POLS 2401 1st EditionLecture 9Outline of Previous LectureGlobalization: Its Proponents and Its DiscontentsI.Types of GlobalizationA. Economic globalization B. Social and cultural globalizationC. Political and military globalization D. Environmental globalization II. DefinitionIII. Economic GlobalizationA. TradeB. FinanceC. InvestmentIV. ProponentsV. Anti-globalizationOutline of Current LectureFree Trade and the WTOI.Theory of free tradeA. Adam smith & David RicardoII. Basic ConceptsA. Division of LaborB. Comparative AdvantageIII. GATT, WTO and the Postwar Global Trade RegimeIV. World Trade Organization (WTO)V. WTO Dispute Settlement ProcessVI. Clash of Sovereignty and World Trade RulesVII. The Doha Development AgendaA. Developmental ProgramB. Trade Round •Theory of Free Trade: Background•First defenders of free trade:–Adam Smith (1723-1790)–David Ricardo (1772-1823)•Counter-theory to free trade: Mercantilism–Set of trade policies designed by the state to increase exports and use trade to enrich the nation (industrial policy)–Trade as a means to power•Theory of Free Trade: Basic Concepts•Division of Labor–People/companies/countries produce a good/service and trade it for other goods/services••Comparative Advantage–People/nations should specialize in the production of goods/services that they can produce most efficiently and cheaply and trade these good/services with others who specialize in other areas–•Free trade allows people to get the best product at the best price (focus on the consumer)•GATT, WTO and the Postwar Global Trade Regime•General Agreements on Tariffs and Trade (GATT) Trade “Rounds” Reducing Barriers to Trade–The Dillon Round (1960-61): tariffs, 26 countries–The Kennedy Round (1964-67): tariffs, anti-dumping measures, 62 countries–The Tokyo Round (1973-1979): tariffs and non-tariff barriers, 102 countries–The Uruguay Round (1986-1994): tariffs, non-tariff measures, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, 123 countries•World Trade Organization (WTO)•Set up in 1995, created by the Uruguay Trade Round negotiations•159 countries are members of WTO•Headquartered in Geneva, Switzerland•Functions:–Administer WTO trade agreements–Provide a forum for trade negotiations–Handle trade disputes–Monitor national trade policies–Provide technical assistance and training for developing countries•WTO Dispute Settlement Process•Dispute Settlement Body: includes all WTO members, adopts decisions•A country accuses another country of unfair trade practices and violation of WTO rules. Countries must first try to settle the problem through consultation and mediation•If that fails, the complaining country can ask the DSB to set up a panel, composed of trade experts to investigate and write up a report•The report of the panel is usually adopted by the DSB and if a country is found to be breaking WTO rules it must change its policies/practices or possibly face trade sanctions•Clash of Sovereignty and World Trade Rules•Food safety issues–Beef hormones, genetically modified organisms, invasive species•Environmental issues–Endangered species, environmental laws and initiatives•Challenges for developing countries seeking to build new industries•The Doha Development Agenda•Doha Development Program–Help developing countries deal with problems of implementing trade agreements•Doha Trade Round–Next round of trade negotiations, started in Doha, Qatar, in 2001–Very complex, involving many sectors/issues (agriculture, non-agricultural market access, services, intellectual property, etc.)–Negotiations are stalled and have passed the deadline of 2005, due to sharp divisions betweenindustrialized and developing countries–Talks were revived in 2013 and the goal is to conclude the round by the end of