CHAPTER THREE

IPE
 How is international/global trade governed?
• One most common answer is the idea that
Global/Regional Free Trade Agreements govern it i.e
institutions like
World Trade Organization (WTO) and
North American Free Trade Agreement (NAFTA) or
similar other organizations.
In the case of NAFTA- a trade agreement among the U.S.,
Canada, and Mexico-
For example, “free trade” was initially meant a lesser
degree of governmental constraints in cross-border trade,
The notion of free trade in NAFTA had and
still have significant element of
protectionist /mercantilist policies such as a
tax on specific imported goods (tariff)-
prohibiting their importation (import
ban), or
imposing a quantitative restriction
(import quota).
The latter two policies are examples of Non-
tariff barriers, or NTBs.
Other types of NTBs include;
domestic health,
safety, and
environmental regulations;
technical standards (i.e., a set of specifications
for the production or operation of a good);

 2. International Investment and the WB
• The World Bank was created after the World War II
in 1945.
• Its activities are focused on the developing
countries.
Works/tasks of WB
for human development (education, health),
agriculture and rural development (irrigation, rural
services),
environmental protection (pollution reduction, establishing and
enforcing regulations),
infrastructure (roads, urban regeneration, and electricity) and
governance (anti-corruption, development of legal institutions).
It provides loans and grants to the member of countries.
In this way, it exercises enormous influence on the economic
policies of developing countries.
It is often criticized for setting the economic agenda of the
poorer nations,
attaching stringent conditions to its loans and forcing free
market reforms.
• International/Transnational/global production (in
short global FDI).
• FDI is a type of production in which different parts
of the overall production process for a particular
product take place across different national
territories and it is one major element of the
international or global political economy.
• To appreciate how many countries participate today
in the production of a single product, car consider
the following case for example.
 3. International Finance and the IMF
• The International Monetary Fund (IMF) is an
international organization that oversees those financial
institutions and regulations that act at the international
level.
• The IMF has 184 member countries, but they do not
enjoy an equal say.
• The top ten countries have 55 per cent of the votes.
• They are the G-8 members (the US, Japan, Germany,
France, UK, Italy, Canada and Russia), Saudi Arabia and
China. The US alone has 17.4 per cent voting rights.
 The roles of IMF are the following;
Shaping the monetary system of the world.
Managing a system of fixed and adjusting exchange rates.
Lending money to countries facing short-run balance of
payment = E≠ I.
Stabilizing the world economic system.
World Bank (WB) roles
• Facilitating investment across the world.
• Raising capital in monetary markets and lend to the LDCs.
• Stimulate the world economy.
• The global financial system is divided into two separate,
but tightly inter-related systems: a monetary system and a
credit system.
The international monetary system can be defined as the
relationship between and among national currencies.
The credit system, refers to the framework of rules,
agreements, institutions, and practices that facilitate the
transnational flow of financial capital for the purposes of
investment and trade financing.
 5. Exchange Rates and the Exchange-Rate System
• An exchange rate is the price of one national currency in terms of
another currency.
• For example, according to July 2013 rate, one U.S. dollar ($1) was
worth 98.1 Japanese yen (¥), while one British pound (£) was worth
1.54 U.S. dollars.
• There are two main exchange rate systems in the world namely:
fixed exchange rate and
floating exchange rate.
In a pure floating-rate system: the value of a currency is determined
solely by money supply and money demand.
• A pure fixed-rate system: is one in which the value of a particular
currency is fixed against the value of another single currency or against
a basket of currencies.
 CHAPTER FOUR
Globalization and Regionalism
Globalization can be defined as a multidimensional process
characterized by:
(1) the stretching of social and political activities across state
(political) frontiers so that events, decisions, and activities in
one part of the world come to have significance for individuals
and communities in other parts of the world.
(2) the intensification or the growing magnitude of
interconnectedness in almost every aspect of social existence from
the economic to the ecological, the spread of HIV-AIDS, from the
intensification of world trade to the spread of different weapons.
(3) the accelerating pace of global interactions and process as the
evolution of worldwide systems of transport and communication
increases the rapidity of or velocity with which ideas, news, goods,
information, capital and technology move around the world;
(4) the growing extensity, intensity, and velocity of global interaction is
associated with a deepening enmeshment of the local and global insofar
as the local events may come to have global consequences and global
events.
