Chapter 2 International and Regional Agreements Affecting Trade

Chapter 2 International and Regional Agreements Affecting Trade

The GATT and the WTO Principal objectives of the GATT/WTO: v Nondiscrimination: Members must be treated in the same way with respect to import-export duties and charges. v Trade liberalization: Sponsorship of periodic conferences to reduce trade barriers v Settlement of trade disputes v Trade in goods and services: The WTO rules were originally intended to govern trade in merchandise (primarily imports). The rules have, however, been extended to include trade in services and trade-related intellectual property.

The North American Free Trade Agreement (NAFTA) The scope of coverage for NAFTA includes: v Market access for goods: No discrimination in favor of domestic goods. Application of national treatment standard. Provides for gradual elimination of tariffs over fifteen years (except for certain agriculture products). Goods must be wholly or substantially made within member countries to qualify for preferential market access.

The North American Free Trade Agreement (NAFTA) (cont. ) v Market access to services: Application of national treatment standard. Provides for gradual elimination of restriction on services trade during the transitional period. v Investment: Application of national treatment standard, prohibition on the imposition of performance requirements. Exceptions made in the case of certain strategic industries such as energy (Mexico), cultural industries (Canada), nuclear energy and broadcasting (all three countries).

The North American Free Trade Agreement (NAFTA) (cont. ) Protection of intellectual property rights such as patents, trademarks, copyrights, trade secrets, etc. v Government procurement: Equal treatment to all member country providers for all goods and services procured by federal government entities (some exceptions apply). v Safeguards: Emergency actions (temporary) to protect domestic industry if a surge in imports causes serious injury to domestic industry. v Standards: No use of standards as a disguised restriction to trade. v Dispute settlement: Consultations, mediation, conciliation, etc. v

Preliminary Assessment of NAFTA v Overall increase in trade between members: Intra. NAFTA trade jumped from $304 billion in 1993 to $626 billion in 2002 compared to NAFTA’s trade with the rest of the world, which increased by only 42 percent (from $536 billion to $762 billion) during the same period. v Increase in the U. S. trade deficit: The U. S. merchandise trade deficit with Canada and Mexico has quadrupled since NAFTA. v

Preliminary Assessment of NAFTA (cont. ) v. NAFTA’s impact on jobs is uncertain v. Substantial increase in foreign investment in all countries

The European Union Major objectives of the European Union: v. To create free trade and a common external tariff among members v. To abolish restrictions on the free movement of all factors of production v. To establish common policies in the areas of transport, agriculture, competition, etc.