IO week 3-5

Eagleton-Pierce article issue

Cotton Four - Benin, Burkina Faso, Mali and Chad. o Didn't feel other cotton producers were being fair, especially through their use of subsidies (usually rule takers, not makers) issue raised debate on agricultural trade and north south relations, even though it only accounted for 0.2% of global trade

IMF and East Asian crisis

¬ in '97 and '98 - the whole region got loans that totalled $100billion, $33billion from the IMF. o The east Asian financial crisis - sharp decline in currencies and stock markets. Spread to Russia in 1998, and Brazil in 99. But began in Thailand and spread round Asia. o Resulted in massive disruptions, bank closures, political instability, increase in unemployment and poverty, and declines in living centres. o Triggered by the collapse of the Thai Baht in 97, lost a quarter of its value overnight. Why? ♣ Rapid growth in private capital flows from 90-96 but there wasn't a lot of supervision which increased corruption. Once the issues started, investors panicked and withdrew, which worsens the situation. ♣ No one was monitoring Asian countries to see if they were taking on too much risk - had recently be liberalized by the IMF and didn't know how to handle this. ♣ Value of Japans currency fell by 35% to the dollar, and as one of their major trading partners Thai products became more expensive in Japan and exports declined o Diffusing the crisis ♣ IMF organized large bailout packages with the condition of high interest rates, closing banks, and some more detailed like eliminating certain monopolies or removing barriers to market. ♣ This would help governments to not default on their debt and increase investor confidence. ♣ Indonesia - closed 16 banks, but didn't work on strengthening the remaining ones so people were nervous they might also be weak, so there was a run on the privately-owned banks and fear the system might collapse again ♣ South Korea - was doing very well until 1997, when a few large conglomerates went bankrupt and weakened the banking system, and it was almost about to default on its loans. Received $21billion from IMF and $55billion from the World Bank, Asian Development Bank and US. However, the system was so shaky that it didn't help, they had very little currency in reserve, as their currency fell by 10% against the dollar every day for 5 days until the international banks agreed to reschedule the loans. o The Role of The IMF ♣ Showed the IMF was failing in its mission to promote global stability. ♣ Its conditionality was either too harsh, detailed or the wrong policy choice. o Problems with conditionality ♣ One of the biggest causes of the crisis was speculation on the financial markets, and this had nothing to do with the conditions the IMF insisted on. ♣ Similar conditions were asked of the Latin American countries in the 80s, is it still appropriate almost two decades later in a different continent? o Moral hazard - insurance against bad outcomes encourages more risky behaviour. ♣ Banks know that they have a regulatory safety net so they make more risky decisions ♣ IMF responded saying they don't promote a moral hazard, because private investors don't escape as easily as some believe. Private investors apparently lost $325billion as a result of the Asian crisis

schmidt ¬ 2004 - eastern expansion of the EU

Germany took advantage of the 7 year introduction period of new states by giving them a year to work in Germany on the national minimum wages of their home country. Germans were laid off from work (e.g. in a slaughterhouse) and Eastern Europeans were bought in. They had no specific wage and social security rights, they had to just adhere to German rules.

IMF membership and governance

o 188 Members, virtually every country in the world. Each has a quota assigned when it joins, and then can withdraw when it needs. Must pay 75% in local currency, and the rest in a widely accepted currency. A member can borrow up to 300% of its quota each year. Their votes depend on the size of their quota. o Quotas were last adjusted to give more of a voice to the BRIC countries. o There are rarely votes in reality though, mainly operates on consensus.

¬ How does the WTO work?

o A member driven organisation, each state makes a budget contribution depending on their states share of world trade. o Highest authority is the Ministerial Conference - meet every two years to negotiate agreements o Mostly agreements are made by consensus, not voting. ♣ Consensus = no state is actively opposed. ♣ Formally, when there is voting it is one country = one vote. o The General Council - under the Ministerial Conference, handles the daily work. Has three councils below it - the Goods Council, the Services Council and the Trade-Related-Aspects of Intellectual Property Rights. ♣ Can meet as the dispute settlement body, or its trade policy review body. The DSB (dispute settlement body) is new in the WTO, where an IO intrudes on state sovereignty, its decisions are compulsory and binding. Only happens if the states cannot settle the dispute themselves, but in reality it is the richest states that use it the most • The US participation rate as a party or third party is 97%, and the EU is 82%. They have the money to hire those with legal expertise that can devote time to this.

¬ Birth of the World Bank

o 1920s International Financial Conference in Brussels ♣ Wanted an international finance institution to help make loans to governments to rebuild Europe after WW1 o 1942 - US treasury official Harry Dexter-White - 'Proposal for a United Nations Stabilization Fund and a Bank for Reconstruction and development of the United and Associated States' would eventually be the lead for talks with the British and produce the Bank and Fund ♣ Was asked to create a proposal on post-WW2 reconstruction - help to stabilize currency, the Bank would be a lender and have its own currency. ♣ Was endorsed by Roosevelt and ultimately created in July 1944 at Bretton Woods and was a combination of ideas from White (US) and Keynes (UK) and was first called the International Bank for Reconstruction and Development (IBRD) • Not entirely a bank, but Keynes said there wasn't anything more satisfying in the dictionary to call it o The Banks primary function would be to lend to European Governments for recovery, and when they were recovered they could start lending to developing countries. Loans would have interest, but its shareholders would be governments. It could only lend to governments or private/public actors with a government guarantee of repayment. Loans would contain conditionality and would need a sovereign guarantee. o Total capital would be $10billion and was funded by shareholder's capital subscriptions as well as interest from other loans

¬ GATT

o 1947 - 23 states signed the General Agreement on Tariffs and Trade, was supposed to be a temporary agreement while the ITO was formed and would eventually operate under it. ♣ Was never a form organisation or a treaty, but existed for 47 years. Was more like a system of rules to promote more open and fair competition, consisted of almost 200 treaty texts. o GATT had two principles - most-favoured nation treatment and national treatment, meant to encourage reduction and avoidance of discrimination in policies ♣ MFN - Most favoured nation - if one member grants a tariff concession or other trade advantage to one member it must do the same to all. One country will not favour another. ♣ National Treatment - must treat domestic and foreign products equally. Cannot create obstacles to market for foreign goods such as taxes, licensing requirements or charges. ♣ Also all committed themselves to the principles of transparency in their trading practices, consultation and dispute settlement. ♣ As well committed to reciprocity - maintaining balance in trade relations with mutually agreeable rules. o Had to make some exceptions to these. ♣ Article XX says countries can use protectionist measures to protect human/animal/plant life or health, public morals and national treasures. • Created a lot of room for dispute, was pretty vague. ♣ Article XXI allows exception relating to national security issues ♣ Article XXIV allows the creation of smaller, regional group rules. o There were a total of 6 rounds in its time, at each one states came together to develop the GATT.

lecture 6 ¬ Development - Dynamism and Stagnation

o 1960s saw a lot of progress ♣ Customs Union completed by 1968, ahead of the strict schedule ♣ CAP in place by 1968 o 1970s saw stagnation over non-tariff barriers. States moved back towards using their national standards as an excuse not to further liberalise. o Happened because of economic crisis post oil crisis. Hard to ensure that everyone keeps on cooperating - move towards protectionism and beggar-thy-neighbour policies. o The first step was about moving towards free trade, but the next step was addressing the problems of common product standards. ♣ Positive integration, creating things and working together. o Decision making - no progress towards QMV. The Luxembourg Compromise agreed all decisions would continue to be made through unanimity, o Three states joined in the 70s - UK, Ireland and Denmark - and it is said they weren't sufficiently socialise

stab ¬ Benefits of a single market

o 1988 Cecchini Report said that the GDP across the EU would rise by 5% or more because of lower costs for business transactions, as well as creating 2million new jobs. o In 2003, the analysis showed that it wasn't as good as predicted, but still was worth it. From 1988-2003 there was a 1.8% rise in GDP and 2.5million new jobs in the EU. ♣ Result of the global economic boom or the single market? o Fourfold increase in foreign direct investment in the EU - shows how attractive the area now is in the business world. o National firms have more access to the global market, whilst 64% of trade from member states is intra-EU. o 15 million Europeans had taken advantage of the free movement of people and were living abroad.

¬ Response to Critics WB

o 1990s they became more transparent on information disclosed to the public o Created an Inspection Panel to increase accountability, investigated complaints from people affected by the projects. o Created the Global Environmental Facility (GEF) in 1991 to help poor countries address the global environment. o World Bank and IMF worked together to make sure that highly indebted poor countries could have more say over their own poverty reduction. o Made the bank more client-oriented and less bureaucratic, and more people worked 'in the field' to understand life there. o Matrix management system - improve use of resources and efficiency, so the information can be shared more easily which promotes more teamwork and less hierarchy. o Criticisms ♣ The bank was trying to do too many things and was stretching itself in too many directions because of pressure from the NGOs. ♣ Clientitis -became too cosy with clients which made it harder to cut them off if they violated the laws. ♣ The Matrix Management System added more layers of reporting complexity and shifted budget powers. ♣ Was suggested by the US Congress in 98 suggested they couldn't cope and should scale back and rename themselves the World Development Agency.

Millennium Development Goals - 2000- WB

o 8 Goals endorsed by the Heads of States from most countries at the Summit meeting o Bank promised to weave them into their operations, but it was tougher than expected as they were completely different on the strategy to reduce poverty than the World Bank was used to. o Bank and IMF developed the Poverty Reduction Strategy Paper (PRSP) in 1999. Highly indebted poor countries were required to organize a PRSP to get debt relief - the country was more in the driver's seat for its own poverty reduction.

