CH 9 ASSIGNMENT - try to answer once you have read the whole ch , can use help

from internet

- a) Read the case In Focus 9.4.Disputes over ISDS (Investor-State-Dispute Settlement)

tribunals. There needs to be a fair system in place when foreign investors believe they
have been treated unfairly in a certain host country. Look for a recent case on the ISDS
operations and distinguish clearly between the political and legal objections made by
the company in the particular case.

- b) The WTO (World Trade Organization) is responsible for 6 main areas of activities.
Distinguish these activities and give an example of what each of them entails.

- c) Go to this blog of the former Deputy-Director of the WTO, Ms. Anabel Gonzalez:
https://www.wto.org/english/blogs_e/ddg_anabel_gonzalez_e/blog_ag_03aug23_e.htm
with her take on the multilateral trading system. What are the challenges and how can
they be tackled according to you?

- d) Read the document ‘Creating markets from research results’ from the European
Patent Office in collaboration with the OECD and the Technical University in Munich,
Germany, at https://link.epo.org/web/Creating_markets_from_research_results_en.pdf
What is the role of a TTO (technology transfer office) of a university and how important
is it to ?
Chapter 9 Global integration and multilateral organizations - answer at the end of reading , use internet
help if needed

- 1 Explain the multilateral institutions of the global trade system and their current challenges.
- 2 Explain the advantages and disadvantages of regional and bilateral economic integration.
- 3 Explain the multilateral institutions of the global monetary system, and their current challenges.
- 4 Participate in policy debates on the institutional framework for global economic integration: the
development agenda and the climate change agenda.
- criticism of WTO

Opening Case: WTO Mediates Between Airbus and Boeing - look for case

- WTO mediator . Their task: solve the dispute US VS EU

- Airbus : infant industry so it is entitled to get subsidies
- 1992 EU US agreement to legitimize these subsidies (tax payers' money)
- 2004 EU complained that US government was supporting BOEING (associated in US military and
airforce) - US said EU violating WTO rules especially on loan aid (lower interest rate than market
interest rate) and subsidies for infrastructure (Hamburg airport)
- Airbus shareholders are actually european governments - it is like association of companies arounf
europe
- EU says they do not involve military
- EU: airbus US: Boeing
- tit for tat story - governments are always helping the companies

World Trade Organization

- Origins are in the General Agreement on Tariffs and Trade (GATT) created in 1948 and became the
WTO in 1995.
- The WTO is the multilateral organization establishing rules for international trade, and resolving
trade-related conflicts between nations worldwide.
- Role:
- Handle disputes constructively.
 - Common set of rules through the principle of non-discrimination = most favored nation principle
- allow your partners and third parties the same conditions and options
- Raise income, generate jobs and stimulate economic growth.
- current issues - together with controversies later:
- GATS general agreement on trade of services
- insurance telecom tourism transportation
- services have less agreements
- TRIPS goods and services containing intellectual property -
- need for minimal standards are going to be enforced and enforcement of rules
- cannot always do this
- Multi Fiber agreement project textile industry in developing ended
- non-tariff barriers
- members of WTO: 164 members - RU 2012 ,CHI 2001
- non members: palestine, kosovo, monaco, NK - not bound by the agreement

Six main Areas of the wto

GATT:

- trade policy – review the tarde that are going on

- TRIPS and medicines for developing countries: why are compulsory licenses rarely used?
-

Trade Dispute Settlements (compare investment dispute settlement)

- Core activities of the WTO is its dispute settlement mechanism, which aims to resolve conflicts
between governments over trade- related matters.
- Compared to GATT (1) long delays – now 12 months, (2) blocking by accused countries – not possible
anymore and (3) inadequate enforcement – still problem: WTO does not have its own enforcement
capability.
- Any country that has lost a dispute case can choose its own options:
- Change its laws or practices to be in compliance.
- Defy the ruling by doing nothing and be willing to suffer trade retaliation by winning countries
known as ‘punitive duties (duties=tariff retaliations)’.
- this is when they do not change it. WTO would allow this
- A WTO ruling is a recommendation but not an order; no higher level entity can order a sovereign
government to do something against its wishes.
- See also the Repsol case of Chapter 2 and the debate about ISDS (investor-state dispute settlement)

Investor - State Dispute Settlements

- VATTENFALL - case against germany and objected to changes in german law that changed position of
nuclear power plant
- compensation for the company
- link to repsol case
- 327 cases in favor of state
- 249 decided in favor of investor
 - 121 discontinued
- 171 settled
- others no solution - not many