The Globalization Debates
Hyper globalist
Skeptic and
Transformational
 A. Hyper globalist
For the hyper-globalists, globalization today defines;
 a new epoch in human history in which nation states become
obsolete/outdated to regulate their economy and boundary.
 this view of globalization privileges the economic over the political,
the market over the state, and prefigures the decline of states.
 economic globalization is bringing about a de-nationalization/ de-
territorialization of economies through the establishment of
transitional networks of production, trade and finance.
In this borderless economy, national governments are relegated to
little more than transmission belts for global capital or ultimately
powerless institutions marginalized by the growing significance of
local, regional and global mechanisms of governance.
the hyper-globalists share a conviction that economic
globalization is bringing about the decline of states.
Under the condition of globalization, states becoming the site
of global and transnational flows and as opposed to the primary
container of socio-economic activity.
the authority and legitimacy of states thereby is undermined as
the national governments become increasingly unable to control
the Tran boundary movements and flows of goods, services,
ideas and different socio-economic activities inside their
borders.
 The cumulative effects of these forces would make the state
ineffective to full fill the demands of its citizens.
economic globalization is generating a new
pattern of losers as well as winners in the
international economy.
The already existing South-North gap has
been considered as acronyms/shortening as a
new international division of labor emerges
with more complex economic configuration of
economic power.
The competitive nature of the market would bring
new economic class as winners and losers, hence
this put a challenge for the state, especially welfare
states, to helping those losers under the constraint of
liberal market economy.
argue that globalization is imparting new liberal
ideas and implant culture of modernization
replacing the traditional culture having an impetus
towards creating a new global order marked by
uniform cultural values or way of life.
 2. The skeptics
rejected the view of super- globalist as a myth, flawed and
politically naïve since it fundamentally underestimate the
enormous power of national governments to regulate
international economic activities.
For them, rather than being out of control, the force of
globalization, which is synonymous to internationalization,
very much dependent on the regulatory power of the state to
ensure the continuation of economic liberalism.
States are central actors and agents of globalization playing
central role in shaping and regulating the economic activities
including the Trans-boundary flows of ideas, goods and peoples
the world is interconnected and moving into a
village where by there exists a free flow of goods
and services, investment and circulation of money
from one corner of the world in to another by state
facilitation.
For them, the so called globalization is not more
than regionalization that is being manifested in the
emergence of financial and trading blocs in Western
countries, North America, in Asia and to some
extent in Africa.
For instance in Europe, there exists EU as site and
expression of globalization; in North America, there
exist a trading bloc, NAFTA, ASEAN in Asia. And
we have seen more interconnectedness at regional
level lesser than at the global level.
there is no free flow of goods, resources,
technology and finance at the global level; instead
we have regional based globalization without states
intervention.
the Western region is more intergraded and globalized
than the other part of the world such as Africa and Asia.
In fact these countries are in one way or another
interconnected in terms of trade;
yet we have seen less instantaneous flow of technology
financial capital from the west to Africa and other
developing countries.
Yet in terms of trade the developing countries are
integrated to the western market whereby the developing
countries supply their primary agricultural commodities
to earn foreign currencies.
However such trade connection is not benefiting the
developing nations.
The Sceptics thus do not believe that globalization would help
to narrow the economic and technological gap that is still
prevailing between the Global North(developed Countries) and
The Global South(Developing countries).
So, for the Skeptics, globalization brings nothing new, rather it
is just the crystallization the already existing realities of the
world which has been marked by the North-South gap
reflected in terms of the deeply rooted patterns of inequality
and hierarchy.
 3. The Transformationalist
Central to the transformationalist perspective is the
conviction that globalization is a critical driving
force behind the rapid social, political and
economic changes which are reshaping societies
and international politics.
the contemporary process of globalization are
historically unprecedented such that governments
and societies across the globe are having to adapt to
a world in which there is no longer a clear distinction
between the international and domestic affairs.
At the core of the transformationist view is the
belief that globalization is reconstituting or
reengineering the power, function and the
authority of the state, Even though the state has
ultimate legal power to control events inside its
boundary, it can’t command sole control over
trans-boundary issues, actors, resource
movements.
Under globalization, national economic space
no more coincides with state boundary.
Under globalization, there are non-state actors as
Multinational Corporation, transnational social
movements, international regulatory agencies.
In this sense world order can no longer be
conceived as purely State-Centric or even primarily
state managed as authority has become increasingly
diffused amongst public and private a agencies at
the local, national, regional and at global levels i.e.
down ward, up rewards and sideways.
 Disadvantages/cons of globalization
wars and conflicts in developing countries would
increase
the flow of asylum seekers and illegal migrants in to the
developed countries.
