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MEM
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- 1Mulitlateralism vs . regionalismPositive
Negative
Multilateralism
More comprehensive in scope
Global reach (more countries
negotiating)
Systematic dispute settlement
More binding in commitments
since agreements reached by
consensus
Protracted negotiations
Negotiations on the
Spaghetti bowl because of
rules
of origin
Exclusivity (could block accession)
may collapse if
countries refuse to give in
Power game (qualified
majority
voting) - 2MultilateralismPositive>
More comprehensive in scope
Global reach
Systematic dispute settlement
more binding ind commitments since agreements reached by consensus
Negative
Protracted negotiations
Negotiations may collapse if countries refuse to give in
Diverse agenda on the negotiationg table - 3Regionalism|Positive>
Domino effect can occur> More countries want to join
Less time consuming to reach agreements
Deeper trade reforms since member are like/ minded
Negative=
Spaghetti bowl effect can occur because rules of origin.
Exclusitivity which could block accession
Power game in qualified majority for example - 4WWorld Trade Organization
Only world body that deals with rules of trade between nation
Oranizises liberlization of trade
As of 2015 162 member states
All decision are reached by consensus
Place to settle trade disputes - 5What are the functions of the WTO World Trade OrganizationAdministering WTO Agreements
Forum for trade negotations
Handling trade disputes
Monitoring national trade policies
Providing technical assistance and training to developing countries
Cooperation with other organizations. - 6Structure of the WTOMinisterial Conference
Dispute Settlement Body, General Counci,Trade Policy Review body
Councils are suboridinated to General Council. These are Councilfor Trade inGoods
Council for Trade related Aspects
Council for Trade in Services - 7Ministerial ConfereneceTop level decision making body
The Ministerial Conferenece meets every two years
Firth Ministerial COnference held in Cancun mexico - 8General CouncilGeneral Council Is comprised of ambassadors and heads of delegation in Geneva. also officials sent from members capitals
They meet several time a year in Geneva
Acts as trade policy review body and dispute settlement body - 9Goods CouncilGood Council Service Counciland Intellectual Properties Council ]
report to the General Council
Administer all different agreements on GATT and GAT and TRIPS - 10Specialized working groups comittees and working partiesthey deal with special ares such as
trade and environment
trade and investments
trade and labor a
and accessionor membership - 11WTO secretariatThe WTO Secretariat
Is not involved in decision making
Porvides technical support to various councils
provides technical assistance to developing countries
provides analysis of world trade developments
explains WTO affairs tp public and media - 12What are the principles of the WTOPrinciple of non-discrimination
________Most favored nation MFN treatment (countries should not discriminate between its trading partners*
______________national treatment
treating foreigners and locals alike
Principle of recipropocity
Concession ,ade by parties should be balanced. Tariff concessions should dbe matched with tariff concessions.
Principle of fariness
The WTO ascribes to open fair uand undistorted competition.
It bans and discourages unfair trading practices such as dumping and export subsidies.
Also countries should be compensated for damage caused by unfair trade
Principle of predicitability>
This is done through binding mechanisms and transparency.
Binding mechanism countries when agree should bind to their commitments
transparancy trade rules should not be kept secret. - 13How did the WTO evolveGATT was predecessor of WTO>
Created in 1948 the GATT alongside Bretton Woods insittutions of the World Bank and The International Monetary Fund
The original concept was to create and ITO Interantional Trade Oganization as a UN agenct but not all ratified the Havana Charter.
GATT became only mulitlaterial instrument since 1948 and was formed. The WTO was finally formed in 1995 - 14What created the WTOThe Uruguay round in 1995
- 15What was the Uruguay RoundThe Uruguay Round took 7,5 years to conclude but included all trade issues
it included trade barries anti dumping subsidies investment measures etc. disupute selltment - 16Wf Doha round was a new round of Trade Negotiations
It was devoted To oursue trade opening
Strenghten rules and improve global governance
Developing
Iit adressed developing countries concern
access to medicines
trade related technical assiastance
Singapore isses, such as terade and competition poilciy - 17Dohan round agricultureDoha round 1994
1. Comprehensive negotiations aimed at opening up market access, reductions with export subsidies
special differential treatment for developing countries. - 18Doha round subjjectsAgriculture
Non agricultural goods
Services
Trips
Singapore issues - 19Doha round Non agricultural goodstariff cutting on all non agricultural products
reduction or elimination of tariff peaks high tariffs tariff escalation and non tariff barriers - 20DOha roundServices in services the doha round decided the liberaliyation of trade in services in subsequent rounds
- 21DOha round tripsPrimacy ofpublic health and access to medicines
extent deadline for LDCS to apply provisions on pharamceutical patens
geographical indication - 22Regionalismrefers to to negotioations made by goups of countries to liberalize trade among themselves.