Eagleton-Pierce Conceptualisation of framing

o A frame is a tool used to fix meanings, organise experience and alert others that their interests and identities are at stake, and propose ongoing problems o Once constructed it has to be defended and sustained. If there is more evidence the problem exists, then there is more space available for opponents to challenge the claims. o There may not be a consensus on how to solve the problem, even if there is consensus that the problem needs solving. o Can be a technique of power Power shouldn't only be viewed as repression, but also construction. Subjects and objects are shaped through signification and the social construction of meaning.

eagleton pierce ¬ Main points

o A struggle over competitiveness, competing representations of legitimacy in claims of competitiveness o The C4 tried to mimic the Norths legitimation methods but did so by framing themselves as a 'competitive victim' which caused tensions. o The US reframed the C4 from rights based proponents - demanding equal application of rules - to charity based seekers - hoping for foreign assistance - so the US became more powerful in the situation and managed to slow down the momentum of policy reform.

lecture 6 ¬ 1992 programme

o Aim of completing the internal market by 1992 o Dooge Report 1985 - what can be done to further integration. ♣ More supranational mechanisms, introduce proper QMV and complete the common market were essential in Europe. o A Commission Paper on Completing the Internal Market ♣ 300 complete proposals that needed to be implemented to complete the common market by 1992. Split into fiscal (tax), physical (labour) and technical (standards) barriers to trade. o Why so successful? ♣ Member states and economic actors felt something was needed in Europe to enhance their global standing, essentially all because of member states wants. ♣ Some emphasis more the supranational dynamics - the work of the Commission in speeding up the process. ♣ Arguably, both are responsible in part for the speedy success. ♣ Harmonization is such a lengthy process that it wasn't helping speed up the process, so the commission set up mutual recognition - if a product is lawfully marketed in one member state then all the other states should accept and recognise that product

stab ¬ State Aid Provisions

o As aid distorts the market, it is only allowed under certain circumstances as outlined in Article 87: ♣ Not discriminating against others ♣ Compensated for damage caused by natural disasters ♣ East Germany is allowed aid to overcome the inequality caused by its time as a former Communist area. o Commission gets 600 notifications of aid a year, and another 100 are unregistered but investigated. Most of the time, they do not oppose because reasons given are things such as job preservation and social cohesion.

¬ IMF Performance of the Non-System

o Attempts at macroeconomic coordination - where the G7/8 comes from by the 80s. ♣ Initially had a lot of success e.g. Plaza Agreement 1985, to help the dollar appreciate a little to rectify the balance. o Restrictive system of Bretton Woods had worked better in preventing major crises, and since the 80s there were so many crises ♣ Debt Crisis 1980s - vicious circle starting with the oil crisis in the 1970s, becomes much more expensive to keep up economies, and developing countries have to borrow from oil producing countries through the intermediary of US banks. They then, when the US interest rates rise, have to fold on debt payments because they got so high e.g. Mexico, couldn't pay the debt back because they couldn't get a new loan from a new bank to pay back the first loan as it became too costly. ♣ First time the IMF was in the position as an international actor discussing debt restructuring - first step, they wanted to extend the due date of payments but it simply wasn't sustainable. Second step was to simply reduce the debt. o In the 1990s the focus was on the Asian Crisis, but there are many others. Mainly due to the outflow of capital - may be some underlying problems, but are triggered by the investors getting out. Then they have exchange rate problems, problems attracting new loans. ♣ IMF conditionality - step in to give a loan, but they promote a certain type of reform, must accept the conditions that they are given. Always giving austerity conditions, come under a lot of pressure because they always give the same guidelines, don't look at the system on the ground. o 2010 - crises in developed economies ♣ Continued a lot longer than originally thought. ♣ Greece - can no longer refinance its debts, or it would fold on its debt. Then the EU and IMF stepped in and provided an international rescue package. Is this really about saving Greece, or the European banks with money in Greek banks?

¬ Strategic Interaction

o Before EMU, the ECB advocated a strict adherence to the stability and growth pact, warned against accumulation of competitiveness differentials between countries through wage increases that weren't matched by productivity increases. Governments ignored these measures so once the crisis came the ECB hoped that market pressures would force a reform. o ECB response to the financial crisis was to purchase bonds on the secondary market, but blamed member states for putting them in that position. When governments asked the ECB to do something to help them - like France asking them to buy their sovereign bonds - they would reject. o Final measure from the Government Heads was a combination of consolidating public finances, supporting the ECB in its action to ensure the stability of the euro area, and agreeing on the outlines of a new facility. ♣ Central European banks announced the purchase of Greek, Irish and Portuguese sovereign bonds. Reduced the yield spread over the bonds. ♣ Eventually also purchased Italian and Spanish bonds - didn't want to initially because they weren't really cooperating in terms of reforms. ♣ After Berlusconi resigned as Italian PM, the ECB demanded deep policy reforms. ECB reforms weren't going well, so other state leaders took over and pushed conditionality. Governments must take political responsibility for applying conditionality on crisis countries, not the ECB.

lecture 7 wb and imf ¬ Why Cooperate?

o Benefits for all ♣ Trade encourages cooperation specialization ♣ Exchange rate stability, they are no longer fixed or stable. No such thing as a global fixed exchange rate ♣ No competitive devaluations - beggar thy neighbour policy. Vicious circles of devaluation that don't benefit anyone in the end. At least you then have a system where states are prevented from competition in devaluations. ♣ International lender of last resort idea - within a state, if an economic actor goes bankrupt there is a legal system that shows what is to be done, and there is a bank that is the lender of last resort. What happens is this happens on a state level, there isn't a global court or bank? This is the role of the IMF in recent years ♣ Finance for projects that cannot raise private money - financing projects that are very risky or long term for a state. The market has failed because it hasn't provided it, so the IMF will make money on a global market. o Benefits for the powerful few ♣ Promote preferred norms and own business that benefit big companies and developed countries more than anyone else. For instance, the Greece rescue packages were only there to ensure German banks didn't lose their money in Greece, weren't there with the primary function to help Greece. o IOs as structure AND actor from the outset ♣ We need to create a structure where cooperation can be achieved, and from the outset there was an idea that this was going to have to be done by a single actor with 'actor qualities'

lecture 6¬ Why cooperate in the trade policy field?

o Benefits for all. ♣ Hard to argue that it really is beneficial to all, but in theory there are obviously benefits to be had • There is a tendency to want to protect your own markets - beggar thy neighbour policies o Benefits the powerful few ♣ The British wanted a trade agreement for a while, and since WW2 it's been the US that benefit the most ♣ Incentive for others to change the game - the US controls the system for others to use o Regional Setting ♣ Stronger incentive to cooperate economically and commercially simply because of shared identity, interdependence and proximity. o IOs as a structure ♣ Rules and procedures put in place by IOs mean there is more of a disincentive to not cooperate, minimising the fear that other states will not cooperate to set up their own rival industries.

¬ Decision making in the IMF

o Board of Governors ♣ Same as the World Bank ♣ High politicians and ministers from member states, or maybe the Central Bank Governor ♣ Decides the general direction o Board of Executive Directors ♣ Managing directors of the IMF ♣ Not from each state like the board of governors, often only regionally grouped states ♣ Votes not based on one each, but on quotas. Get divided based on how much they contribute ♣ Need an 85% majority, but the US essentially has a veto because their share of the vote is over 15% o 2010 Reforms - both World Bank and IMF ♣ Increased the total sum of votes and increased the weight developing countries has ♣ US congress didn't ratify this

¬ Protests in Seattle, 1999.

o Called undemocratic and unaccountable, didn't make enough effort to help issues on labour/environment/human and consumer rights o Protestors paralyzed the city, included the North Carolina Peanut Growers Association and OXFAM. o Declared a state of emergency that night, and the conference was marred by the events, not a lot of successful negotiations

¬ Birth of the WTO

o Came into being on January 1, 1995. Would be a stronger organisation, necessary to solve some of the weaknesses of the GATT. o Still contained everything agreed by the GATT. o WTO included special treatment for developing countries, as well as the rule that members had to keep the WTO informed about their trade laws and measures, more transparent policy. o The EU is a member, as is Taiwan even though not formally recognised by all as a sovereign state.

Henning ¬ Post financial crisis

o Central banking was seen as more complex, directed to financial stabilization and price stability. Used more tools, such as quantative easing and forward guidance. o The ECB had a lot of trouble post crisis, the EU was fragmented politically, as well as financially. Threatened the ability of the ECB to manage monetary conditions in the currency union. o Exposed the incompleteness of the monetary union, and the ECB became the lender of last resort as a consequence. Provided liquidity to banks and financed sovereign governments. o Created a game of chicken - the ECB wanted to extract meaningful measures from governments, but governments wanted to get more accommodative monetary policy from the ECB.

