one factor of production, LABOR, but there are others -Capital -Land—agricultural land -Human capital—skilled labor -Industries use these factors in different proportions -Countries will have a comparative advantage based on their relative endowments of factors Trade Interests, Domestic Interactions, and Institutions -Puzzle #1—If the economic consequences of free trade are a net positive, why do we ever see trade protection? -Answer—politics, of course -More specifically, interest-group politics -Interest groups that favor trade barriers (protectionists) often have advantages organizing and lobbing compared to the general public -Basis of trade interest groups -Sometimes preferences for trade policy are determined by social class: labor, capital, and land -When factors can be moved between industries -HO & SS models -Sometimes interest groups are based on specific industries—those with a comparative advantage versus those without -When factors of production are fixed to specific industries -Ricardo-Viner model -Examples of trade fights based on class -19th century germany—iron and rye -late 19th century U.S.—the progressive coalition and The Wizard of Oz -Britain in the mid-19th century—the repeal of the corn laws -Trade and interests groups—ricardian model -Interest groups in the Ricardo-viner model are based around specific industries -Industries with a comparative disadvantage oppose trade openness because they must compete with inports -Industries with a comparative advantage would favor openness in order to export their products to other countries -Domestic interactions—lobbying for trade policy as a collective action problem -Political organization in support of trade protection, like any lobbying effort, is costly. It takes time and money -There is a temptation among interest groups to free-ride, or not join the lobbying effort -Political influence will go to those groups that can best overcome this problem of free-riding -Advantages of protectionist industries in lobbying -Those harmed by trade liberalization have very strong preferences, giving them a stronger motivation to organize -Small number, compared to the general public, make collective organization easier -Industries that are harmed tend to be geographically concentrated, making coordinated action easier to achieve -Domestic interactions and protection—logrolling -Protectionists have an advantage over free traders in lobbying for protectionist trade policy -Legislators representing many different protectionist industries can form legislative bargains (logrolls) to produce high tariffs -Example—the US smooth-hawley tariff of 1930 -Puzzle 2—how is it possible that trade liberalization is ever enacted, given the political advantages of protectionists? -Compensation of those harmed by free trade -Domestic political institutions that represent broader constituencies -International agreements -Trade and domestic institutions -Trade liberalization has stronger support from politicians that represent broader segments of a population. Why? -Because the benefits of international trade tend to be spread out -Example -Democratic states tend to be more open to trade than non-democracies -Us president tends to favor trade liberalization more than congress -Unilateral tariffs vs. international agreements -States can make trade policy through several different mechanisms -Domestic laws—smoot-hawley tariff -International agreements—NAFTA, EEC/EU -When tariff cuts are made through international agreements they tend to be supported by a broader set of interest groups -Interest groups and trade agreements -Protectionists favor higher tariffs and OPPOSE free trade agreements -What type of industries would favor low tariffs and SUPPORT trade agreements? -Importers—economic sectors that consume imports will favor lower tariffs -Exporters—export oriented firms that have a comparative advantage don't care about domestic tariffs, but they want to lower foreign tariffs -Agreements and reciprocity -Trade agreements formalize the process of reciprocity in trade policy—tariffs in one state are reduced in response to reductions in another -Examples -RTAA—1934 -EEC—1960 -NAFTA—1994 -Trade agreements and domestic interactions -When tariffs are set through domestic laws, the fight is between protectionists and importers -A trade agreement will receive the support of both importers and exporters -Together, the political efforts of importers and exporters can counteract the efforts of protectionists Trade Interactions and Institutions -functions of intl trade agreements -they expand the domestic political coalition supporting free trade, by giving exporters a stake in the process -they formalize reciprocity, by exchanging tariff cuts between the signatories -general agreement on tariffs and trade (GATT) -multinational trade agreement, founded in 1947 as part of the Bretton Woods System -it has been repeatedly revised and updated in a series of negotiations, known as rounds -most recent round—Uruguay 1994 -Failed round—Seattle 1999 -Current round—Doha 2001 -Membership also grows over time -Currently 153 parties (member countries) -Principles of GATT -Reciprocal trade liberalization -Gradual move to freer trade through reciprocal cuts in barriers -Sets maximum tariffs -Non-discromination of members -Most favored nation—treat all members the same -National treatment—treat all products the same -Stability—transparent “rules based trade” -Permitted exceptions to the nondiscrimination principle -Regional trade integration (NAFTA, EU) -Banning imports of unsafe products -Administrative protection—temporary protection in certain circumstances -Safeguards—temporary protection to deal with unexpectedsurge of imports -Anti-dumping measures—punishment of dumping (exports sold at a loss; predatory pricing) -Problems with the GATT -During the Uruguay Round talks, it became clear that there were some problems with the GATT structure -Large membership made negotiations hard to manage -GATT had very weak procedures for resolving trade disputes and addressing violations -Trade disputes -Even when trade between two states is covered by an agreement, there is still the problem of cheating on that agreement -Cheating occurs when states raise protectionist measures against each other -Examples -“beggar thy neighbor” policies during the 1930s -Japanese auto exports to the US in the 1980s -US tariffs on steel, 2002 -Domestic interests and trade disputes -The political incentives behind these disputes resemble the prisoner’s dilemma. Why? -Because of the influence of domestic interest groups -Importers want lower domestic tariffs -Protectionists want higher domestic tariffs -Exporters want lower forgeign tariffs -Cheating on a trade agreement will allow a government to make two of these three groups happy -Addressing interests and trade disputes—international institutions -International trade institutions can help minimize trade disputes by… -Formalizing reciprocity -Clarifying standards of behavior -Which trade measures are legitimate exceptions and which are cheating -Facilitating negotiated settlement of disputes -Verifying compliance -Streamlinging the punishment of defectors -The World Trade Organization -Created in 1994 by the Uruguay Round -Formal international organization that oversees the GATT -Two primary functions -It is a negotiating forum for the creating of international trade law