International Economic Relations

Nguyễn Anh Tuấn

Associate Prof, PhD
Giáo trình: QHKTQT
 Tài liệu tham khảo:

 Krugman, Obstfeld (2015), International Economics,

NXB Pearson.
 Khoa Kinh tế Quốc tế, HVNG, 2021, Giáo trình
Quan hệ Kinh tế Quốc tế, NXB Văn hóa Dân tộc.
 GS.TS. Võ Thanh Thu, Quan hệ kinh tế quốc tế,
NXB Thống Kê.
 TS. Bùi Thị Lý, Quan hệ kinh tế quốc tế, NXB Giáo
dục Việt Nam.
 GS. TS. Võ Thanh Thu, Quan hệ Kinh tế quốc tế,
NXB Lao động- Xã hội.
 Chủ đề viết tiểu luận
 1. Phân biệt EOI và ISI? Lấy ví dụ về những nước sử dụng
thành công ISI và EOI. Trình bày chiến lược công nghiệp hóa
của NIEs từ thập kỷ 60 của thế kỷ 20 đến nay (14/3).
 2. Trình bày những hiểu biết về tập đoàn Honda Việt Nam
(HVN)? Quy mô HVN đầu tư vào VN? Giải thích tại sao? (28/3).

 3. Trình bày cơ cấu tổ chức, chức năng nhiệm vụ và cơ chế

hoạt động của NH Nhân dân Trung Quốc (PBoC) (11/4).
 4. Trình bày quá trình hình thành và phát triển của Cộng đồng
kinh tế ASEAN (25/4).
 5. Trình bày tiến trình đàm phán và nội dung cơ bản của Hiệp
định CPTPP. Thuận lợi và khó khăn cho VN hiện nay (25/4).
 6. Hãy nêu tiến trình đàm phán và kết quả của Hiệp định Paris
về Biến đổi khí hậu. Cơ hội và thách thức cho VN thực hiện
cam kết của mình từ COP-21 cho đến COP-27 (9/5).
Unit 1: World Economy and International Economic Relations

