-Emphasizes the role of the state in global affairs.

-Emphasis on the state's ability and willingness to intervene in the market in the pursuit of national interests

-neo-realism / neo-mercantilism

-Less confident that the state occupies such an exalted position in the international political community

-Liberals tend to focus on the limit of the states power and the tendency of states to redefine their national interests in context of changing international economic conditions

-Sees potential harmony

Absolute Gains

(liberal)

- argue that it is the international capitalist class that benefits

- working classes are the losers all around, particularly in less-developed countries

- actions or threats to disrupt economic exchange unless the target state modifies its behavior as demanded

- use of tariffs, quotas, and other restrictions on free trade usually fall toward the less severe end of spectrum

- economic warfare is extreme end

- use of sever economic coercion to change the behavior of an adversary

- usually accompanied by political isolation and sometimes the use of military force

- form of economic coercion and take the form of comprehensive or partial trade embargoes, bans on investment, and freezing of assests

- key issue as to whether economic coercion will work

- if target state can find substitutes for the items covered by the sanction regime, and can do so at acceptable cost, then economic sanctions will fail to change the target state's behavior

- state being punished must also be unable to find a substitute for the sanctioned item, in terms of either goods or market

- see industrial and technological development as boons for the state's military strength

- along with liberals they recognize that domestic economic priorities like employment and high living standards are increasingly seen as key elements of the "national interest"

- along with realists, they see more competition than cooperation when it comes to the pursuit of these national interests and are generally suspicious of arrangements that would undermine the sovereignty and capacity of the state to secure advantages for itself

- feeling compelled to have permanent armaments industry of vast proportions;

- can include politicians whose districts benefit directly from military spending and even labor unions whose memberships are employed disproportionately in the defense sector 

- when the commercial payoffs are considered so uncertain that firms are reluctant to invest resources in new areas that in the long run would benefit society

-sometimes causes government intervention

- policies in which the sole objectives of R&D programs pertain to military missions while commercial spin-offs are unintended and unanticipated by-products of those efforts

- R&D programs that concentrate on promoting technological and industrial advances in the commercial sector, which are then expected to have military applications (the military applications called "spin-ons" because originate in civilian economy

- shorthand for the essential trade-offs identified by critics of excessive military spending

- military spending being used as a counter-cyclical tool (fiscal policy where spend much $ on military - like did on public works during G.D)

- associated with advanced stage of capitalism in which industrial production, including defense production, is concentrated in relatively few hands

- tendency in this stage of capitalism for monopolistic firms to produce more than market demands 

- cancellation of major weapons program, or the closing of an entire plant or military base can mean laying off a large share of the local workforce

- this reverberates as shopkeepers and others who serve that community see the demand for their goods and services decline or evaporate altogether

- viewing government expenditures as a pie of relatively fixed size; larger military slice means a smaller slice for social programs like education, health, and welfare

- have to find balance

- countries that engage in innovations at the military-technological frontier (today's "smart" and "brilliant" weapons) and they have the military-industrial capacity to produce (and export) the entire range of weaponry

-U.S currently alone at furthest edge of frontier

- countries that are able to manufacture much of the most advanced weaponry available, but their capacity for military-related scientific and technological innovation is more limited

- can manufacture very good fighter aircraft, but do not yet produce stealth fighters; when they do they will be be based on U.S scientific and technological innovations from the 80's and 90's

- Britain, Germany, France

- states that rely more heavily on second-tier producers on imported technology, including weapons designs, and they are not capable of producing the same range weaponry (not that advanced)

- some of these nations are fairly active in international arms markets; China, Brazil, India, Israel

- actual or potential threats to national security exacerbated when states find themselves dependent on others for the implements of defense 

- staple of cold war

- continues to be a source of technological diffusion to the third-tier

- involves transfer of the rights and wherewithal to produce a weapons system or component originally developed and manufactured by a supplier

- increasing competition among first- and second-tier suppliers for business clients, buyers can demand this and other forms of military-technological transfer as a condition for their purchases

- dependent on others for some needs

- not able to produce everything you need

International Interdependence

2 parts:

1) Sensitivity 

-  sensitivity: international actors are sensitive to the behavior or other actors or developments in parts of the system

- states and other actors are sensitive when changes implemented or experienced by others cannot be ignored; they require some policy response

- degree of sensitivity depends on how quickly changes by one actor in one setting bring about changes in another and how great the effects are

International Interdependence

2 parts:

