International Trade Negotiations

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The course is the graduate lecture in international trade organizations and negotiations . The course is offered in English in the winter term. Its focus will be on new trends in the theory and practice of international trade negotiations. The objective of the course is to acquaint participants with the rules of international trade policy and selected practical issues of trade negotiations. The topics covered will include the elements of political economy of trade policy, the international trade rules of the GATT/WTO system, dispute settlement system of the WTO, techniques of trade negations, the history of multilateral (GATT/WTO) negotiations and recent negotiations of the European Union (TTIP and Brexit).

Another objective of the course is to help students explore potential thesis topics in these areas. Students actively participating in the lectures will receive a premium for the final grade.

Detailed description of lectures:

No. 1: Import tariffs and monopolistic markets

Tariffs in a small and large country, under perfect & imperfect competition.

Lit. overviews:

• Feenstra R. (2003), Advanced International Trade, Princeton University Press. pp. 209-240.

• Bagwell K. , Bown C., and Staiger R. (2016). Is the WTO Passé? Journal of Economic Literature, 54(4), 1125–1231.

No. 2: Protectionism and endogenous trade policy:

Political economy of trade policy: Models: Median voter & protection for sale, Commitment of governments to sign agreements in the presence of standard terms-of-trade externalities and by the desire to commit vis-à-vis domestic industrial lobbies.

• Lit.:

• Maggi, G., & Rodríguez-Clare, A. (2007). A Political-Economy Theory of Trade Agreements. The American Economic Review, 97(4), 1374-1406.

• Maggi, G. and A. Rodríguez-Clare, “The Value of Trade Agreements in the Presence of Political Pressure,” Journal of Political Economy, 1998.

• Grossman G, Helpman E (2002) Interest Groups and Trade Policy, Princeton Univ. Press.

No. 3. The role of GATT/WTO system in the post war trade liberalization.

The history of international trade policy organizations: the concept of International Trade Organization (ITO), creation of the GATT and transformation into WTO since 1994.

Lit. (overviews)

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP.

• Bagwell K. , Bown C., and Staiger R. (2016). Is the WTO Passé? Journal of Economic Literature, 54(4), 1125–1231.

No.4. The economic theory of multilateral trade system

• Bagwel and Steiger Bagwell and Staiger (2002). The Economics of the World Trading System. MIT Press.

• Bagwell, K., & Staiger, R. W. (2010). The world trade organization: theory and practice. Annu. Rev. Econ., 2(1), 223-256.

• Bagwell, K., & Staiger, W. (1999). An Economic Theory of GATT. The American Economic Review, 89(1), 215-248.

No. 5. Rules of international trading system

The principle of non-discrimination and reciprocity as the best rules for international trade negotiations, the role "bound" tariffs, measures of the reciprocity in trade negotiations

Lit.:

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 1

• Saggi, K. (2004). Tariffs and the most favored nation clause. Journal of international economics, 63(2), 341-368.

• McCalman, P. (2002). Multi-lateral trade negotiations and the Most Favored Nation clause. Journal of International Economics, 57(1), 151-176.

• Ludema, R. D., & Mayda, A. M. (2009). Do countries free ride on MFN? Journal of international Economics, 77(2), 137-150

• Henrik Horn, Petros C. Mavroidis (2001) Economic and legal aspects of the Most-Favored-Nation clause, European Journal of Political Economy, Vol. 17 pp. 233–279.

• P.J. Lloyd (2001) The architecture of the WTO, European Journal of Political Economy, Vol. 17 pp. 327–353

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No. 6. Techniques of international trade negotiations.

Identification and development of negotiation goals and strategies, identification of parties (stakeholders) and their respective interests and priorities, development of multiple options that will maximize the probability of positive outcomes for all parties to the process, language and technicalities of negotiations, “national” cultures and approaches to negotiations, development of specific skills in the crucial areas.

Lit.:

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 4.

• William W. Monning & Geza Feketekuty International Trade Negotiations Training Manual (2002) on line: http://www.commercialdiplomacy.org/pdf/manual/InternationalTradeNegotiations.pdf

• International Negotiations Trainer’s Notes (2012) Cambridge University Press 2012 www.cambridge.org/elt/internationalnegotiations

No. 7 Trade disputes and their resolution in the framework of GATT/WTO system

Enforcing trade contracts, the problem of reciprocity, optimal a remedy system for breach of trade agreements that specifies less-than-proportional retaliations against deviating parties. The WTO Agreement on Dispute Settlement Understanding: rules and steps of dispute resolutions, example of DS cases.

