What is IPE? IPE= 3 Areas 1. Monetary System (IMS) 2. Trade System (ITS) 3. Investment & Finance (II & IF)

About the IMS Currency exchange Int’l Monetary Fund (IMF)IMF Stability GDP  measures of monetary wealth GDP per capita ¤

CountryGDP (IMF 2014) GDP per capita (IMF 2014) United States $17.35 T (1) $54,370 (10) China$10.36 T (2) $13,224 (88) Japan$7.376 T (3) $5,855 (28) Germany (UK 5, FR 6) $4.751 T (4) $37,390 (18) Brazil (Italy 8) $2.15 T (7) $8,800 (69) India$2.15 T (9) $1,700 (140) Russia$1.86 T (10) $8,450 (72) EU$ T$36,700 (23)

China’s Income Distribution

IMS: Interdependent Connected Income from exports Currency value Interest rates Currency exchanges $5.3 T exchanged ~$14.5 B/ per day Top 5 city currency exchange centers? ¤

#1 London #2 NYC #4 Singapore #5 Tokyo #3 Hong Kong also see

IMS: GN Domination Colonization Post WWII US Goals Created IGOs Bretton Woods Conference Int’l Monetary Fund (IMF) Financial stability World Bank (WB) Development

IMS: GN Domination GN currencies buy more Purchasing Power Parity (PPP) Big Mac Index Way to compare currency valuecompare Same goods in different countries Big Mac (ave. cost) Could BuyAbroad U.S.$4.9311,028 Big Macs 28,616 Big Macs in India India$ Big Macs 345 Big Macs in U.S. Calculations based on IMF data 2015 and 2016 Big Mac IndexBig Mac Index

Europe Tries to Compete Treaty of Rome – 1952 European Union – 1992 Expansion- 28 members Expansion Adoption of euro euro 19 members Global recession Eurocrisis – 2010 ¤

About the ITS Exchange of goods & services 2 types of trade 1. Merchandise trade Primary goods Raw foods, fuels, fibers, minerals, water Manufactured goods Processed 2. Service trade ¤

ITS: Interdependent Global trade flows Who relies on what exports Outsourcing 3 rd party Offshoring Abroad Reshoring Returning ¤ Goods & Services $20 Billion = $55,000/ day 2013$18.3 Trillion = $50 B/day

ITS: GN Advantage Colonization GS  Primary goods Cash crops Uneven trade World Trade Org. (WTO) Free trade Rising role of EEs Bigger economy = more leverage ¤

ITS: How States Trade Bilateral China- Japan, Canada- UK, US- EU US- EU trade deal-- How does this deal affect you?trade deal Cheaper shoes Cheaper drugs EU cars cheaper, more available Dairy availability Standardize products Headlights issue Gas exports to EU ¤

ITS: How States Trade What’s up with cheesemakers? Proprietary names When is ‘feta’ really ‘feta’? EU demanding protection 145 food names Often city, region origin How does/ could this proprietary issue affect trade? Could stop trade agreements EU- US TTIP pact Viewed as trade barrier Unless trademarked (ex.: Parmigiano Reggiano) ¤

ITS: How States Trade Multilateral Free trade agreements (FTAs) NAFTA, APEC, proposed TPP Fight protectionism Challenges WTO Dispute mechanism Ruled on over 450 cases Recent rulings US wrongly imposed tariffs on steel from India, China US wins complaint against Chinese tariffs on US cars ¤ Jeep Billboard in Shanghai

About II & IF Int’l Finance Countries’ ‘checking accounts’ Debits Credits

About II & IF Int’l investment Funds invested abroad 2 ways: 1) Foreign Direct Investment (FDI) MNCs Control assets  $$$ 2) Foreign Portfolio Investment (FPI) Stocks, bonds, etc. Earn dividends ¤

II & IF: Interdependent FDI, FPI  WWII U.S.  MNCs invest abroad after war Most FDI  China, US EEs, EU Investment not evenly distributed ¤

II & IF: GN Domination Post-WWII US hegemony Top 500 MNCs  80% GN80% GN Gross Corporate Product (GCP) ¤ RankCountry# of top 500 MNCs 1US128 2China95 3Japan68 4 (tie) France32 4 (tie) Germany32

Economic Sanctions What are they? IMS, ITS, II Why are they used? Political sanctions ¤ /

Economic Sanctions Effectiveness Some examples E.U., U.S.  Russia U.S.  Cuba Global, unilateral  Iran Nuclear weapons program ¤

IPE Recap IPE: 3 Sectors 1. Monetary System 2. Trade System 3. Investment & Finance Economic Sanctions