Part 2: Vulnerability 

- actors who are sensitive to external changes may also be vulnerable to their effects

- vulnerability is measured by the costs imposed on a state or non-state actor by external events, costs that the actor must absorb because it cannot pursue alternative policies that might minimize those costs

- points to interdependence as a constraint on states and therefore as potentially a very important source of conflict

- interdependence - especially if lopsided, making one party much more dependent than the other - can generate frustration and anger, as states hopelessly wish for past times when they were not inextricably linked with others and had greater freedom of action

Comparative Advantage: 

Prisoner's Dilemma

- choice between protectionism and free trade

- A erects trade barriers (protects domestic industry) and B does not, lets market remain open to A's exports

--> best outcome for A because able to screen dangers of free trade while getting benefits of expanded markets

- A and B both erect barriers, trade declines for both sides and potential for inefficiens increase because fewer opportunites to specialize in production

- A and B remain open, best outcome, both enjoy benefits of free trade and both can move resources around to their specialization and increase production

A/B open = 3,3

A/B barriers = 2,2

A open B barrier = 1,4

A barrier B open = 4,1

- gains from trade are easy to see, both states benefit from trade and come out about even.

- country A moves workers to its specialty (so produces less of other product - which is B's specialty) but trades the excess production of its speciality for country B's specialty

- economic policy minimizing trade in favor of domestic production of all goods and services required by society 

- not very cost-effective given the principles of comparative advantage

- policy of restricting, but not eliminating, imports in an effort to maintain or nurture - to protect - the economic viability of domestic industries

- protected for political and economic reasons

- taxes or duties levied on imported goods in order to raise revenue or to regulate the flow of foreign goods into a coutnry

- protect domestic industries, but can also be manipulated in an effort to influence trading partners

- tariff makes imported item more expensive to purchase and fewer will be sold relative to similar domestically produced goods

- Quotas control imports not through prices but through the amount of goods permitted to enter a country from a specific source for a specific time period

-subsidies and loans reduce the costs of domestic production

-boycott, states cease to buy goods, resources, or services of another state

-embargo, stops sales of economic items to another state, thus cutting off the state's supply of resources and products from outside

Collective Good

(public good)

- good that cannot be possessed or consumed exclusively by those who pay for it 

- provided through actions by individuals, once provided though, belong to the group

- are not possessed by individuals so cannot be consumed, transferred, or exchanged in the manner of private goods

Collective Good:

Jointness of Supply

Collective Good:

Nonexclusiveness

- jointly supplied good may either be excludable or nonexcludable

- cable signal is supplied to any one cable subscriber, the addition of new subscribers does not reduce the supply of the good.  But good is excludable because those who do not pay for the service are not hooked up to the cable and thus do not receive the service

- collective version of prisoner dilemma

- both A and B can work for good and both receive it

- A can work for good and B will still receive it (visa versa)

- both A and B don't work for good and neither receive it

- has to be a sacrifice by either one party or both in order for good to be received

- A can hurt B, but B can hurt A

- promotes something akin to "golden rule", circumstances are such that states can be expected to "do unto others" then cooperation becomes best strategy despite the temptation to defect

World Trade Organization

(WTO)

- successor to the GATT's de facto organization

- monitors compliance with the rules and procedures that emerged from Uruguay Round

- organization provides a forum for states to address issues relating to trade

- the chief decision-making body for reviewing trade policy and settling trade disputes between member states

-consists of midlevel representatives from all member states and meets regularly

- typically appoints a panel of experts to investigate the dispute, identify unfair trade practice (if exist), and indicate how those practices should be changed in order to comply with the rules

- 1st was creation of ECSC to coordinate coal and steel production by "Six" (F, WG, Belg, Lux, Nether)

- failed to create EDC (france)

- Treaties of Rome established EAEC and EEC but were only moderately effective

1960 European Free Trade Agreement formed

- 1986 signed Single European Act (SEA) and creation of common market became 1st priority

- 1992 12 EC signed Treaty on European union (Maastricht Treaty) 

- the Six were to first eliminate all tariffs between them and then adopt a common set of tariffs on imports from countries outside the ECC

- trade between Union has no tariffs, but have fixed tariffs for goods coming from countries outside union

- tariffs within the community would be dismantled, and without common tariffs imposed on imports from outside the community 

- Britain pushed for creation , but Six rejected

-British approached by 6 other countries (Aust, Den, Nor, Port, Swed, Swizz) and then formed the European Free Trade Area (EFTA)

