1. International Political Economy, Trade, and Development

2. International Political Economy of Trade
International political economy: how politics influences economic interactions and vice versa
International trade is the movement of goods, and increasingly services also, across borders.
Although trade has many domestic policy implications, it is also a foreign policy issue.

3. Trends in the International Political Economy
Growing transactions in trade, investment
Expectation that governments are responsible for economic policies
Increasing visibility of economic problems
Policy outcomes more controversial
Facilitated by new technologies

4. Contending Theoretical Approaches to the International Political Economy
Statism or Mercantilism
Economic Liberalism
Marxist and Dependency interpretations

5. Mercantilism/Statism
states dedicated to pursuit of economic wealth; encourage exports over imports and industrialization over agriculture; protect domestic production
emphasizes the role of a strong state and the subordination of all economic activities to state interest
national self-sufficiency, limited trade, restricted foreign investment

6. Mercantilism/Statism
emphasizes the role of the state and the subordination of all economic activities to state interest
national self-sufficiency, restricted foreign investment
Maximize exports, limit imports
Role of colonies in traditional mercantilism (modern a bit different)

7. Economic Liberalism Adam Smith
Humans act rationally to maximize self- interest
When individuals act rationally, markets develop to produce, distribute, and consume goods
Markets enable individuals to carry out necessary transactions to improve their own welfare

8. Economic Liberalism
…maintains that the free interplay of market forces leads to a more efficient allocation of resources, to the benefit of the majority.
free markets, separation of economics from politics, non-interference of governments – “laissez-faire” economics
through “the invisible hand” of the market, economic growth and well-being can be achieved

9. Economic Liberalism
By maximizing economic welfare and stimulating individual economic growth, markets epitomize economic efficiency
Later versions posit both economic and political advantages: economic wealth comes with formation of an international market

10. Dependency Theory Marxism projected on global scale
International capitalist system creates inequalities across and within states
World divided into North and South (core and periphery)
State supports capitalist class, pushes to expand markets at expense of others
Less developed states trapped in dependent relationships that keep them poor

11. Barriers to Trade Tariffs, or import duties Quotas VERs Subsidies
Non-tariff barriers to trade

12. World Trade Organization (WTO)
Initially GATT (General Agreement on Tariffs and Trade)
Its main goal: trade liberalization
…has managed eight rounds of multilateral trade negotiations
…has 153 members
WTO was established in 1995
Initially, a forum only for developed countries. Now, developing countries interests also represented.

13. WTO Two main areas of focus: -Multilateral trade negotiations
-Dispute settlement
Each round has more areas of negotiations and achieves a certain reduction of tariffs.

14. WTO
In the current round of negotiations (Doha): Some of the areas of negotiation in the current round of talks – agriculture, anti-dumping, subsidies, technical barriers to trade, trade in services, intellectual property rights, electronic commerce, environment; etc.

15. WTO Dispute Settlement
There is a Dispute Settlement Body within the WTO
If one state is found guilty of violating WTO agreements– the WTO directs the losing member to bring its laws and policies into conformity with the WTO agreements and can authorize punitive trade measures by the agreeved state against the offending state.

16. Globalization Defining globalization
What are the effects of globalization?
Distance and time
Interdependence
Economic Effects
Social and cultural effects

17. Trade Policy
How does globalization affect calculations in trade policy?
What are the benefits and drawbacks to liberal and protectionist trade policies?

18. Inequalities Among States
Economic North (first and some second world countries)
Economically Developed Countries
Countries in transition
Economic South (third, fourth, and some second world countries)
LDCs (Less Developed Countries)
LLDCs (Least Developed Countries

19. Effects of Interdependence
Benefits
Vulnerabilities

20. Modernization Theory
Causes of underdevelopment
Path to development

21. Liberal Economic Theory and Causes of Development
Shortage of capital
Lack of infrastructure
Faulty economic policies
Political instability
Corruption

22. Liberal Economic Theory and Solutions
Foreign aid
Technical assistance
Foreign investment
Trade
Political stablility and better economic policies

23. Structuralist Theories
Dependency Theory
Assumptions
Explanations for economic inequalities

24. Dependency Theory, Causes of Underdevelopment
Trade
Capital
Multinational Corporations

25. Dependency Theory, Solutions to Underdevelopment
Import-Substitution Industrialization (ISI)
Increased South-South Trade
Restructuring of international trade agreements

26. International Development Aid
Loans
Grants
Organizations involved in development UN
World Bank
IMF

27. Foreign Aid Motivations
Humanitarian
Economic
Political

28. Potential Effects of Foreign Aid
Economic growth
Debt problems
Potential for dependence
Potential to disrupt local economies

29. Foreign Direct Investment (FDI)
Motivation (for MNCs)
Labor
Capital
Market Access
Benefits (for host country)
Technology
Expertise
Global Markets

30. Foreign Direct Investment
Potential Costs for Host Country
FDI compared to other international investment