Tpp Questions

In a diet speech of January 24, 2011, former prime minister Kan proclaimed that Japan would and should participate to the Trans-Pacific Strategic Economic Partnership. This proclamation raised an unusual controversy among Japanese, not only those policy people and media people, but among wide range of people in industry, agriculture, medicine and even writers. The controversy continued until prime minister Noda decided that the Government would start to negotiate with TPP countries on November 11, 2011. Mass media stopped to treat the question on every-day basis but the opposition movements continued. Recently Mr. Noda revealed that he will not discuss TPP question at the coming talk with U.S. President Obama on April 30.

The list of used basic literature:

1. Oatley T. International Political Economy / Thomas Oatley. – fifth edition- Boston: Longman, 2012- 416 p.

2. Pugel T.A. International Economics: / Thomas A. Pugel – fifteenth edition – New York: McGraw-Hill, 2012 – 770 p.

3. King P. International Economics, Globalization and Policy: a reader / Philip King, Sharmila King - fifth edition - New York: McGraw-Hill, 2009 – 376 p.

4. Feenstra R.C. (2004), Advanced International Trade. Theory and Evidence, Princeton University Press.

5. James Rauch (2008). "growth and international trade," The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.

6. M. June Flanders (2008). "international economics, history of," The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.

7. Reuven Glick (2008). "macroeconomic effects of international trade" The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.

8. Smith, Charles (2007). International Trade and Globalisation, 3rd edition. Stocksfield: Anforme. ISBN 1-905504-10-1.

9. Stanley W. Black (2008). "international monetary institutions," The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.

10. Paul R. Krugman International Economics: theory and policy: / Paul R. Krugman – seventh edition- Boston: 2006

11. Cr. W. Kegley American Foreign Policy: pattern and process / Cr. W. Kegley – 2009

12. Caves R.E. World Trade and Payments: an introduction / Caves R.E. – Boston, 2007

Theme of the lecture № 7. The foreign trade and economic policy of developing countries

1. Trade Policy of Latin American countries

2. Trade Policy of BRICS countries

3. Trade Policy of Turkey

1. Trade Policy of Latin American countries

During the 80’s and 90’s, a tremendous movement toward free trade in Latin America occurred. This change in trade policies has resulted from a number of factors. First, earlier attempts at trade reform did not include radical changes in trade philosophies toward trade liberalization and these policies did not achieve the success that many of these countries had hoped. Secondly, research has long shown a significant benefit from a liberalized trade policy. Third, Southeast Asia was experiencing a great deal of benefits from their liberalized trade policies, and therefore, Latin American needed to move towards a more open economy to compete with Southeast Asia. Fourth and finally, the World Bank used monetary incentives to encourage greater openness in trade policies for Latin American countries. As a result, Latin America has seen a steady decline in tariff rates and the abolishment of a number of trade barriers. In this section, the transition of the various Latin American governments is described. This discussion is not an all-inclusive discussion, as it only highlights selected countries.

Comments and observations regarding foreign policy as contained herein are those of the study consultants and are not necessarily shared by the Federal Highway Administration or any other Alliance member.

ARGENTINA

Argentina has experienced strong growth in their economy in the last decade as the result of their efforts to reduce inflation and creating a stable currency. Like many Latin American countries, this stability has been achieved through establishing a fixed exchange rate, reducing inflation, and through the privatization of a number of government agencies. As a result, Argentina has created stability within the economy that represents an attractive trading partner for the U.S.. By 1995, the U.S. exports totaled nearly $4.5 billion and the U.S. imports totaled $2.3 billion. With its transition to a more market based economy, Argentina has created a more open economy with less barriers to trade. Argentina, along with a number of South American countries, established the Mercosur Agreement in 1991 with common tariff rates that ranges from 0 to 20 percent for different goods. This and other agreements involving Argentina have helped reduce the average tariff rates to all countries to less than 10 percent and has helped abolish the import licensing system. As part of these agreements, greater flexibility in the financial service industry has also occurred.

However, a number of barriers still exist, especially for the U.S.. Duties have been placed on a number of goods including automobiles, textiles, and apparel. In addition, heavy tariffs and quotas have been established for specific industries including the automobile assembly industry. In order to become a truly open economy, these issues need to be addressed.

BRAZIL

In the past, Brazil’s economy has been marred by high inflation and instability. As late as July of 1994, inflation was as high as 50 percent per month. Recently, however, a major reconstruction of the economy has occurred including the privatization of a number of public agencies, the reduction of market barriers, the provision of a stable currency, and the attraction of foreign investments and foreign currency by maintaining high real interest rates. Together, these policies have managed to gain a stable and prospering economy with inflation rates as low as 1 percent per month.

