3.2a) What is the work of international organisations?

Question 1

1) Which international organisations have promoted free trade policies and FDI?

Answer 1

1) The IMF, World Bank and WTO have attempted to create a free trade consensus.

Question 2

1) What are the Bretton Woods institutions, and what is their purpose?

Answer 2

1) They were established after WW2. Their purpose was to restabilise the world economy, and avoid a return to the conditions of the Great Depression of the 1930s, when countries turned to protectionism.

Question 3

1) What protectionist actions did countries take, following WW2?

Answer 3

1) Foreign imports were blocked with tariffs, which damaged export markets for countries, causing a spiral of economic output for major players.

Question 4

1) Considering the current global situation, what is the new purpose of Bretton Wood institutions?

Answer 4

1) They persuade developing countries to embrace free market economics and globalisation.

Question 5

1) Will Bretton Woods maintain its influence in the future?

Answer 5

1) > The financial crisis which originated in the US and EU, made developing countries be sceptical of advice given by the IMF and World Bank.
> Geopolitical changes have led to the creation of the China Development Bank, which has given out US$110 billion to developing countries, exceeding the World Bank´s lending.
> In 2014, the BRICS group of nations the New Development Bank.
> The WTO´s lack of success in convincing its 159 member countries to agree on any aspect of trade, raises questions about its role.

Question 6

1) What is the role of the IMF in globalisation?

2) Who has the most influence over the IMF?

Answer 6

1) It channels loans from rich nations to countries that need help. Recipients must then agree to free market economies that are open to outside investment. TNC’s will then enter more easily.
2) The USA has significant influence over the IMF, despite it having a European president.

Question 7

1) Negatives of the IMF:

2) What might recipients have to cut back on?

Answer 7

1) The IMF’s regulations are controversial, due to strict financial conditions being imposed on recipients.
2) Health care, education, sanitation and housing programmes.

Question 8

1) What is the role of the World Bank in globalisation?

2) What are some examples of projects they have funded?

Answer 8

1) It lends money on a global scale.
2) In 2014, the Philippines was given a US$470 million loan for a poverty reduction programme, and in the same year Congo was given a grant to help with the construction of a mega-dam.

Question 9

1) Negatives of the World Bank:

2) How much money did they distribute in 2014?

Answer 9

1) They impose strict conditions on loans and grants. All presidents have been Americans.
2) US$65 billion.

Question 10

1) What is the role of the World Trade Organisation in globalisation?
2) Give an example of the WTO discouraging protectionist attitudes:

Answer 10

1) They encourage trade liberalisation, especially for manufactured goods, and ask countries to abandon protectionism.
2) In 2014, China was convinced to lift export restrictions on ‘rare earth minerals.

Question 11

1) What are the failures of the WTO?

Answer 11

1) They have failed in stopping the world’s richest countries from subsidising their own food producers. This disadvantages farmers in developing countries.

Question 12

1) What happened in the 1980s, which caused globalisation to happen at a faster rate?

Answer 12

1) Financial deregulation throughout Europe and the USA, meant that capital could be injected into foreign countries, without any political barriers.

Question 13

1) What is offshoring?

2) Use Fender as an example:

Answer 13

1) TNC’s build production facilities in low-wage economies.

2) The US-guitar maker Fender opened a plant in Mexico, at Ensenada in 1987.

Question 14

1) What are foreign mergers?

2) Give an example:

Answer 14

1) Two firms in different countries join to create a single entity?
2) Royal Butch Shell has headquarters in both the UK and the Netherlands.

Question 15

1) What are foreign acquisitions?
2) Give an example of such a takeover:
3) Are such acquisitions easier to carry out in the UK or the US?

Answer 15

1) When a TNC launches a takeover of a company in another country.
2) In 2010, UK’s Cadbury was taken over by the US food Giant Kraft.
3) The UK has few restrictions, compared to the US, where the Committee on Foreign Investment closely scrutinises foreign takeovers.

Question 16

1) How do Starbucks and Amazon carry out Transfer pricing?

2) What is the view of the Organisation for Economic Cooperation and Development?

Answer 16

1) They channel profits through subsidiary companies in low-tax countries such as Ireland.
2) They are trying to stop this.

Question 17

1) When did Pakistan join the World Trade Organisation?

Answer 17

1) In 1995

Question 18

1) What rules did the WTO impose on Pakistan?

Answer 18

1) It would have to open its fishing grounds to competition.

Question 19

1) What was the exclusion zone of Pakistan?

Answer 19

1) There was a 200 mile exclusion zone around its coast.

Question 20

1) What were the consequences of opening up their waters?

Answer 20

1) Indian trawlers now take most of the catch, leaving Pakistani fishing communities in poverty.