Study Guide for International Relations and World Politics | POLI 150, Exams of Political Science

Download Study Guide for International Relations and World Politics | POLI 150 and more Exams Political Science in PDF only on Docsity! Notes I. The Policies of Trade a. Graphs 1.Autarky  Not trading on international level  Standard S&D curve 2.Free Trade  Trading on international level  Prices shifts down from domestic to world  Imports to make up for less domestic supply because of lower prices 3.Tariff Barrier  Free trade with restrictions (protectionism)  Similar to free trade graph  Tariff prices are higher than world prices but lower than domestic prices  Tariffs act as tax revenue to government b. Two Models of Policy Preference 1.Factory Model  Labor to capital  Stolper-Samuelson Theorem: Trade raises the income of societies abundant factor, and reduces the income of its scarce factor  US Labor vs. Business 2.Sector Model  Factors are industry specific: Factor mobility is low  Import competing vs. export-oriented sectors 3.Ability of “factors” to move c. Collective Action Problem 1.Asymmetry in organizations driven by free riding and group size 2.Reciprocity works against the problem d. Drawbacks to interests 1.Economic interest alone don’t drive mobilization e. Governance of International trade 1.Governments often want to engage in international trade, but…  They want reciprocity  They worry about defection and cheating 2.Solutions  Hegemony  International Institutions  Help governments cooperate to achieve joint gains from trade  Reciprocity: Most favored nations status  Monitoring (Carried out by members)  Enforcement (WTO/ DSU) II. Governance of International Trade 1.General agreement on Trade and Tariffs 2.GATT  1947 aimed for universal rules on trade policy  Stopgatt effort, after a more ambitious ITO failed  Today’s average tariff is 10% of what it was in 1948  Several negotiating rounds, covering a variety of issues  Basic ideas:  Reciprocity (In reduction of trade barriers)  Non-discrimination (“most favored nation” status to all)  National Treatment (Treat all products equally once inside a country 3.WTO  Subsumed the GATT In 1995; a more formal organization  153 members  Includes agreements on trade in services and intellectual property  Biggest change: Dispute Settlement Understanding  Deals with enforcement concerns  GATT: 200 disputes in 47 years; WTO: 400 disputes in 14 years  US is most frequent defendant and complainant. EU comes in 2nd.  Does the WTO work?  Dramatic growth in world trade since the 50s  Due to policy? Technology? Ideational shift?  Tariffs decreased since 1950s  Developing countries tariffs gone from 30% to 9%  4 times higher than developed nations  Agriculture is a tariff magnet and trade blocker  Negotiating Round  Doha Round: 2001-???  The Development Round  G-20 argue for agricultural reform  Hope to conclude talks by the end of 2010 III. Governing International Capital Trade 1.IMF is a “Lender of Last Resort”  Mostly makes loans to developing nations  Loans are usually short term  2008-09: surge of lending activity  Increased resources 2.Criticisms of the IMF  Effects on growth?—Mixed evidence  Moral Hazard  A tool of international investors 3.Other areas without global regulation  Foreign Direct Investment (Mostly Bilateral)  Engaged in production trade and cross-border investments  1/3 of all world trade is generated by MNCs  Generate ~10 percent of global GDP  A long history (pre-WWI)  The majority of FDI still occurs among developed nations  Main sources: US, Japan, and Western Europe  But FDI from developing nations- esp. China, Brazil, and India- is on the rise (2008: 16% of global FDI)  Percentage of total FDI going to developing nations has increased steadily over time  Certain regions and countries get most of the investment e. FDI: Why? (Oatley) 1.Why operate overseas?  Locational Advantages  Natural resources  New Markets (Avoid tariffs; reduce shipping costs)  Efficiency gains (factor endowment) V. Foreign Direct Investment 1.Why operate overseas?  Locational Advantages  Natural resources  New markets (avoid tariffs; reduce shipping costs)  Efficiency gains (factor endowment) 2.Why go overseas with the FDI? (Oatley)  Or why make transactions internal to the firm?  Intangible assest horizontal integration (cars and beverages)  Specific assets  vertical integration (cars and oil)  The firm retains all control of the material of production in one facility 3.Other ways of being involved internationally?  Sub-contracting factories to make products (Nike) b. Foreign Direct Investment: Effects on Host Economies 1.Way of expanding national stock 2.Linked with economic growth  Less volatile than portfolio flows 3.Transfer of technologies and best practices  But this does not always occur 4.Higher wages in MNCs  We usually think firms go overseas to exploit wages  They pay more overseas than they pay in the U.S. 5.Foreign firms make decisions that affect host economy  Costa Rica and Intel problem (boosts economy but also exposes to Intel’s decisions) 6.No global institution to govern FDI  We have bilateral treaties and the WTO handles the FDI c. Financial Crisis 1.A long history of boom and bust cycles, and of crises  Developing Country debt, 1982-1987  Europe (currency), 1992  Mexico (currency and banking), 1994  E. Asia, 1997-98 2.Are causes internal, external, or a combination?  External events  “Push factors”  Internal events  Currency crisis: credibility of exchange rate commitments  Economic policy: current account and fiscal deficits, inflation  Lack of regulatory oversight  Who bears the costs of crises?  