THE CONTEMPORARY

WOLD LESSON 2
INTERNATIONAL TRADING
SYSTEM
-The International Trading System refers to the
framework of rules, agreements, and
institutions that govern international trade
between countries. It encompasses various
aspects of trade, including the exchange of
goods and services, intellectual property,
investments, and more. The primary goal of
the international trading system is to facilitate
smooth and predictable trade relations among
nations while minimizing trade barriers and
fostering economic cooperation.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

1. World Trade Organization (WTO): The WTO

is a global international organization that
deals with the rules of trade between
nations. It provides a platform for
negotiations, sets trade rules, and resolves
trade disputes. The WTO's main principles
include non-discrimination, transparency,
and promoting fair competition.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

2.Trade Agreements: Countries often enter

into bilateral (between two countries) and
multilateral (involving multiple countries)
trade agreements to establish favorable terms
for trade. These agreements outline tariff
reductions, trade quotas, and other trade-
related provisions.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

3.Tariffs and Non-Tariff Barriers: Tariffs are taxes

imposed on imported goods, which can make them
more expensive and less competitive in the domestic
market. Non-tariff barriers include various
regulations, standards, and administrative procedures
that can hinder trade
INTERNATIONAL TRADING SYSTEM
INCLUDE:

4. Customs and Trade Facilitation: Simplified

customs procedures and efficient trade facilitation
measures are crucial for reducing delays and costs
associated with cross-border trade.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

5. Intellectual Property Protection: International

trade agreements also address the protection of
intellectual property rights, including patents,
copyrights, trademarks, and trade secrets.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

6. Investment Rules: Some international trade

agreements include provisions related to foreign direct
investment, helping to create a favorable environment
for cross-border investments.
7. Dispute Settlement Mechanisms: The international
trading system includes mechanisms for resolving
trade disputes between countries, usually through
negotiations and legal procedures provided by
organizations like the WTO.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

8. Regional Trade Agreements: Many countries form

regional trade agreements to enhance trade within a
specific geographic area. Examples include the
European Union, North American Free Trade
Agreement (NAFTA, now replaced by the United
States-Mexico-Canada Agreement or USMCA), and the
Association of Southeast Asian Nations (ASEAN) Free
Trade Area.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

9. Trade Liberalization: Trade liberalization involves

reducing trade barriers, such as tariffs and quotas, to
promote free trade and economic integration.
INTERNATIONAL TRADING SYSTEM
INCLUDE:

10. Global Supply Chains: The international trading

system has facilitated the development of complex
global supply chains, where different stages of
production take place in different countries to
maximize efficiency and competitiveness.
 The International Trading System plays a
crucial role in shaping global economic
interactions and promoting economic growth.
However, debates and challenges related to
trade imbalances, protectionism, labor
standards, environmental concerns, and the
impact on domestic industries continue to
shape discussions around international trade
policies
THE BRETTON WOODS SYSTEM
 The Bretton Woods System refers to the
international monetary and financial
framework that was established after World
War II during a conference held in Bretton
Woods, New Hampshire, United States, in July
1944. The conference aimed to design a new
global economic order that would promote
stability, prevent competitive devaluations,
and facilitate international trade and
economic cooperation in the aftermath of the
war.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

1. Fixed Exchange Rates: Under the Bretton

Woods System, participating countries agreed
to peg their currencies to the US dollar, which
was convertible to gold at a fixed rate of $35
per ounce. This system aimed to provide
stability by preventing large fluctuations in
exchange rates.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

2. International Monetary Fund (IMF): The

IMF was established as a part of the Bretton
Woods System to oversee the international
monetary system. Its primary goal was to
provide short-term financial assistance to
member countries facing balance of payments
problems and to promote exchange rate
stability.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

3. International Bank for Reconstruction and

Development (IBRD): Now part of the World
Bank Group, the IBRD was created to provide
financial support for the reconstruction of war-
torn countries and the development of
infrastructure and projects in member nations.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

4. Stability and Fixed Parities: Countries

agreed to maintain their exchange rates within
a narrow band of fluctuations (known as par
values) around the pegged rates. This was
intended to prevent competitive devaluations
and reduce uncertainty in international trade.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

5.Convertibility: Participating countries

agreed to keep their currencies convertible to
the US dollar and gold. This allowed for the
free movement of capital and facilitated
international trade.
KEY FEATURES OF THE BRETTON WOODS SYSTEM INCLUDE:

