Lecture Three

World Economy and

International Trade and
Sustainable Development

Prof. Adel Al-Senn

 In this lecture we`ll discuss the
following topics:
1- International 2- General 3- Dumping and
trade Agreement on Anti-dumping
relations Tariffs and Trade Measures
4- International
Trade and 5- Multinational
Sustainable corporation
Development
 International economic relations

International International International

trade monetary financial
relations relations relations
 First: International trade
relations
Studying the exchange of goods
and services in the form of exports
and imports between different
Countries
 1. International Trade
International trade is the trade between different countries.

International trade on large scale has become a

phenomenon of the 20th century especially after the Second
World War.

There is practically no country today is functioning as a

closed system.
 1. International Trade
Trade :(goods and services)WTO‫اﺣﻔظ اﻟﺗوارﯾﺦ‬- ‫ﺣد‬، ‫ ﺧﻣﯾس‬، ‫ﺧﻣﯾس‬-Restrictions (quota ,tax)Liberalization (elimination,reduction )Free (elimination of
both)Finance:(investments)‫اﻟﺑﻧك اﻟدوﻟﻰ‬Direct investment (capital)Indirect (stokes and shares ) Moinatery(national and foriegn currencies )

International trade, thus, has become as essential ingredient

of the normal economic life of any country.

In terms of economic development, international trade is a

potentially effective engine of growth.
 2. Benefits of International Trade for Developing
Countries

a. Trade enhances competitiveness by helping developing

countries reduce the cost of inputs, acquire finance through
investments, increase the value added of their products.
b. Trade can help boost development and reduce poverty by
generating growth through increased commercial
opportunities and investment.
c. Trade facilitates export diversification by allowing
developing countries to access new markets and new
materials which open up new production possibilities.
 d. Trade encourages innovation by facilitating exchange of
know-how, technology and investment in research and
development, through foreign direct investment.

e. Trade openness expands business opportunities for local

companies by opening up new markets, removing
unnecessary barriers and making it easier for them to
export.
f. Trade expands choice and lowers prices for consumers by
broadening supply sources of goods and services, and
strengthening competition.

g. Trade creates employment opportunities by boosting

economic sectors that create stable jobs and usually higher
incomes, thus improving the standard of living.
 3. Trade Barriers
Trade barriers are measures that governments or public
authorities introduce to make imported goods or services
less competitive than domestically produced goods and
services.
Types of Trade Barriers:

Tariff Quota Embargo

Voluntary Export
Restraint (VER):
 3. Trade Barriers

A- Tariff: Is a tax on imported good or service

which increases the price of the imported
products.

B- Quota: Is a limit on the quantity that can be

imported. Imposing quota on imports creates a
shortage of the good in the domestic economy which
allows its price to rise and domestic producers to
expand in its production.
C- Embargo: a ban on trade with a country or a group of
countries, usually for political reasons.

D- Voluntary Export Restraint (VER): a limit on the quantity

of a good that can be exported from a country during a
specified time period. It limits the quantity of a good that can
be exported from a country during a specific time period. It
is considered as an export quota.
It is usually established upon the request of the importing
country. It is designed to avoid tougher restrictions, such
as tariffs or import quotas. For example, Japan imposed a
VER on its automobile shipments to the United States in
the 1980s when faced with U.S. threats to restrict
Japanese auto imports.
 The Four Forms of Trade
Policy:
Free Trade

Trade Liberalization (reduced tariffs and elimination of

non-tariffs)

Trade Restriction( high tariffs and imposed

quota)

Embargo (prohibihited trade)

 Trade Barriers Pros and Cons

Trade Barrier Benefits Costs

Protective • Saves jobs in protected industries. • Raises prices for domestic

tariff • Reduces competition in protected consumers.
industries.
• Raises revenue for government.
Import quota • Saves jobs in protected industries. • Limits product choices for
• Reduces competition in protected consumers.
industries. • Raises prices for domestic
consumers.
Trade embargo • May bring about policy changes in • May lead to economic hardship for
targeted country. people in targeted country.
Voluntary • Reduces risk of trade restrictions • Hurting domestic producers by
Export being imposed by another country. limiting their foreign sales.
Restraint (VER)
 Second: General
Agreement on Tariffs and
Trade
23 countries signed the general agreement on tariffs
and trade on 30th Oct. 1947
GATT entered into force from 1st January 1948.