Other initiatives have become more popular over the years than WB

o Chinas Exim Bank lends to the developing world with no conditions, unlike the world bank o New Development Bank BRICs in 2014 - created by Brazil, Russia, China and India o Asian Infrastructure Investment Bank (AIIB) was opposed by the US and Japan after its creation in 2014, but still the UK/Germany/South Korea joined o Decline of Americas far reaching power and influence? These were all set up as an alternative

stab A free market i. a. white papers and barriers

o Citizens would get more choice of products and services, rights to live and work wherever they wanted. o All tariffs and customs duties were abolished within the EEC o Took a step back of the oil crises of 1973 and 79 because of the recessions, states put up more protectionist measures, so trading and settling across borders became harder. o In order to compete with emerging economies like Japan, as well as the US, Europe knew something needed to be done ♣ 1985 White Paper - introduced QMV in the Council of Ministers and agreed on the completion of a single market by 1993, meaning all member states had to implement 270 measures over three areas - physical barriers, technical barriers and tax barriers. o Physical barriers, it was agreed, were to be completely eliminated, so no goods or citizens were to be help up at boarders. o Technical barriers should be removed - goods should be able to be sold anywhere as long as they were lawfully produced in one state. o Fiscal barriers were harder, the Commission didn't want uniformity because each state has their own plans and consensus. Instead, focused on VAT, because goods differed from state to state so the VAT influenced prices heavily. The EU implements a narrow band of VAT across the EU, with only 5% between the highest and lowest rates.

lecture 5 why trade?

o Comparative advantage - Ricardo - is being more efficient, each country produces what they are best at, letting the invisible hand work means that we are all going to live better. -countries have incentive to keep barriers up- o Potential Problems can be solved by IO - how to get them both to cooperate, and how to stop one from defecting once they cooperate ♣ IO solutions - institutionalizing cooperation, enforcement mechanisms like the WTO court.

schmidt What happened to the Boltkestein Directive?

o Compromise reached - Abolished references to the home-country principle, and only spoke of the obligation to enable the freedom of services. o Created a list of measures which member states may not impose o Exempted more things in reality than in the draft ♣ Public transport, health, temporary services, financial and legal services were not included o Home country authorities are responsible for overseeing implementation, but they are both 

eagleton-pierce ¬ Construction of the Cotton Problem

o Cotton was left out of 2003 WTO agreements because it was suddenly being seen as a separate 'issue' o Was found that if the US didn't subsidies cotton so much, then the price would increase by 6-14%, which would be so beneficial to the C4 o The C4 produce higher quality cotton for cheaper, so is competitive on the global market o Interesting as to why the C4, considering their possible competitiveness, went down the victim route. ♣ Much more contestable and complicated o The C4 demanded financial compensation to offset the income they are losing as a result of other states subsidies, would have to go through the DSB to get this and why would the USA and EU want to agree that they were causing damage? ♣ Should have aligned closely with the WTO and put the US and EU under pressure ♣ So why do represent themselves as a 'competitive victim'? • an inflammatory subject, get people discussing • historical roots could have taken years to eradicate subsidies, so would help with the economy in the meantime

¬ Impact of the Marshall Plan on WB

o Couldn't find someone to be president, and when they did he stepped down after 6 months - Eugene Meyer. o US launched the Marshall Plan in 1947 for western Europe at $12.4billion. US loans/grants came with no conditions, but the World Banks did. The World Bank didn't make a loan until 11 months after it opened ♣ Made in 1947 to France, $250 million. They had asked for $500million to buy coal, equipment and raw materials, so it wasn't a project loan and didn't get the whole amount. ♣ No way of knowing the creditworthiness, didn't know if they'd be able to pay it back.

Development of the IMF over the years

o Developed new loan facilities ♣ Stand-By Agreement, Flexible Credit Line ♣ Invented something new to help Greece. ♣ Include concessionary loans for low income countries, usually the idea is that you have to pay back everything, but this way means that low income countries get a small grant. o Need access to more and more resources ♣ Expanding quotas and borrowing from members depending on the size of their economy. ♣ In the case where the IMF needs a large amount of money to put into a crisis country, they can take money under the 'new arrangements to borrow' from those countries who can afford to pay some more. o Conditionality ♣ Contested subject economically and politically ♣ Competition between supply side and demand side - is it about austerity, or increasing spending. A lot of disagreement within Europe about what to apply to Greece. o Criticism ♣ Burden the weak and promote the interests of the rich

gutner ch 11 The euro crisis

o EU banks were invested in the US mortgage market, needed bailing out by governments. o In some countries, the governments couldn't rescue the banks, and some weren't meeting the fiscal principles anymore so it was difficult to maintain a common currency. ♣ Arguably, the Euro was created before the nations were ready, economies were not similar enough for one to fit all. Pushed apart rather than coming together. o Created economic contraction, increasing unemployment, stagnant growth. Fear the Euro could collapse. Revealed some flaws in the Eurozone, pledged to save the Euro no matter the cost. o Greece - had a large budget deficit - 12% of GDP, EU guidelines were 3%. The Euro therefore weakened as investors feared Greece couldn't pay its debt. EU forced Greece into massive spending cuts, which led to political unrest in the area. o Got a large €110billion bailout package in 2010 from the other European banks and the IMF. ♣ Largest ever EU bailout for a member state. o This bailout was very unpopular in Germany, but Greece accepted more spending cuts with it. o Announced another €750billion would be spent on stabilizing the euro more broadly. But later that year, bailouts were sought by Portugal, Ireland and Cyprus, and narrowly avoided by Italy and Spain because they were helped before it was necessary by the ECB. One problem was that no one could devalue their currency to get out of the crisis. o The ECB lowered interest rates to record lows to calm the markets, but Greece were still really struggling. The bailout plan hadn't done enough, the banks were undercapitalised, there was too much public debt and unemployment was still rising. A second bailout was agreed on at €130billion, €28billion from the IMF. Reduced speculation that the Eurozone might break up and calm markets. ♣ Greek voters were sick of the austerity, so in a 2015 referendum under a new leader they rejected the new EU deal.

lecture 5 ¬ Domestic Distributional Concerns

o Each country produces different things to be efficient, but those that are vulnerable to import competition oppose trade agreements o This is leading to a rise of a global elite who win, but also growing inequality as there are so many losers. o Countries have an incentive to lower their standards, if they can pay their people less then they can sell their products cheaper ♣ A race to the bottom, lowering regulations on labour and the environment which disadvantages workers across the world ♣ Growing inequality - shown in the GINI coefficient

history of IMF

o Evolved since its conception in response to criticism and broader trends. o First loans were made to France, Netherlands and Mexico in 1947. o All currencies were linked to the dollar, but because of increased spending on the Vietnam War, they went from a trade surplus to a deficit in 1971 - there were more dollars in the world than were demanded, so the price of all currencies against it declined, as did confidence in the dollar and the system. Resulted in people cashing in currency for gold, which hurt even more because then the US was linked to this and it was falling in value even more, so Nixon announced the gold window closing in 1971, and the Bretton Woods system ended in 1973. After this, some countries let their currency 'float' or pegged it to another - some regionally. o Oil crisis 1973 - OPEC countries quadrupled the price of oil which triggered a recession and high inflation. IMF made loans and created facilities to help countries meet the increasing cost of oil, and a new Trust Fund in '76 especially for developing countries with minimal conditionality and a low interest rate. o 1982 Latin American Debt Crisis - sparked when Mexico said it couldn't afford to pay back its loans as it couldn't repay US commercial banks, and this was a massive problem since its debt was $80billion. Many other countries followed in their footsteps - 27 nations, 16 Latin American - of asking the IMF for help with restructuring debts in return for economic reform. ♣ E.g. reducing government spending, high taxes and reduced inflation. o 1985 Baker Plan and 1989 Brady Plan - responded to the fact that debtors were drowning, and hat banks weren't increasing lending. Called for 15 high indebted countries to liberalize their economies, as well as increasing lending from the World Bank and Inter-American Development Bank. ♣ In 1994, 18 countries received deals under the Brady Plan, which meant that over $60billion of debt was forgiven. o The 90s were a tough decade - the fifty years in enough campaign in '94 and the Mexican peso crisis in '94. IMF responded with the largest ever financial package yet giving Mexico $17billion, on top on the $3.7billion they received in 1982.

¬ Services in the Single Market

o Far less integrated than the goods market o Cannot just delink the production and consumption, cannot trade the haircut without the hairdresser or the customer - provider and consumer have to be present o High competitive pressure - not as much regulation with services, so how do you know which is best to use? It is a lot clearer with goods. o Mutual recognition - best for producers to establish themselves in a place with the cheapest production standards, but then they risk the race to the bottom. ♣ Fear of forum shopping - consuming the cheapest provider who produces in the cheapest country where standards are quite low. ♣ Fear of redistribution instead of efficiency. Enhance the level of welfare.

¬ Last Decade WB

o Financial crisis - lent over $230billion from 2007 to 2012. From 2008 to 2009 IBRD commitments increased by 144%. ♣ Responded quickly when it hit, loans made in the form of development policy lending, not projects. o Loans declined from 2012 to 2014, when Kim took over. Decided on $400million in cost cuts over 3 years and fired 3 managers as a start of his reorganization, caused a lot of turmoil and confusion. o Has been more focused on issues of corruption, transnational crime and post conflict reconstruction, is today the largest source of funds for issues such as health in poor countries. o Lending has been declining because of new organisations (NDB BRICS and AIIB).

