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Gov Final


the exchange of goods or services across borders by individuals, fi rms/corporations, governments. buying products from and selling products to international partners International Trade
study of the flows of goods, services, nance, investment, currency, and people across borders for economic purposes. How political forces affect economic outcomes and economic forces affect political outcomes at the international level. International Political Economy
in that which they can produce relatively more eciently, global production is increased, and more goods will be available for consumption. Specialization
the ability of an economic actor to produce a good more efficiently (lower opportunity cost) than another actor. Allocating productive resources to this good produces relatively more than allocating productive resources toward other goods. Comparative Advantage
the ability to produce more of a particular good given a set amount of resources. neither vital for nor harmful to logic of gains from trade Absolute Advantage
Land, labor, capital, human capital. Factors of Production
Good for agriculture Land
Unskilled workforce Labor
Like stuff. Machines and money and stuff that you can use to make other stuff. Capital
Skilled labor Human Capital
The comparative advantages of states will be determined by their relative factor endowments. How scarce or abundant states are in the key resources or inputs of productivity Heckscher-Ohlin model of comparative advantage and trade
Factors which are relatively abundant in a state will be cheap - large quantity. Economic activities that make heavy use of these abundant factors will have cheaper inputs and be more ecient than activities that make heavy use of scarce factors. Factor Scarcity/Abundance
control or limit trade, sheltering domestic industry from international producers. leads to deadweight loss through inefficiency. May be initiated to preserve resources needed for national security (military, tech, food). Allows exports protects ag import Protectionism
taxes charges on imported goods which are easy to impose and which generate revenue. Make foreign products more expensive. Tariffs
Quotas, import licenses, requirements that governments only buy domestically produced goods/health & safety standards that discriminate against foreign goods. Non-Tariff Barriers
limited number of a particular good allowed to be imported from a particular country (sometimes called 'voluntary export restraints') Make foreign products either unavailable or more expensive. Quotas (Quantitative Restrictions)
direct payments to the domestic industry, which compensate for costs of production, enable lowering of prices and support industry survival. Make domestic products cheaper. Subsidies
Restrictions on safety, health, environmental impact, labor processes or local ownership. Can represent genuine concern for related issues. Can also act as back door trade barriers. Regulations
Productive activities which may have a long-term comparative advantage (based on factors of production) but which is short-term inefficient (from experience) Infant Industries
General Agreements on Tariffs and Trade. 1948-1995. Formed post WW2. Covered (1) tariffs, (2) anti-dumping, (3) NTBs, services, (4) intellectual property, establishment of WTO. Bargaining rounds trade liberalization, reciprocity nondiscrim, dispute resol GATT (consensus voting, equal weight for each state but policies dictated by major powers)
World Trade Organization 1995-present. Stronger institutional structure, broader coverage of trade-related issues. Dispute settlement body. WTO
Lower tariffs on other states' goods in exchange for them lowering tariffs on your goods. Bargaining rounds reduce a wide range of tariffs and (increasingly) other protectionist measures Reciprocity
Uniform tariff reductions for all member states, no selective discrimination. Multilateralizes bilateral trade agreements. Give everyone Most Favored Nation status. Non-Discrimination
Commitment to extend as-favorable trade policies to all member states as you do to your most favored nation. Normal trade relations. Most Favored Nation
Major proliferation in recent decades. Different levels - trade agreement, free trade area, customs union, common market, economic union. Examples EU, NAFTA Regional/Pref. Trading agreements
Free Trade Area
Customs Union
do regional agreements create momentum toward global free trade, or set up independent groups of states interacting with themselves but not worldwide? Building Blocks vs Stumbling Blocks
Do trade institutions generate more trade by reducing barriers, or simply shift existing trade from outside to inside the institution (possibly to less efficient producers)? Trade Creation vs Trade Diffusion
At the intl level, what general theories explain when (relatively) free trade will be able to be sustained, and when it will break down to protectionism? What causal forces plausibly predict the trends and patterns of international economic integration? Trade Openness
