978-1138206991 Chapter 7

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CHAPTER 7

THE INTERNATIONAL TRADE STRUCTURE

Overview

International trade is one of international political economy’s oldest and most controversial

subjects. To trade structure is the set of relationships between states and other actors such as

international businesses that shapes the flow of goods and services around the world. We

emphasize that although trade became progressively freer in the decades following World War

II, trade is still subject to many politically-determined restrictions. Particularly since the election

of Donald Trump as president of the United States, liberal global trade rules have been under

attack, and protectionism is rising. Some free trade agreements such as NAFTA that were

negotiated before 2016 are in jeopardy, and trade negotiation over TiSA and TTIP have stalled.

We describe economic liberal, mercantilist, structuralist, and constructivist perspectives on trade.

The chapter include fairly extensive coverage of trade liberalization efforts outside of the WTO,

namely through RTAs, the TTP, TTIP, and TiSA. We highlight the kinds of trade rules

emphasized in these efforts, with special attention to current debates over new rules to govern

international trade in services. We also describe how trade relates to public health risks. Finally,

we look at how trade’s effects on different groups in society has engendered a politically-

powerful anti-free-trade backlash in many countries.

Key Terms

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neomercantilists

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fair trade

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food sovereignty

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reciprocity

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dispute settlement panels

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Doha Round

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special and differential treatment

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North American Free Trade Agreement (NAFTA)

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Transatlantic Trade and Investment Partnership (TTIP)

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Trade in Services Agreement (TiSA)

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data localization

Teaching Tips

• The first part of this chapter reiterates some views on trade from Chapters 2-5, but also

• It is important to cover the theory of comparative advantage, as it is the foundation upon

which economic liberals understand international trade. Many instructors, however, are

accustomed to analyzing comparative advantage using arithmetic examples (perhaps because

• The Uruguay Round is a good topic for focused study since it brings up North–South and

North–North trade issues and provides a nice link to Chapter 10 where we examine the issue

of intellectual property rights.

• One suggestion for a paper topic or class research project is to follow a traded item through

the global economy. What advantages or disadvantages do certain producers and states face

given international terms of trade or the trade policies of certain states regarding the item?

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What measures or options exist to reconcile differences between states and/or producers of the

Sample Essay Questions

1. The economic liberal view of trade as a positive sum game is based in part on the theory of

comparative advantage. Define comparative advantage and discuss its relationship to

international differences in opportunity costs. Why do all nations supposedly gain when trade

takes place according to comparative advantage?

2. Compare the views of mercantilists, economic liberals, structuralists, and constructivists on

trade. (Note: think about the tension between the politics and economics of trade.)

5. Discuss the most important issues of the GATT Uruguay Round and the WTO’s Doha

Round.

6. What are the differences between “at-the-border” and “behind-the-border” trade rules? Give

examples of both. Why are behind-the-border rules often more politically difficult for states

to agree on?

7. What explanations do Muzaka, Bishop, Wolfe, and Hopewell offer for the failure of the

Doha Round? Do developed or developing countries deserve most of the blame for the

Round’s failure?

9. Some IPE scholars argue that free trade can lead to unfair or negative effects in society.

Explain their views and give examples that seem to support their arguments.

10. Some argue that the United States is hypocritical on trade because it pressures other countries

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11. What do Autor, Dorn, and Hanson believe are some major effects on the United States of

trade shocks from imports of Chinese goods?

12. What are some potential public health consequences of trade liberalization?

13. Free trade agreements have never created truly free trade. Explain this statement, with

examples.

Sample Multiple-Choice Questions

1) Which country or region has the highest share of global merchandise exports?

2) For which region of the world do agricultural exports constitute the largest share of its

d) Asia

3) Which country is the world’s largest exporter of commercial services?

4) According to the theory of comparative advantage, mutually advantageous international trade

is based on differences in

5) Which of the following statements about trade is false?

a) Trade generates political, economic, and social interdependencies between nations.

6) Technically, the United States has a comparative advantage over the European Union in the

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b) the U.S. can produce bigger airplanes than can the EU.

7) Which of the following is incorrect?

8) A mercantilist would most likely agree with which of the following statements about trade?

a) Specialization in comparative advantage benefits all the parties engaged in trade.

9) A measure that restricts the quantity of an item that can be brought into a country is called

d) strategic trade

11) The two main components of nondiscrimination in the GATT agreement are

12) All of the following are inconsistent with true free trade principles except

d) Voluntary export restraints

13) Negotiations in the Uruguay and Doha Rounds were each organized as a “single

undertaking,” meaning that

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d) WTO members pledged not to sign any other trade agreements during the Rounds.

14) Which of the following bodies is sanctioned to adjudicate trade disagreements between WTO

e) none of the above

15) One important trend of recent years has been the growth of regional trade blocs. Which of the

d) NAFTA

16) Which of the following is a multilateral trade deal being negotiated between the EU and the

United States?

17) Place these four trade-related events in their proper chronological order: (a) TPP

negotiations; (b) Uruguay Round; (c) Tokyo Round; (d) Doha Round.

18) Which of the following is a reason why many states resist significant liberalization of trade in

services?

a) Worries that the state will lose monopoly control over the health care and education

19) Which of the following is not a claim that Autor, Dorn, and Hanson make about trade

shocks?

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a) They reduce manufacturers’ expenditures on research and development.

d) starting negotiations with South Korea to revise the Korea-United States Free Trade

Agreement