School of Accounting and Finance (SAF)

Faculty of Management Studies

University of Central Punjab, Lahore

Course Pack
On
International Economics & Finance
2017
Course Instructor Prof. Dr. Qais Aslam
For M. Phil / M.S. Students

POPULATION 2016 104360

PER CAPITA INCCOME
BY COUNTRY IN US $ IN 2016
78180

69712

66265

62521

57220

54464

54460

53104

52755
Population Million in 2016 % of World
1386
1326

1500
3.5 260.6
2.8209.6
2.6192.6
4.4 324

1.9143.4
128.6
126.3
102.2
2.5187
2.2163
18.6

1.7
1.7
1.4
18

Course Title International Trade & Finance

(International Economics)
Teacher’s Name: Professor Dr. Qais Aslam
Counselling Hours: 2 Hours per Week
Email: dr.qais@ucp.edu.pk

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Teacher’s Website Address: http://online.ucp.edu.pk/

Course Code: ECO

Academic Program: M. Phil / MS-(Morning) A
M. Phil / MS – (Evening) B
M. Phil / MS – (Week Ends) C
Semester: II
General Instructions:
 Students are advised to be present in the classroom before the start of each class.
According to UCP policy students who will reach after 10 minutes will be marked Late and
students who will miss more that allowed number of classes will be dropped from the role.
 All students should follow the dress code (page no. Dress pants, dress shirts, dress
shoes and neck ties for boys and decent Shalwar Qameez and Dopatta for girls).
 Medium of instruction of the course is English.
 All assignments (wherever possible) should be submitted using ‘Turnitin’ software.
 Plagiarism will be checked and evaluation will be done using ‘Turnitin’ software.
 Deadlines of submission will be strictly followed.
 Topics (page no. Please add references of page numbers of books or study pack)

 Exercises/Problems/Class Discussions (page no. Please provide specific numbers and

pages)
 Assignments/Quiz/Project (page no. Term Paper)/Presentation etc. (page no. Please
provide details of topics or areas of assignment or quiz)
 Topics (page no. Please add references of page numbers of books or study pack)

 Exercises/Problems/Class Discussions (page no. Please provide specific numbers and

pages)
 Assignments/Quiz/Project (page no. Term Paper)/Presentation etc. (page no. Please
provide details of topics or areas of assignment or quiz)
Course Description:
__________________________________________________________
Course Objectives: To equip the students in Theoretical as well as Practical aspects of
International Trade & Finance (international Economics) in the 21century Global environment
with special reference to Pakistan
Course Requirements 2 X 1 & 1/2 hours weekly (3 hours) interactions with students for 16
weeks = 32 lectures; Quizzes; Assignments and presentations ending with Mid-term and Final-
Term Exams
Course Outcomes: after this course the M. Phil /M.S students would be able to know all
 the theories of International trade to-date
 the Policy instruments available with the Government to control and monitor trade
between nations
 the principles of WTO regime
 The instruments and practices of International finance
 The economic relations of Pakistan with other countries, especially its neighbors
 To be able to use all this information and strategies for their M. Phil research as well as
for their practical work in years to come.
Marks Breakup:
1. Assignments: 20
2. Class Participation: 05

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 3. Presentations: 05
4. Mid Term Examination: 30
5. Final Examination: 40
Total 100%

Course Outline
Lecture 1 Introduction: The Globalization of the World Economy
Lecture 2 International Trade and nation’s Standard of Living
Current International Economic problems & Challenges
Lecture 3 International Flow of Goods, Services, Finance, Labor & Capital
Lecture 4 International Flow of Goods, Services, Finance, Labor & Capital: The Gravity
Model
Lecture 5 International Trade Theories:
The Theory of Mercantilists – Thomas Munn
Trade based on Absolute Advantage – Adam Smith
Trade based on Comparative Advantage – David Ricardo
Lecture 6 Trade based on Comparative Advantage Gains from Trade.
Comparative advantage with Money
Labor Theory of Value
Opportunity Costs Theory & Relative Commodity Prices with trade
Basis of Trade under Constant Costs
Lecture 7 Standard Theory of International Trade
Production Possibility Frontier & Increasing Costs & Marginal Rate of
Transformation
Community Indifference Curves
Equilibrium in Isolation &
Equilibrium under open Economy ( International Trade)
Lecture 8 Standard Theory of International Trade - Equilibrium under open Economy (
International Trade)
Lecture 9 Demand & Supply
Offer Curves – General & Partial Equilibrium Analysis and
Terms of Trade
Lecture 10 Factor Endowment Theory and Heckscher – Ohlin Theory
Assumption of the Model
Factor Intensity, factor abundance & Shape of the PPF
Factor Price Equalization and Income Distribution
Lecture 11 Empirical test of H-O Model and Leontief Paradox
Capital –Labor; Skills and land Requirements & issues in H-O Model
Edgeworth Box Diagram; Factor Intensity Reversal Model
Lecture 12 New Theories of Internal Trade
Economies of Scale & International Trade
Imperfect Competition & International Trade
Trade based on Dynamic Technological Differences
Transportation, Environmental Standards & Non-Traded Commodities
Lecture 13 New Theories of Internal Trade
Economies of Scale & International Trade
Imperfect Competition & International Trade
Trade based on Dynamic Technological Differences

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 Transportation, Environmental Standards & Non-Traded Commodities
Lecture 14 Economic Growth & International Trade
Growth factors of Production
Rybcznski Theorem& Samulson Theorem
Technical Progress and International Trade
Large and Small Country Cases
Growth, Change of Tastes and International Trade
Lecture 15 Technical Progress and International Trade
Large and Small Country Cases
Growth, Change of Tastes and International Trade
Lecture 16 International Trade Policy:
Trade Restrictions and Tariff
Effect of Tariff on Consumer and Producers Surplus – Welfare effect
Theory of Tariff Structures
Optimum Tariff
Mid Term Exam
Lecture 17 Non-Tariff Barriers and New Protectionism
Political Economy of Protectionism
Lecture 18 Economic Integration, Custom Unions and Free Trade Areas
Lecture 19 Welfare effect of International labor Migration
Lecture 20 Balance of Payments
Lecture 21 Foreign Exchange markets and Exchange rates
Exchange Rate and Balance of Payments
Spot and Forward Exchange Rates; Currency swaps and
Future Options
Lecture 22 Foreign Exchange Risk, Hedging and Speculation
Interest Arbitrage & the Efficiency of Foreign Exchange markets
Currency markets and offshore Financial Markets
Lecture 23 Exchange rate Determination
Purchasing Power Parity Theory
Lecture 24 Monetary approach to Balance of payments & Exchange Rates
Portfolio balance Model & Exchange Rates
Lecture 25 International Monetary System – Past and Present
Breton Woods System and its evolution
World Bank & IMF
Lecture 26 WTO, Principles, Objectives and Agreements
International Economics and Financial System - Present and Future
Lecture 27 Price Adjustment Mechanism with Flexible and Fixed exchange Rates
Lecture 28 Income Adjustment Mechanism & Synthetics of Automatic Adjustment
Lecture 29 Open Economy Macroeconomic Adjustment Policies
Lecture 30 IS_LM BP Model with Flexible exchange Rates
Policy Mix in the Real World
Lecture 31 Economic Relations (Trade & Finance) of Pakistan
Trade (Export & Import) Balance and Balance of Payments of Pakistan
Direction of Trade and Classification of Trade of Pakistan
Lecture 32 Pakistan Economic Relations with
 India; Bangladesh and (SARC)
 OIC
 China (CPEC) and Shanghai Economic Agreement

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  Other Economic Blocks (EU; USA; ASIAN and G-20)
Final Term Exam

Course Readings:
Required Reading: Study Pack
Basic Text: 1. Study Pack
2. Dominick Salvatore. International Economics (Trade & Finance). International
Students Edition. John Wiley & Sons Inc. 2016. Singapore
Other Readings: Other books on International Economics & Finance by numerous authors
and International publishers.

