JC History Tuition Online - What is NAFTA and what is its purpose - Global Economy Notes

What is NAFTA and what is its purpose?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the contributions of the NAFTA to the affordability of goods and services [Video by Vox]

The North American Free Trade Agreement (NAFTA)
On 1 January 1994, the NAFTA was signed by three members – the United States, Mexico and Canada. Its purpose was to eliminate tariffs between the signatories, facilitating market integration. Furthermore, the agreement required all parties to support the gradual elimination of trade barriers over a course of fifteen years to enhance cross-border investment and the flow of goods and services.

Before the signing, the Mexican government sought US investment in the wake of the Latin American debt crisis. In June 1990, Mexican President Carlos Salinas de Gortari and the American President George H. W. Bush announced the creation of a free trade area between the United States and Mexico.

Impacts on involved parties
It turns out that the NAFTA yielded tremendous benefits to the trading partners. NAFTA amounted to a $6 trillion economy with a population of 360 million. By 2004, the NAFTA area expanded to a $12.5 trillion economy.

Wonnacott believes, that in one important way, the NAFTA is superior to treaties like the GATT, which allows developing countries to maintain many of their own barriers to liberalized imports. The NAFTA has effectively told Mexico and other future participants that if they want to participate in the agreement, they must be prepared to remove their own trade barriers.

An excerpt from “Nafta As a Model of Development: The Benefits & Costs of Merging High-And Low-Wage” by Richards S. Belous and Jonathan Lemco.

From the US perspective, the NAFTA was seen as a significant step forward to achieve encourage international trade. The agreement was meant to be a signal to other participating members of the GATT to re-affirm their commitment to achieve freer trade.

I am gratified that, as Vice President Gore and Chief of Staff Mack McLarty announced 2 weeks ago when they met with President Salinas, next year the nations of this hemisphere will gather in an economic summit that will plan how to extend the benefits of trade to the emerging market democracies of all the Americas.

The United States must seek nothing less than a new trading system that benefits all nations through robust commerce but that protects our middle class and gives other nations a chance to grow one, that lifts workers and the environment up without dragging people down, that seeks to ensure that our policies reflect our values.

An excerpt from US President Bill Clinton’s speech on the NAFTA, 8 December 1993.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA played a crucial role in the resurgence of trade in the 1990s?

Join our JC History Tuition to learn more about the development of the global economy. Our H2 and H1 History Tuition classes are conducted online to broaden your knowledge of diverse issues and enhance your writing skills.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition Online - What caused Japan's lost decade - Global Economy Notes

What caused Japan’s Lost Decade?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the impacts of the ‘Lost Decade’ that led to the commercialisation of ‘closeness’ [Video by Polygon]

The geese ahead of the flock
Before the ‘Lost Decade‘, Japan’s economic progress have continued until it was the second largest in the world, after the United States. In fact, the ‘flying geese paradigm’ was used to refer to Japan as the frontrunner of economic development in Southeast Asia (contrast with the ‘Four Asian Tigers’).

The pattern was one in which first Japan, followed by its former colonies, achieved miracles of growth. They left such bastions of U.S. influence as the Philippines in the dust. South Korea, Taiwan, Hong Kong, and Singapore, followed by Thailand, Malaysia, and Indonesia were all members of Japan’s flock. Even China took its turn.

An excerpt from “How Asia Got Rich: Japan, China and the Asian Miracle” by Edith Terry.

Speculative activities: A growing asset bubble
After the Plaza Agreement was signed, Japanese Yen was twice the value of US dollar between 1985 and 1987, spurring speculators to plough their funds in assets and stocks. Additionally, borrowers could obtain funds from banks in Japan easily, fueling more speculative activities. Over time, stock and land prices surged.

Between January 1985 and December 1989 the real value of the Nikkei 225 stock price index tripled. By the middle of 1992, the index in real terms was less than 20% above its January 1985 level. Land prices have behaved similarly. An index of land prices in Japan’s six largest cities almost tripled in real terms between 1985 and 1990.

An excerpt from “Japan’s Bubble, Deflation, and Long-term Stagnation” by Kōichi Hamada, A. K. Kashyap, David E. Weinstein.

