Impact and Implications of International Trade Agreements

Imp twist and Implications of foreign barter organizationsIt alike requires from its signatories to extend most-favoured-nation (MFN) status to archean(a) trading partners participating in the WTO. MFN status means that each WTO process receives the same tariff treatment for its goods in foreign markets as that tout ensemble-encompassing to the most-favoured rude competing in the same market, and in resolution eliminating any thinkable preferences or discriminatory activities.In 1995 the GATT became the in nary(prenominal)ationion Trade Organization (WTO), which now encompasses to a greater extent than 140 member countries, oversees four substantial supranational shell out systems the GATT, the General balance on Trade in Services (GATS), and organisation on exchange-related intellectual property rights and clientele-related investing, which are c everyed respectively TRIPS and TRIMS. Further more than, GATT permits the formation of relieve shell out field of battles and customs fraternitys among WTO members. Free great deal areas are characterized by evacuation of all of tariffs on change over with each of the member countries, with simultaneously remain autonomous in basis of determining their tariffs with non-members. One of the examples for much(prenominal) an area is included in the objectives of European Free Trade Association (EFTA), which is undisturbed primarily of Scandinavian countries.A customs union constitutes a assembly of countries that eliminate all tariffs on administer among themselves exactly maintain a common external tariff on trade with countries outside the union. A good example of a formation of a customs union was the European Economic Community (EC) that came into force with the Treaty of Rome sign in 1957 by France, Ger umteen, Italy and the Benelux. The Treaty brookd for the establishment of a common market, a customs union and common policies1. Nowadays it is known as the European Union (EU), it includes twenty-seven European countries and it has g unity beyond s need reduce barriers to trade among member states and forming a customs union. EU has achieved its greater stinting integration by enough a common market, which coordinates and harmonizes each countrys tax, industrial and agricultural policies. Many members have as well as form a single currency area by replacing their internal currencies with the euro.Nevertheless, many trade agreements not including duty reduction schemes are by and by on completed with the objective to ar wander an FTA in the future. In grimaces of agreements including non WTO members, it is unremarkably specified in the agreement that MFN rates impart (continue to) be applied. Among many agreements without duty reduction schemes we can enumerate, for instance, the already mentioned Bilateral Investment Agreement ( crisp), which set forth actionable standards of conduct that applies to the nations governance in their treatment of fo reign investors, including i.a. fair and equitable treatment, protection from expropriation and hand somewhat transfer of means with full protection and security2. The amount of signed BITs has been constantly increasing, since 1990s from 446 signed agreements to over 2500 active BITs in 2007, according to United Nations Conference on Trade and Development (UNCTAD)3. To former(a) agreements without duty reduction schemes we can include Foreign Investment and aegis Agreements (FIPA), Economic Partnership Agreement (EPA), Trade and Investment Framework Agreement (TIFA), Economic Framework Agreement, or Partnership Cooperation Agreement.The suppuration trend of write planetary trade agreements is irreversible in any region of the globe, and is becoming a dominant factor influencing immensely all of the world(prenominal) scotch relations nowadays. The more of them are signed, the more urgent the take to quantify their actual contact. Thus, it is crucial to correctly evaluate t he potential impact of the agreements, oddly during theirs negotiation configuration. In the recent years in that location has been a full-size demand for impact assessment studies of trade agreements, both before and afterwards negotiations. Conducting solid studies concerning their impact is considered to be peculiarly grievous for developing countries, because they need to adjust their policies in a way to diminish or totally avoid the practical negative takes and maximize potential benefits. Nevertheless, completed impact assessment methodology it is not easy from the technical allude of view, mainly because of the lack of frugal theories which specialize in developing countries. Thus, collectible to insufficient appropriate knowledge and support, it is trying for the governments of developing countries to conduct a relevant policy from the economical studies4.Furthermore, in conducting an impact assessment analysis of the planetary Trade agreements it is impo rtant to be able to evaluate all of the potential gains, difficulties and implications. Economic possibility since the middle of the 18th century has implied legion(predicate) advantages in lowering tariffs for most parties in most events, and economists view the cargo to trade easiness as a welfare-maximizing pursuit. The main gain from trade was considered to derive from specialization on the basis of comparative advantage. Income is considered to be growing more speedyly in countries open to multinational trade than in those more closed to trade. This phenomenon is dramatically illustrated in Chinas rapid growth after 1978, and Indias after 1991. These dates indicating when major trade reforms took placement in those countries5.However we have to keep in mind, that although trade relaxation in the form of international trade agreements may contribute to the boilers suit