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 Study Pack
Lecture Introduction: The Globalization of the World Economy
1
Globalization is a revolution which in terms of scope and significance can be
compared to the Industrial revolution. But Industrial Revolution took place in a century,
today global revolution is taking place in a decade or two.
Globalization is not only economic or technological, it has many aspects - social,
political, legal as well as ethical. Therefore economists need to work closely with other
social and physical sciences as well as with the entire civic society to give globalization
a more human face so that this revolution or process can benefit more and harm a few and
all in the globe can share in its benefits.
Economic globalization is the increasing economic integration and
interdependence of national, regional, and local economies across the world through an
intensification of cross-border movement of goods, services, technologies and capital.
Economic Interdependence between nations and their people can be measures
by the ratio of their imports, exports of goods and services to their GDP, as well as by
the Terms of Trade between nations.
Financial globalization, defined as global linkages through cross-
border financial flows, has become increasingly relevant for emerging markets as they
integrate financially with the rest of the world.
Financial Interdependence can be measured by the flow of capital to and from
a nation in respect to their Balance of Payments and Exchange Rates of their currencies
The first phase of globalization started after the Industrial Revolution (1870-1914)
and resulted in colonializing of the world by the technically advanced nations and ended
in the two world wars between nations.
The second phase of globalization started with the end of the World War II in
1945 and extended till 1989 with the end of the Cold War between Soviet Union (World
Communism) and USA (World Capitalism).
The third phase of globalization has started in 1995 with Free Trade and WTO
regime and is even being played out today in 2017.
Seventy years ago, the world was coming out of the World War. The Colonial era
was being broken by an array of independence movements across the globe, immediately
to be ushered into an era of the Cold War of the Systems. On the quieter front a basis of
a new, much powerful revolution was being formed – the basis of scientific and
technological revolution both in the advanced capitalist as well as the socialist countries.
The pace of new inventions in both military as well as peace industry had risen and now,
much developed versions of the old products as well as new products were being thrown
in the markets of the world.
In 1990 the Cold war had ended, Most of the socialist countries had dismantled
their system of economics and politics and even China had started adapting a combination
of both the market as well as the state controlled economic system. Developing nations
had started dismantling the state owned enterprises in order to pay back old debts, or in
order to receive new debts from the International Financial Organizations. New laws were
being enacted everywhere in order to facilitate free flow of information, goods, money
and resources. Multinational Corporations had now a plain playing field for both
economic activity as well as for research and development across continents in a more
cost effective manner.
In 1992 the Rio Conference on Human Environment had brought in 27 principles
for Sustainable Development of Economic and Environmental activity in the world and

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by 1996 the World Trade Organization had replaced the General Agreement of Tariffs
and Trade regime. The world was not only at the end of an old millennium; the world had
started a theoretical countdown to entering a new millennium. The millennium of science
and technology, the millennium of economic integration of the world, the millennium of
democratic reforms across countries and a millennium of empowerment of small
businesses, women, minorities, youth, educated and generally the people. This was the
new philosophy of the new world – the philosophy of Globalization of economics,
cultures, science and human development. This process of globalization was only made
possible and will only be made possible because of the quite revolution in the information
technology.
A new global civilization is emerging in our lives and people who are blind to this
change or who tend to be marginalized because of this process are trying to suppress or
retard the emergence of this global civilization. This new civilization brings with it new
family styles, changing ways of working, loving, and living, a new economy, new
political conflicts, and new consciousness of human behavior and cultural integration
around us. This new civilization is bring new opportunities to those that foresee the
change and are adapting to the changing circumstances by adapting to the newer
techniques of production, newer technologies in information and transport, newer ways
of living.
Today, any person sitting anywhere in the world with a mobile phone, a laptop
computer and a credit card can think innovate and sell his or her’s ideas to those that are
willing to buy those ideas anywhere around the world and then with that money buy
through e-commerce everything and get it sent to their home via a courier. All this made
possible because of advancement in information technology. This is the real spirit of
globalization. The technology of inter-net through mobile phones, and concepts of e-
commerce and e-credit will even replace the laptop and credit card. IBM for example has
invested in research that by year 2004 will implant a chip in the human body using human
energy source to relay information globally without even the help of other implements
like the mobile phone etc. That is the importance of information and technology in today’s
fast process of globalization.
The forces that reshaped and will reshape the development terrain of the process
of Globalization are: new innovations in technology, especially information technology;
the spread of knowledge across the world; the sustainable growth of population and its
concentration in urban centers of the world; the financial integration of the world; and
rise in demand for political and human rights across the globe. If national states can
effectively manage these above named forces, then these forces could revolutionize the
prospects for development and human welfare. However the same forces if unmanaged,
are capable of generating instability and human suffering that will be beyond the ability
of individual nations to remedy.
Globalization reflect the progressive integration of the world’s economies,
requires national governments to reach out to international partners as the best way to
manage changes effecting trade, financial flows, and the global environment. The process
of globalization does not only mean that there is a fast integration of the world economies
through opening of borders to goods and resources from other countries, relaxing of
exchange controls, but also a fast integration of information to an from nations through
the channels of information technology. The process of globalization starts with the
unification of scientific knowledge around the world, the mergers of businesses, the
migration of cultures and ethnicities between continents as well as the advent of thought,
innovation and education across the globe. All this was made possible through the rapid
development and induction of information technology in different nations.

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 But in essence the process of globalization cannot succeed and develop without
the same process being introduced at the local level in each country. Localization is as
much part of the globalization process as globalization a part of the localization process.
Localization reflects the growing desire of people for a greater say in their governments,
manifestation of regional cultural, economic and ethnic identities. Localization pushes
national governments to reach down to regions and cities as the best way to manage
changes affecting domestic politics and patterns of economic and scientific growth.
What a locality wants and gives to the world and what the world want from a
region or locality or give to the locality in economic terms can only be determined and
communicated through the fast moving and fast integrating channels of information
technology.
Globalization is the other name of global competition. In theory global
competition would mean forces of economic activity moving away from big business
towards competition between fast adapting small business which can cater for the needs
of fast changing trends in tastes and habits across the globe, thanks to the information
channeled on the web. In the words of Alvin Tofler, “Global competition means that we
can not go back to the conformity, uniformity, bureaucracy and brute force economy of
the assembly line”. Globalization and revolution in science and technology is not just a
matter of technology and economics. It involves morality, cultures and ideas as well as
institutions and political structures. In short globalization involves a true transformation
in human affairs.
In reality because of the advancement of information technology, education and
process of globalization, there is transformation going on every day in the private sector
among entrappers and with people who are inventing new things and creating new
solutions because the state machinery and bureaucracy does not stop them to sell their
innovations, ideas and products across boundaries. In this process of globalization or the
new civilization as I have called it, nations that sell information and innovation,
management, culture, advanced technologies, software, education, training, medical care,
and financial services, human resources of the advance intellectual level and other
services on the internet will supersede others which sell mass produced goods and those
that are trying to develop industries on traditional lines will be left behind.
Information technology and Globalization are changing everything in our lives, it
has and is changing the concepts of our social interaction, the concepts of education, our
freedom of thought, political will, economic policy making, religious believes, sexual
behaviors and into many other areas that we could imagine of receiving the change.
Whatever we talk about, whatever is the definition of education to you,
globalization and influx of technology is going to change each and every institution of
the global society, which includes various cultures, economies, either from east or from
west, we are going to see a dramatic shift in each and every social institution
internationally.
The concepts of doing business has changed, you have got a chance to free you
mind and open it for the new and amazing ideas from anywhere around the world, now
you can have all opportunity to get the education of the same standards, as someone is
getting in US or England. The global movement of producing the best brains have started,
we the youth of a poor country like Pakistan could have all the chance to show this world
the power of our thinking, we could learn the same skills as western people could have,
we could have all the opportunity to make our lives beautiful, we could work with the
intelligentsia of the world as a respected member of global world.
What is important today that equipped with the power of information and
technology, living in the world of global information, global resources, global