Reforming the WTO

- Long-standing controversies include: (1 and 2 pushed by developing countries, who want to change
this, and non governmental organizations)
1. agricultural subsidies in developed countries inhibiting exports from developing countries.
2. tariffs in industries where developing countries may have comparative advantages, e.g. textiles.
3. trade in services.
4. IP protection
- Negotiations are further complicated by new issues added to the agenda including:
1. climate change - carbon pricing issues, new trade quality whether a product is made in a damaging
environment way
2. state ownership
3. the digital economy - sales online at which tax rate? is it transparent?
- 2013: tax facilitation agreement remove red tape - excessive regulation or rigid conformity to formal
rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making
- Deputy-Director of the WTO, Ms. Anabel Gonzalez: there is a lot that we have agreed upon but still a
lot to do for multilateral trade (between more than two countries)
- work on geopolitical tensions issues and differences in standards
- WTO has done and good effect and increase trade
- although trade has increased also because of medicine and weapons in last year

Selected multilateral trade agreements

- EU - most far going problems

- USMCA:
- example of unequal benefits: mexico manufacturing industry - was USMCA taking jobs away
from US?
- afCFTA
- example of export similar products and similar comparative advantage - working together does
not help them - they can only exchange similar goods and when they do with US less beneficial
- comparative advantage theory ricciardo is not followed -
- RCEP : worked less than ASEAN
Regional (many will be also be multilateral) Economic Integration

deep trade agreements: go further than reducing quotas or tariffs - competition policies, labor standards,
customs, …

- Free trade area (FTA)

- A group of countries that remove trade barriers among themselves.
- USMCA (formerly NAFTA)
- A free trade agreement among Canada, Mexico and the USA.
- Association of Southeast Asian Nations (ASEAN)
- The organization underpinning regional economic integration in Southeast Asia.
- import from china more than export
- South Asian Free Trade Area (SAFTA)
- Free trade area covering India, Pakistan, Bangladesh, Sri Lanka, The Maldives, Nepal and
Bhutan.
- Gulf Cooperation Council (GCC)
- Political and economic integration involving Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and
the United Arab Emirates.
- not very integrated
- Regional Comprehensive Economic Partnership (RCEP)
- 10 ASEAN countries along with China, Korea, Japan, Australia and New Zealand launched in
2020.
- not very integrated
- Mercosur
- A customs union in South America that was launched in 1991.
- chile not in
- ECOWAS
- Economic integration in West Africa.
- not going very far
- CFA franc
- Common currency of French-speaking countries in West Africa.
- African Continental FTA (AfCFTA)
- 54 member countries in Africa, launched in 2018 and started trading in 2021.
- PROBLEMS: (1) unequal benefits, (2) asymmetric shocks, (3) similarity of comparative advantages
(african countries products are similar) and (4) controversial protection rules

Bilateral Trade and Investment Agreements

- Examples include the Australia-New Zealand Closer Economic Relations Trade Agreement
(ANZCERTA or CER).
- bilateral dissputes go further
- The USA signed 20 bilateral free trade and investment agreements with countries as diverse as
Australia, Singapore, Peru, Oman and Jordan.
- Advocates of bilateral FTAs see them as a convenient substitute for global free trade.
Critics argue they:
- Permit countries with large markets to use their bargaining power to more effectively
- Lead to a hub and spoke system of international trade that further strengthens the countries at
the hubs (that already had many agreements with others)
- Create fragmented rules for businesses operating in multiple countries
- increase trade diversion
- transatlantic trade and investment partnership - EU +US+others not consuss negotiations stopped

International Monetary Fund - 1944

 - IMF is a multilateral organization promoting international monetary cooperation and providing
temporary financial assistance to countries with balance of payments problems.
- It has three primary activities on behalf of its 190 member countries:
1) Monitoring the global economy
2) Providing technical assistance to developing countries
3) Lending to countries in financial difficulties
- basic principle: IMF conditionality typically imposes conditions that require belt- tightening by pushing
governments to embark on reforms that they probably would not have undertaken otherwise.
- a country with high inflation or government deficits, IMF will help with condition that you will
actually fix this
- The financial crisis of 2008 has led to renewed debates around the pros and cons of IMF conditionality.
1997 Asian crisis devaluation of Thailand currency too as an example of conditionality issue
- bailout criticism because you put burden on next generations
- Like the WTO, the IMF has no power over those countries that do not need its loans even when
running major budget deficits or current account deficits – notably the USA and the EU.
- all multilateral organization have their political agenda

-
- ADB asian development bank
- EBRD european bank for reconstruction and development in london - they have equity
stakes in some privatized companies
- IDB inter american development bank