national welfare, it is also responsible for disruptive consequences within societies by producing lose rs and gainers, much(prenominal) as import-competing industries and consumers respectively. Besides economic gains and losses, trade agreements also provide important political outcomes to the parties involved, as a consequence of facilitated international cooperation, institutionalized rules of reciprocity, observe and enforcement.It is curiously important in terms of conducting impact assessment analyses of trade agreements for developing countries as I have previously written, for which they constitute an important institutional context within which they can build up their coalitions and purify their bargaining position in the global market. Moreover, developing countries prefer more defined rules and greater enforcement capacity. The main reason for this is the fear of marginalization or peripherality, namely the inability of developing countries to take advantage of trade free-handedisation and emerging as full players in the international system6. Due to their internatio nal as well as domestic weaknesses, usually caused by their compound past, these countries are more of the rule-takers rather than agenda-setters. As an illustration, countries like Brazil and India despite fetching part in many negotiations they have repeatedly complained nearly their concerns being disregarded. The same applies to smaller developing countries which have found it difficult to even take part in key decision qualification meetings.In addition, there even exist a phenomenon called Third valet Schizophrenia, which was used by Mohammed Ayoob in his article The Third World in the organization of States Acute Schizophrenia or Growing application?7 It illustrates the behaviour of developing countries trying to take about systemic changes and aiming at adjusting to an international order, but as a egress of their vulnerabilities and their past they also have the incentive to preserve the existing system of rules that ensures their very survival. As a consequence of these two pressures, decision-making centres of these countries are faced with conflicting demands, and hence this situation is referred to either as schizophrenic, or similar to the growing attention of adolescence.International trade agreements and the liberalisation process that follows them, besides being economically beneficial, it is also very often politically feasible. Due to the fact that some countries are legally binded by multilateral trade organizations and agreements, their lack of allegiance may have punitive consequences of various types, depending on the nature of the agreement and its enforcement mechanism. Thus, governments tend to hide behind the possible consequences of lack of obedience that could range from the international disapproval to compensation of all the costs incurred as a result of this countrys actions. By claiming that their international commitments bind them to act freely, they are able to justify especially unpopular actions that are suppos e to have longer-term benefits, and not solely in trade manners. This is why many of the programmes of economic and restructuralization reforms from the 1980s and 1990s, in particular those involving both controversial and possible distributive consequences for the society, were hidden in the shadow of international economic agreements and organizations8.Thus, it comes as no surprise that historically, countries have been reluctant to reduce trade barriers and earnest to raise them, even though the classical trade theory states that gains from trade accrue to any country that lowers their trade barriers, irrespectively of what other countries do. Despite this call up of economic benefits coming from free trade, many states have chosen the caterpillar track of protectionism throughout history. An example can be found in the case of the Great Depression period, when following the stock market crash of 1929, the US Congress adopted the Smoot Hawley Tariff Act in 1930 that raised US tariffs to an average of nearly 60% affair9.Explanation of this behaviour comes from the economic theory and the notion of optimal tariff, which tells us that it may be in the interest of a medium-large economy to restrict trade at a certain optimal level, as it go away be a change of the terms of trade in its favour. This obviously does not cod to small economies, for which liberalisation of trade or lack of it may bring different results, conditioned by many economic, political and social factors. For large economies this situation looks different, thus the optimal tariff may appear as a good solution to some of them. However, is it really an efficient one? The interpretation of this problem in terms of the game theory would imply that even though it is in each countrys interest to impose restrictions, the outcome of much(prenominal) action might be inefficient, especially in the long-term calculation. Once one large country will impose restrictions, the other might as well f ollow this behaviour, which would result in the overall decrease of global market efficiency and economic welfare. Thus, the best way of preventing such a mutually destructive situation from happening is by ensuring mutual reciprocity in trade commitments, which increases the economic gains as well as the output.In any case, mutual reciprocity being a foundation for most of the concluded trade agreements all over the world does not always guarantee their success. Multilateral trade agreements and organisations, such as the WTO, have been accused of inefficiency due to the problem with maintaining and extending the liberal world trading system, slow pace of trade liberalisation negotiations, and wanting(predicate) requirements for consensus among the members, which immensely limits the