SUPRANATIONAL ORGANISATIONS ARE DETRIMENTAL TO ECONOMIC GROWTH AND DEVELOPMENT

AHMED RUKHSAR 01 ALMEIDA VIANCIA 02 SONI NEHA 03 BATAVIA NEIL 04 SAMEER BEHLIM 05 BISWAS SUJAY 06

What is an International Institution/Organization? An International Institution refers to an association of sovereign countries that is created for the purpose of advancing common interests of the member countries as well as the common good for the humanity. The United Nations (UN), the British Commonwealth, the Organization of African Unity (OAU), the Organization of the Islamic Conference (OIC) are all examples of international institutions. International institutions are run by representatives from member countries and provide financial, technical, and humanitarian assistance to member countries.

What is a Supranational Organization? A supranational organization is an association composed of different countries where the membercountries voluntarily surrender some decision making prerogatives for the sake of the collective good of their citizens. The key difference between an international organization and a supra-national organization is that an international organization cannot make decision on behalf of its members, whereas a supranational organization can. The WTO, EU, the Security Council of the UN are all examples of supranational bodies. Regardless of political affiliation, policy makers worldwide must make choices that will please a certain group while being opposed by another. It is a worldwide truth that no single choice by a policy maker will please all those involved. From the capitalist reforms in Russia to the latest tax reforms proposed in the USA, political, social and economical decisions are always controversial. Nevertheless, the constant pressure by voters and interest groups, who hold in their hands the election of policy makers, forces them towards shorter-term decisions that are often contradictory with much needed long-term reforms. Since the voter or supporter is the one allowing the policy maker to stay in power and represent him when ruling in a democratic or representative system, and take into effect the policies, it is in the policymaker s interest to try to please as much as possible those who give him power, and that is difficult to balance with more general interests (those of a region, a country or even a continent s). This is particularly worrisome in economic regulatory issues. The economy is such a complicated balance of factors that it could very well be compared to an ecosystem. Any unbalance and the whole system could be fatally damaged. Sacrifices must be made by its members in order for the system to grow strong. But it is not always easy. When a member of the economic system (an interest group, a workers union, pensionists, the unemployed, farmers, etc) holds enough power to confront the

ruler (by the means of a strike, the threat of changing vote intention, the use of veto, etc), a conflict of interest usually arises.

What is good for the community or the system is often not so for the individual. Or at least that is how it is usually perceived by him. Individuals, as part of a system (whether it is biological, political, social, etc) make choices based on their experience, beliefs, needs, or desires, and tend to be short sighted, prejudiced and narrow minded. The strikes that usually result from a privatization process, in any given country, are a perfect example of how the individual, or the community it belongs to, is willing to fight for what is in their best interest, regardless of that being negative for the country or the economy. It is perfectly understandable, and even a natural rule that the fight for the individual s survival comes before anything else (even before the fight for the group s survival). But in order for an increasingly global economy to prosper, sometimes the individual interest must be overridden by the general interest. That is where the Supranational Organization (SO) can help. While collaboration among different countries has been frequent throughout history (in the form of alliances, pacts and agreements), it is not until recently that SOs have come to symbolize the birth of a new era: Globalization. The first truly International Organization dates back to 18152. But it is the rapid growth of transnational interactions (travel, communications, finances, wars, etc) in the late Twentieth Century, mostly allowed by advances in technology, what has given SOs a real and growing role in the world order. Let s take a look at the European Union as a SO with tangible power in economic regulations, its influence on the global economy, and the lessons it teaches for other world regions. Initially envisioned by Jean Monnet, Robert Schuman, and Konrad Adenauer in 1950, it originally comprised the European Coal and Steel Community, the European Economic Community, and the European Atomic Energy Community. Established in 1967, the European Community became the European Union in 1993. Today, the EU has grown into much more than the sum of its parts. It has become a common ground addressing the needs and hopes of its citizens and state members. What started as a limited scope group has now become an entity that unites governments and its people throughout Europe. But it is in the economic arena where the biggest transformation has occurred. Europe, rebuilding from its ashes after World War II, and leaving differences and nationalisms aside (for the most part), has been able to recognize the need for unity in order to compete in the global marketplace, so far dominated by the USA and Japan. Left alone, no individual European

country could surpass those two fierce competitors, but uniting their forces those same European countries have become a real commercial and industrial superpower. The conception and implementation of the European Common Currency (Euro) established in the Maastrich Treaty has really made all of this possible. Now the project is about to be realized, with the introduction of the Euro as a real currency in 1999, and as a monetary instrument of day-to-day transactions in the year 2002. The compliance with Maastrich s requirements to join the single currency by most state members, regardless of the hard sacrifices needed to do this, and the stiff opposition that those sacrifices would have encountered if it was not deemed as a Target objective, proves the theory of the Target Effect .

Let s look into the EU s case. Born out of pure economic interest, it soon needed a political branch, so the European Tribunals, European Commissions, and a European Parliament were created . Having become a de facto political union, the EU started the difficult task of finding a common interest course and trying to make every state member follow. With Economic policy it has not been so difficult, based on general but positive ideas like free competition (enforced by the European Court), a common currency, or the deregulation of some industries. But other issues have remained hard to tackle, like the welfare state, or language and education policies. Silently the EU (with a flag and an anthem of its own) has become a political force much stronger than most of its members would like to recognize. While most of the EU rulings affect all or most its state members, its citizens are most aware of it when those rulings affect their country or way of life directly. Per example, development funds are distributed all over the Union, according to an agreed system of distribution. While these funds are extremely large, it is the rulings on prohibiting the United Kingdom to export beef due to an outbreak of bovine spongiform encephalopathy (a.k.a. mad cow s disease) or the quota proposed for next year s milk production what really gets to every member state s news casts. That is not necessarily negative, for that way the EU state members do not need to rule on those difficult issues and can concentrate on local interests. Yet this yielding of decision-making power to supranational entities encounters many opponents who cast fear and doubts of loss of sovereignty over those willing to hear them (usually close to extremist and/or separatist ideologies).

The loss in decision-making power and autonomy for the member states (the biggest of all claims against this kind of organizations) is not enough to turn people away from the idea that unity and combined efforts can bring bigger advantages than disadvantages. Of all member states of the EU, none has displayed a continuous and strong opposition to the rulings, or has left (or considered so). Therefore we must come to the conclusion that, while nobody likes to loose independence and decision-making power, the benefits of belonging to those SOs outweighs the disadvantages. So far, the biggest, yet the least talked about of those benefits is the Target Effect . Because by themselves most member states of the EU would have not been able to undertake the reforms that their countries needed. Yet, while the future looks bright for Europe (given a certain amount of political and economical control), its example may not be easily exported to other scenarios. Specially into a global SO. Continental versions of the EU could appear sometime in the distant future as the globalization process mentioned before becomes a worldwide reality. Asia, with its recent financial markets turmoil, has seen for the first time the need to fine tune their economic policies and controls, which may be the first step towards a greater integration. America, with the obvious leadership of the USA, is trying to come together with actions like NAFTA4. And Africa, a continent in dire need of political and economical reforms, could greatly benefit from a strong SO.

But taking the matter even further: why not a Worldwide SO? One with real political and economical regulatory power, unlike the United Nations5 (which serves correctly humanitarian causes and is an important diplomatic forum, but not much more). We are still far from a hypothetical World Federation, because: a) In order for SOs to be strong they must be created by (and with its member states bonded by) either economic interest, or a higher reason which could only be strong enough if it seriously and immediately endangered the Human Race (key words: seriously and immediately , because the Cold War Nuclear Arms Race and the current environmental threats have not been able to create a satisfactory SO to control them). b) Regardless of the globalization process the World s economy is experimenting, economic interests are still regionalized by an insolvable problem: worldwide distribution of goods (not services anymore). The distribution problem has come a long way since the advent of commerce, some sixty6 centuries ago, yet great distances have to be covered for worldwide distribution of tangible goods, which makes shorter distance distribution preferable, which in turn creates and

or African worlds. G7 and G8. the international financial architecture and the processes guiding short-term and longer term capital flows. ILO). suppliers. the constraining factors are more numerous and dominant. The first set of analyses proposed are studies on the global and regional (supra-national) institutions and setting which constrain or facilitate the growth and development of Third World countries. bilateral institutions all these need to be analyzed on how they affect the possibilities and room for maneuverability of Third World nations. are mostly concerned with the kind of corporate corruption that may be beneficial to a firm in the short run. NAFTA. patterns of world trade and the impact of global and regional trade and economic blocs (WTO. AFTA. local government.). as different as all the member countries of the EU may seem. favors . but not as much as it would be needed if we all were to be bonded by a World SO.). ADB. companies constrain the supply side of corruption (who is offering a bribe. and non-governmental organizations (nGos). Analyses of the ideologies and strategies of multilateral institutions (IMF. WB. Of course.maintains a certain degree of regionalization of the Economy. Organization of African Unity. Supranational organizations. such as transparency international. etc. these policies limit how money. Arab. The services. European Union. communications. Yet the trend is unstoppable. Normative and prescriptive analyses towards a new economic world order and a new global financial architecture are necessary components of this set of topics. such as offering kickbacks and bribes to win contracts. and gifts can be used to induce favorable business outcomes. like the Asian. financial and technology sectors have grown so global and interdependent (and it does not seem to be slowing down or turning back) that the future lies in the unification of the forces and a global control and regulatory effort that must be made by a commonly agreed upon SO worldwide. there is a common history and basic set of values that is not shared (or at least not commonly perceived as such) with other cultural regions. for example). c) Cultural regionalization is still a fact. UNDP. as well as employees and shareholders. In fact. the local community. . prohibitions against this type of corruption. are included as part of corporate social responsibility (Csr) programs. such as the World Bank. Through CSR policies that prohibit firm-beneficial or functional corruption. Global communication networks have allowed us to standardize knowledge and values up to a point. etc. Csr policies adopt the perspective that managers must consider all stakeholders. UN agencies (UNCTAD.

