Domestic sources of foreign policies

Domestic sources of foreign policies - aj Michael Hiscox...

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1 aj Michael Hiscox, “Domestic Sources of Foreign Economic Policies” Each government/country makes a different choice about how to manage its economy with respect to the global economy in terms of: o Position of national market towards international trade, sectors o International flows of investment o Migration of workers o Exchange rate and the national currency policies Our goal is to: o 1) Identify the policy preferences of different groups in domestic economy square4 How are people affected by their nations’ tie to global economy? o 2) Specify how political institutions determine the way these preferences are aggregated or converted into actual gov. decisions square4 How are political representatives elected and what kind of power do lobby groups yield? POLICY PREFRENCES People are fundamentally concerned about how different policy choices affect their income. They may also have non-material concerns (i.e. impact on environment, human rights…) Trade square4 Can be very controversial. Examples: o USA – NAFTA (North America Free Trade Agreement 1993) o European Union – Common Agricultural Policy o World Trade Organization Protests square4 Trade provides mutual gains, when countries exchange goods and services they’re all generally better off square4 Why so controversial? Because it creates winners and losers square4 Have lots of land [Australia/Canada] barb4right export agricultural products (wheat…) square4 Have lots of labourers [China/India] barb4right export things that require intensive labour (textiles, footwear…) square4 Have lots of capital [USA/Europe/Japan] barb4right export capital intensive goods (cars, pharmaceuticals…) o Import labour-intensive goods from locations with low supplies of capital compared to labour square4 Stopler-Sammuelson theorem (1941) o “Trade benefits those who own the factors of the production with which the economy is relatively well-endowed, and trade hurts owners of scarce factors.” o Owner of locally abundant factor barb4right OPEN TRADE o Owner of locally scarce factor barb4right PROTECTIONISM square4 (for example in US/Europe farmers have called for greater protectionism)
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