We`ve experimented with a variety of variations of this approach, but the results are still very similar: trade agreements increase quality, but they don`t have much impact on price and diversity. The Court`s initial findings suggest that EU trade agreements have increased the quality of goods imported by trading partners by around 7% over a five-year period. Trade agreements regulate international trade between two or more countries. An agreement may cover all imports and exports, certain categories of goods or a single category. The United States is currently involved in about 320 trade agreements with various countries. (These are listed under www.tcc.mac.doc.gov.) However, several general trade agreements have shaped trade policy on a large scale. International trade not only leads to increased efficiency, but also allows countries to participate in a global economy, which promotes the possibility of foreign direct investment (FDI). Theoretically, economies can therefore grow more efficiently and become competitive economic operators more easily. Criticisms of bilateral and regional approaches to trade liberalization have many additional arguments. They suggest that these approaches could undermine and replace the WTO`s multilateral approach, rather than supporting and complementing it, which is preferable for global action on a non-discriminatory basis. Therefore, the long-term outcome of bilateralism could be a deterioration of the global trading system into competing and discriminatory regional trading blocs, resulting in additional complexity that would complicate the flow of goods between countries.
Moreover, the reform of issues such as agricultural export subsidies cannot be effectively addressed at the bilateral or regional level. From time to time, you`ll hear about what`s called accelerated trade legislation, where Congress would give the president the power to negotiate trade deals. This law has not been adopted and remains controversial. The USTR has primary responsibility for the administration of U.S. trade agreements. This includes monitoring the implementation of trade agreements with the United States by our trading partners, enforcing America`s rights under those agreements, and negotiating and signing trade agreements that advance the president`s trade policy. This does not mean that everything is rosy in the world of foreign trade, nor that the United States always plays fairly in the world market. U.S.
agricultural subsidies and textile tariffs, for example, impede the import of food, fabrics, and clothing from poor countries to protect these domestic industries. Nevertheless, it is expected that the United States and the world in general will continue on the path of freer international trade. The customs union exception was partly designed to take account of the creation of the European Economic Community (EC) in 1958. The EC, which originally consisted of six European countries, is now known as the European Union (EU) and comprises twenty-seven European countries. The EU has gone beyond simply removing barriers to trade between Member States and forming a customs union. It has moved towards even greater economic integration by becoming a common market – an agreement that removes obstacles to the mobility of factors of production such as capital and labour between participating countries. As a common market, the EU also coordinates and harmonises the fiscal, industrial and agricultural policies of each country. In addition, many EU members have formed a single currency area by replacing their national currency with the euro.
Since the signing of the GATT, several “rounds of negotiations” have taken place on trade liberalization. The most important of these were the Kennedy Rounds, which eventually led to a one-third reduction in tariffs, and more recently, the Uruguay Rounds. The Uruguay Round addressed general barriers to trade and relatively new issues of intellectual property rights, fishing practices and environmental concerns. The United States is a member of the World Trade Organization (WTO) and the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) establishes rules for trade among the 154 WTO Members. The United States and other WTO members are currently participating in the Doha Round of Global Trade Negotiations for Development, and a strong and open Doha Agreement on markets for goods and services would be an important contribution to overcoming the global economic crisis and restoring the role of trade in economic growth and development. In addition, the World Trade Organization (WTO) is a Geneva-based world organization that deals with trade between nations. The WTO, established in January 1995 by the GATT Uruguay Round negotiations, comprised 144 countries in January 2002. The WTO manages trade agreements, provides a forum for trade negotiations and the settlement of trade disputes, monitors trade policy, and provides technical assistance and training to developing countries. International trade allows countries to expand their markets and gain access to goods and services that might not otherwise have been available at home.
International trade makes the market more competitive. This ultimately leads to more competitive prices and brings a cheaper product home to the consumer. Despite the potential tensions between the two approaches, it appears that multilateral and bilateral/regional trade agreements will remain hallmarks of the global economy. However, the WTO and agreements such as NAFTA have become controversial among groups such as anti-globalization protesters, arguing that such agreements serve the interests of multinationals rather than those of workers, even though trade liberalization is a proven method to improve economic performance and increase overall revenues. To address this opposition, pressure has been exerted to include labour and environmental standards in these trade agreements. Labour standards contain provisions on minimum wages and working conditions, while environmental standards would prevent trade if there were fears of environmental damage. Why doesn`t the world have open trade between countries? If there is free trade, why do some countries remain poor at the expense of others? There are many reasons, but the most influential is what economists call rent-seeking. Rent-seeking occurs when a group organizes and lobbies the government to protect its interests. However, in the early 1970s, the Vietnam War led to high inflation in the United States and an increase in the prices of American products. These high prices have made products and services too expensive for other countries. As with high tariffs, high commodity prices have led to a worsening of the trade balance with the United States. The Nixon administration responded with various plans and programs to reduce inflation, but the 1973 oil crisis overwhelmed these efforts and widened the trade deficit to chronic levels.
The Watergate crisis also divided and distracted the U.S. government, making the situation worse. The rest of the chapter is as follows. In Section 2, we present a sequence of models and diagnose the problem that a trade agreement could solve. Building on our findings in Section 2, Section 3 then deals with reciprocity, Section 4 deals with most-favoured-nation treatment, and Section 5 deals with linkages and overhangs. .