. paying bribes to contractors and civil servants. When this happens. they become burdensome additional costs for the company to bear. functional corruption is a part of a developmental stage of an economy. many developing countries become better governed through rule of law. such as by bribing someone to accept a contract s bid offer in order to gain an advantage for one s own firm. at some point. Active corruption is committed by the one who pledges to give a bribe. official corruption might be functional and personal corruption might be dysfunctional.The difficulty in delineating between functional and dysfunctional corruption is that market economies and societies evolve. Using the previous terminology. and other forms of corruption that are prevalent particularly in many developing countries. passive corruption is committed by a government official who receives a payment. these actions no longer save a company money by facilitating bureaucracy and deal-making. Bureaucratic systems become easier to navigate and systems become more transparent and more accountable. The wording in the anticorruption convention sponsored by the organization on economic Cooperation and Development (oeCD) differentiates between active corruption and passive corruption. in other words. the established procedures for public and private systems work well enough that corruption is not necessary. She is officially corrupt when she acts illicitly in order to serve the principal s interests. Gradually. insider trading. shift from being functional to dysfunctional. Banfield (1975) differentiates personal corruption and official corruption. An agent is personally corrupt when he does not fulfill his obligations but serves his own private interests.

the link between regional organisations and quality of government has become more debated in both policy and academic communities. or. to take a more specific example. For instance. Nevertheless. reduce corruption. The first perspective is mainly associated with institutionalist and functionalist scholarship. (functioning) regional organisations will have a largely positive impact on government practices and policies. Power determines outcome. with . a growing amount of recent research associated with critical international political economy underlines the dysfunctional character of regional organisations. the Peer Review Mechanism of the African Union. it is possible to identify two broad perspectives on the ways regional organisations affect the quality of government: one celebrating and the other criticising their impact. whose main aim is to enhance nationally designed sustainable forest management. Hand in hand with the emergence of a changed governance structure in the context of globalisation. The aim of this research project is to contribute to theory-building. From this perspective.Aim of supranational organizations. there is an undersupply of systematic research on the ways whereby they impact on national government and policy-making. empirical evidence and policymaking regarding in what ways intergovernmental and supranational regional organisations affect the quality of government. and as a result (directly and indirectly) enhance the quality of government. regional organisations can improve democratic government. which is not necessarily contributing to quality of government. in the Southern African Development Community s forestry sector. lock-in the government s economic and political policies. In spite of a vast amount of literature on various aspects and consequences of regional organisations. according to which regional organisations are assumed to enhance regional cooperation and public goods. From a somewhat different point of departure. In policy circles the growing importance of regional organisations as mechanisms to enhance good government is seen the EU s stability pact and the Copenhagen criteria .

This research project seeks test the relevance of both the idealistic and the realist/sceptic perspective but at the same time create more nuanced theoretical and analytical tools to determine how regional organisations actually impact on the quality of government. which will be initiated in the region of Itä Uusimaa. The unit of analysis are informal and formal regional cooperation processes within Nordic countries (like Finland). services and lifestyles through the neighbouring markets. Baltic countries and part of Russia. There are some challenging policy implication if these results are correct. The significance of this research in creating understanding of regional cooperation and development processes may be manifold. First. this research project aims at assessing under which circumstances and how SOS could be applied in other contexts like in Nordic countries. patronage and partiality. aims at increasing the understanding of the disparities and complementarities in regional developments. This critical.detrimental effects for the quality of government. This research project understands this type of regional cooperation and developments within globalization and emphasizes the trend towards increasing interdependencies among neighbouring markets and the diffusions of new ideas. Norway. even sceptic . products. and that regional organisations are more prone to abuse and manipulation compared with international organisations. . scholarship emphasises that regional organisations may be used as strategic resources by rent-seeking political elites to further corruption. namely that the strengthening of regional organisations would be counterproductive. it is giving about a realist consideration of the applicability Growth Triangle. This paper is devoted to present the initial arguments in relation to a larger research project. the ultimate goal of this research project is to examine regional development and cooperation processes in order to draw conclusions about the factors that facilitate and /or impede growth triangle type of developments in Nordic countries. technologies. Thus. Sweden. With the assumptions derived from the experiences of Asian growth triangles strategies. and accordingly it aims at analyzing the possibilities for developing growth triangles in countries Finland. This project.

the curiosity which precipitated this research project. Furthermore. would bear fruit as a strategic tool for the regions in Europe as well. which were implemented 20-40 years ago. . is whether imitating complex multifaceted strategies.Strategies to the European context.

it was President Zia-ur-Rehman of Bangladesh who took the initiative of sending an invitation to the presidents/heads of states of seven South Asian countries in 1980 to discuss his proposal for establishing a framework for regional cooperation in South Asia. according to Dash Kishore is not based on firm evidence. 85 India. Prior to that. They were. stability and security in the region. the internationalisation of the Kashmir issue. The goal of this proposed meeting was to discuss the goal of achieving peace. they started to look inwards. Bajpai argued that the reason for Bangladesh s initiative was because of its rejection of its application for membership to Association of South East Nations (ASEAN). President Zia toured a few of the South Asian countries and discussed with various leaders individually on the necessity of a regional cooperation mechanism. The initial reaction of the two biggest countries in the region--India and Pakistan to this proposal was the one with scepticism. at best reluctant regionalists 82. this argument. Only when they failed to transcend the regions in search of cooper-ation--for example Pakistan in West Asia and Sri Lanka and Bangladesh in South East Asia. being sceptical of its neighbours' plans to gang up against it. However. Some analysts like Datta Ray (1992) believe that the action on the part of Bangladesh was based on the need for security cooperation among the smaller neighbours with an unstated aim of neutralising India s probable expansion. Pakistan believed that the whole idea of a regional organisation was a ploy by India to raise up the entire region against Pakistan and ultimately expand its own markets by trading with the countries and strengthening India s economic power. Some other analysts also point to the widely held belief that South Asian Regionalism was more not because of the initiative of the hegemon (India) but it was because of the failure of some countries to find berth in adjacent regional arrangements. India was sceptical of including the issues related to security and most importantly. While India feared that this was a forum for all the small neighbours in the region to gang up against it84. without competition from the Hindu business elites in India. Pakistan was of the opinion that a regional organisation would impinge on its independence in foreign policy. This scepticism was also because of the Muslim bourgeoisie that supported the movement for an independent Pakistan wanted to become the leaders in their region.THE EMERGENCE OF SAARC In these circumstances and political situation. . especially after Sikkim was annexed into the Indian territory as a full-fledged state (province) in 1975. Sikkim was a protectorate state under India.

According to Muni and Muni. somewhat with hesitation. meteorology. postal services and science and technology. So. rural development. SAARC would be focused primarily on social welfare and economic cooperation . The much deliberation. However. It also insisted on a clause on non interference in the domestic issues of a country in the new cooperative arrangement. Bangladesh took up the task and circulated the draft which was a reformulation of President Ziaur Rehman s proposals. The meeting later identified 11 potential areas of cooperation and this was discussed in the meeting held at Colombo in 1981. the two large countries agreed to participate in the meeting.87 The Foreign ministers meeting in New Delhi approved the . Subsequent meeting at Islamabad in 1982 the area of sports. telecommunications. all SAARC decisions to be taken by consensus. these meetings enabled the foreign secretaries were able to make good progress in two areas: organisational aspects and the areas for cooperation.wanted all the disputes between countries be kept out of the purview of the new group. it was decided to entrust Bangladesh with the responsibility of making the draft working papers for discussion among the foreign secretaries. This explains the cooperation model of Haas. After the meeting. Finally the IPA was prepared and approved at the 1983 meeting in Dhaka. culture and arts was added. health and population. The meeting of foreign secretaries held at Kathmandu in 1981 added three more areas for cooperation--transport. the important thing about the draft was the dropping off of all the references to security matters and suggesting that cooperation to be confined to non-political and non-controversial items.scene diplomatic activity followed with consultations between the South Asian foreign ministers in 1980 at New York. who mentioned that cooperation from low-politics that would lead to cooperation in high politics-perhaps the belief of the leaders of the countries that were full of mistrust towards each other. hectic behind-the. Colombo agreed to establish a committee to prepare Integrated Programme of Action (IPA) in these areas. The meeting finalised five areas for cooperation--agriculture. India tried to ensure that (i) (ii) (iii) no bilateral or contentious issues to be discussed in SAARC. The IPA was agreed upon to be formally launched at the meeting of the Foreign Ministers in New Delhi later.

. understanding and appreciation of one another's problems. The first summit also decided to rename the SARC as South Asian Association for Regional Cooperation (SAARC) as the belief was that while SARC was a process.IPA and named the proposed organisation the South Asian Regional Cooperation (SARC) in 1983. b) to accelerate economic growth. the leaders agreed to formally hold the first summit meeting of the heads of state in Dhaka in 1985. It was a successful completion of the preparatory phase and also the beginning of the implementation of the agreed-upon areas. c) to promote and strengthen collective self-reliance among the countries of South Asia. e) to promote active collaboration and mutual assistance in the economic. SAARC was the culmination of the efforts to establish an association to promote and develop such cooperation. Now the political will and the cooperation of the leaders was needed to move the process ahead. social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potentials. Manepalli. it was the beginning of new hope and a new era in history South Asian regional cooperation. cultural. technical and scientific fields. Jayaraj d) to contribute to mutual trust. social. f) to strengthen cooperation with other developing countries. Because of Bangladesh s role in initiating the whole process. g) to strengthen cooperation among themselves in international forums on matters of common interests h) to cooperate with international and regional organisations with similar aims and purposes. Thus when the heads of the state first met. The SAARC charter outlines its eight objectives : a) to promote the welfare of the peoples of South Asia and to improve their quality of life.

United States President Ronald Reagan congratulated the South Asian leaders and hailed the SAARC as a significant new venture in international cooperation. European Union. The countries of South Asia. regional cooperation provided a logical response to these problems. This itself is an accomplishment. cultural and historic traditions. the European Union has identified support for South Asian Cooperation and Regional Integration as one of its 'priority' areas. world leaders hoped that this would usher in new peace and development in the region. given the widely prevalent mistrust existing among the countries since their emergence as nation-states. China and Japan.The leaders at the first summit acknowledged the situation in South Asia and the necessity of a South Asian cooperation. . the group has attracted the attention of major superpowers United States. bound as their countries were by many common values rooted in their social. according to Dash. in his message expressed the hope that the summit would open a new era of progress and help reduce the tensions in the region. The United Nations Secretary-General. ethnic. When SAARC finally emerged. Russia. low levels of production. constituting one-fifth of humanity. In its policy for Asia. They felt that. underdevelopment. Today. Javier Perez de Cuellar. were faced with the formidable challenges posed by poverty. unemployment and pressure of population compounded by exploitation of the past and other adverse legacies. The leaders at the first summit highlighted the similarities among the countries in the region and each expressed their country s readiness to make the endeavour fruitful. Chinese premier Zhao Ziyand described the Summit as an event of great significance in the South Asian Region while the head of the Commission of the European Community. Jacques Delors congratulated the leaders for their efforts. The leaders used this forum to break the ice and discuss their bilateral issues and reach some sort of unofficial agreements on the sidelines of the summit.