¬ Structure of the Game - Sargent and Wallace 1981.

o Fiscal Dominance - government sets fiscal policy irrespective of monetary policy, and the latter will adjust o Monetary Dominance - governments sets monetary policy irrespective of fiscal policy, and fiscal will adjust. ♣ Government deficits, debt and inflation are higher under the fiscal dominance strategy. ♣ Game of chicken - two authorities (ECB and Governments) fight, but the government usually wins because it created the ECB. ♣ Problems with the Chicken Game • The players aren't unitary actors, their position depends on whether they are a debtor or creditor. • Assumes that the moves are simultaneous, but in the euro crisis they may have been sequential. Governments often announced more than they wanted to deliver as the ECB insisted all individual and collective government measures were announced, even if they aren't adopted.

lecture 6 ¬ How does cooperation happen?

o Free Trade Agreement (FTA) ♣ Enhanced version of the WTO, often at regional level, but between any states ♣ Reducing tariffs or quantitative restrictions among members ♣ Separate management of relations with non-members, the state can still organise their own policies with all other countries ♣ Comparatively straight forward to set up, simply about reducing barriers to trade. ♣ Tricky business is to do with imports from a third state - if you can go through a state with a free trade agreement, then they can be traded easily. • There is a rule of origin - all goods coming to the EU must be listed as where they have been produced. At least half of the good must be produced in the free trade area otherwise it cannot be traded freely. This means there is not complete abolition of boarder control because there must be administrative checks. ♣ E.g. NAFTA o Customs Union ♣ Abolishing tariffs or quantitative restrictions among members, whilst setting up a common external trade policy ♣ This is more difficult as you have more to decide among members ♣ But in reality, you therefore have less worries about third parties because everybody has the same common external trade policy on states not in the agreement ♣ E.g. the EU o Issue with WTO Conformity ♣ As long as these agreements facilitate trade within whilst not hurting countries outside of the agreement ♣ Create trade without diverting trade ♣ Outlined in GATT article XXIV. ♣ How do they test if these agreements are conforming? They can't really, it is only really a gentleman agreement and therefore difficult to assess. ♣ Regionalism and universalism - how can regional organisations be placed in a system where you also promote cooperation at a global level? • You can't really have both, its either or. • However, maybe the two complement each other. • This was outlined at the Uruguay Round - where NAFTA was set up - saying that liberalization is essential, so if it isn't happening globally then it needs to happen regionally.

open and protected markets WTO

o Free trade represents the liberal perspective, argued by Smith in the 18th century ♣ The wealth of nations increases if market barriers are removed, because people are left to pursue their interests in whatever means works best for them. o Comparative advantage - David Ricardo, 19th century. Example - Portugal is able to produce both wine and cloth more efficiently with less labour than England, but should they still produce both? Ricardo argued that it makes more sense to focus on one and then trade because specialization is more effective. o No country has ever been completely open to all trade ♣ Mercantilists - a system of economic control used by colonial powers from Europe in the 1700s, exploited the colonies. The economy was subordinate to the state so this exploitation would help the crown and security. ♣ Import-substitution-industrialization - modern version of mercantilism. Self-sufficiency is necessary to promote development in poor countries. • This is what many Latin and African countries used as a policy - they would produce goods that could be imported cheaper to create more jobs, and would then make their economy a bit more protectionist. ♣ Creative destruction - where some jobs are destroyed by trade, but others are created. • The textile market in North Carolina declined, but instead the high-tech and bio-tech industries in the area increased, as shown by the creation of Research Triangle Park. ♣ There are certain regions that may get preference if they try to negotiate for it. For instance, the EEC agreed to eliminate trade barriers to member states and create a common external tariff for the rest of the world. WTO and GATT agreements allow member states to enter into bilateral agreements as long as they don't increase barriers for non-members. • With increasing regional agreements, is it eroding the role of the WTO?

¬ The ECB and Relationship to Germany

o Germany was the largest country in the Eurozone, but their Bundesbank dissented from key decisions of the Governing Council. E.g. the reduction in interest rates in 2013. Relations became very politicized. When the ECB reduced interest rates from 0.5% to 0.25% there was controversy in Germany. ECB believed this was necessary to stop the steadily dropping inflation

Int trade

o Globalized world there is so much foreign and international trading o Criticism: ♣ Environmentally bad - what is the point in the US harvesting wood to send to Japan, and Japan harvest the same wood to harvest back to the US ♣ Adam Smith - trade is an inherently human characteristic and embedded into our nature, no other species does it o World trade in goods was $2trillion in 1980, but in 2013 was $19trillion. ♣ Important point - underpins economic growth, shows level of competition as it opens new markets. But on the other hand, it can increase tensions, harm the environment and increase poverty. • The EU banned the import of hormone treated US beef in the 1980s, and then in response the US banned beef from the EU in the 1990s due to the outbreak of 'Mad Cow Disease' • International trade has increased the employment of child labour to produce goods, even though it was prohibited by the International Labour Organisation o For developing economies, their international trade is so important because they then receive foreign currency to use in the purchase of other goods and services from other countries, so trade opens new markets. However, this is helping to create greater inequalities as the winners are the owners of factors of production, not workers o Globalization is a root cause of the increase in trade, but has also seen some regulations go. Has created a borderless commerce, increased travel, migration and capital flows. ♣ There is an idea that countries are too interdependent, but the US produces over 80% of what is consumed in the US.

¬ The Common Market Today

o Goods - Impressive Progress of the 1992 programme o Capital - Limited until 1990, since then they're almost complete. o Services - Relatively slow until the present. o Persons - mutual recognition of professional qualifications, cannot discriminate, freedom of establishment since Treaty of Rome. o Still not completed, still going! ♣ E.g. the data roaming costs have been lifted over the last few years by the Commission, International Organisations is a process.

lecture 5¬ Emergence of modern international trade regime

o Great Depression and WW2 started many years of protectionism. GATT started being negotiated in the back drop of this time in the Bretton Woods period o Havana Charter, 1948 ♣ Ambitious plan to create the ITO ♣ Signed by 56 countries ♣ US failed to ratify it, didn't even send it to the Senate ♣ Left with this weird GATT system

WB ¬ Affiliates and New Directions in Lending

o Has been changing and developing since its creation. New affiliates were created to bridge gaps in the IBRD ♣ International Finance Corporation (IFC) in 1956 - lend money to private sector actors without government guarantees. ♣ International Development Association (IDA) in 1960 - interest free loans and grants for the world's poorest countries who were too poor to take out a loan with the IBRD ♣ International Centre for the Settlement of Investment Disputes (ICSID) in 1966 - settle disputes between member countries and foreign investors. ♣ Multilateral Investment Guarantee Agency (MIGA) in 1988 offered insurance and other services to investment projects to help reduce losses in things like war or contract breaches. ♣ The IBRD and IDA have merged into the World Bank, while those two plus IFC, ICSID and MIGA are the 'World Bank Group'

¬ Evolution of the WB

o Has gone through a lot of large world events e.g. the Cold war, oil crisis etc.... o Change one was the shift from early lending to Western Europe to developing countries o Created subsidiaries which lend to the poorest countries and private sectors o Shift towards agriculture in the 1970s - away from only building projects. o In the 1980s they started doing structural adjustment lending - lend to correct economic problems, not just for projects. o Addition of lending for projects like the environment and gender in the 80s and 90s. o Focused on the Millennium Development Goals in 2000 - world free of poverty and stimulating economic growth for the bottom 40% of the population.

seminar 6 ¬ What is the puzzle that Eagleton-Pierce is trying to explain in the assigned article, and which explanation is found to be most convincing?

o How important is framing, and how did the four cotton countries frame themselves as victims o Framing and counter framing - If you introduce yourself as the victim, they can reframe you into something else o How you frame a problem is closely linked to how it is perceived o IO are not as objective as they believe to be, very idealistic, all believe they are equal in theory ♣ C4 attempt to narrow the inequalities of power, WTO was managed by northern actors. They argue they are being outed by lower quality cotton that is subsidies by developed countries. ♣ US response was to take this issue and make it broader, in the end they confused what they were - are they victims, or are they searching for subsidies so a charity country? ♣ If you say they're victims it makes the WTO look like they're facilitating inequality, but if you say they're looking for charity then the US said they were doing nothing wrong. o How you are framed changes your idea of power, and how likely you are to achieve your goal o Competitiveness frame vs. victim/developmental frame o In the end, this was not successful.

lecture 7 IMF and WB ¬

o IOs as structure - facilitate continuous cooperation o IOs as process - constant evolution o Commercial Negotiations - ♣ Commission - sole negotiator, but council mandate ♣ Trade Policy Committee - member state interests ♣ Final agreement - approved by Council through QMV and the EP - they get a yes/no vote only o Rules on imports ♣ How do we transpose our obligations under the WTO into EU law? ♣ Follows the ordinary legislative procedure ♣ Includes so-called 'trade defence' - e.g. against trade dumping ♣ Strong Commission o External face of the internal market ♣ Policy that the rest of the world sees.

stab chapter 9 ¬ Single market would be a guarantor of peace, stability and economic progress, helping in recovery after WW2

o Immanuel Kant - Perpetual Peace - trading nations will not go to war with each other, would hurt profits. o Chapter 2 of the Treaty of Rome outlined it, but is continuing and developing today

schmidt integration through mutual recognition

o Implications on three relationships ♣ Relationship between EU governments ♣ Relationships between governments to their citizens ♣ Relationship between EU citizens o For it to work, states must believe they're cooperation, not competing ♣ Issue stems from the fact that the member states with the most market-friendly regulation gain the most.

¬ Making Sense of Monetary Integration

o In Europe we aren't great on monetary policy because it is all just delegated to the European Central Bank o There are a lot of rules on fiscal policy, but there is no integration. No one policy. o What is monetary policy ♣ Determine money supply ♣ Controlling inflation vs. promoting economic growth o Fixed exchange rate system ♣ Reduce commercial transaction costs but does also tie down monetary policy, that means the Central Bank has to work at ensuring the inflation rate is always what it is supposed to be. o Monetary Union ♣ In Bretton Woods, there would always be some rule to fix exchange rates, but that is not possible in a monetary union. Irrevocably fixing exchange rates. ♣ The step to the common currency is then a small one o Problems/challenges ♣ States give up their economic policy control. ♣ Does one size really fit all - does one policy work for the whole Eurozone. • Hasn't really worked - Spain and Ireland were booming so needed tighter controls, but the others weren't so the booms slowed down. ♣ No exchange rate change to help adjustments, so now the adjustments have to happen in the real economy. ♣ To what extent should you integrate fiscal policy?

