ELECTRONIC ASSIGNMENT

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Student Number: 3457538

Surname: Tan
Given name: Farlynda
Email: farlyndatan@gmail.com

Unit Code: TSA 2022

Unit name: POL298 International Political Economy
Enrolment mode: External, Internal or Placement
Date:
Assignment number: 1
Assignment name: 900 word Discussion brief
Tutor: Maam Malee Valer

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 Assignment 1 Discussion

SESSION 4 Unit Topic Six Tutorial:

The Globalisation of Trade, Investment, and Production

6.1 What have been the main interests, institutions, and political ideologies driving
economic liberalisation in the IPE? What political agreements and changes to
government economic policies has liberalisation necessitated?

Economic liberalization derived from classical liberalism encompasses the

processes, including government policies, that promote free trade, deregulation,
elimination of subsidies, price controls and rationing systems, and, often, the
downsizing or privatization of public services (Woodward, 1992).

This liberalism also refers to the "opening up" of a nation to the rest of the world
in terms of commerce, rules, taxes, and other areas that generally affect
business in the nation, giving it the chance to compete globally, boosting GDP,
and producing foreign exchange (IMF, 2001).

Economic policies liberalization helped businesses and the country's economy by

allowing businesses to grow and by bringing in new companies. For instance, in
India, the Indian government started opening its economy to foreign companies in
1991 by allowing 100 domestic companies to export goods and services to other
nations. This opened up India even more to the world in general and particularly to
China, Japan, Thailand, and South Korea. This led to an increase in foreign direct
investment (FDI) into India. As a result, India became an attractive place for
multinational corporations due to its rapid economic growth and lower costs of
production. In turn, this led to an increase in employment and business growth as
new companies entered the Indian market (Masharu, U, Nasir, 2018).

The WTO’s rules—the agreements—are the result of negotiations between the

members. The current set is largely the outcome of the 1986- 94 Uruguay Round
negotiations, which included a major revision of the original General Agreement on
Tariffs and Trade (GATT), (WTO, N.D). The Uruguay Round created new rules for
dealing with trade in services and intellectual property and new procedures for
dispute settlement. The complete set runs to some 30,000 pages, consisting of
about 30 agreements and separate commitments (called schedules) made by
individual members in specific areas, such as lower tariffs and services market-
opening. Through these agreements, WTO members operate a non- discriminatory
trading system that spells out their rights and obligations. Each member receives
guarantees that its exports will be treated fairly and consistently in other members’
markets. Each promises to do the same for imports into its own market. The system
also gives developing economies some flexibility in implementing their commitments.

The notion of international political economy has grown to cover a wide array of
concerns, including the overlap between politics and economics, since goods,
services, money, men, and ideas cross borders. A final area of focus within trade
political economy is the reciprocal effects that international trade has on domestic
and international politics (Marlin-Bennett, R., & Johnson, D. K. (2010, March 1). In
what ways has economic liberalization been a threat to some?

But we also look at how trade liberalization may be a threat to developing countries
or economies as they are forced to compete in the same markets as stronger
economies or nations. Critics of trade liberalization argue that this policy could cost
jobs, as cheaper goods would flood a nation's internal markets ( Banton, C. (2022,
September 21). In seeking mutual liberalization, countries may look to either their
own geographical regions or to the world trade system at large. The global approach
is substantially superior, as it maximizes the number of foreign markets involved and
avoids the economic distortions (and political risks) that arise from discrimination
between trading partners (OECD, 2022).

The present period of flux and stress facing East Asian economies is a sign both of
changes to institutions and also of the accommodation of institutions with their
dynamic economic and political environments. Taking advantage of the different
socio-political divisions and development coalitions within East Asian economies,
state elites are engaging the international marketplace by re-configuring their
institutional capacities and policy tools in a way that better aligns with the rise of new
border industries (e.g., Many developing countries have taken advantage of
opportunities in the global economy.

As countries liberalize, the trade sectors of their economies are expected to

increase, along with the impact of international economic pressures. Second,
countries can also influence global prices with policies that are economically
suboptimal but politically motivated. Second, economic governance policies in a
global economy are becoming increasingly complex.
References APA format

Welcome to the United Nations. (n.d.). Retrieved November 5, 2022, from

https://www.un.org/esa/socdev/rwss/docs/2010/chapter6.pdf

Global trade liberalization and the developing countries -- an IMF issues brief.
International Monetary Fund. (n.d.). Retrieved November 5, 2022, from
https://www.imf.org/external/np/exr/ib/2001/110801.htm

Masharu, U., & Nasir, M. A. (2018, July 6). Policy of foreign direct investment
liberalisation in India: Implications for retail sector - international review of
economics. SpringerLink. Retrieved November 5, 2022, from
https://link.springer.com/article/10.1007/s12232-018-0306-y

Understanding the WTO - the Uruguay Round. WTO. (n.d.). Retrieved November 5,
2022, from https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm

Marlin-Bennett, R., & Johnson, D. K. (2010, March 1). International political

economy: Overview and conceptualization. Oxford Research Encyclopedia of
International Studies. Retrieved November 5, 2022, from
https://oxfordre.com/internationalstudies/view/10.1093/acrefore/978019084662
6.001.0001/acrefore-9780190846626-e-239

Banton, C. (2022, September 21). Trade liberalization: Definition, how it works, and
example. Investopedia. Retrieved November 5, 2022, from
https://www.investopedia.com/terms/t/trade-liberalization.asp

Chapter 2. (n.d.). Retrieved November 5, 2022, from

https://www.oecd.org/site/tadicite/50287270.pdf
6.2 What is FDI? Why has it grown so dramatically in recent decades and what
trends are evident in its distribution between states?