(3) Handling trade disputes. it claims that criticisms of the WTO are often based on fundamental misunderstandings of the way the WTO works. If the WTO s mission is simply to help producers of goods and services. and nowhere does the issue of sustainability arise. and Does it ignore the concerns of health. exporters. Further. environmental and economic sustainability to the nations participating in trade. the environment and development? the WTO s answer is Emphatically no . exporters. The goal is to help producers of goods and services. negotiated and signed by the bulk of the world s trading nations and ratified in their parliaments. These functions are specifically vague. and importers conduct their business and leave issues of social. and at the expense of the environment and sustainability. Does it destroy jobs? . and (6) Cooperation with other international organizations. Further. its behavior regarding sustainability must be examined. the WTO claims these that these six tasks are its core functions: (1) Administering WTO trade agreements. and perhaps eventually impossible. (5) Technical assistance and training for developing countries. Since the WTO is defensive against accusations that it promotes trade to the benefit of private interests and wealthy nations. (4) Monitoring national trade policies. how can the WTO be put under the microscope regarding sustainability? Because. If the WTO does not prevent major trade policies from conflicting with environment and development policy it will be making future trading between nations more difficult. But this is where the rub lies. to the questions.WORLD TRADE ORGANISATION Does the World Trade Organization do enough to promote sustainable development and protect the environment? The WTO claims to be the only global international organization dealing with the rules oftrade between nations. Is it a dictatorial tool of the rich and powerful? . and importers conduct their business. At its heart are the WTO agreements. (2) Forum for trade negotiations. The WTO has no specific agreement dealing with .

Its members do not want it to intervene in national or international environmental policies or to set environmental standards. Other agencies that specialize in environmental issues are better qualified to undertake those tasks. the committee s work is based on two important principles. First. WTO members are convinced that an open. Its duties are to study the relationship between trade and the environment. The committee s responsibility is broad-based and covers all areas of the multilateral trading system. In addition. These principles are outlined below: y y y y y y y Trade without discrimination Most-favored nation (MFN): treating other people equally National treatment: treating foreigners and locals equally Freer trade: gradually. if the committee does identify problems. its solutions must continue to uphold the principles of the WTO trading system. the WTO is only competent to deal with trade. to address issues regarding the environment the WTO created the Trade and Environment Committee. through negotiation Predictability: through binding and transparency Promoting fair competition Encouraging development and economic reform Beyond these principles. Also. In other words. and to make recommendations about any changes that might be needed in the trade agreements. in environmental issues its only task is to study questions that arise when environmental policies have a significant impact on trade.the environmental protection or sustainable development but does have a number of agreements which include provisions dealing with environmental concerns. The WTO is not an environmental agency. Second. equitable and non-discriminatory multilateral trading system has a key contribution to make to national and international efforts to better protect and conserve environmental resources and promote sustainable trade .

They see environment as an area where rich countries have a comparative advantage. Both have as their aim the optimization of the efficient use of resources. [5] If what Brack says above is true. and the creation of wealth with which to protect the environment and pursue social justice will follow. It . Neither do they concern themselves greatly with any negative social or environmental effects. Ward argues that the theoretical foundations of the GATT system which are the basis for the WTO lie in the doctrine of comparative advantage. or of ensuring that economic development becomes environmentally sustainable. What if the wealth created by trade liberalization is not used to protect the environment and pursue social justice? Short-term gains are realized by multi-national corporation and their partners in developing nations. then why does the WTO not include environment issues in its trade policies? Halle argues one reason is that developing countries fear with some justification that it will be used for protectionist purposes by those countries with more stringent environmental requirements. Ward further argues. the objectives of trade liberalization and environmental protection should be entirely compatible. sustainable development is concerned with the nature of democracy and with securing wide rights of access to information and of public participation in decision-making processes. This argument has validity but there is no reason environmental standards need to be applied absolutely. it is a means to an end. Requirements regarding environmental protection and sustainable development can be created and applied relative to a particular country s ability to abide by them. these theoretical foundations say little about how the economic benefits of trade liberalization should be distributed. Ward continues. The GATT system encourages a trickle down approach to both social justice and environmental protection. But trade liberalization is not and should not be treated as an end in itself. The dogma is first secure trade liberalization. It is these less fortunate people who are exploited through cheap labor and poor working conditions and these less fortunate people who have to live in a continually deteriorating environment.What are the major arguments that defend and criticize the WTO s influence on trade as it relates to sustainable development and the environment? In theory. through trade. who often times have no intention of helping the less fortunate. and in the idea that there are economic (and consequently social) gains from international trade and the cultivation of comparative advantage that go beyond those that can be provided by autarky. whether from the perspective of maximizing the gains from the comparative advantages of nations. One argument that supports more involvement by the WTO in environmental and sustainability issues comes from Halina Ward.

. however. Increasingly. . raising standards of living. Others think not having environmental reviews actually hurts developing nations. This involves concern and respect for future generations . sustainable development carries with it the idea that environmental. social and economic considerations be integrated in the formulation and execution of policies. . Salzman believes it has become increasingly fashionable for political leaders to talk about putting a human face on trade and promoting sustainable development but turning this rhetoric into action has been difficult. and cites two critics who argue the essence of free trade is deregulation but trade regimes like NAFTA and the WTO have tremendous power in determining rules. As part of the run-up to these meetings President Clinton signed an executive order committing the United States to conduct environmental reviews of trade agreements. He believes that environmental reviews are important because they provide the means to create trade policy that takes into account both environmental and commercial concerns. he states that many economists believe such goals are not attainable with democratic governance One such attempt at democratic governance came prior to the 1999 Seattle ministerial meeting of the WTO. Presumably the point these critics are making is free trade is intended to take the regulatory power of governments out of the trade equation but has given it to an international body instead. and meaningful public involvement in the negotiating process. . Howse later points out the Preamble of the WTO Agreement lists among these objectives. Why? Because as mentioned earlier.is also concerned with equality. such rules include requirements and constraints addressed directly to domestic regulation. Finally. and optimal use of the world s resources in accordance with sustainable development . Further. Critiques of globalization and even trade liberalization argue making choices about policies that affect the fundamental welfare of a nation s people should be left to the nation itself. . . Traditionally. . Proponents of these reviews argue they allow integration of environmental considerations into a trade policy process traditionally dominated by commercial concerns. . ensuring full employment and a large and steadily growing volume of real income . free trade rules were about constraining border measures such as tariffs and quantitative restrictions on imports. developing nations believe that the reviews will work against their interests. The Seattle meeting ended in riots and suggestions that the WTO itself conduct environmental reviews garnered little support. Howse argues that these restrictions fuel the argument that globalization suffers from a democratic deficit.

Greenpeace. hoping that higher visibility and more widespread state practice will soften opposition and gain credibility for eventual reviews at the multilateral level. the WTO is a tool of rich and powerful countries. This is because the WTO is driven by narrow corporate interests. y In essence. forests. like genetic engineering companies and the agri-business. y These companies are behind the US attempt to use the WTO as a tool to force feed the world genetically engineered (GE) food. instead. y y The WTO puts trade on the highest pedestal before our health and the environment. social and developmental concerns are distant priorities. on developing domestic capacity. y The WTO threatens crucial environmental agreements. Poorer countries are losing out to the interests of the industrialized world. non-transparent and undemocratic. the trend of powerful business lobbies influencing government positions at the WTO is worrying.Residing in between the proponents and opponents of the environmental review of WTO trade agreements is the World Wildlife Fund (WWF). and minerals. Greenpeace argues that environmental. The group has focused. The WWF is the leading advocate of reviews. . are hidden from public view and are closed to direct public input. Further. but not at the international level. which has long been a critic of the WTO. much faster than they can be regenerated. Given this narrow agenda. fisheries. argues: y The WTO is secretive. Meetings are by invitation only. like the first legally binding global agreement that allows countries to reject genetically modified organisms. the Biosafety Protocol. and tend to be a corporate focus only when they bring commercial advantage. y So-called free trade is speeding up the use of natural resources such as water.

and throwing money at the problem of poverty has not been shown to be an effective method in the past. This suggests that while money will be required to achieve success. liberals and conservatives. it is hard to make a case that being in extremely poverty can be a solid foundation on which one can build a satisfying and productive life. North and South. According to a recent article written by Bryson for the Associated Press. on the other hand. it is only one ingredient of the recipe needed. Foreign aid often creates climates of dependency and there is little empirical evidence linking foreign aid with poverty reduction throughout Africa or other regions of the world.MIDPOINT IN ACHIEVING THE UN S MILLENNIUM GOALS: GOOD NEWS. the world would have already eliminated this major cause of human suffering a long time ago. The ambitious goal of lowering the levels of poverty around the world is something that Americans and Europeans. expanded life expectancies and improved overall standards of living. Republicans and Democrats. While it is generally agreed that there is no single method that can be used in all places around the globe to lessen the grip poverty has over the planet s citizens. young and old. Money may not guarantee happiness. LESSONS LEARNED AND CHALLENGES AHEAD In the current environment of heated political divisiveness found around the world. While there remains far too much suffering around the world due to extreme poverty. and East and West can all agree upon. lower levels of infant moralities. lessons learned from the success stories may provide ideas about developing general principles that can then be adapted to specific situations and locations. . achieving these goals is not a simple task. poverty reduction is a complex issue and if there were easy solutions. Poverty reduction has been shown to be associated with reduced crime rates. there has also been a significant amount of progress in improving the lives of people is many parts of the world. many leaders in Africa have acknowledged the limitations of financial aid as a tool to use in poverty reduction. the UN s Millennium Goals are refreshing in that they are objectives that have near unanimous support. However. Poverty reduction may normally require complex cooperative arrangements that involve many different individuals and organizations that attack the problem from multiple angles.

