Notes global business E PDF

Preview

Summary

Download Notes global business E PDF

Description

Table of Contents BRETTON WOODS, IMF, World Bank...................................................................................1 GOVERNMENT INTERVENTION IN INTERNATIONAL TRADE.................................................4 REGIONAL INTEGRATION....................................................................................................6 INNOVATION, ENTREPRENEURSHIP AND ECONOMIC GROWTH...........................................7 BREXIT...............................................................................................................................9 UKRAINE WAR..................................................................................................................13 COVID-19 ECONOMIC IMPACT..........................................................................................13 SUSTAINABILTY.................................................................................................................22 POLITICAL INSTITUTIONS, ECONOMIC GROWTH AND DEMOCRACY..................................25 EXCHANGE RATES MATTER FOR TRADE.............................................................................27 EU AND COVID-19............................................................................................................31

BRETTON WOODS, IMF, World Bank The Bretton Woods Agreement and System Explained Approximately 730 delegates representing 44 countries met in Bretton Woods in July 1944 with the principal goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth. The Bretton Woods Agreement and System were central to these goals. The Bretton Woods Agreement also created two important organizations— the International Monetary Fund (IMF) and the World Bank. While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have remained strong pillars for the exchange of international currencies. 1 Though the Bretton Woods conference itself took place over just three weeks, the preparations for it had been going on for several years. The primary designers of the Bretton Woods System were the famous British economist John Maynard Keynes and American Chief International Economist of the U.S. Treasury Department Harry Dexter White. Keynes’ hope was to establish a powerful global central bank to be called the Clearing Union and issue a new international reserve currency called the bancor. White’s plan envisioned a more modest lending fund and a greater role for the U.S. dollar, rather than the creation of a new currency. In the end, the adopted plan took ideas from both, leaning more toward White’s plan. It wasn't until 1958 that the Bretton Woods System became fully functional. Once implemented, its provisions called for the U.S. dollar to be pegged to the value of gold. Moreover, all other currencies in the system were then pegged to the U.S. dollar’s value. The exchange rate applied at the time set the price of gold at $35 an ounce.1 IMF Activities

The IMF's primary methods for achieving these goals are monitoring capacity building and lending. Surveillance

The IMF collects massive amounts of data on national economies, international trade, and the global economy in aggregate. The organization also provides regularly updated economic forecasts at the national and international levels. These forecasts, published in the World Economic Outlook, are accompanied by lengthy discussions on the effect of fiscal, monetary, and trade policies on growth prospects and financial stability. Capacity Building

The IMF provides technical assistance, training, and policy advice to member countries through its capacity-building programs. These programs include training in data collection and analysis, which feed into the IMF's project of monitoring national and global economies.7 Lending

The IMF makes loans to countries that are experiencing economic distress to prevent or mitigate financial crises. Members contribute the funds for this lending to a pool based on a quota system. In 2019, loan resources in the amount of SDR 11.4 billion (SDR 0.4 billion above target) were secured to support the IMF’s concessional lending activities into the next decade.8 IMF funds are often conditional on recipients making reforms to increase their growth potential and financial stability. Structural adjustment programs, as these conditional loans are known, have attracted criticism for exacerbating poverty and reproducing the colonialist structures.9 Where Does the IMF Get Its Money?

The IMF gets its money through quotas and subscriptions from its member countries. These contributions are based on the size of the country's economy, making the U.S., with the world's largest economy, the largest contributor. How Much Are the IMF Grants?

IMF grants are given to charities in Washington D.C. and member countries. The grants are meant to foster economic independence through education and economic development." The average grant size is $15,000. What Is the Difference Between the International Monetary Fund and the World Bank?

The International Monetary Fund is primarily focused on the stability of the global monetary system and monitoring the currencies of the world. The aim of the World Bank is to reduce poverty across the world and strengthen the low- to middle-class populations. What Is the World Bank?

The World Bank is an international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement. The bank predominantly acts as an organization that attempts to fight poverty by offering developmental assistance to middle- and low-income countries. Currently, the World Bank has two stated goals that it aims to achieve by 2030. The first is to end extreme poverty by decreasing the number of people living on less than $1.90 a day to below 3% of the world population. The second is to

increase overall prosperity by increasing income growth in the bottom 40% of every country in the world. World Banks

Through the years, the World Bank has expanded from a single institution to a group of five unique and cooperative institutional organizations, known as the World Banks or collectively as the World Bank Group. The first organization is the International Bank for Reconstruction and Development (IBRD), an institution that provides debt financing to governments that are considered middle income. The second organization within the World Bank Group is the International Development Association (IDA), a group that gives interest-free loans to the governments of poor countries. The International Finance Corporation (IFC), the third organization, focuses on the private sector and provides developing countries with investment financing and financial advisory services. The fourth part of the World Bank Group is the Multilateral Investment Guarantee Agency (MIGA), an organization that promotes foreign direct investments in developing countries. The fifth organization is the International Centre for Settlement of Investment Disputes (ICSID), an entity that provides arbitration on international investment disputes. Examples of What the World Bank Does