The Bank of Japan viewed the growing bubble as a threat. As such, it raised interest rates from 2.5% to 6% to discourage speculation. Consequently, borrowers were alarmed by higher interest rates as they anticipated their inability to finance their loans. Panic selling took place, causing the value of shares to plunge drastically.

By August 1990, the discount rate reached 6%. meanwhile, starting in 1990, the Bank of Japan sharply reduced the growth in the supply of money. Although Japanese officials were trying to engineer a soft landing by gradually deflating the speculative bubble, it burst with surprising speed. By October 1990, the Nikkei had fallen to nearly 20,000 yen. The price of real estate began its descent in 1991… Non-performing loans piled up at banks. Economic growth virtually ground to a halt, as it averaged only 1% per year from 1990-2003.

An excerpt from “Japan’s ‘Lost Decade’: Causes, Legacies and Issues of Transformative Change” by Miles Fletcher III, Peter W. von Staden.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Japanese government was responsible for the ‘Lost Decade’?

Join our JC History Tuition to learn more about the development of the global economy. We conduct H1 and H2 History Tuition Online classes, featuring thematic discussion and writing workshops.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition Online - What was the Plaza Accord - Global Economy Notes

What was the Plaza Accord?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Learn more about the economic challenges faced by the United States that prompted the Reagan administration to introduce the Plaza Accord of 1985 [Video by Danieljbmitchell]

New competitors; Trade deficits
Following the abandonment of the ‘gold standard’ in 1971, the United States (US) continued to experience severe trade deficits vis-à-vis Japan and West Germany. The Japanese Yen and German Deutsche Mark were relatively weaker than the US Dollar. This meant that these two advanced economies’ exports were cheaper than the American exports, fueling demand for the former group’s.

In the US, heavy manufacturers and automobile firms called for their politicians to embark trade protectionism. With American jobs at stake, the Reagan administration had to step in to manage this worrying trend.

At the beginning of the 1980s the American auto industry was reeling under pressure from foreign competition – deservedly so, as the quality of American-made autos from the Big Three was noticeably inferior to that of imports from Europe and Japan.

…Unable to meet this quality competition head-on, and having lost $4.2 billion in 1980, the Big Three American automakers pressed for the predictable solution: trade protectionism.

…After a heated debate at the White House, Reagan passively agreed to seek a “voluntary export restraint agreement” with Japan.

An excerpt from “The Age of Reagan: The Conservative Counterrevolution: 1980-1989” by Steven F. Hayward.

In addition to the voluntary export restraint (VER) with Japan that limited the number of imported automobiles, the US government oversaw the meeting with the G5 nations. The G5 comprised of industrialised nations, namely United Kingdom, Japan, West Germany, France and the US.

The Plaza Accord
On 22 September 1985, the G5 nations met at the Plaza Hotel in New York. At main outcome was the formulation of an agreement to depreciate the US dollar relative to the Japanese Yen and German Deutsche Mark.

The main purpose of the accord, however, was to address the United States-Japan trade imbalance by making American goods less expensive and Japanese goods more expensive, so that Japanese customers would buy inexpensive American goods and Japanese companies would have to raise their prices in dollar terms and therefore lose customers.

… The time from 1986 until the middle of 1990 in Japan is often referred to as the ‘bubble economy‘. This period saw massive expansion, primarily due to a rapid surge in domestic demand – a growth in capital investments and in personal spending. Stocks and real estate prices skyrocketed.

An excerpt from “Government, International Trade, and Laissez-Faire Capitalism: Canada, Australia, and New Zealand’s Relations with Japan” by Carin L. Holroyd.

Although the Accord did manage to reduce trade deficits, the repercussion on the Japanese economy was severe. As the Japanese Yen appreciated relative to the US dollar, individuals and firms purchased real estate and stocks, pushing up the prices artificially. Speculators used their newly-purchased real estate as collateral to buy more. Eventually, the expanding asset bubble burst, ushering the ‘Lost Decade’ in Japan.

What can we learn from this article?
Consider the following question:
– Assess the view that the Plaza Accord of 1985 was key in explaining the decline of the Japanese economy in the 1990s.