Growing Criticism on WB

o In the time of Thatcher and Raegan - 80s - the right criticized it being too inefficient and shouldn't preach free market reforms to the world. The Left said that the bank shouldn't preach free market reforms as well, and thought that the harsh conditions it was forcing on poor countries were making them worse off. o In the 1990s there was more criticism from an environmental standpoint, as well as high levels of poor country debt and gender issues. o A 1992 in-house report showed the worst of the World Bank - projects that were 'unsatisfactory' upon completion were 15% in 1981 but 37.5% in 1991 and compliance by borrowers with the laws that came with the loans were 'startlingly low'. o 200 US NGOs came together for the '50 years is enough' campaign - called for the immediate stop of the institutions that cause 'widespread poverty, inequality and suffering of the worlds people and the environment'.

¬ The Euro Crisis showed the structural weaknesses of the ECB

o Incomplete economic union ♣ Uneven fiscal policy, different levels of competitiveness, lack of bank supervision. ♣ No bailout clause in the treaty of the functioning of the EU - may not cover the liabilities of other member states, took a while how to create structures that could help member state. o Monetary Policy ♣ Problems of single monetary policy and no exchange rates ♣ For instance, the UK was in trouble after the subprime prices of 2008 but once prices adjusted it did go up again. o Divisions among actors within the EMU ♣ ECB has to avoid excessive financial risk, all a very political game within member states. Much of the debt may not actually be paid back, so the ECB wants reform in the indebted countries to help development and paying them back. ♣ ECB cannot easily bargain with fiscal authorities, US has two actors (Treasury and fiscal actor) but EU can't do that. ♣ Has to avoid political risk - is a preferred political risk. o Ongoing process ♣ Creating of finance facilities, tighter fiscal rules, banking supervision ♣ Will things be better in a future crisis?

The world trade org

¬ - international organization that was the successor to the GATT. o GATT - General Agreement on Tariffs and Trade, governed international trade for over 40 years. Successful in achieving growing liberalization of world trade and lowering tariff barriers. o WTO - widened and deepened the trade agreements, and acts like a court with rulings on trade disputes that are binding on Member States. ♣ Criticisms - on accountability, legitimacy and environmental damage. • 30,000 demonstrators protested them in 1999. • The failure of the Doha Development Agenda failed, so this hurt the WTOs leadership role

¬ Explanations IMF

o Increasing International Capital Flows ♣ Europe and Japan overcame post war troubles, made their currencies convertible so there was more transfer of currencies. ♣ Eurocurrencies - currencies being traded outside of their own country. Eurodollars - pretty unregulated, quick changes from Euros to Dollars. ♣ Put pressure of exchange rate system - huge amount of currency moving from one country to the next, which puts pressure on. Increasing international capital flows strained the system, as did the introduction of so many TNCs. o Oversupply of dollars ♣ In a way, the US was doing what the IMF would discourage today in increasing the money supply too much, printing money to finance activities or pay off debt - did this to pay for the Vietnam War. ♣ Really put a lot of pressure on the link to the gold, so there was doubt on the value of the dollar, so international actors went to check by converting dollars to gold. This therefore further weakened the dollar because more gold was leaving the country - why Nixon decided to suspend this, would be left with no gold and an inflated currency. o Engrained imbalances ♣ No adjustment in surplus countries - Germany and Japan. They were exporting a lot so making a lot of profit, which should appreciate your exchange rate but they didn't adjust anything. The Central Banks then invented a trick to offset the international imbalances - the surplus countries would grow more and more while the deficit countries were growing their deficits more and more. Force surplus countries to adjust and contribute to the system themselves. o Political Dissatisfaction ♣ De Gaulle - complaining about the privilege of the US as an anchor currency, pushing early on for a different currency to be involved as well. Not only left to the US.

¬ Development finance and the World Bank - One IO, Many Actors

o Institutional structure is a bit complex o IBRD - International Bank for Reconstruction and Development - loans to public sector o 1956 - International Finance Corporation (IFC) can lend to private sector o 1960 - International Development Association (IDA) - grants to developing countries o 1966 - International Centre for Settlement of Investment Disputes (ICSID) o 1988 - Multilateral Investment Guarantee Agency (MIGA) - putting together the actors willing to finance so they feel safe as it is guaranteed by the World Bank

¬ Criticisms/Issues IMF

o Is it about big projects or eradicating poverty? Both are on the agenda, but does that mean that the goals are too broad? o Conditionality is a big criticism - only get the loans if you do certain reforms. ♣ Economic criticism - impose the conditions that often don't meet the need of economies, because they don't have a clue about the reality of the situation there. ♣ Political criticism - when does conditionality become interfering with the sovereignty of the state? ♣ Moral criticism - if the IMF intervenes in the balance of payment problems then governments arguably might be more risky because they know they will be bailed out, the same thing may happen with banks - they have no incentive to really be careful about what they buy. o Who's interests are they really pursuing? ♣ Washington Consensus - led since the 1980s, both institutions are based in USA so therefore they pursue certain goals more. China wasn't happy about this idea - creation of the Beijing Consensus? o Regional Competition ♣ AIIB, European Monetary Fund, loss of the US influence? o Overall - the IMF and World Bank are ongoing processes. There are hardly any IOs that are just stable and solid, they pick up on criticism and develop over time. ♣ New structural layers and actors - providing aid.

Lisbon treaty

o Lisbon Strategy was started in 2000, implementation of economic, social and environmental renewal by 2010. Aims of it include: ♣ Liberalize telecommunication, gas and electricity, rationalize the road tax system, raise the employment rate, harmonize corporation taxes, reduce state subsidies. Lisbon was focused on supply-side economic reforms, the Anglo-Saxon model, which wasn't really working for all, and did end up increasing inequality in the process o agreed within the Commission that all future policies should include sustainable development innovation and education in a new agenda - the EU 2020 strategy. o After the economic crash in 2008, the Commission tried to get sager financial product regulations as well as clearer information for citizens. o Boltkestein Directive - wanted complete liberalisation of services across the EU, provided 75% of jobs and 66% of GDP. ♣ Feared this would result in a race to the bottom - Poland could send workers to Germany and they would not be subject to their rules, only Polish rules which are more relaxed. This may mean that countries with lower regulation rules get an advantage. o Newest development - the regulation of roaming charges, incoming and receiving calls from 2007/08.

explaining EMU

o Member State preferences ♣ For fixed exchange rates so there is constant stability. ♣ Locking in exchange rate stability through creating fixed EMU, no one can change anything alone so there will be no instability. ♣ More similarity in monetary policy preferences • 1980s - Raegan and Thatcher, supply-side economics, so here was the time of the intellectual's approach which was more rigid and strict, ideational approach, not just about following the Germans. ♣ Convergence between Bundesbank and the rest - was just making monetary policy for Germany, not for the whole of Europe, but was so strong in the whole region. ♣ Compromise on the path towards EMU • Very strict schedule of convergence, so for those who wanted it quickly it was said they had to take it steady. ♣ Supranational dynamics - what happens at Union/Community level. • Focus on commission activism - Delores, made a lot of things happen. Move towards the common market programme, but the Commission played an important role in the process. • Spill over - when things move on there will be a spill over from something else.

stab Avoiding Market Dominance - Mergers.

o Mergers in the UK are done by the Office for Fair Trading - quasi-governmental institution- and in Germany they're politically independent o The Directorate General for Competition investigates all cases of mergers, even if they're from the same state and aren't worth 2.5billion within the EU. Big cases have to seek the approval of Brussels. ♣ Decide if they're fair from whether effective competition is preserved - a dominant market position of 50% or more might be a consequence of the merger. ♣ E.g. the merger of Orange and T-Mobile, UK mobile providers, into EE saw them have over 30million customers out of the population of 60million. In return, other companies are allowed to use its wireless spectrum.

lecture 5 the WTO

o Ministerial Conference (Ministers of Trade from each country), meet every 2 years o General Council - every day, an ambassador from each country o Dispute settlement - there is an actual enforcement body, a tribunal for each dispute and can authorize retaliate measures o Globalized world means more trade in services, cannot separate goods and services.

schmidt Why are goods are services different?

o Mutual recognition started properly after the '79 Cassis ruling from the ECJ, found goods legally marketed in one member state can also be marketed in all member states. Means it is not as difficult to agree on harmonised rules. o Apply the same mutual recognition to the area of justice and home affairs o Issue with mutual recognition is the question of what is equivalent. o Few services can cross borders independent of their production ♣ Correspondence services resemble goods - financial services, telecommunications o Most services need producer and consumer in the same place to be consumed o If an EU worker is in another market, it is regulated by the free movement of labour, so regulated on a par with nationals in that country o If they are providing services, then the host country can only apply rules that are covered by general interest if they have not been observed in the home country, the regulations used will be from the home country.

lecture 5 ¬ The GATT

o Negotiated as a stop gap, a forum for discussion o Very little institutionalization o No charter, didn't even have a secretariat for the first 8 years o Impacts its abilities to create change, anyone could block anything. o Most-favoured nation - what you give to one you must give to all o National Treatment - you cannot favour a domestic product over an international one o Transparency - tariffs are better than non-tariff barriers ♣ Tariff barriers - a tax on imports ♣ Non-tariff barriers - depend on giving subsidies to domestic products which allows them to sell them, or quotas. ♣ Tariffs are more obvious and clearer, easier to tackle and create laws about o There were many rounds of negotiation - WTO is an organisation of the GATT, decided on at Uruguay

lecture 5 power matters

o Not just about the whole power of the system, but also how the IOs and states o Power is not just about two actors that can force each other, other dimensions o Productive power - not interested in how actor A forces actor B to do something, but how you can be forced to look at something in a certain way which will then create winners and losers, the problem is dependent on how we define it ♣ Africa - wanted to set up the cotton industry as a fair industry, but at the WTO they wanted to set up the industry by separating trade and development. When an IO is set up, they have the ability to set up a problem in a certain why by setting the agenda ♣ At the WTO productive power is very obvious, world systems theory would have said to connect trade and development, as would the developing countries. Institutionalizing the liberal world order. ♣ Example - the Banana War, about 7% of the bananas came from the Caribbean and 2/3 came from Latin America. The EU has the policy that the Caribbean gets better deals for exporting, as the majority of them are former colonies and they wanted to help the economy (trade not aid). The US and EU ended up starting the bananas wars, as many US companies own banana plantations and can sell them for cheaper due to being bigger. The WTO ruled in favour of the US. Is that really fair - liberalism isn't favoured by the WTO, but should the EU have to take that?

