Carbaugh, Chap. 7 1

The US and international trade Smoot-Hawley Tariff Act (1930) Reciprocal Trade Agreements Act (1934)

“Most favored nation" (MFN) clause General Agreement on Tariffs and Trade

[GATT] (1947)

World Trade Organization (1995)

Trade regulation

Carbaugh, Chap. 7 2

GATT - Postwar trade liberalization Principle of non-discrimination:

"Normal Trade Relations" treatment equal treatmt

National treatment of imported goodsSame safety & health standards for imports as home goods

Trade dispute resolution Use tariffs rather than quotas

Trade regulation

Carbaugh, Chap. 7 3

GATT - Postwar trade liberalization (2)

Forum to reduce tariffs and NTBs Kennedy Round (1964-67) - first multi-lateral

negotiations; CUT TARIFFS Tokyo Round (1973-79) – Lower NTBs

Uruguay Round (1986-93) – New areas: Intellectual property, services, agriculture Included developing nations

Trade regulation

Carbaugh, Chap. 7 4

GATT becomes WTO, January 1995

Members must adhere to all agreements negotiated under GATT (not pick and choose)

Covers trade in goods, services, intellectual property and investment

Strengthens GATT's dispute-settlement mechanisms

Trade regulation

Carbaugh, Chap. 7 5

Controversy over WTO

Infringement of national sovereigntyEnvironmental protectionOpposition to "globalization"

Trade regulation

Carbaugh, Chap. 7 6

US “trade remedy” laws Escape clause steel tariffs Countervailing duties – offset foreign subsidies

Canadian lumber Anti-dumping duties Unfair trade practices Banana wars/retaliation Protection of intellectual property – hi tech piracy Trade adjustment assistance

Trade regulation

Carbaugh, Chap. 7 7

US “industrial policy” Broad policies to foster economic growth Aid to targeted sectors

Agriculture, ship-building, energy, technology, manufacturing (autos, for example), etc.

Tariff protection of declining sectors Export promotion and financing

Export-Import Bank Commodity Credit Corporation

Knowledge based growth policy

Industrial policy

Carbaugh, Chap. 7 8

Economic sanctions Trade sanctions Financial sanctions Success of sanctions depends on:

Number of nations imposing sanctions Nature of ties between target and imposing

nations Extent of political opposition in target nation Cultural factors in target nation

Trade regulation