International Relations, World Trade Organization and Hong Kong Simon Shen 16 January 2006.

International Relations, International Relations, World Trade World Trade

Organization and Hong Organization and Hong Kong Kong

Simon ShenSimon Shen16 January 200616 January 2006

TopicsTopics

► Inter-disciplinary Studies and Inter-disciplinary Studies and International Relations International Relations

►Background of the Bretton Woods Background of the Bretton Woods SystemSystem

►The ControversyThe Controversy Hyper-globalizersr Hyper-globalizersr Skeptics Skeptics

►The Transformationists The Transformationists ►WTO Summit, Hong Kong (2005)WTO Summit, Hong Kong (2005)

Interdisciplinary Studies Interdisciplinary Studies and International and International

RelationsRelations

Part IPart I

Ray Huang: Ray Huang: China, a Macro China, a Macro HistoryHistory► The Years, The Figures, The Names The Years, The Figures, The Names ► The “Analytical Questions”The “Analytical Questions”► The “Meaningless Facts” The “Meaningless Facts” ► The “Macro System”The “Macro System”

1.1. Inter-transferability: The Liberal Arts Inter-transferability: The Liberal Arts Philosophy in the USA Philosophy in the USA

2.2. Macro Formula of Yourselves Macro Formula of Yourselves

Examples of Inter-disciplinary Examples of Inter-disciplinary FormulaFormula

►Ray HuangRay Huang►李天命李天命

►Edward Said Edward Said ►陶傑陶傑►…………

The Bretton Woods The Bretton Woods System System

Part IIPart II

The Bretton Woods Conference The Bretton Woods Conference (July 1944)(July 1944)

►The Great Depressions (1929-1939)The Great Depressions (1929-1939)►WWII (1939-1945)WWII (1939-1945)►The Theory of Liberal PeaceThe Theory of Liberal Peace

The Theory of Democratic Peace The Theory of Democratic Peace

►1944: United Nations Monetary and 1944: United Nations Monetary and Financial Conference Financial Conference

►44 Allied Nations Representatives 44 Allied Nations Representatives

3 3 Pillars of Pillars of The Bretton Woods System (I)The Bretton Woods System (I)

1.1. International Bank for Reconstruction International Bank for Reconstruction and Development (IBRD, World Bank)and Development (IBRD, World Bank)

Post-war Reconstruction Post-war Reconstruction Long-term Loans to State Governments Long-term Loans to State Governments War on Poverty War on Poverty

2.2. International Monetary Fund (IMF)International Monetary Fund (IMF) Monetary Stability / Exchange Rate Monetary Stability / Exchange Rate

StabilityStability Short-term LoansShort-term Loans

3 3 Pillars of Pillars of The Bretton Woods System (II)The Bretton Woods System (II)3. 3. International Trade Organization (ITO)International Trade Organization (ITO)► Free Trade Vs Tariffs / Barriers Free Trade Vs Tariffs / Barriers ► Blocked by the US SenateBlocked by the US Senate► General Agreement on Tariffs and General Agreement on Tariffs and

Trade (GATT) (1944-1995)Trade (GATT) (1944-1995)► World Trade Organization (1995)World Trade Organization (1995)

► Anti-Globalization Movement Anti-Globalization Movement (1995)(1995)

5 5 Principles of WTOPrinciples of WTO

► A trading system should be A trading system should be discrimination-freediscrimination-free in a in a sense that a country cannot favour another country sense that a country cannot favour another country or discriminate against foreign products or services. or discriminate against foreign products or services.

► A trading system should be freer where there A trading system should be freer where there should be should be little trade barrierslittle trade barriers (tariffs and non-tariff (tariffs and non-tariff barriers). barriers).

► A trading system should be A trading system should be predictablepredictable where where foreign companies and governments can be sure foreign companies and governments can be sure that trade barriers would not be raised and markets that trade barriers would not be raised and markets will remain open. will remain open.

► A trading system should be more A trading system should be more competitivecompetitive. . ► A trading system should be A trading system should be more accommodating more accommodating

for less developed countriesfor less developed countries, giving them more time , giving them more time to adjust, greater flexibility, and more privileges. to adjust, greater flexibility, and more privileges.

