PP 430 Seminar 8

International Agencies and Policies Unit 8 Assignment

The Big Picture The goal of this unit is to present the “big picture” of International Trade and its impact on U.S. Economic Growth and Development. As such, learning its institutional framework before proceeding to more specific policies and their effects is paramount.

The Big Picture Given its intricacy and ubiquity, International Trade demands credible government institutions and policies. Promoting coordination and cooperation among over 160 trading nations could not happen without The World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank, Customs Unions, and Free Trade Areas.

Agencies World Trade Organization (WTO): The official international organization charged with mediating trade disputes among nations International Monetary Fund (IMF): International agency designed to help fix trade- and currency-related problems across nations, thereby encouraging Economic Growth and Development

Agencies World Bank: The international lender of last resort, using funds from the Advanced nations to promote Economic Growth and Development in Developing countries Customs Union: The adoption of tariffs at the same rate across participating nations Free Trade Area: The practice of Free Trade within a specific collection of nations

The Big Picture The important point to appreciate here is why so many nations, including the U.S., submit to these institutions on questions of trade and the promotion of Economic Growth and Development. They risk losing national sovereignty by doing so, but do it anyway.

The Big Picture What is their logic for doing so? It comes down to efficiency and self-interest. Better trade flows mean more wealth overall; it is an investment in their long-term economic well- being. In the case of the U.S., there are national policies and institutions at work as well.

The Big Picture For example, the “Commerce Clause” of the Constitution clearly delegates all power to regulate U.S.-related commerce, both interstate and international, to Congress. It is a broadly defined power, giving Congress much leeway to define “regulation,” but its jurisdiction is unquestioned.

The Big Picture The U.S. Congress takes this power and, here too, delegates it to, not international organizations, but the executive branch (i.e., the President) to negotiate treaties which are then taken directly to the Congress for an up- or-down vote, no amendments.

The Big Picture This is called “Fast Track Authority.” It represents Congress forgoing its right to amend treaties for the sake of quick passage of trade bills. These can be with both “Advanced” and “Developing” countries.

The Big Picture In addition to goods and services is the financial side of international trade. This includes nations’ Capital Accounts and both Portfolio and Foreign Direct Investment. Capital flows are considered good indicators of other nations’ assessments of a country’s economic conditions, both present and future.

The Big Picture In short, before proceeding to analyses of particular trade policies, you must appreciate the governing institutional organizations and general trade policies. This unit provides such a working background.

Discussion Questions Why nations delegate away some of their sovereignty to international organizations in order to promote trade on the assumption that doing so helps their Economic Growth and Development. -What does America gain by submitting to the World Trade Organization and contributing to the World Bank and International Monetary Fund? -What does Congress get by granting the President ‘Fast-track Authority’?

Unit 8 Assignment Debate the proposition, “International agencies and policies that promote free trade are good for economic growth and development in the United States.” – For this assignment, in a 1-2 page position paper, debate your ‘side’ of the above proposition. – The purpose of a debate is to argue the ‘pros’ and ‘cons’ about an issue and persuade the audience that your position is more valid than the other side’s position

Unit 8 Assignments Read Chapter 19 in your Taylor text and Chapter 12 in your Todara text Participate in Discussions Submit your Unit 8 Assignment