Introduction, History

Developed by Adam Smith, it states that a country should produce and export goods it can make more efficiently (using fewer resources) than other countries, and import goods that other countries produce more efficiently

Introduced by David Ricardo (and later refined by John Stuart Mill), it suggests that a country should specialize in producing and exporting goods in which it has the lowest opportunity cost, even if it does not have an absolute advantage in producing them

But Ricardo’s theory shows why specialization makes sense even if a country is not the cheapest overall — as long as it is relatively cheaper.

1. Industrialization / British Age: ~1870 to 1913 (From the Industrial Revolution to the outbreak of World War I)

2. Cold War Era: ~1945 to 1991 (From the end of World War II to the fall of the Soviet Union)

3. Post-Cold War Euphoria: ~1992 to 2008 (From the collapse of the USSR to the global financial crisis)

4. De-Globalization -> Financial Crisis fourth phase: 2008

5. Trade Wars, Covid19, Russia-Ukraine War

1. Early inter-state law and Conference System

2. Industrial Revolution + British trade dominance

3. 1860 Cobden-Chevalier Treaty: tariff cuts, MFN model

4. 1873 recession (silver crash) → trade liberalization slowdown

• Latin American independence (1808–1826) ended colonial rule but led to new economic dependencies.

• Opium Wars with China resulted in unequal treaties favoring Western powers.

• The "Scramble for Africa" (from 1880s) intensified European colonization.

• Gunboat diplomacy / big stick diplomacy: use of military force to secure economic/political interests.

• Unequal treaties imposed special rights for foreigners (e.g. trade, legal immunity).

• Calvo Doctrine: rejected foreign intervention and demanded equal legal treatment.

(1839–1842, 1856–1860):

• Fought between China and Britain (and later other Western countries).

• Britain sold opium to China, and China wanted to stop it.

• Britain used its military power to keep trading.

• China lost and had to sign unfair treaties:

  • Gave land like Hong Kong to Britain.

  • Opened ports for trade.

  • Gave foreigners special rights.

(1880s–early 1900s):

• European countries rushed to take control of land in Africa.

• They wanted resources, power, and markets.

• At the Berlin Conference (1884–85), they agreed how to divide Africa.

• African people were not asked.

• This caused many problems later:

  • Borders cut through tribes.

  • African economies were used for European benefit.

  • People lost freedom and land.

• Bretton Woods Conference 1944 (International Monetary Fund and World Bank)

• GATT 1947

  • Tariff concessions

  • preliminary application (“grandfather clause” for Part II, i.e. substantive provisions of code of conduct)

  • 23 members (“rich countries club”

  • Havana Conference

Havana Conference 1947, Havana Charter 1948

• plans to establish an International Trade Organization (ITO)

• not only for trade but also rules on employment, commodity agreements, restrictive business practices, international investment, and services

• not established due to US abstention

  • US Congress disagreement

    • too protectionist

    • SOME SAID

    • too liberal

• GATT evolved into a de facto-International (Trade) Organization

• Universal most favoured nation principle

• National Treatment

• No increased Trade Barriers

• Tariffs Only

• Regular Negotiations

The “Grandfather Clause” in the context of the GATT 1947 (General Agreement on Tariffs and Trade) refers to an exception rule.

Meaning in the GATT context:

The Grandfather Clause allowed member countries to keep existing national laws or measures, even if they conflicted with the new GATT rules — as long as those measures were already in place before the agreement came into effect.

Uruguay Round (1986-94)

• Background: Deteriorating trade policy environment during 1980s, loopholes in agriculture, rise of trade in services

• Largest trade negotiation ever (123 participating countries in the end)

• Biggest reform of world trading system since GATT 1947 • Covered almost all trade aspects

• 1993: Maastricht Treaty -> Establishment of EU Pillar System, Maastricht criteria

• 1994 Marrakesh Agreement: WTO (replacing GATT as IO)

  
  

• Eradication of extreme poverty and hunger

• Universal primary education

• Promotion of gender equality and empower women

• Reduction of child mortality

• Improving maternal health

• Combatting HIV/AIDS, malaria, and other diseases o Ensuring environmental sustainability

• Developing a global partnership for development

• Gender inequality persists

• Big gaps exist between the poorest and richest households, and between rural and urban areas

• Climate change and environmental degradation undermine progress achieved, and poor people suffer the most

• Conflicts remain the biggest threat to human development

• Millions of poor people still live in poverty and hunger, without access to basic services

17 Sustainable Development Goals and 169 targets

• 5Ps:

  • People

  • Planet

  • Prosperity

  • Peace

  • Partnership

    
    

—> ▪ Trade facilitation (custom procedures,…) ▪ Rules on anti-Dumping, subsidies (fisheries), regional trade agreements ▪ The environment ▪ The WTO dispute settlement mechanism ▪ Improve market access for

• Bilateral trade agreements

  e.g. Agreement on Trade in Wine between EU and Australia, Trade Agreement between US and Israel

• Regional Free Trade Agreements, e.g.

  • NAFTA (was there from 1994 till 2020 between Mexiko, Kanada and the US)

  • MERCOSUR

  • EU

• Multilateral Trade Agreements

  • WTO Agreement & its annexes