Ch 6
Why do governments enact protectionist policies?
to protect domestic markets
What is the primary difference between the GATT (the General Agreement on Tariffs and Trade) and the WTO (World Trade Organization)?
WTO is larger, has more participating countries, larger enforcement capabilities
What is moral hazard? Explain.
an actor engages in a risker action when they do not have to pay the full cost of their choices; S&L Crisis
What is international law?
institution
sets a standard of behavior, reduces transaction cost, creates incentives
Which type of treaty (environmental, human rights, economic, or security) is most likely to contain a punishment provision?
economic treaties
What is protectionism? Explain.
trade barrier; the use of specific measures to shield domestic producers from imports
What are the two types of foreign investment? Explain each.
portfolio investments: investors have no role in the management of money
FDI: investors aquire real investments in a foreign country
What are common austerity policies? Explain.
government policies designed to lower budget deficits
government will cut spending and raise taxes
What are the two types of international law? Provide an example for each type.
treaties (Ottawa Convention 1997)
customary laws (Diplomatic Immunity)
How does a norm differ from a law?
norms are not official, just widely accepted/followed
What are two types of protectionism? Explain each.
tariff barriers: taxes on foreign goods
non-tariff barriers: subsidies, prohibitions, quotas
Which set of domestic institutions, democratic or autocratic, tends to be more supportive of free trade and why?
democratic because they tend to have larger winning coalitions to which the leaders are accountable
Who are the Bretton Woods twins?
IMF and World Bank
How does a treaty become an international law?
often originate in conventions, must be ratified to go into effect
What is a transnational advocacy network (TANs)? Provide an example.
international non-governmental organizations (NGOs) aimed to persuade indivduals and groups to share their commitment for a specific norm/belief
The International Campaign to Ban Landmines (ICBL)
Why do countries restrict trade? In other words, what is the primary political problem with trade?
mercantilist beliefs
trade means some people lose jobs, one wants to protect those existing jobs
What does the Stolper-Samuelson theory tell us about international trade preferences? Explain.
individuals will support free trade if they have the abundant factor in their country
they will oppose free trade if they are abundant in the scarce factor
What does the IMF (International Monetary Fund) do? Why do some people dislike IMF loans and policies?
makes loans, negotiates new terms with lenders, certifies compliance
IMF conditions would make the borrowers (leaders) unpopular
What are the three characteristics of international law?
obligation, precision, delegation
What are the two primary ways that TANs try to redefine interests? Explain.
naming and shaming: calling out violators of a norm; publicizing
framing: trying to shape of definition of what is right or wrong
What does the Hecksher-Ohlin theory tell us about international trade? Explain.
two states two goods two factors
abundance is based on capital/labor ratio
a capital abundant country will export goods that make intensive use of capital and import goods that make intensive use of labor
What does the Ricardo-Viner theory tell us about international trade preferences? Explain.
an individuals preferences are based on the sector/firm they work
if firm is internationally competitive, then you support free trade
if not internationally competitive, you oppose free trade
U.S. Automotive Industry
What is the trade-off between a fixed versus floating exchange rate regime? Explain the pros and cons.
fixed exchange rate regime pros: stability of the exchange rate/prices which benefits trade
fixed exchange rate regime cons: reduces government policy autonomy for the government to affect exchange rates
floating exchange rate regime pros: more government policy autonomy for the government to affect exchange rates
floating exchange rate regime cons: less stability of the exchange rate/prices which benefits trade
Why do proponents of international law say it matters?
AND
Why do skeptics of international law say it does not matter?
keeps countries on the same page, which reduces transcation costs and facilites cooperation, for mutual benefit and trade
AND
not enforacable, difficult to punish powerful countries
situation where a minority rules over majority and that minority fears change of power. if minority loses its power, it creates concerns about the other side's incentive to uphold any protections against them
What are the two primary ways that TANs use to promote cooperation? Explain.
endorsers: TANs make a statement on a policy that provides useful information for others on their position (communicates helpful information)
monitors: rely on actors to self-report or have direct monitoring on operations (one is more careful of their actions when being monitored)