Globalization International Trade and The Bretton Woods Institutions

Globalization: International Trade and The Bretton Woods Institutions CGW 4 U

What is International Trade? n n n The exchange of goods and services across international borders In most countries, it represents a significant share of GDP While international trade has been present throughout much of history (ex: Silk Road), its economic, social, and political importance have been on the rise in recenturies, mainly because of industrialization, advanced transportation, globalization, multinational corporations, and outsourcing

Advantages of Trade n n n Meeting our Needs Job Creation Attracting Investment New Technology and Materials Diverse Products and Services

Disadvantages of Trade n n n Support of Non-Democratic Systems Cultural Identity Issues Social Welfare Issues Environmental Issues Political Issues

Encouraging/Discouraging Trade n Free Trade ¡ ¡ ¡ n Limited barriers (ie tariffs, quotas, environmental regulations, etc. ) Greater flow of goods, less control Preferred by wealthier nations Protectionism ¡ ¡ Many barriers Economy more domestic Greater control Doesn’t work well for nations that need goods/resources from others

Encouraging Global Trade n A key force in the liberalization of global trade is the Bretton Woods Institutions ¡ ¡ ¡ Origins are in a 1944 meeting in Bretton Woods, New Hampshire by delegates from the WWII allies Mandate is to ensure global economic growth Today, consists of: n n n The WTO (World Trade Organization) The World Bank The IMF (International Monetary Fund)

The IMF and World Bank n We’ll come back to the WTO later, but for now let’s focus on the IMF and World Bank

The IMF and World Bank n n n Two distinct bodies, but very similar They administer loans to governments and impose structural adjustment programs as a condition of borrowing In theory, both the loans and the structural adjustments are designed to help the country’s economy

Structural Adjustments n Reduce government spending ¡ n Privatization ¡ n Cuts in spending on education, healthcare, infrastructure, social programs Previously state-run institutions and assets are sold off to private corporations to be run as for-profit ventures Trade Liberalization ¡ ¡ Reduced trade barriers to allow the freer flow of goods in and out of the country Reduced or removed regulations and standards that may hinder business

Case Studies n Let’s examine some examples of IMF/World Bank loans and Structural Adjustments in action