such as money. East Asia Update). It should be mentioned that this reduction in poverty was achieved without substantial foreign aid. people of all political orientations should be celebrating the success that has come from increased economic and personal interactions across national boundaries and work together to increase openness and to enjoy the resulting benefits for all. Although the good news out of Asia is heartening. back in 1990. sustained strong economic growth has provided an indispensable foundation for the broad declines in poverty seen in most East Asian economies in recent years" (World Bank 2006. over 80% of the population lived in extreme poverty (earning less than $2 a day). an astounding 156 million people were able to lift themselves out of extreme poverty and now instead of living in despair. Noble Laureates Sen and Becker have often supported the concept that one of the keys to economic growth and poverty reduction is to open up a country's economy to international trade and investment. but that number has fallen to well under 50% today according to a recent World Bank report. In Vietnam. as well as intangible assets such as training and new ideas. but having a bigger overall pie seems to help in ensuring more individuals are getting a big enough slice to live on. There is still a lot of work to do and the conception of new ideas and approaches are needed in order to achieve the UN s Millennium Goals. During the period of 2001 through 2005. history has shown that embracing the world brings success while protectionism and attempts to keep people and economic activities separated from each other are not effective economic policies. However. India and other parts of South and Southeast Asia have also recently seen substantial improvements in the standards of living of many of the continent s most disadvantaged people. How has poverty been attacked in Asia? "Clearly. How the economic pie is craved up in an economy will have an effect on poverty reduction. factories and equipment. the greatest success story of rapid poverty reduction the world has ever seen can be found in the recent history of China. they have hopes for the futures of both themselves and their children. Furthermore. Foreign trade and investment bring in tangible assets.MACROECONOMIC LESSONS FROM ASIA Most of the recent poverty reduction in the world has taken place in Asia. Eskew in his 2005 article in the Chief Executive argued that instead of using international trade and "globalization" as topics to be debated politically. poverty has not been eliminated in Asia and there has been less progress in many other areas of the world. .

the positions have reversed. but also regional organizations such as NAFTA. For private for-profit companies to play a greater role in poverty reduction may require these companies to develop new perspectives and paradigms. Latin America had significantly higher levels of economic development and lower levels of poverty than were seen in Asia. NGOs and other organizations can assist by supplying monitoring and education in support of macroeconomic stability. In 1950. in his recent article for the IMF's publication Finance and Development. Additionally. However the effort may be worthwhile and it has been shown that private enterprises can play a significant role in poverty reduction by finding sustainable methods . private for-profit companies have a supporting role to play in macroeconomic stability by focusing on long-term direct investments into developing nations while reframing from more speculative and potentially disruptive investments. and therefore are important in integrating improvised regions into the global economy. and supranational organizations such as the UN. international organizations and private industry all have a role to play in poverty reduction. looked at the tale of two regions. Large multinational corporations are sometimes criticized for exploited lesser developed regions. These results suggest that governments. but today. Private companies are the organizations for the most part that actually connect lesser developed regions with the global economy. These factors were macroeconomic instability. Macro-economic stability requires the efforts of national governments. lack of integration with the global economy and the low quality found in public institutions within Latin America. Integration with the global economy requires governments to support policies of economic openness and to resist the calls of special interests for protection from competition. Asia and Latin America. World Bank and IMF can play constructive roles. In addition.A TALE OF TWO REGIONS Elson. What were the factors that allowed Asian economies to lessen poverty and what factors slowed progress in Latin America? There were three major factors found holding up improvements in the lives of the improvised in Latin America that were different from the factors that had evolved in Asia. but the reality is large companies mostly ignore these areas of the world since potential profits are relatively small and dealing with the bureaucratic red-tape that is often found in these regions is too much of a hassle. the EU and ASEAN.

education and lessening the levels of crime and violence. international organizations can assist in the training and monitoring roles in order to lessen the influence of corruption emanating from public institutions in developing economies. In addition. a strictly top-down approach that relies solely on governments and liberalized macroeconomic policies. An equally strong case can be made that improved health and education and lowering crime rates lead to economic development and the resulting declines in levels of poverty. TOP-DOWN AND GRASROOTS APPROACHES Economic development is also strongly correlated with improved health. However. In all likelihood. would probably not be as effective or quick in achieving the goals as a combination top-down approach mixed with efforts at the grassroots level. or a strictly grass roots approach that doesn't take into consideration the macroeconomic structure of an economy. private profit-making enterprises can do their part by refusing to pay bribes and lobbying for efficient and transparent public institutions. The primary responsibility for improving the quality of public institutions lies with the national governments. Furthermore.that will bring profits for themselves while simultaneously providing quality jobs. work experience and infrastructure development to less economically developed countries. . and there is substantial research that indicates the presence of foreign companies in developing economies has a positive influence on lessening the amount of corruption tolerated of government officials. Therefore. this can lead to a chicken and egg type of question about the direction of causation. improved health and education and lower crime rates. A strong case can be made economic development lays a strong foundation for poverty reduction. economic development works in tandem with the aforementioned other factors in reducing poverty in a complementary fashion. as well as through a variety of education and training programs. international NGOs and other organizations can assist in connecting less developed areas to the global economy by designing programs aimed at including individuals into the global economy who market force have neglected. However.

Thus while aid agencies are likely to cause more harm than good in the globalization process (lending to Russia. Liberalism from above or Liberalism from below? The distinct institutional framework under which liberalization is taking place worldwide--including the prominence of supranational governmental organizations like the IMF. for example. The danger of the constructivist approach to achieving a . and furthermore. However. and the United Nations. Muhammad Yunus. The Grameen Bank has been an extremely cost effective way to allow people to raise themselves out of despair. and to recommend that further developments be managed by international world bodies. have certainly slowed the move to world capitalism. trade and capital account liberalization. than money in developing sustainable poverty reduction programs. Yet the evidence indicates that such international organizations have at best been marginal to the globalization process and at worst have caused disruptions or delays along the way. which reduced its trade barriers for years before proposing the North American Free Trade Agreement. China. and other policy reforms as past policies failed. The bank has improved the lives of thousands of those that used to be living in extreme poverty in Bangladesh through micro-credit lending programs. the World Trade Organization. like Mexico. free-trade agreements such as the WTO are likely to be helpful. in its bid to join the WTO. That is even so of countries that have entered into multilateral free-trade agreements. Important lessons learned from the Grameen Bank include the concept that ideas and implementing the ideas are equally if not more important. the World Bank. for example). Decades of World Bank and IMF lending to inward-looking regimes. they serve more to preserve trade liberalization reforms than to promote them. and the prominence of welfare and regulatory states-.An example of a very effective grass roots program is the Grameen Bank founded by the most recent Noble Peace Prize winner. is following the same course.causes both enemies and proponents of globalization to attribute the market revolution to the efforts of those institutions. the world economy has evolved as a result of changes coming from the national level rather than changes directed at the international level--what German liberal Wilhelm Röpke called an international order "from within and beneath" rather than the "false internationalism" that characterizes supranational organizations. not all of these ideas will originate from individuals from developed countries.15 In short.14 Yet countries have unilaterally undertaken economic restructuring.

international regimes are manifestations of government failure transplanted to the international level. through international forums. This is the hallmark not of limited government under the Rule of Law. and Argentina had current account deficits greater than 10 percent for decades before 1913. a $30 billion package? We may never know the criteria or the rationales used in that case or many others. Australia. but the extent to which the world is more globalized today than it was 100 years ago. The world has seen global capitalism before. no matter how much international agencies would like to take credit for the worldwide market revolution. Razeen Sally of the London School of Economics describes those hazards. In the end. avoiding both domestic political accountability and market disciplines. what is unprecedented is not globalization per se. Neoliberal institutionalists do not portray international policy coordination in the frame of limiting general rules at the international level that proscribe discretionary government action. Moreover. Why did the IMF put together a $57 billion rescue package for Korea as opposed to. those changes have emerged at the . far removed from public scrutiny and the control of national legislatures and judiciaries.16 We have already seen some of that dynamic at work. And efforts to promote international liberalism from above may prove futile. the Fund does not tolerate the current account deficits of its member countries exceeding 4 or 5 percent of GDP even though large deficits are beneficial in many cases. In the meanwhile. supply extra room for arbitrary activity by politicians and bureaucrats. they think of it as an apparatus of complicated negotiations on particularistic policies intended to achieve specific results. rich countries have pressured poor countries to adopt labor and environmental regulations that did not exist in rich countries at a similar stage in their development. In this context. They exacerbate the malaise of Big Government and political markets within nation-states. rather. Those impositions have come about against the wishes of developing countries and the vast majority of consumers in rich countries. we can come to some tentative conclusions. Examples of arbitrariness and lack of transparency are amply provided by the IMF. Canada.liberal economic world order is that it may lead to discretionary and arbitrary use of power. Indeed. For instance. The process by which the IMF decides the bailout amounts nations receive is also unclear. say. For example. Intergovernmental cooperation and international agreements. That is especially so in terms of trade and finance. but of unlimited and discretionary government in an international public policy cartel. globalization may make such international bureaucracies irrelevant.

the nation-state remains quite relevant. which intellectuals considered held great promise for humanity. But a backlash against global liberalism is in fact more likely to occur if international agencies increasingly manage the world economy to the detriment of what poor countries consider most important. In that sense. but it removes a major obstacle on the path toward prosperity that the world has recently resumed.national level and have not been imposed from above. . basic liberal principles are generally accepted. That current climate of opinion does not make continued globalization inevitable. Happily. one of the biggest differences between the two periods of world capitalism--the ideological environment--portends well for the 21st century. the wave of the future was socialism and its variants. At the end of the nineteenth century. namely. with socialism thoroughly discredited. Today. economic growth. That belief system helped destroy the first era of globalization.

Moreover. Interactions between such movements in different countries can go a long way in creating new bastions of cooperation. Apart from that. Europe can imbibe some of the resourcefulness that is characteristic of USA and India to enable transformations and USA and India can in turn incorporate. The important point is that future collaborations have to be less bureaucratic. Research and development of . they can all borrow and learn from each other s strong points. It causes politics to become more transparent and brings about reform in religion. They cannot be modern replicas of the institutions created after the Second World War. comes with its own share of dilemmas. The role of governments is another one of the key examples of the importance of the human element. After having dealt with issues that are foremost and in the limelight. from Europe. carbon tax and emissions trading. A current example is the debate going on in United States of America and Europe over the benefits and risks of manufacturing and consuming Genetically Modified Food. The development of the concept of emissions trading has meant that countries can make profits by selling their emission quotas and by providing ecosystem services. biodiversity and sustainability from the very poor and use these lessons in the context of the rest of the world. that are needed to manage these transformations. The human element also plays a pivotal role in the behavioural side of facing these challenges. Chief amongst them is the debate on whether future actions will be ruled by internal issues or by external forces like multilateralism. the business sector must be made to collaborate with the public sector. Things like demand for accountability by the people of their governments and popular movements have to be tapped into. its social institutions. some attention also needs to be paid to issues that are currently in the periphery of our consciousness but are of equal importance. thus benefiting everyone. This commercialisation and globalisation of economics makes it a force larger than politics and religion. For example. for example. two traditional symbols of power. The biggest dilemma is arguably the moral lag that accompanies any radical technological advancement. we need to understand that markets also pay an important role and cannot be ignored. Governments also need to implement and enforce some of the changes and developments proposed.ROLE OF TECHNOLOGY Technology however. However. Government structures need to be changed and modified globally. The question thus raised is not if we are able to use certain technologies but whether we should use these technologies at all. It would serve us well to take lessons in spatial management. The moral questions are thus the most difficult ones to answer. It has to be understood that governments have to take different kinds of steps and measures depending on the location and the country.

