North-North Relations

-Hegemony

-Intl. Institutions (IMF, World Bank, GATT)

-OECD, G-10, G-7(8), G-5

-Rich v. Poor Nations

-Inequality of Wealth and Power

-Little Influence over decision making

-opens up remote parts of the world up to expanded trade, investment and economic oppurtunity

-Ties world closer together thru communications, transportation

-Fosters spillover of tech. of drugs and medicine into poor countries

-Reduces tendency of gov.'s to commit human rights violations b/c of exposure of national medai (CNN, BBC)

-Loss of National Identity (stateless corp.)

-MNC's swallowing up small businesses -exploitation of workers in pursuit of "profits" -Destroying the environment

mercantilism

-pre-industrial economic doctrine

-expand exports/decrease imports

-nation state is dominant actor

-struggle for power is a "zero sum" game

-Globalization- nation states can control it

-states engage in "beggar thy neighbor" policies

• England
• Abolished in 1846 -removed agricultural tariffs

Mercantilism's primary goal and concern

-achieve "self sufficiency" thru the pursuit of wealth and power

-state power determined by wealth (gold and silver)

-primary concern: relative gains, not absolute gains

Mercantilism Alexander Hamilton (1791)

-Report on the Subject of Manufacturers (1791)

-advocates economic nationalism and protectionism to strengthen national security

-protectionist policies include tariffs, quotas, and subsidies to bolster the manufacturing sector

-keep economy open to foreign technology, capital, and "skilled" labor

• The national system of Political Economy (1841)
• advocates economic nationalism and protectionism to strengthen German security
• Government investment in "human capital" development
• protectionist policies in short term to bolster "infant" industries only

• Creation of nation-state system        
• created the sovereignty and territorial integrity of states    

• 1500-1780
• no hegemonic power during this period

• preoccupation with centrality of security
• over-emphasis of nation-state as primary actor
• concern for relative rather than absolute gains
• focus on self interest rather than the common good

• form coalitions to strengthen their numbers (e.g., group of 22, regionalism (Mercosur)
• alter or disrupt international regimes (voting)
• government support for industrial development (e.g. NIE's- the asian tigers)

• Realism tends to ignore the interest of poor nations
• LDC's seek power to reduce dependency

• emphasizes free market, private property rights, & limited gov't in economic affairs
• "the consumer is king" primacy of consumer
• primary concern: absolute gains, not relative
• struggle for power is a "positive sum" game
• view intern. system as mutually cooperative

• orthodox liberalism
• free enterprise, free trade, & minimal gov't interference maximize human welfare
• Adam Smith ("Wealth of Nations")
• key: "let the market alone", "the invisible hand" - self interest and competition
• free trade (theory of comp. advantage)
• David Ricardo - theory of comparative advantage

• Adam smith
• states benefit most by specializing in the goods they produce best & trade with eachother

• states benefit from specialization & trade even if one has the absolute advantage in all the products traded
• criticism: comp. advantage results only from differences in labor productivity

• between UK & France
• sparked trade liberalization in Europe

• Industrial Revolution (1780-1914)
• First nation to industrialize - prior to 1830, gradual tariff reductions on industrial imports & high duties on agricultural imports

• 1873-1896 depression
• Increased protectionism on continent
• decline in british production/exports
• Rise in German and US production  - protecting infant industries

• collapse of the European state system
• shift in financial/monetary superiority
• US emerges as a military superpower

• Interwar period (1919-1939)
• US as "reluctant" leader
• Largest industrial power/creditor nation
• US unwilling to assume role as hegemon (e.g. refusual to Join League of Nations)
• Heavy tariff protectionism - Fordney-McCumber Act of 1922 - impeded post-war European Recovery

• war debts, currency devaluations & declining world trade
• Great Depression (1929 Stock market crash) - Smoot-Hawly tariff act of 1930 - Europeans retaliated with a rise in tariffs     -Smoot Hawly- steep rise in ratio of import duties to value of dutiable imports (bad)

• rejected Orthodox "laissez-faire" doctrine
• wanted limited gov't interference in marketplace
• pursuit of "efficiency" in the marketplace causes unemployment

• Gov't should support full employment (finance public works)
• implement fiscal policies to increase consumer demand

1. Remove DC trade barriers to LDC's
2. Permit short term protectionism for LDC industries
3. adequate IMF/WB financing to LDC's

