1. Which created more problems for the development of the global economy from 1970 to 2000: protectionism or the debt crisis of the developing world?
Miao
14A01C

2. Protectionism Details
Done to protect local industries against competitors
Increase in tariff barriers
Nixon imposed a 10% tariff barrier on all imports in 1971 (but was soon revoked)
More importantly, creeping protectionism in the form of non-tariff barriers
Health standards: prevented US beef from entering Japanese markets
Voluntary Export Restrictions (VERs): US limited Japanese car imports to 1.68m

3. Protectionism Problems created Reduced global trade
Real world trade halved to 3.2% per annum
Delayed global recovery
Uncompetitive domestic industries with spare capacities
Increase in trade tensions

4. Protectionism However Can bring about benefits Limited impact
Prevents dumping (Japanese steel in the 70s)
Protects local industries from shocks
Limited impact
East Asian Tigers, China, Japan continued to grow despite being export-oriented
Faded by 1990s
1988 Omnibus Trade and Competitiveness Act
1994 NAFTA aimed to eliminate all trade barriers

5. Third World debt crisis
Details
Due to slowdown of Crisis Decades, many borrowed heavily
From global financial institutions, which were awash with petrodollars
Loans were spent unwisely
By 1990, 24 countries owed more than their GNP, including the entire region of sub-Saharan Africa
Often worsened by IMF intervention
Structural Adjustment Policies (SAPs) imposed austerity measures that were harmful
Protectionism worsened this
Prevented debtor countries from selling exports and earning foreign currency to pay off the debts

6. Third World debt crisis
Problems created for the developing world
Hindered potential for growth
Decline in average growth from 6.3% to 1.7%
Debt repayment was at an average 3% of GNP
Reduced ability to fund development programmes
Most economies never recovered
Out of 39 Heavily Indebted Poor Countries (HIPCs), 33 are from sub-Saharan Africa

7. Third World debt crisis
Problems created for the developed world
Reduced exports
Import growth for HIPCs was at -6% in the 1980s
US was the most affected, exports decreased by $10bn
Debtor countries needed to strengthen local currencies
Prevented job creation
Nearly 1.6m jobs have been lost due to debt crisis
US banks were overexposed to debts
By 1982, 9 major US banks had loaned out 287% of their capital to developing nations
Fear of loan defaults and banking sector collapse
1989 Brady Plan reduced bank losses by repackaging loans into new bonds

8. Concluding slide Third World debt crisis created more problems
Greater extent
Protectionism was easily reduced in 90s but debts could and were not
Greater impact
Longer lasting debt crisis had greater impact
Debt crisis affected more sectors and potential growth, while protectionism could have benefits

9. Essay plan Intensity of problems Duration of problems
Protectionism reduced global trade and delayed recovery
Debt crisis did that and more – affected potential growth, put US banks at risk
Duration of problems
Protectionism faded by 1990s
Debt crisis still plagues Third World
Besides, protectionism could bring about benefits