Introduction to International Area Economics

Definition-->word

100

The concept of MFN is rather simple one. In the context of the WTO, it simply means that whatever one countries allows one country to do, it must allow all other MEMBER states to do so. This only applies to member states. The actual doctrine is that members must not discriminate against imported products from other members. It also applies to tariff reductions and other items under GATT, but the general idea is that if one country allows another a “deal”, then it must allow all countries the same deal. A country is now allowed to give one country a better deal in a certain area than other countries. This does not apply for non-members, so if a country is not a member of the WTO, countries can make deals as they wish.

Most Favored Nation

200

General exceptions - Right to take measures, for example, necessary to protect human, animal or plant life or health, which may restrict trade in goods (GATT 1994). Such measures cannot constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. Similar general exceptions also apply to trade in services (General Agreement on Trade in Services (GATS), whereas there are no general exceptions as such under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement); Security exceptions - Right to take measures to protect essential national security interests, which may restrict trade in goods (GATT 1994). Similar security exceptions are allowed under the GATS and the TRIPS; Exceptions for Regional Trade Agreements (RTAs) - Right to depart from the MFN principle in order to grant preferential treatment to goods (GATT 1994) or service suppliers (GATS) from trading partners within a customs union or a free trade area without extending such treatment to all WTO Members; Balance-of-payments (BOP) – Right to take measures to safeguard a Member's external financial position and its BOPs; and, Waivers - Temporary waivers granted with the authorization of the other Members, in exceptional circumstances.

MFN exemptions

300

The concept of _________ is a rather simple one. In the context of binding tariffs and setting rates, minimum access is the theory/concept that each member country has a minimum level of access to a market in a particular country, and that is how tariffs are set. This ensures that the playing field is leveled when a new market is opened. Essentially the tariffs are bound in amounts that will ensure this policy is met so that each member state has a minimum level of access to the market with any other member.

Minimum access

400

The ________ is the highest authority of the WTO. It meets every two years and can make decisions on all matters involving any multilateral trade agreement. It essentially the highest decision making body with the WTO since the WTO belongs to all the members. This body is comprised of financial ministers and leaders from all member states. They are often labeled by where they took place, such as the Singapore Ministerial Conference, the Singapore Ministerial Conference, etc.

Ministerial Conference

500

_______ are the simply the way, or “mode” in which something is done. The ________ are the “how” to the “what”. Take the reduction of tariffs. The Reduction of tariffs become the “what”, and the “how” then becomes how member states will lower tariffs and so on. This is a ______. Within the context of the WTO, modalities are often flexible and allow for some deviation from formulae so as to deal with unforeseen consequences and items that arise, as well as closing unforeseen loopholes and other items not known to exist that slow down the implementation of the “how”, or lowering of tariffs

Modalities

Word-->Definition

100

Multilateral trade negotiations

Multilateral Trade Negotiations are simply trade negotiations that take place between many countries the same time. In the context of the WTO, they are basically the different conferences and rounds that lead up to the creation of the WTO and include: 1st Round: Geneva Tariff Conference, 1947 2nd Round: Annecy Tariff Conference, 1949 3rd Round: Torquay Tariff Conference, 1950-51 4th Round: Geneva Tariff Conference, 1955-56 5th Round: Dillon Round, 1960-61 6th Round: Kennedy Round, 1963-67 7th Round: Tokyo Round, 1973-79 8th Round: Uruguay Round, 1986-94 Each round had a different agenda and/or had a significant accomplishment, but again, the general idea is that an MTN is nothing more than a negotiation taking place with many countries being involved.

200

Multilateralism

What is Multilateralism In the strictest terms, multilateralism means “a lot of laterals”. This essentially means that multilateralism is any kind of arrangement, meeting, etc that involves a great deal of countries. There is a marked difference between multi and plural literalism, as multi means a multitude, or in some cases, the majority.

300

Multilateral trading system

Multilateral trading system This is a trading system in which the above principle of multilateralism is applied to trade. This is the foundation of the WTO and its many principles work to ensure this. The basic idea behind a multilateral trading system is that each member can contribute to it and trade within it, without severe restrictions to entry. The system is established by rules and principles, the very same principles which guide the WTO and it’s every day operations.