The Climate Change Agenda

- temperature has risen a lot - by 2024 increase of 1.5 degrees celsius increase - needs to be stopped
- The environmental impact of human activity is also a major concern of the 21st century, with the major
focus on the warming of the Earth’s atmosphere due to greenhouse gas (GHG) emissions.
- The Kyoto Protocol signed in 1997 attempted to cut emissions of developed countries, aiming to cut
CO2 emissions in 2012 by 6% of 1990 levels - using COO certificate - you pollute you pay EU
participated but major countries like CHI and IN did not participate
- Paris Agreement - 2015
- the central aim is to strengthen the global response to the threat of climate change by keeping a
global temperature rise this century well below 2 degrees Celsius above pre-industrial levels
and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
- US left and now w Biden they are back, US pollute twice as much as EU citizens
- some countries seem to be decreasing pollution especially in europe
- The Intergovernmental Panel on Climate Change (IPCC-multilateral) is a global collaboration of climate
scientists and it updated it’s alarming forecast in 2021.
- issues: need for funding and a lot of disagreements

Closing Case: The World Health Organization Faces Global Coordination Challenges

1. From an institution-based perspective, how would you redesign the WHO to enhance its ability to fight
global pandemics?
 2. From a resource-based perspective, how can the WHO best access the resources it needs to enhance
global public health?

problem with WHO: not own rules

WHO role:

- facilitate sharing of data, good medicine practices and funcign among national health systems
- 80% still comes from voluntary foundation

COVID initiative:

- CITEK have voluntary sharing of IP of vaccines, share technologies, and share covid data
- COVAX: founded by CEPI foundation and the Gates foundation and Welkom trust and some countries
- aim vaccinate a percentage of people in world did not happened because
- funding
- national governments had own systems
- first time a good collaboration

Chapter Summary

1. Explain the multilateral institutions of the global trade system and their current challenges:
 - There are both political and economic benefits for global integration by trade.
- The WTO was set up not only to reduce tariffs but also to cover trade in services, intellectual property,
trade dispute settlement and peer review of trade policy.
- Conflicting interests of the member countries make it difficult to reform the WTO.

2. Explain the advantages and disadvantages of regional and bilateral economic integration:
- Regional economic integration brings together groups of like minded countries and thus is easier to
negotiate than global agreements.
- For developing countries, regional trade agreements are often not very effective because countries’
main export markets are outside the region.
- Bilateral FTAs often include a commitment not only to reduce tariffs but to liberalize service sectors and
adjust industry regulations.

3. Explain the multilateral institutions of the global monetary system and their current challenges:
- The IMF promotes monetary cooperation and provides temporary financial assistance with balance of
payments problems. but issue on how to enforce it
- IMF loans are usually conditional on macroeconomic or financial reforms, which are often controversial
in the countries concerned.

4. Participate in policy debates on the institutional framework for global economic integration:
- Development banks such as the World Bank provide loans for projects such as infrastructure in
developing countries.
- The Kyoto Protocol and the Paris Agreement aim to combat projects such as infrastructure in
developing countries.
- The Kyoto Protocol and the Paris Agreement aim to combat climate change but are widely criticized for
lacking tangible commitments.
- International banking standards promoted by the Basel Committee are being revised in view of the
experiences of the global financial crisis.

in developing regional are not effective because of comparative advantage thing

bilateral include more than multi (liberalize, labor,.. AUS AND NZ EXAMPLE) but only a few countries so …

link between climate change and trade

- some trade is unfair because it is at the expense of trade - companies go to places where the climate
change regulations are low

with geopolitical tensions and trade wars we see that WTO should provide incentives against these
deglobalization measures

VOCAB
Basel Committee
A group of central bankers establishing standards for banking supervision.
Black swan events
Rare events that occur only once in a generation.
compulsory licences
Licences issued by a national government in an emergency without agreement of the licence owner.

deep trade agreements

An FTA that covers more than removal of tariffs, quotas and export promotion.
Development aid
A gift from generous donors wishing to help developing countries.
EU Canada Comprehensive Economic and Trade Agreement (CETA)
The economic integration agreement between the EU and Canada.
European Bank for Reconstruction and Development (EBRD)
A multilateral bank designed to help transition economies.
Generalized System of Preferences (GSP)
A system of tariff reductions facilitating less and least develop country’s access to EU markets.
International investment agreements (IIAs)
Agreements between states to protect foreign direct investment between countries.
Non-discrimination principle
A principle that a country cannot discriminate among its trading partners (also known as most favoured nation
principle).
Risk-ratings agencies
Agencies that assign ratings to assets such as bond that indicate the level of riskiness of the asset.
rules of origin
Criteria products have to fulfil to be eligible for tariff exemption under an FTA.
Trade diversion
A change in trade pattern away from comparative advantages due to trade barriers.
WTO dispute settlement mechanism
A procedure of the WTO to resolve conflicts between governments over trade-related matters.