Read the summary and the most important questions on The WTO and preferential trade agreements: From co-existence to coherence

• 1 Balance of payments

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• Case 6. Balance of payments crisis.When does a country have a Balance of Payments crisis?

  This is the case when you import more than export ( Q > X), so a deficit. And no other country wants to lend you money because of the lack of trust. 

• Case 5. Financial AccountYour country has a Financial Account surplus: What does that mean?

  When there is an surplus it means that the Exports > Imports. Since the Balance of payments always needs to be in equilibrium, capital will be lend out to other countries.

• Case 3 balance of payments.Can your country have a balance of payments deficit?

  This is not possible since this always should be in equilibrium. For example when a country imports more than it exports, a trade balance deficit will arise. However since the balance of payments should always be in equilibrium, the country will attract foreign capital ( loans) to pay the extra imports. Therefor it is not possible for a country to have a balance of payments deficit. This also goes the other way around, so an balance of payments surplus is also not possible. 

• Your country has a trade deficit (its trade balance is in deficit): 1)   Do you need  foreign currency or do you have a surplus of foreign currency? 2)   Is there is more money going out than into the country through trade?    

  1) First of there is a trade deficit which means that the imports are larger than the exports ( X<Q)  Yes, you need foreign currency because more money is going out.

• 2.1 WTO

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• Which organisations are concerned with which barriers to trade?

  1. Classical -> WTO
     
  2. Physical/Customs/Normative -> WTO
  3. Fiscal -> No global organisation
  4. Monetary -> IMF
     
  5. Cultural -> UN/OECD/IMF/WTO/CCI
     
  6. Development/Income/Poverty Barrier -> WB

• What are the different decision making procedures?

  1. Unanimity -> everyone has to agree
     
  2. Consensus -> Basically the same as unanimity but in this case voters have the option to vote blank. (Still everyone can veto by voting against) -> Used by the WTO
  3. Vote by majority ( can be half but also 2/3 etc.)
  4. Vote by qualified majority (qualify each member and give them voting power accordingly. (e.g. EU, weight of vote depends on population of country)

• 3 Forms of membership

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• Why is it difficult to create a customs Union?

  Difficult to create a common tariff agreement ( for customs union) because of the different production costs for the products thats why it is so hard to become a customs union.

• What is a common market?

  Customs union + certain degree of free movement of capital and labour also reduce normative barriers and fiscal barriers. Don't remove customs control because countries have different norms

• 4 Cases Trade

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• Case 1 In the EU there are rules for the marketing of baby food jars to ensure their quality. The requirements are: such products should be sold in glass jars and their labeling should clearly indicate the jar contents and expiration date. In the U.S. there are no requirements regarding the jar but the label must also indicate the number of kilocalories. In China there are no specific regulations on the marketing of baby food jars. Are all these requirements valid?    

  1. In china there are less quality requirements then in the U.S. & EU

  Differences of requirements can be due to the changes in development . e.g. In the case perhaps China is more focused on to even just feed children. 

  
  

  2. Also developed countries know how to meet the requirements.

  
  

  Cultural norms are different between countries. Normative barriers has a biases in favor of the developed countries--> changes in trade

• Case 2. U.S. baned imports of Mexican tuna because Mexicans used fishing nets that failed to protect dolphins and therefore disregarded the US law to preserve American dolphins. Is that normative barrier protectionist?

  For a norm not to be protectionistic, the norm must be necessary to protect it's individuals within the country. This also should be non-disciminatory, should apply for the domestic and foreign producers.