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International trade, globalization

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University of Toronto St. George
Political Science
La Haine

Tuesday January 26 - Discussed state of the union address Obamas speech the world has changed etc - Obama was basically asking: How can we encourage generate new growth? There are 2 schematic answers to that 1. More traditional answers: we have to minimize state intervention the market will solve everything neoliberalism 2. The state needs to provide the infrastructure for growth Firms arent going to finance infrastructure and take care of various types of employees.. Whats the IR impact on this debate? International Trade - Economic theory: free trade benefits all (Smith) ; comparative advantage (Ricardo) - Winners and losers Domestically: stolperSamuelson) Internationally: Terms of Trade - History - 19 C: the industrial revolution: the repeal of the Corn Laws: a dramatic growth in international trade Seethe correspondence of the rise of the hegemons (US & UK) and the rise of free trade. Can we establish a causal link that will connect the international structure of power with the development of trade, and free trade in particular? Hegemonic Stability Theory I (Krasner) : Assumptions A1: States prefer to avoid vulnerability A2: Protectionism is costly - Small states cannot afford the cost of protectionism they have no choice but to open up - Large states can chooseto opt for stability and security over the benefits of free trade - A hegemon takes up such a large share of the worlds market that it can enjoy the benefits without compromising stability The state as a whole, loses. Protectionism is costly. However, complete free trade means a lot of vulnerability Theres a dilemma: we dont want to be vulnerable, but if we close our market, we lose a lot of money. So Krasner suggests this logic: small states theyre too weak and small in order to adopt protectionism, the cost for their economy will be too big. So small states are generally going to be pro-free trade so they have to choosevulnerability. Larger states they can choose, because their economy is big enough to withstand the cost of protectionism. What happens with the hegemon? If you have a huge state, that actually controls a chunkj of the world economy --- Krasner suggests that they have a dilemma they are large enough that they are no longer vulnerable. So the hegemon, once it reaches a large enough chunk of the world economy, it can opt for free trade without paying the cost for vulnerability. Evidence that Krasners wrong or right: diagram of global top 20 (the most open countries in the world level of personal conduct, technological conduct, economic and political conduct) --- if you follow Krasners logic the more open you are, the more vulnerable you are. (Ireland, Switzerland.US & Norway in the middleNew Zealand & Malaysia)
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