8
opportunities, global trends, we have to innovate and take such risks that will not only
develop our individual capabilities, but also use these processes in such a way that we
collectively can solve the global problems of poverty, disease, wars, environmental
degradation, and other such manmade problems that have plagued the human race and
hinder this fast growing and integrating process of global welfare and global cooperation.
Challenges of Business Management in a Global Economy
 Market Structure & Industry and Evolving Business Models
 Prioritizing IT Investments, Assimilation & Organization
 Buy vs. Make
 Partnership among key Constituencies through IT
 Protecting IT Assets and Managing Risks
CISM: Corporate Information Strategy & Management examines how IT
enables organizations to conduct business in radically different and more effective
ways
CISM is a fast moving global phenomena
It is a source of opportunity, uncertainty, advantage and risk – a wild card in
business
Information has become a major economic good – exchanged and priced
Why CISM? - Because
IT expands processing capacity & enables convergence of voice, video & data;
IT encourages real time transactions & interactivity;
IT dramatically increases connectivity & access;
IT gives new choices for designing & building industries, markets & organizations
Opportunities
Business Models are evolving to take advantage of the capabilities of new
technologies & business practices of NETWORK economy
New opportunities perused & technologies employed strongly influences the
approach taken to develop, operate and manage IT
Standardization of IT infrastructure has shifted It investments from cost-avoidance,
project centered approach to a asset-based strategic approach
Difficulties
Time required to successfully learn & assimilate rapidly changing technologies
limits the organization’s practical speed of change
External industry, internal organizational learning & technological change are
increasing the pressure on organizations to ‘buy’ rather than ‘make’ IT applications
and services
Ability to exploit 21st century technology successfully demands high level of
engagement & cooperation among four key constituencies – business executives, IT
executives, users and use technology providers/partners
Ability to ensure high level of security, privacy & availability has become a core
capability that determines organization’s ultimate success and survival
There is a fundamental shift of how people access and use technology, the way
organizations exploit it, & the way it is developed & managed
Market structures & Industry dynamics
Businesses are: suppliers, producers, distributers & partners that work together to
design, deliver, market, & sell products & services for business customers &
consumers
Although Businesses basic role and objectives have not changed, yet
The managers & executives of businesses & corporations have numerous options for
how to organize these activities and manage relationships among multiple partners

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Value Chain & IT
Primary value activity defines, how raw materials, information, and labor are used to
create products and services for business customers and consumers called a
sequence ‘value chain’
‘Value chain’ activities inside industrial firms were organized within functional
units: R&D, procurement, engineering, production, marketing, sales and services
etc. that were well defined in characteristics, policies, procedures, and function
Today managers are faced with a myriad of organizational choices without clearly
defined boundaries and relationships
IT systems enable access to the real time information needed to closely monitor
core activities that take place inside and outside the organizational boundaries
therefore virtually integrated industries
Evolving Business Models

Creating Business Advantage with IT

As the century closed, the world became smaller. The public rapidly gained access
to new and dramatically faster communication technologies. Entrepreneurs are able
to draw on unprecedented scale of economies and to build vast empires.
21st century brings with itself intense period of technology-enabled innovations,
creativity, & excitement that has been spurred by the commercialization of several
core technologies & associated changes in work & society - they are:
Technology, Business & social Evolution in 20th century
Innovations that helped producers in the past
Business innovations: include physical/analog production & distribution technologies
(machines, rail roads, steam engines, telephones0
Operating models: the assembly line, marketing, sales, and after sales service
channels)
Management models: (the hierarchy), &
a social regulatory systems: specialized work, pay-for performance incentives,
workers education, unions, antitrust laws
Technological changes in 21st century

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Internet & broadband networks
World Wide Web (WWW & high performance servers
Uniform resource locators (URL) & browser
Multimedia digital devices
Wireless networks & protocols
Java, Jini, XML & other object-orientated programming languages & database
technologies
Forces that shape Business Strategies
When business environment is stable, strategic decision making is like a game of
chess – moves & countermoves by players in the market
Three framework guidelines as analytical tools of impact of It on strategy of
businesses
1. Michael Poter’s ‘Value Chain’
2. ‘Industry and Competitive analysis’
3. warren Mcfarlan’s ‘Strategic Grid tool’
Value Chain
Once activities are defined, it becomes possible to analyze the economies at each step
of the value chain by identifying both the cost incurred and the value created.
Business market assumes one or more of four primary roles to carry out the value-
creating activities, like economies of scale (leveraging capabilities & infrastructures
to increase revenues & profitability within a single product line or market), and
economies of scope (leveraging capabilities & infrastructures to launch new product
lines, businesses or entering new markets)

11
 Industry
and Competitive Analysis
 Network Economy Businesses
 Network economy Businesses innovations include
 Production & distribution technologies (broadband & wireless networks,
multimedia content creation, flexible/real-time knowledge access &
management)
 Networking operating model (integrated supply chain & buy chain)
 Networked management Model (teams, partnerships, consortia) &
 Social/ regulatory system (ownership incentives, freelancing, virtual work,
distance learning, digital copyright laws)
 Network Economy markets leverage a shared:
 Digital Business Infrastructure; to enable

The Bretton-Woods Conference

June 1944
BRETTON WOOD CONFERENCE: Formally known as the United Nations Monetary
and Financial Conference
The conference was held from July 1–22, 1944 at the Mount Washington Hotel, situated
in Bretton Woods, United States
Was the gathering of 730 delegates from all 44 Allied nations
Before Bretton wood there was “General agreement of tariff and trade GATT)”.
Bretton wood declaration took several decisions- Bretton wood round of GATT.

Founders
Harry Dexter White -Chief International Economist at the U.S. Treasury
John Maynard Keynes – U. K. Treasury Advisor
44 Delegate Nations
1. Australia
2. Belgium
3. Bolivia

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 4. Brazil
5. Canada
6. Chile
7. China
8. Colombia
9. Costa Rica
10. Cuba
11. Czechoslovakia
12. Dominican Republic
13. Ecuador
14. Egypt
15. El Salvador
16. Ethiopia
17. France
18. Greece
19. Guatemala
20. Haiti
21. Honduras
22. Iceland
23. India
24. Iran
25. Iraq
26. Liberia
27. Luxembourg
28. Mexico
29. Netherlands
30. New Zealand
31. Nicaragua
32. Norway
33. Panama
34. Paraguay
35. Peru
36. Philippines
37. Poland
38. Union of South Africa
39. Union of Soviet Socialist Republics (USSR)
40. United Kingdom
41. United States
42. Uruguay
43. Venezuela
44. Yugoslavia
“To regulate the international monetary and financial order or to make financial
arrangements for the postwar world after the conclusion of World War II”

Major Accomplishments
International Monetary Fund (IMF)
International Bank for Reconstruction and Development (IBRD) = World Bank
Major Decisions of Conference
Gold Standard was abolished. SDR (paper gold) was to become international currency.
 US $ would become the world currency for international payments.

