Regional Integration Free trade area – free trade within Customs union – free trade within +...

Regional Integration

• Free trade area – free trade within• Customs union – free trade within + common

external tariff• Common market – customs union + free

exchange of labor and capital• Economic Union – Common market + common

economic policies• Economic Integration – Economic Union +

common social policies and a supranational authority

Economic groupings

WTO

• Developed from GATT (General Agreement on Tariffs and Trade)– post WWII– Facilitate economic recovery through trade– Reduce tariffs, restrictions and subsidies– Fundamental principal – non-discrimination

• WTO evolved from GATT in 1994– Primary change – enforcement– Mission: “to ensure that trade flows as

smoothly, predictably and freely as possible"

WTO principles

• Nondiscrimination– Most-favored Nation– National Treatment

• Transparency

Advantages

• Important role in ensuring world peace• Reduces rich country/poor country

inequalities• Gives poor countries a voice• Makes goods and services cheaper and

increases consumer choice• Promotes trade that also raises incomes• Stimulates trade to increase jobs• Promotes good government

Critiques

• The WTO is undemocratic, and does not decrease conflict

• Big countries are bullies• Fair trade lowers income for the poor• Free trade causes unemployment when

imports threaten jobs• WTO focuses exclusively on trade – what

about i) environment, ii) labor standards, iii) total employment

Structural Adjustment Programs

• Policies imposed by the IMG and WB as conditions for receiving loans

• The goal is to balance a nations books, through economic growth, income generation, balancing trade deficits and debt repayment.

• Conditions include privatization, regulation, reduction of trade barriers

Grameen Bank

• Micro-credit – extension of loans to entrepreneurs to small to qualify for traditional bank loans

• Prof. Yunus, Winner of 2006 Nobel Peace Prize• problem not just lack of money, but lack of

capital. • Grameen means “village”• Grameen bank target bottom 25% of the

population• Principal: turn social collateral/mutual insurance

into capital

How it works

• Small loans: primarily to women• Must have existing business, not farms• Loan must capitalize that business• Weekly payments and savings are required• Money is loaned to a credit group, not to the

individual• Joint liability: The entire group is responsible for

repayment• Monitoring happens through peers and center

staff

What activities?

• Weaving• Goat fattening• Handicrafts• Cellular phones

Advantages

• Provides capital, freedom from usury• Empowers women and the poor• Encourages self-help and savings• Reduces fertility• Contributes to group solidarity

Disadvantages

• High interest rates: 20%, can be compounded to over 70%/year– Some communities may be in a debt trap

• Real winners are the corporations that sell goods to the borrowers

• Grameen is not transparent, but it is believed that it receives large subsidies, nor does it pay taxes – it is a form a social welfare, not a bank