IRLS420 AMU Lesson 4 International Trade Effects Discussion In what ways do international regulator regimes affect international trade? How would the economic environment be different without them?I look forward to your thoughts!Instructions: Your initial post should be at least 350 words. Please respond to at least 2 other students. Responses should be a minimum of 150 words and include direct questions. Far
IRLS402 LESSON 4
Let’s begin with one of the major international regime scholars, Stephen D. Krasner. In discussing international
trade, he points out:
“The structure of international trade changes in fits and starts; it does not flow smoothly with the redistribution of
potential state power. Nevertheless, it is the power and policies of states that create order where there would
otherwise be chaos or at best a Lockean state of nature. The existence of various transnational, multinational,
transgovernmental, and other nonstate actors that have riveted scholarly attention in recent years can only be
understood within the context of a broader structure that ultimately rests upon the power and interests of states,
shackled though they may be by the societal consequences of their own past decisions” (Krasner 2003, 36).
The World Bank
• International Monetary System (IMS)
Multinational Corporations (MNCs)
• Additional Resources
The World Bank
The two most important components of the international trade regime are the World Bank and the International
Monetary Fund (IMF). The World Bank was established in 1945 at the United Nations Monetary and Financial
Conference, held in 1944 in Bretton Woods, New Hampshire. It is usually simply referred to as Bretton Woods
States came together with the goals of rebuilding Europe after WWII and solidifying international financial
cooperation. The World Bank is comprised of two bodies: 1. the International Bank for Reconstruction and
Development (IBRD) – this used to be synonymous with the World Bank itself; 2. the International Development
Association (IDA), added in 1960.
The World Bank’s first loan was to France, but after the European states were well on the road to recovery the Bank
began to focus more on lower-income states or what was then known as ‘3rd World’ states. By the 1960s it was
focusing on development and poverty alleviation. “Development” As John Maynard Keynes noted, “as soon as
possible, and with increasing emphasis as time goes on, there is a second duty laid upon (the Bank], namely to
develop the resources and productive capacity of the world, with special attention to the less developed countries.
The IDA was developed in responsive to decolonization and the changing membership. In 1947 there were 44
member countries, 2 of which were African (Ethiopia and South Africa), but by 1971 there were 116 members, 40 of
which were African. The IDA offered below-market interest rates and long-term loans to low-income states that would
not qualify for loans from the Bank. The IDA also moved beyond the infrastructure kind of projects the World Bank
focused on and gave out loans for social lending” projects like education, health care, agriculture, and housing.
Globalization and neoliberal economic policies have changed labor patterns, integrating economies around the world and allowing for more foreign-owned industries to emerge in developing countries. These industries often provide low-wage,
precarious jobs, primarily hiring women because they can be paid less. The ILO reports that women’s participation in the labor force has been increasing “almost everywhere around the world, a process described as ‘the feminization of labour.”
The ILO claims that women’s employment, paid and unpaid, may be the single most important factor for keeping many households out of poverty.” However, while economic opportunities for women have grown, this has not translated into
equal access to high-quality jobs, as women continue to be relegated to “lower quality, irregular and informal employment (ILO. 2009). Additionally, a significant wage gap persists between men and women.
As States are now frequently operating through the G20 (formerly the G7), the degree and sources of their effectiveness continue to be debated. Organizations like the IMF and WTO play a crucial role. Some of the main questions for you to
consider is whether regimes can be neutral and what the role of dominant powers is. When you look at the importance of particular regimes think about technological factors, economic factors, political factors such as the role of dominant powers
and ideological factors.
As the Council of Foreign Relations noted in a 2013 issue brief, “After the global financial system collapsed in 2008, policymakers around the world scrambled to respond. The Group of Twenty (G20) designated itself the world’s premier forum
for economic cooperation but has struggled to implement necessary reforms. The International Monetary Fund (IMF) was also retooled to better reflect shifts in the global economy. Similarly, regulators from twenty-seven countries forged new
rules, known as Basel III, in an effort to prevent similar crises in the future. But despite these efforts, mitigating financial risk and coordinating global economic policy remains a challenge” (CFR 2013).
International Monetary System (IMS)
The international economic system is far more than the international monetary system (IMS); but the IMS, for better or worse, is the necessary engine the drives the world’s economies. But what do we mean by the term, the International Monetary
System? The simplest answer is that the IMS provides a systemic framework for trade, investments, other economic transactions and perhaps most important-provides the psychological and physical security to make such transactions happen at
blindingly fast speeds in an age of sophisticated technology. For many, the stability that the U.S. dollar provides is the basic guarantor of the entire system. But it hasn’t always been that way. Indeed, the Bretton Woods period, with fixed
exchange rates and using the gold standard as the previous engine of stability, effectively died on 15 August 1971, when U.S. President Richard Nixon announced that the dollar would no longer be convertible into gold, and the United States
would impose a surcharge of 10 percent on dutiable imports in an effort to force Germany and Japan to revalue their currencies. Since then, fluctuations in exchange rates made the Japanese Yen powerful in the 1980s and, today, the European
Currency Unit-the Euro-is emerging as a powerful currency and may indeed, conceivably, replace the dollar as the future stability guarantor of the international system (that, of course, is debatable.).
There is, nonetheless, an astounding recognition that United States policymakers seem to have acknowledged and acted correctly upon five decades ago in order to provide growth and prosperity not only to the United States but also to the
international. The so-called “gold standard,” nonetheless, had up until 1971 been an international monetary system in which the value of a currency was “fixed” in terms of gold. A government whose currency was on the gold standard would
agree to convert it to gold at a pre-established rate. This practice self-regulated balance of payments with the inflow and outflow of gold. Inevitably, though, as Spero and Hart detail, there were other forms of inequity.
Multinational Corporations (MNCs)
As you learned in IRLS210, Multinational corporations (MNCs), broadly defined, are business entities that have facilities—whether production, administrative, or distribution-related-in two or more different countries. The influence of MNCs in the
international system demonstrates how foreign relations and economics are intertwined. MNCs are a relatively recent development, and although they do not have the political sovereignty or military strength possessed by states, they still exert
considerable influence over the international system. MNCs also have a mixed reputation in terms of the benefits they provide and the harm they can cause, especially in the poor countries where they often locate production.
The World Bank, created in 1945, was established to encourage international financial cooperation following World War II. Today, it focuses on eradicating
poverty and the development of lower-income states. The international monetary system helps drive world economies through trade, investment, and
secure transactions. These organizations, multination corporations, and globalizing forces demonstrate that states and economies today are more
interdependent than ever.
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