possible scope of reform of trade agreements. Moreover, some sectors such as trade in agriculture, textiles and apparel have not experience any significant cuts in tariffs, and thus they had much les s success, especially in comparison with, for instance, industrial goods. According to UNCTAD data, non duty-free trade distillery faces an average tariff of about 7% in manufacturing and about 18% in agriculture.All these arguments have raised many concerns, and in consequence many countries have turned away from the multilateral process toward more advantageous agreements such as bilateral, or regional ones. An example of such an agreement is the North American Free Trade Agreement (NAFTA), which went into effect in January 1994. Under its terms United States, Canada and Mexico collectively agreed to phase out all tariffs on merchandise trade and to reduce restrictions on service trade as well as foreign investment over a decade10. Besides that there exist numerous trade agreements between particular countries, or group of countries, and their number is constantly increasing. It has been particularly observed in terms of Preferential Trade Agreements (PTAs). As of early 2014, th ere were more than 300 PTAs in force, about half of which also covered services. In 2013, almost half of world trade was taking place between countries that had signed a PTA and almost a trinity was regulated by deep trade agreements11.This increase in PTAs is more often than not attributed to the greater promotion of trade among the parties that are signing a PTA, but it is also a good alternative for countries when multilateral negotiations run into difficulties. Moreover, it contributes to the egress of competitive liberalisation, wherein countries are challenged to reduce trade barriers to keep up with the rest of the world. For instance, after NAFTA was signed and implemented, the EU aimed at signing an FTA with Mexico, in order to ensure that European goods would not be at a competitive disadvantage in the Mexican market. On the other hand, there are still many disadvantages associated with PTAs, such as discriminatory riddance of certain countries, or the inability to ref orm certain issues, such as agricultural export subsidies on the bilateral or regional level12.Predominantly, it appears that international trade is increasingly more regulated and influenced by policies and instruments reaching beyond tariffs. As of 2013, technical measures and requirements coming from free trade liberalization and international trade agreements regulated about two-thirds of the world trade13. Both multilateral and preferential agreements will remain the future of the global economy, shaping its flows and regulating the distribution of wealth. There will always be pressures to include more standards and regulations, and there will always be those that argue that such agreements serve the interests of international corporations and not regular citizens. Nevertheless, keeping in mind that free trade contributes to the transfer of technology and knowledge, which is especially important for the developing countries in terms of improved economic welfare, we can not si mply despise this concept without accurately evaluating all of its losses and gains. International trade agreements do provide us with a greater measure of certainty in international relations, and they do provide developing countries with one of the few safeguards that they have against the almighty high-income countries. However, it is safe to say that they will continue to generate controversy, and there will always be an intense public discussion surrounding them, and the impact they make.1 Europa, Summaries of EU legislation. purchasable from http//europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm. 6 January 2015.2 Legal Information Institute, Bilateral investment treaty. lendable from http//www.law.cornell.edu/wex/bilateral_investment_treaty. 6 January 2015.3 United Nations Conference on Trade and Development, Quantitative data on bilateral investment treaties and double taxation treaties. Available from http//unctad.org/en/Pages/DIAE/Intern ational Investment Agreements (IIA)/Quantitative-data-on-bilateral-investment-treaties-and-double-taxation-treaties.aspx. 6 January 2015.4 Plummer M. G., Cheong D., Hamanaka S., Methodology for Impact Assessment of Free Trade Agreements, Asian Development Bank 2010, pp. 7-9.5 Library of Economics and Liberty, International Trade Agreements. Available from http//www.econlib.org/ program library/Enc/InternationalTradeAgreements.html. 6 January 2015.6 Narlikar A., The World Trade Organization A actually perfectly groundwork, Oxford University Press Inc., New York 2005, pp. 7-8.7 Ayoob M. The Third World in the System of States Acute Schizophrenia or Growing Pains?, International Studies Quarterly, vol. 33, no. 1, 1989, pp. 67-79.8 Narlikar A., The World Trade Organization A Very Short Introduction, Oxford University Press Inc., New York 2005, pp. 6-7.9 Narlikar A., The World Trade Organization A Very Short Introduction, Oxford University Press Inc., New York 2005, pp. 3-7.10 Library of Economics and Liberty, International Trade Agreements. Available from http//www.econlib.org/library/Enc/InternationalTradeAgreements.html. 6 January 2015.11 Key Statistics and Trends in Trade constitution 2014, Trade Analysis outset (TAB), Division on International Trade in Goods and Services, and Commodities (DITC), UNCTAD Secretariat, pp. 10-11.12 Library of Economics and Liberty, International Trade Agreements. Available from http//www.econlib.org/library/Enc/InternationalTradeAgreements.html. 6 January 2015.13 Key Statistics and Trends in Trade Policy 2014, Trade Analysis Branch (TAB), Division on International Trade in Goods and Services, and Commodities (DITC), UNCTAD Secretariat, pp. 10-11.