Research Proposal on "International Trade Role of Leadership"

Research Proposal 7 pages (2273 words) Sources: 1+ Style: MLA

[EXCERPT] . . . .

International Trade

Role of leadership in International trade: Appointment of WTO head Roberto Azevedo

The author has presented the theories of international trade and theoretical positions that researchers have taken regarding free trade as well as liberalization of trade policy. The author mentioned that Regional Trade Agreements (RTAs) and Preferential Trade Agreements (PTAs) are increasing by every year and more than 50% of the all the trade conducted worldwide is through RTAs. Authors have described the pervasiveness of PTAs by stating that all parties to World Trade Organization (WTO) are also signatories of one or another PTA. Elaborating further on the theoretical frameworks of international free trade, the authors have divided theories of international trade in three broad perspectives. Each perspective holds responsible different category factors responsible for trade liberalization or protectionism. Protectionism and liberalization are key indicators as there has been increased regionalization of trade.

Trade policy preferences and domestic politics: The theories described under this category explain the role of domestic interest groups in promoting increased protection or liberalization of trade. Since protection or liberalization increases their income, each interest group pursues her own motive. Distribution consequences of trade provide incentive for the each trade policy.

Role of political institutions in free trade or protectionism: It is mentioned that the role of trade policy making body is vital on the outcome policy. For instance, American congress in 1920-30 developed Smoot-Hawley tariff and was developed under the influence of domestic interest groups rather than national interest. Pressure group model effectively details the working of trade policy and its formulation under the influence of pressure groups. Theories have revolved around two main factors, sources of trade policy preferences, and nature of political interest groups.

Factoral and sectoral preferences: Trade Policy change is thus attributed to benefit anticipated by actors in the state. Preferences of those who lose income and those who gain income impact the trade policy formulation. Sectors with scarce resources support protection whereas those with abundant resources support liberalization. Krurger (1997), an economist described that it is 'ideas' whose change enable the change in trade preferences and policies. The example of Brazilian president Fernando Henrique Cardoso who opposed free trade policy and propagated protection of economy of LDCs from capitalist economic model but initiated trade liberalization once in power in Brazil in 1990s. The economic downturn of 1980s was cited as a time when trade policy reforms were enabled by bad economic situation.

Exchange rate and trade policy: Appreciation of exchange rate increases protectionist policies as appreciation results in increase in imports and decrease in exports income. Since balance of trade disturbed domestically, devaluation may result in protectionism of trade. Both appreciation and devaluation by governments are encouraged by an idea to increase domestic output and decrease depression. Thus, all theories explain domestic sources of opposition and support to the cause of trade liberalization, voters' policy makers, interest groups,

The role of institutions: U.S. before 1934 making trade policy was very susceptible to pressure from interest groups. Making Executive branch of government more authoritative in trade policy formulation decreased the impact of interest groups. Free trade encouraged insulation from pressures from outside sources and this enables the formulation of free trade policy. Administrative capacity of government also impacts trade policy as less developed countries rely more on trade taxes such as import duties. More developed countries on the other hand rely on income taxes rather than import taxes. Mexico has been cited as perfect example where trade liberalization and democratization took place simultaneously. During 1980s, Mexico liberalized trade policies.

International politics: Theory of hegemonic stability (THS) asserts that single power hegemony promotes free trade. This theory though refuted and challenged by most of the researcher s is lent credence from the current U.S. status whereby developing and LDCs are encouraged to adopt free trade and under the 'Washington Consensus' trade liberalization is implemented throughout the ex-communist states as well. Security related issues such as security blocs tend to trade more with each other as compared to countries not bound in a security agreement. International institutions such as GATT, WTO, IMF, and World Bank also impact the trade policies. From information provision to trade dispute resolution and trade regulation, these institutions have a positive role in trade liberalization. The greatest argument in favor of this position is that trade reforms have been the pre-condition of providing loans to LCDs and developing countries. Concluding, the text implies that trade policy liberalization and trade preferences are dependent on number of factors, such as ideas about trade, openness of trade market, and the international factors such as macroeconomic conditions of country and region.