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  Birth of the twin world financial distribution:
 International bank for reconstruction and development (IBRD)
 International Monetary Fund (IMF).
 Fixed Exchange Rate of currencies against US$ (1944-1980).
 Democratic election process among members e.g. if you take loan from IMF ,
voting rights decrease and if you give loan to IMF, voting rights increase.
 The World Central Banks would guarantee stability of the dollar by creating a
tunnel of currencies.
 The USA government guaranteed dollar as the only convertible currency. In
other words anyone could exchange dollar for gold from any bank.
Policies of the Depression era
High tariff barriers
Competitive currency devaluations
Discriminatory trading blocs
W T O & ITS IMPACT ON PAKISTAN’S ECONOMY
What is WTO
WTO or the World Trade Organization was established in 1995 in result of the extensive
trade negotiations under Uruguay Round
WTO is a forum that has replaced GATT and serves as a forum for negotiations relating
to multilateral trade matters
Under WTO agreements, trade disputes between states can be settled and nations would
have to abide by WTO Dispute Settlement Understandings and regime
WTO would conduct review of Trade Policies of its members

The Charter of the World Trade Organization governs international trade and
subsequently economic activity in each country.
The preamble of the WTO says that the parties will try to make relations in the field of
trade and economics by conducting the following measures:
1. Raising standards of living;
2. Ensuring full employment;
3. Ensuring a large and steady growing volume of real income and effective demand;
4. Expanding the production of and trade in goods and services; and
5. Optimal use of world’s resources in accordance with the objectives of
Sustainable development
Protect and preserve the environment and enhance the means for doing so; and
The manner to do all these in a way consistent with the respective needs and
concerns, etc
Objectives of WTO
To contribute to the Development of a fairer & a more open multilateral trading system
in the World
To strive for greater global coherence of policies relating to trade, money and finance
To ensure differential & more favorable treatment for developing countries
To assist the least developed & net-food importing countries to cope with their
predicaments
Principles of WTO
 Non-discrimination or to give the most favored nation treatment to all member
countries
 Legal, institutional and procedural Transparency
 Prohibition of Quantitative Restrictions
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 Reduction, & ultimately elimination of trade distortions & trade restrictions by
individual nations
 Reciprocity among Members
WTO AGREEMENT
WTO agreement consists of the following instruments:
 Multilateral Agreements on Trade in Goods
 General Agreement on Trade in Services
 Agreement on Trade-related Aspects of Intellectual Property Rights
 Understanding on rules & Procedures Governing the Settlement Disputes
 Plurilateral Trade Agreements

The Multilateral Agreement on Traded Goods include:

•General agreement on Tariffs & Trade 1994
•Agreement on Agriculture
•Agreement on Application of Sanitary & Phytosanitary Measures (No
natural biological thing will be exported to another country where it can
become a preditor)
•Agreement on Textiles & Clothing
•Agreement on Technical Barriers to Trade
•Agreement on Trade related Investment measures
•Agreement on Anti-Dumping measures
•Agreement on Custom valuation
•Agreement on Reshipment Inspections
•Agreement on Rules of Origin
•Agreement on Import Licensing Procedures
•Agreement on Subsidies & Countervailing Measures
•Agreement on safeguards
Note: WTO legislation also includes hundreds of rulings of the WTO Dispute
Settlement Panels and Appellate Bodies

WTO Agreement on Services

Services comprise of 12 sectors, about 54 sub-sectors & more than 160
activities.
The Sub-sectors include:
•Business activities
•Communication Services
•Construction & Related Engineering Services
•Distribution Services
•Education Services
•Environment Services
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 •Financial Services
•Health Related & Social Services
•Tourism & Travel related services
•Recreation, Cultural & Sporting Services
•Transport Services
•Other Services
Agreement on Trade-Related aspects of Intellectual Property Rights
TRIPs deals with:

•Copy Rights & Related Rights

•Trade mark
•Geographical Indications
•Industrial Designs
•Patents
•Layout-Designs (Topographies) of Integrated Circuits
•Protection of Undisclosed Information
•Control of Anti-competitive Practices in contractual Licensing
Rights of members
 A member receives MFN and national Treatment from other members
 Export Goods & services of members receive expanding access to the
markets of 147 countries
 Each member receives protection of several laws, regulations & rules of
WTO Agreement
 Each member can contest arbitrary action by any other member in the
area of anti-dumping, countervailing duties, safeguard measures, sanitary and
phytosantiary measures, technical barriers to trade, and in the administration of
quotas
 Each member can enforce his right through the dispute settlement
procedure of the WTO, and
 Each member can participate, however marginally, in the construction of
emerging international trade regime.
 Duties & Obligations of Members
 Each member must ensure the conformity of its laws, regulations &
administrative procedures with WTO agreements
 National Institutions must act transparently, and, transparency is and
should mean good-governance
 All countries, except the least developed, should participate fully in the
WTO rounds of negotiations on a reciprocal and mutually advantageous basis
 Each country should submit its schedule of concessions & commitments
relating to its policies affecting international trade in goods and services at the
end of each round of negotiations.

16
  Note: These schedules should contain the country’s new tariffs relating to
goods & market access & national treatment conditions relating to trade in
services

1. Globalization and the introduction of a market economy have not produced the
promised results.
2. Not only in trade liberalization but also in every other aspect of globalization even
seemingly well-intentioned efforts have often backfired.
3. The policies that have been imposed on developing countries in the process of
globalization need to be radically rethought.
4. Unfortunately we have no world government, accountable to the people of every
country, to oversee the globalization process in a fashion comparable to the way
national governments guided the nationalization process.
5. We have a system that might be called global governance without global
government, in which many of those affected by their decisions are left almost
voiceless.
6. The IMF has made mistakes in all the areas it has been involved in.
7. There are alternatives to IMF-style programs, other programs that may involve a
reasonable level of sacrifices, which are not based on market fundamentalism, programs
that have had positive outcomes.
8. Time has come to ‘grade’ the international economic institution’s performance and
to look at some of those programs.
9. Privatization needs to be part of a more comprehensive program, which entails
creating jobs in tandem with the inevitable job destruction that privatization often
entails.
10. That without the appropriate legal structures and market institutions, the new
owners might have an incentive to strip assets, rather than use them as a basis for
expanding.
11. American government is pushing nations to live up to agreements that were vastly
unfair to the developing countries, and often signed by corrupt governments in these
countries.
Conclusion
Government of Pakistan should put up its shields as allowed to it by WTO Regime in
the form of:
 Institutions
 Regulatory Regimes: Legislating preventive measure against Dumping &
Discriminatory Trade practices
 Monitoring and enforcement of its laws both for local as well as foreign firms
 Labor laws
 Environment Protection laws
 National Quality Standards

WTO, DOHA AND THE DEVELOPING COUNTRIES

The WTO, based in Geneva, is made up of 146 member countries, one-fourth of which
are developing countries.
WTO was founded in 1995 as a successor to the General Agreement of Tariffs and Trade
(GATT), as a result of Uruguay Round of multilateral trade negotiations, which took place
between 1986 and 1994.

17
The WTO establishes the rules governing the international trading system, which have a
major impact n people’s livelihoods.
These rules often require that member countries change their intellectual property
legislations, industrial and agricultural policies, basic service provisions and sometimes
even their constitutions.
These rules of WTO affect unemployment, incomes and prices for imports and locally
produced goods that compete with imports. These rules extend into a number of areas that
had been outside GATT system – notably agriculture, textiles, trade in services and
intellectual property rights like patents and copyrights etc.
This greatly increases the potential effect of WTO decisions on people’s everyday lives,
particularly in developing countries, not only by extending the scope of the effects on
employment, incomes and prices, but also by introducing measures affecting trade in
services that affect the provisions and regulation of public services such as health
education, water and sanitation etc.
In short, the WTO is a key part of the globalization process, which affects everyone’s
lives.
The charter of WTO
Trade Organization governs international trade and subsequently economic activity in
each country.
The preamble of the WTO says that the parties will try to make relations in the field of
trade and economics by conducting the following measures:
Raising standards of living;
Ensuring full employment;
Ensuring a large and steady growing volume of real income and effective demand;
Expanding the production of and trade in goods and services; and
Optimal use of world’s resources in accordance with the objectives of
Sustainable development
Protect and preserve the environment and enhance the means for doing so; and
The manner to do all these in a way consistent with the respective needs and concerns,
etc
Sanctions
The WTO is unique among international bodies in including mechanism to enforce its
agreements with sanctions – although in practice these sanctions are largely ineffective
in the hands of most developing countri
Liberalization
WTO is being interpreted as being the progressive liberalization of international trade
among its members.
Many developing nations have lowered their trade barriers further than required by
WTO, under the structural adjustment programmes supported by IMF AND THE World
Bank.
Accession
Accession process which member countries have to go through in order to join WTO is
vigorous and time consuming – it took China no less than 15 years to accede, from its
application to join GATT in 1986. No least developing country has acceded since the
inception of the WTO. Moreover, any existing member has the right to veto accession
by any new member – Iran’s request for accession has been vetoed by the USA since
1996.
Developed countries like USA also make demand on newer members (Iran) that go
beyond the commitment required of the existing members or scope of existing WTO
agreements on the routine trade and economic requirements for accession.

