Question 1

What are the key principles of the multilateral trading system?

Accepted Answer

The multilateral trading system is a framework of rules and agreements that govern international trade between countries. It is based on several key principles that are designed to ensure that trade flows as smoothly, predictably, and freely as possible. These principles are enshrined in the agreements of the World Trade Organization (WTO), which is the primary international body facilitating the multilateral trading system. Here are the key principles:

1. **Non-Discrimination**: This principle is manifested in two major policies:
   - **Most-Favored-Nation (MFN) Treatment**: Under the MFN rule, a WTO member must apply the same conditions on trade with all other WTO members. If a country grants a special favor (such as a lower customs duty rate) to one trading partner, it must do the same for all other WTO members.
   - **National Treatment**: Once goods have entered a market, imported and locally-produced goods should be treated equally. This principle is about treating foreigners and locals as equals.

2. **Reciprocity**: The principle of reciprocity is about mutual concessions in trade negotiations. It ensures that any concession or privilege granted by one country is met with an equivalent or comparable concession by the other countries involved.

3. **Binding and Enforceable Commitments**: The tariffs and other trade-related commitments made by WTO members in a multilateral trade negotiation are legally binding. Governments are required to keep their trade policies within agreed limits to everyone's benefit.

4. **Transparency**: WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, and to respond to requests for information by other members.

5. **Safety Values**: The agreements allow governments to take actions to protect human, animal or plant life or health, to ensure the conservation of exhaustible natural resources, and to protect consumers from deceptive practices. There are provisions in the agreements that allow for exceptions, including for national security and other reasons.

6. **Trade Liberalization**: The system encourages countries to lower trade barriers and to negotiate reciprocal trade terms. Trade liberalization is achieved through successive rounds of trade negotiations aimed at reducing tariffs and non-tariff barriers.

7. **Development and Economic Reform**: The system is designed to contribute to development and economic reform. Special provisions for developing and least-developed countries are included, recognizing their need for a more favorable environment to enhance their trade.

These principles are meant to create a stable and predictable trading environment, which is essential for the promotion of economic growth and development. However, the effectiveness of the multilateral trading system in upholding these principles can be subject to debate, and there are ongoing discussions about how the system can be reformed to better serve the interests of all countries involved.

Question 2

What are deep trade agreements (DTAs), and how do they differ from a standard free trade agreement (FTA)?

Accepted Answer

Deep trade agreements (DTAs) are comprehensive trade agreements that go beyond traditional free trade agreements (FTAs) by including provisions on a wide range of issues such as investment, competition policy, intellectual property rights, and labor and environmental standards. These agreements aim to create a more integrated and harmonized trading environment among participating countries.

One of the key differences between DTAs and FTAs is the scope of coverage. While FTAs primarily focus on reducing tariffs and quotas on goods and services, DTAs also address non-tariff barriers, regulatory issues, and other aspects of trade and investment. This broader scope allows DTAs to have a more significant impact on economic integration and regulatory cooperation among member countries.

Additionally, DTAs often include provisions for dispute settlement mechanisms, which provide a framework for resolving trade-related disputes between member countries. These mechanisms help to ensure that the terms of the agreement are effectively enforced and provide a level of certainty and predictability for businesses operating within the DTA framework.

Overall, DTAs are designed to create a more comprehensive and integrated trading environment compared to traditional FTAs, by addressing a wider range of issues and promoting deeper economic cooperation among participating countries.

Question 3

What is the key difference between multilateral and regional trade agreements?

Accepted Answer

The key difference between multilateral and regional trade agreements lies in their scope and membership.

Multilateral trade agreements are treaties negotiated between three or more countries at a global level. They are designed to facilitate trade and investment by reducing or eliminating tariffs, trade barriers, and import quotas among the member countries. The most prominent example of a multilateral trade agreement is the World Trade Organization (WTO), which has a large number of member countries from around the world, all of whom are subject to the agreements reached under the WTO framework.

Regional trade agreements (RTAs), on the other hand, are treaties between two or more countries within a specific region. These agreements aim to boost trade and economic integration among the participating countries that are in close geographical proximity. RTAs often include free trade agreements (FTAs), customs unions, common markets, and economic unions. Examples of regional trade agreements include the North American Free Trade Agreement (NAFTA), which was replaced by the United States-Mexico-Canada Agreement (USMCA), the European Union (EU), and the Association of Southeast Asian Nations (ASEAN) Free Trade Area.

In summary, the key difference is that multilateral trade agreements have a global focus and include a wide range of countries with diverse economic interests, while regional trade agreements are limited to countries within a particular region, focusing on deepening economic ties and integration among neighboring countries.

Question 4

What does the "financial stability trilemma" suggest?

Accepted Answer

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Question 5

Identify the 5 correct statements 
1. The political trilemma posits that limiting hyper-globalisation is necessary for democratically legitimated global governance.
2. A rise in populism could in history often be observed after (global) financial crises.
3. When a policy of one country has a (spillover) effect on all other countries this clearly calls for global governance.
4. Regional trade agreement are by definition discriminatory.
5. According to the most-favoured nation principle of the multilateral trading system some countries are more favoured than others.
6. A custom union does require rules of origin.
7. A free trade area is welfare reducing when trade diversion exceed trade creation effects.
8. Deep trade agreements (DTAs) cover areas that are not covered also by WTO rules.
9. When an interest rate increase in one country leads to higher interest rates elsewhere, this is a clear case for international coordination.
10. The financial trilemma posits that a highly integrated financial system cannot guarantee financial stability when relying on national supervision.

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1. The...

Question 6

What are the major forms of regional trade agreements and how do they differ?

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Question 7

Which cases clearly call for "global governance"?

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Question 8

Can the recent rise of populism be linked to "globalisation"?

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Question 9

What is the "political trilemma" and what are the arguments behind it?

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Question 10

What are major cases for international coordination in the International Monetary and Financial System (IMFS)?

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Exam 7: Governance in the New Global Economy