The Controversy The Controversy

Part IIIPart III

The Hyper-Globalizers The Hyper-Globalizers

► Francis Fukuyama: Francis Fukuyama: The End of HistoryThe End of History ► Free Trade / Liberalism as a Universal Value Free Trade / Liberalism as a Universal Value

The Cannibal Example of Prof. Leo Strauss The Cannibal Example of Prof. Leo Strauss ► Free Trade and Capitalism and Free Trade and Capitalism and

Entrepreneurship Entrepreneurship ► Free Trade and EfficiencyFree Trade and Efficiency

The Privatization Formula of the Liberal Party, HKThe Privatization Formula of the Liberal Party, HK► Free Trade and Political Liberalization Free Trade and Political Liberalization

► The Washington Consensus (1989)The Washington Consensus (1989) Lower Debt Lower Debt Higher TaxationHigher Taxation High Interest Rate High Interest Rate ““Monetary Stability”Monetary Stability”

The Skeptics (I)The Skeptics (I)

► The Leftists (e.g. Noam Chomsky) The Leftists (e.g. Noam Chomsky) ► The Internal Critics (e.g. Joseph Stinglitz: The Internal Critics (e.g. Joseph Stinglitz:

Globalization and its Discontent Globalization and its Discontent ))► Protectionism as a Necessity of Nationalist Protectionism as a Necessity of Nationalist

Economy Economy ►World System Theory: World System Theory:

““Core” and “Periphery”Core” and “Periphery”► Blind-spots of the Market System Blind-spots of the Market System

Social Function of a Government Social Function of a Government ► The Examples of “Crony Capitalism” The Examples of “Crony Capitalism”

The Skeptics (II): The Skeptics (II): “Globalization of Poverty”“Globalization of Poverty”►Domestic Production Replaced by Domestic Production Replaced by

ImportsImports Tariffs Tariffs

► Import Bills Included Large “Service Import Bills Included Large “Service Fees”Fees” Free Intellectual Property Rights Free Intellectual Property Rights

►Privatization and Foreign Investment Privatization and Foreign Investment “ “Corporate Social Responsibility”Corporate Social Responsibility” Control Mechanism of Foreign Capital Control Mechanism of Foreign Capital

Loan Conditionalities Loan Conditionalities

►Money was provided to help countries Money was provided to help countries to adjust to market economy to adjust to market economy

►Multi-party democratic elections as an Multi-party democratic elections as an additional prerequisite additional prerequisite

►Fixed Usage of the Loan Money Fixed Usage of the Loan Money Service Fee / Consumer GoodsService Fee / Consumer Goods No Domestic Infrastructural Development No Domestic Infrastructural Development

The HermitsThe Hermits

► North Korea’s Kim Jong-Il: Juche IdeologyNorth Korea’s Kim Jong-Il: Juche Ideology Self-Reliance Self-Reliance Rationality of the Nuclear ProgramRationality of the Nuclear Program The Kidnap of Actress The Kidnap of Actress

► Turkmenistan’s Niyazov Turkmenistan’s Niyazov Renamed Months and Days Renamed Months and Days No Recorded Music and TV Games No Recorded Music and TV Games No Libraries (besides No Libraries (besides RuhnamaRuhnama)) No Hospitals (besides in the capital) No Hospitals (besides in the capital) No Departure No Departure Ice Castle and Manmade Lack in Ice Castle and Manmade Lack in

the Desert the Desert

The The TransformationistsTransformationists

Part IVPart IV

Stolper-Samuelson TheoremStolper-Samuelson Theorem

► Negotiation Mechanism of WTONegotiation Mechanism of WTO► Relationship between Trade and Domestic PoliticsRelationship between Trade and Domestic Politics► Gains and Losses from Protectionism / Free Trade Gains and Losses from Protectionism / Free Trade ► 3 Variables: 3 Variables:

Land = LandlordsLand = Landlords Labor = Laborers Labor = Laborers Capital = Entrepreneurs Capital = Entrepreneurs

► Comparative Advantage Comparative Advantage ► Free TradeFree Trade

Abundant Factor Holders Abundant Factor Holders Gain Gain Scarce Factor Holders Scarce Factor Holders Loss Loss

