Question

1. Advantages of Euro
2. Discuss treaty of Maastrich, EU and NAFTA
3. What is the rational for Govt intervention in trade & investment?
4. List and describe the non-tariff barriers related to price influence and related to quantity control
5. Define dumping
6. Briefly discuss GATT & WTO

Answer 1

The benefits of the euro are diverse and are felt on different scales, from individuals and businesses to whole economies. They include:

More choice and stable prices for consumers and citizens
Greater security and more opportunities for businesses and markets
Improved economic stability and growth
More integrated financial markets
A stronger presence for the EU in the global economy
A tangible sign of a European identity

1. It established the European Union
The Maastricht Treaty, officially known as the Treaty on European Union, marked the beginning of “a new stage in the process of creating an ever closer union among the peoples of Europe”. It laid the foundations for a single currency, the euro, and significantly expanded cooperation between European countries in a number of new areas:

European citizenship was created, allowing citizens to reside in and move freely between Member States
a common foreign and security policy was established
closer cooperation between police and the judiciary in criminal matters was agreed
The Treaty was signed in the Dutch city of Maastricht, which lies close to the borders with Belgium and Germany. It was the result of several years of discussions between governments on deepening European integration.

2. It was signed by 12 countries
Representatives from 12 countries signed the Treaty on 7 February 1992 – Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and the United Kingdom.

The parliaments in each country then ratified the Treaty, in some cases holding referendums. The Maastricht Treaty officially came into force on 1 November 1993 and the European Union was officially established.

Since then, a further 16 countries have joined the EU and adopted the rules set out in the Maastricht Treaty or in the treaties that followed later.

3. It laid the foundations for the euro
The Maastricht Treaty paved the way for the creation of a single European currency – the euro. It was the culmination of several decades of debate on increasing economic cooperation in Europe. The Treaty also established the European Central Bank (ECB) and the European System of Central Banks and describes their objectives. The main objective for the ECB is to maintain price stability, i.e. to safeguard the value of the euro.

The idea of a single currency for Europe was first proposed in the early 1960s by the European Commission. However, an unstable economic landscape in the 1970s meant that the project was brought to a halt.

European leaders revived the idea of a single currency in 1986 and committed to a three-stage transition process in 1989. The Maastricht Treaty formally established these stages:

Stage 1 (from 1 July 1990 to 31 December 1993): introduction of free movement of capital between Member States
Stage 2 (from 1 January 1994 to 31 December 1998): increased cooperation between national central banks and the increased alignment of Member States’ economic policies
Stage 3 (from 1 January 1999 to today): gradual introduction of the euro together with the implementation of a single monetary policy, for which the ECB is responsible
4. It introduced the criteria that countries must meet to join the euro
Along with setting out the timeline for the introduction of the single currency, the Treaty also established rules on how the euro would work in practice. This included how to determine if countries were ready to join the euro.

The purpose of these particular rules, sometimes referred to as the Maastricht criteria or the convergence criteria, is to ensure price stability is maintained in the euro area even when new countries join the currency. The rules work to ensure that countries joining are stable in the following areas:

inflation
levels of public debt
interest rates
exchange rate
5. It was a giant leap forward for European integration
Since the signing of the Maastricht Treaty, European countries have grown closer together while some policy areas such as economic and fiscal policies remain at national level. European leaders have agreed on additional steps to promote further integration between European states:

the Stability and Growth Pact was agreed in 1997 to ensure that countries followed sound budgetary policies
the European Stability Mechanism was established to provide financial assistance to euro area countries experiencing or threatened by severe financing problems
the Single Supervisory Mechanism and the Single Resolution Board were created after the financial crisis to make the European banking system safer, as well as to increase financial integration and stability
Today, more than 440 million citizens from 27 Member States enjoy the benefits of European cooperation. And 25 years after the roadmap towards the euro was agreed, the euro has become the world’s second most traded currency and is part of the daily life of 340 million citizens in 19 countries.

Governments erect trade barriers and intervene in other ways that restrict or alter free trade. Protectionism refers to trade and investment barriers applied with the aim of defending domestic markets and industries. Tariffs and nontariff trade barriers are the main instruments of protectionism. A tariff is a tax imposed by government on imported goods. Tariffs have fallen over time, but many high in many countries. Nontariff trade barriers are government policies or measures that restrict trade without imposing a direct tariff or duty. Subsidies are financial or other resources that a government provides to a firm or group of firms. Governments undertake intervention to achieve several goals, including: to generate revenue, to achieve policy objectives, and to protect or support the nation's citizens or private firms.

