Tài chính doanh nghiệp - Chapter 7: The multilateral trade and investment framework

Chapter 7The multilateral trade and investment framework1Lecture planBrief history of tradeGATT creation and impact on world tradeBasic principles of GATTThe Uruguay Round resultsPost-Uruguay Round progress: basic telecommunications; information technology; financial servicesThe World Trade Organisation (WTO)WTO’s dispute settlementThe next WTO roundUNCTADProgress to date in FDI liberalisation2Ancient tradeOne of the oldest economic activitiesFirst cities and trade (about 6000 BC): Mesopotamia (Babylon); Northern China; India; Central America Trade between urban centres (e.g. Mesopotamia, Egypt and the Eastern Mediterranean) grew food, cotton, timber, domesticated animals Greek city states e.g. Athens and Sparta (around 500 BC) expanded trade3Ancient trade The Roman Empire(300BC-400AD) emphasised businessPax Romana(The Roman Peace) Common coinageSystematic law and administrationCentral market locations/CitiesExcellent communication systemOther city-nations and tribes joined the empire and agreed to pay tributes and taxesThe fall of the Roman empire(5th century AD)Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/aInternational Trade and Investment by John GioneaSlides prepared by John Gionea4Trade under European feudalism(c.700–c.1500 AD)After fall of Roman Empire (476 AD), decline in urban life/trade for about 500 yearsClosed-state economy pursuing self-sufficiency11th century AD, revival in export trade: Italy,Low Countries,German Hanse townsEast–West trade: Europe importing: spices, rice, oranges, dyes, cotton and silk; Western European merchants exporting: timber, arms, woollen clothing Trading associated practices (e.g. banking, double-entry bookkeeping, bills of exchange, tariffs and commercial organisations) introduced in 15th and 16th century.5Industrial Era Trade (1750–1945)England led world in industrialisation and trade (‘the workshop of the world).US and Western European countries followed a few decades later.Development of urban/trade centres in Asia, Africa and L. America largely result of colonial expansion by industrial powers.Decline of international trade between the two wars due to Great Depression (1929–33) and strong protectionism in the US, UK, France.1913–1950 period had lowest average economic growth since 1820; also the only period over 250 years where trade slower than production. 6GATT (the General Agreement on Tariffs and Trade)Signed on 30 October 1947 by 23 nationsCame into force on 1 January 19488 rounds of multilateral trade negotiationsWorld Trade Organisation established on 1 January 19957GATT negotiating roundsRound Years No of parties1. Geneva 1947 232. Annecy 1949 133. Torquay 1950–1 38 4. Geneva 1956 265. Dillon 1960–2 456. Kennedy 1964–7 627.Tokyo 1973–9 998. Uruguay 1986–94 1179. Doha 2002–05 144EValue of world trade($USb) E = Feb.2002Source: adapted from various GATT/WTO publications8Impact of GATT on industrial tariff rates 9Weighted tariff rates for the farm sector in selected countries and regions, %, 199710GATT: basic principlesTrade without discrimination– most favoured nation clauseProtection only through tariffs– quantitative restrictions prohibitedStable basis for trade– tariff bindingsSpecial treatment for developing countries– principle of non-reciprocity11The Uruguay Round resultsIncrease in incomesworld income up by US$510 billion by 200512The Uruguay Round resultsIndustrial tariff reductions– developed countries to reduce tariffs by 40%* average tariff will range from 1.7% (Japan) to 4.8% (Canada)– developing countries reductions * India, S.Korea and Singapore by > than 50%– transition economies reductions* Poland down by 38% (average at 9.9%)13The Uruguay Round results cont.Removal of quantitative restrictionstextile and clothing restraints under MFA to be phased out in 4 steps between 1 January 1995 and 1 January 200514The Uruguay Round results cont.Increased industrial tariff bindings– developed countries from 78 to 99%– developing countries from 21 to 73%– transition economies from 73 to 98%15Post-Uruguay Round progressBasic telecommunications – Negotiations successfully concluded in Feb.1997 with 69 governments agreeing to wide-ranging liberalisation measures. The agreement came into force in Feb. 1998.Information technology – In March 1997, 40 governments agreed to cut customs duties on IT products beginning on 1 July 1997 and eliminating tariffs altogether on trade amounting to some US$600 billion p.a.Financial services – The agreement came into force in March 1998, when 70 governments agreed to open their financial services sectors, covering more than 95% of trade in banking, insurance, securities and financial information.16World Trade Organisation vs GATTMore global(prospective membership: 150) Wider scope: services, intellectual property, investmentFull-fledged international organisation in its own rightAppellate body17World Trade Organisation vs GATT cont.Administers a unified package of agreements to which ALL members are committed.Improved GATT rules plus a lot more.Reverses policies of protection in ‘sensitive areas’.18WTO disputesAs of 31 Dec. 2000, WTO examined 200 trade disputes compared with 196 by GATT in 50 years.US: 60 complaintsEU: 50 complaintsHormone-treated beef (US–EU); US won.Banana war (US + Central American Banana producers vs EU); US won.Howe leather (US + Canada vs Australia; Australia lost. (See end of chapter Case, p.173) Lamb exports to the US (Australia + NZ); Australia and New Zealand won (See case p.166).19WTO’s rulings encourage developing countriesEncouraged by WTO’s tougher system, developing countries started to use the settlement procedures more than under GATT. Costa Rica and India won cases against the US on textile exports to the US.In 2003 India topped the list of ‘anti-dumping initiations’ with a number of 46 actions out of a total of 231.China had a number of 83 initiations of anti-dumping measures over 2000 to mid 1994.Over same period: Mexico (14), Indonesia (12)20The Doha RoundThe Declaration of Doha (Qatar) in November 2001, set 1 January 2005 as date for completing all but two negotiations.Seven negotiating bodies: (1) agriculture; (2) services; (3) non-agricultural market access; (4) rules; (5) trade and environment; (6) geographical indications for wines and spirits; (7) reform of Dispute Settlement Understanding.‘The risk is that the new round (and so the entire multilateral system ) could collapse under the weight of too many contentious issues’. (The Economist).21United Nations Conference on Trade and Development (UNCTAD)Permanent United Nations agency established in 1964No executive powerConvenes a meeting every four yearsForum for examining North–South issues in trade, finance and development22Liberalisation of FDIOECD, UNCTAD, WTOIn 1995 OECD initiated talks between its members with the purpose of drafting a Multilateral Agreement on Investment (MAI).Talks broke down primarily because the US refused to sign the agreement; too many exceptions would weaken its powers.Not achievable in the foreseeable future. 23