. people all over the world must come together and collaborate to solve global problems. especially in the fields of bio sciences.technology must be encouraged but at the same time there has to be a balance between scientific development and commoditisation of human beings. In short.

as in the case of dumping. If firms can successfully dump goods (i. Since a customs union has the capacity to provide for free internal movement for goods of origin as well as duly admitted third country goods. In the usual case.e. but to the export country producers. however. then this affects the trade between regional partners. The added element of customs union analyses emphasizes somewhat more the elimination of trade measures (and their future potential to be used) in a formed single customs territory. . the more likely it is that these practices will in fact be addressed and remedied.COMPETITION LAW For a customs union in particular. then this may also be the result of anti-competitive exclusionary practices in the export country. a focus on eliminating the underlying trade distortions caused by anti-competitive practices is also drawn more to the centre of attention by looking at effects of high and low prices of goods or services in the absence of a regional competition 1) Prices too high If prices of exports from one market to another are too high due to export cartel activity or a cross border abuse of dominant position.. the importing country can take legal action against these foreign practices. 2) Prices too low If prices of exports are too low. A more decentralized approach to this problem would rely wholly on national laws and agencies and attempt to create a cooperative framework among them in order to share information and other investigatory assistance. tariff cuts made by the importing country are being allocated not to the import country consumers. The more central the investigative and enforcement mechanisms are made. If it has a functioning domestic competition law. enforcement against foreign actors is very difficult for domestic agencies where the evidence lies outside of the enforcing territory. the core argument for a regional competition law can be expanded by considering the effects of anti-competitive practices on the trade liberalization commitments made by the Members to achieve free trade. In this scenario.

In this case the trade solution of parallel imports cannot be made effective. Mere cooperation may be sufficient except in the case where exporting Members refuse to pass and implement national laws that address anti-competitive practices. the regional law could serve as an important gap-filler. To summarize. The tension caused by a lack of reciprocity in competition law remedies may result in some Members utilizing trade measures (anti-dumping duties or safeguards) irrespective of the tariff cutting schedule and commitments in the region. a regional competition law will provide a common regional basis to deal with anticompetitive conduct that affects the regional market. At the same time. Overall. while also providing reinforcement for national competition laws and the authorities responsible for their implementation at the national level. this closure may be created by a private set of exclusionary practices. but other regional Members do have competition laws. if there is no competition law in the producing market.sell them at a price that is below production cost). This remedy can be available in a decentralized scheme relying only upon national laws that have a provision to address anti-competitive exclusionary practices. There may be a stronger argument for an independent regional law and a centralized competition authority in the case of export restraint behaviour that affects trade between the Members. firms from regional Members with functional competition law can always be challenged if they engage in dumping using exclusionary vertical restraints. perhaps in the form of vertical restraints in the distribution chain from a producer to the ultimate consumer. . then the overall result is potentially highly damaging for free trade regimes and economic integration. The problem of dumping can be resolved by effective national laws and intergovernmental approaches. then they may be operating in a closed market whereby those dumped goods cannot be re-imported to challenge local prices. Firms from the countries without laws can effectively dump goods on the other regional Members without being challenged. It can be addressed in the producing territory by the affected foreign firms if there is a competition law that can be invoked against anticompetitive vertical restraints and which also guarantees a non-discriminatory right of action on behalf of all complainants. For those Member States who do not yet have the capacity or resources to enact national competition law. However. preferential trade liberalization within the ECOWAS region should facilitate increased competition in the regional market but national or regional competition policies may also be necessary to provide recourse for injurious firm behaviour that responds to the removal of governmental barriers. If there are no trade barriers in place. and this is then a competition law problem that is affecting trade between the Member States.

societal behaviour. What prevent promarket. Craig 1998. Vitols 2003). 1 The Chinese and German governments thus respectively proposed sophisticated laws and regulations on. China and Germany have each undergone massive capital market restructuring. the Chinese and German capital markets are today still commonly perceived as underdeveloped and/or risky (e. . At the same time. Vogel 1996. technologically-advanced investment systems to promote/facilitate their capital markets and other new equity-linked products. Heo and Tan 2003).g. Despite the above institutional reforms and developments. and the U. In the early 1990s.K. brokerage surveillance to protect equity investors.Comparing the Chinese and German Capital Markets Over the past 15 years.S. information disclosure. accounting standardisation. Nowak 2001. for example. in a bid to maintain their rapid economic growth during the 1980s and seek new sources of corporate finance as an immediate relief to massive debtmarket problems. Macleod 2002. industrial norms and corporate cultures as bundles of informal rules in terms of organisational arrangements have discouraged the appearance of new regulatory/institutional reforms. pro-consumer regulations alone from promoting capital markets? Much of the recent literature on financial market development has argued in favour of formal institutions through regulation or reregulation (e. which are seen as more market-based and arms-length (Taskinen 1999).g. China and Germany needed to steer their capital markets away from their bank-based debt markets towards an alternative source of corporate finance. whilst establishing more efficient. The corporate finance and governance systems of these two national economies have generally been classified as bank-centred and relationship-based setting them apart from Anglo-Saxon countries such as the U.

semi-direct and indirect regulation. they normally adopt three main features: Type 1 Dualistic(or multilistic )/supranational organisations organisations made up of two (or more) independent. direct government . semi-hard and soft controls. self-regulation and standardisation .The enabling/constraining force of informal institutions To present the latest forms of new governance in terms of regulatory instruments. i. they could be enabling. If they are well managed and/or rearranged by the state (or by cross-border hegemony). regulatory standards .e. authority . Painter and Wong (2005: 3) basing their argument on Knill and Lens chow (2004: 222) classify regulatory techniques according to the modes of steering and the kinds of instruments deployed. and the hard. . Through observing empirical facts. thus constructing a twodimensional grid between the modes of direct. conflicting parts or aspects are subject to two (or more) different jurisdictions respectively .e. i. or they are not confined to the laws and regulations of a single nation-state. There are some tangible forms of organisational arrangements . otherwise they could be constraining. on the columns of an analytical table. incentive and learning that are employed to shape the behaviour of target actors on the rows of the grid. Type 2 Differential organisational practices corporate operations are specially carried out so as to freely take advantage of infinitesimal (or possibly enormous) differences between national and cross-border regulatory requirements. indirect government .

Similarly. following the ideas of Weiss (2003: 20-21). as discussed below). there are some other aspects influencing the outcomes of corporate governance. there are also enabling ones of them. e. formal rules will prevail. In any particular policy sector such as capital markets. I regard these. Scott (2004: 168) has seen fit to discuss the rise of the post-regulatory state in the age of governance. if the enabling aspects supersede the constraining ones. . are organised and their societal/business norms are constituted might greatly influence policy. this has occurred principally in various countries/economies during the era of internationalisation (or more appropriately described as the era of erratic and fractional globalisation. actors tend to explore the grey areas of their organisational arrangements. there are enabling aspects of informal rules that include. In contrast to the constraining aspects of informal rules such as corruption and cronyism. harmony and cooperation. By contrast. and particularly regulatory. with corporate cross-purposes (this term will be illustrated in the Chinese case later) or in a cross-border district (this term will be illustrated in the German case later). outcomes. the rapidly developing globalised capital market versus the continually revised national regulatory framework. if the constraining aspects override the enabling ones. in contrast to the constraining aspects of organisational arrangements. which have been largely ignored by empirical-based scholars.g. leading to inefficient and ineffective policy implementation at length. Moreover. This new institutional concept implies that the manner in which companies in any industry. suggesting that in the areas where regulatory reform is not yet intensive and the credibility of the regulators is not strong enough. for example. as the enabling or constraining force of informal institutions in terms of informal rules or organisational arrangements. Perhaps for this very reason. the state should strengthen regulation by providing greater recognition to other types of legal and non-legal norms in processes of control .Type 3 Gradualism/soft-landing organisational strategy organisations are specifically conditioned to adopt gradual or soft-landing measures by (deliberately) placing or maintaining political or societal barriers . As regards the formal regulatory pressures enforced by state agencies in the cases of China and Germany discussed below.

