International Organizations Trade Economic Interdependence The WTO NAFTA

International Organizations Trade & Economic Interdependence -The WTO, NAFTA & EU March 25 th, 2003

Arrangements for Economic/Political Integration n range of options for integration trade (WTO & GATT) u trade plus (NAFTA) u political and economic integration (EU) u

Bretton Woods (1944) n history u era of freer trade prior to WW 1 « economic stagnation, collapse of world trade, Great Depression end of WW 2 – Bretton Woods central premise -- expanding international trade held the key to stable economic reconstruction u trade based on openness and currency stability fixed-exchange rate u world trade conducted in US dollars u based on US dollar backed by gold (1 oz gold=$35 US) u countries declared a fixed exchange rate (i. e. value of domestic currency in US$ u collapsed in 1971 u n n « US suspension of the gold standard moved the international market to a system of floating exchange rates (value of domestic currency determined by international supply and demand)

Bretton Woods (1944) n n central premise (importance of trade) and institutional infrastructure remains institutional infrastructure u World « Bank provides access to international capital markets by guaranteeing loans u International « Monetary Fund (IMF) oversee fixed (but adjustable) exchange rate system u General Agreement on Trade and Tariffs (GATT) facilitate freer trade on a multilateral basis « GATT rounds (multi-year periods of negotiations) « Uruguay Round, 1993 « • created the WTO (1995)

The World Trade Organization (WTO) n function – enhance trade builds on GATT framework u covers all of trade including manufactured goods, services, and intellectual property u designed to promote international trade and adjudicate trade disputes u

The WTO – Organizational Structure n organization of governments « « n member-driven various interest groups can only influence the WTO through their own government membership is voluntary « 145 member countries • China – December 2001 « n decisions generally decided by consensus « « n accession – must ask to join one member, one vote agreements must be ratified in national parliaments adjudicating disputes « « country expected to implement ruling with reasonable time period failure to implement within reasonable time period – must enter negotiations with complaining country to determine mutually-acceptable trade-related compensation no agreement on compensation – WTO authorizes retaliation WTO does not impose penalties above and beyond retaliatory actions that would be available to a country in the absence of WTO adjudication

The World Trade Organization n principles (self-declared) u trade without discrimination most-favoured nation (non-discrimination) « national treatment « u u freer trade predictability « u fair competition « u more stable business environment anti-dumping & subsidies encouraging development and economic reform progressive/flexible liberalization « special assistance and trade concessions for developing countries «

The World Trade Organization n Canada and the WTO u as complainant « US Dumping and Subsidies Offset Act « softwood lumber « asbestos u as respondent « Canadian Wheat Board

NAFTA – Trade Plus n Free Trade Agreement (FTA), 1989 u u Canada and US removal of almost all barriers to flow of goods and services between the two countries reduction of tarrif and non-tariff barriers (e. g. subsidies) « national treatment «

NAFTA – Trade Plus n North American Free Trade Agreement (NAFTA), 1994 u extended FTA to Mexico u limited differences between FTA and NAFTA « « « expanded to include intellectual property, medical services, etc. border crossing for business people side agreements • environment • labour standards « Chpt. 11 on investment • expropriation and compensation • provides rights to foreign investors that are not constitutionally guaranteed to domestic investors in Canada

NAFTA – Trade Plus n similar to principles enshrined under WTO plus. . . u u u investor protection cross-border mobility environment and labour side agreements

European Union (EU) – Economic & Political Integration n expansion – deepening and broadening integration u European Coal and Steel Community, 1951 « u European Economic Community (EEC), 1957 « « u six countries (Belgium, France, Germany, Italy, Luxembourg, the Netherlands) negative integration – absence of restrictions on movement of workers, goods, services Denmark, Ireland UK admitted, 1972 European Union, 1993 « positive integration – actively fostering integration • Maastricht Treaty, 1992 • Amsterdam Treaty, 1997 « 15 members currently • Greece (1986), Spain (1986), Portugal (1986), Austria (1995), Finland (1995), Sweden (1995) • 10 candidate countries (Bulgaria, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Romania, Slovenia, Slovakia, Turkey)

European Union (EU) – Institutions n legislative – shared legislative powers « Council of the European Union • ministers and heads of state of member countries « European Parliament • direct election n executive – European Commission u u n President and commissioners appointed by member states confirmed by European Parliament judiciary – Court of Justice

European Union (EU) – Economic Integration n single market u n free movement of people, capital (investment), goods and services monetary union « the Euro • comes into existence January, 1999 • banknotes and coins in circulation, January 2002 • national banknotes and coins withdrawn from use (February 2002) n common labour market « Schengen Agreement, 1985

European Union (EU) – Political Integration n political integration u common political institutions « u e. g. European Parliament common European citizenship freedom of movements « fundamental rights « civil and political rights « u common social citizenship (limited) « u access to social programs in other countries common currency money traditionally symbol of sovereignty « requires integrated monetary policy «

Implications for Domestic Democratic Systems n increasingly limits domestic policy latitude to what degree do democratically elected governments have the right to cede sovereignty in international agreements u to what degree can they make decisions that are binding on future governments? u n questions regarding citizen control and involvement in discussion over terms of trade e. g. WTO and the “Battle in Seattle” u what is the required level of citizen engagement? u « is involvement of democratically elected governments enough?

Main Points! n range of options for integration trade (WTO & GATT) u trade plus (NAFTA) u political and economic integration (EU) u n each set of options raises important questions about democracy