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Discuss the main characteristics of international trade and economic relations in the post Cold-War era, with special reference to the role of international economic organisations.

During the Cold War, trade was restricted to being between the countries of the West or the countries of the East, or with the marginalised non-aligned. But the fall of the Iron Curtain at the beginning of the 1990s opened up the whole world to trade, and the victory of capitalism has given new impetus to free trade and less government intervention. The decrease in government involvement has increased the power and scope of economic organisations that operate on a global level. Technology has at the same time increased the pace of globalisation, shortening the time for information to flow and creating new trade opportunities. In order to survive in this globalised world, countries and organisations have been forced to cooperate and group together, changing the dynamics of trade relations from being bi-polar, to being between regional trade blocs.

There are many different players in the international trade system, from the small export and import businesses in countries to the huge multinational corporations (MNCs). Traditionally states were the most important regulators of international trade, defining the terms of trade, setting tariffs and quotas, and regulating business, however international organisations are increasingly taking over this role of the state. The major international economic organisations now filling these roles are the Bretton Woods organisations (World Bank, International Monetary Fund and World Trade Organisation), the multinational corporations and investment companies, and lastly the international criminal organisations.

The Bretton Woods organisations were created after the Second War World with the objective of maintaining the international economic system. The World Bank was created for funding reconstruction and development projects, and continues its role in funding third world development. It describes itself as “a development Bank which provides loans, policy advice, technical assistance and knowledge sharing services to low and middle income countries to reduce poverty.[1]” The International Monetary Fund (IMF) was established “to promote international monetary cooperation, exchange stability …; to foster economic growth …; and to provide temporary financial assistance to countries[2].” So where the World Bank generally deals with individual projects and specific development goals, the IMF deals with macroeconomic policy and states. The last of the three organisations took until 1995 to be formed. Although planned at Bretton Woods, the International Trade Organisation (ITO) never got off the ground and only a General Agreement on Tariffs and Trade (GATT) was accomplished. The Uruguay Round of GATT talks lasting from 1986 till 1995 eventually created the organisation to regulate global trade – the World Trade Organisation (WTO). In terms of the Bretton Woods organisations, the WTO is arguably the most significant in terms of the post Cold War economic system, since it is one of the few organisations that provides regulation at a global level. The WTO agreements have been created through negotiation, are enforced by the member countries themselves and have been ratified by the governments of all its members. Since the membership at the end of 2003 was 148 countries[3], these agreements regulate the majority of international trade. Initially the agreements covered mainly trade in goods (through GATT), but other agreement covering trade in services (General Agreement on Trade in Services – GATS) and intellectual property (Trade-Related aspects of Intellectual Property Rights – TRIPS) have been added. The WTO also has dispute resolution procedures and may perform trade policy reviews in countries.

Multinational Corporations (MNCs) and global investment firms are major actors in the international economic system – operating in several countries and with vast funds at their disposal they play a large role in international economic activity and are able to influence policy. In 2003 General Motors had a turnover of over $180 billion dollars[4], which is more than the GDP of Nigeria, and General Electric has assets of just under $650 billion dollars[5]. Companies like McDonalds, Nike and Microsoft operate in almost every country in the world and permeate our lives and our cultures. In the trade of capital, the global investment firms are the ones that move the funds around the global in search of the best returns. Smith Barney, the global private wealth management and equity research unit of Citigroup, manages $900 billion dollars worth of clients’ assets[6]. With revenue and resources that dwarf most developing countries, these MNCs are arguably more powerful than most developing countries.

The third major player is that of international organised crime. Estimates of the proceeds of international organised crime range from between $600 to $700 billion annually[7] to between $500 billion to $1 trillion dollars annually[8]. Although not part of the formal international economy, their money is laundered through the system, and the activities of these criminal organisations have a major impact and influence on international economic activity. Global criminal money includes drug money, terrorist funding, the personal stashes corrupt dictators, embezzled corporate funds, and funds of international crime networks (Chinese Triads, Mafia, etc). Since they are not constrained by any laws, regulations or borders, and with enough money to buy off any opposition, the criminal organisations are also finding a home in the new global world.

The end of the Cold War changed the dynamics of global interaction, the world moved from bipolar relations to multilateralism. This change not only affected political relations, but economic relations and trade. The end of the Cold War coincided with and created further opportunities for freer global trade – the ideologies of capitalism and liberalism had triumphed over communism and became the standard for trade relations. At the same time as the Cold War was ending, the information technology revolution was gaining momentum – international communication, and therefore international trade too, was becoming easier, cheaper and faster. Better information and communication means that capital and resources are easier to control and manage, no matter where in the world they are. No longer constrained to being with the West, with the East or part of the non-aligned, countries have formed new groupings and larger regional trade blocks. Furthermore, the Uruguay Round of talks that resulted in the WTO being created, were ongoing at the time. These three things define economic relations in the post Cold War era – liberalism, information and communications technology, and increased multilateralism and international cooperation.

A lot of emphasis has been placed on trade and economic liberalisation. The Bretton Woods institutions advocate and encourage freer trade between nations and liberalisation of economic policies. One of the prime functions of the WTO itself is to encourage freer trade, because “liberal trade policies … sharpen competition, motivate innovation and breed success.”[9] MNCs and investors encourage liberalisation through a process Thomas Friedman calls “globalution[10]”, whereby countries are forced by global pressures to become more democratic and more liberal. Companies generally prefer to invest in countries with a liberal economic environment as it allows them to move their capital quickly if required, and also provides greater trading opportunities. Since countries want to attract foreign investment, they will liberalise in order to be more attractive to the investors.

