Discuss the reasons why regionalism might assist or impede trade liberalization at the global level.
Regionalism can be examined as the development of a political or social system that is based on one area or more. There are so many reasons that are considered in finding out whether regionalism assists or hinder the liberalization of trade at the global level. Regionalism can act as a stepping stone and also act as a threat to trade at the global scale (Michaely, 2014). One of the facts that can be considered in figuring out the benefits that the process of regionalism offers is the sensitization of constituencies to liberation. The arrangement of the region to region trade will be an initiator in the dissipation of fear and reinforce the experience that those regions had before.
The examination of the regionalism on external trade liberations can be done with the use of MFN tariffs and bilateral preferences for different countries. With the consideration of these customs duties, it can be noted that the more the country reduce its multilateral tariff, the more it gets affected when the development of a nation is concerned (Pianta, 2014). It has been noted that over 200 regional trade agreements have been in force for the last ten years with the consideration that regionalism is the most preferred mode of liberalization. There have been concerns however due to the rise of regionalism, in that the preferential trading arrangement has been inimical to the world trade system.
Regionalism has been viewed as the building block that is used to free trade in places like Latin America. Preference has been associated with a higher decline in tariff. Regionalism may enhance external trade liberalization in global level (Pianta, 2014). For example in the developing countries, the regional agreement may serve as an enforcement mechanism for a broader reform package. Regionalism is what sets the stage for competition, high external tariffs, expensive trade diversion which will cause countries to liberate and it might have a similar product which might make it easier to liberate the others and liberate regionally and multilaterally.
Regionalism can be used to pave the way for global free trade. With the use of regional trade agreements that have continued to perforate as progress while others have slowed down. Free trade blocs that were formed as a result of the agreement like the North American Free Trade Agreement (NATA) and the customs union like the European Union (EU) have allowed the lowering of the trade barriers among the political allies and the neighbors (Regionalism in global trade, 2005).The agreement has also enabled the retainment of flexibility over which the liberation of the sector to negotiate.
World Trade Organization members have also allowed the exception for regional trade initiatives which would, in turn, assist the nation to work gradually towards a global free trade and allow the countries to increase the level of competition gradually by providing domestic industries time to adjust. Regionalism can also be useful as it can be used in valuable arenas and also by tracking volatile trade issues like the agricultural subsidies and the trade services (Regionalism in global trade, 2005). Political pressures and regional diplomacy can be used in cases of deadlock in the multilateral negotiations. Some economists have argued that regionalism is like a circle of free trade whereby it can expand, converge to form expensive multilateral agreements.
Complete Money Integration
Various advancements that have been made has shifted in considering that the monetary union is the best option in the generation of fewer costs and more emphasis on its benefits than it was earlier perceived. The balance of judgment has shifted towards favoring the monetary union. The monetary integration when applied can be used to solve a lot of economic entangles that engulf every nation globally (Lothian, 2006). The benefits be fitted to this include price and wage flexibility whereby when the nominal prices and wages become flexible between and within countries that are having a single currency, the transition towards their adjustment will be less likely to be associated with sustained employment in one country (Rose and Engel, 2002). There can also be mobility of factors of production including labor whereby the high factor market integration within a group of partners can reduce the need to alter the real factor prices and the nominal exchange rate between countries. Trade theory has been used to determine that the mobility of factors of production can be used to enhance both efficiency and also welfare.
Financial market integration can also result as a benefit which can reduce the need for exchange rate adjustments. It means that the borrowing from surplus areas or decumulating net foreign assets can be done and reverted when the shock is over. Financial integration is not a substitute for a permanent adjustment as it can only smooth the process (Bartolini, Hilton, and Prati, n.d.). Temporary financial flow can induce a postponement for real change and can render a more it more difficult at a later age. If not handled well, though, it can lead to destabilization capital movement.
Complete money integration can also cause diversification in products and consumption since it can correspond in imports and exports as it dilutes the possible impacts of shock concrete and any particular sector. The monetary union also cause the fiscal integration among different countries whereby fiscal transfer system can be utilized in the sense of creating a more adverse asymmetric shocks which might require less nominal exchange rate adjustments. Money integration can also be used to make sure that the political will is regarded as the most important reason towards the sharing of a single currency(Rose and Engel, 2002). It is because the political will can be able to enhance compliance with joint commitments that will see to it that cooperation on various economic policies has been made to foster institutional linkages. Similarities in political policies and attitudes among partners and countries are very relevant as it helps to promote successful currency area.
