International Institutions - Governing Trade

GOVERNING TRADE AND DEVELOPMENT The UN has a framework to manage the international political economy - IMF, WTO and WORLD BANK GATT - idea was to create a permanent multilateral forum for countries to discuss issues that concerned them, freedom of trade and lowering trade barriers (very successful: 97% of world's trade, consists of 150 member states) WTO principles - MFN (most-favoured-nation principle): grant tariff reduction to all member, RECIPROCITY: like be exchanged for like, value of that being exchanged is perceived by participants to be of roughly equivalent value, NON-DISCRIMINATION: foreign goods to be treated the same as domestic Problems for developing countries: -not enough bargaining power to push tariffs down-the issues of 'principle supplier' when the tariff is determined by the principle supplier, not all suppliers -mistrust of liberal trade policies -need to protect infant industries URUGUAY ROUND - a series of negotiations 1986-1994, for the first time addresses textiles and agriculture which were fundamental to developing countries Grand bargain remains unbalanced against developing countries HOWEVER, governing trade dominated by governments (no alternative inputs), no agreements on sensitive issues (farm products), EU, Japan and USA subsidies to farmers which distorts the world trade, need for a balance between trade and the environment, continuing protests about wage in developing countries and how this affects jobs in developed countries IMF - part of the post-war project, Europe would need funds for reconstruction, Great Depression showed need for stable exchange rates, Harry Dexter White and John Maynard Keynes (wrote) IMF cont. - 184 members, resources coming from the joining fees, oversaw the dollar-gold standard and exchange rate system, provided short-term liquidity to countries in balance of payments crises, dollar standard collapsed in1971 when the US could no longer back the dollar with gold IMF finds new purpose in the debt crisis of the 1980s: OPEC raises oil prices in 1973 > US interest rates raised in 1979 (many countries unable to repay loans) > IMF steps in to ensure that countries cannot default (bailed out Hungary and Ukraine), EU and WTO also actors in debt crisis WORLD BANK - president always American (IMF, European), funded by member governments with each given a quota, each member has one vote per dollar (US has a veto over important decisions because of large input), US significant control and political influence 1980s - IMF and WB adopted neoliberal ideas, 'Washington Consensus', consisted of liberalisation (trade labour markets) privatisation, reduced government spending, monetary and fiscal restraint and emphasis on markets > over time more and more conditions have been applied East Asian crisis 1997 - shows up the problems of conditionality WB operates in such a ways as to extend the capitalist system, and doesn't act in the interests of particular states, it acts in the interests of capitalism more generally IMF re-invention - South American countries have repaid their debt, East Asian countries are building huge reserves so they won't need another IMF-bail out (IMF was facing a crisis of funding), loans have been agreed recently with Iceland, Hungary and Ukraine, any new global finance regulation put in place may involve the IMF