These international aid flows have not been devoid of debates. development assistance in many respects had become increasingly a budgetary assistance. Despite the flow of some financial resources over the years in many of these countries. It was in this context that lending institutions such as the International Monetary Fund (IMF) and the World Bank sponsored Structural Adjustment Programmes (SAPs) as a means to redress the poor economic conditions of these countries starting from the late 1970s. In this case. It is in this regard that African countries have sought assistance from developed countries and the Bretton Wood institutions. been viewed in terms of scarcity of capital and technology. One of the indications by then was the fact that the United Kingdom and some other donor countries had reduced their commitment to development assistance. there were already signs that that aid provisions were under threat. to the extent that one hardly encountered any real development which had taken place as a result of a considerable proportion of aid inputs (Arnold 1979: 19). Most of the emphasis has largely been geared towards overcoming economic problems. more often than not. since these had resulted into the worsening of the situation. In fact. But as a consequence of the developments in the 1980s. most governments became in favour of aid. These institutions had come to the conclusion that orthodox approaches do not work. In reality. Development aid multilateral and bilateral. poorer health and education facilities and higher foreign debts. aid provision for most other donor countries (especially those in the Organization for Economic Cooperation and Development OECD) for the developing countries expanded by more than .FOREIGN AID AND AFRICA S DEVELOPMENT African countries have had to tackle difficult problems of underdevelopment in their various forms in the last 45 years or so. at times to the detriment of social and political considerations. These problems have. to African countries since 1960s had more and more become viewed by the recipient governments as an annual addition to their economies. it seems the socioeconomic situation has tended to deteriorate even more. which has led to fall in the standards of living.

as a traditional tool for development was being steadily withdrawn by the developed countries in favor of direct foreign investments (FDIs). to those of development and globalization . Critics of development aid on the Right were on the whole condemning aid as a distortion of market forces and a waste of resources which simply encouraged corruption. These theories have ranged from those of change .3 per cent a year in real terms between 1981-1991 (Watkins 1994: 517). modernization . but regarded it within the framework which viewed aid as an element of neo colonialism which aimed at integrating the developing countries into the capitalist world economy (Mosley 1987 for details). The Left critics of aid also shared this view. it also signalled the triumph of the neoliberal economic ideologies which championed the virtues of free market economies and resulted into the consolidation of the New Right which stood in opposition to welfarism and provision of aid in general. these theories and practices have focused on economic growth and since early 1980s. dependence . mostly those from the Atlantic World. has offered a challenge to the donor community to continue giving more aid. Despite its diminishing share and frustrations over what development aid had been able to achieve. One of the international political changes that was to take place in the end of the 1980s was the collapse of bureaucratic state socialism in Eastern and Central Europe. Aid. mostly focusing at institutional levels (nationally and internationally). the general impression . By 1997. the publication of the Brundtland Report on World Development and Environment in 1987 and the conclusion of the Rio Conference on Development and Environment. Social sciences economics. political science and history have produced a considerable number of theories of social change/development since the late 1940s. They mainly grounded themselves in the economic arguments. FDIs in the developing countries had exceeded USD 160 billion. while aid in that year stood at USD 40 billion (Hertz 2001: 34). Besides resulting in the end of the Cold War. sociology. Basically. This was despite the fact that aid was being criticised. The debates pointed out above were been conducted by both social scientists and lobbysts. While official development aid totaled almost USD 60 billion in 1990 and FDI was just over USD 20 billion. It was in this context that aid budgets in the industrialized countries began to decline among the major donor countries. FDIs overtook aid for the first time in developing countries in 1992.

prevailing among development scholars is that such theories have reached an impasse and they have generally failed to deal with the realities of the African countries (Spybey 1992. visits between African and Arab leaders increasingly became significant in the post October 1973 period. formed in a meeting held in Algiers in 1967. is to provide some clarification of certain deceptive aspects of the link between aid and development in contemporary Africa. The Arab countries had conditionally tied their aid. a very modest contribution to the historical debates on aid in Africa. Other important events internationally during this time were the liberation of Saigon and the victory of the liberation movements in Mozambique and Angola in 1975 and 1976 respectively. Thus it was during this period that the Economic Commission for Africa decided to include Arabic in the list of working languages of the organization. given the uncritical acceptance of the positive role of aid. In these conceptions of development. the Ministerial Conference of the Group of 77 was held in Arusha. with OPEC showing the way forward. had developed out of a felt need for the Third World Countries to speak one voice at the UN Conference on Trade and Development (UNCTAD) and other conferences concerned with world economic matters. in that they did not support countries that had ties with Israel or countries that showed any hostility to the Arab world. The goal of this paper. Zeleza 1997). The concept of development itself has been quite elusive. The Group of 77. class antagonisms were on the . western) to sensibilities of development as a management of a promise of economic growth through adopting commodity-based forms of production with accumulation being the overriding logic and possibilities of the outcomes of the benefits trickling to the poor. Special consideration was given to Islamic religious institutions and Qoranic education. In 1979. as clearly demonstrated by the formulators of the New Partnership for Africa s Development (NEPAD). which were followed by the liberation of Zimbabwe in 1980. The agenda of this conference was on how the Third World Countries could negotiate for a New International Economic Order. Tanzania in the background of these developments. At the same time.e. as that transformation of traditional societies to modern ones (i. in that the last four decades of development of the third world countries have seen it being transformed from modernization.

multinationals and International Financial Institutions (IFIs). international NGOs. and their notions of partnership in development. FAO. conquering By late 1970s and early 1980s. private individuals. . With their objectives of meeting the basic needs through the process of people s participation . efforts were made to create them. Their operations were boosted in a context of a perceived failure of official aid agencies and governments. it had already been established by these sponsoring agencies that voluntary agencies (NGOs) had a comparative advantage over the WB and IMF direct intervention in reaching the target groups as far as the evolution of the new ethos of development were concerned. etc. Where none existed. progress. quantifying rationality. were now working with indigenous/local organizations. UNICEF. WHO. NGOs had become more desirable and efficient conduits for development programmes than official ones. backed by financial support of their governments. etc. universalism.main hidden and emphasis was on the existence of shared values of nature. together with specialized UN agencies such as UNESCO.

and between nations and transnational or subnational structures. and the parliamentarian and political party systems are regarded negatively as sources of populism.. everyday knowledge of the people tends to prevail. It is not easy to determine whether an overall increase in corruption led to the anti-corruption campaign. Politics is identified with corruption.governmental agents. which harmed much the functioning of economy. Governance aims at organizing the state and social life in general.CORRUPTION AND GOVERNANCE The term governance started to be positively used by all parties to describe the political form of global market economy. A neocorporatist structure is developing in which interest groups and specialized policy networks represent themselves in a market-like sphere of politics. Understanding these processes can open fresh perspectives on the ways in which new political arrangements are embedded (or not) in state-society relationships. partisanship etc. nepotism. the democracy of citizens is being replaced by the democracy of organized interest and lobbies. who were claimed to be neutral professionals applying the objective rules of the game called economy. As expert knowledge as opposed to popular. commonsensical. Theories of governance argued that while government refers to formal acts and procedures at state level. along market relations. It assumes an interdependency between nations. It is defined as governance without government . Brown and Cloke (2004: 278) argue that there was little reliable evidence to determine if corruption levels had been worsening or whether there has simply . governance is based on a network of informal relations at all levels. Even the state itself is dealt as if it is a business administration job. 1998: 228-231) Jean Grugel states that globalization and governance are not neutral processes and they affect states. Critical studies highlight the instrumentalization of anti-corruption discourse. (Andersen and Burns. between nations and international organizations. Since 1990s anti-corruption agenda has been promoted in developing countries through the reform programmes of the international financial institutions. classes and social movements differently. Making economic decisions turned out to be the job of technocrats. Legislation and regulation are increasingly carried out by non-parliamentary and non.

Bedirhano lu (2007) describes this as to put . politics of civil society is gradually articulated in the campaign. A central role is attached to the state in the launching of anticorruption policies. Minister of Economic Affairs. Many scholars underline the conscious attempt of neoliberals to use corruption as a strategy for enabling neoliberal policies and try to demonstrate the consequences or by products of international anti-corruption campaign of the last decade. which required independent states to acknowledge the extraterritorial jurisdiction of Western states in the area of commercial law. does not fight with corruption itself but in the first place promotes commerce. One of those consequences is the strenghtening of executive power and the growing role of international financial institutions. In this respect. To overcome this problems that undermine state legitimacy. as Brown&Cloke (2004) put it. uniformity in commercial law and the associated disciplines of the market as indirect constraints on the conduct of states themselves . The international crusade against corruption. Coming to the office to recover Turkish economy after the 2001 financial crisis. Despite their anti-state stance neoliberals are well aware of the continuing functions of state as a coercive and legitimizing body in regulating society. Hindess regards the international anticorruption campaign labeled as the promotion of good governance as an updated version of the older system of capitulations. a process which had already started in the mid 1990s but which had been proceeding back and forth because of the resistance of various social forces accelerated. The example of Turkey is worth mentioning. have then explained the causes of the crisis with reference to the corrupt banking structure in Turkey and succesfully reproduced the neoliberal discourse that associates anti-corruption with the implementation of the second generation reforms.been increasing legal and public recognition of corruption cases or perhaps even the conscious manipulation of public sensitivity about the issue. the strategy received public consent. Neoliberal institutionalisation in Turkey. now the UNDP President Kemal Dervi . And since this competition-induced concern over corruption was articulated within the moral based debates in domestic politics.

related only to the politicians and their bureaucratic companions. As to the NGOs. .the foxes in charge of the chicken house if it is recalled that corruption is assumed to be intrinsic to the state in rentier state theories . and leave responsibility for political engagement with NGO staff? Dinler states that anti-corruption measures were functional in the redefinition of the relationship between the economic and the political. Rent-creation capacity of these bodies are usually disregarded. because the failure of the first generation reforms were explained by the continuing dominance of the political over the economic. the question below is worth asking: Can NGOs and similar organizations really help socialize citizens into the system. or do they rather represent a means by which citizens abdicate responsibility for active citizenship. Corruption has been conceptualized as a purely political phenomenon. NGOs. regional development agencies is applied. Practical monopoly of technical expertise makes such institutions extremely powerful and unaccountable in deed. They emerged as a legitimating mechanism to justify market reforms and the separation of the economic from the political. by ignoring the major role of the businessmen in corruption and rent seeking. To balance the state and prevent it from following a national program external pressure imposed by international financial institutions. private sector. autonomous regulatory agencies.

