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This lesson examines the role of international organisations and trade agreements in driving globalisation. It addresses the Edexcel Enquiry Question: "What are the causes of globalisation and why has it accelerated in recent decades?" by focusing on the political and institutional architecture of the global economy.
In July 1944, delegates from 44 Allied nations met at Bretton Woods, New Hampshire (USA) to design a new international monetary and financial order for the post-war world. The system they created had three core institutions:
Together, these institutions created the rules-based international economic order that underpins economic globalisation. They reflected the belief that economic openness and cooperation would promote prosperity and prevent the protectionism and economic nationalism that had contributed to the Great Depression and World War II.
The WTO was established on 1 January 1995, replacing GATT. It has 164 member states (as of 2024), accounting for approximately 98% of global trade.
| Principle | Explanation |
|---|---|
| Most-Favoured Nation (MFN) | A country must grant the same trade concessions (e.g. tariff rates) to all WTO members — you cannot discriminate between trading partners |
| National Treatment | Imported goods must be treated no less favourably than domestically produced goods once they have entered the market |
| Reciprocity | Trade concessions should be mutual — if one country lowers tariffs, trading partners should reciprocate |
| Transparency | Trade rules and regulations must be published and accessible |
| Special and Differential Treatment | Developing countries may receive more flexible terms and longer transition periods |
| Criticism | Detail |
|---|---|
| Favours HICs | Richer countries have more resources to negotiate complex trade deals and bring disputes; LICs may lack capacity to participate effectively |
| Agricultural subsidies | The USA and EU heavily subsidise their agricultural sectors ($700+ billion per year globally), making it difficult for LIC farmers to compete on world markets |
| Doha Round stalemate | The Doha Development Round (launched 2001) aimed to address developing country concerns but has stalled due to disagreements between HICs and LICs |
| Environmental concerns | WTO rules can override national environmental regulations if they are deemed to be "trade barriers" |
| Loss of sovereignty | Membership requires countries to accept WTO rules, potentially overriding domestic policy preferences |
Exam Tip: When evaluating the WTO, always present both sides. The WTO has contributed to a massive expansion of global trade and economic growth, but its rules can disadvantage poorer countries and its dispute resolution system is dominated by wealthier nations. A balanced evaluation is essential for top marks.
The IMF has 190 member countries and its primary functions are:
When the IMF lends to countries in financial difficulty, it typically imposes conditions — requirements that the borrowing country must implement in return for the loan. These are known as Structural Adjustment Programmes (SAPs) or, more recently, "conditionality".
Typical SAP conditions include:
| Condition | Rationale | Criticism |
|---|---|---|
| Reduce government spending | To reduce budget deficits | Cuts to healthcare, education and social safety nets harm the poorest |
| Privatise state-owned enterprises | To improve efficiency | Foreign companies buy up national assets; profits leave the country |
| Liberalise trade | To promote efficiency through competition | Domestic industries destroyed by cheaper imports |
| Devalue the currency | To make exports cheaper and imports more expensive | Increases the cost of living for ordinary people |
| Remove subsidies | To reduce market distortions | Food and fuel become unaffordable for the poor |
| Open capital markets | To attract foreign investment | Volatile capital flows can cause financial crises |
In the 1980s and 1990s, many sub-Saharan African countries were required to implement SAPs in return for IMF loans. The results were deeply controversial:
Critics argue that SAPs promoted a one-size-fits-all neoliberal approach that failed to account for local conditions and increased poverty and inequality in many countries.
Supporters argue that SAPs helped stabilise economies, attract investment and lay the foundations for future growth.
Exam Tip: SAPs are an excellent example of how globalisation can be imposed on countries through power asymmetries. Use this case study when discussing whether globalisation is a voluntary or coercive process, and when evaluating the role of IGOs.
The World Bank Group consists of five institutions, the most important of which are:
The World Bank funds development projects in areas such as infrastructure, education, healthcare, agriculture and governance. In 2023, the World Bank committed approximately $73 billion in loans, grants and guarantees.
The World Bank promotes globalisation by:
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