Introduction to Trade Policy
Centre for Trade Policy and Law
University of Ottawa Faculty of Law
January 2011
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International trade policy is understood as the
system of rules that govern how states
regulate international commercial
transactions.
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• 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 www.wto.org
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• 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.
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The Economics of Trade
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Adam Smith’s Wealth of Nations
Ricardo’s theory explaining gains from comparative advantage.
Krugman – productivity/specialization
Porter – Clusters of excellence enhancing international
competitiveness.
• 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
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Trade Policy Interfaces
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Foreign policy
International security
Trade and development
Trade and labour
Human rights
Environment
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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.
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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.
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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.
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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
organizations
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