400

Plurilaterialsm

Plurilaterialsm This concept is the half step between bilateralism and multilateralism in that it involves many countries, but not a significant portion. This is similar to regional blocs and the concept of them, but doesn’t necessarily have to be based on region. It is simply the idea that a few countries work together rather than a majority. Some experts define it as more than two, but less than 50% of all countries, but there is disagreement in this regard. The important thing to note is that it is more than two countries working together, but not a significant number as to be considered multilateral.

500

National Treatment

National Treatment is the extension of the MFN concept into TRIPS. According to the WTO online glossary The principle of giving others the same treatment as one’s own nationals. GATT Article 3 requires that imports be treated no less favourably than the same or similar domestically-produced goods once they have passed customs. GATS Article 17 and TRIPS Article 3 also deal with national treatment for services and intellectual property protection. What is

Trade blocs/regional Agreements

100

NAFTA

NAFTA, or North American Free Trade Agreement, is a plurilateral agreement between Mexico, the U.S. and Canada that facilitates free trade and flow of goods between the three countries. NAFTA saw a significant reduction in tariffs between the U.S. and Mexico, but many tariffs between the U.S. and Canada were already reduced because of a previous free trade. There are a few key provisions which remain controversial to this day, including chapter 11 and chapter 19. Chapter 11 is controversial because it allows corporations or individuals to sue the U.S, Canada, or Mexico when it believes their actions have violated international law or that the actions of the countries cause them undue harm. This partially gives individual persons or corporations the same power level as a country. Chapter 19 is controversial because it allows for disputes of anti-dumping and countervailing duties within NAFTA to be decided by an international tribunal, whereas previously they were decided in the highest trade court of each individual country.

200

MERCOSUL

MERCOSUR (Mercado Común del Sur) Spanish for “market common on the south” is a quasi regional trade bloc with the Argentina, Brazil, Paraguay, Uruguay, and Venezuela. The goal of the organization is to promote free transit of produced goods between the member countries, setting a common external tariff for good transfer between a member and nonmember, coordination of macroeconomic policies, and promises made to strengthen the common market shared by all countries which allows the free flow of labor amongst them. This organization was founded upon the Ascuncion treaty. It has a two part structure—Common Market Council and Common Market Group. The common market group is the executive body, while the common market council is the highest body with the authority to actually conduct the policy made by the market group. One of the goals of creating MERCOSUL was to balance the activities between other regional blocs, like NAFTA and the EU. It has had setbacks with things like the collapse of the Argentinian economy in 2001, but still remains a potent force in economics today.

300

SAARC

SAARC Similar in design to MERCOSUL, this is a regional bloc designed to facilitate trade and make economic cooperation in South Asia that much easier. It is comprised of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. It is similar to MERCOSUL in that is made up of countries in a region that share a common economic interest due to similar agriculture, geography, etc. It has granted observer status to several countries, including the USA, China, Australia, the EU, Iran, Japan, Mauritius, Myanmar ,and South Korea.

400

SELA

Another regional block compromising most of Latin America. Excerpt from Sheldon Liss “Diplomacy and Dependency: Venezuela, the United States, and the Americas” (1978)- SELA, composed of twenty-five member states, and to which Venezuela contributes the largest share (17 per cent) of the budget, hopes to: restructure international commerce in basic commodities in order to raise developing states' export values, improve trade conditions, stimulate industrial development, control foreign-based transnational corporations, create Latin American multinational companies which will use to better advantage the human, technological, and financial resources of the area, sponsor organizations to process and market raw materials, improve the negotiating power of the member states, and plan joint economic strategies. SELA members deem it likely that Venezuelan oil wealth will permit them easy access to petrodollars for use as finance capital.

500

Tokyo Round

Tokyo Round A round of the GATT that took place from 1973 to 1979 that included 102 countries. It was essentially a “test run” for the WTO and included talks about tariffs, non-tariff measures, and “framework” agreements. The amount of tariffs reduced was approximately 300 billion. It did not include items like TRIPS, textiles, etc, which were included within the Uruguay Round. The Tokyo round was an important step in the creation of the WTO and is one of many rounds since 1948 under GATT.

