JC History Tuition Online - What is the Generalised System of Preferences - Global Economy Notes

What is the Generalised System of Preferences?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Historical context: Disagreements over the MFN
Before the Generalised System of Preferences (GSP) was introduced in 1971, member nations in the developing world had concerns over the “most favoured nation” (MFN) concept. In particular, these countries argued that the MFN disincentivised more advanced counterparts from supporting tariff reductions and eliminations.

The most-favored-nation (MFN) clause embodied in article I of the General Agreement on Tariffs and Trade (GATT) was the defining principle for a system that emerged in the post-World War II era, largely in reaction to the folly of protectionism and managed trade that contributed to the global economic depression of the 1930s.

An excerpt taken from “Trade Preference Erosion: Measurement and Policy Response” by Bernard M. Hoekman, Will Martin and Carlos Alberto Primo Braga.

About the Generalised System of Preferences
In 1971, the GSP was introduced as part of the General Agreement on Tariffs and Trade (GATT). It functions as a system that grants products that came from developing countries lower tariff rates than those enjoyed under the MFN status. Ideally, the GSP was meant to boost export growth of developing countries and thereby advance economic development.

Unlike trading partners under the MFN status, the GSP features preferential tariffs that apply not only to countries with distinct historical and political relationships, but also to developing nations in general. Examples of such relationships can be observed in the case of US pro-trade policies with its Cold War allies in Asia, such as Japan.

Japan’s GSP
On 1 August 1971, Japan established the GSP, a month after the European Community had done so. The GSP scheme featured two regimes, namely the general preferential regime and a special preferential regime. The first type applies to preferential tariffs on import of designated items that originated from GSP beneficiaries. The second type focuses on duty-free treatment granted to import of designated items that came from least developed countries.

In principle, GSP preferences are not granted in the agricultural-fishery sector, given the weak competitiveness of Japan’s domestic industries. Items that are covered under the GSP are enumerated in a Positive List. Safeguards enable the government to suspend preferential treatment for items on the Positive List under certain conditions.

An excerpt taken from “Trade Preference Erosion: Measurement and Policy Response” by Bernard M. Hoekman, Will Martin and Carlos Alberto Primo Braga.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Generalised System of Preferences have worked effectively in promoting trade liberalisation?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the steel trigger price mechanism - Global Economy Notes

What is the steel trigger price mechanism of 1978?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Reasons for problems of the global economy

Find out more about the protectionist policies set by past administrations in the USA that affected the steel industry [Video by MarketWatch].

Historical background: Intensified competition
In the post-WWII years since the 1950s, world steel exports have increased tremendously. Yet, the key exporter USA faced a decline. One possible reason raised by steel producers is traced to ‘dumping‘.

According to the Word Trade Organisation (WTO), ‘dumping’ refers to a practice in which the “price of a product when sold in the importing country is less than the price of that product in the market of the exporting country”. It is arguably a destructive policy that undermines the trading partner’s industry-specific interests.

Yet dumping is more often perceived as being harmful to the importing country. At its worst, price discrimination in international trade may be a weapon of economic warfare. An exporter may sell goods cheaply in a foreign market with the intent to drive out competition or to prevent the establishment of a rival industry. After competition has been eliminated, the exporter may raise prices to the detriment of the same consumers who had temporarily benefited from bargain prices.”

An excerpt taken from “The Reinstated Steel Trigger Price Mechanism: Reinforced Barrier to Import Competition” by Garry P. McCormack.

The ‘steel’ problem worsened as the world entered a decade of high oil prices in the 1970s. As a result of the twin oil shocks, inflation contributed to higher steel prices, which forced businesses to explore alternative materials like plastic and aluminum to replace steel in the production of appliances and cars. Consequently, the demand for steel declined.

As early as 1959, the United States imported more steel than it exported. By 1970, the U.S. share of world steel production had plummeted to 20 percent, down from 50 percent in 1945. Steel production then fell from 130 million tons in 1970 to 88 million tons in 1985.

An excerpt taken from “Understanding Globalization: The Social Consequences of Political, Economic, and Environmental Change” by Robert K. Schaeffer.

The Eagle Strikes Back: Steel trigger price mechanism
In response to the American steel industry’s claim that foreign producers were ‘dumping’ steel in the US market, the Carter administration introduced the trigger price mechanism (TPM) in 1978. The TPM sought to identify steel imports sold at unfairly low prices, prompting legal intervention.

There were three aims of the TPM:

  • Support the enforcement of existing anti-dumping laws
  • Promote higher import prices and lower import volume to stimulate the domestic steel industry
  • Avoid the use of undesirable protectionist policies

True enough, the price of imported steel increased by 10% a year later. At the same time, US steel exports rose by 3.1 million tons and employment of steel workers increased by 12400.

Yet, there were shortcomings for the use of the TPM. One such consideration was the legality of selling steel below the trigger price, which led to a large influx of European steel in 1981.

