Introduction to Trade Policy

Introduction to Trade Policy
Centre for Trade Policy and Law
University of Ottawa Faculty of Law
January 2011
International trade policy is understood as the
system of rules that govern how states
regulate international commercial
• International trade encompasses the exchange of
goods and services.
• In 2009, total international goods trade amounted to
$12 trillion USD.
– European Union $4.6 trillion
– China $1.2 trillion; and
– USA $1.1 trillion
• In 2009, services trade amounted to $3.3 trillion USD
– European Union $1.5 trillion
– U.S.A. $470 billion
– China $129 billion
Source: The WTO Report
• International trade also encompasses foreign
direct investment (FDI).
– Note: There is no comprehensive multilateral
agreement governing FDI.
• As of the Uruguay Round of trade negotiations
and the establishment of the WTO global
trading rules also cover trade related aspects
of intellectual property.
The Economics of Trade
Adam Smith’s Wealth of Nations
Ricardo’s theory explaining gains from comparative advantage.
Krugman – productivity/specialization
Porter – Clusters of excellence enhancing international
• New New Trade Theory
– Trade takes place at the firm level
– Who succeeds and why
• The impact of globalization on trade
– Innovations in communications and transportation
– Integration of research, development and production
– Movement of skilled peoples
• Limitations imposed by geography and politics
Trade Policy Interfaces
Foreign policy
International security
Trade and development
Trade and labour
Human rights
The Relationship to Domestic
Economic Policy
• Success in international trade is dependent on
domestic economic fundamentals.
– Fiscal, monetary and tax policies must be right
• Domestic policy fundamentals promote
productivity and competitiveness.
Contribution of Exports and Imports
• Exports generate economic activity and jobs.
• Exports increase foreign exchange earnings.
• Imports lower costs for Canadian producers
using foreign made inputs.
• Imports lower costs to consumers.
The Conduct of International Trade
• The role of Government
– International agreements among trading nations
• Multilateral/plurilateral/bilateral
• The role of the private sector
– Commercial transactions: trade in goods; trade in
services; investment.
– Stakeholders: business; consumers; NGOs and
other interested parties.
Evolution of the Global Trading System
• The Bretton Woods Framework.
• The General Agreement on Tariffs and Trade
(GATT) contract.
• A multilateral trade institution: the WTO
– The WTO Agreements
– The WTO’s relationship to other international