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26 For and against RTAs The central economic question: do RTAs support a gradual and long-term increase in world trade (constituent elements) or do they tend to become obstacles to a further easing of trade barriers (stumbling blocks)? 28 The Role of International Economic InstitutionsThe main difference between international institutions and national governments is that the former have limited enforcement power ©. All rights reserved. 32 Criticism of international institutions International institutions receive three types of criticism 1. Sovereignty and Transparency – International institutions can violate national sovereignty by imposing undesirable national economic policies -Transparency concerns are based on issues relating to the decision-making mechanism within an international institution Copyright © 2011 Pearson Addison-Wesley. All rights reserved. 33 Criticism of international institutions (continued) 2. Critics of ideology argue that advice and technical assistance to developing countries are often a reflection of the prejudices and wishes of developed countries. 3. Implementation and adaptation costs – When agreements combining developed and developing countries are concluded, there are often asymmetries in the ability to absorb the associated costs that favour developed countries. Copyright © 2011 Pearson Addison-Wesley. All rights reserved.

3 Introduction: International Institutions and Issues Since World War II Institutions: Rules and Organizations That Govern and Behave Formal Institutions: Written Sentences of Rules That Explicitly State What Informal Institutions Are Allowed or Not: Customs or Traditions That Define Appropriate Behavior, but Without Law Enforcement Copyright © 2011 Pearson Addison Wesley. All rights reserved. 10 The IMF and the World Bank (continued) have their own currency, the so-called SDR, or the special drawing rights of a DSS based on a country`s quota and are part of its international reserves. 18 Regional Trade Agreements Regional trade agreements (ATRs) between two countries (bilateral) or several countries (plurilateral) are another important institution in the global economy, called the multilateral agreement, as it potentially encompasses all countries in the world. 20 Five types of regional trade agreements (continued) Economic union: a common market with coordination of macroeconomic policies (including the single currency, harmonization of standards and rules) Members of the United States By Canada European Union participating in the euro area, Copyright © 2011 Pearson Addison-Wesley. All rights reserved. 8 The IMF and the World Bank (continued) The most visible role for the IMF is to intervene by invitation for a nation when a nation experiences a crisis in its international payments. For example, if a country imports more than it exports, it may run out of foreign exchange reserves.

7 The International Monetary Fund (IMF) Founded by 29 nations (1945) at the Bretton Woods meetings between allies in July 1944 The IMF,184 members (2006) is the central monetary institution in the current international economy, the IMF`s financing is derived from its contribution, or quote (the price of membership) depends on the size of the member and the status determines the voting rights of the copyright member © 2011 Pearson Addison-Wesley.