Analysis

The author of this book 'Handbook of International Relations' in its chapter titled 'International Trade' has elaborated theoretical positions that researchers have taken regarding international trade activities. Free-trade and trade liberalization has been the main topic of discussion with an emphasis on how the trade policies are formulated and what rationale lies behind protectionist or liberal trade policies. Many theories have been cited whereby the discussion got initiated from description of the role of 'domestic interest groups' in formulation of trade policies. It is observed that rather than an era of free trade, as cherished by WTO, the influence of RTAs in trade policy has been increasing. Rather than conducting free trade across all borders of their country, many states have entered into RTAs, thus allowing greater market access to regional countries rather than non-regional. The observation of author is lent credence by the fact that ASEAN, NAFTA, and treaties like these are based on regional cooperation rather than all-out trade cooperation between countries. This has been mentioned in the text that by encouraging the RTAs only, the countries in effect create barriers of market entry to non-regional countries. The world has become virtually divided into several 'trade blocs'. It is also argued that local since income of 'interest groups' that lobby for 'free trade' or protectionism is impacted by the trade policy adopted, it is not unlikely that the industry with scare presence in one country will lobby for increased protection whereas one with abundant products in one market will favor liberalization of trade.

The perspective of 'ever-changing ideas' regarding trade has also been mentioned as one plausible explanation that creates change in trade policies. A country that previously supports the notion of trade protectionism might reconsider her position under the same leader after some years and adopt free-trade measures to liberalize the trade barriers. The case of Brazilian president Fernando Henrique Cardoso is cited as an example where previously Cardoso supported protectionist policies in Least Developing Countries (LDCs) whereas on assuming power, he liberalized Brazil's trade policy and initiated many reforms in Brazil's trade sector. The author in this book has mentioned differing perspectives, mainly related to domestic politics, exchange rate changes, and role of political and large institutions of a country in trade policy formulation, and the external pressures and impact on trade policies of a country. Thus, by stating different perspectives on the liberalization of trade policy, the author has tried to put in place common and divergent theoretical perspectives regarding free trade and how international trade is influenced by various factors.

Role of leadership in International trade: Appointment of WTO head Roberto Azevedo

Of all the theories that have been discussed in the text, the role of leadership has been central in conceiving and implementing ideas regarding free trade and policy of trade liberalization. Roberto Azevedo, Brazil's top trade diplomat has been appointed the head of WTO back in May 2013 (BBC News Business, 2013). This puts Azevedo as well as WTO in a challenging position as prior to this appointment, WTO's role an international trade body has been questioned for its effectiveness. Brazil as well as the U.S. has also got embroiled in several trade disputes whereby each has alleged the other to protect domestic industries through import tariffs and provision of subsidies, a potential threat to trade liberalization policies. A more appropriate case in this regards was filed by Brazil in 2002 at the WTO forum in which Brazil alleged the U.S. Of providing cotton subsidies to its domestic cotton industry (Stolepestad, 2011). The main theories explained in the text of this book gets applied in the U.S.-Brazil cotton subsidy case whereby initially during the early 2000s, U.S. did not pay heed to Brazil's position and insisted on keeping its cotton industry protected. With a gradual increase in the political power of Brazil in world politics and economy, the U.S. has conceded to some of Brazil's demands for removing subsidies. Further, Brazil also acknowledged the U.S. position as the procedures for trade ratification adopted by several institutions does not allow speedy abolition of subsidies. Further, a change in U.S. economic position due to GFC has also led the U.S. To come to terms with Brazil in this dispute. Thus, power politics, domestic pressures, role of national institutions, and procedural factors are eminent in this trade dispute. The role of Azevedo in… READ MORE

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