Tariffs/Barriers to Trade

100

TBT (Technical Barriers to Trade) 무역에 대한 기술장벽 Technical Barriers to Trade Agreement 무역에 대한 기술장벽에 관한 협정 Technical Barriers to Trade Committee 무역에 대한 기술장벽에 관한 위원회

This agreement is an agreement founded under two principles—the first that differences in things mentioned above (safety procedures, etc), should not be a hindrance to international trade. The second principal is that WTO members must be able to protect human health, the environment and other items as they see fit. Keeping that in mind, the first set of rules in the agreement deals with the adoption, application, and enforcement of technical regulations, while the second part of the agreement deals with “standardizing bodies” which oversee this process. TBT committee Another WTO committee that deals with a specific issue, in this case Technical Barriers to trade. They are meet every three years and review the agreement. In addition, they are able to call in an independent panel of experts to help settle disputes that arise in regards to TBT issues.

200

Sunset Clause

A clause within the safeguards agreement that sets a time limit on safeguard actions. This basically means that once a specific amount of time has passed, a country can no longer take safeguard actions

300

Tariff cuts/Formula to cut tariffs

Tariff cuts The process by which tariffs are reduced under GATT and the Uruguay Round. Under the general principles of the WTO and it’s guidelines, a reduction of tariffs is a good thing and the WTO strives to implement lower tariffs among member states to keep with the idea of freer trade amongst member states. Formula to cut tariffs These vary from state to state due to economic factors within each individual state, but the general principle remains the same. Here is an example of Switzerland From the formula, Z=AX/(A+X), as the initial tariff X rises to infinity, X/(A+X) approaches 1, resulting in Z=Ax1. X being the initial tariff, A being the coefficient and maximum final tariff rate and z being the output of a lower rate. These equations vary from member to state and the variables also change but the general idea remains the same—the output, or Z will be lower, which in the end result is a reduction in a tariff.

400

Tariff Escalation

Tariff escalation Process by which tariffs escalate (go up) the further a country goes into the processing of a good or material. Higher import duties are imposed on semi-finished products than on the raw materials themselves, so domestic production of a product is encouraged, rather than where the raw materials to make such said product originates. An example would be limestone. For this example, Canada has a large limestone deposit, and the U.S. does not. The U.S. wants to use the limestone to make roofing tiles. The U.S. would then impose higher tariffs on everything but the limestone, thus making the limestone easier to get in the U.S. The U.S. would use the limestone to produce its own roofing tiles rather buy Canadian produced ones. The U.S. would impose smaller tariffs on partially finished Canadian made roofing than on completed ones, and this would encourage domestic production.

500

Protectionism/Neo-Protectionism

Protectionism The economic policy by which a country protects competition between a good made domestically and an import. There are several key components:Tariffs, Import Quotas, Administrative barriers, Anti-Dumping Legislation, Import Quotas, Subsidies, and currency rate manipulation. Neo-Protectionism A new form of protectionism designed not to give parity between a domestically produced product and an imported one, but rather to give preference to the domestically produced one. The ways and means that this happens is similar to protectionism, but taken to an extreme. The basic difference between protectionism and neo-protectionism is that in protectionism, the intent is to make competition between imports and domestic production equal, whereas in Neo-protectionism, the domestic industry is supported much more than the import industry

WTO Structure/committees

100

Panel/Panel's report

Consists of three to five experts in particular field to deal with a dispute. During a dispute the panel meets, summarizes their findings, and issues their recommendation to the WTO. There is a process by which this happens. It is found on page 55-57 of the text "Understanding the WTO", here https://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf) The report is issued by the panel can then become a ruling and be final within the WTO, but only after there is time by both parties involved within the dispute to contest it.

200

TRIPS (Trade Related Aspects of Intellectual Property Rights

This is an agreement that is large scale in structure and played a massive role in the WTO rounds. At its core is the idea that intellectual property is a property that should be protected under the WTO. The basic principles of MFN and transparency are also applied here. The TRIPS agreement is an agreement of minimum standards, and actually encourages member states to set higher standards in regards to intellectual property rights. The outline of the agreement is in regards to MFN and transparency as well, meaning that the rules that use MFN as a basis are also in effect here. The copyright standards for the TRIPS agreement came from the Berne Convention and basically spells out the rights that authors of computer programs have. It also spelled out a few “moral rights” to the creators of intellectual property, such as they be named as the creator and ensures that their property isn’t mutilated. There are also provisions about trademarks, patents, geographical origins, integrated circuits and other items. The important thing to note is that the TRIPS was put forth in the same principles as the WTO—mainly MFN and transparency. The third part of trips spells out general obligations each country has under TRIPS, as well how rights holders to items hold people who violate their rights accountable. It also gives member states authority to enforce violations through civil and criminal penalties. Finally, one key provision is that border measures, or measures which are taken to stop the flow of counterfeit goods across borders.