It was legal to sell at less than the trigger price as long as steel was not sold at less than fair value. Apparently, many firms decided to do just that, as shown by the European requests for preclearance. Depreciation of European currencies relative to the U.S. dollar lowered European production costs relative to trigger prices. […] European Economic Community (EEC) steel producers increased their tonnage sold in the United States by 63 percent.

An excerpt taken from “Economic Commentary: The Steel Trigger Price Mechanism” by Gerald H. Anderson.

In January 1982, the Commerce Department processed 132 anti-dumping and countervailing duty cases filed by 7 domestic firms. Subsequently, the TPM was suspended. Notably, US protectionist policies took other forms as well, such as the imposition of steel tariffs under the Reagan administration.

What can we learn from this article?
Consider the following question:
– How far do you agree that the rise of trade protectionism was the result of American policies in the 1970s?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did the 1973 Oil Crisis affect the United States - Global Economy Notes

How did the 1973 Oil Crisis affect the United States?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Reasons for problems of the global economy

Learn more about the 1973 oil crisis that hit the USA adversely. [Video by WFAA]

Weaponisation of the ‘Black Gold’: Yom Kippur War
During the 1973 Yom Kippur War, the USA launched Operation ‘Nickel Grass’, which was a strategic operation to send military supplies to its ally, Israel. Between October and November 1963, the USA aided Israel to counter a coordinated attack from Egypt and the Syrian Arab Republic. Armed with Soviet weaponry, these two nations fought back after their defeat in the Six-Day War of 1967.

Neither as well known as the Berlin Airlift nor as large as Desert Storm, Operation Nickel Grass airlifted thousands of tons of materiel and restored the balance of power, helping Israel survive the Soviet-backed assault from Egypt and Syria.

[…] The Egyptian Third Army pretended to conduct exercises until the Israelis began to ignore their machinations. Choosing the most holy day in the Jewish calendar, Yom Kippur, the Day of Atonement, in hopes of catching the Israelis off-guard, the Egyptians attacked across the Suez Canal.

An excerpt taken from “Air Warfare: An International Encyclopedia” by Walter J. Boyne.

Viewed as an act of defiance, the oil-exporting Arab nations that were part of the Organisation of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the United States and other countries that helped Israel (such as Britain).

Four days after President Nixon’s authorisation of US aid to Israel, OPEC announced its decision to raise oil price by 70%, which was over $5 per barrel. Later, a total embargo on shipments of oil to the USA caused the oil price hike to $12 per barrel.

Oil shortage
By the summer of 1973, the USA experienced shortages of refined petroleum products, which were used extensively in activities such as refueling of automobiles. In response to the serious problem, the Emergency Petroleum Allocation Act (EPAA) was passed on 27 November 1973. The EPAA oversaw the control of oil prices and even rationing.

The retail prices of gasoline rose by 40% in November 1973. Long lines of cars were a common sight back then during the gas shortage. Gas stations revised their prices multiple times per day. Unfortunate drivers were met with signs that wrote “Sorry, No Gas Today” in the fall months.

On 17 March 1974, the Arab petrostates announced the end of the oil embargo against the USA. However, the economic repercussions were widespread. The 1973 oil crisis has caused prolonged economic stagnation. The American economy shrank by 2.5% and increased unemployment rate.

The American economy was shedding jobs at the fastest rate since the Great Depression. The deficit was climbing. Inflation had roared to life. Consumers were cutting back on spending. The export sector had slumped because of falling demand for American goods overseas. Factories were closing down. A noxious economic phenomenon known as “stagflation”—high levels of unemployment and inflation—had taken root. If relief did not come soon, feared some economists, then a financial catastrophe on a par with the Great Crash of 1929 could not be ruled out.

An excerpt taken from “The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East” by Andrew Scott Cooper.

What can we learn from this article?
Consider the following question:
– Assess the view that the 1973 oil crisis devastated the American economy.

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the Reverse Course Policy - Global Economy Notes

What is the Reverse Course policy?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Historical context
On 15 August 1945, Japan surrendered to the Allied Powers, thus bringing the Second World War to an end. Under the leadership of the Supreme Command for the Allied Powers (SCAP), General Douglas MacArthur, Japan underwent a process of social and political reform. The USA aimed to ensure that Japan would not endanger international peace and security.

For instance, SCAP broke up the business conglomerates, also known as Zaibatsus, which used to support Japan’s warmongering conquests in Asia. In 1947, a new Constitution was established, which included a noteworthy Article 9 that prohibited Japan from maintaining a military force.

The postsurrender instructions given MacArthur recommended dissolution of “large Japanese industrial and banking combines or other large concentrations of private business control.” This concern reflected the fact that some ten zaibatsu families controlled nearly three fourths of Japan’s industrial, commercial, and financial resources. Obviously, any program to curb this power and redistribute the “ownership and means of production and trade” required a tremendous effort and will.

