Exam 3

• Market

  exchange of goods, services, and payments
• Liberalism

  primary policy- free trade

  no state interference with markets (ideally)

  Reduce barriers to the market (ie. tariffs)

  Comparative advantage

  -Adam Smith "Wealth of Nations"
• comparative advantage

  The ability of a country to produce a good at a lower cost than another country can. (determined by market- Not State)
• Mercantilism

  an economic system (Europe in 18th C) to increase a nation's wealth by government regulation of all of the nation's commercial interests.

  *Tariffs and other barriers used by governments to control market
• Difference between Liberalism and Mercantilism

  The role of the state:

  mercantilism- state controls economics

  liberalism- economics run the state
• Protectionism

  the practice or policy of shielding one or more industries within a country's economy from foreign competition through the use of tariffs, subsidies or quotas.

  - to protect infant industries, national security or in response to dumping
• Dumping


  selling products in a foreign country at lower prices than those charged in the producing country
• Economic Nationalism

  an emphasis on domestic control and protection of the economy. (ie. "buy American")
• Japanese Case Study

  used protectionist policies to grow infant industries, established itself in the market, the voted to make protectionist policy illegal to ensure that no other countries could overtake their new industry.
• Globalization

  the expansion of free trade everywhere, by opening up all markets and states to the global economy-- sell the products and ideas of the world and every state
• Anti-Globalization Protests

  1. Began with WTO meeting in Seattle (Nov. 2009)

  2. Several protests have been staged at major international meetings

  3. Anti sweatshop campaigns
• Biggest problems with free trade

  agriculture, intellectual property rights, service sectors policies
• The World Trade Organization (WTO)

  International organization derived from the General Agreement on Tariffs and Trade (GATT) that promotes free trade around the world.

  *Strong enforcement structure

  *Means of reciprocal free trade enforcement (if you break agreement then other countries have the right to place barriers on your trade)
• GATT (General Agreement on Tariffs and Trade)

  international agreement first signed in 1947 aimed at lowering trade barriers

  *grew to big and too broadly focused--> became WTO
• Bretton Woods

  An international conference where 44 nation-states met in New Hampshire in July 1944 that established the World Bank and the International Monetary Fund (IMF). Established the economic structure of the UN.
• Most Favored Nation (MFN)

  a means to promote equality in trade relationships by guaranteeing that if one country is given better trade terms by another then all other trade partners must receive the same terms (applies to all states in the WTO)
• Generalized System of Preferences (GSP)

  US trade agreement where rich states give trade concessions to poor ones to help their economic development
• Uruguay Round of GATT

  - Problems of issues

  - Problems of duration

  - Problems of enforcement and permanence

  1986-1994

  CREATED THE WTO
• Who protests WTO, free trade in general?

  - Labor

  - human rights groups

  - environmental groups
• who is against free trade?

  - protectionists—economic nationalists

  - labor

  - environmentalists
• NAFTA (North American Free Trade Agreement)


  An agreement for free trade between the United States and Canada and Mexico
• FTAA (Free Trade Area of the Americas)


  A trade agreement currently under negotiation that would expand the North American Free Trade Agreement (NAFTA) to include 31 additional nations in the Western Hemisphere

  *Miami, Nov. 2003
• ASEAN (Association of Southeast Asian Nations)

  An international organization linking together the 10 most important countries of Southeast Asia
• EFTA (European Free Trade Association)

  A free trade association including Norway, Iceland, Liechtenstein, and Switzerland.
• European Union (EU)


  a free trade zone encompassing 28 European countries
• IMF (International Monetary Fund)


  3 origional Purposes:

  1. Manage exchange- gold standard

  2. Balance of Payments- debts b/w countries paid off as low interest loans

  3. Lender of last resort- 1972-now: only remaining part of IMF in use
• World Bank


  Primary Function- IBRD (International Bank for Reconstruction and Development) which allowed states to borrow to rebuild after WWII.

  *Massive amounts of money given for specific reconstruction projects
• What is Mission Creep?


  the expansion of a project or mission beyond its original goals, often after initial successes.
• structural adjustment loans


  loans granted by international financial institutions such as the World Bank and the International Monetary Fund to countries in the periphery and the semi-periphery in exchange for certain economic and governmental reforms in that country (e.g. privatization of certain government entities and opening the country to foreign trade and investment)
• structural adjustment policies


  the bundle of market-oriented reforms required for developing nations to receive IMF loans
• Fund Conditionality


  A list of conditions that states must follow in order to receive financial backing from the IMF.
• Asian Monetary Crisis


  1977- East and SE Asian countries who had been funded and instructed by the IMF all economically crashed (example of how ineffective IMF funding is at aiding in reconstruction of developing countries due to the immense debt resulting from the IMF's loans)
• Devesh Kapur


  the IMF: curse or cure?

  Fund conditionality

  Moral hazard (goes both ways)

  *shift in mandates leads to more control, but not necessarily more effective
• Moral Hazard


  a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.
• JESSICA EINHORN: The World Bank's Mission Creep


  1. world bank reform must be seen as intergovernmental

  2. Finance ministers should lead delegations in reform/reorganization of the world bank

  3. bank should address changes in global economic demand

  4. the poorest countries can no longer accept the most difficult demands

  5. the world bank must be reevaluated to fit the global economic structures of the 21st century
• Adam Smith, The Wealth of Nations


  Promoted laissez-faire, free-market economy, and supply-and-demand economics. (birth of liberalism)
• Alexander Hamilton's, On Manufacturers


  He saw manufacturing as a way of helping the country become "independent of foreign nations for military and other essential supplies." (Mercantilism)
• Norms


  the expectations held by national leaders about normal international relations

  *principle norm of IR has traditionally been non-intervention... Exception: international morality
• Morality (international)


  as an element of power

  - allows for intervention (ie. Iraq- moral purpose to invade)... um yeah ok
• Neoliberalism


  a modified form of liberalism tending to favor free-market capitalism.

  Most Important: International orgs and Institutions Create COOPERATION