Transcript International Political Economy

International Political Economy
International Production
and Trade Structure
Lecture 9
(Ch. 6)
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Nation States are interdependent – beneficial? Creates tensions?
Four Structures that link nation states and other actors furthering
their interdependence
International production and trade
Finance and monetary structure
International security structure
Knowledge and technology structure
International production and trade
structure
Deals with issues such as
- Who produces what, under what conditions, how it is
sold, to whom and on what terms?
- Why production and trade are so controversial
- Who gains from international trade? What and
whose terms and conditions prevail when it comes to
international trade?
- Connection of production and trade to earning
income and development hence controversial
In this chapter:
Development and changes that have occurred
in the post WWII production and trade
system.
Many trade experts in Northern industrialized countries have sought ways
to liberalize the world’s markets since WWII.
US and its allies created GATT in 1947 to promote liberal values and
trade based on US strategic and military objectives. In a further effort
to liberalize world trade, WTO replaces GATT in 1995.
Other trade issues covered: increase in number of PTAs and FTAs. North
South trade relations and its effects on economic development etc.
How has the nature of production
changed over time?
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World production increasingly becoming fragmented
– vertical specialization and outsourcing- eg. Boeing,
Apple?
Changing trends – increasing mobility of capital and
economic restructuring whereby industries leave the
developed w search of new markets, cheap labour
and other production advantages. Mercantilists and
structuralist viewpoint on these changing trends?
North – South Disparity?
59 per cent 2006 developed country share of
world output
- 14 per cent 2006 share of East Asia and the
Pacific developing countries
(Source: World Development Indicators 2008,
World Bank)
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International Trade
International trade has grown dramatically –
increased demand for goods that cannot be
produced locally –
Multifold increase in trade volume- world trade
in merchandise and services increased from
$84 billion in 1953 to $76 trillion in 2004 –
reflects growing internationalization or
globalization of production
Trade- the liberal route to development –
generating income and jobs – countries
engaged in efforts to regulate trade to
maximize its benefits and minimize the costs
to their economies.
How would the three perspectives in IPE
(liberalism, mercantilism and structuralism)
view trade?
Liberal View on Trade
Washington Consensus (based on liberalist
ideology- free trade based on comparative
advantage is positive sum for all nations) –
promoted by US, its allies and institutions
such as WTO, IMF and WB.
For the liberalists the benefits of open
international trade far outweigh its costs.
Mercantilist Views on Trade
Fredrich List and Alexander Hamilton both argued for protection of infant
industries through tarriffs and quotas in order to national indepence
and security.
Neomercantilists today also challenge the assumption that comparative
advantage unconditionally benefits all parties engaged in trade –
people in the importing country will be laid off as CA shifts to other
nations.
Also in many cases states can intentionally create comparative advantage
almost overnight in the production of new goods and services simply
by adopting strategic trade policies that invest heavily in those
products.
Trade protection is necessary because of the fear of becoming
independent on another nation and the possibility of exploitation
Structuralist Views on Trade?
Trade helped dominant mother countries to dominate and
subjugate the economies of the colonial territories.
Colonial territories provide mother countries with primary goods,
mineral resources and well as market for output.
Industrialized countries converted these primary resources into
finished products and sold it to other major powers and back to
the colonies
Peripheral countries have become underdeveloped as a result of
contact with industrial nations through trade.
Trade Terminology…
Tariffs- tax placed in imported goods – used as a source of revenue for LDC
governments or as a form of protection
Quotas: limit on the quantity of an item imported – effect?
Export quotas: international agreements that limit the quantity of goods exported by
a nation ( to limit the quantity of imports by another nation). Eg. VERs, MFA
(system of textile export quotas for LDCs)
Export subsidies? NTBs?
Currency Devaluations: making a nation’s currency worth less so that exports to
other nations become cheaper and hence more attractive.
Strategic Trade practices: state efforts to create comparative advantage by
subsidizing research for a particular industry etc. or provide subsidies to an
industry to help it get established
Dumping: the practice of selling an item cheaper at home than abroad, Dumping is
an unfair trade practice – used to drive out competitors from an export market
with the goal of generating monopoly power.
Counterveiling trade practices: measures taken as a reaction to another country’s
protectionist policies. Eg. Antidumping duties to counter the advantage gained
by a state that dumps its products.
Safeguards: Defensive measure: after tariffs are reduced, a product might be
imported in quantities that threaten to damage local industries.
GATT and the Liberal Post-War Trade
Structure
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Bretton Woods Conference in 1944. Post WWII, the US and Great
Britain established a new economic order based on promoting free
trade and integration between nations – they hoped this would prevent
many of the interwar economic conflicts and problems that had led to
WWII.
1930s Great Depression – Protectionist Policies uptil 1934 – it was
only in 1934 that the US adopted a free trade policy
Establishment of GATT in 1948- the primary organization responsible
for the liberalization of international trade through a series of
multilateral trade negotiations called rounds – in each round the
world’s main trading nations would agree to reduce their own
protectionist barriers in return for a freer access to each other’s
markets.
GATT membership open to all nations but communist countries
refused to join it viewing it as a tool of Western imperialism.
GATT..
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Based on the principles of reciprocity and non-discrimination.
Both principles successful – members slowly began to peel away the
protectionist barriers they had erected in the 1930’s after the
Depression. However, some members were not willing to grant
reciprocity or apply non-discrimination to all trading partners – use of
trade as a foreign policy tool.
GATT was not a set of rules that could be enforced by the
organization- but rather depended on member countries to fulfill
multilateral trade obligations with one another.thus allowed a lot of
exceptions – textiles, agri products etc.