Key Takeaways from Trade Lecture

Counterintuitive Idea

• Trade deals aren’t primarily about trade, contrary to common belief.
  • Not mainly about tariffs, quotas, GDP growth, or jobs.

Historical Context

• Modern Era of Free Trade: Began in 1944 at Bretton Woods, New Hampshire.
  • Context: Post-World War II, focused on world peace.
  • Key Idea: Economic interdependence prevents wars.
    • Example: Germany needs France for coal; France needs Germany for steel.
  • Led to the formation of the General Agreement on Tariffs and Trade (GATT) in 1948.

Impact of GATT

• GATT Outcomes: Created globalization, outsourcing, and multinational corporations.
• Economic Growth: Global GDP grew by approximately 7% per year from 1948 to late 1970s.
  • Initially thought this growth would be endless.

Shift in Trade Philosophy

• Late 1970s & 1980s: New Bretton Woods (Uruguay Round) focused on global efficiency.
  • Shift towards non-tariff barriers.
• Definition of Non-Tariff Barriers: Issues inside a country’s borders that affect competition.
  • Example: A product may enter a market without tariffs, but face unfair competition from local subsidized products.

World Trade Organization (WTO)

• Established in 1995: Replaced GATT, continued emphasis on non-tariff barriers.
• Trade agreements influenced by the need for uniform domestic policies across nations to promote global efficiency.

Modern Trade Discussions

• Shift in trade discussions from GDP/job growth to national sovereignty, environmental regulations, and welfare.
  • Example 1: U.S. vs Europe on GM beef—dispute over local rules vs global efficiency.
  • Example 2: U.S. dolphin-free tuna regulations impacting Mexican fishermen—WTO agreed on unfair discrimination.

Current Trade Landscape

• Confusion in national trade discussions.
  • Candidates support free trade but oppose big agreements like the Trans-Pacific Partnership (TPP).
  • Organizations (AARP, Sierra Club, etc.) oppose aspects of trade agreements.

Conclusion

• Trade involves discussions about rules and global standards, not just trade itself.
• Importance of defining the rules we want to set for global trade.
  • Question posed: Do we prioritize global efficiency or global prosperity for ordinary people?
• Emphasizes that the rules we create shape the global economy we live in.