World Treaties and Pacts

The escalating level of world trade and globalisation taking hold has meant that what one country does affects practically every other country. Out of this, relationships develop.

International cooperation and agreements are a natural consequence.

The European Union

Easily the most obvious. Formerly the European Economic Committee, the EU started out as a group of 6 economies in Europe; Luxembourg, Germany, Belgium, Holland, France and Italy through the Treaty of Rome in 1957.

He loves it, really…

The EU is now a monetary union, the 5th of 6 stages of total economic integration.

Monetary Union Characteristics and the EU

  • Common Currency for stability and business confidence between member economies for trade between themselves and the rest of the world. Common monetary policy done by the European Central Bank.
  • Common Regulation set by the European Commission and is either a regulation which under the Treaty of Rome has to followed, or a directive which is a policy measure for the home parliament which can choose its own way to achieve it.
  • Open Trade Barriers between member economies. Protectionist Trade Barriers are also the same between EU members and the rest of the world, a common tariff.
  • Common External Trade Policy The EU has a common external tariff for any import from outside.
  • Free Factor Mobility between members. Meaning a single labour market, less monopsony power. People from a member state are able to work in other member states.
Key Developments: Single European Act for free trade and factor mobility. Schengen Agreement for non passport travel between some member states. Maaschtrict Treaty proposing the common currency implemented 1999.

EU Bodies

  1. European Parliament: Despite it’s name, it is only an advisory panel body to the commission as to what laws to pass.
  2. European Commission: One selected member from each country is involved in the commission. Draft up and pass laws for the EU, and can ignore the Parliament’s recommendations if they wish.
  3. European Council of Ministers: A panel which discusses different topics such as transport and sanitation. Meetings are arranged with a chosen topic, and each state sends an appropriate person to the event.
  4. European Court of Justice: Gives fines to economies which breach EU regulations. Open to judicial reviews (if somebody thinks a regulation should be changed).
  5. European Central Bank: Sets the EU monetary policy, defining the monetary union.

The World Trade Organisation

Started as the General Agreement of Tariffs and Trade in 1947 eventually made the WTO in 1995. Members must be pro free trade and are only allowed a certain level of protectionism.

Whose round is it?

Trade policy, not a Friday night out…..

Since the GATT was founded a series of rounds have been completed, one on average every 10 years. Each round is a series of talks carried out by the government officials of members of the WTO, focussed on a specific topic, with a specific goal set out. Mostly they have been achieved.

They are named after the region it takes place. The most recent, the Doha Round at Qatar, has been going since 2001

WTO around the World

  1. Green: Members of WTO
  2. Yellow: Undergoing talks of membership
  3. Grey: Don’t want to know
For more WTO info


Fully the North Atlantic Treaty Alliance. Set up after the WW2 as a peace pact. Simply the members have an ‘I got your back‘ agreement where they agree not to fight one another or step in when one member is under attack.

The International Monetary Fund

Makes loans to troubled economies governments when they either seek a period of expansion, or to save their current government from going bankrupt. The fact that it is set in the US may add to dependency theory being proved.

The World Bank also performs the same functions. It also releases statistics and research as to performance of countries, such as GDP levels.

World Bank website and published stats:

Economic Integration; Forming a relationship

Two or more countries can embark on a journey to become in total economic matrimony through six definite steps. We can think of this as how a guy chases a girl

Preferential Trading The chat up

But you don’t need to know the Economics chat up lines to make a pact. Two can agree to lower the tariff or increase the quota on one another’s exports.

Free Trade The dating stage

The couple bring down their barriers of trade altogether and start to expose themselves fully to one another. No quotas, no tariffs.

Nafta, that love triangle….

The Common Market  Facebook status now ‘in a relationship’

The couple agree on what kind of behaviour is acceptable with those they may have had a bit of previous with.

If the couple are the possessive type they may keep an autarky, an open relationship would be welcoming others into the arrangement.

The Economic Union ‘The moving in stage’

On top of the the common market the economies are allowed to move their stuff (labour and capital investment) in with one another. Whats yours is mine, and mine is yours accompanies common product regulation standards.

The Monetary Union ‘The Marriage’

The lovebirds form a monetary union, and just as with a marriage one another’s budget tends to merge, just at their central banks do. The husband rations the wife’s shoe shopping by printing a certain amount of their common currency per year.

Total Economic Integration ‘The making babies stage’

Now the budget is really shared as the countries begin to merge their governments. The laws of tort, contract and criminal law are the same. Let’s just hope there isn’t a messy legal battle to follow!


One Response to World Treaties and Pacts

  1. Pingback: Thinktank « Zahablog's Economic Page

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