• The New Deal (roosevelt)- which was limited gov't intervention in the market - work relief, welfare, AAA, Social Security
• Reciprocal Trade agreements of 1934 - shifted tariff setting policy to the pres. - led to bilateral trade agreements w/ 27 countries, decreased tariffs by 44%
• WWII and US involvement

• favors strong international institutions
• post WWII  Period (Pax Americana)
• International institutions  - United Nations, IMF (promote monetary stability), World Bank (Loans to LDC's)
• agreements - GATT
• European Recovery program (1948) - Marshall Plan

• domestic pressure affects state policy
• "two level" game level 1 v. level 2
• Level 1: International Interests
• Level 2: Domestic interactions
• Realism ignores domestic interests

• disregard of role of state as primary actor
• overemphasis on the free market for LDC development
• underemphasizes redistribution to solve the problem of inequality
• inattention to "assymetries" in North & South political power relationships
• disguises exploitation and imperialism under cloak of "interdependence"

• LDC problems rooted in irrational or inefficient domestic policies and corruption
• competition, free trade, and specialization
• open north-south relations are "positive sum" game

• agree with view that LDC problems rooted in irrational or inefficient domestic policies
• "Laizess-faire" creates inequality
• Northern aid to South a matter of "enlightened self interest"

• a state that is "able" and "willing" to enforce agreements, punish cheaters, and bear the extra burden of providing public goods
• single dominant power (US and GB)
• maintain open and stable international economic system
• extremely unequal distribution of power
• type of power: political, military, economic, cultural

• benevolent ("carrot")
• coercive ("stick")
• mixed ("carrot and stick")

• increas likelihoood of open intern. economy
• fosters creation of international liberal regimes
• restores stability in time of economic collapse/shock

• tendency to overstretch ("imperial overstretch"
• free rider problem
• declining hegemon: more difficult to maintain an open and stable intern system

• includes marxism, imperialism, dependency theory, world systems theory & gramscian analysis
• premise: history is marked by exploitation and class struggle
• main factor: relationship among classes - capitalist class (bourgeoisie) exploits working class (proletariat)
• favors the poor/less powerful & rejects capitalism
• primary goal: redistribution of power by taking over capitalist class
• view economic relations between classes as a "zero sum" game

• politics are subordinate to economics
• class struggle characterizes human history
• exploitation of one part of society by another - feudalism> capitalism > socialism
• capitalism leads to overproduction, low wages, underconsumption, eventually to unemployment
• collapse of capitalism is inevitable (proletariat revolution)

• state policy reflect interests of dominant class
• capitalists use state as an instrument to exploit the working class
• strong business/gov't ties

• the state is free from the dominant class
• state adopts policies to benefit the working class by keeping the working class at bay (eg welfare)

• view world as hierarchical (capitalist states v. poor states)
• political theory: cap. states seek conquest, control, and prestige in colonies
• economic theory: capitalists look to colonies as outlets for surplus goods & increased profits
• brings industrialization to LCD's

• Imperialism: the highest Stage of Capitalism
• No marxian revolution as predicted due to imperialism
• new profits via export of capital/goods
• capitalists avoided revolution by paying higer wages back home from overseas profits
• "a necessary evil" - brings industrialization to LDC's
• eventually, imperial competition leads to downfall of capitalism

• originated in Latin America in the 1960's
• focuses exclusively on North-South relations
• Premise: capitalist states prevent LDC's from achieving economic autonomy
• LDC's suffer from declining "terms of trade" with DC's
• policy prescription: adopt import substitution industrialization (ISI) policies and protectionism to reduce dependency

• foreign control/domination by core over periphery
• marxist see it as private control of means of production
• reject marxist notion that north is contributing to the development of the south.