Welfare retrenchment is sold to the public in terms of it being more a dictate of rules or logic of the global economy. In addition to the usual concern over immigration. e. it can take an extremely aggressive stance in wage bargaining or in political negotiations. 1997. to the task of retooling the state to face new social risks and to reproduce the social (social cohesion. the WTO.Welfare system today have been openly scrutinized and challenged by politicians. 79). nation states have forfeited sovereignty to supranational organizations and treaties. it is obvious that governments in Europe and North America point . Given the enhanced exit options in today's world. Trans-state accumulation has enhanced the power of capital. the IMF or World Bank. citizens. social inclusion. the political relationship among capital. unemployment and population aging.. the World Bank. the International Monetary Fund (IMF). the European Union (EU) and the North American Free Trade Union (NAFTA). and tax payers as never before in the vast majority of Western nations. This move toward rules is an attempt to implement mechanisms that automatically force domestic policy to reflect the changes associated with the global economy (Burnham. 150-160).g. employers. the World Trade Organisation (WTO). These agencies and treaties represent a complicated shift in political economic governance from the domestic level toward the supranational With trans-state accumulation. 2003. Welfare systems are viewed now as national luxuries that cannot be afforded in the global economy. the state and welfare coalitions have been recast. the European Union.GLOBALISATION AS SOCIAL POLICY MAKING There is a growing sense that social policies are taking new directions as policy debates move from an earlier embrace of privatization and marketization. The roots of this scrutiny and challenge have been the subject of much political and scholarly debate As economic globalization has progressed. Capital mobility or the threat of capital mobility has the effect of forcing workers/unions and welfare coalitions into making concessions (Crotty & Epstein 1996. Because capital is mobile. 118-149). such as the Group of Seven. social economy) (Jenson & Martin. while leaving labor and welfare coalitions politically impotent. there has been a move within many nations to move from discretionary-based to rule-based policymaking. social capital.

neo-liberalism seeks to restructure labor markets.to the pressures of economic globalization as being one of the main reasons behind social cutbacks. in which the benefits and services in one country are lowered the ward off any potential competitive disadvantages relative to another (Alber & Standing. Neo-liberal transformative action aimed to reorder post-war capitalism s structural and institutional arrangements. economic flexibility can refer to the ability of capitalist enterprises to adjust their productive strategies. In general terms. As with the recasting of class relations. an adaptable workforce and flexibility in the hiring and firing of workers are considered valuable economic assets. Social dumping effects reflect governments' concern that high social cost will undermine a nation's international competitiveness. market contestability. The importance of coercive competition is that it simultaneously acted on and transcended domestic institutional-policy frameworks. and factor mobility ( coercive competition ) on all nations. Given the rapid changes in the world market and the intensification of competition. making them more responsive to competitive forces. the ability of workers to move from one job to another and the ability of wage levels to move according to prevailing economic conditions The early 1980s employers offensive was launched to restore profitability. . The integration of domestic economies has opened the door to welfare system social dumping effects. 99-119). 2000. This offensive against the public sector in general and social systems in particular is universal and the language of globalization has been central to this neo-liberal assault. This neo-liberal reordering unleashed the economic transforming tendencies of state rationalization. remaking the mode of production and reorganizing accumulation.

These pressures were dealt with politically determines the nature and scope of welfare system retrenchment. and welfare system rivalry. Recent welfare practice reflects discursive practices that communicate an apolitical logic of inevitabilism that rules out all alternatives to globalization and welfare retrenchment (Gills 1997. integration induced convergent welfare effects. . neither can it exist without. 108). domestic social systems faced a number of transformatory pressures. 1995. It is obvious that the explanation of globalization has become a force helping to create the institutional realities it purportedly merely describes. including the erosion of government autonomy over social provision. (Piven. The contradiction is that capitalism cannot coexist with. 1-3).In this new political economic context. the welfare system. The prime source of retrenchment pressures was that the mobile capital has an aversion to anything that contributes to competitive locational disadvantage.

predicts that stronger states in the issue system will dominate the weaker ones and determine the rules of the game. exogenously determined preference ordering into the analysis. Structural explanations show how the international structure determines the possibilities for cooperation. In particular. They argue that regimes facilitate communication. Another structural explanation. But the free movement of labor is not a collective good. Bob Hamilton and John Whalley analyze the influence of free movement of labor among 179 countries and conclude that it would produce enormous gains in global efficiency. and decision-making procedures that make these patterns predictable. and between wages. Regimes help to overcome collective action problems. thereby overcoming the collective action problem of supplying a collective good. and its supply does not represent a . In pure economic terms. Keohane and Nye s issue structural model. and promote diffused reciprocity.INTERNATIONAL LABOUR MOBILITY Several studies suggest that international migration regimes exist in the European Union and in regard to refugees. based on principles. and supply public (or at least collective) goods. Most versions of regime theory postulate that regimes help to supply public (or at least collective) goods. enhance the importance of reputation. in various regions. which could exceed existing worldwide GNP. the theory of hegemonic stability links regime creation and maintenance to the existence of a dominant power. the free movement of factors (including labor) benefits both countries involved. norms.Several studies emphasize the contributions of free labor mobility to global welfare. it could be argued that the free movement of labor does represent a collective good. I argue that regime theory cannot explain multilateral cooperation leading to the free movement of labor because such free movement is not a collective good. despite the lack of a central authority. and because the countries of destination do not face a collective action problem. According to James Markusen and James Melvin's two-country model. rules. which helps to provide the collective good. lengthen the shadow of the future.Regimes are institutionalized or regularized patterns of cooperation in a given issue-area. International labor mobility constitutes an equilibrating mechanism between supply and demand for labor. Two major explanations for regime development and change are the structural and the game-theoretic ones.

g. social and political costs (c) the global supply of unskilled labor is much greater than the demand for it. This derives from a key argument of this article.19 This asymmetry differs from the case of trade. from poor countries to richer ones. The asymmetry of labor migration: Historically. and argues that only in cases where policy preferences of the states converge. In contrast. most international migrant labor has been unskilled. that the countries of destination do not require the free movement of labour. But it is not expected to alter . inter governmentalism focuses on the role of the state and asserts that the state retains its dominant role throughout the process of integration. Consequently. social and political costs of international labor migration are taken into account. it is questionable whether unrestricted/free movement of labor benefits the countries of destination. The costs of migration: When the long-term economic. and moved in one direction. the EU) is seen as an instrument to be called upon whenever member states wish to do so. from the poor countries to the rich ones (b) the countries of destination perceive the unrestricted inflow of migrant workers as detrimental because of its long-term economic. It rejects the importance of spillover between issue areas. and export others. most countries can be characterized as either countries of origin or countries of destination. The supra-national organization (e.collective action problem. will new steps toward integration be taken. where most countries import certain products. because: (a) most international labour has moved in one direction. namely.

France and the UK. while Garrett argues that the economic rules and political institutions governing the internal market reflect the preferences of France and Germany. Moravcsik focuses on bargains among Germany.interstate relations. Moravcsik locates the sources of regime reform not only in the changing power distribution but also in the changing interests of the state. this theory focuses on bargains between the largest member states. . In the context of the EU. Derived from the neo-realist approach. which in turn are influenced by changes in the domestic political system. Finally.

President Salinas de Gortari s motivations in pursuing an FTA with the United States were to increase economic growth by attracting foreign direct investment (FDI). Comprehensive immigration reform was debated early in the 110th Congress and immigration reform efforts could be considered once again in the 111th Congress. security. hemispheric. creating .W. Bush with the idea of forming a free trade agreement (FTA). plays a key role in the bilateral economic relationship between Mexico and the United States.The North American Free Trade Agreement (NAFTA). and possible policy options for Members of Congress. one of the more controversial issues regarding the effects of NAFTA in Mexico. Carlos Salinas de Gortari. NAFTA s effect on Mexico and the state of the Mexican economy have implications for the overall relationship between the United States and Mexico and for U. social and economic well-being. environmental. in effect since January 1994. The two leaders discussed a wide range of bilateral. economic conditions. This report will be updated as events warrant. the Mexican economy. and border issues. economic and political interests. boosting exports. 2010. approached then U. and health issues. trade. President George H. which includes three new border crossings that are opening in 2010. and significant modernization projects at existing border facilities. and security of citizens in both countries. It also provides information on NAFTA s effect on Mexico s agricultural sector. initiation of three additional binational bridge projects. migration. This report provides an overview of Mexico s motivations for entering NAFTA.2 The 111th Congress will likely maintain an active interest in Mexico on issues related to counternarcotics. On May 19. Mexican President Felipe Calderón met with President Barack Obama during an official state visit of the Mexican president to the United States. and global issues that affect the two countries and reaffirmed their shared values regarding the safety.1 The two presidents expressed a commitment to increase cooperation in enhancing economic competitiveness and noted progress in the building of a Twenty-First Century border.S. and in areas of mutual interest such as migration. the President of Mexico at the time.S. The two countries are closely tied in bilateral trade and investment. the economic effects and views of NAFTA in Mexico. Mexico s Motivations for Entering NAFTA In 1990.

Mexico maintained a strong protectionist trade policy in an effort to be independent of any foreign power and as a means to industrialization. which would help create jobs. From the 1930s through part of the 1980s.5 Prior to this agreement. In the late 1980s and early into the 1990s. there had been no legal framework to govern commercial relations between the two countries. In November 1987. At the time NAFTA went into effect. increase wage rates. many studies predicted that the agreement would cause an overall positive impact on the Mexican economy. Mexican began to reverse its protectionist stance in the mid-1980s when the government was forced to declare that it was unable to repay its debts and to default on its loans. These protectionist economic policies remained in effect until the country began to experience a series of economic challenges caused by a number of factors. the United States and Mexico entered into a bilateral understanding on trade and investment called the Framework of Principles and Procedures for Consultation Regarding Trade and Investment Relations. lowering trade barriers and making the country competitive in non-oil exports. Mexico established a policy of import substitution in the 1930s. The 1980s in Mexico were marked by inflation4 and a declining standard of living. The 1982 debt crisis in which the Mexican government was unable to meet its foreign debt obligations was a primary cause of the economic challenges the country faced in the early to mid-1980 s. Mexico placed high restrictions on foreign investment and controlled the exchange rate to encourage domestic industrial growth. . general protection of the entire industrial sector. Then President Miguel de la Madrid took steps to open and liberalize the Mexican economy and initiated procedures to replace import substitution policies with policies aimed at attracting foreign investment. The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty. In 1986. Much of the government s efforts in addressing the challenges were placed on privatizing state industries and moving toward trade liberalization. Mexico also nationalized the oil industry during this time. There were two parts to the agreement. Mexico acceded to the General Agreement on Tariffs and Trade (GATT). consisting of a broad. and giving the Mexican economy a growth stimulus.industrial jobs. assuring further trade liberalization measures and closer ties with the United States. and reduce poverty. the Mexican government implemented a series of measures to restructure the economy that included steps toward unilateral trade liberalization. Mexico s intention in entering NAFTA was to increase export diversification by attracting FDI.

and because of other social and political issues that could be affected by economic conditions. Mexico s exports as a percent of GDP equaled 31%. The economy has also been affected by other factors such as Mexico s previous market-opening measures in Mexico. and the other established an agenda for the removal or reduction of trade barriers. financial crises. technology transfer and intellectual property. making it very sensitive to economic developments in the United States. establishing a negotiating process for expanding trade and investment opportunities. In October 1989. In 2008. Under this framework understanding. These two agreements significantly improved trade relations between Mexico and the United States and other improvements in trade relations followed. and alcoholic beverages. In addition. Mexico has .W. electronics. the two countries entered into a second trade and investment understanding called The Understanding Regarding Trade and Investment Facilitation Talks.one served as a mechanism to address trade issues. and information on the service sector. Trade-related job gains and losses since NAFTA probably accelerated trends that were ongoing prior to NAFTA and are not totally attributable to the trade agreement.7 Mexico is highly reliant on exports and most of Mexico s exports go to the United States. tariffs.6 This agreement built on the work of the 1987 agreement. In June 1990. agriculture. Seven topics were listed in the agenda for possible future discussions: textiles. Economic Conditions in Mexico Before and After NAFTA The Mexican economy is strongly tied to economic conditions in the United States. then President Carlos Salinas de Gortari of Mexico and then President George H. working groups started meeting on agriculture. exchange rates. textiles. industry. The state of the Mexican economy is important to the United States because of the close trade and investment ties between the two countries. Marking the advances in trade relations between the two countries. Not all changes in economic growth or trade and investment patterns in Mexico since 1994 can be attributed to NAFTA. and business cycles. oil prices. Mexico proposed negotiations for a free trade agreement with the United States. and over 80% of Mexico s exports went to the United States. Bush issued a joint statement in support of negotiating a free trade agreement. and intellectual property rights. steel. two sectoral agreements were reached which liberalized trade in steel. investment. services. particularly poverty and how it relates to migration issues. up from 10% twenty years ago. Isolating the economic effects of NAFTA from other economic or political factors is difficult.