Join our JC History Tuition to learn how to write essays effectively. Our online learning classes are suitable for JC students taking either H1 or H2 History. We conduct thematic discussions and written practices to improve your reading, thinking and writing techniques.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - Why did Nixon abandon the gold standard - Global Economy Notes

Why did Nixon abandon the gold standard in 1971?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Let’s take a look at the implications of the collapse of the ‘gold standard’ on the US economy and the rest of the world [Video by Ampleforth]

An unsustainable model
Ever since the Bretton Woods system was established in 1958, the convertibility of United States (US) dollars to gold was fixed at $35 an ounce. Initially, the US government held nearly 75 percent of the world’s official gold reserves, instilling confidence in the global monetary system.

However, demand for gold increased in the 1960s when exports from Western Europe and Japan became more competitive with the US. Additionally, the large Cold War expenditures contributed to excess supply of US dollars in circulation.

The economy falters
In the late 1960s, the US economy was hit by the increase in inflation (5.4%) and unemployment (6%) rates. An unexpected phenomenon has occurred – stagflation, which meant a combination of slow growth and high inflation.

In order to fight stagflation, US President Richard Nixon addressed the nation on 15 August 1971, declaring the end of the fixed exchange rate system that underpinned the Bretton Woods ‘gold standard’.

The Bretton Woods system of fixed exchange rates based on the free convertibility of the U.S. dollar into gold, which had been showing signs of strain for many years, came apart entirely on August 15, 1971. President Nixon’s announcement that the U.S. would no longer sell gold at $35 per ounce effectively set the dollar afloat. By December 1971, the dollar had fallen about 6% relative to a multilateral trade weighted average of currencies, as the world groped for a new international monetary system.

An excerpt from “Economic Policy and the Great Stagflation” by Alan S. Blinder.

Bold actions
During Nixon’s historic speech on 15 August, he raised three points to protect the US economy – lower unemployment rates, curb inflation and minimise international speculation.

For the third point, Nixon claimed that the ‘gold standard’ was not sustainable as currency speculators have been ‘waging an all-out war’ on the US dollar even though it functioned as a ‘pillar of monetary stability’ on the global scale.

I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

… If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

The effect of this action, in other words, will be to stabilize the dollar.

An excerpt from a speech by Richard Nixon, 15 August 1971.

Nixon defended his position by asserting that the devaluation of the dollar was to ensure fair competition between the American workers and the rest of the world. Furthermore, he imposed a 10 percent tax on imported goods into the US as a temporary measure to protect domestic jobs.

Fragmentation of markets
In response, the European governments were taken aback by the policy shifts of the US government. On 10 September 1971, The New York Times reported that the imposition of tariff barriers may affect nearly 90 percent of the European exports to the US, amounting to $7 billion.

What can we learn from this article?
Consider the following question:
– How far do you agree that the collapse of the Bretton Woods fixed exchange rate system was a turning point?

Join our JC History Tuition to comprehend the complexities of the global economy. Our online learning classes are suitable for students taking either H1 or H2 History. In preparation for the GCE A Level History examination, we provide thematic revision and writing practices.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - The Japanese Economic Miracle Revisited - Global Economy Notes

The Japanese Economic Miracle: Revisited

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

Examine the post-war economic development of Japan. [Video by Documentary Tube]

A global economic powerhouse: Japan
From 1968 to 2010, Japan gained international recognition as the world’s second largest economy. Before the devastating ‘Lost Decades’ of the 1990s, academics have sought to figure out the key factors that explained the remarkable growth of Japan. Notably, the keiretsu is well-known contributor of Japan’s economic growth.

Keiretsu: The Japanese business network
After World War Two, the United States dissolved the family-owned conglomerates known as the zaibatsu. Then, six major keiretsu (commonly known as the ‘Big Six’) were formed, such as Sumitomo, Fuyo, Sanwa and Mitsui. The keiretsu comprised of a group of large companies that connected different entities in the production line, like the manufacturers and distributors.

Thus, the Keiretsu can also be seen in practice as the major force behind the transformation of Japanese society from a postindustrial into a postmodern society, in close cooperation with powerful political and social influences.

An excerpt from “Keiretsu Economy – New Economy?: Japan’s Multinational Enterprises from a Postmodern Perspective” by R. Kensy.

These large business groups form interconnected networks to involve banks and industrialists to compete with local and foreign rival firms. Over time, the keiretsu accumulated market share, contributing to their economic dominance in Japan.

