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International Trade
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International Trade
BTEC Business
Trade Barriers
• the EU’s internal market is about removing barriers to free movement of goods, services, people and capital
• the flow of goods and services in the world economy is also important
• organisations have been set up to encourage the removal of barriers to free global trade
Why the stress on free world trade?
• The world economy went into a deep depression in the 1930s, as many countries closed their barriers to trade with other states. This led to:
• Mass unemployment• Social upheaval• Rise of fascism
and the Second World War
How to prevent chaos happening again?
• Global powers set up bodies to support international trade
• International Monetary Fund• World Bank• All countries encouraged to join
these organisations, or face exclusion from benefits of free world trade
What do the IMF and World Bank do?
IMF:• Lends to countries with balance
of payments problems• Pushes for economic reforms• Reports on policies in member
states
What do the IMF and World Bank do?
World Bank:• Aims to help development by
advising and lending – with many conditions
• Countries encouraged to lift import and export barriers, cut subsidies and remove price controls
Criticisms of IMF
IMF only lends money if countries agree to:
• Sell their resources cheaply• Cut public spending
Critics say this serves to increase the problems of poverty in poor member countries
Criticisms of World Bank
Loans depend on countries agreeing a ‘Structural Adjustment Programme’
• Leads to rapid increase in price of goods in country
• Increases poverty• Lower investment and cut social
spendingLittle evidence that these policies work
What about the World Trade Organisation (WTO)?
• The WTO deals with the rules of trade between countries
• It developed from the General Agreement on Tariffs and Trade (GATT)
• WTO agreements set the ground rules for international commerce
Why so much outrage over globalisation?
Other than the criticisms raised earlier, opponents of globalisation point to:
• Falling share of world trade taken by developing countries
• Subsidies and tariffs set by rich developed economies: USA steel tariffs, EU agricultural subsidies are two of the culprits