18
Dispute Settlement Mechanism
A major problem of the dispute settlement mechanism is that the enforcement of its
decisions is through the sanctioning of retaliatory trade restrictions.
Trade sanctions by USA or EU against any other country would have a real impact on
its economy, but the effect of trade restrictions by any small nations on these economic
giants would have no effect t at all. In addition, there are serious obstacles to developing
countries using the mechanism effectively.
three key areas in which such obstacles arise:
The cost of, and access to, the dispute settlement process (usually small nations do not
get involved in disputes, because it is a very long and expensive system to get engaged
into, although for example the EU banns imports from some African nations under
pretext of the fish being infected with cholera bacteria without scientific proof);
Problems in the implementation of decisions and compensation arising from the
process, and;
The implementation of provisions regarding Special and Differential treatment in favor
of developing countries.
Principles of WTO
Non-discrimination or to give the MOST FAVORED NATION (MFN) treatment to all
member countries
Legal, institutional and procedural Transparency
Prohibition of Quantitative Restrictions
Reduction, & ultimately elimination of trade distortions & trade restrictions by
individual nations
Reciprocity among Members
Democracy in the WTO
Ian Wilkinson of the EU asked whether the institution was democratic, and went on to
say, “It is not democratic in the sense that people can just come in and say what they
think… The Organization itself has no policy or mind of its own”. The Malaysian
ambassador to the WTO, M. Suppermaniam says, well, [the WTO] is supposed to be
democratic... In practice, there have been complaints that the agenda is dictated by very
few powerful countries”.
The major obstacle faced by developing countries in the WTO
is the discrepancies between human resources available to them and those available to
the developing countries.
The US mission in Geneva has fourteen professional staff devoted exclusively to the
WTO. The EC – eighteen in addition to the staff in the missions of its fifteen member
countries. Japan – twenty-three and Canada – Twelve.
While a handful of developing countries have between eight and thirteen professional
staff, most have between two and five.
Pakistan has five professional staff in its Geneva mission in 2001. Countries like
Burkina Faso, Guyana, Malawi, Mali and Mozambique have zero.
Key regional groups and alliances within the WTO that play an important role in the
WTO are:

The Quad (Quadrilateral Group), comprising the USA, the EC, Japan and Canada forms
the most formidable alliance within WTO
The European Community (EC) comprises all the fifteen member countries of the
European Union.

19
The LDC (least Developed Countries) Group consists of thirty WTO members, mostly
low-income countries (Another 19 are not in WTO). The LDC’s are becoming
increasingly strong and coherent as a group, and had a coordinator at the Doha
Ministerial, as well as producing a joint declaration (the Zanzibar declaration)
The ACP (African, Caribbean and Pacific) group is made up of fifty-six developing
country WTO members in the region (Another twenty-two ACP countries are not in
WTO)

The African Group comprises of all African countries at WTO and often produces joint
statements and declarations. They threatened a walk out of the Seattle Meeting and
since have been instrumental in calling fundamental changes in the TRIPs Agreement.
The Cairns Group has 17 members from 4 continents, mostly high and middle-income
group countries – Argentina, Australia, Brazil, Canada, Chile, Colombia, Costa Rica,
Guatemala, Hungry, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines,
South Africa, Thailand and Uruguay
The Like-Minded Group (LMG) has a diverse membership that includes Cuba,
Dominican Republic, Egypt, Honduras, India, Indonesia, Jamaica, Kenya, Malaysia,
Mauritius, Pakistan, Sri Lanka, Tanzania, Uganda and Zimbabwe. The group meets
informally at the WTO, and has attained the reputation of being the grouping that most
frequently voices pro-development position at the WTO. It has played a major role in
raising implementation issues, and, after Doha, in putting procedural issues on the
agenda.
.
Major issues at the Doha Ministerial Conference were
Industrial tariffs and market access for non-agricultural goods;
Agriculture
Trade in services
Trade-Related aspects of Intellectual Property rights (TRIPs)
The New Issues (Competition, investment, transparency in government procurement
and trade facilitation)
Implementation Issues, and
Special and Deferential treatment
Industrial tariffs and market access for non-agricultural goods
many developing countries opposed the launch of yet another round of industrial tariff
reduction before Doha, because this was not part of the ‘built-in agenda’ specified in
Uruguay Round Agreement. Some African Countries like Kenya, Nigeria Uganda and
others submitted a joint paper explaining why they did not want these negotiations to
take place. They pointed out that both the African Countries and the Latin American
countries had already liberalized their imports of industrial products, which had led to
serious problems of local industries losing market share and closing down causing
unemployment and loss to government revenue.
Agriculture
developing countries accepted the Uruguay round Agreement as a whole largely
because they believed that they would benefit from agricultural liberalization and
subsidy reduction in the OECD countries and AoA. These promises were not fulfilled.
The USA dumps staple crops in developing countries in large amounts, exporting corn
at price 20% below production cost and wheat at 46% below costs. The EC spends half
of its total budget ($ 40 billion or Euro 40 billion) on agricultural subsidies. The USA’s
and EC’s agricultural subsidies and dumping have had devastating effect on developing
country’s agricultural sectors. Subsidies lead to over production, increasing surpluses in

20
the world market, that leads to depressing world prices, therefore farmers in developing
countries go out of business destroying local agriculture and food production. Cheap
European milk power has displaced dairy farmers in India and Jamaica, while corn
farmers in Philippines have been wiped out. Key sectors to food security and rural
employment like wheat, rice, cotton, onions and potatoes shrank in many developing
countries due to competitive pressures and in some cases the possibility of
diversification away from these crops is limited.
Trade in services
developing countries are under pressure to liberalize in many sectors, where they can
not compete. This could destroy existing local services industries, jeopardizing social
and development objectives. This applies equally in basic services such as health,
education, water and sanitation. Developed countries account for 70% of the world
export of services but only 20% of WTO members in 2002. Trade Commissioner of EC
Pascal Lamy in 2000 had publicly announced that the EC has ‘offensive export
interests’ in services. The massive financial strength, worldwide networks, access to
technology and sophisticated IT infrastructure of the major MNC’s makes it difficult, if
not impossible, for developing nations and their small and medium enterprises
providing services to catch up and in some cases not even to compete with them even I
their domestic markets. Egypt’s service imports have increased by 52% between 1996
and 1999 Developing countries wanted if liberalization had adverse effects, but there is
no political will on the part of the major powers.
Trade-Related aspects of Intellectual Property rights (TRIPs)
the developing countries have fought against TRIP’s agreement, arguing that it would
benefit MNC’s while preventing their own companies from copying technologies in
order to develop, as has been done historically by developed countries. The USA,
Germany, Japan Korea and even China, all industrialized largely by copying existing
products and/or process technologies. In practice the effect of TRIP’s on R&D in
developing nations is non-existent, has discouraged collaboration and information
sharing in research and arguably tilts the balance in favor of rights-holders, rather than
the public. Several analyses have recommended the removal of TRIPs from the WTO
on the ground that it is against the very essence of free trade. The largest US drug
companies made profit of $37 billion in 2001, about $7 billion of which came from
sales in developing countries, representing an annual rate of returns of 39% - the highest
in the industry. They guard this position jealously and through aggressive lobbying with
the US government. The pharmaceutical MNC’s took South African government to
court in 2001 to prevent it from introducing a law that allowed compulsory licensing.
The New Issues
(Competition, investment, transparency in government procurement and trade
facilitation) – These are also referred as the Singapore issues (1996), and are essentially
about removing any domestic legislation in developing countries that favor local
companies over foreign companies. The developed countries want these agreements
situated in the WTO because of the principle of national treatment and the most favored
nation (MFN) principle. The new issues were a key battleground in Doha where it was
agreed despite the opposition of the developing countries that negotiations would take
place on the new issues after the Fifth Ministerial in Mexico in 2003 based on explicit
consensus on the modalities negotiations. The majority of developing countries in the
WTO oppose agreements on investment and competition. Developing countries have
made it clear the need to protect government procurement, as this is now one of the few
policy tools still available for the developing countries to peruse their socio-economic
and development objectives. Also behind the objectives of trade facilitation lies the