- 23Regionalism ttwo integrationnegative integration
refers to to market integration by the elimination of barriers to trade in goods and services as well as mobility
Positive integration is
oolicy integration is harmonization of rules and creation of underlyning institutions. - 24Why do countries operate at regional level?Regional Domino effect, deepand fast
Multilateral trade negotiations take so much time for being reached.
Geographical proximity of countries facilitates cheap transport and communication
Existence of trade and cultural ties
Awarnes of each other sternght and weaknesses - 25What are reasons for regional integrationOptimize on use of limited resources
Promote specialization and division of labour
expand the size of the domestic market
achieve greater bargaining power in the world market
attract foreign investments
increase competitiveness of local frism
achieve economies of scale
benefit from technology transfer
enhance labor and capital mobility - 26What are obstancles to integrationPoltical Integrity Autarky Disparity of development size cultural heteregoeneity competition for the same product in the market
- 27Obstacles to integrationpoltical integrity
Loss of submission of independence to a supra national body
autarky assisting other memebers is contray to self sufficiency
Disparity of devlopment
gains will accrue to the more economically advanced members
size
fear of dominance from lager members
Cultural heterogeneity
Cultural differeces, language barrier differences in religious beliefs
Cometition for same products in world market
Other members are very competitors in the world makret for the same product - 28What are stages of Eocnomic IntegrationFree Trade Area
Customs
Common
monetary
Economic
Political
Freie Kuesse comme monet - 29What are the stages ofEconomic IntegrationFree Trade agreement Monetary Union
Countries abolish tariiffs among themselves but mantain own tariff against non members as in NAFTA
Common Market
A Custom Union is an FTA with the member states agreeing on a common external tariff for non members. West african Customs Union
Common market
A CU allows free movement of capital and labor like in the European single market
Monetary Union A MU uses a common currenct and common monetary policy
Economic Union
A EMU that has a common fiscal policy as well
A Politcal Union
An PU is an Economic Union that integrates furhter by harmonizing fiscal polciies and ratyfying a common constitution
Economic Union
Politcal Union - 30What are degreees of policy integrationUnification> eurozone with a comoon currenct common visa under schenger
Harmonization> Common standards and procedures like in cassis de dijon case, migration and customs procedures
Consulation> consulation with the constituents lobbying groups for directives regulations and decisions of Eu institututions
Information > information sharing e.g. tax evasion criminals and intelligence. - 31Regional approahc Stubling Bolck or building block?Stubling block.
if it leads to more exclusivity and countries are blocked from joining
if the union introduces trade policies that are WTO inconsistend, such as in the pyramid of preferecnes
Proliferation of crisscrossing FTAS lead to spghetti bowl effect
Building block
if it leads to more countries wishing to integrate
shallow integration leads to deeper integration later - 32What are growth triangelesGrowth triangles are localized economic zones that exploit complementaries between geographically conigious areas of differnt countries to gain a competitive advantage.
- 33Custom union theoryJaco Viner showed that custom union have contraciitctory effect on welfare due to trade creation and trade diversion
- 34Economic effect of integrationStatic welfare effect, Dynamic welfare effects
- 35Static welfare effectstrade creation vs trade diversion
would be immediate one off effects - 36Dynamic welfare effectsIs medium to long run. Economies of scale, learning effects and terms of trade effects
Factor price equation and increased technical progress - 37What are incidence of welfare effects in a custom unionCUS are likely to have increase in Welfare if.
