International Economic Institutions since World War II · International Economic Institutions since...
Transcript of International Economic Institutions since World War II · International Economic Institutions since...
International Economic
Institutions since World War II
UNICOLLEGE MANTOVA A.A. 2017/2018
STORIA DEI TRATTATI E DELLE RELAZIONI INTERNAZIONALI
Prof.ssa ISABELLA QUERCI, Ph.D.
13 aprile 2018
Outline
Barriers to trade vs. Liberalism
Bretton Woods
History and functions of international
institutions in world economy
World Trade Organization
International Monetary Fund
World Bank
Criticism towards international
economic institutions
Barriers to trade
«Government induced reastriction to international trade»
The imposition of cost on trade that raises the price of the
traded products /services
Economists agree that B2T are detrimental and decrease the
overall economic efficiency.
Examples:
1. Tariff: tax on imports or exports between sovreign States.
2. Non-tariff: any measure restricting trade, other than tariffs
import licenses, export licenses, sanitary controls, labelling, etc
Liberalism
Belief in progress and optimistic interpretation of
human nature.
Priorities : freedom reassurance and human needs
satisfaction
Democracy inside the state and cooperation
outside
Belief that nternational institutions can assume
responsibilities States are not able to assume
Postwar economic system: multilateralism and
principle of non discrimination -> international
institutions Copyright © 2002 Pearson Education, Inc.
Since the end of WWII gradual
reopening of the international
economy and strenghtening of
international institutions
According to some, Bretton Woods
institutions and GATT established a
shallow globalization
Globalization promoted economic
growth and social welfare
Liberalism
In July 1944
Aim: to design an international monetary system administered by an international organization
delegates from 44 countries met in a small town named after the conference “Bretton Woods” (New Hampshire)
In the conference, the countries drafted and signed the Articles of Agreement of the International Monetary Fund (IMF), thus the Bretton Woods system was created.
6 Bretton Woods
The Bretton Woods System
- A stable and fixed but adjustable exchange rates regime
- Allied countries fix their exchange rates by tying their
currencies to the U.S. dollar (dollar-pegged exchange rate)
- The U.S. dollar linked to gold; per ounce - Currencies to be kept within 1% of the fixed rate - Golden age of the U.S. dollar
- The system’s stability required price stability in the US
1. Exchange rate stability and the IMF (27 December 1945),
2. Recovery and development (International Bank for Reconstruction and Development, now known as the World Bank),
3. Liberalization of trade via the General Agreement on Tariffs and Trade (GATT) in 1947.
Three pillars
International Economic Institutions
The three global organizations
playing a major role in international
economic relations are:
The International Monetary Fund (IMF)
The World Bank
The World Trade Organization (WTO)
- Through capital controls, the countries would
pursue the full employment and price stability
(low inflation) and the external balance
(keeping exchange rates stable)
simultaneously.
Expected Benefit from the New System
The IMF was established to:
Promote international monetary cooperation;
Promote exchange stability and orderly exchange arrangements
To foster growth and high levels of employment, and
to provide temporary financial assistance to countries to help ease balance of payments adjustment
The International Monetary Fund
The International Monetary Fund
Each of the 184 members charged a quota
Special Drawing Right(SDRs) or convertible currencies
US quota is SDR 37,149.3 million (largest)
Palau quota is SDR 3.1 million (smallest)
The size of the quota determines the member‟s voting power
US has 371,743 votes (17.11%) Palau 281 votes.
IMF conditionality – requirement
for the borrowing member to
carry out economic reforms in
exchange for a loan
The International Monetary Fund
The World Bank
Founded as the International Bank for Reconstruction and Development (IBRD)
World Bank has 184 members
Main functions: development lending
Today, IBRD is one of the five subgroups making up the World Bank Group
IDA (International Development Assn.),
IFC (International Finance Corp.),
MIGA (Multilateral Investment Guarantee Agency),
ICSID (Int‟l Cent. For Settlement of Investment Disp.)