21
hidden agenda of MNC's to limit the ability of the customs authorities to question the
transaction value declared by them, to prevent unfair transfer pricing etc.
Implementation Issues
despite the promise of liberalization, the developed countries have for example
increased the level of protection and subsidization of agriculture exports, while the
agreement on Textiles and Clothing allows them to hold on to most of their quantitative
restrictions on textiles (banned for other goods). As a result, the standards put in place
are more or less those that of the developed nations and difficult for developing
countries to implement because of their limited technical capacity and the high financial
costs. The SPS Agreement has thus become a tool by which the developed country
governments and their corporations restrict export from the South, and such ‘trade
harassment’ places heavy burden on developing countries.
Special and Deferential treatment (SDT)
gathered support in Asia and Africa as more developing countries gained independence.
The US has generally been un-sympatric to SDT provisions and the developed countries
are trying to roll back SDT even attacking weaker SDT provisions such as longer
implementation periods. The USA has taken a position that no transaction period should
be extended beyond 2005. The majority of these provisions therefore have not been
implemented, and in practice seem to serve a public relations purpose rather than of any
real value.
Some 3,800 delegates from 142 countries spent a week in Doha. In the end, despite the
principle of consensus, and the reservations of many developing countries, the text was
published. Doha offered minimal concessions to the developing countries while the
Quad prevailed and got what they wanted – a new round, including a major advantage
in the decision to be taken on ‘new issues’. For the Northern delegates, Doha represents
a bit of a gain and a bit of a loss for everybody, allowing all governments to claim some
degree of victory. For the Southern delegates, Doha work programme has enhanced the
imbalance in the WTO system significantly, because it was not the result of any serious
negotiations among members of WTO, because the agenda of the Doha Work
programme had been totally set out by the major developed countries guided by their
own economic interests.
What Happened to the Old Issues
There was made no change in the legal text of TRIPs Agreement
The exact mechanism of how developing countries without manufacturing capacity
could have access to generic drugs remained unsolved
Foot-dragging by developed countries on the patenting of biological materials continued
in Doha
The Declaration failed to deal substantively with other TRIPs related problems, such as
prevention of technology transfer and diffusion
While decisions were made on forty-eight implementation items, in the document
running to eleven pages, only about three decisions were of any value. The remaining
was limited to ‘best Endeavour’ language, merely urging developed countries without
making any actions mandatory.
The developing countries’ opposition to negotiations on industrial tariffs and market
access for non-agricultural products was further undermined by the draft declaration.
That is, products that are important for local employment will have to be liberalized.
The Doha declaration did not launch new negotiations in area of Agriculture, but
specified deadlines for the competition of negotiations on modalities and the submission
of draft schedule.

22
Most disappointing for developing countries was that the developed nations wriggled
out of agreeing to end export subsidies – legalized dumping, which has long been
banned for industrialized products.
The repeated requests of developing countries for the assessment required by the GATS
agreement on trade in services before new negotiations was ignored
On trade and environment, the final declaration agreed to negotiations on the
relationship between the existing WTO rules and specific trade obligations set out in
multilateral Environmental agreements (MEAs). Developing countries are worried that
eventually the MEAs would automatically take precedence over WTO rules and its
might be used by developed nations in their own favor and against the interest of the
developing countries.
Like Minded Group proposals
The more formal reaction to Doha process came from Like Minded Group and in
January 2002 they (LMG) circulated a draft proposal, focusing on how the process
leading up to and at ministerial meeting could be improved, through the introduction of
checks and balances. Several developed and richer developing countries opposed the
LMG proposal and Chile, Costa Rica and Singapore rejected the proposal.
After Doha
After Doha, it became clear to most developing countries that a basic set of rules and
procedures was necessary to give effect to transparency, inclusiveness and the effective
participation of all member states in negotiations.
The process leading to Cancun in September 2003 and after resembled the process
leading to Doha. The major powers clearly continue to control the process, hoping to
repeat the successes. They carry on loading the agendas relentlessly with their own
issues, and use their political muscle to secure the negotiation framework and the
committee chairs that they want, irrespective of the WTO rules and I face of stiff and
now more unified resistance from the LMG countries, most other opposition and
criticism from developing nations is put down.
Conclusion
The WTO dispute settlement system is supposed to protect the weak. In reality, the high
resource and monetary cost of litigation only let the developed nations to use the system
The veto on the accession process allows the developed countries to put inverse pressure
on developing countries wishing to join WTO
The TRIPs agreement has provided the basis to force many developing countries into
adopting patents and copyright legislation in the interest of major developed nations and
their MNC’s
GAT in services offers means to make liberalization in service sector almost
irreversible, giving developed countries a new tool in taking over the services market of
the less developed nations
Agreement on Agriculture (AoA) ties the hands of developing countries to protect
themselves against dumping by OECD countries.
In short, instead of protecting the weak WTO, currently as it operates, does help the
richer and more powerful countries to take over the markets of the less developed
nations. Instead of increasing employment and income opportunities for the poor in the
developing countries is helping drive out of businesses and employment the very people
that it is said to protect and help secure a better lifestyle.
Thank You
The Doha Declaration

23
The November 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar,
provides the mandate for negotiations on a range of subjects, and other work including
issues concerning the implementation of the present agreements.
The negotiations take place in the Trade Negotiations Committee and its subsidiaries.
Other work under the work programme takes place in other WTO councils and
committees.
Issues
Implementation
Agriculture
Services
Market Access (Non-Agriculture)
Intellectual Property
Investment
Competition
Transparency In Government Procurement
Trade Facilitation
Anti-Dumping
Subsidies
Regional Agreements
Dispute Settlement
Environment
E-Commerce
Small Economies
Trade, Debt And Finance
Trade And Technology Transfer
Technical Cooperation
Least-Developed Countries
Special And Differential Treatment
Joseph Stiglitz’s “Globalization and its Discontents”
1 Globalization and the introduction of a market economy have not produced the
promised results.
2. Not only in trade liberalization but also in every other aspect of globalization even
seemingly well-intentioned efforts have often backfired.
3 The policies that have been imposed on developing countries in the process of
globalization need to be radically rethought.
4. Unfortunately we have no world government, accountable to the people of every
country, to oversee the globalization process in a fashion comparable to the way
national governments guided the nationalization process.
5. We have a system that might be called global governance without global government,
in which many of those affected by their decisions are left almost voiceless.
6. The IMF has made mistakes in all the areas it has been involved in.
7. There are alternatives to IMF-style programs, other programs that may involve a
reasonable level of sacrifices, which are not based on market fundamentalism, programs
that have had positive outcomes.
8Time has come to ‘grade’ the international economic institution’s performance and to
look at some of those programs.
9. Privatization needs to be part of a more comprehensive program, which entails
creating jobs in tandem with the inevitable job destruction that privatization often
entails.