By the early 1970s, Japan became increasingly known in the global trade scene, such as the automobile industry. With support from the Japanese government, the keiretsu manufactured goods that rivalled competitors like the United States.

The government essentially closed the domestic market to foreign competition, to allow home-grown enterprises time to develop and prosper. Japanese businesses took the form of a series of keiretsu, vertically integrated companies that straddled virtually every facet of the Japanese economy. And the keiretsu, such as Mitsubishi, Matsui and others, enjoyed unbridled growth during the post-war period.

By the early 1970s, Japanese car makers were dominating even the once immune US market. The Japanese economic miracle was in full swing.

An excerpt from “The Routledge Companion to Global Economics” by Robert Beynon.

What can we learn from this article?
Consider the following question:
– Assess the importance of the state actors in causing the economic miracle of Japan in the post-war years.

Join our JC History Tuition and learn more about the Global Economy (1945-2000). We have online learning programmes to streamline your study of the topics tested during the GCE A Level History examination. Also, you will learn to develop and refine essential reading and writing skills, such as question analysis and perspective setting for essay and source based case study.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - What caused the post-war economic miracle in Western Europe - Global Economy Notes

What caused the post-war economic miracle in Western Europe?

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

Learn more about the role of Ludwig Erhard, who was known as the architect of the German economic miracle. [Video by Public Broadcasting Service]

Picking up the pieces: Post-war reconstruction
By the time the World War Two had concluded, many European nations were badly damaged by the military campaigns, especially Germany. A 1953 United States report noted that the Allied bombing campaign in Dresden had destroyed at least 50 percent of its residential buildings and at least 23 percent of the city’s industrial buildings.

Government leaders sought to introduce domestic policies to re-build their economies. At the same time, they turned to foreign aid and assistance, such as the United States, to augment their post-war plans.

In this article, we will be examining the case study of West Germany. It is important to note that other parts of Western Europe also experienced rapid economic growth in the early post-war years, such as France (Les Trente Glorieuses).

Wirtschaftswunder: The German Economic Miracle
Enter Ludwig Erhard. From 1949 to 1963, Erhard assumed the role as Minister of Economic Affairs under Chancellor Konrad Adenauer to spearhead the post-war economic reforms in West Germany. Erhard embarked on a multi-pronged approach to revive West Germany’s economy.

For example, Erhard came up with the currency reform (Deutsche Mark) on 22 June 1948 to replace the old Reichsmark. The West German government also imposed price control measures to avert the hyperinflation and the expansion of a black market.

On 25 June 1948 currency reform was introduced in the Western zones. The old money would be exchanged at a rate of one-tenth of the new, though for a while the two currencies ran side by side. The SBZ (Soviet Occupation Zone) had been excluded from monetary reform because the Russians could not have been trusted to print the right amounts. By June 1948 Ludwig Erhard had made arrangements to print 500 tons of banknotes in the US and have them airlifted to Frankfurt. Virtually all rationing and price controls were abolished.

An excerpt from “After the Reich: The Brutal History of the Allied Occupation” by Giles MacDonogh.

As a result of Erhard’s guidance, the West Germany economy flourished. The Deutsch Mark had encouraged the citizens to use it as a new currency for consumption of goods and services. People reduced their reliance on barter trade and the black market. With greater access to essentials like food, the Germans increased their time spent on work. From 1948 to 1958, industrial production increased more than four times its annual rate.

Changing priorities: Foreign aid and assistance & the Marshall Plan
Following the United States Secretary of State James Byrnes’ speech on 6 September 1946, the Western powers changed its stance towards the West German zones, focusing on post-war economic recovery. They focused on the recovery of key industries that produced coal, iron and steel. The United States also announced the introduction of the Marshall Plan on 5 June 1947, offering financial aid to European nations for reconstruction.

The influx of Marshall Plan funds intensified the new faith in the Deutsche Mark and hastened the reconstruction of West German capital and fixed assets. Although the economy was still subject to various Allied controls and rationing, the West German people now possessed sufficient confidence in the economy to conduct normal business and participate in the free circulation of goods and money that is so critical to a healthy economy.