Dominant states have the interest/ability to promote global free trade Economic power/really competitive productive capabilities create desire for open market structure of commerce & can protect shipping lanes/only open own markets to participating states Hegemonic Stability Theory
Int Institutions & regimes create expectations & patterns that support free trade. Reduce transaction costs, provide info on other states' activities, establish repeated interactions that facilitate reciprocity & issue linkage. Help states get 2,2 in PD Regime/Institutional Theory
Good economic times = trade openness, fewer losers from trade, easier to compensate them harsh times = protectionism, budgets tight, unemployment, fear of disruption and openness Business Cycle Theory
If free trade is beneficial, why does protectionism occur? What are the distributional implications (who is helped/hurt). How are regulations, institutions, and patterns of change influenced by political/economic interactions between interests? Domestic Politics of Trade
Numerical concentrat - better overcoming collective action issues, organize/mobilize small familiar groups. Individuals feel impact more, more willing to bear costs, vehement interests. Geo concentrat - politicians n detroit have incentive to protect auto Concentrated (vs Diffuse) Interests
Variation in structures of dom institutions influences degree of advantage for concentrated/diffuse interests. Democracies may pursue liberal (open) trade policies. US mechanisms privilege trade by shifting power from congress to president Diffuse (vs Concentrated) Interests
Protectionism redistributes wealth from consumers to producers. Consumers = diffuse interest group-entire population of a state, all individuals that use a certain good Consumers (vs producers)
Producers = much more concentrated. Numerical concentration (small # of major producers of a product), Geographical concentration (producers of a given product located in same area) Free trade has diffuse benefits and concentrated costs Producers (vs consumers)
factors will win/lose from free trade according to their abundance/scarcity. Scarce factor owners like protectionism, Abundant factor owners like free trade. Stolper-Samuelson
Should be seen with free trade. Prices of factors of production (wages, land, etc) should become more equal. Increased demand for abundant factors at low prices drives prices up. Decreased demand for scarce factors at high prices drives those prices down. Factor Price Equalization
Advanced economy with small land/labor ratio (lots of labor) would experience cleavages between urban and rural Urban-Rural Cleavages
Capital abundant high land/labor ratio - labor should be protectionist, land should be free trade. Class Cleavages
Preferences over trade will be driven by sector/security interests rather than factor interests. actors will win/lose based on success of their industry ≠ success of the factor of production they control. If free trade hurts an indust prefer protectionism Ricardo-Viner
Mobility - how easily/cheaply/quickly means of production can be shifted/retrained/repurposed/reallocated from one industry 2 another Highly mobile non-specific, Highly immobile specific. If factors r mobile, interests=factors If immobile interests=sector Factor Mobility/Specificity
Use aggregate benefits to compensate those made worse off. In theory, always possible. In practice, subject to political and economic pressures, may not happen or happen imperfectly. Free trade agreements linked to job security/retraining programs Redistribution
Cross border investment can improve welfare, investors/investment opportunities can have mutual interests in the ability to freely move capital, mutual (or more than mutual) vulnerability, threat to sovereignty International Finance/Investment
Claim on income and profits, but no direct control over management of assets. Stocks (equities), bonds, loans. Fairly fluid, can move money easily if conditions change, but still possible defaults Portfolio Investment
Loan to a government, generally by private banks or investors (when international, specifically referring to banks/investors in other countries). Government/treasury bonds. Much portfolio investment is this. Sovereign Lending
Acquisition by a company of fixed, hard assets in a foreign country with managerial control/more risk. Actually buying/building a factory. Host govs want to have them. Firms may prefer this because it evades trade barriers/cuts down transport costs, etc Foreign Direct Investment (FDI)
Loans at or below market interest rates (or with no interest) to finance development projects. Goal of enabling development rather than realizing max profits. Takes the form of intl finance, but more intl aid than a financial loan transaction Concessional Finance