Domestic Distributional Issues 3.US and Beyond (Ferguson)  Pre-2007: Liquidity Boom  US: consumer borrowing (mortgage, debt)  Recall US current account deficit, as well as fiscal deficit  Securitization of many assets, including mortgages  China: High savings rates  Export goods to US, earn dollars (facilitates by undervalued exchange rate)  Desire to hold foreign currency reserves in dollars (dollar as key currency)  Willingness to purchase US Treasury bonds and other dollar- denominated assets  Weak US regulation of financial institutions  Declines in asset prices ripple across the financial system  Will the crisis lead to a rebalancing?  Americans need to buy less stuff d. Iceland (Lewis) 1.Rapid financial sector expansion 2.Foreign currency borrowing  Low interests rate abroad  High interests rates at home 3.Securitization 4.Nov. 2008: First wealthy country to receive IMF assistance since 1976  Various conditions, including a fiscal surplus by 2013 5.Nov. 2009: Iceland lifted some restrictions on capital outflow VI. Development: Global Economy 1.Import Substituting Industrialization (ISI)  Linked with Marxist view of IPE (Core Periphery)  Terms of trade of countries specializing in primary products tend to deteriorate  Prescription: close markets to imports, develop local industry  Begin with simple consumer goods, then move to durable goods  Require trade barriers, government planning, and investment policy (targeted loans)  Results  Income redistribution: benefits local manufacturing  Rapid economic growth in 60s and 70s  Failure and imbalances beginning in the 70s  Need too much government support government borrowing proves costly 2.Export Oriented Industrialization (EOI) 1980s  Problems with ISI  Severe economic crisis  External pressures (IMF, US) for economic reform (Structural adjustment  Washington Consensus)  East-Asian Countries: Economic Transformation  Focus on export industries  Government intervention: protection for infant industries; targeted bank lending (Rodrik)  Empirically: positive linkage between reform and growth, at the country level  But significant poverty and inequality remain  Bias in international institutions against developing economies  2005 World Bank Study: Complete trade liberalization could increase worldwide growth of $287 billion/year by 2015  But 2/3 of these gains would go to rich nations  Better than no institutions at all? 9Reaching pareto frontier vs. where on frontier)  Alternatives, such as cartels? (OPEC)  Slight shift in balance occurring (Brazil, China, India)?  Trade-offs with integration strategy (Rodrik)  Costs of complying with joining the WTO  More attention to domestic institutions and investment necessary  Empirical results on trade and growth may not be as robust as suggested  Only clear pattern is that countries dismantle trade restrictions as they grow richer (reverse causality)  Openness not necessarily associated with economic growth  If investors are driven mostly by external factors, it is less clear that economic openness is beneficial to developing countries  TANs  Treaties may establish norms, leading to longer term changes (women’s rights)  Trade agreements  Consumer pressures (labor rights and working conditions)  The international criminal court  First permanent court established to try individuals for specific violations of international human rights law  Genocide  Crimes against humanity  War crimes  Empowered to prosecute anywhere in the world, as long as the crime occurred in a signatory country or the accused is from a signatory nation  A court of “last resort”  110 states are parties IX. The Environment a. Functional Need for International cooperation 1.Often involve externalities  Public goods: non excludable, non-rival in consumption  Ex. Ozone Layer, Climate, Oceans  Problem: tragedy of commons  Common Pool Resources: non-excludable, but rival  Examples: fish, whales 2.Collective Action Issues (International Institutions)  Group Size (Free-Riding)  Domestic Politics  Developed vs. developing nations (emissions per capita) 3.Success Story: Ozon Depletion  Montreal Protocol (signed 1987, in force 1989)  22 nations agree to reduce CFCs by 50% by 1998  London Amendments (1990): Included 81 nations; agree to eliminate all CFCs by 2000  Accelerated again in 1992  Covered 99% of production and of consumption  Aid and longer timetable for developing nations  Why?  Scientific Consensus on causes and effects of problem  Narrow set of producers (firms and countries  US willing to bear the cost unilaterally  Relatively low costs of transition (i.e. DuPont was leading producer of alternative technologies) 4.Climate Change Challenges  Wide set of countries, with varying interests  Developed nations, especially US: high emissions per capita  Developing nations: increasing emissions per capita  Cheaper to reduce emissions in developing nations  But less interests in environmental protection at low levels of development (FLS 465)  Greater scientific uncertainty  Domestic politics  Producers: narrow interest group, well organized  Consumers: economic cost of curbing emissions  Time horizons: current costs vs. future benefits X. Future of International Politics a. US-China Conflict? 1.Conflict between rising power and established hegemony (Power Shift) 2.Depends on costs of war, plus extent of conflicts of interest  Both are economically dependent on one another b. Economic Globalization: Will it continue? 