FDI is a crucial component of global economic integration since it forges strong,

long-lasting ties between nations' economies. An investor's ownership of 10 percent
or more of the voting power in an enterprise in one economy by an investor in
another economy is evidence of such a relationship. FDI fosters international trade
by providing access to foreign markets and serves as a significant means of
technology transfer between nations. It can also serve as a significant tool for
economic development. This group's indicators include the inward and outward
stock, flow, and income values as well as the indicators of FDI restrictions and
partner country by industry.

Foreign direct investment (FDI) is the act of investing in another country's economy
by transferring capital to its companies and businesses. FDI has grown rapidly over
the past fifty years as corporations have sought new sources of revenue and
increased market share. The global economy has drastically changed since the
1960s, fueling greater business opportunities and a greater incentive for outside
investors to enter new markets. FDI has become a major driving force in
international trade and commerce, creating employment opportunities for both
domestic and foreign citizens.

FDI contributes to the global economy by creating new markets and increasing the
global wealth distribution. Corporations increasingly look to expand their operations
globally to find new customers and increase revenue. This trend has helped fuel
economic growth in countries around the world. In turn, this increased economic
activity creates more job opportunities for people living in those countries. FDI is an
excellent way for countries to grow their economies and create jobs.

The overall view of the global economy has grown stronger as more countries open
their borders to foreign investment. China's rapid economic growth in the past fifty
years has contributed greatly to the worldwide FDI trend. China became a significant
player in the world economic arena during the 1980s as it transitioned from a Maoist
communist society to a capitalist one. Many multinational corporations saw an
opportunity in opening up business in China at that time, and they've since become
some of China's biggest investors and trading partners. As a result, China now has
some of the world's most robust economic statistics.

Additionally, increased global FDI has contributed to increased global economic

growth over the years. Exporting manufacturing jobs from the U.S. contributed
significantly to America's slowdown during the 1970s and '80s. However, opening up
new markets for corporate investment helped turn this trend around. The
implementation of free-trade agreements between countries make it easy for
corporations to export goods internationally without worrying about tariffs or taxes.
This makes it much easier for countries to grow their economies by allowing foreign
investment into their economies.

Recent data shows that FDI has had a positive effect on the global economy. From
2000 to 2007, total FDI grew from $1.7 trillion to $2.3 trillion- a rate of 19%. In 2008,
total worldwide FDI decreased slightly as many countries struggled with economic
downturns caused by the recent global financial crisis. However, that year marked a
significant drop in worldwide FDI compared to 2015: $1.8 trillion versus $2 trillion. It
appears that corporations are more willing than ever before to invest in new markets
overseas, even during times of economic strife at home. This is thanks to an
increase in worldwide wealth distribution brought on by FDI!

Through international trade relations, foreign direct investment is an excellent way

for corporations to increase revenue and create jobs globally. Increasing openness
to foreign investment increases the market share of businesses within countries as
more investors seek new sources of profitable opportunity. Furthermore, increased
growth in international trade has helped increase job creation and increased
economic wealth worldwide due to FDI.

However, Global foreign direct investment (FDI) plummeted in 2020, falling 42%
from $1.5 trillion in 2019 to a projected $859 billion, according to the United Nations
Development Programmes Investment Trends Monitor, released January 24. The fall
in FDI was concentrated in developing countries, with flows plunging by 69% to an
estimated $229 billion, according to last year's World Investment Report. According
to the report, while the flow of FDI into developed economies appears to have been
relatively stable in 2020, greenfield issuances fell 46 percent, while financing for
international projects fell by 7 percent. FDI flows fell from $35bn to $33bn compared
with $35bn the previous year (5%), according to UNCTADs World Investment Report
2020.
While foreign direct investment flows historically are more volatile than trade or other
aspects of our strength, this 1-year rate of decline is exceeded only by the collapse
in FDI and CDIA caused by the 2008-09 Global Financial Crisis, where the two fell
60% and 46%, respectively. In terms of FDI flows going out, in 2020, the
Netherlands was our second largest investing country behind the US, a position it
had held since 2019, with 2020 seeing negative FDI flows from Switzerland.
Between 2000 and 2016, FDI stocks increased from 22% to 35% of world GDP.
From a research perspective, FDI outwards is expected to tend to have positive
correlations with host economies' size and their market potential from an economic
growth perspective. Especially in light of recent investment treaties that recognize
sustainability goals and the importance of responsible corporate behavior, this
perspective asks whether host countries may also legitimately expect to see foreign
investors behave. Will FDI inadvertently be drastically disrupted in many nations as a
result of the geopolitical recession?

Sources:

https://unctad.org/news/global-foreign-direct-investment-fell-42-2020-outlook-
remains-weak

https://www.ecb.europa.eu/pub/economic-bulletin/articles/2018/html/
ecb.ebart201804_01.en.html