The World Bank provides financing, advice, and other resources to developing countries in the areas of education, public safety, health, and other areas of need. Often, nations, organizations, and other institutions partner with the World Bank to sponsor development projects. Human Capital Project

In 2017, the World Bank created the Human Capital Project, which seeks to help countries invest in and develop their people to be productive citizens and active contributors to their economy.1 World leaders are urged to prioritize investments in education, healthcare, and social protections, and, in return, they will realize a stronger economy full of healthy, thriving adults. The Human Capital project outlines how governments should invest in providing quality, affordable childcare to support and improve child development, increase women's access to better employment opportunities, and increase economic growth, to name a few. To build human capital globally, the World Bank has identified several areas of focus: the Human Capital Index (HCI), measurement and research, and country engagement.2 Created in October 2018, the Human Capital Index summarizes a nation's investments in its human capital, specifically concerning health and education. The index is used to identify what is lost from the lack of investments in human capital; it also prompts leaders to think of how to remedy these deficiencies. Beyond analyzing human capital, the World Bank measures the effectiveness of a nation's educational and healthcare systems. Doing so helps them identify what should be continued and what should be changed. It can also give insight on where to allocate resources.

Country engagement requires a country to take a "whole government" approach to addressing factors that compromise human capital. The nation, its leaders, and influencers band together to champion reducing poverty and increasing shared prosperity. (INVESTOPEDIA)

GOVERNMENT INTERVENTION IN INTERNATIONAL TRADE Free trade among different countries offers many benefits in terms of business opportunities for the individual, building international relations, as well as economic growth for entire economies. So why would governments intervene by creating barriers, tariffs, and other obstructions to international trade? This is a topic that has many nuances and differs greatly from country to country. Still, there are many reasons (some unexpected) as to why governments intervene when it comes to international trade. In this article, we aim to give you a greater understanding of why governments intervene in international trade and some of the ways in which they do so.

What are the most common forms of government intervention in international trade? Import tariffs are probably the most common way in which governments intervene in international trade. An import tariff is a very specific tax that is placed on certain imported goods, thus causing these imported goods to cost more and disrupting the balance of international trade. Apart from tariffs, most governments also implement bans and restrictions on certain products. In the UK, bans and tariffs are quite minimal when compared to stricter companies. But it should be noted that you cannot import weapons, illicit drugs, rough diamonds and a few other products listed on the banned and restricted goods list.

What are some of the reasons for governments intervening in international trade? Some of the reasons that governments around the world intervene in international trade include: Protecting infant industries Tariffs and other forms of government intervention are often used to protect newly founded, local businesses from an already established international competition that may be selling similar products for lower prices. These tariffs encourage customers to support local businesses and give new businesses the time and opportunity to get their business off the ground. Without tariffs on international goods, many startups in the UK would fail entirely, and unemployment would surely increase. National defence Whether it’s a time of peace or a time of war, most governments make an effort to protect their own sectors of the economy that provide services critical to national defence and security. A government may impose heavy tariffs in an effort to protect and secure their own

domestic production of these products and services. Some obvious examples would include weapons, advanced electronics, aerospace, and strategic minerals. National security experts argue that a country should be completely self-reliant when it comes to its defence and security. Still, a smart move would be to stockpile weapons and resources in times of peace when they are cheaper. Employment rates No country wants to see its unemployment rates rise as it will raise levels of crime as well as general dissatisfaction. Governments should focus on creating an environment that maintains high levels of employment, as well as new employment opportunities being offered all the time. This keeps the economy healthy and promotes economic growth. If the domestic economy is struggling to compete with international competitors, a government may impose certain tariffs to direct consumer attention back to local businesses and therefore insulate and protect their own economy from outside competition. Environmental concerns Certain governments may implement tariffs on certain products that they feel are harmful to the environment or do not adhere to specific environmental standards. Imports, in general, may be subject to some sort of environmental tariff because of the environmentally unfriendly nature of importing and exporting goods (petrol, jet fuel, excessive packaging etc.). Aggressive trade There are many cases in which international competitors may use highly aggressive trade tactics such as flooding the market. This may cause domestic traders to be run out of business as international traders will get a foothold in the market share. Aggressive trade practices can happen quite unexpectedly and without warning. Governments need to put barriers in place to protect their economies from this sort of aggressive trade practice. Emotional argument Within certain countries, a purely emotional or sentimental argument is used for certain trade tariffs and barriers. A good example of this would be in China and Japan. Both countries have a strong cultural connection towards rice and believe that rice grown outside of their home countries is not right for the palates of its citizens. While this may not make logical sense to many, this argument is seen as acceptable to many. Throughout the world, many other countries use emotional arguments for bans on certain items or services. Canada places limits on international publishing, TV and bookselling, while India does not allow for outside investments in print media. And these are just a few examples. Consumer safety When you look at the list of banned and restricted import goods of any country, you should notice that most of the items listed are considered dangerous, such as guns, knives, and other weapons. Certain animal products, as well as products, made from endangered animals (such as ivory jewellery etc.), are usually also banned in an effort to prevent consumers from being a part of unwholesome consumption. There is also the concern of some animal products being diseased, and importing them runs the risk of having an outbreak. This is something that we need to be incredibly careful of in 2021. Medical drugs Each and every country will have their own list of what medical drugs require a doctor’s prescription and which can be bought over the counter. These lists will differ from country to country, based on what health professionals deem safe. In an effort to prevent overdosing and incorrect consumption of medical drugs (especially prescription drugs), bans and tariffs are often placed on medication, especially for individual orders and use.

