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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