GATT is a multilateral trade agreement including mutual

rights and obligations in the field of international trade
between contracting parties signed on the agreement
 General Agreement on Tariffs and Trade (GATT )
Has founded
Multilateral Trading system (1st January 1948 – 1995)

Liberalization Elimination of
Reduction of
of trade quantitative
tariffs
restrictions
 GATT Principles
First Principle: General Second Principle: National
Most-Favored-Nation treatment on internal
Treatment taxation and regulation
Third Principle: General elimination
of quantitative restrictions: Fourth Principle: Tariff
Protecting the domestic industry by Negotiations: reciprocity
tariffs only

Tariffs should be reduced and bound against further increases

 Eight rounds were held,
the last on was Uruguay Round (1986 to 1993)

Year Place/Name Countries

1947 Geneva 23
1949 Annecy 13
1951 Torquay 38
1956 Geneva 26
The GATT 1960 - 1961 Geneva (Dillon Round) 26

rounds 1964 – 1967 Geneva (Kennedy Round) 62

1973 – 1979 Tokyo Round 102

1986 - 1994 Uruguay Round 125

 WTO is the most important results of
the Uruguay Round In addition to 17
agreements that form the basis of
the world trading system
Sunday 1ST of January 1995
125 countries signed on WTO agreement

Intellectual
Trade Policy
Trade in Trade in Disputes property
Review
goods services Settlement rights
Mechanism
(TIPRs)
 General Agreement General Agreement on Tariffs
and Trade (GATT) and World Trade Organization
(WTO)
1. General Agreement General Agreement on Tariffs and Trade
(GATT):
On Thursday 30 October 1947, 23 countries signed the GATT
included two Arab countries (Syria and Lebanon).
The target of GATT was the liberalization of trade on goods
only through reduced tariffs and elimination of nontariffs.

Gatt articles: 36 articles.

The GATT held 8 rounds during the period of first January
1948 (the date of entering into force) until first January 1995
(the date of the entrance into force of the WTO)

The last round for the GATT called Uruguay

round.
 The important outcomes of Uruguay round are:

1. Establishing WTO.

2. Enhancement liberalization of trade in 3 fields (trade in

goods, services, and intellectual property rights) through
WTO.

The countries joined the GATT called contracting parties but

the countries joined WTO called members.
2. World Trade Organization (WTO):

The objective of WTO is to enhance liberalization of trade in

3 fields (trade in goods, services, and intellectual property
rights).

The number of countries signed WTO were 125 and became

now 164 including 13 Arab countries.

WTO held 12 conferences.

 3. Free Trade and Fair Trade

Fair trade
Free trade (encouragement
(encouragement )
) Unfair trade
(condemned )
Increased imports of certain products may cause
serious injury to the domestic industry of identical or
similar products in the importing country.

The increase in injurious imports is due to the unfair

trade practices of the exporters or their countries.
Third: Dumping and Anti-
dumping Measures
 What is Dumping?

Dumping is, in general, “a situation of international price

discrimination, where the price of a product when sold in
the importing country is less than the price of that product
in the market of the exporting country.” World Trade
Organization (WTO)

The Uruguay Round negotiations resulted in the Agreement

on anti-dumping practices.
 Conditions for imposing anti-dumping measures:

Three conditions must be combined to impose anti-dumping

duties:

1- The occurrence of an event of

dumping.
2- Occurrence of material damage to a local industry that
produces products similar to dumped imports.
if i do not produce iphone , it is not dumping ,
as it is not a local industry(no similar products)
3- The dumped imports are the reason for the material injury.
may be the quality of the similar products in my
country is bad , so the dumping is not the cause, no
That is, there is a causal
relationship between dumping and
injury to the local industry.
 What is Normal Value? , we check them in Order ,:!!!