The combination of the currency reform, Marshall Plan funds, and the social market economy has been described as the foundation on which the expansion of the economic miracle was based. With the industrial boom prompted by the Korean War, the West German GNP (Gross National Product) gained 67 percent in real terms and industrial output rose by 110 percent between 1948 to 1952.

An excerpt from “Selling the Economic Miracle: Economic Reconstruction and Politics in West Germany, 1949-1957” by Mark E. Spicka.

What can we learn from this article?
Consider the following question:
– How far do you agree that the United States was chiefly responsible for the post-war economic miracle in Western Europe?

Join our JC History Tuition and learn more about the Global Economy (1945-2000). Our online learning programmes are effective in covering the key historical events through class discussions and writing practices. By doing so, you will develop the awareness to form persuasive arguments for the GCE A Level History essay questions.

We have other JC tuition classes, such as GP TuitionEconomics Tuition, JC Chemistry Tuition, JC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to find out more.

JC H2 History Tuition - What is the Mexican debt crisis - JC History Essay Notes

What is the Mexican debt crisis?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the former Mexican finance minister’s reflections on the Mexican Debt Crisis of 1982 [Video by CNN Business]

The Latin American debt crisis of the 1980s
The 1970s and 1980s were characterised by a series of devastating problems that hampered the growth of the global economy. Apart from the twin oil shocks in 1973 and 1979, a serious debt crisis affected developing nations, particularly in the Latin American region. This financial crisis was known as “The Lost Decade” (La Década Perdida) in Mexico and Guatemala.

An unsustainable growth: A sticky situation
Before the Crisis Decades, most developed nations took loans from the World Bank to finance their infrastructural development. In view of the first oil crisis of 1973, commercial banks received a large inflow of funds from oil-exporting nations, particularly petrostates that belonged to the OPEC (Organization of the Petroleum Exporting Countries). In short, petrodollar recycling was carried out.

However, the loans did not translate into profitable investment activities. Some of these loans were mismanaged. For instance, President Mobutu Sese Seko stored $5 billion in personal Swiss bank accounts, which amounted to Zaire’s total foreign debt.

Additionally, in response to the oil shocks, the USA raised interest rates in 1979. This proved disastrous to the debtor nations as their loans originated from Western commercial banks in the USA and Europe.

When Paul Volcker, head of the Federal Reserve, raised U.S. interest rates in 1979 to fight inflation in the United States, he did not intend to create a global debt crisis. But rising U.S. interest rates, and the rising London Interbank Offered Rate (LIBOR), which set interest rates for Eurodollar lending, greatly increased the cost of southern loans, most of them now tied to floating rates set by the United States or LIBOR.

Rising interest rates had two important consequences. First, they increased interest payments on accumulated debt. “Mexico’s interest bill tripled from $2.3 billion in 1979 to $6.1 billion in 1982… for the region as a whole, interest payments more than doubled, from $14.4 billion in 1979 to $36.1 billion in 1982.” …

A second problem was that high U.S. interest rates acted like a magnet, attracting money from around the world… Massive capital flight created several problems for Latin American countries: it deprived them of money they might have used to invest in their own countries, pay for imports, repay debt, and it eroded their country’s tax base…

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

The Trigger
In August 1982, the Mexican Finance Minister Jesús Silva Herzog announced that Mexico can no longer service its debt that amounted to $80 billion. Subsequently, other Latin American nations like Brazil, Chile and Argentina followed suit. Eventually, the International Monetary Fund (IMF) allowed sixteen Latin American countries to conduct debt rescheduling.

The threat of default by Mexico sent the first world bankers into panic. Many had lent more than 100 per cent of their shareholder capital to governments in Latin America and elsewhere. They knew that if the default was to be repeated across the developing world, it would lead to the collapse of the global financial system

IMF conditionality varied from country to country but generally contained a mix of the following policy ingredients: a cut in public spending, promotion of exports, the elimination of government subsidies, currency devaluation, privatization of state-owned enterprises, and the liberalization of foreign trade and investment…

This approach became known as structural adjustment and, over the course of the 1980s and early 1990s, most Latin American countries fell subject to IMF conditionality. The support for such policies from the US government and powerful institutions based in Washington, DC meant that the policy package became known as the Washington Consensus.

