IB Econ Study Guide Internationals - Sunny Hills High School

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Anti-dumping duties
. Domestic firms may file a complaint that foreign firms are . Often, firms file such claims only to buy time to
dumping their goods in their market, i.e. selling at below restructure and hopefully become more efficient.
unit costs. A duty (tax) is automatica ly imposed that
raises the foreign firms price until the issue is investigated
and resolved by the World Trade organization.
Why have calls for
A growing number of developing countries (especially advantaqes it may lead to calls for protection for domestic
in South East Asia and lately China and India) have
industry l\y'ajor trading countries, most notably China,
achieved rapid, export-led groMh. Export success by
these countries means deep impori penetration in Europe
are accused of maintaining their currency arlificially
undervalued to render their products even cheaper In
and the US. Protectionist response is expected from those
groups most affected.
foreign markets.
. Rising unemployment has always been a reason for
Large trade imbalances between large trading nations
(most prominent example being the Us-china case) have
increased protectionism. Recessions and unemployment
always put political pressure on governments to limit'job
strained relationships between these countries and have
led to various protectionist measures.
Exchange rate instability has added risk and uncertainty to
trade and since it can lead to sudden shifts in comparative
threatening'imports.
Economic integration and trade liberalization
Globalization implies greater interconneqtedness of countries in the world. This grealer
interconnectedness is also expressed in the area of international trade. Economies are
becoming more open, meaning that the size of exports and imports as a proportion of GDP
is increasing. The volume and value of annual trade flows has been rislng in the past decades
as a result of trade liberalization.
Trade liberalization, defined as a process of reducing or even eliminating trade barriers, may
be achieved through the multilateral route or on a bilateral (more generally, regional) basis
Trade liberalization
Thls refers to the reduction and elimination of
protectionism resulting from membership in the World
Trade organization (WTO).
The WTO was set up in 1995 and has 148 member
countries, replacing another international organization
known as the General Agreernent on Tariffs and Trade
(GATI. GATT was formed in 1948 when 23 countries
signed an agreement to reduce customs tariffs.
The WTO is an international institution aiming at
promoting free trade by persuading countries to abolish
import tariffs and other barriers. lt has become closely
associated with globalization. ll ensurcs that trade rules
are adhered to, it selties trade d/sputes between countries
and it organizes trade negotiations. \MO decisions are
fmai and every member must abide by its rulings. So,
when the US and the EU are in dispute over hormonetreated
beef, it is the WTo which acts as judge and jury
WTO empowers its members to enforce its decisions by
imposing trade sanctions against countries that have
broken the rules.
The WTO is criticized on several grounds. lt is accused
of being controlled by the rich nations, especially the
US, and that it does not sufficiently consider the needs
and problems of the developing world. For example,
agricultural products from developing countries do not
have free access to the US market but the US insists
that the poor open up their markets to US goods and,
especially, services. lt is claimed that it is too powerful,
trying to force nations to change policies, laws and
regulations by declaring them in violation of its rules. lt
is charged that it does not consider the possible adverse
effects of trade liberalization on workers, the environment
and health, or child labour. Lastly some consider that it
lacks transparency in its decision making on trade disputes
as it is closed to the media and the publlc.
On the other hand, even if the benefits of freer trade
have not been shared equally, many believe that the trade
liberalization efforts of the WTo have improved living
standards across the globe.