Business that is stretched across several different nations. And stuff. Makes different parts in different places that are comparatively better at making those parts. Multinational Corporation
Investing companies may grow profits by operating overseas but at the costs of local jobs as well as concerns over labor, environmental, or human rights standards Home Country
Created by Bretton Woods to provide loans for development projects, to redevelop Europe after WW2. Evolved to help the developing world and reduce poverty. World Bank (weighted voting based on economic size)
Established at Bretton Woods to promote monetary security. Acts as a last resort to provide bailout loans and signal creditworthyness to investors. Requires policy concessions (conditionality/austerity measures) to show they intend to promote sound policy International Monetary Fund (weighted voting based on membership quota payments)
Protect the interests of overseas investors, promote stability of expectations and terms of investment. Major growth in recent decades with massive rise of international investments. Bc no multilateral institution exists for foreign direct investment. Bilateral Investment Treaties
National monetary systems allow actors to use money to exchange goods and services. Enable transactions too complicated for barter, store value across time. Govts establish a currency and regulate it Currency
The price of one currency in terms of another. Currencies need to be convertible into one another to engage in economic transactions across borders. Exchange Rates
When a currency goes up with respect to another currency, it strengthens or appreciates (opposite for depreciation) A-more expensive for foreigners to buy goods, reduces exports. cheaper for us to buy foreign, increases imports. Opposite for D. Appreciation/Depreciation
Keep value of currency stable in terms of another commodity (gold etc). Guarantee conversion at set rate, buy/sell reserves of gold/foreign currencies to shift supply for own currency. raise or lower interest rates to shift demand for own currency Fixed Rates
Let the value move, worth whatever people are willing to pay for it. Allow market forces of supply and demand to dictate price Floating Rates
Pegged rate allowed to be adjusted periodically as the govt sees fit Fixed but Adjustable rates
Floating within a certain range. If it gets too high or low, the gov steps in to push it one way or another. Managed Floating Rates
Ability of govts to influence macroecon (unemp, growth, inflation) by managing $ supply, largely by taking actions that influence domestic interest rates. low int=saving less borrowing more. √ growth. high int=higher return, harder to borrow ≠inflatio Monetary Policy Autonomy
Ability of currency to flow freely in and out of an economy Capital Mobility
Pick 2 - Fixed Exchange Rates, Capital Mobility, Monetary Policy Autonomy. You can't lower interest rates when people can get a better deal at a fixed rate in another currency. Mundell-Fleming Trilemma
arrangement that most countries accept to regulate relations among currencies. Formed by individual government decisions to fix or float, and how to affect their currency value. May be formally agreed to through active coordination or informally generated International Monetary Regimes
Major currencies fixed to gold, easily convertible, commodity standard Classical Gold Standard
US dollar pegged to gold ($35/1oz), other currencies pegged to the dollar, fixed-but-adjustable, heavy cooperation Bretton Woods System
Most major currencies float, with exceptions and regional integration Contemporary Monetary Regime
Govs run debts trying to fuel econ, borrow $, spending ≠ growth, paying becomes hard (choice between normal spending and payback), investors worry about default and wont lend more, default, bailout, investor loss, reputation loss Debt Crises
Govt adopts fixed rate, problems emerge, loss of faith and investors sell currency, investors flee, govt raises interest to defend currency/buys own currency, govt gives up and currency is allowed to float/lose value/depreciate Currency Crisis
Misguided policies of over-borrowing, implicit guarantees to private banks, poor development strategies, lax regulation lead to fundamental economic problems Bad Policy
maturity mismatch between long-term assets and short-term loans make borrowing states vulnerable to self-fulfillinf investor crises of confidence Financial Panic
You can only have the money if you promise to... Conditionality
promise to cut spending, etc Austerity
Massive gov borrowing at low interest rates to finance Import-Substitution Industrialization policies. Econs ≠ develop, slow growth. Volcker Shock raises interest in US, drawing capital away. Mex defaults in 82, investors panic and pull of all over latin Latin American Debt Crisis
Euro currencies fixed to German Mark though Exchange Rate Mechanism. Germany sets high interest rates following reunification to avoid inflation. Recession = downward pressure, Brit and It unable to defend fixed rate with reserves, abandon peg in 92 European Currency Crisis
