VILLANUEVA, JOHN MARK H.

MA in Political Science
11685174

International Economic Cooperation is affected by the (1) preferences aggregated by

domestic and international institutions, (2) the extent of the influence of International

Institutions and (3) technological advancement and open borders.

Under the Open Economy Politics Framework, it begins with individuals, sectors, or

factors of production as the units of analysis and derives their interests over economic policy

from each units position within the international economy. It treats domestic political

institutions as mechanisms that aggregate interests and structure the bargaining of competing

societal groups. Finally, it introduces, when necessary, bargaining between states with different

interests that will lead to international cooperation.

Individual and group preference or interest are aggregated by domestic institutions.

Hiscox argued that preferences are influenced by the abundance of factors. Individual trade

policy preference may be affected by two factors namely, (a) economic factors, which have

personal effects on real income asset values and consumption and (b) non-economic factors such

as education and norms. But in contrast, realist believed that individual interest is irrelevant since

only state interest matters. But it should be noted that policy makes have their own personal

preferences, and can be considered as economic actors. Policy makers institutions shape policy

space or the range of policy options available and incentives to respond to certain groups over

the others. While domestic interest groups institutions shape those who represent capital owners,

labor, skilled or unskilled workers, importers vs exporters, generally industries competing, the
range of actions available to influence policy or the strategy space and the incentives to organize

and mobilize (collective action).

Political regimes also affect trade policies. Milner and Kubota explained how political

regimes affected the shift to trade liberation, (1) the economic crises, before 1980s many

developing countries are protectionist (2) the pressure from Western Country especially the USA

and (3) the spread of neoliberal policy ideas. But trade liberation occurred the same time as

democratization among developing countries. Are the two trades related? Answers may vary. It

can be yes because any change in a political regime is likely to induce trade reforms. It can also

be no since democracy is nor propitious for economic reform. Orouke and Taylor (2006) suggest

that democratization promoted trade in both land scare countries and land abundant countries,

where both labor wins.

The influence of International institutions extends into domestic arena. Krasner

presented a 2x3 matrix of causal arguments on the relationship between the probability that a

trading structure will be open and the distribution of potential economic power. He argued that a

system with one dominant state will be most likely to have open trade, somewhat less likely

when there are many smaller states, and even less likely when there are many large states. Also,

when states are at similar levels of development, they will be more likely to have open trade.

Openness can be measured by flows of goods and by policies like tariffs, trade

proportions (the ratio of trade to national income), and the concentration of trade within certain

regions are examined. The theory of state power explains trade openness in period I, II, and V

(up to 1960). But it does not explain III, IV and V (after 1960). In period III, openness grew

while Britain was declining; in period IV, openness failed to grow while the USA was rising; and
in latter period V, openness failed to decline as the USA did. Krasner amends his argument by

explaining that domestic trade policies often fail to change when there are no cataclysmic

external events to encourage that change, because states become locked in by the impact of

prior choices on their domestic political structures. When crises (wars, depressions), indicate

that their current policy is ineffective, then they will change them, but there does not have to be a

direct correspondence between power shifts and trade policy changes.

International Monetary Fund, World Bank, and General Agreements on Tariffs and Trade

(GATT) paved way to an era of increasing economic interdependence. By the end of the 1960s,

as the tariff cuts negotiated at the Kennedy Round of the GATT took full effect, trade as a

proportion of economic activity began to rise rapidly in all advanced industrialized democracies,

leading to a new focus on the political impact of deepening economic ties This new era was

expected by some to transform the nature of international politics, opening a new model of

international politics characterized by complex interdependence and international regimes.

Technological advancement and open borders affect the pace of economic. The advent

of globalization and the development of technology made capital increasingly mobile, moving

freely across borders and become flexible in how it adapts to changes in domestic and

international politics. As observed by Frankel, the world has been increasingly integrated with

finance and trade since the end of the World War II. Globalization was more dramatic, even if

theres a popular impression that national borders and geography still impede trade and

investment. Hence technology advancement ease the barriers such as, difference in currencies,

languages and political system.