Politics of World Trade

Faculty

OSHIMA, Shotaro
IWASAWA, Yuji

Credit / Semester / Schedule / Language

2 Credits / Summer / Friday Period: 5 / English

Objectives/Overview

At the end of the Second World War, a new international economic order based on multilateralism was created which was embodied in the institutions such as the IMF and the GATT.
This commitment to multilateralism reflected lessons learned from the 1930s where pursuit of narrow national interests based on protectionist motives worsened the international economic situation. The new system contributed in bringing about unprecedented economic growth in various regions of the world in the decades following its inception.
Over the years, this system necessarily experienced various stresses and made adjustments by transforming itself in various ways, such as the move from the fixed currency rate system to the floating exchange rate system under the IMF in 1973, and the creation in 1995 of the WTO.
In recent years, the world economy has seen further successes, such as demonstrated in the rapid growth of China and other emerging economies, but at the same time are experiencing serious tensions in the very foundation of the global economy.
An obvious example is in the area of trade policy.
While multilateral negotiations under the auspices of the WTO, or the Doha round, are still unable after ten year from its initiation to come to a successful conclusion, we are witnessing proliferation of regional and bilateral free trade agreements.
The questions before us, then, are: What is happening on the global scene with respect to trade liberalization? Why is this so? and Where will this trend take us?
This course seeks to look into these questions, by looking at the WTO and the Doha round, developments in regional integration, and current proliferation of FTA agreements and negotiations, with a particular focus on the Asia Pacific arena.

(This course is in a sense, flip-side of the course given last semester by the same instructor under the course title “Modern Japanese Diplomacy”, in that while last semester the focus was on political security issues, this time the focus will be on trade and economic aspects of the current global political economy.)

Keywords

English

Schedule

I. OVER VIEW SECTION
Session 1: Introduction; role of trade in economic development:
(“Mission” and “methodology”)

Trade and Economic Progress
Post War system
The Flying Geese Pattern
Recent Features of Global Trade

(Assignment of countries/entities)

Reading: Ikenberry (Chapter 6), Hoekman &Kostecki (Chapter One)

Session 2: Overview of the current international trading system:

Basic framework of rules based multilateral trading system, as embodied by the WTO (with particular focus on trade in Goods)
WTO’s basic principles of MFN and NT
Salient features of the Multilateral System;
Rules and commitments (predictability and security)

Reading: H&K (Chapter One)

Sessions 3 : Multilateral Trading System (from the GATT to the WTO):

GATT to WTO via Uruguay Round
Goods;
Services; growing sector and related to investment
movement of people, political sensitivities
Intellectual Property;

Reading: H&K Chapters 7 & 8

Session 4: Current Trade Policy Issues faced by individual countries:

Brief (5 minutes) presentation by students about their “countries/entities” with respect to the trade structure as well as issues they are faced with, including their respective tariff schedules, and the problems they face in their export markets, such as trade remedies (SG, AD and CVD) or erosion of preferences.

US, EU, Japan, Australia, Korea, Russia, reporting

Reading: access WTO HP and look into its “Trade Policy Review” section (http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm) for each of the countries in question, as primary reference. This material should be supplemented by others, preferably issued by respective governments. For instance, check tariff schedules to see how they are structured.

Session 5: (same as 3 expect for the reporting parties):

China, India, Brazil, ASEAN (Indonesia, Thailand, Viet Nam, the Philippines, Malaysia, Singapore), GCC, LDCs (Bangladesh and Cambodia)

Session 6: Multilateral Trade Negotiations:

DDA;
difficulties of multilateral negotiations (single undertaking, developed vs. developing, stringent disciplines, etc)

Reading: see materials on DDA from the WTO HP (http://www.wto.org/english/tratop_e/dda_e/dda_e.htm)

Session 7: Preferential Agreements:

“preferences”
GSP, LDC DFQF
Rules of Origin (ROO)

PTA typology

trade creation vs. trade diversion

regional integration; EU, ASEAN and MERCOSUR; East Asian Community

Reading: H&K Chapter 10; Baldwin and Low

II. TRADE REALITIES AND TRADE POLITICS SECTION

Session 8: Politics of trade in autos:

US, Japan, China, ASEAN reporting

global market, individual domestic markets, production and imports, trade and investment
MFN and preferential tariffs, NTBs (regulations), domestic taxes

Reading: to be indicated

Session 9: Politics of trade in agriculture:

EU, Australia, Korea, LDCs (Bangladesh and Cambodia) reporting

global markets, tariffs and subsidies
diversity in natural endowment,
domestic political sensitivities
A case study on EVSL negotiations (within APEC)

Reading: H&K Chapter 6 Section 1 (on agriculture)

Session 10: Politics of trade in energy and natural resources

Korea, Brazil, GCC, Russia

III: Section on Multilateralism vs. Preferential Trade Agreements:

Session 11: Politics of Bilateral FTAs:

Japan, Korea, EU , Russia reporting

strategy and domestic politics
some examples; Japan (FTA, EPA and TPP)
Korea (KORUS, EU)
US

Reading: various government information as well as media reports on FTA, TPP negotiations

Session 12: Multilateral Rules and Bilateral FTAs:

ASEAN, LDC, Brazil (Mercosur) , GCC

disciplines on AD, CVD and SG
dispute settlement

domestic regulation (such as affecting services);
bilateral concessions with multilateral implications

Reading: H&K Chapter 9, also refer to examples in FTA texts on such provisions

Session 13: WTO vs. PTAs:

US, China, India, Australia

complementary or contradictory? “building blocks” or “stumbling blocks.”

global perspective vs. individual government perspectives

GATT Article 24 (GATS Article 5)
Trade diversion or trade creation
MFN and ROO

preference erosion
political motivations and economic impact
Areas dealt by FTAs but not by WTO
multilateralization of FTAs

Reading: Baldwin & Low

IV: LOSING SECTION:

Session 14: “Informal Meeting of Ministers Responsible for Trade”,
or, a mock trade conference to discuss the future of the global trading regime.

Session 15: Concluding session: overview of where we are:

Teaching Methods

The course will be organized as a seminar where students are expected to take active part in discussions.
Students will be assigned to one of the following 12 major trading countries/entities, namely; US,
EU,
Japan,
Australia,
China,
India,
Brazil,
Korea,
ASEAN (Indonesia, Thailand, Viet Nam, the Philippines, Malaysia, Singapore),
GCC
LDCs (Bangladesh and Cambodia)
Russia.

Depending on the size of the class, there may be more than one student assigned to a country/entity. No one will be assigned to his/her country of citizenship.

Throughout the course, students will follow the subject matters from the perspective of the country/entity of assignment, and will make contributions by orally reporting on their respective positions on various subjects and issues.

In the penultimate session students will engage in a mock trade conference, Informal Meeting of Ministers Responsible for Trade, to discuss the future of the global trading regime.

TERM PAPER:
At the end of the course, students shall hand in a TERM PAPER (of about 15 pages) in which they will predict the international trade scene in 2025, with a focus on Asia Pacific region. To be more specific, the paper should foretell the prospects of
1) Doha round and/or the next round of multilateral negotiations,
2) East Asian Economic Community, and
3) FTAs in the Asia-Pacific region, especially the TPP.
This exercise of “predicting” is essentially a matter of making an “educated guess” which would require one to “educate” oneself in order to make a more realistic “guess.”

Grading

1) term paper 70%
2) participation in class discussions including oral reports 20%
3) overall focus and commitment to learning 10%

Reference Books

Ikenberry, G. John: After Victory; Princeton

Hoekman, Bernard M., & Kostecki, Michel M.: The Political Economy of the World Trading System – The WTO and Beyond (Third Edition); Oxford

Jackson, John H.: The World Trading System (Second Edition); MIT Press

Baldwin, Richard, and Low, Patrick (edited): Multilateralizing Regionalism, Challenges for the Global Trading System; Cambridge

Munakata, Naoko: Transforming East Asia; The Evolution or Regional Economic Integration; Brookings/RIETI

Multitude of references accessible at the WTO HP