Regimes, sets of rules standards and accepted practices, generally understood & shared by the community, around which expectations converge and which structure political interactions. International Institutions
Institutions formalized with states as members, a permanent secretariat or bureaucracy, concrete tangible structures, and a specifically defined mission (NATO, WTO, EU) International Organizations
Attempting to promote intl stability & peaceful conflict resolution by acting as a forum for promoting views, providing mechanisms for dispute settlement, coordinating information, and symbolizing inl order and global unity United Nations
Equal representation and voting for all UN member stages. Accredit nat delegations, oversight of special agencies, pass non-binding resolutions, control finances. UN General Assembly
Most powerful body, approves use of force, sanctions, investigations, resolutions binding on member states. Reflects 1945 power balance. UN Security Council
authorized under chapter 6.5 of the UN charter. observation (watch/report) peacekeeping (interpose between formerly conflicting parties) and rarely peacemaking (enforce peace when it breaks down) Peacekeeping
Mearshimer (94). Basically a reflection of the balance of power. No independent effect on state behavior Institutions: Irrelevant
Keohane (84) Provide symmetrical info, establish legal liability, arrange bargaining, create issue linkages, provide forums for negotiation, unbiased info, standards of behavior, encourage compliance Institutions: Facilitate Cooperation
Nielson & Tierney (03) institutions perform things that will benefit members with initial but not continuous guidance by states. can act on their own, as long as they dont stray too far from member preferences Institutions: Delegated Authority
Barnett & Finnemore (99) Act by themselves, in a way creator states didnt intend. Institutions: Rational-Legal Authority
institutions with nearly universal membership, designed to deter any state from challenging the status quo through aggressive action. Based on all states wish to prevent war & aggression & preserve the status quo. Commitment to use nonviolent conflict res Collective Security
(1919) Resect and preserve against external aggression the territory/independence of all members. Any threat of war is a threat to the whole league and they deal with it as such. All members protect the one that's threatened. Didn't work in Japan (31) League of Nations
institutions with limited membership, joining states with some common interests and geopolitical objectives, designed to commit to and/or facilitate military cooperation. Specify terms of military, standards of acceptability or distributions of benefits Alliances
Defensive- allying against invasion, mutual aid if attacked. Offensive- allying to invade another state Offensive/Defensive Alliances
Symmetric- states are rough equal in strength/contributions to the alliance Asymmetric- somes states much more powerful than others Symmetric/Asymmetric Alliances
Targeted- established against a specific potential adversary of target General- established with a general goal against any mutual opponent Targeted/General Alliances
states drawn into wars in which they have no interests and would not have otherwise participated Entrapment/Chain-Ganging
free-riding and under-provision of security as states seek to shift obligation of deterrence onto alliance partners Buck-Passing
People want a bipolar system and align themselves in such a way that the power balance is approximately equal Balancing
Everyone jumps on the most powerful side Bandwagoning
Your adversaries have to believe you can and would beat them and that you would actually come to the defense of your alliance partner(s) Credibility
Originally a nonagression pact between Germany and SU. But they were like "If Poland happens to get's how it would work out for us" and then it got broken when Germany invaded them later Molotov-Ribbentrop Pact
Parties separately, through self help and mutual aid, will maintain their individual and collective capacity to resist armed attack. Attack against one (EU or US) will be an attack against all. Cold war, either NATO or Warsaw. Only time clause evoked-9/11 North Atlantic Treaty Organization (NATO)
1953-parties will consult when either one's independence or security is threatened. US has helped but not in every single little thing. US-Korea Defense Treaty
Common market/economic union - complete free trade, common external tariffs, harmonized regulatory standards, (partly) common currency, (limited) labor mobility. Functionalist approach to supranational integration, spillover with econopolitical issues European Union
Economic cooperation and (mostly) free trade area, though limited deeper integration Association of Southeast Asian Nations
(Mercosur) Free trade area evolving into a customs union and development of a common market Southern Common Market