Ensure that you are compliant When it comes to import and export, you definitely don’t want to dodge the system. In the times of the COVID-19 pandemic, the government is more strict than ever when it comes to movement of goods and also people. Don’t try to get around the tariffs or import/export illegal goods. The repercussions could affect your entire life. Nixon, R. (2021, July 27). Why governments intervene in international trade. Retrieved from https://realbusiness.co.uk/governments-intervene-international-trade

REGIONAL INTEGRATION Regional integration helps countries overcome divisions that impede the flow of goods, services, capital, people and ideas. These divisions are a constraint to economic growth, especially in developing countries. The World Bank Group helps its client countries to promote regional integration through common physical and institutional infrastructure. Divisions between countries created by geography, poor infrastructure and inefficient policies are an impediment to economic growth. Regional integration allows countries to overcome these costly divisions integrating goods, services and factors’ markets, thus facilitating the flow of trade, capital, energy, people and ideas. Regional integration can be promoted through common physical and institutional infrastructure. Specifically, regional integration requires cooperation between countries in: Trade, investment and domestic regulation; Transport, ICT and energy infrastructure; Macroeconomic and financial policy; The provision of other common public goods (e.g. shared natural resources, security, education). Cooperation in these areas has taken different institutional forms, with different levels of policy commitments and shared sovereignty, and has had different priorities in different world regions. Regional integration can lead to substantial economic gains. Regional integration allows countries to: Improve market efficiency; Share the costs of public goods or large infrastructure projects; Decide policy cooperatively and have an anchor to reform; Have a building block for global integration; Reap other non-economic benefits, such as peace and security. However, there are risks to regional integration that need to be identified and managed. Countries may have different preferences on priorities for regional integration, depending on their connectivity gaps, economic geography, or preferences for sovereignty in specific areas. Regional integration’s impact on trade and investment flows, allocation of economic activity, growth, income distribution are often difficult to assess. Lack of adequate complementary policies and institutions may lead to inefficient outcomes. For instance, policy barriers at the border may offset the gains transport infrastructure cooperation. Regional integration creates winners and losers, notably within countries. Policies and institutions are needed to ensure that regionalism is inclusive and social, environmental, governance risks are managed. The World Bank. (2022). Regional integration. Retrieved from

https://www.worldbank.org/en/topic/regional-integration/overview#1

INNOVATION, ENTREPRENEURSHIP AND ECONOMIC GROWTH Entrepreneurship is a blanket term related to starting a business. Howard Stevenson of Harvard Business School, for example, has defined entrepreneurship as the “pursuit of opportunity beyond resources controlled,” considering it as a kind of managerial approach rather than a specific time, like a business's creation, or a specific person within a business, such as its founder.1 While there are some complicating factors to the relationship between entrepreneurship, economic growth, development, and welfare, discussed below, the increase in economic growth from entrepreneurship is considerable. It is not, however, a magic bullet, and as discussed below broader economic conditions outside of entrepreneurship are important in determining whether economic growth occurs. Entrepreneurial efforts have forced new social, political, and economic changes, holding out the promise for new innovations that will address intractable social problems such as climate change and structural racism. Notably, however, the results can vary, sometimes not creating as much social justice or positive development outcomes as initially promised. Entrepreneurs and Economic Growth Innovation and entrepreneurs undeniably contribute to economic growth and they are a particular area of concern for policymakers.2 However, scholars say that the economic growth offered by entrepreneurship can be exaggerated. Growth from entrepreneurial activity doesn't occur evenly across sectors of the economy. Studies of economic growth have pointed towards an apparent paradox where productivity growth has been “at best modest in recent years,” despite the pervasiveness of innovation, entrepreneurs, and innovation ideology. According to research from the National Bureau of Economic Research, this is because innovation ...