An Excerpt from “Latin American Development” by Julie Cupples.

What can we learn from this article?
Consider the following question:
– Assess the view that the Latin American debt crisis of the 1980s was a devastating problem that affected the global economy.

Join our JC History Tuition and learn how to write JC History Essays for topics like the Global Economy. Join our online learning classes and receive study notes for A Level History.

Besides, we have other JC tuition classes, such as GP TuitionEconomics Tuition, JC Chemistry Tuition, JC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. Call 9689 0510 to learn more.

JC H2 History Tuition - What is World Trade Organization and its function - JC History Essay Notes

What is World Trade Organization and its function?

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

Re-look at the contributions of the World Trade Organization ever since its inception in 1995 [Video by the World Trade Organization]

What is the World Trade Organization (WTO)?
The WTO is an inter-governmental organization that formalized international trade. Under the Marrakesh Agreement, the organization was formed on 1 January 1995, replacing the multilateral framework known as the General Agreement on Tariffs and Trade (GATT).

A Prelude to WTO: Trade Rounds under GATT
Before the WTO was established, GATT provided the essential guidelines on international trade from 1948 to 1994. During the Bretton Woods Conference, an International Trade Organization (ITO) was supposed to be formed alongside two other pillars (World Bank and the International Monetary Fund). Yet, the US Congress refused to ratify the Havana Charter. As such, the concept of an ITO was not realized.

Even so, GATT had played its part in promoting multilateral discussions. In the post-war years, GATT contributed to tariff reductions of nearly 8 percent on average till the 1960s.

1. Kennedy Round (1964-1967)
During the Kennedy Round, an Anti-Dumping Agreement was passed. ‘Dumping’ refers to an unfair trade practice in which a firm sell its exports at a price below the price set in the domestic market. The Act was recognized as a success, especially for developing nations.

Recognizing that anti-dumping practices should not constitute an unjustifiable impediment to international trade and that anti-dumping duties may be applied against dumping only if such dumping causes or threatens material injury to an established industry or materially retards the establishment of an industry;

Considering that it is desirable to provide for equitable and open procedures as the basis for a full examination of dumping cases;

An excerpt from the Kennedy Round.

2. Tokyo Round (1973-1979)
In the 1970s, the Tokyo Round was held with the intention to manage the imposition of non-tariff barriers (NTBs). Although participating countries managed to agree on the reduction of tariffs on industrial goods, they were unable to accept the use of plurilateral agreements (they are trade agreements between more than two countries).

The Tokyo Round also led to the adoption of a range of specific new disciplines. These included the legalization of preferential tariff and nontariff treatment in favour of developing countries and among developing countries.

Codes were negotiated on subsidies and countervailing measures, technical barriers to trade (product standards), government procurement, customs valuation, import licensing, antidumping (a revision of a Kennedy Round code), bovine meat, dairy products and civil aircraft…

By negotiating a code, like-minded countries were able to agree to new, legally binding commitments, without having all GATT contracting parties on board.

An excerpt from “The Political Economy of the World Trading System” by Bernard M. Hoekman, Michel M. Kostecki

3. Uruguay Round (1986-1994)
The eighth and final round lasted nearly seven and a half years. In the wake of the twin oil shocks of the 1970s, the Uruguay Round was held as the largest multilateral trade negotiation. The main purpose of the round was to reduce agricultural subsidies, introduce the protection of intellectual property and liberalise trade services in the banking sector. It was a tricky issue due to the sensitivity of the agricultural and textile sectors that affected many developing countries. Furthermore, the round dragged on due to the lack of consensus between the USA and European Union (EU) [also known as the “European Community”, EC] over the reforms to agricultural trade.

For much of the Round the USA and the EC held their own mini-round and their mutual intransigence, especially over agriculture and specifically a long-running dispute over oil seeds, stalled the Uruguay Round for some time. Completion of the Round was in the end facilitated by the so-called Blair House (Washington) accords…

Negotiations on agriculture were among the most contentious of the Round, the final Agreement on Agriculture seeking reforms for a ‘fair and market-oriented agricultural trading system’, but with special consideration for poorer countries and for non-trade concerns such as food security, environmental protection or schemes for diversification from narcotic crops and the like.