Lit.:

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 3

• Beshkar, M. (2010). Trade skirmishes safeguards: A theory of the WTO dispute settlement process. Journal of International Economics, 82(1), 35-48.

• Beshkar, M. (2016), Arbitration and Renegotiation in Trade Agreements, Journal of Law, Economics, and Organization, Vol. 32, 3 , pp. 586–619, https://doi.org/10.1093/jleo/eww001

• Horn, H., Maggi, G., & Staiger, R. W. (2010). Trade Agreements as Endogenously Incomplete Contracts. The American Economic Review, 100(1), 394-419.

• Beshkar, M. (2010). Optimal remedies in international trade agreements. European Economic Review, 54(3), 455-466.

• Maggi, G., & Staiger, R. W. (2011). The Role of Dispute Settlement Procedures in International Trade Agreements. The Quarterly Journal of Economics, 126(1), 475-515.

• Amador, Manuel, and Kyle Bagwell. “The Theory of Optimal Delegation with an Application to Tariff Caps.” Econometrica 81.4 (2013): 1541-1599.

• Beshkar, M. (2011). Arbitration and Renegotiation in Trade Agreements. Journal of Law, Economics, and Organization Advance Access published February 19, 2016

No. 8 Multilateral trading system: the evolution of approaches to tariff negotiations

The country-by country and product-by-product negotiations in early GATT rounds, Initial Negotiating Rights (INRs), Principal supplier, Safeguards, Global approaches to trade negotiations: linear and harmonized reduction of tariffs, the position of developing countries

Lit.:

• Ossa, R. (2011). A “New Trade” Theory of GATT/WTO Negotiations. Journal of Political Economy, 119(1), 122-152.

• Croome, J. (1999) Reshaping the World Trading System: A History of the Uruguay Round, Kluver Law International.

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 4.

• Hertel T, Hoekman B, Martin W (2002), Developing countries in the New Round of WTO negotiations, The World Bank Research Observer, vol. 17, no. 1, p.113-140

No. 9. Multilateral trading system: the evolution of approaches to non-tariff measures and negotiations

QRs and VERs , commitments regarding subsidies and domestic support, approaches to the reduction of restriction of TBTs, The role of standards in international trade, standardization union, empirical estimates

Lit.:

• Feenstra R. (2003), Advanced International Trade, Princeton U.P. pp. 254-240-286.

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 4.

• Croome, J. (1999) Reshaping the World Trading System: A History of the Uruguay Round, Kluver Law International, chap.

• Fontagné, L., Guillin, A., & Mitaritonna, C. (2011), Estimations of Tariff Equivalents for the Services Sectors. CEPII Working Papers No. 24, CEPII, Paris.

No. 10. The EU as a partner in trade negotiations

The exclusive competence of the EU commission in trade policy.

Lit.:

• Sophie Meunier, 2007, Managing Globalization? The EU in International Trade Negotiations, Journal of Common Market Studies, 2007 Vol. 45. Number4. pp.905–926

• Andreas Dür, And Hubert Zimmermann, Introduction: The EU in International Trade Negotiations, Journal of Common Market Studies, 2007 Vol. 45. Number 4. pp. 771–787

• Elgström, Ole, Outsiders' Perceptions of the European Union in International Trade Negotiations: Journal of Common Market Studies Vol 45 No. 4, pp. 949- 967, 2007

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 10.

No. 11. The specificity of trade negotiations in agricultural sector:

The reasons of high protectionism, The WTO Agreement on Agriculture , “tariffication” of NTB’s, commitments regarding subsidies, The SPS Agreement, the difficulties in the agricultural negotiations in the Doha Round.

Lit.:

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 6.

• Croome, J. (1999) Reshaping the World Trading System: A History of the Uruguay Round, Kluver Law International, chap.

• Diaz-Bonilla E., Thomas M., Robinson S. (2000), Food Security And Trade Negotiations in the World Trade Organization: A Cluster Analysis Of Country Groups, International Food Policy Research Institute, Economic Research Service, U.S. Department of Agriculture.