 I/ Conception
 1. World Economy
 - WE = total national economies (NEs) in the world + IER
 - NEs developed in a particular stage, when social labor
division was beyond nation border, => international labor
division appeared + Transport => IER arose. It is said that
WE appeared.
 - NEs depend on and interact each other through IER
 - Classification of World Economy: (i) based on ideology:
socialist and capitalist economies; (ii) based on
development level: Developed, Developing (third world),
and LDC; (iii) based on economic regional integration:
USMCA, CPTPP, RCEP, AFTA (AC), EU…
 2. International economic relation (IER)
 - IER is total economic relations of NE (the states),
international organizations, TNCs. => These are subjects
(CT) of IER
 - IER consist of: (i) International trade (goods & service)
 (ii) International investment
 (iii) International financial flows
 (iv) Technological transfer
 (v) International labor mobility
 => These activities are objects (KT) of IER
 - In the modern world, without both state and market it
could be no IER.
 - The state is based on the concepts of the territoriality,
loyalty and exclusivity, and it possesses a monopoly of the
legitimate use of force.
 - Market is based on the concepts of functional integration,
contractual relationship and expanding interdependence of
buyers and sellers. Market is a universe composed of prices
and quantities.
 - In the absence of the market, the state would allocate
economic resources. This would be the pure world of
political scientist.
 The logic of the state is to capture and control the
process of economic growth and capital accumulation.
 - In the absence of the state, the price mechanism and
market forces would determine the outcome of economic
activities. This would be the pure world of economist.
 The logic of the market is to locate economic activities
where they are most productive and profitable.
 - Although neither world can ever exist in a pure form, the
relative influences of the state/market change overtime and
in different circumstance.
 - GDP = Rent + Profit + Salary/wage + interest +
proprietors’ income + indirect tax = G + I + C + NX
 = (Gf+Gd) + (If+Id)+(Cf+Cd) + (Ex-Im)
 - EE is a part of a state-nation economy
 3. Strategies of External Economics
 - External economics of a state is total economic relations of
a state with the other actors (other states, international
organizations, TNCs).
 - Strategy of EE is deferent from country to country, subject
to international and domestic economic situation.
 a. Close door strategy is a strategy, according to which
economic development is based mainly on the own potential
and all domestic demands are satisfied by itself without
international economic relations.
 + The characteristic of close door strategy:
 - the economy developed self-sufficiently,
 - only exporting things left after satisfaction of domestic
GDP and factors determined the aggregate demand
and supply
 - not stimulating foreign investment of both direct and
indirect
+ advantages of close door strategy
 - having economic and political self-reliance
 - not being influenced by external economic shocks
 - being developed extensively to satisfy all domestic
demands.
 - keeping stable economic growth for long time (India for
instance)
 - avoiding severe competition from international rivals
 + Disadvantages of close door strategy
 - limiting technological renovation due to strong protection,
as a result, low labor productivity, low economic growth
 - limiting production development and utilization of design
capacity because not exploiting economies of scale.
 - appearing monopolistic behavior
 - appearing rent-seeking behavior
- lack of commodities and appearance of commodity
distribution by coupons
- lack of foreign exchanges
b. The open door strategy is a strategy based on export-
oriented production, not limiting foreign trade, stimulating
FDI and facilitating domestic investors to invest abroad.
+ The characteristics of open door strategy:
- external economic activities are based on freely competition
law and determined by market forces.
- there is no state intervention in external economic activities
 + Advantages of open door strategy
 - helping exploit the comparative advantages of the
economies. => improving the competitiveness of
commodities and enterprises, labor productivities and
economic growth.
 - changing economic structure thanks to deep participation
in international labor division.
 - helping economies get modern technologies and
management methods
 - settling shortage of foreign exchanges thanks to increasing
exports and attracting FDI
 + Disadvantages of open door strategy
 - exposing infant industries to severe competition from
outside
 - causing the economy to be in disproportionate
development
 - causing the economy to be in income inequality among the
industries, regions in a country.
 - making the economy be dependent on the world economic
shocks
 c. Nowadays, no country followed totally close or open
economic strategy, but they followed mixed economic
strategy combined between close and open strategy.
 II/ Different development stages of WE and IER
 - Modern world economy started to emerge something over
250 years ago and is divided into 6 stages.
 1. The First industrial revolution (1760-1850): 1765
 - The modern WE started to emerge with the first industrial