WB ¬ McNamara Years

o One problem with the project loans is that there wasn't really the trickle-down effect they'd hoped for - poor countries had roads and power plants, but there was no literacy or rural development and most of the work was farm work - why did they need roads if they can't produce enough crops to sell? o McNamara was president from 68-81 and focused on poverty reduction, lending jumped from $953million to $12.4billion. o Focused on a lot of small projects - increasing the water available for irrigation, increasing agricultural production ♣ E.g. $2million was sent to Jamaica to support family planning programs and to create 10 rural maternity centres. o Poverty related projects shot up to 31% by 1981, from 19% in 1968. o Again, a problem is that a lot of the time the loans ended up benefitting the rich through corruption and the bank appeared to be overreaching - McNamara believed you could have everything - quality and quantity, wouldn't compromise.

schmidt limits of mutual recognition

o Only accept equivalent regulations, and if not equivalent then host-country rules apply, which fragments the market because they are responsible to their population. o Governments have to trust each other o Goods is a lot easier, only have to control the standards o For services, governments have to trust that other governments are being altruistic. o Confusing as they no longer know which rules services are provided under, so it is difficult to know your rights. o Governments can't guarantee equal treatment to citizens o Service providers may believe they are above the law

The European Common Market

o Origins in the Treaty of Rome 1957, article 2 - free market for all goods, not just coal and steel o Treaty of Lisbon - common market is now re-framed as an internal market, added new points to promote solidarity and respect within the member states ¬ Treaty of Rome 1957 o Outlined four freedoms - free movement of goods, persons, services and capital. Complete liberalization of factor movements, o Approximation of laws - knew that the difference in standards across boarders would be a problem, but in the process of negotiation they decided to find common standards on all kinds of products that can be traded o Competition policy - wanted to maintain healthy competition, avoid monopolistic markets and too much intervention from states. o Common Agricultural Policy - introduced thanks to demands from France. Counterpart to the liberalisation, creating a policy that redistributes money to sustain European agricultural markets. o Supranational and decision-making - states should give up some sovereignty to allow the EU to make important decisions. o Very ambitious - EU states wanted to create an international structure, to guarantee each state benefits. Should not see the European project as only economical, has been influenced heavily by history and politics.

gutner ch 11 ¬ Perspectives on the EU

o Policy network theory - focus on a 'cluster' of actors who shape outcomes in individual policy sectors. o In some countries, the EU is no longer associated with freedom and opportunity, but financial pain, joblessness and lack of democratic choice, for example in Greece and UK. The Euro Crisis reflects the failure of governance, the bailouts didn't involve the governments in decision making.

¬ The Origins of International Monetary Cooperation

o Pre-WW1 - all tied to the gold standard, states would have a fixed exchange rate towards each other. Not even an IO involved, just structured cooperation. ♣ There are political and economic reasons why it didn't work, but each currency must be backed by gold. We have had a lot of economic growth over the last 150 years, and the discovery of gold hasn't grown with that. That means this wouldn't be able to match economic growth ♣ Underlying problem, no way to easily create problems o Current system has its origin in post-WW2, while the war was still going on at the Bretton Woods system 1944 ♣ Introduced the Gold Exchange state. At the time, half of the worlds gold was in the US. Seemed the best idea that the US dollar was linked to gold, and then link all other currencies to the US dollar. ♣ Fixed exchange rate system, but it is fixed par value, but adjustable. The system introduced a new notion of adjustability, in case of major tensions in the system countries could change their own rate. Often happened with the Italian Lira - it had to be devalued. o What is the role of the IMF? ♣ Monitor exchange rates ♣ If a country wanted to adjust its par value then it had to consult the IMF. If a central bank is running out of foreign exchange reserves, then the IMF can step in and give a temporary loan to stabilize the whole system.

What is the main argument of Susanne K. Schmidt?

o Process and product standards ♣ Products are easier and there is more incentive to do this for trade and profits. ♣ Processes are harder simply because of the differences across Europe • Some places are happier to be taxed more - e.g. Sweden • Some countries do not have a government set minimum wage • Services cannot be separated their producers and their consumers o Mutual Recognition is hard and has become very politicized ♣ Domestic workers may be worse off, there may be a race to the bottom because it is cheaper for producers. ♣ The special nature of services - process standards and high competitive pressures. Difference in regulation invite forum shopping wherever possible and a tendency towards redistribution rather than enhanced efficiency ♣ Boltkestein Directive - there will be discrimination, want to choose the cheapest. There is therefore a competition from new members become a concern even without the liberalization push of the draft directive. ♣ Not all about who will create, but who will check regulation. There should be more administrative harmonization. o Discrimination - if two or more service providers work side-by-side but each with different regulations concerning remuneration, social security, safety at work etc.... ♣ E.g. the UK complains about foreign workers, but since 2004 industries have got more efficient because there are more workers actively seeking work, and they do not have a minimum wage, they just accept the minimum salary. o Forum Shopping ♣ Choice of member state of the most attractive regulatory environment for a business in the service sector. ♣ Consumers are more likely to opt for the cheaper option. o What does mutual recognition lead to? ♣ Theory - more efficient, more competition, lower prices ♣ In practice - services are provided from a different location, so prices may be lower but welfare isn't enhanced overall - businesses are better off, but foreign workers are working for a low price and home workers may be fired.

¬ Issues ahead

o Regionalism will continue, how will that impact the WTO legitimacy? o Trying to help more countries to get out of poverty, but the poorest countries face issues just getting into the market e.g. lack of infrastructure, not being involved in PTAs, undiversified economies. o Agriculture - amounts to over 50% of the labour force in developing countries. OECD countries heavily subsidises the industries in their own countries, hurt external markets and importers. 

¬ Perspectives WB

o Rich - quantity over quality is a problem, want to get money out quickly. Also, is where society's contradictions on geopolitics and environmental concerns are most obvious. o Einhorn - the banks mission is way too complex, it is becoming unmanageable. o Its two core principles may be opposing - a bank that lends money, and a development institution to promote a wide range of activities goes far beyond just a bank. o Marshall - shouldn't forget how hard the job of the bank is, tackling some of the hardest issues and there will inevitably be some falls.

¬ Institutional Structure

o Set up in Maastricht, defined 7 years before it happened. o European Central Board ♣ Most important institution ♣ Executive board - top officials, daily management ♣ Governing council - important decision making organ, all the central bank governors, decides on monetary policy tools. ♣ General Council - also includes the central bank governors that aren't part of the Eurozone, enhances cooperation of the whole region. ♣ Main goal is to keep inflation at 2%. Many economists said it was wrong to focus solely on price stability, but others agreed it was best for stability in Europe. ♣ Fully independent from other EU or Member State authorities. Can't take instructions from anyone, but the governors can be outvoted. An expert entity. o National Central Banks ♣ Implementing monetary policy and supervise the payment systems. They are at the centre of exchanges of funds, at the European level they are using nationwide payment systems but they still play a role. o ESCB ♣ Includes all the central banks from non-Eurozone EU members. The rest of the Eurozone stays in touch, even if they don't use the Euro, because it may influence them or they may want to get involved in the future.

¬ Relaunching EMU

o Single European Act wanted to achieve economic and monetary union from the 80s. o European Council 1988 ♣ Heads of states requested report on how to reach EMU o Report of Delors Committee April 1989 ♣ Picks up the three-stage approach from Werner o Madrid European Council June 1989 ♣ Not long until the member states follow suit. ♣ The first of the three stages start 1 July 1990. o Treaty of Maastricht 1992 ♣ Includes in article B the goal of EMU ♣ Ultimately including a single currency - that is the goal, not possibility but inevitability

¬ Initial Reform Efforts and the Breakdown of the IMF

o Special Drawing Rights - 1968 ♣ Articles of agreement ♣ Why was it set up? The dollar was weakening and under a lot of pressure, and people were questioning if it was possible to be reliant on just one currency linked to gold. ♣ Should we create an international currency standard to do what they want with it? ♣ The dollar is still one of the major currencies, and it hasn't been replaced as an international reserve currency. We could do without the $ if we really wanted to. o Nixon suspends dollar convertibility into gold - 1971. Confidence in the $ erodes, and it comes under a lot of pressure. After this, the system was broken down because the whole systems first step was dependent on the link of dollars to gold. ♣ Panicked the international monetary system, they wanted to save the Bretton Woods system. o 1976 - Jamaica Agreement ♣ All members of the IMF agreed to pass a second amendment on the system. ♣ Abolished the fixed exchange rate and gold standard ♣ Introduced a 'non-system' ♣ Up to each state to identify which exchange rate they want. ♣ Central bank keeps a check that they don't move too fast, many developing countries kept their currency fixed to the US dollar. No general rule that is applicable to all ♣ Most states went into a floating exchange rate. ♣ Europe decided to work together, because they wanted a fixed exchange rate but it wasn't happening globally. o New Role for the IMF ♣ Monitoring function - not unusual for IOs. The information function is very important for IOs, and the IMF has the reputation of being a home for bright economists. ♣ Lender of last resort - loans to countries who are facing difficulties in international payments. ♣ The emphasis has shifted towards debt restructuring, as well as providing emergency loans. IMF plays a leading role in restructuring, for instance in the EU with Greece. Bring in international creditors that will help in an international crisis situation.