The product is dumped - that is, the case of dumping occurs

when:

1- If the price of its export is less than the selling price of the
similar product when it is consumed in the country of its
export.
 What is Normal Value?

2- Or less than the price of a similar product when exported

to a third country.

3- Or less than the cost of production in the country of origin

plus the costs of management, selling and profits.
So, dumping is not a commodity,
but it is related to the price at first.
but its duties are not

When the situation of dumping occurs,

we are in the process of what is called
“the margin of dumping”.
The margin of dumping is
determined by the amount of the
export price of the product less
than its normal value.
we apply imposing anti-dumping duties , to raise the price to = normal
value
A) The existence of harm to the local industry in the
importing country:

“Determination of Injury”

In order to impose anti-dumping measures,

there must be injury to a domestic industry that
produces products similar to dumped imports.
In the event that imports of a particular
product from more than one country are
subject to anti-dumping investigations, the
investigation authorities may prepare a
cumulatively assessment of the effects of
these imports from all countries, subject
to two conditions:
 1- That the
2- And that the
margin of
volume of
dumping for
imports from
imports from
each country is
each country
not a negligible
exceeds a small
quantity
amount “de
minimis”
B) The existence of a causal relationship between the
dumped imports and the existence of the damage:
It must be shown that the dumped imports directly caused
injury to the relevant domestic industry. “Causal
Relationship”.

Examples of factors causing damage that are not due to

dumping:

1- Changes in consumption patterns

2- Advances in technology and production

Types of anti-dumping measures:

1- Provisional measures.

2- Price Undertakings.

3- Imposing anti-dumping duties.

1- provisional measures

The imposition of a temporary fee or

guarantee by the importing country
by a cash deposit or a bond.
Fact :shows the info given
Issue : accumulative assesment
Rule : 2 rules and 5 percent law
Application : reuslts
conclusion
2- Price Undertakings:

The importing country can suspend or terminate the

proceedings without imposing provisional measures or
anti-dumping duties.

If he receives satisfactory voluntary undertakings from

the exporting country, to revise his prices or stop his
exports to that country at dumping prices.
2- Price Undertakings:

Price Undertakings are proposed by the authorities of

the importing country, but the exporting country will not
be forced to implement these commitments
3- Imposition and Collection of Anti-
dumping Duties:

The amount of the anti-dumping

duty shall not exceed the margin
of dumping resulting from the
investigations.
1- The anti-dumping duty shall not remain in force except to
counter dumping that causes injury.

2- The responsible authorities in the importing country

should review the need for the continued imposition of this
fee.

3- If, as a result of the review, these authorities consider that

these measures are no longer necessary, this fee should be
terminated.
 Sunset clause:
Under this condition, any anti-
dumping duty shall be
automatically terminated no
later than five years from the
date of its imposition or the
date of the last revision.
Fourth: International Trade
and Sustainable
Development
International trade has substantial influences on
global sustainability and human well-being as
follows:

1. Trade barriers can have a tremendous effect on

sustainable growth everywhere, especially in developing
countries. For example, the agricultural subsidies of
developed countries distort international food trade and
deny many developing countries what should be the
benefits of their comparative advantages in agricultural
trade barriers : good for devoloing countries
production. agriculture
International trade has substantial influences on
global sustainability and human well-being as follows:

2. Lowering trade barriers can contribute to achieving the

goal of ending poverty.

3. Lowering food export restrictions can help achieve the

goal of ending hunger.
 lowering barriers not trade !!!!!!!!!!!!!!

4. Lowering barriers to trade in pharmaceuticals and other

medical goods can help achieve the goal of health and
wellbeing.

5. Building on existing efforts to engage more women in

trade can help achieve the goal of gender equity.

