3.2 political and economic decision making Flashcards
what types of organisation do we cover?
international political and economic
what was the Bretton Woods conference?
It was a gathering of delegates from 44 nations that met in 1944 to agree upon a series of new rules for the post WW2 international monetary system
-the main aim was to create trusting economic relationships between countries to enable protectionist methods to be removed and global flows to occur without hinderance.
protectionism definition
imposing economic conditions to preserve position and security in relation to global flows e.g. tariff and quotas
what 3 IGOs were created at the Bretton Woods Conference
WTO- World Trade Organisation
WB- The World Bank
IMF- International Monetary Fund
where is the world bank and the IMF based?
Washington DC
where is the WTO based?
Geneva, Switzerland
what umbrella do the IMF, WB and WTO fall under.
The United Nations- in its economic section
IGOs
Intergovernmental organisations
The World Trade Organisation
aims to support free trade without barriers and to promote global flows of commodity and capital and facilitate economic growth and development.
-works with nations to enable free trade agreements and economic liberalisation through removing protection measures.
how many member states did the WTO have in 2016?
162 member states
-can act as a mediator in situations when agreements over trade become difficult, such as in 2020 USA vs China
The International Monetary Fund
maintains financial stability across the world, it tries to force countries to privatise government assets in return for loans to increase the size of the private sector, generating wealth.
-requires countries to adopt free market principles enabling flow of commodity and openness to FDI.
-people believe that this policy as forced poorer countries to sell off assets to wealthy TNCs
The World Bank
provides loans to countries requiring financial support for development projects
-uses bank deposits placed by the world’s wealthiest countries to provide loans for development in countries that agree to certain conditions, concerning repayment and economic growth
opportunities for IGO’s
economic development
-provide economic stability and policy advice for developing countries
trade facilitation
-WTO works to reduce trade barriers and promote free trade
conflict resolution
-try to promote peace and cooperation amongst countries
sustainable development is supported
challenged for IGO’s
misalignments
-between IGO and national policies of member states that can create conflicts
criticism for being too slow or inefficient
inconsistent and insufficient funding
-rely on member countries
global challenges
-such as pandemics and climate change pose issues that require coordinated global responses, this can be difficult to achieve with ongoing tensions and conflicts
3.2b
FDI
foreign direct investment
TNC acronym
MOAT
M ergers (foreign)- two or more companies come together
O ffshoring- elements of business are carried out in a foreign location
A cquisitions (foreign)- one company takes over another company
T ransfer pricing- locating financial HQs in countries with a favoured tax policy
how can FDI be facilitated
deregulation
-removing rules, for example environment and land rules
protectionism
-anything put in place that is a barrier to protect countries
however for flows of globalisation to occur efficiently, national government barriers and protections need to be removed
name 3 economic strategies to support FDI
Free market liberalisation
Privatisation
Incentivisation
how does free market liberalisation support FDI
-deregulation encourages and facilitates the flow of commodity and capital
how does privatisation support FDI
-it involves taking national services our of the control of the government and into the hands of businesses
-this adds competition to the market, reducing prices and improving consumer service
how does incentivisation support FDI
-encourages business start ups around the world
-gives grants, tax breaks and governments can provide infrastructure to attract FDI and businesses
offshoring
TNCs set up production facilities in developing countries who have a large, cheap workforce
example of offshoring
offshoring in China
-moved production to China
-workers have higher income for economic growth
-shared technology has increased production and efficiency
foreign mergers
TNCs form abroad join to form one larger company
foreign acquisitions
A TNC acquires another company from abroad
-this can be hostile
transfer pricing
TNCs channel profits through subsidiaries in tax havens
how can governments limit the effects of globalisation through policies?
- censorship
- limiting migration
- trade protectionism
how does censorship by governments limit globalisation?
-restricts the flow of information and technology through internet and social media restrictions
-population has limited knowledge on foreign culture and practices
-this is usually in a dictatorship governance
how does limiting migration by governments limit globalisation?
border control and migration monitoring is becoming stricter
e.g. in the UK and Japan
how does trade protectionism by governments limit globalisation?
subsidies, quotas and tariffs that help a country to protect domestic industries
for example: oil exports are banned in the USA so all domestically produced oil must be used in the USA; India restricts foreign companies investing in its retail sector to protect Indian small shopkeepers from competition.
what do free trade blocs offer?
they allow trade to move more freely, governments can sign agreements with each other to reduce restrictions of the flow of capital and goods
-this can encourage the movement of people, culture and knowledge.
benefits of trade blocs
-businesses can access a larger market to sell too, increasing revenue
-other businesses benefit from a business increasing their volume of production with raw materials or having more skilled workers or outsourcing opportunities
-trade of essential materials and services become more reliable within a trade bloc- there is less economic risk
drawbacks of trade blocs
-outside trading countries can become excluded and find it difficult to join in with the trading
-foreign industries and suppliers can be directly damaged to due competition
-does not guarantee fair treatment within, relationships may not become stronger or grow
3.2c
what has improvements in transportation and ICT increased?
increased levels of global governance
-created opportunities for additional parts of the world to contribute in globalisation
what have new global areas done to attract FDI from TNCs?
they have been created by their governments, reducing protectionist measures and placing certain strategies down
acronym for established global zones
B razil
R ussia
I ndia
C hina
India as an established global zone
-India has attracted FDI after being slow in liberalising in relation to trade
-protectionist measures have been reduced and FDI has increased, well educated population
acronym for new global areas
M exico
I ndonesia
N igeria
T urkey
movement between established global zones and new global regions is called….
GLOBAL SHIFT
Indonesia as a new global regions
Indonesia has attracted FDI, created an attractive economy for businesses through the multiplier effect
-the world bank has supported their ambitions with loans granted for infrastructure
name some strategies for attracting FDI
-trade liberalism
-reduction of protectionist measures
-incentivisation
-creation of SEZ
explain China’s Open Door Policy
1978
-China changed their political attitude leading to more liberalisation and opening up FDI
-they agreed to export more raw minerals to other countries
-created SEZ for FDI
-led to rapid economic growth and superpower status
-exports increased from $2 billion to $200 billion