1. Production structure is more complementary than substitutive. More diversidfiede would lead to more opportunitiees for specialization.Germany has apples and Spain raisin== Apfelstrudel
2. Size of the union. The greater the union the higher remains the likelihood to find a low cost producer
3. Level of intitial tarifs. Means the higher the level of initial or pre union tariff the greater the possibilit for trade creation
4. Initial cost differences. The smaller the differeces in costs of production between members and third countries the greater the lieklijood for trade creation
5. Transportation and transaction costs. The closer the countries are geographicallt the lower the transport cost of moving goods.
6.Felxibility adaptablilitz of the CU memnbers =. The greater the trade flows and economic relations between the countries before forming the Cu the greater the scope for integration - 38What are the gains in a CUincreased competition leading to greater technical efficiency
changes in efficiency as economies of scale are utilized in the course of integration
increased competition between firms erode market power
existence of more product varietes avaiblable to consumers
existence of more product variaetes available to consumers
learning and exposure to new technologies and - 39Dynamic effect Competition effectImperfect competition firms exercise market power to the extent that price extecd marginal cost
Increasing the size of the market economifc integration reduces the extent of monoply pricing practices - 40What are the effects of Custium union formationEconomies of scale. In pro
Internal ecoomies of scale are
exteranal econmcies of scale - 41What are other effects Price convergence Learning effectsPrice convergence effect
Goods makret integration shoudl ideallt lead to price oncvernce or same prices. for identical goods.
Custom UNion will lead to Price convergence. Cause less expensive goods can because of transport mobility travel and hence other member states lower their prices.
Learning effects
Benefits of technological learning and aharing of Rand D activities. Inculusion can lead to fortrunners draggin leggards - 42What are approahced to measure effects of Eu integrationEx ante est estimatation estiimate the future effects from a pre union sitatuion
==Cecchini Report
Ex ante is creating a fictious world whci his not clear.
Ex post evaluates the effects if integration after being in effect for a while. Single Market Review 1996=97 - 43cecchini report taurus mountaincecchini report analyzed integration in three ways.
empirical measurement of economic ipact of regulatory barriers and border controls
Measurements of dynamic effects of integration
Measurement of services of service liberalization - 44What were the main outcomes of the Ce Cecchini Report4,5 % GDP increase
6% reduction in inflation
1,5% increase in employment - 451996 Single market reviewThe single market review by the Eu had the main findings
Increased competition results in cost and price reductions and output expansion
Intrea Euriopean trade creation and no significant trade diversion occured
Significant price reductions in high tech sectors food and electrical sectors
Price convergence achieved - 46What are empricical approahches to measure trade effects of eu integrationresidual model
econometric model
=== Econometric gravity and analytical model
Computable general equilibrium model - 47Residual models of measuring trade effectshypothetical trade flows are imputed from existing trade flows by extrapolating developments that existed prior to creation of a custom union.
- 48Econometric model of Effect of EU integrationRegression analysis of integration indicators on trade and assessing their explanatoryy power
=Gravity models predict the level of bilateral trade flows GNP population geographical and PTAs
Analytical model estamtes trade flows had there been no integration using GDP and GNP consumption ration of domestic to import prices;. - 49Triangular framework For goods in the EUApproximation
Cooperation and harmoization of rules and procedures
Liberlization
Removal of tariffs and quotas, deciding on common external tariff
Regulation
Common policies in trade, competition, agriculture and coal and steel
Regulation - 50new regulatory strategy fod good integrationNon discrimination National regulation should not favour domestic over EU goods
Dasonville test. alle trading rules capapble of hindering movement of goods
mututal recognition goods that have passed the SHEC in one member state should have the same in other
Proportionality if an objective is pursued in national legislation regulatory obligation should be proportional to that objective
Bruder of proof burder of proof - 51What are barriers to free mobility of goods In pub mit physen stinchts nach fisc und technickphysical frontiers
technical standards
public procurement
fiscal differences - 52Barrier to free mobility of goodsPhysical frontiers
eliminating frontiers imlied either in liminating border check tariffs and
Technical standards are mututal recgonition replaced harmonisation of standadrds
Public procurement
tiny share of cross border pruches rule on tendering
Fiscal differences
Orginal concern was with indirect tax differences
more recent level playing concecern - 53Single marketSingle market has the advantage of factor mobility and freedom of capital and labor and services
- 54What are the effects of a Single Marketallocative and investment effect
Factor price qeualization effect
Growth effect
agglomeration effect - 55Effect of a single marketallocative and investment.
improved allocation of capital and labor whcih implies specialization.