Non-Tariff Barriers
Trade barriers that restrict the import or export of goods through means other than tariffs
Home › Resources › Knowledge › Economics › Non-Tariff Barriers
What are Non-Tariff Barriers?
Non-tariff barriers are trade barriers that restrict the import or export of goods through means other than tariffs. The World Trade Organization (WTO) identifies various non-tariff barriers to trade, including import licensing, pre-shipment inspections, rules of origin, custom delayers, and other mechanisms that prevent or restrict trade.

Non-Tariff Barriers

Developed countries use non-tariff barriers as an economic strategy to control the level of trade they conduct with other countries. When making decisions on the non-tariff barriers to implement in international trade, countries base the barriers on the availability of goods and services for import and export, as well as the existing political alliances with other trade partners.

Developed countries may elect to release other countries from being subjected to additional taxes on imported or exported goods, and instead create other non-tariff barriers with a different monetary effect.

Types of Non-Tariff Barriers
Non-tariff barriers may take the following forms:

1. Protectionist barriers
Protectionist barriers are designed to protect certain sectors of domestic industries at the expense of other countries. The restrictions make it difficult for other countries to compete favorably with locally produced goods and services. The barriers may take the form of licensing requirements, allocation of quotas, antidumping duties, import deposits, etc.

2. Assistive policies
Although assistive policies are designed to protect domestic companies and enterprises, they do not directly restrict trade with other countries, but they implement actions that can restrict free trade with other countries. Examples of assistive barriers include custom procedures, packaging and labeling requirements, technical standards and norms, sanitary standards, etc.

International companies must meet the requirements before they can be allowed to export or import certain goods into the market. The governments also help domestic companies by providing subsidies and bailouts so that they can be competitive in the domestic and international markets.

3. Non-protectionist policies
Non-protectionist policies are not designed to directly restrict the import or export of goods and services, but the overall outcomes lead to free trade restrictions. The policies are primarily designed to protect the health and safety of people and animals while maintaining the integrity of the environment.

Examples of non-protectionist policies include licensing, packaging and labeling requirements, plant and animal inspections, import bans for specific fishing or harvesting methods, sanitary rules, etc.

Examples of Non-Tariff Barriers

1. Licenses
Licenses are one of the most common instruments that most countries use to regulate the importation of goods. The license system allows authorized companies to import specific commodities that are included in the list of licensed goods.

Product licenses can either be a general license or a one-time license. The general license allows importation and exportation of permitted goods for a specified period. The one-time license allows a specific product importer to import a specified quantity of the product, and it specifies the cost, country of origin, and the customs point through which the importation will be carried out.

2. Quotas
Quotas are quantitative restrictions that are imposed on imports and exports of a specific product for a specified period. Countries use quotas as directive forms of administrative regulation of foreign trade, and it narrows down the range of countries where firms can trade certain commodities. It caps the number of goods that can be imported or exported at any given time.

3. Embargoes
Embargoes are total bans of trade on specific commodities and may be imposed on imports or exports of specific goods that are supplied to or from specific countries. They are considered legal barriers to trade, and governments may implement such measures to achieve specific economic and political goals.

4. Import deposit
Import deposit is a form of foreign trade regulation that requires importers to pay the central bank of the country a specified sum of money for a definite period. The amount paid should be equal to the cost of imported goods.

Dumping is a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market. Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturer or producer in the importing nation.Dumping is considered a form of price discrimination. It occurs when a manufacturer lowers the price of an item entering a foreign market to a level that is less than the price paid by domestic customers in the originating country. The practice is considered intentional with the goal of obtaining a competitive advantage in the importing market.

The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. The agreement was designed to provide an international forum that encouraged free trade between member states by regulating and reducing tariffs on traded goods and by providing a common mechanism for resolving trade disputes. GATT membership now includes more than 110 countries.
Consideration of GATT's relationship to environmental policy is an emerging concern in trade and environmental policy circles. Until the recently concluded Uruguay Round of GATT negotiations, the word environment did not appear in the GATT text. Several provisions and sections of GATT may be relevant to environmental issues, however. The following sections of GATT are often referenced in the examination of trade-environment issues.

The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system.