International Political Economy

What is IPE?IPE= 3 Areas

1. International Monetary System2. International Trade System3. International Investment & Finance

#1The International Monetary System

About the IMSAbout the IMS

Currency exchangeInt’l Monetary Fund (IMF)

StabilityGDP measures of monetary wealth

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Country GDP (IMF 2013) GDP per capita (IMF 2013)

United States (1) $16.8 T $53,101

China (2) $9.18 T $9,844

Japan (3) $4.9 T $36,899

Germany (4) $3.64 T $40,007

France (5) $2.74 T $35,784

India (10) $1.87 T $4,077

EU $17.37 T $34,280

China’s Income Distribution

http://www.theatlantic.com/china/archive/2013/09/mapping-chinas-income-inequality/279637/

IMS: InterdependentConnected

Income from exportsCurrency valueInterest rates

Currency exchanges2013- $5.3 T exchanged

http://www.economist.com/news/economic-and-financial-indicators/21586351-global-foreign-exchange-turnover

~$1.45 T/ per day60% of global capital through 4 cities

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#1 London

#2 NYC

#4 Paris

#3 Tokyo

IMS: GN DominationColonizationPost WWII US Goals

Avoid repeating Post WWI errorsGN currencies buy morePurchasing Power Parity (PPP)

Way to compare costSame goods in different countries

Big Mac index

Big Mac (ave. cost)

Could Buy Abroadhttp://www.economist.com/content/big-mac-index

U.S. $4.20 12,310 Big Macs

312,916 Big Macs in India

India $1.62 2,372 Big Macs 891 Big Macs in U.S.

#2The International

Trade System

About the ITSExchange of goods & services2 types of trade

1. Merchandise trade Primary goods

Raw foods, fuels, fibers, minerals, water

Manufactured goods Processed

2. Service trade¤

ITS: InterdependentGlobal trade flows

Who relies on what exportsOutsourcing

3rd partyOffshoring

Abroad Reshoring

Returning¤

Goods & Serviceshttp://www.bbc.co.uk/news/business-22093304

1913 $20 Billion= $55,000/ day

2013 $18.3 Trillion= $50 B/day

ITS: How States TradeBilateralChina- Japan, Canada- UK, US- EUUS- EU trade deal-- How does this deal affect

you?Cheaper shoesCheaper drugsEU cars cheaper, more available Dairy availabilityStandardize products

Headlights issueGas exports to EU

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ITS: How States TradeWhat’s up with cheesemakers?

Proprietary names When is ‘feta’ really ‘feta’?

EU demanding protection 145 food names

Often city, region originHow does/ could this proprietary issue affect

trade?Could stop trade agreements

EU- US TTIP pactViewed as trade barrier

Unless trademarked (ex.: Parmigiano Reggiano)¤

ITS: How States TradeMultilateral  Free trade agreements (FTAs)

NAFTA, APEC, proposed TPP Fight protectionism Challenges

WTO Dispute mechanism

Ruled on almost 450 cases Recent rulings

US wrongly imposed tariffs on steel from India, China

US wins complaint against Chinese tariffs on US cars

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Jeep Billboard in Shanghai http://www.nytimes.com/2014/05/24/business/wto-ruling-on-chinese-tariffs-on-us-cars.html?_r=0

ITS: GN AdvantageColonization

GS Primary goods Cash crops

Uneven tradeRising role of EEs

Bigger economy = more leverage¤

#3The International

Investment & Finance

About II & IFInt’l FinanceCountries’ ‘checking accounts’

DebitsCredits

About II & IFInt’l investment

Funds invested abroad

2 ways:1) Foreign Direct Investment (FDI)

MNCs Control assets $$$

2) Foreign Portfolio Investment (FPI) Stocks, bonds, etc. Earn dividends

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II & IF: InterdependentFDI, FPI WWIIU.S. MNCs

invest abroad after war

Most FDI China, USEEs, EUInvestment not

evenly distributed ¤

http://www.finfacts.ie/irishfinancenews/article_1026203.shtml

II & IF: GN DominationPost-WWII US hegemonyTop 500 MNCs 80% GNGross Corporate Product (GCP)¤

Rank

Country # of top 500 MNCs

1 US 132

2 China 73

3 Japan 68

4 (tie) France 32

4 (tie) Germany 32http://money.cnn.com/magazines/fortune/global500/2012/countries/Australia.html?iid=top3

Rank

Company

1Royal Dutch Shell

2 Exxon Mobil3 Wal-Mart4 BP5 Sinopec Group

6China Nat’ l Petroleum

7 State Grid8 Chevron9 ConocoPhillips

10 Toyota Motorhttp://money.cnn.com/magazines/fortune/global500/2012/full_list/index.html/

II & IF: GN DominationMNCs’ power

ShellGCP of $484.5 B in 2013= 25th state GDP

http://www.economist.com/news/finance-and-economics/21594476-scarce

Economic Sanctions

Economic Sanctions

What are they?Why are they used? EffectivenessSome examples

U.S. Cuba M23 U.K. Rwanda for M23 support Global, unilateral Iran

Nuclear weapons program¤

http://www.the-japan-news.com/news/article/0001214320

Iranian Sanctions‘Iranians Feel Sanctions Bite’What impact have sanctions had on Iran?

Cut business ties High unemployment Fewer w/ steady income Increased prices Shortages Can’t transfer $ Volatile prices Rial value decreased Trade $, buy gold Oil exports affected http://www.bbc.co.uk/news/business-19800532

Russian Sanctions‘Iranians Feel Sanctions Bite’What impact have sanctions had on Iran?

Cut business ties High unemployment Fewer w/ steady income Increased prices Shortages Can’t transfer $ Volatile prices Rial value decreased Trade $, buy gold Oil exports affected http://www.bbc.co.uk/news/business-19800532

Recap

# 1 What IPE ISIPE: 3 Sectors1. International Monetary System

Currency exchange

2. International Trade System Exchange of goods & services 2 types of trade

3. International Investment Foreign Direct Investment (FDI) Foreign Portfolio Investment (FPI)