Factor price equalization effect
Factor mibility will leead to equalization of wage and capital cost between member states
Growth effect
Creating single market is always improving the efficieny. the use of capital and labor. Increase in income ffrom improvement in the efficiency of the ise of capital and labour leasds to increase in savings which then is source of new investment
Agglomeration effect
Creating a single market leads to specialization. Craeating a single market will lead to locational specialization and concentraion of industries in urban center. - 56How is Growth being visualyedSolow growth model
states that Y=AK alpha Lbeta
Kapital and Labour input and A is a parameter resprenting technology/ - 57integrationproduces regional or geographically based specialiyation or location effects that may lead to cencerration of industries in the core or center and may widen disparities at the periphery
- 58agglomeration forcefirms prefer to locate in big markets to save transport and other costs ]]
- 59dispersion forceis the force described when firms will prefer to be in the smaller market. where there are few local competitors.
- 60What are the three freedomsFree movement of capital labour and services
- 61How did the three freedoms came aroundCapital mobility.
In 1988 Directeive for complete removal of capital control
1989 Second Banking Directive
19999 Financial Services Action plan to liberalize financial markets
Labor mobility
Each member state still has its own restrictions against third country national
-EU citizens are free to move under Schengen. White paper on harzmonized rules on third countries
Services mobility
2004 Directive to create Single Market for Sercieves. Financial, telecome, services.
-Removal of discrimitar requirement
Mututal recogniting of documents
Right to establish in antoher member state - 62Economics of a monetar y union What are theoretical appraches of a monetary unionOptimum currency Area
Philipps curve approach (Keynesian)
Game theory approacj
Seigneiorage approach (Monetarist) - 63What are theoretical approahces of a monetary un ionSeignior Opa Game mit philipp
- 64SeignorageIs the difference between money the value that it cost to produce it and the value it really has.
- 65Optimum currency area theorytOptimum currency area theory looks at the cost an benefits of monetary and establishes criteria for joining.
The criteria relate to
degree of labor and capital mobility
openess to trade
level od diversification
similiartiy - 66Optimal Currency AreaThepry OCA aruges that the optimal area for a system of fixed echange or a currency union is one that is highlt economically integrated
In Otipma Currency Area Theorty Economic Integration means high degree of the four freedoms or mobolity
of
goods and services
financial capital
workers and labor - 67What are the cost and benefits of the OCACosts are loss in sovereignt
loss of policy instruments such as exchange rate policy and monetary policy
The Benefits are exchange rate stability and elimination of transaction cost
bette price transparancy
smaller requirement
greater bargianing power
more exchange rate intervention
more indeoende of the central ban - 68Euroszone crususnow
- 69What is the crisis in EuoropeBanking crisis
Liquidity based
solvenct based
balance of payment crisis
currency crisi
growth crisis
Growth Crisis
Financial crisis - 70What are the crisis in EuropeBanking crisis> Bank run and panic. inability of banks to honor debts
Liquityz based not enough liqued assets
Solvency based Liablities exceed total assets
Debt criris Inability to pay back interest adn capital on external debt
Balance of payment crisi persistent current account deficit. depletion of innternational reserces
Currency crisis_ abrupt depreciation devaluation of the exchange rate
Growth crisis. Stubstantial drop in GDP which persists for 3 years of more
Financial ciris> Financial crisis is the loss of investor conficence trhough capital flight - 71Dual Gap analysisGap Analysis. The Process through which a country compares its actual perfomance to its expected performacen to se whether it is using its resources effecrivelt.
- 72How can we i dentify a crisis BergwerikUsually throug hindicator threshold
threshold indicator.
