Global Political Economy (E049)

Course Organization

Time & Location:

Thursdays: 10:15 – 13:00 (see schedule below), SGAS

This is an interdisciplinary class open in priority to MIA students but also to graduate students from the economics and political science sections (depending on seat availability). The class will run on Thursdays from 10:15 to 13:00 for eight sessions on the following dates:

March 22 and 29
April 19, 26
May 3, 17, 24, 31

Professors:
Cédric Dupont, Professor of Political Science, IUHEI [CD]
Office: Rigot 34
Office hours: Tuesday, 10:30-12:00
Telephone: 022 908 59 50
Email: dupont@hei.unige.ch

Daniel Traca, Visiting Professor [DT]
(Professor, Solvay Business School, Université Libre de Bruxelles)
Email: daniel.traca@ulb.ac.be

Assistant:

Assia Alexieva
Office: Rigot 26
Office hours: Tuesday 14:00-16:00 and by appointment.
Telephone: 022 908 59 41
Email: alexiev3@hei.unige.ch

Course Description

This course will discuss key international political economic issues using a case based approach. Topics include the economic and political challenges of trade liberalization for both industrialized and developing nations, the role of natural resources and foreign direct investment in economic development, regionalism, global capital flows and financial crises, strategic trade and competition between major economic powers, as well as the emergence of China.

Requirements

Students will be required to work in small groups (2 persons) for that class as well as to participate actively in class discussions. They must do one oral presentation (on topics indicated in the assignment for each session) as well as write a 5000-word (about 15 pages double-spaced) group paper at the end of the term. The paper should focus on a topic not extensively discussed in class and should be chosen after discussions with the instructor(s). The final paper will account for 60% of the grade, the oral presentation for 30% and class participation for the remaining 10%.

Readings and Resources

The emphasis of the course is on discussions of specific policy decisions and strategies in connections with the evolving economic and political context in which they occur. It is therefore essential to do the readings before coming to class. To assist those who make oral presentations, we also provide a list of further readings for each of the sessions. The readings are assembled into a course reader to be pre-ordered and purchased at Imprimerie Minute. In addition to the core materials, the reader includes the ‘further readings’ that are difficult to access electronically. Those available online are not included in the reader, and can be reached either through the library’s journal portal or will be posted on the course website (password protected). The readings for Session 1 can also be downloaded from the website. Below we provide some additional references as well as useful websites.

Economics – References:

• Burda, M. and Wyplosz, C., Macroeconomics, A European Text (Third edition).
• Krugman, P. and Obstfeld, M. International Economics: Theory and Policy (latest edition).

Economics and International Political Economy – General Bibliography:

• Cohn, Theodore H. 2007. Global Political Economy: Theory and Practice. New York: Longman (4 th edition).
• Dicken, Peter 2007. Global Shift: Reshaping the Global Economic Map in the 21 st Century. London: Sage.
• Eichengreen, Barry 1996. Globalizing Capital . Princeton: Princeton University Press.
• Eichengreen, Barry 2002. Financial Crises . Oxford: Oxford University Press.
• Frieden, Jeffrey A. and Lake, David A. International Political Economy (latest edition)
• Grieco, Joseph M. and G. John Ikenberry 2003. State Power and World Markets . New York: W.W. Norton.
• Helleiner, Eric 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.
• Luttwalk, Edward 2000. Turbo Capitalism. Winners and Losers in the Global Economy . New York: HarperCollins.
• Ravenhill, John, ed. 2005. Global Political Economy . Oxford: Oxford University press.
• Spero, Joan and Jeffrey Hart 1997. The Politics of International Economic Relations . London: Routledge.
• Stiglitz, Joseph 2002. Globalization and its Discontents , New York: W.W. Norton.

 
Journals:

• International Organization
• The World Economy
• Review of International Political Economy (RIPE)
• Journal of Economic Perspectives
• World Development
• Journal of Common Market Studies
• Economic Policy
• Foreign Affairs
• Foreign Policy
• Third World Quarterly

 
Newpapers, Magazines:

• The Economist
• Financial Times
• Wall Street Journal
• International Herald Tribune
• Far Eastern Economic Review (for Asia)

 
International and Regional Organizations:

