INTERNATIONAL
RELATIONS
2013–2014 Update
Tenth Edition
Joshua S. Goldstein
Jon C. Pevehouse
Chapter Eight:
International Trade
Port in Valparaiso, Chile, 2005.
8.1 Theories of Trade
Liberalism and Mercantilism
Comparative Advantage
Political Interference in Markets
Protectionism
MyLab Media
Simulations:
International Trade: You Are a Trade Expert
http://media.pearsoncmg.com/long/long_mpsk_media_1/si
ms_2011/trade_expert/player.html
Please log into MyPoliSciLab with your username
and password before accessing this link.
Liberalism and Mercantilism
Mercantilism
Economic liberalism
Comparative Advantage
Trade creates wealth by allowing states to specialize in
producing goods and services for which they have a
comparative advantage (and importing other needed
goods)
Drawbacks of trade from political (rather than
economic) vantage point
Political Interference in Markets
Market imperfections
Monopoly
Oligopoly
Corruption
Legal framework for markets
Taxation
Sanctions
Autarky
Protectionism
Motivations
Methods
8.1 Theories of Trade
Q: The mercantilist approach to trade is similar to what
theoretical framework?
A) Liberalism
B) Realism
C) Structuralism
D) Feminism
Answer:
B) Realism
True/False:
Emphasizing worldwide free trade, liberal
economics advocates for international
cooperation.
Answer:
True
8.2 Trade Regimes
World Trade Organizations (WTO) - formerly GATT
Bilateral and regional agreements
Cartels
Industrial and interest groups
Enforcement of trade rules
MyLab Media
Video: IMF Conditionality and the Irish Bailout.
http://media.pearsoncmg.com/long/long_mpsk_media_1/vid
eo_2011/ireland/player.html
Please log into MyPoliSciLab with your username
and password before accessing this link.
The World Trade Organization (WTO)
Most-favored-nation principle
Generalized system of preferences
Rounds of negotiations
SANCTIONS BITE
Economic sanctions, such as the current international restrictions on
trade and business with Iran, are among the most obvious ways that
politics interferes in markets. Sanctions are hard to enforce,
especially when not all countries participate, because doing
business is profitable. Once Europe and the United States
coordinated tough sanctions on Iran, they caused major economic
disruption there, triggering a decline in Iran’s currency by about half.
Here a street vendor offers banknotes on a Tehran street, 2013.
KING COTTON
Protectionism uses various means to keep foreign imports from
competing with domestic products. Agricultural producers in the
global South complain that subsidies and other protectionist
measures in Europe and the United States prevent poor farmers in
developing countries from exporting to world markets. Here, cotton
awaits processing in Mali, where low prices for cotton, the country’s
most important cash crop, have hurt farmers badly. (2006)
MAKING MAGIC
Rounds of trade negotiations, such as the current Doha Round
begun in 2001, last for years as members negotiate complex deals
that must be approved by consensus of all 150 member states. A
conference of trade ministers in December 2005 tried to regain
momentum for the stalled Doha Round, with mixed success. Here,
WTO head Pascal Lamy opens the conference with the tool he
hopes will bring success—a magic wand. The talks remained
stalled in early 2013.
Bilateral and Regional Agreements
Bilateral agreements
Free trade areas
Cartels
Organizations of Petroleum Exporting Countries (OPEC)
International Energy Agency (IEA)
Joint producer-consumer cartels
President of Brazil,
Dilma Rousseff
Industries and Interest Groups
Influence state’s foreign economic policies
Industrial policy
Industries important in trade negotiations currently
COMPETING WITH BIG CORN
Agriculture is at the top of the agenda of international trade
negotiations, as developing countries push richer ones to end farm
subsidies. Here, Mexican farmers protest the full opening of
Mexico’s markets to imported U.S. corn under NAFTA, 2008.
J’ACCUSE!
Intellectual property rights have been an important focus of recent
trade negotiations. In many countries, pirated copies of videos,
music, and software sell on the street with no royalty payments.
Here, the U.S. Trade Representative holds a pirated DVD from
China as she filed a copyright complaint against China in the World
Trade Organization, 2007.
Enforcement of Trade Rules
Reciprocity
Retaliation
8.2 Trade Regimes
Q: Which of the following topics is on the agenda of the Doha
Round of WTO trade negotiations?
A) Forestry
B) Industrial products
C) Electronics
D) Maritime treaties
Answer:
B) Industrial products
True/False:
In Europe, North America, and in several other less
important instances regional free trade areas have
been created.
Answer:
True
8.3 Economic Globalization
The evolving world economy
Resistance to trade
The Evolving World Economy
Industrial Revolution
Free trade
Great Depression, Keynesian economics
After World War II
Centrally planned economics
Transitional economics
China
State-owned industries
Resistance to Trade
Workers
Human rights NGOs
Environmental groups
CHEAP LABOR
Labor, environmental, and
human rights organizations
have all criticized unrestricted
free trade. They argue that
free trade agreements
encourage MNCs to produce
goods under unfair and
unhealthy conditions,
including the use of child
labor. This boy in India makes
soccer balls, 2002.
UNSETTLING CHANGES
Growing trade makes states more interdependent. This may make
them more peaceful, but can also introduce new insecurities and
sources of conflict. The worldwide economic turmoil starting in
2008 sharpened some trade conflicts, while WTO negotiations
remained stalled. This ship that ran aground off New Zealand in
2011 seemed to embody the precarious state of trade relations.
8.3 Economic Globalization
Q: Which of the following is characteristic of centrally planned
economies?
A) Government officials set prices
B) Religious authorities decide on production quotas
C) They were dominant in Africa during the Cold War
D) Governments cannot guarantee the basic needs of
citizens
Answer:
A) Government officials set prices
True/False:
The world economy is drastically integrated on a
global scale, generating wealth at a decelerating
pace.
Answer:
False
Chapter Discussion Question
What role do sanctions play in international
markets? Be specific. Why are they used, as opposed
to other means of influence? And how effective are
they, in general? Use specific examples to aid your
discussion.