• opposed to theory of comparative advantage because it leads to commodity-export dependency (pg 108)

• development of northern capitalist economies requires southern dependency
• more emphasis on external factors constraining LDC development
• LDC's can't escape underdevelopment

• external and local factors in LDC's affect development
• LDC development is possible (eg NIE's, mexico, chile)
• advocate export led growth, not ISI policies

• preoccupation with North-South capitalist exploitation, instead of unequal power among states (realism)
• under-emphasis on domestic policies as source of LDC economic problems- LDC's port. as helpless victims
• failure to differentiate forms of dependency - military, economic, cultural
• failure to account for success stories -NIE's, China, China, Chile, Costa Rica, Argentina

• Antonio Gramsci
• a class based theory
• role of ideas, institutions and culture is important to explaining social hierarchy and change
• capitalist class rules via shared values, not coercion
• capitalist grant concessions to working class (eg collective bargaining, unemployment benefits, etc.)
• key focus: counter-hegemony at the domestic level- eg globalization protestors
• endgame: socialism will overthrow the bourgeois-led capitalist order

• pre-occupied with exploitation in a capitalist system as opposed to other systems, such as socialism
• provides little guidance as to how counter hegemony might develop or what form it will take

• domestic-centered theory emphasizing the role of interest groups in gov't policy making
• premise: business groups- large corporations- are most important actors shaping state behavior
• gov't not in control due to business group pressure
• business groups are divided, thus state doesn't serve one interest group - (internationalists v. protectionist interests)
• President (liberalization) v. Congress (protectionism)

• competitive advantage via industrial targeting of high-tech (value added) industries- forget wine and coffee go for the HDTV's (Japan and Asian Tigers)
• Goal: capture larger share of international export markets (export-led growth)
• Two problems
• identifying nationality of firms (eg joint ventures, foreign ownership)
• encourage retaliation from other states

• havana charter (1948) -multilateral negotiations for an ITO - US proposed an ITO but congress never ratified havana charter- Truman withdrew the charter in 1950
• GATT
• final act signed by 23 states (CP's) in 1947
• trade agreement:no ratification required
• consisted of small secretariat in Geneva
• 8 "rounds" of multi. negotiations (1947-1994)

• GATT to lower tariffs thru "rounds" of MTN's -item by item tariff reductions (5 rounds)  -across the board tariff reductions (Ken. Ro.)
• GATT article 11  -calls for the elimination of import quotas  -exceptions: BOP problems, national security, LDC infant industry, health, agriculture (1955)
• Non-Tariff-Barriers NTB's
• NTBs replaced tariffs
• Tokyo round NTB codes (plurilateral) - eg subsidies, gov. procurement, standards, import licensing

• Most favored nation (MFN) principle - Article 1 -requires equal treatment of imports from different origins
• National Treatment - Article III- requires equal treatment of foreign products with domestic products (taxes regulations, etc.)

• a state benefitting from trade concessions, should provide equal benefits in return
• limits free riding under the unconditional MFN principle
• states joining the GATT/WTO must agree to liberalize market access to its own market as a precondition

• gov't actions that limit imports that may cause harm to an industry or economy
• General Escape Clause (article 19) - permits a state to counter import surges that cause, or will cause serious injury to domestic injury - must be applied to all WTO members- affected states can request compensation
• temporary safegaurds: BOP problems, protect infant industry
• permanent safegaurds: national security, health, public morals

• Anti-Dumping Duties (ADDs) - dumping- when a firm sells a product in foreign market cheaper than domestic price or production cost
• WTO permits ADDs if foreign goods are dumped and dumping threatens material injury
• Countervailing Duties (CVDs) - to counter subsidized imports that material injury to domestic producers

• Article XXI (national security)
• Article XXV (5) (waiver) - allows a member to waive a GATT obligation with two-thirds majority vote

• Disputes over agriculture almost killed UR
• North v. South (CAP, farm subsidies, tariffs/quotas)
• US v. EU (European Union)
• Marakesh Agreement (4/15/1994)

• cut tariffs on manufactured products by 1/3
• elimination of textile quotas (10yrs)
• replaced quotas with tariffs on agriculture
• established the WTO (effective 1995)
• Dispute Settlement Understanding (DSU)
• GATS, TRIPs Trade Regulation of Intellectual Property, TRIMs Trade Related investment measures

• Legally constituted IO (IMF, World Bank)
• GATT reverted to agreement of trade and goods
• WTO oversees trade rules under UR agreements - GATT, GATS (trade in services), TRIMs and TRIPs
• Structure - one nation one vote principle
• Director General - any member country
• Ministerial conference (meets every two years)
• General council

• Dispute Settlement
• Dispute Settlement body establishes panels to investigate complaints
• panel decisions are binding
• Future Issues
• Enlargement (147 members and counting)- Russia still not a member
• Agriculture (LDC priority group of 22)
• Services (US Priority)
• RTAs: building blocks towards WTO multilat. trade liberalization
• labor, environment, human rights