1.Resistance in developed nations (labor unions, environmentalists) 2.Resistance in developing countries c. Global Governance 1.Little bit of a push with groups like the G20 2.Some resistance from countries like the US 3.Shifts toward private governance XI. Unsolicited Advice 1.Stay Informed about current events 2.VOTE! 3.Take a class because it is interesting 4.Realize how young you probably are 5.Consider Grad School 6.Enjoy Carolina North Forest 7.Travel! XII. Exam a. Arrive on time b. Blue book, Scantron, No. 2 Pencil c. Read multiple choice carefully d. Choice for essay Readings - [BL] Mattoo and Subramanian “From Doha to the Next Bretton Woods.”  Attempt at multilateral cooperation but failed even though international trade has flourished  Call for Bretton Woods II - [BL] Lewis “Wall Street on the Tundra”  Financial Crisis led to loans from the IMF and then they put all the money in one basket  Sent Iceland back into an economic depression - [BL] Oatley, International Political Economy (2009)  Rapid growth of MNCs imply that an increasing number of firm have opted to take their int’l transactions out of the market and internalize them within a single corporate structure.  A lot of firms have begun to develop into MNCs  MNCs are overwhelmingly concentrated in advanced, industrialized countries. (FDI)  Locational Advantages: MNCs have incentive to develop where resources are located or costs are low. o Market Oriented Investments o Natural Resource Investments: Building where resources are abundant o Efficiency Oriented Investments: Build facilities where production is cheapest  Market Imperfections: o Horizontal Integration: Firms that have production facilities producing same goods o Intangible Assets: Intellectual Property o Vertical Integration: Owning all the different parts of production (Stores to factories) o Specific Assests: Structure that is specific to one mode of production - [BL] Ferguson, “What ‘Chimerica’ Hath Wrought.”  - Rodrik, “Trading in Illusions,” A&J, pp. 325-332.  South Korea and Taiwan achieved high rates of economic growth by liberalizing trade gradually  economic openness can have benefits for developing countries, but trade liberalization shouldn’t be a substitute for domestic development efforts - [BL] Atwood et al, “Arrested Development,”  Needs to be better coordination between the State Dept. and USAID foundation  Resolution: Better leadership councils and a unilateral movement through USAID - [BL] Woods, “Whose Aid? Who’s Influence?”  China created a free-riding problem with no strings attached idea 7. Default: To fail to make payments on a debt 8. Bank for International Settlement: Collection of cooperating international banks. 9. IMF: Manages int’l monetary relations and debt and currency crises of the int’l financial system. 10. MNC: enterprise that operates abroad with production facilities outside the country of origin. 11. Bilateral Investment Treaty: agreement about conditions for private investment across borders. Chapter 8 (296-329) 1. Exchange rate: The price at which one currency is exchangeable for another. 2. Appreciate: To increase in value in terms of another currency 3. Depreciate: To decrease in value in terms of another currency. 4. Devalue: To decrease the value of one currency in terms of other currencies. 5. Monetary Policy: tool of national govs to influence interest rates or exchange rates. 6. Fixed Exchange Rate: Keeping currency value steady in terms of other currencies or gold. 7. Gold Standard: monetary system which countries tied their currency to gold at fixed prices. 8. Floating Exchange Rates: Currency traded on open market w/o gov intervention or control. 9. Bretton Woods Monetary System: Dollar tied to gold and other currencies were fixed to dollar. 10. Adjustable Peg: Govs expected to keep currency fixed but adjusted as the economy changes. 11. International Monetary Regime: arrangement by govs to govern relations among currencies. Chapter 9 (330-362) 1. Less Developed Countries: countries at relatively low levels of economic development 2. Infrastructure: structures necessary for social activity. (power and water supply) 3. Primary Products: Raw materials and agricultural products. 4. Oligopolistic: Industry whose markets are dominated by only a few firms 5. Terms of Trade: The relationship between a country’s import and export prices. 6. ISI: policies to reduce imports and encourage domestic manufacturing through trade barriers. 7. EOI: policies to spur manufacturing for export through subsidies and incentives for exports. 8. Washington Consensus: advocating for liberalization, privatization, and openness to investment 9. Group of 77: coalition of developing countries, now over 130. 10. New International Economic Order: reorganization of int’l economy demanded by LDCs. 11. Commodity Cartels: Association of commodity producers that restrict supply; cause price rise. Chapter 11 (408-42) 1. International Covenant on Civil and Political Rights: (’66-’76) details basic rights of people 2. Nonderogable Rights: Rights that cannot be suspended for any reason. 3. Prisoner of Conscience: People imprisoned for peaceful protest and expression of beliefs. 4. Individual Petition: A right to petition international legal bodies if state violates rights 5. International Criminal Court: A court of last resort for human rights cases. Chapter 12 (444-83) 1. Nonexcludable: characterizes a public good; has to be available to everyone in the world. 2. Common Pool Resources: One users consumption leaves less goods for the next person 3. Overexploitation: Consumption of a good at a collectively undesirable rapid rate. Climate Change Timeline 1. Vienna Convention (1985) 2. Montreal Protocol (1989) 3. Framework Convention on Climate Change (1992-94) 4. Kyoto Protocol (1997-2005)