A Dual Policy Paradox
- Imagine you were a mercantilist, and you were an advisor to the Kuwait decision-makers. What 3 *specific* (the slides are too general) mercantilist policies would you recommend to the Kuwait decision-makers?
The mercantile system is based on the idea of developing a political economy of a nation that promotes self-sustainability through restraining imports and encouraging exports. As Kuwait advisor, the first key policy I would recommend to the decision-makers is the idea of promoting subsidies of export industries to improve the competitive advantage of Kuwait in the global markets. Conversely, the Kuwaiti government should implement trade policies that would assist local industries by imposing tariffs and prohibitions on imports of goods from other foreign manufacturers competing with local manufacturers (Lahaye, 2019). Lastly, the state should consider granting its monopolies to particular companies, especially those that control trade and shipping, which can promote the competitive advantage of the nation (Pettinger, 2019).
- Select a country and name three historical times that country used economic coercion. In your answer, make sure you name the recipient country, the type of economic coercion, and the reason behind the economic coercion.
Economic coercion can be viewed as the actions taken against a particular country with the aim of modifying its behavior as demanded. An example of a country that has used economic coercion is the United States. For example, in July 2018, the United States materialized its threats to impose tariffs on China following allegations that it had been practicing unfair trading practices and theft of intellectual property (“The US-China Trade War: A Timeline – China Briefing News,” 2019). Other instances when the United States used economic coercion was the reinstatement of sanctions on Iran, in 2018, on energy, shipping, and the financial sectors, as a result of disagreements between Iran and the international community on its nuclear program (“Six charts that show how hard US sanctions have hit Iran,” 2019); and the imposition of tariffs on aluminum and steel from Brazil, with the aim of protecting its local manufacturing and production industries (Swanson, 2019).
- How would you solve the natural resource wealth problem? In your answer, you should offer three policies that are specific to a resource-dependent country of your choice.
Based on a superficial point of view, natural resources are good for enriching a country or promoting wealth and development; however, the same natural resources limit incentives that can be used to develop other areas of an economy, which are potentially critical for long-term growth. According to the International Monetary Fund (IMF), Kuwait urgently needs to reduce its dependence on oil revenues and rather boosts savings, which is an advisory that comes when Kuwait, a major oil exporter, recorded a decline in its overall economic growth to 0.7% in 2019, from 1.2% in 2018, following production cuts agreed with the Organization of Petroleum Exporting Countries (OPEC) (“IMF urges Kuwait to reduce oil dependence, boost savings – ET EnergyWorld,” 2020). In regard to this case, Kuwait may be facing the problem of “Dutch Disease,” which can be solved through economic diversification, for example, by putting more focus on the agricultural industry (Clark, 2011); which can help in promoting competitiveness and help create an economy that can withstand shocks, such as volatile prices, as being experienced during this pandemic period. Other measures or policies that can be taken include establishing good governance and long-term development planning, focusing on education, and high civil society engagement that encourages transparency (Clark, 2011).
- In your opinion, what other international organizations should also have double majority voting? How would it work in that organization, and why would it be better?
Notably, the double majority voting or the qualified majority voting system used by the European Council and Council of the EU to make decisions based on a simple majority of members (“What is qualified majority voting?” n.d.). In perspective, there are two forms of double majority, that is, the standard and reinforced majority. Based on the former, decisions are implemented if at least 55% of member states, representing at least 65% of the EU population approve, while the decisions based on the latter must be approved by at least 72% of member states, also representing 65% of the EU population. In my opinion, the General Assembly, which uses a simple voting system of majority rule with one vote per member state (Posner & Sykes, 2014), could use the double majority voting approach. This would help in promoting inclusivity and acknowledgment of member nations.
- Economic interdependence is associated with the stability of state relationships. Do you agree or disagree with the statement? Support your answer by offering at least three historical examples.
I agree that economic interdependence has played a critical role in promoting stability between and among states. For instance, the development of the North American Free Trade Agreement (NAFTA) which opened up the borders between the United States, Canada, and Mexico, which led to the elimination of almost all tariffs on imports and exports, and trade barriers (Sraders, 2018); thus improved the relations between the three countries. Similarly, the formation of the European Union (EU) in 1993 promoted economic integration among the states involved (Gabel, 2019); which has also supported the East African Community (EAC) through the Economic Partnership Agreement (EPA) that has improved partnerships between the European and East African countries (“East African Community (EAC) – Trade – European Commission,” 2014).
References
Clark, H. (2011). Helen Clark: “Avoiding the Resource Curse: Managing Extractive Industries for Human Development.” Retrieved from UNDP website: https://www.undp.org/content/undp/en/home/presscenter/speeches/2011/10/20/helen-clark-avoiding-the-resource-curse-managing-extractive-industries-for-human-development-.html
East African Community (EAC) – Trade – European Commission. (2014). Retrieved from Europa.eu website: https://ec.europa.eu/trade/policy/countries-and-regions/regions/eac/
Gabel, M. J. (2019). European Union | Definition, Purpose, History, & Members. In Encyclopædia Britannica. Retrieved from https://www.britannica.com/topic/European-Union
IMF urges Kuwait to reduce oil dependence, boost savings – ET EnergyWorld. (2020). Retrieved May 20, 2020, from ETEnergyworld.com website: https://energy.economictimes.indiatimes.com/news/oil-and-gas/imf-urges-kuwait-to-reduce-oil-dependence-boost-savings/74896173
Lahaye, L. (2019). Mercantilism – Econlib. Retrieved from Econlib website: https://www.econlib.org/library/Enc/Mercantilism.html
Pettinger, T. (2019). Mercantilism Theories. Retrieved from https://www.economicshelp.org/blog/17553/trade/mercantilism-theory-and-examples/
Posner, E. A., & Sykes, A. O. (2014). Voting Rules in International Organizations. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2383469
Six charts that show how hard US sanctions have hit Iran. (2019, May 2). BBC News. Retrieved from https://www.bbc.com/news/world-middle-east-48119109
Sraders, A. (2018, July 18). What Is NAFTA? History, Purpose, and What It Means in 2019. Retrieved from TheStreet website: https://www.thestreet.com/politics/nafta-north-american-free-trade-agreement-14651970
Swanson, A. (2019, December 2). Trump Says U.S. Will Impose Metal Tariffs on Brazil and Argentina. The New York Times. Retrieved from https://www.nytimes.com/2019/12/02/business/economy/trump-tariffs-brazil-argentina-metal.html
The US-China Trade War: A Timeline – China Briefing News. (2019, February 26). Retrieved from China Briefing News website: https://www.china-briefing.com/news/the-us-china-trade-war-a-timeline/
What is qualified majority voting? (n.d.). Retrieved May 20, 2020, from UK in a changing Europe website: https://ukandeu.ac.uk/fact-figures/what-is-qualified-majority-voting/