An excerpt taken from “The American Occupation of Japan: The Origins of the Cold War in Asia” by Michael Schaller.

The Red Menace: Cold War tensions in East Asia
However, the rise of Communist China in 1949 as well as the start of the Korean War a year later provoked the USA. Fearing the fall of Japan to Communism, the ‘Reverse Course’ (逆コース, gyaku kōsu) policy was launched, which implied a shift in American policies towards Japan from demilitarisation to economic reconstruction and remilitarisation.

The onset of the Cold War altered U.S. thinking about Japan, which suddenly took on a new strategic significance, and a “reverse course” was initiated in 1947. […] Behind the reverse course were concerns about the spread of communism. Global politics once again conspired to intervene in Japanese politics. The victory of Mao Zedong’s communist forces over the Kuomintang (the nationalists) in 1949, the outbreak of the Korean War in 1950, and the Soviet Union’s grip on Central and Eastern Europe created concern in Washington that communism could spread to a weak Japan.

An excerpt taken from “Comparative Politics: Interests, Identities, and Institutions in a Changing Global Order” by Jeffrey Kopstein, Mark Lichbach and Stephen E. Hanson.

From then on, the Japanese economy recovered and soon became one of the most prominent competitors in the global markets. Its economic miracle was heavily studied by academics.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA played a paramount role in realising the economic miracle of Japan after World War Two?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - Golden Age of Capitalism Revisited - Global Economy Notes

Golden Age of Capitalism: Revisited

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

A remarkable phase for the world economy: The Golden Age
Initially, the economic conditions were dire. Critical infrastructure, such as factories, schools and hospitals, were destroyed by bombing campaigns. People starved as food was scarce. Unemployment rates were high, giving rise to strikes in parts of Europe. Governments were in need of monetary assistance to begin their post-war recovery efforts.

Against the Cold War backdrop, the USA stepped up and offered financial aid (e.g. Marshall Plan) to countries affected by WWII. While its financial support to countries was mainly for economic recovery, the USA also capitalised on its economic might to counter the encroaching influence of the Communists led by the Soviet Union.

Between 1945 and 1973, the global economy grew rapidly. Many countries achieved pre-war industrial levels by the 1950s. In addition, the advent of international trade accelerated growth of the world economy.

Between 1950 and 1975 income per person in the developing countries increased on average by 3 per cent p.a., accelerating from 2 per cent in the 1950s to 3.4 per cent in the 1960s. This rate of growth was historically unprecedented for these countries and in excess of that achieved by the developed countries in their period of industrialization.

An excerpt taken from “The Golden Age of Capitalism: Reinterpreting the Postwar Experience” by Stephen A. Marglin and Juliet B. Schor.
Table - Golden Age of Capitalism - Maddison 1982
Table depicting the upward growth trend after World War Two [by Stephen A. Marglin and Juliet B. Schor].

Keep moving: The rise of automobiles
During the ‘Golden Age’, many American households reaped the benefits of post-war economic advancements. It became a norm for each household to own an automobile. Interestingly, Elvis Presley purchased a pink Cadillac in 1955. The Cadillac represented pinnacle of American automobile production.

The 1950s are seen by many as the “golden age” of the automobile in America, with absolute and per capita car sales hitting new heights, styling on a rampage, and the auto becoming a part of every aspect of American life, with drive-in restaurants, movies, churches, and funeral parlors.

[…] The post-World War II period also marks the beginning of a series of studies that attempt to analyze the hierarchical organization and managerial techniques that have been and are being applied in the automotive industry.

An excerpt taken from “The Automobile in American History and Culture: A Reference Guide (American Popular Culture)” by Michael L Berger.

The OECD: Club of the Rich?
On 30 September 1961, the Organisation for Economic Co-operation and Development (OECD) was formed with the aim to promote economic progress and world trade. OECD members were considered advanced economies that occupied most of the world’s Gross Domestic Product (GDP).

However, the growth of the global economy was not entirely smooth sailing. As the post-war allies of the USA recovered, notably West Germany and Japan, the open markets had intensified trade competition. These growing economies then challenged the economic supremacy of the USA in the 1960s.

One of several ironies in these developments was that they were led by Germany and Japan, former enemies of the US and its allies, who are now major challengers to US economic power and serious competitors in world trade. By 1960, Germany and Japan together accounted for only 6.3 percent of world trade, but by 1970, after a decade of unprecedented growth and export expansion, their share of world trade had increased to 18.8 percent. Over the same period the US share of world trade fell from 20 percent to 15 percent, a situation reflected by a rapidly growing deficit on its national trade account.

An excerpt taken from “Empire with Imperialism: The Globalizing Dynamics of Neoliberal Capitalism” by James Petras, Henry Veltmeyer, Luciano Vasapollo and Mauro Casadio.

What can we learn from this article?
Consider the following question:
– Assess the view that the first three decades after the Second World War was truly a ‘Golden Age of Capitalism’.

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.