6. Gold Reserve Standard: The US dollar was

considered as good as gold, and countries held
dollar reserves to settle international
transactions. The US, in turn, held gold
reserves to back its dollar holdings
 The Bretton Woods System led to a period of
relative stability and economic growth in the
post-war era. However, over time,
challenges arose. The system required the US
to maintain a fixed gold value for the dollar,
which became increasingly difficult as the US
faced growing trade deficits and inflation in
the 1960s. As a result, confidence in the
system waned, and by the early 1970s, the
US was no longer able to uphold the $35-per-
ounce gold standard.
 In 1971, then-US President Richard Nixon
announced the suspension of dollar
convertibility into gold, effectively ending the
Bretton Woods System. This event marked the
transition to a system of floating exchange
rates, where currencies are valued based on
supply and demand in the foreign exchange
markets. The collapse of the Bretton Woods
System led to a new era of international
monetary arrangements, with flexible exchange
rates and more diverse exchange rate regimes
adopted by countries around the world.
NEOLIBERALISM AND ITS DISCONTENTS
Neoliberalism is an economic and
political ideology that emerged in the mid-20th
century, gaining prominence in the late 20th and
early 21st centuries. It advocates for limited
government intervention in the economy, free-
market capitalism, deregulation, privatization,
and an emphasis on individual freedoms and
individual responsibility. Neoliberalism places a
strong emphasis on reducing the role of the state
in economic affairs and promoting market-driven
solutions to various social and economic issues.
KEY PRINCIPLES OF NEOLIBERALISM INCLUDE:

 Free Markets: Neoliberalism promotes the

idea that markets are efficient allocators of
resources and should be allowed to operate
with minimal government intervention. This
includes allowing competition to drive
innovation and efficiency.
 Deregulation: Neoliberalism calls for
reducing government regulations that might
hinder business activities, with the belief
that fewer regulations will lead to increased
economic growth
KEY PRINCIPLES OF NEOLIBERALISM INCLUDE:

 Privatization: Neoliberalism supports the

privatization of state-owned enterprises and
services, transferring ownership and control
from the government to the private sector.
This includes areas such as utilities,
healthcare, education, and transportation.
 Fiscal Conservatism: Neoliberalism often
emphasizes the importance of maintaining a
balanced budget and reducing government
spending, especially on social welfare
programs
KEY PRINCIPLES OF NEOLIBERALISM INCLUDE:

 Privatization: Neoliberalism supports the

privatization of state-owned enterprises and
services, transferring ownership and control
from the government to the private sector.
This includes areas such as utilities,
healthcare, education, and transportation.
 Fiscal Conservatism: Neoliberalism often
emphasizes the importance of maintaining a
balanced budget and reducing government
spending, especially on social welfare
programs
KEY PRINCIPLES OF NEOLIBERALISM INCLUDE:

 Monetary Policy: Neoliberalism typically

supports an independent central bank that
focuses on controlling inflation through
monetary policy measures.
 Globalization: Neoliberalism encourages
international trade, investment, and
economic integration, often advocating for
the removal of barriers to cross-border
economic activities
 “Neoliberalism and Its Discontents" refers
to the criticisms, challenges, and negative
consequences associated with the
implementation of neoliberal policies in
various countries. While proponents argue
that neoliberal reforms can lead to economic
growth, increased efficiency, and individual
empowerment, critics have raised several
concerns:
 Inequality: Critics of neoliberalism argue that its
policies can exacerbate income and wealth inequality,
as deregulation and privatization might benefit the
wealthy disproportionately while leaving vulnerable
populations behind.
 Social Safety Nets: The reduction of government
spending on social welfare programs can lead to
inadequate safety nets for those in need, potentially
resulting in higher poverty rates and reduced access to
essential services.
 Financial Crises: Some critics link the deregulation
and liberalization of financial markets promoted by
neoliberal policies to the increased likelihood of
financial crises and economic instability.
 Labor Rights: Neoliberal policies may lead to
the erosion of labor rights, as weakened
unions and reduced regulations can result in
poorer working conditions and wage
stagnation.
 Environmental Concerns: Pursuit of
economic growth without strong
environmental regulations can contribute to
environmental degradation and climate
change
 Democratic Deficit: Critics argue that
neoliberal policies can lead to a
concentration of power in the hands of
corporations and wealthy individuals,
potentially undermining democratic
governance.
 Public Services: Privatization of essential
services like healthcare and education can
lead to reduced accessibility and quality,
particularly for marginalized communities.