An excerpt from “The Free Trade Adventure: The WTO, the Uruguay Round and Globalism–a Critique” by Graham Dunkley.

The WTO
As the Uruguay Round concluded in December 1993, the Marrakesh Agreement was signed on 15 April 1994 by 123 participating nations. Officially, the WTO was formed eight months later, ushering a new era for international trade. The WTO replaced GATT as the institutional framework for trade.

1. The WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.

2. The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.

An excerpt from the Marrakesh Agreement – Article 3 “Functions of the WTO”, 15 April 1994.

What can we learn from this article?
Consider the following question:
– How far do you agree that trade liberalization was beneficial to the global economy from 1945 to 2000?

Join our JC History Tuition and find out more about the Bretton Woods System and other areas relating to the global economy. We provide summary notes for H2 History and H1 History as well as practices for essay writing and source based case studies. Attend our online learning classes to develop an analytical mind.

We have other JC tuition classes, such as GP TuitionEconomics Tuition, JC Chemistry Tuition, JC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. Call 9689 0510 to learn more.

JC History Tuition - What is GATT and its purpose - Global Economy Notes

What is GATT and its purpose?

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

Examine the history of the multilateral trading system, namely the GATT and the WTO [Video by the World Trade Organization]

Origins of a multilateral trading institution: ITO
Before the World Trade Organisation (WTO) was established on 1 January 1955, leaders from over 50 countries gathered during the “Bretton Woods” Conference and contemplated on the creation of an International Trade Organisation (ITO). Ideally, it was to be the third pillar of the Bretton Woods, together with the World Bank and the International Monetary Fund (IMF).

The proposed ITO was meant to promote world trade, cross-border investments and commodity agreements. Following the end of World War Two, more countries supported trade liberalisation. They sought to reverse the adverse protectionist stance since the early 1930s.

A by-product of failed negotiations: GATT
Amidst negotiations, 23 “contracting parties” signed the General Agreement on Tariffs and Trade (GATT) on 30 October 1947. GATT was created as a framework for international trade, taking effect on 1 January 1984.

The signatories were: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the United States.

There were three provisions:

  • Conferment of “Most Favoured Nations” status to other members
  • Prohibition of trade restrictions (except for emerging industries)
  • Elimination of import tariffs (by developed countries to support the admission of developing countries)

However, the path to institutionalise world trade proved difficult. Although the USA was one of the key advocates of free trade, the US Congress opposed the decision. During the fifth Session of the Contracting Parties, USA announced that the ITO Charter (Havana Charter) would not be re-submitted to the US Congress. From then on, the ITO did not take shape. Instead, GATT became the multilateral framework from 1948 to 1995.

Periodic Bargaining: Trade Rounds
From 1949 to 1973, the trade rounds were focused on reduction of tariffs. In 1964, the “Kennedy” Round took place and a noteworthy act was signed. The Final Act was signed by 50 participating countries that accounted for three-quarters of world trade. Concessions were estimated at $40 billion of trade value.

Following the admission of newly-independent countries (Recall: the Third World decolonisation in Asia and Africa led to the admission of new developing member countries into the UN), the GATT included its third provision to support developing countries. The Committee on Trade and Development was established to ensure that developed countries gave priority to the reduction of trade barriers to exports of developing countries.

Setbacks: The advent of “New Protectionism”
Although trade rounds were still being conducted from 1973 to 1993, the start of the Crisis Decades made it difficult for member nations to fully adhere to the provisions of trade liberalisation. Although economic integration enabled freer access of goods and services between countries, it also meant the intensification of trade competition from developed and developing countries.

For example, USA experienced severe and persistent trade deficits vis-à-vis West Germany and Japan. In response, USA introduced protectionist policies, particularly non-tariff barriers to shield its economy from the adverse effects of trade competition. For example, the “Voluntary Export Restraint” (VER) agreement restricted the quantity of Japanese automobile exports to USA in 1981.

The next phase of international trade: WTO
Trade negotiations during the Uruguay Round finally made progress. On 15 April 1994, the Marrakesh Agreement was signed, which led to the formation of the WTO that succeeded the GATT.

Developing nations demanded that VERs should be outlawed. Notably, this led to the creation of the Multi-Fibre Arrangement that accelerated the liberalisation of trade in the agricultural sector.