Although the benefits that are there are beyond comparison, the implications of the integration can be very outstanding. The fact that the weight assigned to particular group or sectors can only be filtered by specific national executives or central banks, organizations or coalitions might choose one arrangement over the other and enjoy individual settings (Bartolini, Hilton, and Prati, n.d.). The only limited menu of government can be allowed to be political actors. The supply and the alternative restrictions is also a challenge whereby the policies alternatives will be ruled off the agenda by the powerful intellectual and political consensus. The choices made are biased through the historical filters that emphasize certain economic risks rather than stressing on others.
The sense that single currency is considered as naive utopianism it implies that the resignation of the rights of the government to print their money means that the government stands to lose less and less. If the world were to use the same currency, there would be a significant challenge as there would arise a query on who would administer the central bank. Resistant from other global players would sink the project, and nothing would prevail.
Discuss whether a hegemonic leader is necessary for a stable international monetary and financial system to exist
Hegemonic can be examined as a one states holding a preponderance of power in the international relations systems whereby it allows it to be single-handedly dominant to the rules and the arrangements in which the political and the economic relations are conducted (Bartolini, Hilton, and Prati, n.d.). Hegemonic stability theory suggests that a hegemonic leader is necessary for a stable monetary and financial system to exist and if there is not one, the system will erupt into chaos. The attendance of a stable hegemon was associated with stability but when the hegemon was no longer able to live up to its role what followed were periods of uncertainty and volatility in the monetary and fiscal system.
Hegemonic stability can be examined from the neorealist or neoliberal way. Hegemon is considered to be the unquestionably great state in the global system which has to have the access to the critical raw materials, control primary sources of capital and comparative advantage. From the standpoint of neoliberal, the global hegemons have a requisite size of political, economic power that overpowers the collective action that generates the public goods. Hegemonic leadership supports institutionalized cooperation that creates sustainable, open international economy (International Monetary Fund, 2001). Hegemons encourage weaker states to join cooperative regimes so that things like transaction costs, uncertainty, and consistent expectation can be built.
The neoliberal and the neorealist hegemonic stability do not indicate that the domestic societal and political preferences for openness in trade and capital currency can be transmitted to the international political economy. For the stabilization of the world economy, there has to be something that acts as a stabilizer, and it insufficiently explains the variation in the global trade openness. From the historical perspective, some things need to be done so as to avoid some of the pitfalls that are made in the analysis of global hegemony (International Monetary Fund, 2012). Countries can be able to manipulate various economic and political resources so that they can construct and maintain the power base and the effectiveness of different tools which can vary in different times periods.
If the resources that are used can be managed wisely, it is possible to state and maintain hegemonic region for a long time. An example of the global hegemon is the Dutch Republic in the 17th and 18th centuries. It came with downward pressure on profit rates as the Dutch businesspeople that withdrew into finance and chose to become bankers of the world. In the seven years of war, the country remained neutral and as a result, they benefited from the rise in trade during the period, but it also requires massive credit operations (International Monetary Fund, 2012). It was at a time that the artificial credit in the economy had created a paper mountain of a size that was according to the exact calculations.
With both the essence of economic and political supremacy, the hegemonic leader began and would last almost a century. A key factor on the stable monetary and financial system that existed in that period was the presence of the gold standard which provided a solution to the exchange currency exchange whereby the Great Britain played a crucial role in enhancing its viability. If hegemonic is reassuring stability, then the absence of one is troubling. If leadership is lacking, then the world would suffer from the collective action problems where the state attempts to move the burdens of adjustment will be to change onto the others. If the change is made, it might turn to be an aid in the generation of an atmosphere of suspicion among states and can threaten any further cooperation.
The European Union is one of the examples of actors who are potential in becoming the future global hegemon which has a Gross Domestic Product that rivals that of America. The EU as it currently stands lacked the ability to be a lender of the last resort (International Monetary Fund, 2012). The national government in the Eurozone issue the debt in a currency in which they have no control over their activities as they will have no enough cash available to pay...
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