No. 12: Sectoral approaches to trade liberalization

Strategic trade policy: competition under Cournot and Bertrand models, the sectoral negations in civil aircraft area, The WTO Agreement on Textiles, The General Agreement of Trade in Services (GATS)

Lit.:

• Hoekman B., Kostecki M. (2001) The Political Economy of the World Trading System. The WTO and beyond. Oxford UP. Chap. 6 & 7.

• Hoekman B. M. & Mavroidis P. C., 2016. "MFN Clubs and Scheduling Additional Commitments in the GATT: Learning from the GATS," RSCAS Working Papers 2016/06, European University Institute.

• Hoekman, B. (2011) "The WTO and the Doha Round: Walking on Two Legs," World Bank - Economic Premise, The World Bank, issue 68, pages 1-6, October

• Hoekman B. and Matoo A, (2013) Liberalizing Trade in Services: Lessons from Regional and WTO Negotiations, European University Institute,

No. 13 Multilateralism vs. regionalism: recent negotiations

The failure of WTO Doha Development Agenda (DDA) Round of negotiations, will TTIP negotiations restart some day?

Lit.:

• Hoekman, B. (2011) "The WTO and the Doha Round: Walking on Two Legs," World Bank - Economic Premise, The World Bank, issue 68, pages 1-6, October

• Francois, J. Hoekman, B. (2015) Introduction to the Symposium Issue on Structural Issues at the World Trade Organisation, World Trade Review (2015), 14: 1, 1–5, Cambridge University Press,

• Fontagné, L., Gourdon, J. & Jean, S. (2013). Transatlantic Trade: Whither Partnership, Which Economic Consequences? CEPII Policy Brief No. 1, CEPII, Paris.

• Hoekman, B. (2004) "Developing Countries and the WTO Doha Round: Market Access, Rules and Differential Treatment," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 19, pages 205-229.

• Shayerah S.I., Vivian C. Jones V.C. & Johnson R. (2016), Transatlantic Trade and Investment Partnership (T-TIP) Negotiations, February 29, 2016, Congressional Research Service

• Centre for Economic Policy Research (2013): Reducing Transatlantic Barriers to Trade and Investment. An Economic Assessment, Joseph Francois (project leader), Prepared under implementing Framework Contract TRADE10/A2/A16.Ecorys (2014): Trade Sustainability Impact Assessment on the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States of America. Draft Inception Report. Study for the European Commission, DG Trade.

No. 14 Is trade liberalization passe? The Brexit

The political economy of Brexit vote, From soft to hard Brexit, early studies of Brexit trade and economic implications

Lit.:

• Cambridge Econometrics (2018) Preparing for Brexit, Final Report.

• KPMG (2018), Impact of non-tariff barriers as a result of Brexit,

• BREXIT 2016, Policy analysis from the Centre for Economic Performance, June 2016, London School of Economics and Political Science

• Van Reenen J. , Massachusetts Institute of Technology, Brexit’s Long-Run Effects on the U.K. Economy, Brookings Papers on Economic Activity, Fall 2016, p. 367-383.

No. 15. Applied Trade Policy Analysis

Estimating trade effects of trade liberalization, The Armington model (products differentiated according to the place of production), Framework for analysis under partial and general equilibrium, SMART partial equilibrium simulations, GTAP simulations.

Lit.:

KW01, KW02, KW03, KW04, KW05, KU01, KU02, KU03, KU04, KU05, KU06, KU07, KK01, KK02, KK03

Two possible forms of the final exam:

1. The essay (policy paper) analyzing two dispute cases solved by the WTO Dispute Settlement Body (DSB) of the WTO. The analysis should be based on the reports of the panels and Appellate Body (AB) of the Dispute Settlement Understanding (DSU). The paper should preferably cover the conflicts regarding the application of the same instruments or the same sector of international trade and contain the analysis of the economic background of the conflict and resume covering both cases. The precise topic and outline of the paper must be accepted by the lecturer.

2. The policy paper describing the negotiation position and arguments of the EU Commission or US covering specific sector of TTIP negotiations (e.g. agriculture, SPS, regulatory issues, motor vehicles, pharmaceuticals). The authors should afterwards participate in the negotiation game with the students representing the other side of negotiators. Depending on the progress of Brexit negations the same scheme can also be applied to these negotiations. The precise topic and outline of the paper must be accepted by the lecturer.