What can we learn from this article?
Consider the following question:
– How far do you agree that GATT was the main driving force that caused the liberalisation of world trade [to be discussed in class]?

Sign up for our JC History Tuition and learn how to answer A Level History essay and source based case study questions effectively. We also incorporate online learning features to diversify your study methods such that learning the historical developments is enjoyable and productive at the same time.

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JC History Tuition - What is the difference between World Bank and the IMF - Global Economy Notes

What is the difference between the World Bank and the IMF?

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

Learn more about the differing functions of the World Bank and the IMF [Video by CNBC International]

A confusing perspective: The World Bank and IMF
It has become a common issue for people to ask what are the defining roles of the World Bank and the International Monetary Fund (IMF). In fact, during the inaugural meeting of the IMF, the British economist John Maynard Keynes was confused by the names. He added the the IMF should have been described as a ‘bank’, whereas the World Bank should be recognised as a ‘fund’.

Let’s recap on the roles of the IMF and the World Bank separately.

#1. The IMF
From 1945 to 1971, the IMF was established for two key purposes:

  • Currency stabilisation through a fixed exchange rate system
  • Provision of short-term loans to finance balance of payment deficits

Currency stabilisation was achieved through the US Dollar (USD) that was pegged to the gold. From 1958 to 1971, the USD was fixed in value to gold at $35 per ounce. Then, all other foreign currencies were pegged to the USD. In other words, USD became the international reserve currency. As such, stable currency values ascertain prices, thus encouraging greater trading and investment activities.

As for the second purpose, the IMF held a pool of funds that nations could borrow from to finance their debts. This pool of funds was to be contributed by member states, including the USA. The correction of balance of payment deficits is critical in maintaining exchange rate stability as well. These conditional loans were given to countries that agreed to correct their trade deficits through policy adjustments like austerity measures.

#2. The World Bank
As for the World Bank, its immediate role after World War Two was to provide long-term financing for devastated nations to rebuild their economies. Formerly known as the International Bank for Reconstruction and Development (IBRD), the institution was initially backed by the USA. For instance, the Marshall Aid was given to Europe for post-war reconstruction.

By the 1960s, the World Bank was more involved in financing the infrastructure projects in developing countries to realise their economic potential. Following the decolonisation of the Third World nations in Asia and Africa, many developing countries were in dire need of these loans.

Changes in the functions of the IMF and the World Bank: 1970s
After the US experienced the twin deficits in the 1960s and realised that a fixed exchange rate system was unsustainable, US President Nixon announced the abandonment of the fixed exchange rates regime on 15 August 1971. From 1973 onward, the IMF focused its efforts in providing short-terms to correct the balance of payment deficits of member nations.

Also, it was involved in managing the Third World Debt Crisis of the 1980s. In 1982, the Latin American nations negotiated with both banks and the IMF for debt repayments. As a result, the ‘bail-out loans’ were introduced. Should the debtor nation agree to accept the IMF loan, the government must agree to conduct policies to achieve macroeconomic stabilisation, such as reduction in government subsidies (part of the austerity measures).

However, the IMF bail-outs had disastrous impacts on the debtor nations. Without government subsidies, many households were unable to cope with the high cost of living. In Bolivia, the price of bread rose four times. Living standards deteriorated significantly. On separate but related note, the ‘IMF bail-out loans’ were introduced to Thailand and Indonesia during the Asian Financial Crisis.

As for the World Bank, it expanded its lending role to include “structural- and sector-adjustment loans” in the 1980s. These loans were meant to facilitate economic reforms to support the heavily indebted nations in Latin America and sub-Saharan Africa.

What can we learn from this article?
Consider the following question:
– Assess the significance of the IMF and World Bank in contributing to the growth of the global economy [to be discussed in class].

Sign up for our JC History Tuition and review your comprehension of the Global Economy as well as other topics like the United Nations to be ready for the GCE A Level History examinations. We also conduct classes for students taking H1 History, which covers contrasting topics such as Superpower Relations with China and the Cold War in Southeast Asia.

Besides, we have other JC tuition classes, such as GP TuitionEconomics Tuition, JC Chemistry Tuition, JC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. Call 9689 0510 to find out more.