revolution, which has been dated from 1760 when British
workers were concentrated into factories, coal mines, and
iron works.
 - Canals began to give way to railways. New sectors were
mechanized. New products, such as gas, mechanical goods
appeared. Growth had become the rule, not the exception.
Growth accelerated from 0.3% per year before 1750 to
around 1.3% per annum by the first half of 19 century.
 2. The age of capitalism (1850-1914): 1870, the second
 - The Great Exhibition of 1851 marked the zenith of British
industrial pre-eminence. And until the First World War,
London remained the centre of the capitalist economic
system whose geographical domain constantly expanded .
 - In the second half of 19 century, industrialization
spread to Germany, Italy, Japan, Scandinavia,
Austria-Hungary and even, to a limited extent, Russia
was classified as industrialized.
 - Free international trade has often been considered as
engine of the 19-century growth. Foreign markets for both
input and output of industrialized countries become the
most important factor for economic development. Free
movement of labor, free mobility of capital and gold
standard were characteristics of this stage.
 - Contradictions between industrialized countries by
themselves, between industrialized and colonized countries
for markets.
 3. The age of crises (1914-1945)
 - Economic progress of 19 century was rudely shattered by
the outbreak of the First WW in 1914, which destroyed
European continent.
 - It led to the downfall of the Tsarist regime and its
replacement by the world’s first communist government in
the Soviet Union, which renounced Russian debts, mainly
borrowed from France and Britain.
 - The 1st WW made countries outside Europe suffered a
shortage of imported manufactures from traditional
European suppliers, as a result, it provided a boost to
import-substitution industrialization in a whole range of
peripheral countries.
 - When the 1st WW ended, the dominant economic aim was
that of restoring pre war normality:
 (i) exporter sought their old export markets;
 (ii) capital mobility was restored, but no longer from
Britain and France, from the new dominant world power,
the US, even war-ravaged Germany;
 (iii) the gold standard was recovered and called convertible.
 - The winning countries issued paper money can be changed
freely into gold, while lost countries issued paper money
can not be changed into gold. As a result, countries like
Germany, Austria, Hungary suffered the world’s first
experiences of unambiguous hyperinflation.
 - During Great Depression of 1929-1933, unemployment
rate was 20%-30%; debts were renounced, capital markets
dried up, the gold standard was abandoned (in Britain in
1931, in US in 1933), competitive devaluation become
vogue and protectionism prevailed. The new economic
theory of Keynes (1936) and nationalism with expansionary
measures appeared.
 - Nationalism and economic collapse led once more to total
war in 1939.
 - In July 1944, almost a year before the 2 nd WW ended, a
historic conference met at Bretton Woods, New Hampshire
to agree to establish two international institutions designed
to nurture the emergence of a liberal international economic
order: the IMF to deal with monetary question; WB to
promote a flow of long-term loans for reconstruction and
development.
 4. The great boom (1945-1973): 1969, the third
 - The Soviet Union did not join the BW organizations but
instead set about creating communist governments in
Eastern Europe. Relations between East and West quickly
deteriorated into the cold war.
 - The communist countries with new centrally-planned
mechanism experienced high growth, especially in the
1950s.
 - US with an unprecedentedly generous aid program for
Western European Recovery purpose (Marshall Plan was
valued USD17 billion). As the same time, liberalization of
intra-European trade under auspices of the Organization for
European Economic Co-operation, later transformed into
OECD and formation of EEC led to economic boom.
 - Developing countries became the third world system,
whose growth left behind because economic development
rarely became a priority until political independence had
been achieved and partly because too many developing
countries pursued an import-substitution strategy from
economic warfare of 1930 rather than the export promotion
strategy.
 - Free trade, and labor & capital mobility played important
role in generating growth. GWP grew by something like
5.5% per annum.
 5. The triumph of the market economy, 1974-1991
 - The end of the world economic boom in 1973 ushered in
trouble era: WE growth slowed down from 5.5% per year
prior to 1974 to around 3% because of three factors,
namely:
 (i) a marked acceleration in inflation deriving from
inflationary wage in the industrialized countries, and from
US budget deficit to finance the Vietnam war;
 (ii) following the Arab-Israeli war of October 1973, the
OPEC quadrupled the oil price, which gave rise to deficit of
payment balance of many countries. The immediate effect
was to intensify both inflation and recession;
 (iii) there was two-tier gold market in 1968, US
renunciation of gold convertibility of the US dollar in 1971,
and finally the abandonment of pegged exchange rate in
favor of floating exchange rate system.
 - Many developing countries borrow “oil dollar” to recover
the economies.
 - In 1979, the second oil crisis happened, which made