Cultural assimilation
Flow of low quality products.
Contraband
Environmental degradation
Neo-colonialism
reinforced the economic marginalization of
African economies and their dependence on a
few primary goods for which demand and
prices are externally determined.
globalization of risks, threats and
vulnerabilities like global terrorism, religious
fundamentalism, proliferation of Small Arms
and Light Weapons (SALWs), arms and human
trafficking.
the flow of goods and services and, to a very
limited extent, labor, technology, especially
transport, communications and information
technology, the spread of culture from one corner of
the world to the other, and the global diffusion of
religious ideas as well as ideologies.
Globalization are the Americanization/ Amercican
influence is high/.
the erosion of sovereignty, especially on economic
and financial matters.
for development and effective governance of African
States.
more difficult for African governments to get away with
blatant and excessive abuses of democratic governance
and transparency.
principles of democratic governance and transparency
tend to be applied selectively and subjectively. More
important is the fact that globalization for the most part
does not facilitate the establishment of the economic
conditions necessary for genuine democracy and good
governance to take solid roots and thrive.
the fragmentation of national economies, polities, societies and
cultures that are triggered by globalization weaken national
consciousness and cohesion, leading to social divisiveness and
instability.
Advantages/pros of Globalization
made available information on how other countries are
governed and the freedoms and rights their people enjoy.
It has also opened African countries to intense external scrutiny
and exercised pressure for greater transparency, openness and
accountability in Africa.
calling for greater accountability and
responsiveness of leaders to their people,
globalization has often pressured African leaders to
adopt policies and measures that are diametrically
opposite to the feelings and sentiments of the vast
majority of their people.
Development strategies and policies that focus on
stabilization and privatization, rather than growth,
development and poverty eradication, are pushed by
external donors.
 Defining Regionalism and Regional Integration
• Region can be defined as a limited number of states linked
together by a geographical relationship and by a degree of
mutual interdependence.
• Regionalism consequently refers to intensifying political
and/or economic processes of cooperation among states and
other actors in particular geographic regions, which can be
developed either 'from below' i.e. from the decisions by
companies to invest and by people to move within a region or
'from above' i.e. from political, state-based efforts to create
cohesive regional units and common policies for them.
• Regionalism normally presents the sustained cooperation (either
formal or informal) among governments, non-governmental
organizations, or the private sectors in three or more countries
for mutual gains.
Categories of regionalism
• It is categorized into two types in accordance with its contexts.
• In the societal context, unit means nation and region is the set of
adjacent nations.
• in the political context, unit is identified with state and region
means: a spatially coherent territory composed of two or more
states.
• Sub-region means part of such a region, whether it involves
more than one state (but fewer than all of the states in the
region) or some transnational composition (some mix of states,
parts of states, or both).
• Micro-region refers to the subunit level within the boundaries of a
state.
• The states that share geographical proximity and a degree of
mutual interdependence will participate in their regional
groupings.
• However, without regionness or regional awareness the proximity
of countries in the given regions cannot be referred to as a key
driving force to regionalize with intimate neighboring countries.
• Regionalization can be conceived as the growth of societal
integration within a given region, including the undirected
processes of social and economic interaction among the units.
• As a dynamic process, it can be best understood as a continuing
process of forming regions as geopolitical units, as organized
political cooperation within a particular group of states, and/or
as regional communities such as pluralistic security communities
(Whiting 1993).
• Similarly, the term regionalism refers to the proneness of the
governments and peoples of two or more states to establish
voluntary associations and to pool together resources (material
and nonmaterial) in order to create common functional and
institutional arrangements.
• Furthermore, regionalism can be best described as a
process occurring in a given geographical region by
which different types of actors (states, regional
institutions, societal organizations and other non-
state actors) come to share certain fundamental
values and norms.
• These actors also participate in a growing network
of economic, cultural, scientific, diplomatic,
political, and military interactions (Mace and
Therien 1996).
 The Old Regionalism
For many scholars, regionalism, as a voluntary and
comprehensive process, is predominantly a post-
World War II phenomenon.
It emerged in Western Europe in the late-1940s,
subsequently spreading to the developing world.
lost much of its dynamism in Europe in the early
1970s and gradually, also in the developing world.
As will become evident below, it is relevant to try
separating the European-centered debate from the
 New regionalism
• The prospects of the fall of the Berlin Wall together with
the 1985 White Paper on the internal market and the
Single European Act resulted in a new dynamic process of
European integration. This was also the start of what has
often been referred to as ‘new regionalism’ on a global
scale.
