POLS 1500 Lecture Notes - Doha Development Round, John Maynard Keynes, Most Favoured Nation

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POLS1500 Oct 4, 2012
Global trade and finance
International political economy (origin of poli-sci studies)
The two way relationship between international politics and
international economics
Focuses on trade an financial transactions across borders
Mediated by technology
Economic Globalization
Global diffusion of capitalism trade and finance
Process in which international trade increases relative to
domestic trade call centers in India, trans-nationalization of
Increased movement of goods, people, information and
money across borders, with decreased time and cost (via
World is increasingly defined by single markets rather than by
many separate markets
Globalization of trade
o Mercantilism: Government control of trade is used to
promote economic and military security of the state
Accumulation of cold and silver (gold standard)
Self regulation
Building a network of overseas colonies
Forbidding colonies to trade with other nations
Export subsidies
Giant stockholding companies (eg the East India
Companies, HBC)
o Great depression
Protectionism: economic policy designed to
cushion or insulate domestic industries form
international competition
Tariffs, subsides, quotas, non tariff trade
Gains in domestic consumption outweighed by
losses of exports
Protectionist policies exacerbated global
o John Maynard Keynes: Active government intervention
in the economy to promote economic growth and
Global Economic Institutions
o Bretton Woods institutions (1944)
World Bank
o General Agreement on Tariffs and Trade (GATT)
World Trade organization (1995)
o Regional Economic organizations and agreements
ASEA (1967)
NAFTA (1994)
Globalization of trade and the GATT
o Government does not discriminate against imports or
interfere with exports by using trade barriers
o Most favored nation principle: any preferential trading
agreement reached with one country must be extended
to other countries
o Non discrimination: a states tariff on a good is the same
for all trading partners
o Puts all foreign producers on equal footing
o Produces competition based on comparative advantage
World Trade organization (WTO)
o Uruguay Round (1986-1994) WTO (1995)
o Member based organization (157 members)
o Purpose:
Forum for negotiating trade agreements
Dispute settlement process (enforcement of
Means of enforcement of terms of trade,
outcome binding on both parties, ability to
impose penalties
Operates a system of trade rules
Monitor national trade policies
Technical assistance an training for developing
o “One member, one vote”
o Members decide on a “single undertaking
o Executive committee of most influential members
Trade barriers
o Tariffs
o Subsidies (eg agricultural subsidies; benefits for
o Other barriers
Domestic content laws
Voluntary export restraints
Health and environmental regulations
DOHA Development Round
o 2001-present (currently stalled)
o purpose: to lower trade barriers
o focused on developing countries
Improve market access
Fair rules
Technical assistant and capacity building
o Issues
US agricultural subsidies
Access to patented medicine (TRIPS Agreement:
Trade Related Intellectual Property Rights)
Lack of technical expertise and capacity
Anti-Globalization Protests
o WTO Seattle
o Lack of access and transparency to/of organizations
Bretton Woods financial system
o Fixed and stable exchange rates
US dollar fixed to the price of gold
All currencies fixed to the USD
o Control of international capital flows
o “Keynesian” economic policy: government should play
an active role to ensure jobs, growth and equity
Embedded liberalism
o Compromise between economic liberalism
Collapse of Bretton Woods (1971)
o Floating exchange rates
o New trade protectionism growth in oil prices
o Growth of transnational capital markets and finance
o Increase in interest rates debt crisis
Neo liberalism and the Washington consensus (Regan and
o Trade liberalism
o Privatization
o Deregulation
o Fewer restriction on capital flows sets the stage for
future financial transactions that create the current
financial crisis ungoverned transactions