Canada, Mexico, US. Free trade with minimal additional integration North American Free Trade Agreement (NAFTA)
Are states growing obsolete in the face of intl integration? To the degree that IR is characterized by integration, what form will it take? World feudalism, functionalism, regionalism, ecologism, cyberfeudalism States and Integrations
(Fukuyama) Gradual, inevitable spread of liberal democracy End of History
(Huntington) Fault lines of conflict between broad cultural identity groups Clash of Civilizations
Possible effects - diffusion of power, diffusion of information, creating new types of threats, creating new opportunities for and advantages to cooperation, transform cultural or identity boundaries Technology and International Politics
What will be the nature of the US-China relationship in coming decades? Is this the relevant dimension of great power interaction, or are other actors equally or more significant (EU, India, Russia, Japan) Major Power Interaction
Greece stays in the EU, stays on the Euro. State creditors agree to major write-down of debt, Greek depression Greek/Eurozone Financial Crisis
Assad regime falls within 6 months. Outside funding, but no direct military intervention except Turkey. Destabilization in the immediate future Syrian Civil War
Gaza Conflict
Rebellion in D.R. Congo
Continuation of the status quo. Tension interrupted with sporadic violence (terrorist /rocket attacks, massive military response) Limited deals, no major resolution. More international recognition of Palestine, de-facto statehood Palestine and Palestine
Any govt limitation on the exchange of international goods, tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods/health & safety standards that discriminate against foreign goods Trade barriers (redistributive from consumers to producers)
political cleavages, coalitions in domestic products, will be driven by winners and losers of different trade policies. Rogowski
Lost access to international markets in 30s. Regained access in 60s, emergence of developing world, interest rates below inflation. Debt became huge. Mexico defaults in 82, investors pull out all over Latin America Latin America and Int Trade
Rapid economic development, easing capital restrictions and attracting economies to rush to invest. Close relationships between govts and banks, poor investment, fear of devaluation sparked insecurity, economic crash, contagion East Asia and Int Trade
Higher rate of return (abundant capital = lower interest rates), access to natural resources, more favorable business/regulatory env. Risk asset seizing, lang/cult barriers, info/transaction costs, discrimination against foreign investors, anarchy Pros/Cons to investing abroad
Lenders and borrowers have a common interest in the efficient allocation of capital. Borrower can grow business, govts can spend on development, lenders get good return. But conflicts of interest happen. Rate o loan, debts repaid in full, taxes, profsplit Cooperation Bargaining
Strong and varied structure. Key ones include Bank for International Settlements (BIS), World Bank, International Monetary Fund (IMF), Bilateral Investment Treaties (BITs) Intl Institutions in Finance
Created in 1930 to manage reparations payments Germany owed under Treaty of Versailles, evolved into a forum for central bankers to get together and discuss monetary policy, international financial issues Bank for International Settlements (BIS)
Fixed rates promote stability, useful when tied to a dominant outside economy, useful for trade and investors. Risk associated with vulnerability to instability of crises Fixed Exchange Rates : Interests
Pursue independent monetary policy. Interest rates not restricted by a need to maintain pegged currency, avoids costly buying of reserves. Useful for local businesses (hairdressers, restaurants) and large, inward-based domestic market Floating Exchange Rates : Interests
Strong rates for national purchasing power. Good for consumers, tourists going abroad. Bad for exporters and import-competitors, farmers. May lead to slow growth, job loss. Appreciated Rates : Interests
Weak rates make domestic goods cheaper. Good for national producers, exporters, import-consumers. Bad for consumers, tourists buying foreign goods. May grow jobs, may lead to inflation as imports rise Depreciated Rates : Interests
League of Nations didn't do anything in Japan. UN worked to help Korea (50). US against Vietnam and Afghanistan but UN didn't do anything. Persian Gulf war, UN works. Rwanda genocide, UN does nothing. UN intervenes in Libya. Collective security issues
IMF, World Bank, GATT/WTO (all trace back to Bretton Woods post WW2) Global Economic Institutions
Engagement, no major conflict. Increased Chinese influence in institutions and the developing world limits US influence. Continued Chinese military modernization but not a serious threat US-China prediction
Created by: haleyBUGoxox



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