INTERNATIONAL TRADE The volume of world trade has grown hugely since the triumph of neoliberalism, the fall of communism and the founding of the WTO, all of which happened in the 1990s. Despite these changes, there are still trade restrictions like tariffs and non-tariff barriers in place. Tariffs (money charged on imported goods) are imposed for various reasons. They are designed ■■ to generate revenue for the importing country. ■■ to counteract export subsidies given to the exporters by their home countries. ■■ to protect small industries in the importing country unable to compete against cheap imports. There are various other ways to restrict imports (non-tariff barriers). For example ■■ imposing technical standards or health and safety standards, often used to block food imports from developing countries. ■■ labelling requirements for e.g. genetically modified food, which will automatically lead to a reduction of sales. ■■ administrative policies (‘red tape’) that make bureaucratic procedures more difficult to discourage imports. World trade and developing countries It is not uncommon for developed countries to offer preferential treatment in the form of tariff reductions (preferential tariffs) to developing countries in order to support their economic growth. One example is called ‘Everything but arms’ (EBA), which forbids the imposition of tariffs or quotas on all imports to the EU from least developed countries (LDCs) except for weapons. Many ACP countries (African, Caribbean and Pacific Groups of States) are included in this agreement. In addition, initiatives in developed countries like fair-trade labels aim at helping producers and manufacturers in LDCs to obtain fairer prices for their products, to work sustainably and to achieve higher social and economic standards. Furthermore developing countries have increasingly become more interesting for foreign direct investment (FDI). Companies from developed countries often invest in developing countries in order to be able to produce their goods more cheaply or to take advantage of a less regulated business environment and lower corporate taxes. Effects of globalisation In the last decades, the share of the GDP that consists of imports and exports has grown significantly in most developed countries, which has led to their economies being connected more than ever. On the one hand, free trade has numerous advantages, like cheap goods and a wider range of choices for customers as well as the opportunity for companies to cut costs by relocating their production to countries with cheaper labour costs or by buying their raw materials in countries where they are less expensive. On the other hand, it leads to a loss of sovereignty and renders countries less able to survive on their own if war, pandemics or other crises impede international trade. Institutions regulating world trade GATT (General Agreements on Tariffs and Trade) provides an institutional framework for negotiations between different countries about free trade. The so-called Uruguay Round led to the founding of the World Trade Organization (WTO), an institution affiliated to the UN that creates rules regulating world trade. The latest round of negotiations launched in 2001 was the Doha Round, which stalled over the north-south dispute over farm subsidies in 2016. Many countries have turned to bilateral or plurilateral agreements instead. New factors in international trade As well as the steady lowering of tariffs, two additional factors in the growth of world trade since the 1990s need to be mentioned. ■■ Firstly, there has been a rapid increase in the number of regional trade agreements (RTAs), such as the EU, NAFTA, MERCOSUR, ASEAN, APEC and CFTA. An increasing proportion of world trade is being done both inside these large blocs and between them. ■■ Secondly, a significant amount of total world trade is now what is called intra-firm trade. This means that the subsidiaries of one large multinational corporation (MNC), located in different countries, trade with each other. For example, automobile companies like Volkswagen or General Motors could have various components made in different countries, then have them shipped to yet another country where they are assembled. 126 Language skills Extras Explore 10 Trading with the world Nur zu Prüfzwecken – Eigentum des Verlags öbv
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