• The new regionalism referred to a number of new trends
and developments, such as the spectacular
increase in the number of regional trade agreements,
an externally oriented and less protectionist type of
regionalism,
an anti-hegemonic type of regionalism which
emerged from within the regions themselves
instead of being controlled by the superpowers,
 the rise of a more multi-dimensional and
pluralistic type of regionalism, which was not
primarily centered around trading schemes or
security cooperation and with a more varied
institutional design, and
the increasing importance of a range of business
and
 Major Theories of Regional Integrations
A. Functionalism
regionalism as a functional response by states to
the problems that derived from regional
interdependence.
It was seen as the most effective means of solving
common problems.
Regionalism has started from technical and non-
controversial issues and has spilled over into the
realm of high politics and redefinition of group
identity around the regional unit (Hurrell 1995).
the task of policy makers is to encourage the states
to peacefully work together.
The like-minded states would spread the web of
international activities and agencies in which and
through which the interests and life of all states
would be gradually integrated from one activity to
others.
spill over effect to other problems and areas of
cooperation, which will deepen integration among
member states. Therefore, 'spillover' is the key
• existence of supranational institutions would set in
motion a self-reinforcing process of institution
building.
• spillover effect leads finally to the formation of
supranational institutions and to the diminishing
role of the nation-state.
• applicable at both regional and global levels; and
later mention that the overwhelming number of
international governmental organizations (IGOs)
could be classified as functional.
 B. Neo-functionalism

• emerged in the 1960s based on the key works of Ernst Haas and
Leon Lindberg. The model of integration is based on the following
basic principles.
• included clear departures from
transactionalism,
federalism and
functionalism, which made it clearly a distinct and independent
theoretical entity.
• Transactionalism had defined integration as a condition, and the
attainment of integration was measured by the existence of a
'security-community'.
•
• Political integration is the process whereby political
actors in several distinct national settings are
persuaded to shift their loyalties, expectations and
political activities towards a new centre, whose
institutions possess or demand jurisdiction over the
pre-existing national states.
• The end result of the process of political integration
is a new political community, superimposed over
the pre-existing ones.'
• Spill over effect in regional integration follows the same logic of
embarking a certain action that achieves a degree of integration and
creates a condition for integration at advanced and wider scale.
• In effect, it deepens the process of integration.
C. Inter-governmentalism
• Liberal-intergovernmentalism is a theory and approach that focus on
the state for integration to succeed.
• It approaches the question of the state in an integration process from
the perspective of traditional international relations.
• It thus considers the state mainly as an actor in the international
system and
• integration process to be a process in that system.
• The problem with this approach is that international
relations have not given much weight to the domestic
level or the society in the state’s foreign policy decisions.
• national governments may pursue international agendas
in the fields of trade and agriculture to satisfy domestic
producer groups.
• national preference formation regarding cooperation in
the field of foreign and defence policy is subject to
geopolitical interests, revolving around a state’s
ideological commitment.
• Developed three mechanisms through which he
thought European integration progresses:
1. positive spillover effects:
2. Transfer of allegiances: from the national to the
supranational political arena; and
3. Technocratic automaticity: referring to an
increasingly autonomous role of supranational
institutions in promoting further integration.
1. The spillover effect: occurs when integration between
states in a particular sector incentivizes integration in other
sectors too. One incentive is, for example, that the
optimization of common benefits of integration in the
original sector requires integration in other sectors
(Lindberg, 1963).
2. Transfer of allegiances
• refers to a process by which domestic interest groups
shift their activities from the domestic to the international
realm.
• Oftentimes national institutions provide less
effective ways for interest groups to pursue their
end goals than international institutions do.
3. Technocratic automaticity
process in which established supranational institutions
develop an interest of their own: encouraging deeper and
broader integration.
In the European case, the European Commission,
established to coordinate and implement integration
strategies, has an intrinsic interest to expand its
 SUMUP
• Haas sees integration as a process led by
• elitist groups, like leaders of industry associations or
political parties, who recognize a lack of opportunities in
pursuing a shared interest at the domestic level and then
push national governments to transfer policy competence
to a supranational body.
• Then, once supranational institutions are created,
international interdependence grows, and interest groups or
political party leaders can shift their loyalties away from
national institutions by choosing to pursue their interests
through newly established international institutions.
 Selected Cases of Regional Integrations
In the world there are many regional organizations. These are:
ASEAN OPEC
AU AMU
EU NAFTA
IGAD
NATO
SADC
ECOWAS
COMESA
ECA