Europe, North America and the world as whole suffer the
most severe economic recession in 1980-82 since the Great
Depression.
 - The world debt crisis that started in August 1982,
occurred. Many countries restructured the economies, and
got robust economic growth.
 - The collapse of the socialist economic system with
centrally planned economic mechanism in Eastern Europe
in 1989 and in Soviet Union in 1991.
 - All the socialist economies including Vietnam and China
have followed principles of market economy.
 - Recommended readings:
 - Some theoretical and practical issues on socialism and the
path towards socialism in Vietnam (Prof. Nguyen Phu
Trong)
 (Một số vấn đề lý luận và thực tiễn về chủ nghĩa xã hội và con đường
đi lên chủ nghĩa xã hội ở VN)
Four Industrial Revolutions
 6. Appearance of new economy/knowledge-based
economy with the Fourth Industrial Revolution (1992 to
2020): 2000, the fourth
 - A lot of economies have been reconstructed with applying
ICT and got high economic growth of 5%-6% before Asian
financial crisis in 1997-98.
 - IoT, AI, VR, Cloud Computing, Blockchain, Fintech
 - In 1998, GWP was about US$28.860 billion. OECD
countries with 1/5 world population but accounted for ¾ the
GWP.
 - In 2004, (i) US GDP was US$11,668 billion, (ii) Japan
was US$ 4,623 billion, (iii) Germany was US$ 2,714
billion, (iv) UK was US$2,141 billion, (v) France was US$
2,003 billion, (vi) Italy was US$ 1,762 billion, (vii) China
was US$ 1,672 billion, (viii) Spain was US$ 991 billion,
(ix) Canada was US$ 980 billion and (x) India was US$ 692
billion.
 - 7. World Digital Economy Post-Covid-19 (2020-now)
GDP of the world and first 11 biggest countries
GDP growth rate of world economy (1965-2020) (%)
 III. Main characteristics and new manifestations
of the world economy and of international
economic relations in the current period.
 1. Current main development trends of the WE
 1.1. The WE is rising to a new level as a result of
scientific and technological revolution with key
technologies in informatics and telecommunication
sectors as the core-centers.
 1.2. Regionalization, globalization trends are
reinforced and developed in a complicated manner
and contradictions.
 1.3. The trend of market-orientation of the world
economy with the open economic model
universalized to every economy.
 1.4. The trend of forming an orderly multi-centered world
economy.
 1.5 the World economy is moving to digital economy.
 2. Main trends of the international economic relations.
 2.1. Developed IER enable countries to interweave wider
and deeper.
 2.2. Scale of competition and cooperation among countries
are being expanded universally .
 2.3. In fostering IER, countries increasingly promote
cooperation, competitiveness and at the same time,
restraining one another in solving common problems of the
WE.
 2.4. International economic organizations have an
increasingly important role to play as coordinating
institutions of IER.
 IV/Subject of International Economic Relations
 - IER studies how the state and its political processes affect
the production and distribution of wealth, and in particular,
how political decisions and interests influence the location
of economic activities and the distribution of costs and
benefits of these activities.
- IER also studies effects of the markets and economic
forces on the distribution of power and welfare among state
and other political factors, and particularly studies how
these economic forces alter the international distribution of
political and military power.
 - The issues of International Economic Relation
 - Whereas powerful market forces in the form of trade,
money, foreign investment tend to jump national
boundaries, to escape political control and integrate
societies, tendency of government is to restrict, to channel,
and to make economic activities serve the perceived
interests of state and powerful groups within it.
 - The conflict between market and state (i.e. economics and
politics) give rise to three general and interrelated issues
that pervade the historic controversies in the field of
international political economy:
 a. The first issue is concerned with economic and political
cause and effects of the rise of market economy: (i) under
what conditions does a highly interdependent world market
economy emerge; (ii) does world market economy promote
harmony or cause conflict among nation-states;
 (iii) is a hegemonic power required if cooperative relations
among capitalist states are to be ensured.
 On these issues, theorists of different schools of thought
have conflicting views.
 b. The second issue pervading the subject of international
political economy (IPE) is the relationship between
economic and political changes: (i) what are the effects on
IP relations and what problems are associated with
structural changes of world economy; (ii) how do political
factors affect the nature and consequences of structural
changes in economic affairs.
 c. The third issue is significance of a world market
economy for domestic economies: (i) what are its
consequences for economic development, economic decline,
and economic welfare of individual societies; (ii) how does
the world market economy affect the economic
development of LDC and economic decline of advanced
economies; (iii) how does it affect the distribution of wealth
and power among national societies.