Class notes
IPE of Trade Lecture & Compulsory video's week 1 & 2
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Notes of the first two weeks of IPE of Trade lectures. Additionally, notes on the compulsory video and podcasts materials of week 1 and 2
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IPE of Trade College Week 1.V1. A brief introduction to the long history of economic globalization
Economic globalization:
- Trend towards the transnational integration of national markets economies through
integration of capital markets, integration of internationalization of firms and value chains,
growing labour mobility and increased trade (biggest focus of this course).
o Trade:
The cross-border exchange of goods and services
Can carry ideas, knowledge and culture.
• So not only the exchange of goods or containers themselves.
o So trade has also social and cultural implications
History of trade and economic globalization:
- Four periods:
o Pre-historic
Tribes exchanging products with each other. Levels of trade compared to
economic production were very low. This, as there was not much to be
traded as a result of absence of a production surplus. Most of what was
produced, was needed to survive (so no product for trade).
o Cradles of civilization
Technological innovations led to more efficient production of goods. So,
some people could dedicate themselves to something else than the
production of goods. Therefore, an agricultural surplus led to the possibility
of trade.
• This was mostly in the east continent.
o Pax Mongolica (“Silk Road”)
Refers to the Mongolian empire.
This started trade between the East and the West.
Also led to the exchange of social and cultural values and technological
developments
o The rise of Europe:
Around 1500/1600 Europe took off. Around 1820 Europe had become the
center of global trade, with the highest GDP per capita.
The rise of Europe also centered in the Netherlands, and even Groningen as
it was a member of the Hanze league. This was a very important part of
political and sociological development.
Another example, the Golden age in which a worldwide trading system
existed. VOC first international company.
- Over time, more and more surplus is created, and trade is becoming more and more
important.
- Overall, the levels of trade were lower than today. The main reasons:
o Although some places were able to produce extra, this surplus was still relatively
limited.
The basis for trade really started to take place around 1820: industrialization. This is where the
period of modern globalization starts. Mostly based on technological development, for example the
invention of the steam engine.
, Modern Globalisation:
- First period: 1820s – WW1: British Empire
o British dominated World Trade.
o There is great increase of trade (in the ages before the increase was very low).
o In WWI the increase broke down, back to before the industrial revolution
o After the war this restored.
- Second period: Post-WWII: (1950-1990s)
o Triadization of the world economy.
Focused on a tripartite: the US-EU-JPN
o This period was led by the US.
o There is a recovery to levels of trade that we had seen before, and even surpasses
those levels.
- This period: 2000s, “rise of the rest”:
o Defining features of this period:
Acceleration of technological change (internet!)
• Now much easier to communicate across borders!
Multinationals: from national to global champions (global value chains!)
• Companies are more and more based on global value chains.
o Parts are produced in several countries
Rise emerging markets
• Not only north-north trading patterns
• More and more trade is happening north-south and south-south
o Result of development of the emerging markets (e.g. China)
Growing importance of trade in services.
Causes of increases in trade flows:
- Technology:
o Lower transport costs
Steam-engine
o Easier cross-border communication
Telegraph/telephone/internet.
- Politics:
o Removal tariff barriers
o Signing of trade agreements
o Creation of international institutions that protect trade (GATT/WTO, EU Common
Market, NAFTA, CETA) and foreign investors (BITs Bilateral investment treaties)
- So political decisions have also been necessary for economic and trade development.
V2. The idea of free trade and the globalization debate
- Mercantilism (15th – 18th century):
o Protectionism is good.
o Emphasizes on national power, so international trade is a zero-sum game. Where
one state wins, another one loses.
o Famous proponents:
Friedrich List, Alexander Hamilton.
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