► Protectionism Protectionism Scarce Factor Holder Scarce Factor Holder Gain Gain Abundant Factor Holder Abundant Factor Holder Loss Loss

Type 1: USAType 1: USAAdvanced Land-Intensive Advanced Land-Intensive EconomyEconomy ► Capital: AbundantCapital: Abundant► Land: AbundantLand: Abundant► Labor: Scarce Labor: Scarce

► Free Trade Free Trade Landlords +Landlords + Entrepreneurs +Entrepreneurs + Trade Unions – Trade Unions – Class Conflict Class Conflict E.g. USA 1980s: Reaganism E.g. USA 1980s: Reaganism

► Protectionism Protectionism Trade Unions +Trade Unions + Landlords –Landlords – Entrepreneurs –Entrepreneurs – Class Conflict Class Conflict E.g. USA 1930: New Deal of Franklin Roosevelt E.g. USA 1930: New Deal of Franklin Roosevelt

Type 2: South KoreaType 2: South KoreaAdvanced Labor-intensive Advanced Labor-intensive EconomyEconomy ► Capital: AbundantCapital: Abundant► Land: ScarceLand: Scarce► Labor: AbundantLabor: Abundant

► Free Trade Free Trade Entrepreneurs +Entrepreneurs + Trade Unions +Trade Unions + Landlords - Landlords - Urban-Rural Conflict [China?] Urban-Rural Conflict [China?]

► Protectionism Protectionism Landlords +Landlords + Trade Unions –Trade Unions – Entrepreneurs –Entrepreneurs – Urban-Rural Conflict Urban-Rural Conflict

Type 3: Sub-Sahara AfricaType 3: Sub-Sahara AfricaBackward Land-intensive Backward Land-intensive EconomyEconomy ► Capital: ScarceCapital: Scarce► Land: AbundantLand: Abundant► Labor: ScarceLabor: Scarce

► Free Trade: Free Trade: Landlords +Landlords + Trade Unions -Trade Unions - Entrepreneurs - Entrepreneurs - Urban-Rural Conflict Urban-Rural Conflict

► Protectionism: Protectionism: Entrepreneurs +Entrepreneurs + Trade Unions +Trade Unions + Landlords –Landlords – Urban-Rural Conflict Urban-Rural Conflict

Type 4: IndiaType 4: IndiaBackward Labor-Intensive Backward Labor-Intensive EconomyEconomy ► Capital: ScarceCapital: Scarce► Land: ScarceLand: Scarce► Labor: Abundant Labor: Abundant

► Free Trade Free Trade Trade Unions +Trade Unions + Entrepreneurs -Entrepreneurs - Landlords - Landlords - Class Conflict Class Conflict

► When Exposure to Trade is Declined When Exposure to Trade is Declined Entrepreneurs +Entrepreneurs + Landlords +Landlords + Trade Unions –Trade Unions – Class Conflict Class Conflict

WTO Conference, WTO Conference, Hong Kong (2005)Hong Kong (2005)

Part VPart V

The Governmental The Governmental Calculation Calculation ►One-country, Two-system One-country, Two-system ►From Free Trade to Privatization From Free Trade to Privatization ►Comparative Advantage Over China Comparative Advantage Over China

The Anti-Globalizers The Anti-Globalizers CalculationCalculation►Momentum of the Grassroot Momentum of the Grassroot

Movement Movement ►From Protectionism to Governmental From Protectionism to Governmental

Intervention Intervention ►Romance of the Red Menace Romance of the Red Menace

Problems Identified Problems Identified

►The Mass Media Credibility The Mass Media Credibility The Alternative Media Credibility The Alternative Media Credibility

►The Dichotomization Phenomenon The Dichotomization Phenomenon A Political Question to the Economy Answer A Political Question to the Economy Answer

►The Paradox on “Civil Disobedience” The Paradox on “Civil Disobedience” The Logical Bug of the Activists?The Logical Bug of the Activists? The Logical Bug of the Authority?The Logical Bug of the Authority? The Escape Clause: “The International The Escape Clause: “The International

Context” Context”

The EndThe End