Download Trade Policy: Understanding the Role of National Interests and International Agreements and more Slides Public Policy in PDF only on Docsity! Trade Policy Part I Trade Policy • Historically primarily national policies. • Compound responsibility: – President: Negotiate international agreements. – Congress: Regulate international trade. – Interest groups: Influence negotiations and ratification. • Policy questions – What policy best serves national economic interest? – What policy best serves my group’s economic interest? • Competing Rationales • Growing internationalization Decrease (index) in the cost of tra communication by mode, 1940 0 20 40 60 80 100 120 1940 1950 1960 1970 1980 1990 Ocean freight Air freight Satellite charge Transatlantic ph l i 03)(source: W. Mol e, Global Economic Inst tutions London: Routledge 20 1 docsity.cmo Growth of world production and trade (average % 1720-1996 0 2 4 6 8 10 12 1720- 1820 1820- 1870 1870- 1913 1913- 1950 1950- 1973 1973- 1980 1980- 1990 1990- 1996 GDP EXP (source: W. Molle, Global Economic Institutions London: Routledge 2003) Context for policy development: globalization-- a process of increasing interconnectedness • Financial: • Technological: • Economic • Educational: – Trade: • Media/Entertain- – Production: ment : • Organizational: • Political : • Environmental: • Cultural: 2 docsity.cmo What makes these policies stable? Executive Interest Group Legisla- ture • Distribution of costs and benefits • Exercise of influence • Institutional rules • Transition problems • Demands of two level game Trade Negotiation: a two level game iati Executive Interest Group Legisla- ture Executive Interest Group Legisla- ture Trade Negot on An example: sugar in the U.S. Al isl President American Sugar liance Fla., La. . . . leg ators • Quotas set annually by USDA based on forecasts of supply & demand • Higher and more stable sugar prices • Broad geographic support from cane growers, sugars beets growers, and corn farmers • Import quotas provide benefits to selected partners 5 docsity.cmo Why would this policy persist? (source M.Moore “Farming subsidies no help to peasants.” Guardian 8/5/02) • U.S. sugar • Why would it production persist? • Quotas restrict • ? imports. • 42% benefits to 1% • ? farms • Estimated cost to • ? consumers $1.9B • ? Why is this policy stable? • Concentrated benefits and widely distributed costs • Unevenly distributed organizational costs • Rational ignorance • Concentrated costs outside the system • Channels of influence ($, information) • Broad base and logrolling in Congress • Some trading partners benefit • Good story: favor fair trade; uneven playing field makes “unilateral disarmament” unwise. Point to evidence in EU subsidies and Japanese quotas Another example U.S. cotton production (source M.Moore “Farming subsidies no help to peasants.” Guardian 8/5/02) • Cotton production in U.S. subsidized: $3.4B • Keeps U.S. production inflated, prices low. • Glut of cotton on international market • Falling prices(66% since 1995). • Developing growers (e.g. Mali) cannot benefit from comparative advantage • Lose money despite record harvest. • Supports sustain U.S. production, pressure of over supply felt elsewhere. 6 docsity.cmo Window time Global Instability Opens a Policy Problem Stream Politics Stream Policy (Solution) Stream Convergence Window A new set of global institutions to promote security and prosperity • International Bank for Reconstruction and Redevelopment (World Bank) loans for post war redevelopment • International Monetary Fund (IMF): short term loans for currency stability • International Trade Organization not organized: General Agreement on Tariff and Trades (a treaty) serves instead to focus on trade 7 docsity.cmo
