This chapter details the history, politics, and recent trends and challenges of the multilateral trade system. The twentieth century witnessed a remarkable emergence of international institutions, and nowhere was their impact greater than in international trade. Following decades of depression and war, a global trading regime was initiated with the creation of the General Agreement on Tariffs and Trade (GATT) in 1947, which expanded steadily in both scope and membership through the twentieth century and culminated in the establishment of the World Trade Organization (WTO) in 1995. Underpinned by the philosophy that open markets and non-discriminatory trade policies promote the prosperity of all countries, and issued with a powerful dispute settlement mechanism, the WTO has been hailed as the most prominent example of cooperation between countries. At the same time, however, the WTO has been subject to internal and external criticism and now faces a number of difficulties.
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John Ravenhill
This chapter assesses regional trade agreements (RTAs). The number of RTAs has grown rapidly since the World Trade Organization (WTO) came into existence in 1995. Roughly one-half of world trade is now conducted within these preferential trade arrangements, the most significant exception to the WTO's principle of non-discrimination. Governments have entered regional economic agreements motivated by a variety of political and economic considerations. They may prefer trade liberalization on a regional rather than a global basis for several reasons. The chapter then reviews the political economy of regionalism: why RTAs are established; which actors are likely to support regional rather than global trade liberalization; the effects that regionalism has had on the trade and welfare of members and non-members; and the relationship between liberalization at the regional and global levels.
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This chapter explores the complex and multifaceted relationship between international trade and environmental protection. The global trade regime's normative principles, legal rules, and real-world consequences often contradict environmental governance. For example, there is tension between trade and environmental governance with respect to the commercialisation of endangered species, export of hazardous wastes, emissions involved in transporting goods, and patentability of living organisms. However, there are also synergies, which enable trade liberalisation and environmental protection to reinforce one another. For example, trade forces were key drivers in the reduction of ozone-depleting substances and the affordability of pollution abatement technologies. The chapter explores these conflicts and synergies by first discussing the literature that examines the positive and negative impacts that trade has on the environment. It goes on to look at the trade dimensions of various environmental regimes, and then environmental dimensions of the trade regime, within both the World Trade Organization and preferential trade agreements.
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Erin Hannah and James Scott
This chapter assesses the global trade system. It begins by looking at the debate over free trade and protectionism. The chapter explores the evolution of the multilateral trade system, with particular emphasis on the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), highlighting the centrality of trade liberalization and non-discrimination in contemporary trade relations. It then considers the debates surrounding the relationship between trade and development, particularly around how multilateral trade rules reflect unequal power relations, and the social consequences of liberalized trade. The chapter also reflects on the recent backlash against neoliberal trade and the ostensible turn towards protectionism in some parts of the world. Finally, it highlights the gendered nature of trade and how it affects gender equality.
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Wendy Asbeek Brusse
This chapter examines how the European Payments Union resolved the problem of currency convertibility and unlocked the potential of trade liberalization, thereby paving the way for the European Economic Community (EEC), which in turn spurred further intra-European trade. It first provides an overview of trade and payments before and immediately after World War II and goes on to discuss postwar approaches to convertibility and liberalization. It then considers the degree, speed, and commitment with which countries opened up their domestic markets to each other's exports under the Trade Liberalization Programme. It concludes with an assessment of Britain's efforts to join a wider free trade area with the members of the Organization for European Economic Cooperation.
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Sophie Meunier and Kalypso Nicolaïdis
Internal and external trade liberalization have together constituted the essence of European integration since the Treaty of Rome. Successive enlargements, along with the constant deepening of the single market, have turned the European Union (EU) into one of the world’s largest trade powers. The EU forms trade policy through a complex decision-making process, often contested politically, which allows it to speak on behalf of its members in international trade, and now investment, negotiations. This chapter argues that not only does the EU derive some inherent power from trade, but it has also long used trade as the backbone of its normative power, using its market access in order to obtain political concessions from its commercial partners. However, this role has been increasingly challenged by recent changes in the relative power and behaviour of the EU’s main trade partners and competitors, which have forced Europe to refocus its trade policy towards more traditional commercial objectives and to create new unilateral trade defence instruments. Through its goal of what is terms open strategic autonomy, the EU is trying to strike a delicate balance between remaining a force for liberalism and openness in the world while not being naive and taken advantage of. This chapter explores the determinants of the EU’s trade power and examines the contribution of trade policy to the power of Europe in the international system, both in the context of international trade agreements and in the broader framework of international relations.