24
10That without the appropriate legal structures and market institutions, the new owners
might have an incentive to strip assets, rather than use them as a basis for expanding.
11. American government is pushing nations to live up to agreements that were vastly
unfair to the developing countries, and often signed by corrupt governments in these
countries.
CANCÚN WTO MINISTERIAL 2003
The Cotton Initiative
This briefing document explains current agricultural issues raised before and in the
current negotiations. It has been prepared by the Information and Media Relations
Division of the WTO Secretariat to help public understanding about the agriculture
negotiations. It is not an official record of the negotiations.
Just over a year after it was first proposed in 2003, a Cotton Sub-Committee was set up
under the Agriculture Committee’s “Special Sessions”. The August 2004 General
Council decision that created the sub-committee also said the General Council would
look at development issues.
SERVICES
The new negotiations
Written into the General Agreement on Trade in Services is a commitment by WTO
member governments to progressively liberalize trade in services. Article XIX
(paragraph1) commits them to start a new round in 2000. These negotiations are now
underway.
Non-agricultural market access negotiations
At Doha, Ministers agreed to initiate negotiations to further liberalize trade on non-
agricultural goods. To this end, the Negotiating Group on Market Access (NGMA) was
created at the first meeting of the Trade Negotiations Committee, in early 2002.
Environmental goods
Paragraph 31 (iii) of the Doha Ministerial Declaration foresees that negotiations be held
“on the reduction or, as appropriate, elimination of tariff and non-tariff barriers to
environmental goods …”. At the first meeting of the Committee on Trade and
Environment Special Session, held in March 2002, there was broad support for the idea
that the negotiations on environmental goods be conducted by the Negotiating Group on
Market Access.
> Negotiations on trade and environment
Special and Differential treatment
Capacity-building measures
The Secretariat organized a “Market Access Seminar” in May 2002 in order to identify
better the issues under negotiations. Three issues in particular were discussed: Tariffs,
NTBs and Databases.

Pakistan & WTO

 There are following types of industry and employment in Pakistan:
 Export Industry
 Import Substitute Industry
 Sub-contracting Industry (outsourcing) & Intra- Industrial Trade

 Effects of Globalization
 Production Effect:
 Theoretically speaking, the production of export industry should increase
because of the demand of domestic goods in international market

25
  The production of import substitute industry should decrease because of
competition from highly skilled, better quality and cheaper import products from
abroad
 The production of sub-contracting industry in the country should increase
as more and more products are being produced by the Direct Foreign investment
in the country and need for sub-contracting of different parts and semi-
manufactured goods would increase

 Restraints
 WTO will have a very stringent quality control as far as product market
is concern
 WTO would have a very stringent environment control that :
 Products for the international market would have to be environmentally
friendly (ISO 14000)
 Production processes in each nation would have to be environmentally
friendly and environmentally friendly technologies would have to be used
(National Environmental quality Standards should have to be enforced)
 3. Personals working on these products would have to confine by
national and international quality standards
 Managements would have to confine by national & international labor
laws
 Property Rights Laws would have to be enforced strictly

The benefits of the WTO trading system to the industry in any country are:
1. Free Trade helps keep peace in the world;
2. WTO system allows disputes to be handled constructively;
3. WTO system is based on rules agreed upon by every member, rather than power of
one nation over other nations, which makes economic and political relations easier for
all;
4. Free trade cuts the cost of living;
5. Free trade gives the consumer more choices, and a broader range of qualities to
choose from;
6. International Trade raises income of the local labor and producers which produce
for foreign markets;
7. International Trade stimulates economic growth, and that can be good for
enhanced employment activity in each country;
8. The basic principles of free trade and competition make the system economically
more efficient, and subsequently that cuts costs of production;
9. The system shields governments from narrow national interests,
10. WTO system encourages good governance; and
11. WTO regime also helps international cooperation for environmental protection and
sustainable development

Harmful effects of MNC’s

MNC’s dominate the economies of less developed countries through

1. The unwillingness of a local affiliate of an MNC to export to a nation deemed
unfriendly to the home nation or the requirement to comply with a home nation law
prohibiting exports

26
2. The borrowing of funds abroad to circumvent tight domestic credit conditions nd the
lending of funds abroad when interest rates are low at home
3.The effect on national tastes of large-scale advertising for products as Coco Cola,
jeans etc
4. The siphoning off R&D funds to home nation from host nation
5. Keeping the country technologically dependent
6. MNC’s also absorb local savings and entrepreneurial talents, thus preventing them
from being used to establish domestic enterprises
7. MNC’s also extract from host nations most of the benefits that occur from their
investments, either through tax and tariff benefits or through tax avoidance.
8. Foreign direct investments in minerals and raw materials production have often
given rise to complains of foreign exploitation in the form of low prices paid to the host
nation
9. Also MNC’s use high capital-intensive production techniques, inappropriate for
labor-abandoned developing nations, which lack trained local labor
10. MNC’s over-exploit natural resources and
11. MNC’s create highly dualistic ‘enclave’ economies in LDC’s
Joseph Stiglitz in his book Globalization and its Discontents underlines the following
points:

27
28
29
 G- 20 Nations
The G20, short for "Group of 20", is made up of 19 countries: Argentina, Australia,
Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea,
Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the
United States, plus the European Union.
The members of the G20 (Group of 20 Leading by GDP Economies) are: members of
NAFTA (Canada, Mexico, the United States of America); the countries of European
Union (comprises 28 member states, i.e. Austria, Belgium, Bulgaria, Croatia, Cyprus,
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal,
Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom; countries of BRICS

30
(Brazil, Russia, India, China, South Africa); the as well as Argentina, Australia,
Indonesia, Italy, Japan, Republic of Korea, Saudi Arabia, and Turkey.
Together, members account for roughly 85% of the world economy; that's around
three-quarters of global trade and two-thirds of the world’s population.
Intra EU trade: There were nine Member States (Belgium, Czech Republic, France,
Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom) whose exports
of goods to partners in the EU were over EUR 100 billion in 2015, accounting for
almost 80 % of the total value of intra-EU exports of goods. In the internal market
international trade in goods is mainly in manufactured products: their share in 2015 was
80 % of total intra-EU export trade in goods. Of this machinery and vehicles made up
36 % of the total goods exports, while other manufactured goods accounted for almost
27 % and chemical products for 16 %. Primary products account for 19 % of total
exports of goods; made up of food and drink (10 %), energy products (6 %) and raw
materials (3 %).
Japan – EU Trade: Japan is the EU's 6th largest export market (3.2% in 2010 with a
value of €44 billion). EU exports are primarily in machinery and transport equipment
(31.3%), chemical products (14.1%) and agricultural products (11.0%). Japan is also the
6th largest source of imports to the EU (4.3% in 2010 with a value of €65 billion).
Japanese exports to Europe are primarily machinery and transport equipment (66.7%).
The EU is Japan's 3rd largest trading partner (11.1% of imports, 13.3% exports).
USA and EU trade: are each other’s main trading partners in goods and services, and
together they have the largest bilateral trade relationship in the world. Either the EU or
the United States is the largest trade and investment partner for almost all other
countries in the global economy. The two economies also provide each other with their
most important sources of foreign direct investment. Together, the EU-28 and the
United States accounted for close to one third (31.1 %) of global imports of goods and
27.0 % of global exports in 2013 In 2013, the EU-28 recorded EUR 1 736.6 billion
worth of exports, the highest value in international trade. In 2013, manufactured goods
(all products included in SITC 5–8) accounted for the largest share of EU exports to the
United States (87.1 % - see Figure 3). Manufactured goods made up the majority of EU
imports (79.9 %) as well
USA – China Trade: China and the United States followed closely at
EUR 1 663.3 billion and EUR 1 188.2 billion respectively.