Absolute level
Deviation from trend. - 73Crisi in the 20 th and 21th century1928 Black Friday
latin American crisis in 1980s
Mexican crisis tequila crisis in 1994
Asian Crisi of 1997
Russian crisis of 1998 vodka crisi
Argentine crisi of 1999
Us financial crisis of 2007
Iceland crisis of 2008
UK ciris if 2008
Greek crisis of 2010
Protugal crisis of 2011 - 74What is co ntagon The big Lebowski was rurich cause of Rubrik cubes wasnt mentioned in the movie thoughCharacterisitcs> Is financial panic and creditor race to collect ahead of the other Transmission channels
Trade> One countrys devaluation of a countrys currency leads to the other counrt also to devaluate its currency if they are competing for the same export
Financial> Financial investor re evaluate their positions to countries of a region when one country is hit by crisis
Neigborhood or pure contagion> CHange in market esentiment of investors due to a counrty specific shock cause them to look for weaknessen
==rubin vase\
Antrade neighboorhood - 75what is pure contagion herd fgibt eine demo ein e info wake up call fuer mancheherd behaviour is when information asymmetry cause unifnfomred investoris to follow the leader in its investments in a crisis economy.
Information cascade Where an investor withdraws an investment in market similar to the crisis economy instead of indivudally.
demonstration effect. where re asses their exposures to other countries. because when one economy hits an economy treat other countires eqaully
wake up call. when an investor realisey other structural defects in another. economy brought about a crisi in other country because of
wake up call - 76What was and is the euorepean crisis in comparision to others>Typology of the crisis. Is Eurozone crisi is classified as debt crisis, particulry sovereign debt crisis.
.greek crisis is similar in magnitude and policy response to the argentine crisis.
Greek and Portugese crisis are similar because they both originate from the public sector and both involve external or foreign debts. - 77What were the orgigins of the eurozone debt crisis >main origin is neglet of the rules. adherence was too lax no credibility
France and Germany breached the SGP but were never sanctioned
Greece previous Governemnt presented false budget figures but no sanctions were established
Financial markets were ignored no bail out clause of the ECB governance and continued extending loans to peripheral eurozone memerbstates.
Failure of economic policies in perioheral euozone countires
Entry to EMU lowered interest rates of peripheral countries leading to
.=loan financed gov expenditures
=wages of private sector were raised
-revaluation of real exhange rates
-sense of wealth led to real estate property bubble - 78LAck of insurance mechanism in the ECB GovernmentBesides. No adherence to SGD there are reasons for fail
no lender of last resort facility
no supervisory function over commercial banks
False impression that if all eurozone members abided bt the sgp then eurozone would operate smoothly
Insurance mechanism is needes since capital is mobile and so financial markets are interconnected. - 79Should EU Bail out of GreecePro> Eu banks with exposure to Greece will be hit hard worsening the crisis
Could trigger domino or contagion effect towards Portugal Ireleand Italy and Spain
Need to restore global confidence in the euro. Stability of the Euro is priorit
Leftist government would regain pwoer
Negaive>
Taxpayers acrooss EU shoulder the bail out for the mistake of the government
Fairness question as Ireland tackled its own ciris without any external helt
Bail out creates moral hazard. Governments will have less incentives for fiscal discipline if the know they woll be bailed out
Grece is free rider why save it
Poor working class ar tge ones who will pay for it - 80How can there be proposal for a more sustainable debt menagagmentrequires a lender of last resort
requires more quantitive easing ECB stan readt to buy more bonds issues
ECB become lender of lost resport it reinforces moral hazard and compromes indeoendece of the ECB
The ECB should prevent short terme liquity problems of banks
ECB invilvmen will make the debt fall under eurozone control
Debt restucturing
Debt conversion or swaps
Fiscal unin
Exit of eweak member states - 81What are other proposal for more sustanable debt maamagenemtCreation of European Monetary Fund
Idea is to have IMF like insitution withi euzone to handle cirsis and becomes ECB
Act as an insurance mechanism in case of sovereign debt crisis which is systemecaic in amonetart union
Moral hazard effect and duplication of IMF mandet
ECB needs to print money and deposit the proceed with the IMF
Issuance of eurozone bonds to replace national governement bonds
Debt relief or debt forgiveness - 82What is the enlargment policy of the EUArticle 49 of the TEU states that a European State which respect the principle set out in article 6 may applky to become a member of the umnion .
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