The General Agreement on Tariffs and
Trade
The GATT functioned through trade
rounds – inter-state negotiations to
reduce tariffs and other barriers to trade
After the Tokyo Round of the 1970s, tariffs
were brought to record lows
Uruguay Round was launched in 1986 to
address previously neglected trade issues,
such as agriculture and textiles, as well as
new trade issues, such as intellectual
property rights and trade in services
From GATT to WTO
Uruguay Round Agreement signed in 1994
established the WTO:
144 members as of 1 January 2002
reaches beyond GATT to new trade issues;
has a more effective dispute settlement
mechanism;
GATT only regulated merchandised goods
WTO covers issues such as trade in services,
telecommunications, banking, and even
intellectual property rights
WTO’s main tasks
Focuses on trade negotiations,
implementation/monitoring, dispute settlement,
building trade capacity for developing countries,
outreach
Helps mediate
Guarantees no sudden changes in policy amongst
countries
Assists in meeting social/environmental objectives
Sometimes rules to maintain barriers if it involves
protecting consumers or preventing the spread of
disease
Who’s Involved?
153 members including UK, Mexico,
Nigeria, and China
31 observers, including Russian
Federation and Mexico
128 GATT signatories joined at the end of
1994
Interdependence
Principles
- Liberalization – negotiations to reduce
protection.
- Nondiscrimination – enshrined in the
concept of most favored national status
(MFN): every WTO member must treat
each of its trading partners as it treats its
most favored partner
- National treatment – imports must be
given a similar treatment on the
domestic market as domestically
produced goods
Sovereignty Principles
Reciprocity – negotiations proceed
in terms of exchange of
“concessions” of substantially
equivalent value.
Safeguards – right of government to
preserve economic stability through
(nondiscriminatory) protection
recognized.
WTO Dispute Settlement—the Process
If a member believes their rights under the agreements are being infringed, it should bring the case to the WTO—instead of acting unilaterally.
Initially, governments try to settle their differences through consultation.
If the case is not settled during the consultation period, a stage-by-stage procedure is initiated.
A panel of independent experts, judging each case based on interpretations of the agreements and individual countries‟ commitments, makes the final ruling.
.
Advantages of Membership
Maintains peace by helping trade and trying to
deal with disputes
Promotes international cooperation
Forum for countries to peacefully and fairly deal
with disputes
Attempts to lower prices/cost of living
Provides more choices for products
Stimulates economy and raises income
Creates efficiency: Similar rules in many countries
makes trading easier
Disadvantages of Membership Criticized for ignoring the developing countries
Benefits of free trade help developed countries more than developing countries
Not necessarily democratic because WTO created by and for corporations
May not promote peace because its dominated by businesses in wealth countries
Some say WTO puts corporations before human rights
Said to be harmful to the environment because it attempts to deregulate logging, fishing, water utilities
Example: Turtle/Shrimp case
Labor and Environmental Standards
2 different perspectives:
1- „Free trade is not compatible with
reasonable labor standards and environment
protection.‟
2- International trade effects‟ on labor and
environmental regulations are by all accounts,
positive. Typically, as income grows, demand
for tighter standards increases; since trade
normally increases income
The “Race-to-the-Bottom” Problem
The government faces pressure from import-competing interests to offer additional
protection from imports.
If its WTO commitments prevent the government
from responding with a tariff increase, then it
might instead choose to relax a labor or an
environmental standard or place the
productive activities where these standard are
already relaxed.
The Future of the WTO
Presently negotiating the Doha round
Deep conflict between developing countries and industrial countries
Costs of current commitments
TRIPs problems
Developing countries seem to be the real supporters of trade liberalization these days
Crisis of multilateralism – resort of bilateral agreements
Opposition to International Institutions
International institutions receive two
types of criticism
1. Globalization is dangerous and
should be limited;
2. International institutions are
undemocratic: decision-making is
closed to participation by civic and
social groups, and thus doesn‟t focus
on the most vulnerable groups