- ensures that the core missions, policies, and structures of the EU as an organization reflect the interest of its sovereign member states

EU has 3 main decision-making bodies

1. European Commision

- main organ for proposing legislation and implementing policy

-first loyalty is to the EU itself

- Commission President who is also member of European Council can be very influential among European statesmen

European has 3 main decision-making bodies

2. Council of the European Union 

( Council of Ministers or Consilium) 

- enacts laws, often based on proposals from the European Commission, and is thus the EU's central decision-making authority

- states have different number of votes and most decisions require "qualified majority" of votes (3/4 of 345)

- unanimity is required on issues such as membership, taxation, and issues relating to foreign policy and defense

EU has 3 main decision-making bodies

3. European Parliament

- also involved in decision making process

- role was enhanced by Maastricht treaty and 1997 Treaty of Amsterdamn

- codecision procedure = Parliament can amend Commission proposals to the Council, amend or reject positions taken by Council, and confer with Council and Commission in conciliation committees when there are lingering differences in drafts

- European heads of state meet as European Council

- the highest political authority in the EU, its main role is to direct the community's evolving domestic and international agendas

European Court of Justice (ECJ)

and

Court of Auditors

- each consists of one official from each EU member state

- ECJ can sit as a "grand chamber" consisting of just 13 judges; on certain cases it may sit in chambers of 3-5 judges

- judgements are binding on member states and it is therefore another source of supranational authority in the EU

EU Supported By 3 Pillars

1) European Community Pillar

- consists of all arrangements that came before Maastricht treaty plus post-Maastricht revisions and reforms of the common market and the economic and monetary union

- also includes citizenship and immigration policy, social policy, and environmental law

EU Supported By 3 Pillars

2) Common Foreign and Security Policy

(CFSP)

EU Supported By 3 Pillars

3)Police and Judicial Cooperation in Criminal Matters

(PJCC)

- began functioning in 1999 at same time Euro entered circulation

- conducts European monetary policy in accordination with national central banks within the Eurozone

- consists of the Eurosystem plus the central banks of member states outside the Eurozone, whose monetary policies are less marginalized

- when economic shocks tend to affect the entire geographic region uniformly, they are not effected as much

- central authority need not weigh the economic needs of one region against another because have same currency therefore value is always uniform

- in comparative advantage prisoner dilemma - when both A and B put up barriers this is not good for trade, but how do they move toward free trade?

- assurance game says that both A and B will need some assurances that their cooperative behavior will be reciprocated

- the expenditure of resources required to negotiate, monitor, and enforce contracts

incurred in a purchase or exchange of goods when one or both sides to the exchange possess imperfect information about the other (not enough info as to whether opposing side is legit)

- ability to freely choose how to use or dispense with a particular good or service

- if A wants to sell DVD's to B, it wants to be confident that its intellectual property rights will be protected 

- if B has bootleg copies being sold then A has lost ability to fully exercise its property rights

- global and regional institutions like WTO and EU help reduce transaction costs and thereby encourage trade among their members

- they do this by providing information available on economic actors

- international institutions provide assurances that states need to move from suboptimal outcome of protectionism to optimal outcome of free trade

- the disproportionate concentration of economic flows or the coordination of foreign economic policies among a group of countries in close geographic proximity to one another

- GATT requires regional trade agreements not include provisions that raise barriers to trade with non-members

- also says that regional agreements should eliminate most restrictions on regional trade and that there should be substantial progress toward deeper economic integration

- not a collective good like free trade

- "club good" because the benefits are limited to those who do contribute by making the formal commitments required of parties to the organization's charter

- continuing advancement of technology has made the transnational movement of goods, people, and ideas increasing easy to accomplish

- national governments seem to be either less able or less willing to exercise control over the goods, people, and ideas that cross their borders

- trade = international trade constantly outpaces global production

- financial flows = growth in interdependence has been even more pronounced in recent years

- activities of MNCs = responsible for the growth in foreign investment

- "harmonization of economic institutions" = not only are more countries adopting free-market approaches to economic development, they are obligating themselves to this course by signing international treaties on trade, foreign investment, and currency convetability

Complex Interdependence

(3 things)

- refutes notion that only states count and points to the numerous other consequential actors and interactions that make up world politics

- suggests that there no longer exists a set hierarchy of internation issues dominated by the concerns of military security

- seems to preclude the use of military force among states whose societies are linked by a web of transnational relationships