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16. Trade Policy
Making Policy in Turbulent Times
Alasdair R. Young
This chapter introduces the importance of EU trade policy both to the European integration project and to the EU’s role in the world. It explains how different aspects of trade policy are made. The chapter also charts how the emphasis of EU trade policy has shifted from prioritizing multilateral negotiations to pursuing bilateral agreements. It considers how the EU has responded to the apparent politicization of trade policy within Europe and to the United States’ more protectionist and unilateral trade policy. It also considers Brexit EU trade policy and how trade policy complicated Brexit. It argues that there has been considerable continuity in EU trade policy despite these challenges.
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This chapter examines the European Union’s (EU’s) external trade relations in the context of the wider framework of global trade agreements, along with its related policies on development aid, particularly with the African, Caribbean, and Pacific (ACP) states. It first looks at the history of the EU’s trade and development aid, before discussing its contemporary external trade and development policies. It explains the workings of the common commercial policy, considers disputes within the World Trade Organization (WTO), especially with the United States, and explores the EU’s trading relationship with developing countries and near neighbours in the context of the European Neighbourhood Policy (ENP). It then considers theoretical explanations of the EU’s external trade and development aid policies, as well as criticisms of such policies. Analysis of the EU’s external economic relations brings to the fore a number of theoretical themes, such as the tension between nationalism and supranationalism, the complexities of bargaining within multiple international forums, and the dominance of particular ideas across different forums.
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Sophie Meunier and Kalypso Nicolaïdis
This chapter examines the determinants of the European Union's trade power as well as the contribution of trade policy to the power of Europe in the international system. It first considers how the EU acquired and expanded competence to represent the member states in trade policy, from the Common Commercial Policy in the Treaty of Rome to trade policy after the Treaty of Lisbon. It then provides an overview of the EU trade policymaking process before discussing the exercise of the EU's trade power. In particular, it explores the European single market and world trade liberalization, settlement of disputes in the World Trade Organization, and the EU's retreat from multilateralism. The chapter also looks at preferential trade agreements, along with bilateral and regional agreements, and concludes with an analysis of how the EU is resolving the tensions inherent to being a world power in trade and through trade.
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This chapter explores policy outcomes by looking at a number of European countries. It considers some salient policy areas, including those that are decided primarily at the national level, for example health, and policies that are determined at the more macro, European Union (EU) level, for example trade. It also looks at policy areas that involve shared decision-making across different levels of government, examples here include immigration and the environment. The chapter also focuses on the role of position-taking by political parties and other groups, such as interest groups and social groups or movements. It considers how these explain variations in policy outcomes.
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Suzette R. Grillot
This chapter discusses the international weapons trade. It first provides a historical background on the global arms trade and highlights the ways in which the trade in defence and military equipment has shifted throughout the years until the present day. It then examines contemporary trends in the weapons trade and how weapons are illicitly traded. It also shows how the illicit arms trade is connected to the legal arms market and concludes by describing various attempts that have been made in recent years to control the global arms trade, as well as prospects for its future regulation. Three case studies are presented to highlight the main issues surrounding the international weapons trade: the first relates to the use of man-portable air defence systems (MANPADS) in terrorism, the second involves arms broker Victor Bout, and the third deals with the non-governmental organization known as the International Campaign to Ban Landmines.
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Jennifer Sterling-Folker
This chapter examines the neoliberalist argument that international institutions promote international cooperation. While neoliberalism acknowledges that cooperation can be difficult to achieve in anarchic conditions, it insists that institutions allow states to overcome a variety of collective action impediments. The central concern of neoliberal analysis is how institutions do so, and how they might be redesigned to more efficiently obtain cooperative outcomes. This chapter considers three questions that are relevant for understanding neoliberal contributions: How did neoliberalism emerge? What are the barriers to international cooperation? How does neoliberalism study international institutions? The chapter uses the World Trade Organization as a case study to illustrate the importance of institutional design for international free trade cooperation. Along the way, various concepts such as interdependence, hegemonic stability, hegemon, bargaining, defection, compliance, autonomy, and principal–agent theory are discussed, along with the game known as Prisoner’s Dilemma.
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Suzette R. Grillot
This chapter provides an overview of the international weapons trade. A history of the global arms trade is offered, highlighting the various ways in which the trade in defence and military equipment has shifted throughout the years until the present day. The chapter outlines the ways in which weapons are illicitly traded and addresses the connections between legal and illicit arms markets. Finally, the chapter addresses the many attempts that have been made in recent years to control the international arms trade, as well as prospects for its future regulation. What emerges is a rather complex picture of the global arms trade that requires attention to numerous facets involving both weapons supply and demand.