¬ The Road to EMU

o Stage 1 - 1990-1993. ♣ Total capital mobility - closer coordination and cooperation. Free movement of capital was realized in '90, was essential to have EMU. Capital owners can invest where they want. States still maintained capital control in the '80s, but hasn't been used since the '90s. o Stage 2 - 1994 - 1998 ♣ Convergence of economic and monetary policy ♣ Based on the convergence criteria of Maastricht - inflation, government deficit small, government debt low, keep exchange rates stable, interest rates low. ♣ The European Monetary System is important in the road to EMU - context to where exchange rate stability is to be achieved. o Stage 3 - from 1999 onwards ♣ Exchange rates were to be irrevocably fixed, and the Euro was to be introduced. Introduced in 2002 - notes and coins. Still had their own currencies for 3 years of this process, but still in this phase.

lecture 5 the doha round

o Stalled, meant to last until 2005 but negotiations stopped o 3 core issues that countries couldn't agree on ♣ Developing vs. Developed Countries - developing countries say that they are not given enough, they only have 5 more years to implement policies and that is not fair on them. ♣ Agriculture - most developed countries don't really want to liberalize it, don't want to lower tariffs because they often spend a lot on ensuring their own agricultural industries are strong. Developing countries say this is too hypocritical, and want them to start being more cooperative ♣ Pharmaceutical and intellectual property - talking about very important drugs that are available in developed countries for a reasonable cost but are sold in developing countries at inflated prices. In India, they have created another industry and just copy the patents so that they can sell them at a fair price. The developing countries say that they won't because their people are dying o At the Bali Ministerial Declaration in 2013, they agreed to the removal of some bureaucratic agreements to make sure that agreements can go through quicker. Thought it might be a sign that progress hadn't stalled, but nothing has happened since

henning ¬ ECB Responses to financial crisis

o Standard Measures ♣ Refinancing operations ♣ Marginal lending facility ♣ Deposit facility of the bank, which define interest rates from private banks in the Eurozone. o Non-standard measures ♣ October 2008 - decided to meet the demands of private banks for liquidity in refinancing ♣ Refinancing arrangements for long periods ♣ Purchasing government bonds on the secondary market ♣ Loosening of the standards that apply to collateral. o The ECB monetary policy is limited by the treaties and the ECBs own rules, much remains subject to judgment and discretion. ♣ Buying bonds from governments in prohibited, but buying on the secondary market isn't. ECB will only do refinancing to solvent financial institutions. Solvency depends on an assessment of assets and liabilities on the balance sheets.

¬ Evolution of GATT

o Successful in convincing countries to reduce tariff barriers ♣ First round, agreed on 45,000 tariffs that impacts 1/5 of global trade. ♣ The 1967 round saw a 35% cut on 60,000 different products o Even though tariffs were reduced, new barriers to trade were created ♣ Nontariff Barriers - government subsidies, antidumping duties, government procurement rules and packaging and labelling rules. ♣ Started tackling these in 60s/70s, but not that successful. o Had a weak settlement dispute mechanism - they could make a judgement on issues between states, but it wasn't binding. o By the 70s and 80s the global recessions and rising unemployment rates made governments more protectionist and exploiting the GATT loopholes. o Uruguay round was the most ambitious in 1986. Lasted for 7 years. ♣ Continue to lower barriers to trade, produce agreements on services/intellectual property/agriculture. ♣ Was the largest trade negotiation in history, such a wide range e.g. toothbrushes, power boats and HIV treatment.

schmidt ¬ The Boltkestein Directive, 2004

o Targeting areas where there wasn't yet legislation - ended up targeting about 50% of all economic activities of member states with this. ♣ Exemptions of lotteries and all public services with zero profits (education, not health) o Member states had to mutually recognise services regulated in other member states as equivalent to other domestic services and abolish any other regulations.

Structural adjustment lendingIMF

o The 80s started with much high interest rates to try to reduce inflation, another oil price shock and a continued global recession. Developing countries were trying to borrow more to cope with higher import costs and less demands for exports as well as paying off existing debts. ♣ Because all debt was tied to the dollar, whenever the US raised interest rates the borrower faced massive growing payments. E.g. 1981 - Latin American countries were borrowing over a billion dollars a week to pay off debt. Mexico triggered a crisis in '82 as it said they couldn't pay off their debt, over 30 countries joined them in this. ♣ The IMF is the lead in debt rescheduling, world bank also played a role through the Structural Adjustment Lending program (SAL) - loans to help governments in the economy instead of projects. SALs increased a lot - issue with the IMF over turf, who's job should that be? o SALs are quite controversial - place more hardships on the country, especially the poor. Countries are required to reduce spending, slowing growth and increasing unemployment as well as cutting programs like education and health.

WB ¬ Governance Structure

o The Articles of Agreement of both the World Bank and the Fund were very similar ♣ Bank membership is open to countries in the Fund o Are linked for these reasons: ♣ Founders believed that stable monetary conditions, which were addressed by the Fund, were necessary for bank lending to be successful ♣ Fund membership required countries to take on certain obligations - such as rules on exchange rates - that weren't required to be a member of the Bank. o Both have a similar structure ♣ A board of governors - one from each member, usually the finance minister. Delegate authority to the level below. ♣ A board of directors - responsible for considering and approving loans and policies. ♣ Institution's Management o Both have a similar voting system - determined by the size of each country's capital subscription. ♣ US started with 37.2% of the vote at Bretton Wood as they were the biggest providers, currently at 15.99%.

WB ¬ Relations with the UN

o The Bank wanted to remain as independent as possible ♣ Didn't want to be involved in political issues, especially since they had a fragile relationship with Wall Street at the time. o Decided in 1947 that the IMF and World Bank should be called 'specialized agencies' of the UN. ♣ Both participate in some UN meetings ♣ Neither are beholden to the UN for financial support or approval ♣ Report annually to the ECOSOC. ♣ Cooperate with other UN agencies - UN Development Program and Food and agriculture Organization.

conclusion henning

o The ECB did not create the crisis, but it did use the crisis to achieve its own goal. Similarly, the member states attempted to use the crisis to extract monetary accommodation from the central bank. o The framework of the Eurozone means that countries will inevitably want to react differently in times of crisis, so therefore the incentive for governments to cooperate with the ECB were strong. But, the ECB reacted differently than the US, UK and Japan. o How they should have handled it - Eurozone governments could have indemnified the ECB against losses on bond purchases undertake for protecting the stability of the monetary union. o The rate of inflation - if governments had maneuvered the ECB into a monetary stance that was accommodating, rates would rise. But, according to the Harmonized Index of Consumer Prices (HIPC) they fell to 0.7%, far from the targeted 2%.

lecture 5 other dynamics besides WTO

o The OPEC countries are not integrated into the WTO, but they are still involved in world trade. o Increase in regional and bilateral agreements, since the 90s especially are increasingly avoiding the WTO and going for PTAs - preferential trade agreements. Not true that each country is being treated the same ♣ Result of the Doha Round - since they cannot agree within the WTO they have boycotted it. ♣ May have serious power implications, the power balance put on a bilateral scale make the influence different - the US is likely to have a lot more influence.

eagleton pierce Northern led management of the problem

o The cotton problem further exacerbated the problems of the Doha Round o At the Cancun Ministerial, the US wanted two things ♣ Elimination of subsidies and lowering market barriers, but didn't acknowledge that the problems were all caused by them - also spoke about the EU and China ♣ The USA moved to distort the C4 - said they didn't want cotton to be treated differently to other agriculture, and that the main issue the C4 had were their lack of technology was making them uncompetitive. o US tried to divide the cotton discussion into 'trade-related aspects' and 'development-related aspects', as well as putting it with the broader discussion on agriculture, so that discussions could start, but were closely linked to the US agenda ♣ Trade related - concerns about government measures ♣ Development related - financial and technical assistance o Why was this distinction accepted so early? ♣ US had more time, the C4 just wanted to see progress ♣ The blame was being re-centred and the responsibility was redistributed, considered equal to development, subsidies weren't seen as the problem anymore, very good for the US and EU. ♣ Opened the possibility for justifying the link of cotton to aid relations.

lecture 5 ¬ Institutional Power

o The most developed countries - the EU and the USA - have bought the most disputes. This means that institutional power is expensive - it is used mostly by the countries with the resources to bully others into liberalising their own markets. Not all countries have this opportunity. o The power dynamics perpetuate the issues of world inequality and dependency.

¬ Different types of economic policies:

o Trade - cross boarder exchange of goods and services, can be liberalised. o Factor Movements - the factors of production movement across boarders o Fiscal policy - do we cooperate in the fiscal policy sphere. Taxation cooperation is used in the EU o Monetary policy - how you regulate the amount and total volume of currency that is out there in the economy e.g. interest rates. It is a prerogative of the state. o Regulation - maintaining standards that, as a state, they want to be respected.