6. Trade can drive economic growth, job creation and

poverty alleviation, especially when it translates into
economic diversification.
trade :poverty alleviation
lower trade barriers : end poverty
7. Trade has a crucial role to support adoption and
mitigation to climate change. Trade in environmental
goods and services should be enhanced by
eliminating tariffs and implementing best practices
trade facilitation measures.
Fifth: Multinational
corporation
 Multinational corporation can be defined as:

A major company with a certain nationality called the Parent

corporation

which has several branches, affiliates or nascent with

various nationalities, each has its own business in another
country outside the homeland.

under the control of the parent corporation that manages all

these businesses within a unified international production
strategy frame.
Based on this definition, it is clear that
multinational corporations are:

1- Huge units which magnitude can be measured through

several factors, including capital, employment, volume of
production, total revenue, added value, turnover (sales), and
the market value of companies and investments.

2- Their activities are carried out in large markets in multiple

countries.
3- Their strategies and decisions are international in nature.

4- They have the freedom to move and transfer resources

and production elements including, capital and labor, and on
this regard, they are independent from national or supra-
national entities.

5- They contribute to transfer technology among different

countries. INTELLECTUAL PROPERTY
 The Legal methods to form
Transnational Corporations
The Methods of formation of transnational Corporations
are: or large monopoly power

First: The international merger of Corporations to form a

large monopoly power.

Second: The formation of nascent companies spread at

the global level
 The Legal methods to form
Transnational Corporations

Third: Controlling of existing companies by

purchasing a large portion of their
shares.(Acquisition)
 The concept of merger and its types

Merger in the legal sense is the "company perish

(erase) or more in another company, or perish two
companies or more and the emergence of a new
company transferred to the Financial disclosure of
the companies that were perished
EACH COMPANY HAS PROPERTIES LIkE ITS nationality ,OWN LEGAL PERSONALITY AND FINANCIAL DISCLOSURE
MERGING :ENDS AT LEAST ONE COMPANY PROPERTIES or both
Aquisition : keep the legal personality but shares in the financial disclosure

It is clear from this definition that a merger can

take place in one of two ways.
• The first is merger by way of swallowing or
annexation, where one or more companies
perish in another existing company,
meaning that one company remains in
existence and the other companies are
swallowed up. A+B = A
• The second is merging by blending
(mixture) whereby the companies that are
merged perish and a new company is
established, to which the Financial
disclosure of the companies that have
been perish will be transferred A+B=C
It is noticed that merger by way of swallowing or
annexation is the most common in the capitalist
world due to the high costs of the merger process
by mixing, as this method requires the dissolution
of all companies that are merged and the formation
of a new company, with all the exorbitant costs
imposed by these operations in addition to the tax
burden resulting from an increase The volume of
assets transferred to the new company and for
which many taxes and fees are imposed.
The difference in the merger in the legal
sense from other operations that
perform the same economic functions. which is a large monopoly
power

whatever the way of the merger takes place, it necessarily

presupposes perish at least one company, and the
transfer of its Financial disclosure to another company,
and it also assumes the transfer of the shareholders of the
company that perished to the company benefiting from the
merger , in addition to the termination of the legal
personality of the merging company.
In this regard, merger differs in the legal concept
from other processes that may be similar to it, and
which perform the same economic functions.
If a company acquires most or even all of the
shares of another company, then this process
is not considered a merger, and all that entails
is converting the company whose shares are
acquired into a nascent or subsidiary company
of the owner company. This process is called
acquisition. acquisition is forming nascent
 merger is not industrial assets

Likewise, a merger is not considered a process

whereby a company transfers its industrial
assets, for example, to one or more existing
companies, while continuing to remain as a
holding company that has no activity other than
managing the shares it owns in the received
company and exercising its control over it.
Economists often call all these processes
merger. That is, what economists mean in this
field is the unity of the economic project.
 because all has the same goal

Every process that brings together similar or

integrated economic projects under a unified
economic management is considered for them a
merger, whatever the legal instrument with
which this process takes place, and whether it
is a merger in the proper legal sense, or the
creation of a group of companies ... etc.
In fact, this mixing is due to the fact that
merger in the proper legal sense - performs
the same economic functions performed by
these different processes Which is similar
with it, as it is, like it, one of the most
important tools of capitalist concentration.
The merger has played historically
important role in the formation of
major projects and contributed
significantly to the formation of the
monopolistic nature of the capitalist
market.