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Robert Ahearne
This chapter examines the role of developing countries in the contemporary global economy. It first provides an overview of trends in the global economy, taking into account the implications of globalization for the developing world and the question of free trade vs protectionism. It then considers three key features of an increasingly globalized economy and their significance for the developing world: trade, foreign direct investment (FDI), and financial flows. It also discusses the role(s) of developing countries in global trade, the advantages and disadvantages of FDI, and two major components of the global economy that can cause serious economic disruptions: the buying and selling of currencies and stocks and shares in local economies, and the rapid movement of capital across borders. The chapter concludes with an assessment of factors that can reduce the economic well-being of countries in the developing world.
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This chapter addresses the intersection of international law and international politics as it relates to global trade. To study global economic governance is to study international law, international relations, and international political economy (IPE) all at once. The chapter begins with a brief introduction to IPE, a discipline which seeks to understand the workings of the global economy in its political context. It examines the relationship between economic globalization and state sovereignty, before turning to the construction of the postwar global economic order, with a focus on the Bretton Woods institutions. The postwar global economic order has often been described as ‘liberal’ by virtue of its underlying assumptions and the ideological convictions of its framers. Importantly, the postwar liberal order was built by, and for, the developed countries of the Global North-a fact that has informed critiques emanating from the developing countries of the Global South. The chapter then assesses global trade governance, analysing the structure, powers, and role of the World Trade Organization.
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Amrita Narlikar
This chapter examines India’s emergence as a key player in the World Trade Organization (WTO) within the context of its foreign policy. It considers plausible mainstream explanations for India’s apparent rise to power, including growing market size, changing ideology, and the role of domestic interest groups in influencing foreign economic policy. It suggests that India’s emergence as a major player in the WTO can be explained by its negotiation behaviour. More specifically, it shows that India’s rise in the WTO is a product of decades of learning to negotiate within the specific multilateral rules of the organization (as well as its predecessor, the General Agreement on Tariffs and Trade (GATT)). The chapter also considers some of the problems that India’s WTO diplomacy raises within the trade context as well as its broader foreign policy goals.
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Matthew Watson
This chapter explores important issues in the conduct of global trade and global finance. It asks why the global economy is so good at allowing some people to own untold riches while many others have too little money to meet basic subsistence needs, and whether the world would be better or worse off without the institutions of global economic governance. After discussing the globalization of trade and finance, the chapter considers the regulation of global trade and global finance. Two case studies are presented, one dealing with the ongoing trade war between the US and China and the other with the effect of tax havens on overseas aid budgets. There is also an Opposing Opinions box that addresses the question of how far the institutions of global economic governance currently go to work specifically to the benefit of developing countries.
Book
John W. Young and John Kent
International Relations Since 1945 provides a comprehensive introduction to global political history since World War II. The text has been comprehensively updated to cover the period between 2001 and 2012. Discussing the World Trade Center bombing and concluding with the run-up to the 2012 US presidential elections, a new final section outlines broad developments including the changing world order and the global financial crisis. Three new chapters look at terrorism, the wars in Iraq and Afghanistan, and the rise of major new powers, including China. Student learning is supported by a range of helpful learning features, including biographies of key figures and chronologies of events.
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Federico M. Rossi and Donatella della Porta
This chapter explores the relationship between social movements, trade unions, and transnational advocacy networks of resistance to non-democratic regimes in the global wave of democratization. It considers views from social movement studies within the democratization literature as well as views of democratization within the social movement literature. It also examines the diverse roles played by movements, depending on the type of democratization process and the stage in which mobilizations emerge (resistance, liberalization, transition to procedural democracy, consolidation, expansion). The chapter identifies a host of factors that produce the most favourable setting for democratization, including a non-syndical strike wave and/or a pro-democracy cycle of protest; increased political organization in urban areas, and a relatively dense resistance network; and the existence of pro-democratic elites able to integrate the demands for democracy coming from below (at least until transition is well initiated).
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Niklas Helwig
The EU’s ambitions to be a global power are a surprising by-product of European integration. Students of European foreign policy mostly focus on EU trade, aid, and the Common Foreign and Security Policy (CFSP). But the national foreign policy activities of its member states cannot be neglected. On most economic issues, the EU is able to speak with a single voice. It has more difficulty showing solidarity on aid policy but is powerful when it does. The Union’s external policy aspirations now extend to traditional foreign and security policy. But distinct national policies persist, and the EU suffers from fragmented leadership. The chapter begins by considering the development of EU foreign policy and then considers how a national system of foreign policies exists alongside EU policies in the area of trade and international development. It then examines the EU’s CFSP and Common Security and Defence Policy (CSDP).
