Transcript US Bureau of Economic Analysis

The Multilateral Trade
System
Lecture 17
Snapshot of U.S. Trade
How Much?
1998: $1,587.4 Billion Imports and
Exports of Goods and Services
1998 GDP $8,760.0 Billion
Openness: 18.1%
Source: Economic Report of the President, 2000
Top Ten Trading Partners
($U.S. Billions, August 2000)
Canada
268.9
Mexico
161.5
Japan
138.8
China
73.1
Germany
58
United Kingdom
55.4
South Korea
44.2
Taiwan
42.9
France
32.0
Singapore
23.6
Source: U.S. Bureau of Economic Analysis
Total: 898.4
Top Ten Deficits
($U.S. Billions, August 2000)
Japan
-54.0
China
-52.4
Canada
-32.9
Germany
-19.4
Mexico
-16.0
Taiwan
-10
Italy
-9.6
Malaysia
-9.2
Venezuela
-8.4
South Korea
-7.0
Source: U.S. Bureau of Economic Analysis
Top 9 Surpluses, 2000
($US Billions)
Netherlands
12.3
Australia
6.0
Brazil
4.5
Belgium
4.0
Hong Kong
3.2
Egypt
2.4
Argentina
1.6
United Arab Emirates
1.3
Panama
1.3
Source: U.S. Bureau of Economic Analysis
US Exports and Imports
($Million)
Exports
Imports
Aircraft
49,611
Motor Vehicles
96,888
Auto Parts
29,398
Crude Oil
50,662
Computers
26,715
Computers
49,173
Telecom Equip
24,381
Computer
Components
31,906
Computer
Components
20,811
Auto Parts
26,044
Motor Vehicles
17,060
Toys and Sporting
Goods
18,991
Piston Engines
12,388
Apparel
17,961
Source: U.S. Department of Commerce
Why Accept Hegemonic
Role?
Altruism: Created the Postwar Economy
Because it was Needed and No Other
Country Could.
Security: Created the Postwar Economy
Because U.S. Security Interests Necessitated
it (Liberalism).
Materialistic: Created the Postwar Economic
System Because American Economic Actors
Stood to Realize Large Benefits From Open
Trade and Stable Exchange Rates.
Why the GATT/WTO?
Mercantilism versus Trade Theory
 Trade Theory: Imports Good, Exports Bad.
 Mercantilism: Exports Good, Imports Bad.
Trade Liberalization Possible Only By Exchanging
Concessions—You Open Your Market to My Exports,
I Open My Market to Your Exports.
Anarchic System Makes it Difficult to Enforce Trade
Agreements (Prisoners’ Dilemma).
GATT/WTO Provide Enforcement Mechanism
 Rules Increase Transparency (Who’s Cheating?)
 Dispute Settlement Mechanism Provides Neutral
3rd Party to Examine and Resolve Disputes.
Three Principles of the
GATT/WTO
Non-Discrimination Embodied in Most
Favored Nation (MFN) (Article I)
Reciprocity and Progressive Tariff
Reductions
Domestic Safeguards
In 1994, the GATT Transformed in the
World Trade Organization (WTO)
The GATT/WTO Process
GATT Bargaining Rounds
Eight Rounds Between 1947 and 1994; 9th Underway
 Kennedy Round (1962-1967) is High Water Mark
of Tariff Reductions.
 Uruguay Round (1986-1993) Brings Institutional
Change (World Trade Organization).
Developing Countries Were Very Reluctant
Participants:
 Didn’t Believe That Free Trade Worked to Their
Advantage
 Believed GATT Bargaining Process Biased
Against their Exports
Consequences of the
GATT
1. Tariff Reductions
United
States
European
Union
Japan
1950
60%
60%
60%
1960
14%
14%
18%
1970
10%
9%
11%
1980
6%
7%
6%
2000
4%
4%
5%
2. Growth of World
Trade
World Trade, 1968-1997
$US Billions
6000
5000
4000
3000
2000
1000
0
68 970 972 974 976 978 980 982 984 986 988 990 992 994 996
9
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
3. Growth of Foreign
Direct Investment
Foreign Direct Investment Flows,
1975-1995
$US Billions
250
200
150
100
50
0
1975
1980
1985
1990
1995
4. Global Division of
Labor
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G F ma
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SwAu wa
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$US Millions
Largest Manufacturing Countries
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Distribution of
Manufacturing Production
North-South Shares of World Manufacturing
120
100
80
60
40
20
0
1953
1963
1970
North
1980
South
1990
1995
Distribution of LDC
Manufacturing
Rest LDC
30%
South Korea
13%
Brazil
12%
Philippines
1%
Hong Kong
1%
Malaysia
2%
Singapore
2%
China
12%
Mexico Thailand
4%
4%
India Indonesia
2%
3%
Taiwan
6%
Argentina
8%
North-South Distribution of
Foreign Direct Investment
102
Percent of Total
100
98
96
94
92
90
88
86
84
1960
1975
1985
North
South
1990
1995
Distribution of LDC FDI
China
19%
Rest LDC
31%
Mexico
9%
Thailand
2%
Hong Kong
3%
Saudi Arabia ArgentinaMalaysia
4%
4%
6%
Singapore
8%
Brazil
7%
Indonesia
7%
The Global Division of
Labor
Advanced Industrialized Countries

Comparative Advantage in Capital and Human
Capital Intensive Goods—Pharmaceuticals,
Computers and Software, Telecommunications
Systems, Aircraft.
Asian Newly Industrializing Countries

Comparative Advantage in Mature Capital
Intensive Goods—Steel, Semiconductors, Autos.
Other Developing Countries

Comparative Advantage in Labor Intensive Goods
(Apparel & Footwear; Assembly) and in Primary
Commodities.