Professional Documents
Culture Documents
REFERENCES
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Amit Bhaduri, Ch 5 Age of Uncertainty: The Mandarin Revolution Keynes The Ascent of Money: Ch 5 Chimerica Amit Bhaduri & Deepak Nayyar An Intelligent persons guide to liberalisation
INTERNATIONAL INSTITUTIONS
Why They Were Created, and When How They Have Changed Their Reputations Today
Lecture 2: Institutions
Other Institutions
United Nations OECD = Organization for Economic Cooperation and Development Preferential Trading Arrangements
The World Financial Crisis The Doha Round PTAs Trade Disputes
Functions
IMF (International Monetary Fund): Financial Assistance World Bank: Development Assistance WTO (World Trade Organization): Trade Policy Regulation and Negotiation WIPO
Lecture 2: Institutions
History
History
Bretton Woods Meeting (Bretton Woods, NH) IMF World Bank ITO (International Trade Organization)
WIPO
MAIN INSTITUTIONS
History
IMF Originally enforced pegged exchange rates Purpose: To prevent beggar-thy-neighbor exchange-rate policies Major currencies switched to floating in 1970s IMF still provides financial assistance
Lecture 2: Institutions
Until recently, mostly to developing countries Subject to conditionality = required policy changes In 21st century, many countries were paying off their loans, until recently
IMF was wondering about its income, but now is lending to countries in crisis, such as Greece and Ireland.
MAIN INSTITUTIONS
History
World Bank =IBRD (International Bank for Reconstruction and Development) Originally intended for reconstruction from war Now mainly assists development Much of it by funding and assisting with projects
MAIN INSTITUTIONS
History
Uruguay Round Created WTO in 1995 Currently is/was doing Doha Round Begun 2001 in Doha, Qatar Stumbled in 2003 (Cancn) and 2005 (HK) Suspended July 2006, but restarted 2007 Suspended again in 2008
MAIN INSTITUTIONS
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MAIN INSTITUTIONS
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MAIN INSTITUTIONS
IMF: Has imposed misguided policies World Bank: Wastes resources on corrupt elites WTO: Dominated by rich countries, corporations
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OTHER INSTITUTIONS
G-20 = G-8 + Australia & EU, + 10 major EMEs (Emerging Market Economies)
= 19 Countries 13 + EU
OTHER INSTITUTIONS
G-20
Used to meet regularly, but only the finance ministers First G-20 summit (i.e., heads of state) met November 2008, London Met again September 2009, Pittsburgh Now looks like G-20 summits will be the main regular meeting, probably once a year
Lecture 2: Institutions
Last was in Cannes, France, November 2011 Next, in June 2012, will be in Los Cabos, Mexico
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G-20
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OTHER INSTITUTIONS
UN = United Nations
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OTHER INSTITUTIONS
EU = European Union NAFTA = North American Free Trade Area ASEAN = Asso of South East Asian Nations SAARC = South Asia MERCOSUR = South America APEC, BIMTECH, Mekong Delta OECD = Organization for Economic Cooperation and Development
Lecture 2: Institutions
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Bad loans Complex financial instruments whose value fell and/or was uncertain
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Crisis spread
To most other developed countries through financial institutions To some developing countries too
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Source: IMF
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Source: IMF
Down 43%
2006 Jan 2006 Apr 2006 Jul 2006 Oct 2007 Jan 2007 Apr 2007 Jul 2007 Oct 2008 Jan 2008 Apr 2008 Jul 2008 Oct 2009 Jan 2009 Apr 2009 Jul 2009 Oct 2010 Jan 2010 Apr 2010 Jul 2010 Oct 2011 Jan 2011 Apr 2011 Jul
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Financial regulation
restraints on bank lending reform of credit rating agencies
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In 2010, starting with Greece, countries in the Eurozone found themselves with unmanageable debts
Markets feared default; interest rates rose EU and IMF stepped in with loans
Lecture 2: Institutions
Similar things happened later to Ireland, and markets now fear the same for Portugal and Spain
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Who will pay for any bailout of Greece and others Whether the bond holders (those who own sovereign debt of Greece ad others) should bear some cost
Result has been repeated fixes that dont solve the problem
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WB from leadership of Paul Wolfowitz Roles have been reduced by private lending, but their staffs have grown, by 50% over last 10 years What should they be doing? IMF: surveillance over exchange systems and imbalances WB: alleviate poverty, especially in Africa
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Cancn:
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Cancn Ministerial, 2003: Failed to agree Hong Kong Ministerial, 2005: Only minimal agreement
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Hong Kong:
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Cancn Ministerial, 2003: Failed to agree Hong Kong Ministerial, 2005: Only minimal agreement Negotiations suspended July 2006, restarted 2007 US, EU, Brazil and India met in Potsdam, Germany, but ended in deadlock June 21, 2007 June 30, 2007: US negotiating authority expired July 29, 2008: Negotiations broke down over agriculture Future uncertain; dont know when, & whether, talks will resume
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Doha Round
To achieve substantial further reduction in trade barriers, In both developed and developing countries, While for the first time providing meaningful benefits to developing countries
Conflicts:
US and EU agricultural subsidies and tariffs Developing-country import barriers in manufactures and services
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Doha Round
All countries wanted other countries to reduce trade-distorting policies, but not to change their own policies WTO requires agreement by all of its member countries (now 156); thats hard to achieve!
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Doha Round
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Lecture 2: Institutions
The Round may be able to restart. This will require leadership, probably from U.S. Likely to be increased move toward PTAs/RTAs among pairs and small groups of countries Who loses? Developing countries (see Blustein article)
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Most countries are in some of these and are negotiating to form more Typical PTA is Free Trade Area (FTA) such as
Lecture 2: Institutions
NAFTA (North American Free Trade Area) They are not necessarily economically beneficial
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Completed since 2001 Australia, Bahrain, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Morocco, Nicaragua, Singapore Signed and ratified 2011: S. Korea, Colombia, Panama
Being Negotiated Ecuador, Malaysia, Oman, Peru, Thailand, United Arab Emirates, + SACU (Southern African Customs Union)
Also Trans-Pacific Partnership (TPP)
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Lecture 2: Institutions
Started in 2006 as Trans-Pacific Strategic Economic Partnership: Singapore, Brunei, Chile and New Zealand In 2008, US said it would negotiate to join, and this brought in 4 more countries: Australia, Peru, Malaysia, and Vietnam. In 2001, Japan and Canada indicated an interest in joining. The countries are extremely diverse.
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US claims it will
Enhance competitiveness Promote US employment Demand high standards
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Trade Disputes
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Trade Disputes
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Trade Disputes
Was pegged to US $ at 8.2765 /$ and considered undervalued Allowed to rise as of July 21, 2005. It rose 2.1% Rose steadily until July 2008, to 6.8363 /$ about 20%
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Trade Disputes
In July 2008, dollar itself started to rise, and yuan went back to being fixed to dollar Many, in US and especially in EU, think yuan should rise much more. China says no! Yuan did start to rise, a little in summer 2010
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0.00 2000 Jan 2000 Jul 2001 Jan 2001 Jul 2002 Jan 2002 Jul 2003 Jan 2003 Jul 2004 Jan 2004 Jul 2005 Jan 2005 Jul 2006 Jan 2006 Jul 2007 Jan 2007 Jul 2008 Jan 2008 Jul 2009 Jan 2009 Jul 2010 Jan 2010 Jul 2011 Jan 2011 Jul
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