12 The peso steadily depreciated through the end of the 1990s.10 By December 1994. the peso devaluation also resulted in a decline in real income. however. Foreign investment flows. and real wages in Mexico. Mexico s currency plunged by around 50% within six months. the Mexican government issued short-term dollar-indexed notes to finance the growing current account deficit. The early 1990s in Mexico were marked by a large increase in foreign investment as investor confidence in the Mexican economy grew due to the prospect of NAFTA. but also the newly . which led to greater exports and helped the country s exporting industries. In the mid-1990s. The government began to experience a short-term liquidity crisis. the current account deficit widened as imports surged due to an overvalued peso. In response to these concerns. Mexico adopted tight monetary and fiscal policies to reduce inflation and absorb some of the costs of the banking sector crisis. The United States and the International Monetary Fund (IMF) assisted the Mexican government by putting together an emergency financial support package of up to $50 billion. the Mexican government took several steps to restructure the economy and lessen the impact of the currency crisis among the more disadvantaged sectors of the economy. and political factors. sending the country into a deep recession. signs that Mexico s economy was not as fundamentally strong as it appeared began to surface after the assassination of Mexican presidential candidate Luis Donaldo Colosio in March 1994. The austerity plan also included an increase in the value-added tax. economic. In the months following the election. did not recover to the level of expectation. budget cuts. and increases in electricity and gasoline prices. the continued decrease in the inflows of foreign direct investment and foreign exchange reserves put pressure on the government to abandon its previous fixed exchange rate policy and adopt a floating exchange rate regime.experienced at least two major events outside of NAFTA that had significant economic consequences. Unilateral trade liberalization measures prior to NAFTA and the currency crisis of 1995 both affected economic growth. However. hurting mostly the poorest segments of the population. However. per capita GDP. As a result.11 In the aftermath of the 1994 devaluation. Mexico experienced a financial crisis caused by a number of complex financial.9 The Mexican government expected investor confidence to be restored after the August 1994 presidential election.8 The shock of the assassination resulted in a subsequent outflow of foreign exchange reserves and growing concerns about a currency devaluation.

After 2001.emerging middle class. The government s economic reforms in the latter part of the 1980s helped stimulate economic growth and GDP growth averaged 3. GDP growth declined by 6.13 After the 1995 financial crisis.2% in 2001. economic conditions in the United States improved. and then increased in the following three years by 5%-6% annually.2%.3% in 2007. which helped economic growth in the Mexican economy. Real GDP grew by only 1. up from 0.2% in 2000 to -0. average real GDP growth dropped due to the 1982 debt crisis.5% in 2008. The 2009 . NAFTA and the change in the Mexican economy to an export-based economy may have helped to soften the impact of the currency devaluation. GDP Growth Between 1960 and 1980. In 2006.8% between 1990 and 1994 (see Figure 1). which resulted in productivity growth falling to negative numbers. however. In the years that followed. Real GDP growth dropped from 6.8% in 2003 and 2002. Real GDP growth in 2004 was 4.9% but decreased to 3. resulting in significant improvements in per capita GDP and living standards during that time period. the Mexican economy grew at an average annual rate of over 6.0%.5%. Yet. GDP grew by 4.

the poverty levels did not decline to their pre-crisis levels until 2002. and though there was some improvement after the crisis. The 1995 currency crisis was a major setback to Mexico s efforts in alleviating poverty levels. The percentage of people living in extreme poverty. especially of indigenous groups of people who comprise 20% of those who live in extreme poverty. POVERTY Poverty is one of the more serious and pressing economic problems facing Mexico. but it remains widespread and is closely linked to high levels of inequality in terms of unequal access to healthcare. fell from 24% of the population in 2000. . but poverty continues to be a basic challenge for the country s development. to 17% in 2004. however. Former President Fox also considered poverty as one of Mexico s principal challenges and made it a top priority during his administration. education. The government has made significant efforts to combat poverty. while that of those living in extreme poverty was 32%. the extreme poverty rate went up again to 18%. respectively. The rates for urban areas were 40% and 11%. The Mexican government had made progress in its poverty reduction efforts. Poverty is often associated with social exclusion. Those living in moderate poverty fell from 54% of the population in 2000 to 50% in 2002 and 43% in 2006.global financial crisis had a strong adverse effect on the Mexican economy. Mexico s continuing problem of poverty is especially widespread in rural areas and remains at the Latin American average. and 14% in 2006. and the GDP growth rate contracted by 6. In 2008. In rural areas the percentage of those living in moderate poverty 61% in 2008. and available work opportunities. Estimates for 2010 show a possible growth rate of 4. though the percentage of those living in moderate poverty also increased in 2008 to 47%.2%. Addressing poverty issues and creating jobs have been a priority for the Calderon Administration.6%.

much of the increases in trade began in the late 1980s when the country began trade liberalization measures. narrowing the U. While there have been periods of positive growth and negative growth after the agreement was implemented. exports to Mexico received duty-free treatment. almost 70% of U. firms in most services sectors. At the time that NAFTA went into effect. The agreement also contained provisions for market access to U.S. . but the benefits have not been evenly distributed throughout the country.S. Economic Effects A number of studies have found that NAFTA has brought economic and social benefits to the Mexican economy as a whole.Mexico gap in prices of goods and services and the differential in real wages. imports from Mexico and 50% of U. foreign direct investment in Mexico.S.S. Upon implementation. Most studies after NAFTA have found that the effects on the Mexican economy tended to be modest at most. NAFTA itself has not been enough to lower income disparities within Mexico. and intellectual property rights protection for U. companies. Though its net economic effects may have been positive.S. or between Mexico and the United States or Canada.Effects of NAFTA on Mexico NAFTA is a free trade agreement that eliminated trade and investment barriers among NAFTA trading partners. a number of economic studies predicted that the trade agreement would have a positive overall effect on the Mexican economy.S. protection of U. The remainder of duties were eliminated over a period of 15 years after the agreement was in effect.

technological innovations more quickly and likely had positive impacts on the number and quality of jobs. and Canada have had higher levels of synchronicity since NAFTA. . The study states that NAFTA helped Mexican manufacturers to adopt to U. resulting in increasing investor confidence in Mexico. The World Bank study estimates that FDI in Mexico would have been approximately 40% lower without NAFTA. the United States. the overall macroeconomic volatility. Several economists have noted that it is likely that NAFTA contributed to Mexico s economic recovery directly and indirectly after the 1995 currency crisis. or wide variations in the GDP growth rate. and NAFTA has reinforced the high sensitivity of Mexican economic sectors to economic developments in the United States.A 2005 World Bank study assessing some of the economic impacts from NAFTA on Mexico concluded that NAFTA helped Mexico get closer to the levels of development in the United States and Canada. Mexico responded to the crisis by implementing a strong economic adjustment program but also by fully adhering to its NAFTA obligations to liberalize trade with the United States and Canada. Business cycles in Mexico. has declined in Mexico.S. NAFTA may have supported the resolve of the Mexican government to continue with the course of market-based economic reforms. Another finding was that since NAFTA went into effect.

They also shed light on the contradictory nature of the WTO s mandates. is that while governments and policy groups and NGOs debate who is responsible for what. While developing countries can not be required to operate under the same standards as developed nations. governance structures and political will whether they can re-impose controls and deal with potential vengeance from the multilateral institutions and developed nations. The attempts of Third World countries to participate fully and benefit from international trade (and not to be adversely affected by it becomes now a struggle with international institutions such as the WTO. But again. One need not argue whether we should supervise or regulate them (akin to the financial supervision and regulation strategy of the IMF) or just ban them outright. macro and global perspectives -. Given these views of markets in a historical and institutional setting from the micro. for the unfortunate countries that have unwittingly opened up their capital accounts (the Philippines. the companies from developed nations that operate in developing countries must be .intervention. Russia). or whether they would need regional and international efforts to transform the global financial structure. which unfortunately is dominated by the developed countries. the East Asian crisis has proved conclusively that capital account liberalization. But the quality and soundness of these markets and related institutions (and their possibilities of contributing to economic development) depend critically on the quality of social. multilateral agencies and the developed countries hypocritical policies of protection for us. What is clear though. is akin to opening your home to drug pushers. Finally. directing and guidance of markets become inherent in their efficient workings and operations.CONCLUSION Third World nations ability to benefit from the export and international markets critically depends on the international world trade setting. Argentina. it would again depend on their institutions. particularly to short-term flows. openness for you . The solution to the problems currently created by trade liberalization will not come easily. actions and behavioral explanations. the environment is suffering and sustainable development is not occurring. Non-intervention in markets can only have meaning in the most anarchic and chaotic sense. Should the WTO be more involved in aligning trade to sustainable development and environmental protection? Yes. political and cultural institutions and governance structures. The arguments presented in this paper clearly demonstrate the differences in opinion regarding the WTO s place in the world and its responsibility.

to encourage sustainable development and environmentally friendly trade.required to do more. The WTO must do more. The infrastructure may not exist to operate under the same standards as in the company s home country but that does not excuse reckless business practices. The long-term effects of irrational behavior for short-term profits can too detrimental long-term effects to be ignored any longer. . either through environmental review of trade agreements or through pressuring for the development of more domestic capacity.

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