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International political economy and the relevance of the liberal approach
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International political economy and the relevance of the liberal approach today
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Free trade is a system which allows businesses in different nations tofocus on the production and marketing of goods that make the best
use of their resources, as well as import goods that are inaccessible
to them domestically. This is done with virtually no tariffs, trade
barriers or exchange prohibitions, and this mixture of foreign trade
and local production enables economies to grow quickly and meet
consumer needs better (Investopedia, 2023). According to Smith, in
his book ‘The Wealth of Nations’, (1776), “the pursuit of individual
interest serves society’s interests rather than creating civil disorder”
(Balaam and Dillman, 2019, p11). On free trade markets producers
compete forcing them to charge reasonable prices and provide
quality goods to consumers. Producers will often struggle to charge
higher prices as buyers will want to push them lower, thus reducing
the risk of self-interest becoming destructive (Balaam and Dillman,
2019).
Unitary systems such as the European Union, the world’s largest
single market area, is an example of the success of the liberal
approach today. It dictates the trade policy between its member
states and arranges agreements on their behalf. Acting as a singular
entity enables the EU to be more influential in international trade in
terms of negotiations (European Commission, 2023). The open trade
policy is very important for European employment, in 2021 it was
estimated that at least 38 million jobs in the EU are supported by EU
exports, indicating a significant increase of said job by 11 million in
the last decade. French exports alone support approximately 658,000
jobs in other EU nations. In terms of exports to countries outside the
EU, its exports support nearly 24 million jobs (European Commission,
2021).
Another example is the World Trade Organisation, which is the only
international platform concerned with rules of trade between nations
in an effort to help producers, exporters and importers conduct their
business (World Trade Organisation, 2023). The development of this
organisation which was “founded on the liberal principles of free
, trade” (O’Brien and Williams, 2020, p14) has greatly aided the
development of the economies of less developed countries such as
Rwanda. The World Trade Organisation aims to create approximately
1.5 million jobs and increase annual export growth to 17% in
Rwanda, by 2024 under their National Strategy for Transformation.
So far they have managed to create 200,000 jobs in manufacturing
and agricultural services, each year. The World Trade Organisation
has helped Rwanda using the law of comparative advantage which
“suggests that nations specialize in and export what they are
relatively highly efficient at producing” (Balaam and Dillman, 2019).
This is shown in them shifting to activities such as mineral exploration
causing export performance in Rwanda to improve, and this has been
growing by approximately 17% each year. Economist David Ricardo
(1817) illustrated the law of comparative advantage, in the book ‘On
the Principles of Political Economy and Taxation’, using the example
that Great Britain should begin importing grains, as this was less
costly for them than producing a vast amount domestically (Balaam
and Dillman, 2019).
footwear and clothing has become cheaper by approximately 16% in
the last two decades (European Parliament, 2020). Due to the
intense demand for fashion in Europe the textile sector is thriving in
various developing countries such as Cambodia where the industry
makes up approximately 11% of its Gross Domestic Products, and has
created jobs for one million people, enabling many to exit rural
deprivation, thus reducing the number of Cambodians living in
poverty by 32%. The country has also experienced an, approximately,
7% increase in economic growth a year for the last 10 years.
(European Parliament, 2020).
Income is money that goes into households usually from wages and
payments and it is essentially an indicator of a persons day-today
economic resources (Keeley, 2015). Although the increasing
globalisation of industries, such as the textile industry, has greatly
benefited many economies its existence has also had dire
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