300

TPR/TRPB/TPRM

TPR A report published every so often about the trade policies of member states. Large member states (US, Japan, Canada, EU) are published every two years, smaller member states every four, and developing countries every six. They are a cornerstone of the WTO principle of transparency. They are published so that the policy of each country can be open, clear, transparent, and readily available. TPRB Given that transparency is a cornerstone of the WTO, the TBRB meets regularly to review and monitor the TPR’s of each member country and issue them in a timely manner and body. TPRM This is “how” of the above mentioned gets done. It was changed under the Marrakesh rules in that it shifted from only a review of trade, but under recent rules, it has shifted to a review of trade in services and intellectual property. The mechanism stipulates that the four largest members get reviewed every two years, the next sixteen every four, and the rest of the member states every six, with special stipulations for developing countries.

400

Tarification/Tariff Peak/Tariff Quota

Tariffication Process by which all non-tariff measures are turned into tariffs. This is spelled out in the Uruguay Round, but the general idea is that other non-tariff measures that had previously been in place are changed to tariffs, and then gradually lowered under the WTO principles. Tariff Peak Higher tariffs on sensitive products put in with lower level tariffs. In an industrialized country, this usually means a tariff of 15% or more is generally a tariff peak. These “sensitive” products are usually exempt from tariff changing policies under the WTO due to their significance in livelihoods, food security, and rural development. Developed countries agreed to allow for a smaller cut in tariffs to these products for an expansion of quotas. Tariff quota Quantities within a certain quota are charged a lower rate than when they exceed that quota. An example of this would be rice. In this example we can use the USA and South Korea. Let’s assume the USA imports South Korean rice. The quota set by the U.S. is 45 thousand tons. Any rice imported into the U.S. from South Korea below and up to that 45 thousand tons is subject to a lower tariff rate. If the U.S. imports more than 45 thousand tons of rice, then the extra rice has a larger tariff imposed on it.

500

2008 World Financial Crisis

World financial crisis in 2008 세계금융위기 World Financial Crisis Often considered the worst financial crisis since the Great Depression the Global Financial Crisis of 2008 stems from massive deregulation, derivatives, subprime mortages, and inability to make assets liquid. There are many factors involved because the crisis was so massive, but they will be discussed. In the early 2000’s, the U.S. passed a series of laws that allowed for massive deregulation of the financial market, which lead lack of oversight by government officials. This lead many new investment schemes, shadow banking and many other items, but the important thing to rise out of this is the use of derivatives. A derivative is a financial contract whose value is derived from the value of that contract. Financial institutions within the U.S. started to issue them as mortgages. This is a difficult concept to grasp but essentially financial brokers sold other companies mortgages based on the value of their EXPECTED income in the future, whether or not that was actually true. To gain as many mortgages as possible, the banks issued sub-prime mortgages, or mortgages to persons who had less than ideal credit. This is typically defined as a person with a FICO score of less than 670. Mortgages are generally issued with terms that are based upon the borrower’s ability to repay the debt, but with subprime mortgages, this was not the case, and mortgages for homes were issued without regards to this, and then sold off to people as a derivative, with the banks buying the derivatives thinking they could profit off the mortgages. The massive amount of mortgages being issued resulted in a property bubble, which then burst, and lead to decrease in liquidity. This was mainly within the U.S. Markets, but it soon spread globally as the U.S. is one of the most expansive economies in the world. To combat this, the U.S. and many other countries did two things—massive bailout packages to failing institutions like Bear Stearns, AIG, etc, and added regulations to the financial market to ensure that it didn’t happen. The financial markets stabilized quickly, and the globe isn’t in crisis mode anymore.