Jan 28 lecture: chapter 2 (continued)
Jan 28 lecture: chapter 2 (continued) IR 292
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This 3 page Class Notes was uploaded by Maritt Nowak on Thursday January 28, 2016. The Class Notes belongs to IR 292 at Boston University taught by James Baldwin in Spring 2016. Since its upload, it has received 25 views. For similar materials see Fundamental International Economics in INTERNATIONAL RELATIONS at Boston University.
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Date Created: 01/28/16
IR 292 Lecture 1/28/16 Chapter 2: International Financial Institutions… Continued The “Big Three” IFIs 1. The IMF 2. The World Bank 3. The GATT/WTO The IMF vs. The World Bank Similarities: both loan to countries in need proportional voting system Differences: every World Bank president has been an American, every IMF president has been a European (not a written rule) IMF loans are for shortterm emergencies in ANY country World Bank loans are longterm and are for developing countries IMF loans have higher interest rates, World Bank are lower (sometimes 0%) IMF conditionalities are strict The World Bank offers “advice and technical assistance,” but not strict conditionalities Where is the Developing World? Niger is the least developed subSaharan Africa parts of Central Asia a bit of Latin America The General Agreement on Trade and Tariffs (GATT) 1946: ITO (International Trade Organization) FAILED (thanks US Senate) 1950: GATT (trade treaty, not a trade organization) Trade Rounds: how the GATT operates reduce tariffs (import taxes) & quotas (limit on imports) 60s & 70s: expands beyond tariffs goods dumping glut in supply drive out competition subsidies standards RE: environmental concerns, safety and justice for worker The World Trade Organization (WTO) established at Uruguay Round, 1995 GATT is now part of WTO charter most countries are in it Doha trade round: help developing countries, especially with agricultural tariffs 2 core principles : 1 national treatment: imports are treated the same as domestic goods 4. nondiscrimination: treat all WTO members like your “Most Favored Nation” consensus decisionmaking trade rounds take longer fairness, but not much gets done Dispute Resolution Mechanisms direct negotiation Dispute Resolution Panel if you win: “retaliatory measures” might be allowed examples: Japan vs. World (rice import tariffs, Japan’s is 800%) Australia vs. Cuba and Honduras (plainpackaging of cigarettes) USA vs. Mexico (“Dolphin Safe” Tuna) USA vs. EU (GMO crops) Regional Trade Agreements (RTAs) subglobal trade agreements some just with 2 countries, others are multilateral and may become global 5 levels of International Economic Integration Type Characteristics Example Partial trade agreement free trade in specific industries European Coal and Steel Community (1950s) freetrade are free trade in goods and services NAFTA (1994present) customs union plus common external tariff Europe in 70s and 80s MERCOSUR common market plus free movement of capital Europe in 80s and 90s and labor economic union common policies, common the EUROZONE (1999present) currency RTAs and the WTO 500 since 1950 (most after 1990) 338 still active (2012) What about nondiscrimination? RTAs are ok if they create more trade than they destroy Cons: labor argument undermine progress for global agreements divide and polarize countries biases and discrimination against smaller/less developed nations Pros: trial for global agreements easier to reach agreement among a few countries than the whole WTO negative impacts only occur within the region might lead to future global agreements Public Goods: everyone wants or would benefit from, no one wants to pay for it 1 nonexcludable: access cannot be restricted to “paying customers only” free riding: why pay for something you can get for free 2. nondiminishable (nonrival): quality is the same no matter how many people use it why pay for something that has an infinite supply Public Goods and IFIs IFIs provide international public goods of global economic and financial stability or each country may act in its own self interest and ruin it for everyonne International Economic Public Goods: 1 open markets in a recession (ex: tariff binding) 5. capital flows to less developed countries 6. lender of last resort 7. international money for the settlement of international debt *without IFIs lots of freeriding Common Criticisms of IFIs undermine national sovereignty conditionality requirements representatives are not elected by the people, appointed by political leaders proportional representations favor more developed countries US veto power ideological bias towards westernstyle, neoliberal economic solutions The American and European presidents developing countries are not able to complete smooth restructuring, so even when the IFIs step in, it doesn’t always work because of inability in domestic politics, institutions
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