• Bank for International Settlements,
  http://www.bis.org/
• International Monetary Fund,
  http://www.imf.org/
• Organisation for Economic Cooperation and Development,
  http://www.oecd.org/
• UN Economic and Social Council,
  http://www.un.org/esa/analysis/papers.htm
• UNCTAD,
  http://www.unctad.org/
• World Bank,
  http://www.worldbank.org/
• World Trade Organization,
  http://www.wto.org/
• Asia-Pacific Economic Cooperation Grouping (APEC),
  http://www.apecsec.org.sg/
• Association of Southeast Asian Nations (ASEAN),
  http://www.aseansec.org/
• ASEAN Regional Forum,
  http://www.dfat.gov.au/arf/arfhome.html
• European Union,
  http://www.europa.eu.int/
• MERCOSUR,
  http://www.americasnet.com/mauritz/mercosur/
• North American Free Trade Association,
  http://www.nafta-sec-alena.org/

Course Outline

Session 1 (March 22): National Policies and Global Institutions – The Role of the WTO [CD]

Objective:

This session intends to discuss the role and impact of global trade regulation and associated mechanisms on national trade policies. The focus will be on the potential gains for weaker countries of the existence of the global legal frameworks as well as on its limits.

Plan for the class:

Assignments:

A strengthened dispute settlement mechanism has been considered as an important achievement of the creation of the WTO in 1995. It provides weaker countries with an opportunity to challenge bigger members and ensure that they respect their commitments. Yet in practice the mechanism has been used more often by the stronger than by the weaker, possibly reinforcing asymmetries and increasing the severity of constraints on developing countries. Based on the two case studies of “Bed linen for India” and “Dispute over the Indonesian Car Program” (parts A and B), Groups ?? and ?? prepare presentations assessing the pro’s and con’s for developing countries of being a member to the WTO, with a focus on their interactions with large developed countries.

Readings:

• Bown, Chad P. and Bernard M. Hoekman 2006. Making Trade Agreements Relevant for Poor Countries. Why Dispute Settlement is Not Enough. Brookings Global Economy and Development Working Paper #5
  http://www.brookings.edu/views/papers/200702bown.pdf
• The Indonesian National Car Program" (two parts)
  http://www.commercialdiplomacy.org/pdf/ case_studies/IndonesianCarProgram/casea.pdf
  http://www.commercialdiplomacy.org/pdf/ case_studies/IndonesianCarProgram/caseb.pdf
• Defending Market Access: Bed Linen from India
  http://www.commercialdiplomacy.org/pdf/ case_studies/bed_linen.pdf
• To access the cases, you must register (free) at: http://www.commercialdiplomacy.org/ ICDP_membersignup.php

Further Readings:

• Brown, Andrew G. and Robert M. Stern 2006. Global Market Integration and National Sovereignty. The World Economy 29(3): 257-279.
• Collier, Paul 2006. Why the WTO is Deadlocked: And What Can Be Done About It. The World Economy 29(10): 1423-1449.
• WT O 2004. “The Future of the WTO. Addressing Institutional Challenges in the New Millenium.”
  http://www.wto.org/english/thewto_e/10anniv_e/ future_wto_e.pdf

Session 2 (March 29): Regional integration: Opportunities and Risks [CD]

Objective:

This session intends to contrast global initiatives in trade with bilateral and regional alternatives. The focus is on Asia where there has been a rush toward the conclusion of bilateral free trade agreements in the last 6 years and on Europe where the regional snowballing effect has been the most spectacular.

Plan for the class:

Assignments:

As the prospects for a breakthrough in the Doha round of talks seem bleak, WTO members increasingly turn to preferential trade agreements at the bilateral or regional level. There is clearly some concern that this movement may undermine the stability of the global trade system. Based on the readings below, Groups ?? and ?? should assess whether: a) the European integration trajectory is reassuring for the future of global integration; b) whether regionalism in Asia is likely to follow a similar path and therefore has the same risks than the European process.

Readings:

• Baldwin, Richard E. 2006. Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade. The World Economy 29(11): 1451-1518.
• Sally, Razeen 2006. Free Trade Agreements and the Prospects for Regional Integration in East Asia. Asian Economic Policy Review 1(2): 306-321.
• Soesastro, Hadi 2006. Regional Integration in East Asia: Achievements and Future Prospects. Asian Economic Policy Review 1(2): 215-234.