Liberalisation has also created its share of critics. The IMF’s conditional loans and structural adjustment programmes, which encourage liberalism in countries, have been criticised for their harshness. As the IMF is generally a lender of last resort and due to the amount of money that it lends to countries, it has been able to play an increasing role in setting economic policy in countries. Joseph Stiglitz says that the IMF’s position “was based on an ideology – market fundamentalism – that required little, if any, consideration of a country’s particular circumstances and immediate problems[11].” On the trade side “Western countries have pushed poor countries to eliminate trade barriers, but kept up their own barriers[12].” The issue of the large agricultural subsidies of the West, eventually led to the disruption of the Cancun round of WTO talks in 2003. The freedom of movement that liberalism gives MNCs has also been criticised – companies have been attacked for using sweat-shop labour, whereby goods are made using cheap labour in a Third World country and sold at a huge profit in a First World country. Since the companies want the cheapest labour possible, they often move from country to country as labour laws become too restrictive, so that the foreign investment in countries is really a temporary thing. And lastly the criminal organisations love liberalisation, since they are able to move their funds and illegal good far easier around the world.

Information and communications technology (ICT) has created the framework for an unprecedented level of globalisation. It allows people to communicate with each other around the world with little or no delay, thereby making location less relevant. The Internet has provided another means of communication, and a forum for companies to advertise and sell their products to a global market. Financial markets have also become global and electronic, allowing money to be moved rapidly around the world. The SWIFT network, through which international fund movements flow, processed over 2 billion messages in 2003[13], with each message possibly representing a hundred dollar or a hundred million dollar transaction. But ICT has created not only the infrastructure for increased global trade, but has also in itself added to global trade. On a goods level, office machines and telecom equipment accounted for 13% of world merchandise trade in 2002[14].

But just as it has created great opportunities, ICT has also raised its own share of concerns and problems. One of the major concerns is that some countries may be left behind – unable to afford the technology and without the skills, and so be doomed to become the “black holes” of Castells[15]. A country unable to create the necessary ICT infrastructure may not be able to continue to participate in the global economy and therefore become more isolated and impoverished. The other concern is the ease at which funds can now be transferred around the world. The international investment funds are becoming an “electronic herd[16]”, roaming the world markets and speculating in world markets. This “electronic herd” has been blamed for the emerging market crises of the late 1990s, where developing countries whose markets had been liberalised experienced massive currency depreciation due to speculative attacks and massive withdrawals of foreign funds. The ability to moved money quickly and easily around the world is also a boon to criminals and the business of money laundering.

The response to this opening up of markets, to the increase in globalism and to the decreasing role of states has been an increase in multilateralism and international cooperation. Trade blocs have become a vital tool to increasing regional trade and to increase bargaining power in other external trade negotiations – as of March 2003 only 4 WTO members were not part of a regional trade agreement[17]. The breakdown of the Cancun Round was achieved only through the joint cooperation of developing countries and has resulted in America and the European Union promising to reduce agricultural subsidies. Attempts have also been made to combat the international criminal organisations through international cooperation – anti-money laundering legislation, requiring reporting of suspicious transactions, has been drafted internationally and implemented in most major countries. The increasing levels of international economic activity have made it such that any attempt to act unilaterally will likely result in failure, and therefore requiring cooperation in order to be heard and to have an impact.

The world is entering into a new era of globalisation and global trade, with the opening up of the world to trade, through the removal of barriers and opening of borders, and through technologies to improve information and communication. Organisations larger and often more powerful than individual states, that think and operate globally, are taking their place in this global system. These international economic organisations and the increase in international trade are raising both the hope of lifting the developing world out of poverty, and the fear that some may be left behind.

[1] “Welcome to the WorldBank Group – About Us”, http://www.worldbank.org/about, 10 October 2004

 [2] “About the International Monetary Fund”, http://www.imf.org/external/about.htm, 10 October 2004

 [3] World Trade Organisation, Annual Report 2004, World Trade Organisation, France, 2004, pg 2

 [4] General Motors Annual Report 2003, General Motors, 2003

 [5] General Electric 2003 Annual Report, General Electric, 2003

 [6] “About Citigroup”, http://www.citigroup.com/citigroup/about/index.htm, 10 October 2004

 [7] Robinson J, The Sink, Constable & Robinson, London, 2004, pg 4

 [8] Olson WJ, “International Organised Crime” in The Fletcher Forum Summer/Fall 1997, Tufts University, Medford, 1997, pg 74

 [9] Understanding the WTO 3^rd Edition, World Trade Organisation, Geneva, 2003, pg 13

 [10] Friedman T, The Lexus and the Olive Tree, Harper Collins, London, 2000, p 167

 [11] Stiglitz J, Globalization and its discontents, Penguin Group, London, 2002, pg 36

 [12] Ibid, pg 6

 [13] “SWIFT reaches 2 billion message mark”, http://www.swift.com/index.cfm?item_id=41623, 23 December 2003

 [14] International trade statistics 2003, World Trade Organisation, 2003, pg 132

 [15] Graaf J, Poverty and development, Oxford University Press, Cape Town, 2003, pg 59

 [16] Friedman T, op cit. pg 112

 [17] World Trade Report 2003, World Trade Organisation, 2003, pg XVI