Int. Trade Policy (Lecture 2)

8/13/2019 Int. Trade Policy (Lecture 2)

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International Trade Policy:

Understanding Trade History

Deepanshu Mohan


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Lecture Outline Last weeks lecture on First Phase of Globalization and its backlash.

Trade History since WWII

Regional Integration

- Rebuilding Europe through deeper economic integration- The EU and other Regional Trade Blocs

- Regionalism vs. Multilateralism

Macroeconomic Tri-lemma

Institutions and Trade Policy

- GATT/WTO

- Trade rounds: A special focus on the importance of Tokyo round, Uruguay Round and Doha

Round.

- Understanding critical issues with the WTO and its Dispute Settlement Mechanism.- India and WTO


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Last Weeks Lecture Defining Globalization

First Phase of Globalization (1870-1914)

- The role of the Industrial Revolution (technological innovations like mechanized cotton

spinning, steam power, iron making etc. in pushing bilateral and multilateral trade from England)

- International monetary system: The Gold Standard and its first phase regulated by greater

central bank co-operation amongst countries and under the hegemon-Bank of England.

- Global peace and greater capital movement.

Globalization backlash (1914-1944)

- Protectionist Phase seen globally from WWI

- The rise of America over England as a hegemonic power

- The second phase of the Gold Standard (poorly regulated and managed in the presence of

the Fed.)

- The Great Depression of the 1920s

- Abandoning of the Gold Standard in the 1930s- WWII


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Source: Maddison (2001)

Trade History since WWII:

World Merchandise Exports/World GDP

0

2

4

6

8

10

12

14

16

18

20

1820 1870 1913 1929 1950 1973 1990 2000


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GATT and Average Tariff Cuts

Source: WTO published papers(2000)


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The Economic Impact of European

Integration

The research paper by Barry Eichengreen and Dolthoprovides us with a lucid, coherent counter-factualanalysislooking at the politico-economic impact of thepolicies undertaken as a part of the European

Unification that started after the WWII.

Europe after WWII was highly disintegrated andcountries like France, Germany and UK had pretty

much lost out on their international competitivenessowing to the greater level of trade protectionism andpolitical instability present in the region.


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Regional Economic Integration:

Rebuilding EuropeRegional integration is commonly viewed as

one of the leading processes shaping the

development of the European economy since

World War II.

Narrative Approach Considered

(Jean Monnet, Robert Schuman, Jacques Delors)

Key Events

(-the decision to form the European Coal and SteelCommunity or ECSC,

-sign the Treaty of Rome,

-establish the Single Market)

Underlying Forces

(the preference of export and banking interests for tradeand financial liberalization,

the acquiescence and even support of the United Statesfor European integration


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The importance of intra-European Trade:

(Share of intra-trade in total)

Year Intra-Western

Europe

Intra-Total

Europe

Intra-Americas Intra-Asia

Pacific

1938 52.2 61.4 33.3 -

1950 49.3 58.7 53.9 -

1970 67.3 73.9 46.9 35.1

1990 72.2 75.2 47.8 47.7

2008 - 76.6 57.2 50.1

Source: The Economic Impact of European Integration, B.Eichengreen & Doltho


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Research PaperResearch Question: How would economic outcomes have differed in the absence of the policies actuallyobserved?

Hypothesis: The ex-ante hypothesis was that the economic (as opposed to the political)impact of EuropanUnification has been limited)

The Policies Observed:

The European Coal and Steel Community

(based on the idea of supra-nationality)

The Common Market and the Common Agricultural Policy (CAP)

(following the Treaty of Rome to eliminate tariff barriers to foster intra Community trade)

European Monetary System(to stabilize exchange rates)

1992 Single Market Program

(the rationale was to enhance efficiency and stimulate growth by intensifying product and factor marketcompetition)

EMU

( formed in 1999 towards the formation of Euro)

As new growth models endogenize technical change, new political-economy models endogenize policies.


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Task

How has the European economic integration

as discussed in the research paper helped

countries within Europe to grow economically,

politically and socially?

A class debate on:

Regionalism vs. Multilateralism in International

Trade.

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Int. Trade Policy (Lecture 2)