Further Readings:

• Crawford, Jo-Ann and Roberto V. Fiorentino 2005. "The Changing Landscape of Regional Trade Agreements" WTO Discussion Paper No. 8 (2005), http://www.wto.org/english/res_e/booksp_e/ discussion_papers8_e.pdf
• Dupont, Cédric 1998. European Integration and APEC: The Search for Institutional Blueprints. In Institutionalizing the Asia-Pacific: Regime Creation and the Future of APEC , edited by Vinod K. Aggarwal and Charles Morrison, 351-384. New York: St. Martin's Press. (Available under additional materials - password required)
• Dupont, Cédric and David Huang 2007 “Containing the PTA Wildfire,” in China, Asia and the World Economy: New Powers, New Problems , edited by Barry Eichengreen, Yung Chul Park and Charles Wyplosz (Oxford University Press, forthcoming). (Available under additional materials - password required)
• World Bank 2005. Global Economic Prospects. Trade Regionalism and Development . Washington: World Bank. http://siteresources.worldbank.org/INTGEP2005/ Resources/gep2005.pdf

Session 3 (April 19): Global Capital Flows and Financial Crises [CD]

Objective:

This session intends to discuss the nature and intensity of interactions between borrowers and lenders in a financially integrated world. The focus will be on situations of ‘turmoil’ or acute crisis, with an analysis both of the road toward a crisis and on the reactions to it.

Plan for the class:

Assignments:

Sunshine on financial markets since 2002 has left the IMF without a major role and with looming budgetary problems. Yet, action may be needed at any time as markets can quickly change course. Recent nervousness in Thailand and on the Shanghai stock exchange may be forerunning signals. In that context, Groups ?? and ?? should prepare presentations assessing the predictability of market actors as well as the IMF role in anticipating or reacting to sudden market movements, based on past chain of events in two important countries, Brazil and South Korea.

Readings:

• Hardie, Ian 2006. The Power of Markets? The International Bond Markets and the 2002 Elections in Brazil. Review of International Political Economy 13(1): 53-77.
• Martinez, Juan and Javier Santiso 2003. Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies. International Political Science Review 24(3): 363-395.
• 'Managing the Asian Meltdown: The IMF and South Korea', Institute for the Study of Diplomacy, School of Foreign Service, Georgetown University, Case 235.

Further Readings:

• Bordo, Michael 2006. Sudden Stops, Financial Crises and Original Sin in Emerging Countries: Déjà Vu? NBER Working Paper Series , 12393.
• Cizre-Sakallioglu, Umit and Erinç Yeldan (2000). Politics, Society and Financial Liberalization: Turkey in the 1990s. Development and Change 31(2): 481-508.
• Duasa, Jarita and Paul Mosley 2006. Capital Controls Re-examined: The Case for Smart Controls. The World Economy 29(9): 1203-1226.
• Edwards, Sebastien 1999. 'The Mirage of Capital Controls', http://www.anderson.ucla.edu/faculty/ sebastian.edwards/for_aff.pdf
• Haggard, Stephan and Jongryn Mo 2000. "The Political Economy of the Korean Financial Crisis." Review of International Political Economy 7(2): 197-218.
• Wyplosz, Charles 2002. “How Risky is Financial Liberalization in the Developing Countries?” Comparative Economic Studies , June.
• ‘ Emergent Markets. The Global Gusher '. The Economist. Jan. 6, 2007

Session 4 (April 26): International Competition for Strategic Industries [DT]

Objective:

This session intends to discuss the concepts of strategic industries for economic growth, and the role of public policies. The focus will be Europe’s industrial policy efforts, with a special attention to the Airbus project, and its intended and unintended consequences.

Plan for the class:

Assignments:

In early March 2007, and in response to Union protests against the restructuring plan for Europe’s ailing aerospace giant, Airbus, talk of a renewed government support began to emerge among policy-makers (IHT, March 5, 2007). Groups ?? and ?? should prepare presentations highlighting the pro’s and con’s of renewed government intervention presented in the case, for France and Europe.

Readings:

• Villepin says state ready to boost stake in Airbus, if asked'. International Herald Tribune. Mar 5, 2007
• ‘ The Making of a Jumbo Problem '. The Economist. Nov. 9, 2006
• ‘Making sense of the Competitiveness Debate' Krugman, P. Oxford Review of Economic Policy, 12 (3). 1996
• ‘Strategic Trade Policy – Note' Daniel Traca, 2007
• ‘Who is Us?' Reich, Robert. Harvard Business Review. January-February, 1990.