¬ Doha Round - launched in 2001 in Qatar. Is now stalled/dead.

o Trade can play a major role in economic development and the alleviation of poverty, created a work programme that would focus on agriculture, trade and environment/intellectual property rights. o Countries wanted too many different things - a gap between the developed and developing world, so negotiations collapsed in 2003. Some walked out, claiming the rich countries were not willing to compromise. o Why did it fail? ♣ 157 countries, too difficult to achieve consensus. ♣ Other crises have distracted negotiations e.g. terrorism, the 2008 crash ♣ In certain sectors, each state has a different opinion on how it should be liberalized e.g. agriculture. o Caused a lot of harm to the WTOs credibility as a negotiating form o Resulted in more protectionism and more trade agreements between only a couple of countries - PTAs ♣ Worry that PTAs mean non-members are left out, hurting their economy, but also potentially hurting consumers because they have less choice.

¬ Why did agreements fail before? WTO

o US and UK wanted to create an international trade organisation after WW2, but the proposed International Trade Organisation (ITO) never came into being because it wouldn't get enough support from the US Congress. ♣ Worry at the time was that economies were so reliant on protection that trade agreements would end up making putting the large powers against each other ♣ The ITO was very ambitious (section on employment rules) so seen as too restrictive and intrusive. ♣ Worried about dumping - markets outside of the domestic market would sell below market price so that when the tariff is imposed they're still cheaper. ♣ Beggar-thy-neighbour - when you increase tariffs there are retaliations from other countries, limiting markets.

Perspectives on the IMF

o Vreeland - the IMF is such a complicated institution because of when they are needed, and they always produce mixed results. For instance, they are good in lowering the balance of payments problem but not on promoting economic growth. o Barnet and Finnemore - when IMF policies fail, they tend to increase conditionality instead of decreasing it, which results in dysfunction because it is too much to manage. o Easterly - this top down approach means that they don't really know what is completely needed because they aren't on the ground. Over $2trillion has been spent on foreign aid by the West in the last 50 years, but there are still so many issues.

lecture 5 ¬ Is the prisoner's dilemma the best way of understanding?

o We make a lot of assumptions; no two players will have the exact same economies so the game shouldn't be perfectly symmetrical. o We believe free trade to be efficient, but is it really? Is it the best way when you bring power into things? ¬ Dependency Theory o Not all countries have the same position in the international system o We need to look at the global trading system as a whole, not all countries are born the same and not all goods are equal o There are a core of countries that produce high cost goods made by highly skilled labour that are exporting a lot to countries that mainly produce primary and secondary goods. Worry that the latter countries are too dependent on the industrialized core countries for their goods. ♣ Decolonization - majority of these countries are former colonies, still in a period on neo-colonialism

The European Economic and Monetary Union

o Werner Report 1970 - PM of Luxemburg at the time and in response to the summit of 69, the report moved toward economic and monetary union. ♣ Unification of both monetary and economic policy in general ♣ Monetary Union - Convertibility, completely and irrevocably fixed exchange rates. Total capital mobility and possibly a single currency. • Single currency is not the most decisive step, have to move towards that with other things first. • Community system for the central banks ♣ Economic Union - harmonization and finally unification of economic policies. Also need a centre of decision for economic policy that is politically responsive to the European Parliament. ♣ Three-stage process to reach Economic and Monetary Union by 1980 ♣ Attempts to stabilize exchange rates failed - proved to be too difficult. Very far from the goal of completely and irrevocably fixed exchange rates ♣ Therefore, the Werner Report didn't really work, bought Europe no closer together than it was.

What is Monetary Cooperation?

o What is monetary policy ♣ Determining the money supply - usually done by the Central Bank. ♣ The economy has a certain aggregate value (GDP) and by issuing money a central bank creates the money that is representative of that value - there is no rule as to why $1 is worth $1, doesn't matter as much why the money supply is there, but simple aim is to not lose value. ♣ Controlling inflation vs. promoting economic growth. Money supply is somehow related to inflation, so by injecting cash into the economy you can stimulate growth. Often requested of central banks, but too much can be problematic o Fixed exchange rate systems ♣ Reduce commercial transaction costs ♣ Nice to know if the exchange rates are stable from a transactional point of view ♣ One of the problems is that it usually ties down monetary policy, which is the job of the central bank. When there is less demand for the currency, the value depreciates which shouldn't happen in a fixed exchange rate system so the central bank should get involved. ♣ You can now make forward contracts that mean you buy currency at a certain rate, irrespective of the future fluctuations. ♣ Since the 70s, there isn't really a fixed global exchange rate. What is the role therefore of the IMF - used to be the guardian of the fixed exchange rate. Now its role is • Provide harmonization • Lender of last resort • Harmonization

WTO criticism

o Whole range of critics and criticism - e.g. ♣ There policies are doing nothing in places where it is needed most ♣ It is too big with too much reach and influence ♣ Does too little in certain areas ♣ Been implementing policies corruptly to benefit the few, and therefore inequality has increased

eu as a regular state /deregulation

¬ EU as a regulatory state o Regulation is the key mode of governance in the EU o Give a safe foundation on which to base transactions, monitored by a neutral. ¬ Deregulation? o Did the single market advance the cause of negative integration (removal of barriers) over positive (creation of new policies)? o You'd think that negative integration would be more dominant - firms would move to a place where regulations make it easier and cheaper to produce, but all states want to attract businesses so this would create a race to the bottom in theory. ♣ In practice, there has been a creation of high environmental and product standards, so therefore it is not just negative and positive integration. It has been more re-regulation than deregulation.

gutner ch 11 EMU

¬ Economic and Monetary Union o In 2003 France and Germany breached the Maastricht Treaty fiscal regulations, but in the end this meant that the regulations were relaxed. o Uses the idea with monetary policy that one size fits all, creates conflicting policy preferences.

gutner ch 11 EIB

¬ European Investment Bank - established by the 1957 Treaty of Rome to be the European Communities biggest long-term lending institution o Lend to public sector or large industrial companies to finance projects] o Lent 71.7billion euros in 2013, 90% of it foes to its member states.

¬ European Monetary System

¬ European Monetary System - end of the 1970s bought forward by the French and German o New effort to create reliably fixed exchange rates. ♣ Exchange rate mechanism - fixed but adjustable. Want the stability of fixed, but need to be able to adjust in case of major imbalances. The US was the anchor currency but with the ERM there is none, just a value of each currency against the other currencies, a more equal system. Nobody wanted to commit to a specific anchor. ♣ Credit facilities for defence of parties. Sometimes you won't have enough credit, but they set it up so you could take a loan to defend the exchange rate. ♣ European Currency Unit - the precursor of the Euro. An accounting unit - international money where the value is a basket of all the currencies of the member, with the amount of each one depending on their value. o Successful ♣ All Europeans prefer fixed exchange rates, but the same argument again is that there is an underlying want for stability which is further encouraged by the single market. ♣ Converging monetary policy preferences - towards monetary discipline. This kind of policy led to an increase in inflation. There was dissatisfaction from the people, so people went towards wanting the more rigid central banks like the German and Dutch, which helped to fix exchange rates across Europe. ♣ In the 1980s, the Bundesbank emerged as the anchor of the system - central German Bank - so you can see the realignment of the various central banks. All other central banks follow what it does - if they raise interest rates, all other banks will do the same within hours, have all followed the same lines since '85. This means you have to adjust economies less because there is less differences in the global economy.

IMF birth

¬ IMF - born at Bretton Woods to maintain the international monetary system. o Is now the most powerful source of lending to countries facing crisis. o 'doctor-patient' - treats ailing countries. o Does not make loans for projects, but makes arrangements to create economic stabilization. ¬ Birth o Created at Bretton Woods to tackle the imbalances over the war and interwar years. o When exchange rates are stable and predictable, consumers and investors have more trust in the economy, and negotiators at Bretton Woods wanted stability instead of, like how in the past, in times of crisis countries devalue their currency to be more competitive - a beggar-thy-neighbour policy. ♣ Created the collapse of the gold standard in the '30s as most industrialized countries all exchanged their currency for gold. ♣ At Bretton Woods it was agreed there needed to be a more flexible system, gold standard was too rigid and didn't allow for adjustment. o The new system involved fixing the US dollar to gold - $35 for 1ounce, but countries were allowed to adjust their exchange rates when necessary, but a change of 1% or more required IMF approval. ♣ Created stable and predictable exchange rates, so global trade was encouraged. o Was also created to lend money to states low on hard currency - running a trade deficit - so the IMF would give a short-term loan and the country could avoid restructuring its exchange rate. To make sure that these loans were repaid and being used properly, they came with conditions. ♣ Very controversial e.g. politically invasive, creating austerity in the country which may not be what they need. ♣ Starting adding up to 80 conditions at a time for developing countries in the 80s and 90s, but have cut back since.

gutner ch 11 ECB

¬ The European Central Bank - established in 98 by the Treaty of Amsterdam o Formulates monetary policy in the euro area, and a stable euro helps to stable prices and economic growth. o Main goals are price stability and low inflation o Countries in the Eurozone don't have control over their interest rates or exchange rate.

Schmidt The Conflict over the Single Services Market

¬ The internal market issue was politicised since the 2004 Services directive o Commission wanted to strengthen the internal market for services, not at the same level as goods even though it accounts for more of GDP, but was viewed as very highly redistributive. o Internal market policies are examples of increasing pareto-efficiency - taking advantage of economies of scale, and consumers get more choice.