Global governance and Banana Trade War

Question 1

What happened in the financial crisis of 2008 - an example of economic interdependence?

Answer 1

1. Deregulation of US banks allows them to sell subprime mortgages.
2. High mortgages approval > rising housing demand/price > bubble burst.
3. Default on loans rises, houses are now worth less than the loans do cannot be used to pay back the mortgage> mortgage companies and banks lose significant sums of money & go bankrupt.
4. Lehman Bothers declared bankruptcy on 15th September 2008. Large financial institutions collapse and have to be bailed out by the government - as “too big to fail”

Question 2

Why were other countries affected by the 2008 financial crisis?

Answer 2

1. Foreign banks bought US debt (subprime mortgage loans) when defaults rose, these banks lost money.
2. When some banks lost money they became reluctant to lend > banks stopped lending each other > businesses struggled to borrow from banks > no money to invest in the economy.
3. The US enters recession > demand for imports fell > many countries experienced a decline in demand for their exports > economic loss.
4. COnfidence. Problems in financial/banking sectors reduce confidence of consumers > lower growth.
5. Government had to bail out the banks e.g. UK and the Netherlands call in short-term debt (run on the banks in the UK) > failure of Iceland’s three major banks > Icelandic financial crisis and associated political unrest. Eurozone Debt Crisis

Question 3

What is the timeline of the banana trade war?

Answer 3

1975 - European Economy COmmunity - LOME CONVENTION

1992 - European market formed, LOME convention integrated into a banana regulation 1993 (challenged 5 times by the General Agreement on Tariffs and Trade (GATT) and WTO).

1992 TNCs file a complaint against the EU in the WTO. By 1997 the WTO rules against the EU.

1999 - Clinton administration imposes sanctions on the EU.

Geneva 2009 - EU agrees to gradually reduce tariffs on Latin American bananas (ratified 2012)

Question 4

What is global governance?

Answer 4

Refers to the rules, norms and laws that make and remake global system and the geographical consequences for citizens, ecosystems and human and physical environments in different places.

Question 5

What does each of these mean: rules, norms, laws?

Answer 5

Rules (standards for the activity)

Norms (expectations about what is considered “normal and reasonable”)

Laws (obligations and duties on signatories)

Question 6

What do governments do?

Answer 6

Provide law and order
Establish sovereignty
Defence
Regulate the economy
Provide social needs
Protect the environment

Question 7

Who is involved with global governance?

Answer 7

According to the Commission on Global Governance it is the: “…sum of the many way individuals and institutions, public and private, manage their global affairs…”

Therefore these are:
Governments
TNCs
International Organisation
Trade Blocs - European Union
NGOs (Non-Government Organisations)
Bill Gates