However, these reforms have resulted in large fiscal deficits for the central government and have contributed to a negative trade balance. In order to work toward a balanced fiscal budget, the government has instituted limitations on spending that has severely reduced discretionary spending, which may have long term consequences with an under-investment in infrastructure. In hopes of reducing trade deficits, a number of trade barriers, including tariffs, quotas, duties, import licensing, and discriminatory governmental policies have been instituted. Each of these policies has led to significant barriers to trade. For example, tariff rates as high as 70 percent on some goods (including automobiles, motorcycles, and shoes) have made imported goods very expensive and reduced the demand for these goods.2 Quotas have also been used to reduce trade barriers for certain industrial goods (including automobiles) and on informatics products. In addition, discriminatory government procurement policies remain a barrier to trade for U.S.. producers. Other government policies that have created strong barriers are the sanitary and phytosanitary standards for agriculture products including chicken, beef, and sheep. While recent agreements have been made in regard to the trade of fruit, and grain between the U.S. and Brazil, there are still significant barriers to trade for these products .

Trade in the service industry has been limited by foreign capital restrictions provided under the 1988 Constitution. Furthermore, foreign legal services including accounting, management consulting, architectural, and engineering have been hindered by forced local partnerships and limitations on foreign directorship. Together, these policies have created significant barriers of trade to one of the largest Latin American economies.

The Brazilian government has also tried to reduce the trade deficit by encouraging exports through a subsidization policy. The Brazilian government has offered incentives such as tax and tariff exemptions for equipment and materials imported for the production of goods for export. Other incentives include excise and sales tax exemptions on exported goods, excise tax rebates on materials used in manufacturing export products, interest rate guarantees that allows exporters to gain financing rates that at world market rates, and incentives that allow exporters to be exempt from certain taxes. These subsidies, along with the practices of imported goods, present a barrier to free trade between the

U.S. and Brazil.

On a positive note, Brazil has been part of a number of trade agreements. For example, Brazil is part of the Southern Common Market (Mercosur) partners, which has caused Brazil to lower their tariffs with member countries that averaged 14 percent in 1995. Other agreements have been in the works with other Latin American countries that should reduce the barriers among Latin American countries, but will maintain substantially high barriers for trade with the U.S.. However, the negotiation of agreements is a positive sign for a reduction of barriers and may allow the U.S. to tap into this large Brazilian market in the future.

MEXICO

Mexico is one of U.S.’s strongest trading partners in the world and there are a number of reasons for this strong relationship. First and foremost is its proximity. Second is its market size. Mexico has one of the largest markets in Latin America with a nominal GDP of $328 billion in 1996. A third reason for the strong relationship is NAFTA.

NAFTA has made a number of significant changes to the trading relationship with the U.S.. As part of the agreement, several industrial tariffs and most agricultural tariffs are in the process of being eliminated. These tariffs are to be eliminated over a 10 year period, with the remaining tariffs eliminated in the following 5 year period. In addition to industrial exports, NAFTA has also created greater access to a number of service industries including Insurance, Telecommunications, and Financial Services. Furthermore, Mexico has committed itself to the highest level of protection of intellectual property rights. Finally, U.S. firms have been given greater access to the governmental procurement market in Mexico. While NAFTA has been highly important to the development of trade for Mexico, other trade agreements have also been important including GATT and WTO. Each of these agreements has created a greater push toward the elimination of licensing requirements. However, Mexico still requires licenses for nearly 200 products, in which most of them are agriculture products. For instance, exporters have experienced a number of problems in gaining licensees for construction grade lumber. In addition, many products are required to have certificates of origin, with the intention of eliminating apparel and footwear produced in China.

This certificate of origin has created a number of problems for U.S. producers who use Chinese producers as part of their production process. The problems of trade with Mexico does not stop there. U.S. exporters have also complained about the extensive customs procedures that have reduced the efficiency of exporting to the Mexican market. These procedures seem to be targeted towards textiles, footwear, beer, and consumer electronics. Finally, phytosanitary standards have also affected the exportation of grains, citrus, cherries, and cling peaches. While there are a number of barriers to trade with Mexico, it is a relationship that continues to grow through international negotiation. Critical to the future growth of the relationship is the continued growth of the Mexican economy. Mexico is continuing to recover from the 1994 currency crisis that required U.S. intervention. Due to the currency crisis, Mexico moved from an exchange rate band mechanism to a free floating exchange rate with only an occasional intervention by the Central Bank of Mexico. Mexico has also undergone a privatization movement that should pay off dividends in the future in terms of economic growth. Through their efforts of strengthen the economy and reducing their trade barriers, Mexico should continue to grow as a trading partner.