GROSS DOMESTIC PRODUCT

TOTAL

(trillion $)

PER CAPITA

($/person)

WORLD 37.0 7,600

U.S. 10.1 36,300

France 1.5 25,400

Spain 0.8 18,900

GROSS DOMESTIC PRODUCT

TOTAL

(trillion $)

INDUST.

(%)

AG.

(%)

SERV.

(%)

WORLD 37.0 32 4 64

U.S. 10.1 18 2 80

France 1.5 26 3 71

Spain 0.8 28 4 68

GDP and MERCHANDISE TRADE

GDP

(billion $)

TRADE

(billion $)

TRADE/GDP

(%)

WORLD 37,000 6,300 13

U.S. 10,082 936 9

France 1,510 293 19

Spain 757 135 18

MERCHANDISE TRADE

EXPORTS

(billion $)

IMPORTS

(billion $)

NET EXPORTS

(billion $)

WORLD 6,300 6,300 0

U.S. 723 1,148 -425

France 293 293 0

Spain 119 150 -32

EXPORTS - PARTNERS

U.S. France Spain•Canada (22%) •Germany (14%) •France (20%)

•Mexico (14%) •UK (10%) •Germany (12%)

•Japan (8%) •Spain (9%) •Portugal (10%)

•UK (6%) •Italy (9%) •Italy (9%)

•Germany (4%) •U.S. (9%) •UK (9%)

IMPORTS - PARTNERS

U.S. France Spain

•Canada (19%) •Germany (17%) •France (16%)

•Mexico (12%) •Benelux (10%) •Germany (16%)

•Japan (11%) •Italy (9%) •Italy (9%)

•China (9%) •UK (8%) •UK (7%)

•Germany (5%) •U.S. (7%) •U.S. (4%)

GDP and TRADE in SERVICES

GDP

(billion $)

TRADE

(billion $)

TRADE/GDP

(%)

WORLD 37,000 1,460 4

U.S. 10,082 226 2

France 1,510 71 5

Spain 757 45 6

TRADE IN SERVICES

EXPORTS

(billion $)

IMPORTS

(billion $)

NET EXPORTS

(billion $)

WORLD 1,460 1,460 0

U.S. 263 188 76

France 80 62 18

Spain 57 33 24

WORLD EXPORTS

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TRADE BARRIERS

• Tariffs

• Quotas

• Technical regulations and standards

• Import licenses

• Valuations of goods at customs

• Preshipment inspections

TRADE DISTORTIONS

• Trade is “distorted” if prices and quantities are different from the levels that would usually exist in a competitive market.– Trade barriers– Dumping– Subsidies

WORLD TRADE ORGANIZATION

• WTO was created in 1995

• But WTO replaced the General Agreement on Tariffs and Trade (GATT), which started life in 1948

WORLD TRADE ORGANIZATION

• WTO was created in 1995

• But WTO replaced the General Agreement on Tariffs and Trade (GATT), which started life in 1948

WORLD TRADE ORGANIZATION

• WTO is the only international organization dealing with the global rules of trade between nations

• WTO’s function is to assure that trade flows as smoothly, predictably, and freely as possible

WTO

• GATT dealt mainly with trade in goods

• WTO covers

– Trade in goods

– Trade in services

– Traded inventions, creations and designs (intellectual property)

PRINCIPLES OF WTO TRADING SYSTEM

1. Trade without discrimination:– A country should not discriminate between

its trading partners– A country should not discriminate between

its own and foreign products (after foreign good entered the market)

2. Freer trade:

– Gradually, through negotiation

PRINCIPLES OF WTO TRADING SYSTEM

3. Predictability:– Through “binding”– A country may change its bindings, but

only after negotiating with its trading partners (which may mean compensating them for loss of trade)

4. Promoting fair competition:

– Promote rules dedicated to open, fair and undistorted competition

PRINCIPLES OF WTO TRADING SYSTEM

5. Encouraging development and economic reform:

– Agreements provide for special assistance and trade concessions for developing countries

WTO

• At the heart of WTO is the multilateral trading system are WTO’s agreements, negotiated and signed by a large majority of the world’s main trading nations, and ratified in their parliaments.

• The agreements are contracts, guaranteeing member countries important trading rights.

• The agreements bind governments to keep their trade policies within agreed limits

WTO AND AG TRADE

• Governments usually give 3 reasons for supporting farmers, even if doing so distorts ag trade:

1. To make sure that enough food is produced to meet the country’s needs

2. To shield farmers from the effects of weather and world price volatility

3. To preserve rural society

WTO AND AG TRADE

• Original GATT did apply to ag trade, but had loopholes:

1. It allowed countries to use non-tariff measures (e.g., import quotas)

2. Countries were allowed to subsidize agriculture

WTO AND AG TRADE

• Agricultural Agreement established rules regarding:

1. Market access: Import restrictions

2. Domestic support: Subsidies and other programmes, including those that raise or guarantee farmgate prices and farmers’ incomes

3. Export subsidies and other methods used to make exports artificially competitive

WTO AND AG TRADE

• Agricultural Agreement does allow governments to support rural economies, but preferably through policies that cause less trade distortion

WTO AND AG TRADE

• Agricultural Agreement establishes the “tariffs only” rule for market access

– If previous policy meant domestic prices were 75% higher than world prices, the tariff replacing it could be 75%

WTO AND AG TRADE

• Agricultural Agreement establishes three categories of “domestic support”:

1. “Green Box”: Subsidies that do not distort trade, or cause minimal trade distortion (e.g., government services such as research, disease control, infrastructure, and payments to farmers that do not stimulate production). “Green Box” subsidies are allowed without limits.

WTO AND AG TRADE

• Agricultural Agreement establishes three categories of “domestic support”:

2. “Blue Box”: Direct payments to farmers where farmers are required to limit production. At present, “Blue Box” subsidies are allowed without limits.

WTO AND AG TRADE

• Agricultural Agreement establishes three categories of “domestic support”:

3. “Amber Box”: Subsidies that so not fall into either “Green Box” or “Blue Box.” “Amber Box” subsidies are considered to distort trade (e.g., price supports, or subsidies directly related to production quantities). “Amber Box” subsidies must be reduced from the initial Total Aggregate Measure of Support (Total AMS).

WTO AND AG TRADE

• Agricultural Agreement prohibits export subsidies on ag products, unless the subsidies are specified in a member’s list of commitments. Where they are listed, the member must cut both the amount of money spent on export subsidies and the quantities of exports that receive subsidies.

WTO

• The agreements bind governments to keep their trade policies within agreed limits

• WTO provides a mechanism for settling disputes between countries.