Further Readings:

• ‘Who are EU? Ambiguities in the Concept of Competitiveness' Strange, S. Journal of Common Market Studies, 36 (1). 1998
• ‘State Aids: Making EU Policy Properly Reflect Geography and Subsidiarity' Besley, T. and Seabright, P. Economic Policy, 14 (28). 1999

And, for more on the Airbus saga:

• ‘Grey days '. The Economist. Feb. 28, 2007
• ‘Home and Abroad' . The Economist. February, 8, 2007
• ‘Set Airbus Free to Soar' . The Economist. Nov. 9, 2006
• ‘Super-jumbo trade war ahead '. The Economist . May 4, 2000
• ‘Reinventing Airbus' , INSEAD 1999

Session 5 (May 3): Industrialized Countries and the Emergence of Developing Nations [DT]

Objective:

This session discusses how globalization, in particular the accession to the global economy of several large, fast-growing, developing economies is affecting the economic systems of industrialized nations. We will discuss the gains from trade, but also the costs of free-trade. We will also assess the recent rise in outsourcing, and see what is different, from a historic perspective.

Plan for the class:

Assignments:

In January 2005, the textile markets of industrialized countries became open to exports from developing nations, with the abolition of the Multi Fibber Agreement negotiated in the Uruguay Round. A surge in exports from developing nations, particularly from China, unleashed complaints from trade unions and, as a response, the European Commissions DG Trade began to put pressure on China to lower its exports. After a few round of negotiations China acceded to EU demands and began imposing constraints to its exports to the EU. Groups ?? and ?? must present the pro’s and con’s of the imposition of trade barriers to Chinese exports of textiles, in light of the political, social and economic context of Europe.

Readings:

• ‘Rich Man, poor Man' . The Economist. January 18, 2007
• ‘In the Shadow of Prosperity' . The Economist. January 18, 2007
• ‘Does Third World Growth Hurt First World Prosperity? ' Krugman, P. Harvard Business Review. July-August, 2004.
• ‘Globalisation and the Reform of European Social Models' Sapir, A. Bruegel Policy Brief. November, 2005

Further Readings:

• ‘Globalization and Its Impact on Labor' Feenstra, R. Presented as the Global Economy Lecture, Vienna Institute for International Economics Studies. February 2007
• ‘Globalisation: the Great Unbundling(s)' Baldwin, R. The paper is a contribution to the project Globalisation Challenges for Europe and Finland, Prime Minister's Office, Helsinki, September 20, 2006
• ‘Will Global Capitalism Fall Again ?' Frieden, J. Brueggel Essay and Lecture Series. 2006
• ‘Fear of Service Outsourcing: Is it Justified ? Amiti, M and Shan-Jin, W. Economic Policy, 20 (42). 2005
• ‘Exploding the Myths of Offshoring' Baily, M. and Farrell, D. McKinsey on Economics. Jun, 2004

Session 6 (May 17): Constraints to Economic Development in Poor Nations [DT]

Objective:

This session will examine the reasons for the lack of economic growth in poor countries. It will assess the efforts undertaken historically to generate development, address their success or lack thereof, and discuss the way forward. We will focus also on the efforts by the World Bank and the IMF, and discuss the relationship between aid and development.

Plan for the class:

Assignments:

To support development in Africa and the achievement of the Millennium Development Goals, the UK’s Commission for Africa has called for an additional US$ 25 billion per year in foreign aid, to be implemented by 2010. Yet, many experts are critical of this effort. They argue that the recipe to promote growth requires a very different mindset from the traditional approaches supported by the Commission for Africa. The debate is epitomised by the dispute between Jeffrey Sachs and William Easterly, captured in some of the articles below. Groups ?? and ?? must present the pro’s and con’s of the implementation the extraordinary package of Aid for Africa argued for by the Commission for, in light of the evidence on the effectiveness of Aid and the current African context.

Readings:

• ‘Our Common Interest: A Report of the Commission for Africa' . Executive Summary and Part1: The Argument. Commission for Africa. March, 2005
  http://allafrica.com/sustainable/resources/view/00010595.pdf
• ‘The Utopian Nightmare' William Easterly. Foreign Policy, Sept/Oct 2005
• ‘Understanding African Poverty: Beyond the Washington Consensus to the Millennium Development Goals Approach' McCord, G; Sachs, J. and Woo, W. T. in Africa in the World Economy – The National, Regional and International Challenges, Fondad. The Hague, 2005

Further Readings:

• ‘Rethinking Growth ' Zagha et al. Finance &Development , Mar, 2006, 42 (1)
• ‘Making Aid Work' Heller, P. Finance & Development , Sept 2005, 42 (3)
• ‘Aid and Growth ' Radelet, S, Clemens, M. and Bhavnani, R. Finance & Development , Sept 2005, 42 (3)
• ‘Rethinking Growth Policies in the Developing World' Rodrik, D. The Luca d'Agliano Lecture. October, 2004.
• ‘The Primacy of Institutions' Rodrik, D. and Subramanian, A. Finance & Development , Jun 2003, 40(2)

Session 7 (May 24): Global Companies and Corporate Responsibility in Emerging Markets [DT]

Objective:

This session will examine how the reality of emerging markets poses a challenge to multinational corporations caught between the need for profits for their shareholders, the pressures to support global development, and government failures in poor countries. We will address the question of the social responsibility of global business, including its different approaches and their implications.

Plan for the class:

Assignments:

In 2001, Exxon-Mobil was caught in a bind on whether or not to start production from its oilfields in Chad. Environmentalists and development activist were arguing that Exxon’s effort would damage living standards and the environment in Chad. Others argued that the potential for increased revenue for such poor country could not be wasted, since this would give Chad a chance to provide for more of the basic needs of the population. Groups ?? and ?? must present the pro’s and con’s of going ahead with Exxon’s investment plan, focusing on the consequences for the company and the African country.

Readings:

• ‘Chad's Billion-Barrel Oilfield: From Rags to Riches?' INSEAD, 1999
• ‘Wealth and Ill-Health: The boom that only oils the wheels of corruption' . IHT, August, 2004
• ‘Managing Oil Wealth' Eifert, B. Gelb, A. and Borje Tallroth, N. Finance and Development, Mar 2003, 40(1)
• ‘The false Developmental Promise of Corporate Social Responsibility: Evidence from Multinational oil Companies' . Frynas, Jedrzej G. 2005. International Affaires, 81 (3).

Further Readings:

• ‘What Goes Up....' Barnett, S. and Ossowski, R. Finance and Development, Mar 2003, 40 (1)
• ‘Cursed by Resources or Institutions? ' Mehlum, H.; Moene, K.; Torvik, R.. World Economy, Aug 2006, Vol. 29 Issue 8
• ‘The curse of natural resources'. Sachs, J.; Warner, A. European Economic Review, May 2001, Vol. 45 Issue 4-6
• ‘Trappings of Power: Royal Dutch/Shell and Nigeria' in ‘Empires of Profit: Commerce, Conquest and Corporate Responsibility'. Daniel Litvin. Texere Publishing. London, 2003.
• ‘Saving Iraq From its Oil' . Birdsall, N. and Subramanian, A. Foreign Affaires. Jul/ Aug, 2004, 83 (4).
• ‘Marketers must seek their ‘Fortune at the Bottom of the Pyramid' Knowledge@Wharton, 2004 s

To be distributed in class but not included or mentioned in the readings:

• ‘Chad Tells 2 oil Firms to Pack Up'. IHT, August, 2006

Session 8 (May 31): Emergence of China and its Impact on the World Economy [CD]

Objective:

This session intends to discuss the impact of the emergence of China on the world economy. It will focus both on the macro-level with a debate on so-called global imbalances as well as on more specific developments at the sectoral level.

Plan for the class:

Assignments:

Is the entry of China into the WTO a kiss of death for the global economy? Much will depend on whether the “system” will be able to remain in balance or to remedy the current widely claimed imbalances. Based on the readings, Groups ?? and ?? should prepare presentations highlighting different scenarios for the world economy, with a specific focus on the biggest national economies in the developed and developing world.

Readings:

• Corden, Max. W. 2007. Those Current Account Imbalances: A Sceptical View. The World Economy 30(3): 363-382.
• Eichengreen, Barry and Hui Tong 2006. How China is Reorganizing the World. Asian Economic Policy Review 1(1): 73-97.
• Ianchovichina, Elena and Will Martin 2006. Trade Impacts of China's World Trade Organization Accession. Asian Economic Policy Review 1(1): 45-65.
• ‘ The Petrodollar Peg '. The Economist. Dec. 9, 2006
• ‘ Manufacturing in Asia. The Problem with Made in China '. The Economist. Jan. 13, 2007
• ‘ The New Titans. A Survey of the World Economy '. The Economist. Sept. 16, 2006

Further Readings:

• Rivoli, Pietra 2006. The Travels of a T-Shirt in the Global Economy . Hoboken (N.J.): Wiley (part II and III, pp 61-172).