ECO230Y1 Study Guide - Empirical Relationship, Uch, Ethiopian Aristocratic And Court Titles
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Globalisation is fragile; a global market economy depends on the support of states:
-decrease in costs of transportation and communication (not a new phenomenon,
E.g. imports have grown more than exports in the US economy, mainly due to the large
inflows of capital, money invested by foreigners willing to take a stake in the US
economy—another aspect of growing int’l linkages
There are gains from trade, i.e. when countries sell goods and services to each other, this
exchange is almost always to their mutual benefit; BUT may hurt particular groups
within nations, i.e. strong effects on the distribution of income.
-shield industries from foreign competition by placing limits on imports, i.e. quota
-help them in the world competition by subsidizing exports
** Conflicts of interest within nations are usually more important in determining trade
policy than conflicts of interest b/w nations.
Since WWII, the advanced democracies led by US, have pursued a board policy of
removing barriers to int’l trade; free trade was not only for prosperity but also promoting
world peace; e.g. NAFTA b/w US, Canada and Mexico in 1993, Uruguay Round
agreement establishing the WTO in 1994 (prior to 1994, GATT).
In an integrated world economy, one country’s economic policies usually affect other
countries as well, thus a fundamental problem in int’l economics is how to produce an
acceptable degree of harmony among monetary policies of diff countries; e.g. when
Germany’s Bundesbank raised interest rates in 1990 to control the possible inflationary
impact of reunification of W and E Germany, it led to recession in the rest of W. Europe.
Growing importance of int’l capital market; e.g. “debit crisis” in Mexico 1982-90, when
Mexico was unable to pay the money they owed, also crisis in Asia 1997, Argentina
2002. Int’l capital market also has to cope with special regulations that many countries
impose in foreign investments.
-special risks associated with int’l capital market—currency fluctuations& national
default (when a nation simply refuses to pay its debts)
E.g. in 2004, the world as a whole produced goods and services worth about $40 trillion
at current prices; more than 25% was sold across national borders, i.e. world trade in
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