General Analysis on Globalization of the Economy

With international trade, financial transfers, and foreign direct investment, the economy
is increasingly internationally interconnected. This page analyzes economic
globalization, and examines how it might be resisted or regulated in order to promote
sustainable development.
Articles and Documents
2013
China, BRICS And Africa: Who Really Benefits? (April 2, 2013)
China’s involvement in Africa over recent years has been the subject of much scholarly
and journalistic debate. Policymakers and observers have also devoted increasing
attention to the emergence of multilateral cooperation between the world’s emerging
economies, often abbreviated as the BRICS (Brazil, Russia, India, China, and South
Africa). Some are convinced that these developments are establishing auspicious
conditions for significant progress and development in Africa. Henning Melber, however,
cautions against excessive optimism, noting the self-interested nature of Chinese
investment. Although current international trends may provide opportunities for Africa,

31
Melber argues that Africa’s future is uncertain and depends on its states, leaders, and
social struggles.
2012
African Economies Face Down European Storms(August 6, 2012)
The Eurozone crisis has reduced foreign aid, remittances, tourists and the demand for
African exports. But the overall economic growth and investment trends are positive—
some countries will benefit from the exchange rate changes and the rise in commodity
prices such as gold. The Eurozone crisis has blurred the distinction between “high risk”
emerging economies and the “safety” zones of Europe and the US; “today, the rich world
offers low growth and high risk.” As South-South foreign direct investment proved to be
more resilient to global shocks, African economies can take this crisis as an opportunity
to diversify their trade and create a new economic order. (This Is Africa)
While Iceland Investigates City Fraud Claims, Our Feeble Watchdogs Fail to Bark
(March 17, 2012)
Allegations of a 2008 London derivatives scandal are currently being pursued.
Investigators believe that an attempt may have been made to manipulate prices in the
unregulated London Credit Derivatives Market at the height of the banking crisis in 2008.
Surprisingly, investigators are not British officials, but prosecutors from Iceland. UK
authorities that had previously examined the case concluded that, despite sound evidence,
a criminal prosecution would be “costly and untriable” due to the complex financial
instruments involved. The fact that UK authorities admit to be defeated by the complexity
of this case is a damning indictment of authorities power to regulate financial markets and
hold them accountable. (Guardian)
Former Treasurer at a Collapsed Bank: “Right and Wrong Become Blurry” (March
12, 2012)
The Guardian blog Going native in the World of Finance aims at making the complex
world of finance accessible to outsiders. In this week’s post a former treasurer at a
collapsed bank presents his answer to the question of why virtually nobody inside the
finance world speaks out against the banks’ practices. The problem, the banker maintains,
lies in the incentive structure, which ranges far beyond large bonuses. “It is about tribal
bonding, about belonging and sticking with your mates.” In an environment that follows
the principle “either with us or against us,” regulation to keep the institutions in check
will not work. “Don’t hold your breath. No matter what rules you out in place, they’ll
always find ways around it.” For this system to ever get truly better “you’d have to
untangle the inherent tendency to amorality.” (Guardian)
Demystifying the Financial Sector (January 30, 2012)
Over the past three decades the financial system has exploded in size and importance.
Markets now act as the central hub of an exploitative system that demands unlimited
economic growth, stretching people and planet to a breaking point. Rather than losing
strength after a financial crisis that sparked economic instability and recession across the
globe, the power of financial institutions has only increased since 2008. Yet, despite its
social importance, the financial system appears incomprehensible for the vast majority of
citizens. This booklet published by Corporate Watch aims at contributing to a popular
understanding of the banking and finance sector and its vast role in society. (Corporate
Watch)
Towards a Global Financial System Fit for Development (January 20, 2012)
Four decades of financial liberalisation have left countries defenseless against pernicious
financial flows and a powerful and highly speculative financial sector, shifting the balance
of power from governments to markets. In this report, the European Network on Debt and
Development proposes concrete solutions to (i) reach macroeconomic and financial

32
stability, (ii) stop food speculation and (iii) curb illicit financial flows facilitated by tax
havens. According to the report, “these difficult times also provide a golden opportunity
to re-regulate the financial system, and change the development model.” It is time for the
big financial casino to be closed for good. (Eurodad)
UN Predicts Billionth Tourist Arrival in 2012 (January 20, 2012)
The United Nations is predicting the arrival of the one billionth tourist in November or
December of this year. Responsible for five percent of the world’s GDP and highly
significant in 11 out of the 12 countries that hold 80 percent of the world's poorest, the
tourism industry has come to represent something of a panacea, a road for shared socio-
economic development. This IPS article presents the upsides of the tourism industry.
However, the article points out that “the true success of travel marketing is not the
numbers of tourists arriving at a destination, but in the earnings that tourism generates for
the national exchequer.” For tourism to serve as an agent for broader socio-economic
development, services and goods ought to be delivered by local providers and inter
sectoral linkages between the tourist industry and other economic sectors of the host-
country need to be promoted. (Inter Press Service)
France Deals with Globalization (January, 2012)
In an attempt to take advantage of low wages and expanding markets, multinational
companies have shifted manufacturing operations and research from North America and
Europe to Asia. Taking the French manufacturing industry as its case study, this Yale
Global series offers ideas on how nations can design their policies to benefit from
globalization. The first article examines how the lack of international market regulations
leads to an uneven distribution of jobs. Economist Pierre-Noel Giraud argues that wealthy
countries should keep their boarders open and emerging counties should continue
developing their domestic markets. The second article explores the promotion of labels
that identify a product’s country of origin as a way to prevent the loss of manufacturing
jobs. Author Alain Renaudin maintains that geographical labels are no solution, as values,
expertise and innovation are more critical factors for economic success. (YaleGlobal)
Prospective Intern in Mathematical Finance: 'Banks Drain the Best Minds'
(January 16, 2012)
In the recently launched Guardian blog “Going native in the World of Finance,” Dutch
anthropologist Joris Luyendijk explores the world of finance from the inside. By
interviewing bankers, traders and financiers, he seeks to make the complex world of
finance accessible to outsiders. In this piece, Luyendijk meets a UK math student who is
trying to get an internship in the banking sector. He is skeptical about the industry, fears
that the financial sector attracts the best minds, and yet chooses to go into finance. This
Guardian interview tries to explain why, illuminating the systemic issues underlying the
student’s choice. (Guardian)
Seven Principles for Arguing with Economists (January 15, 2012)
Having a good command of the language of economics seems indispensable in today’s
political climate. Even with a basic understanding of standard economic vocabulary,
however, it is easy to feel disempowered by “an economic argument.” Politicians and
pundits use seemingly authoritative arguments to quash criticism. Oftentimes though,
economic arguments that seem very powerful at first are not more than hot air. In this
blog entry cited by New York Times columnist Paul Krugman, Noah Smith outlines a list
of seven of these fallacious arguments and presents easy responses to debunk them.
Top Risks and Ethical Decisions 2012 (January, 2012)
Ian Bremmer, founding president of Eurasia Group risk consultants outlines what he
believes to be the top risks and ethical decisions for 2012. Bremmer argues that the lack
of global leadership represents the greatest threat for 2012. At a time in which states and

33
markets are becoming much more interlinked and in which economic rather than security
issues are driving national politics, “private sectors ought not to capture the state.” (Policy
Innovations)
2011
Refounding Good Governance (December 19, 2011)
According to Professor Charles Kupchan of Georgetown University, the idea that
globalization would be particularly advantageous for Western liberal societies was flawed
from the get-go. Governments falsely assumed the lasting efficacy of traditional policy
tools and lost sight of democracy and solidarity. Western economic and democratic
malaise can only be overcome if inequality is redressed and popular control of the political
economy is bolstered. Rather than seeing these conditions as valuable in themselves,
however, Kupchan thinks that they are instrumentally valuable to avert geopolitical
threats to the West’s “material dominance” and “ideological primacy.” Instead of
questioning neo-liberal globalization itself, Kupchan merely criticizes the West’s ability
to take advantage of it. (New York Times)
Time for a New Consensus: Regulating Financial Flows for Stability and
Development (December 15, 2011)
In the wake of the financial collapse of 2008 and at a time of vast economic uncertainty,
the role of cross-border capital flows ought to be questioned. There is considerable
consensus in the economic literature that countries with deregulated and liberalized
policies towards capital inflows do worst when a crisis hits. However, despite the grave
risks involved in not regulating financial flows, an overarching global framework to
regulate and control capital flows does not exist. This report of the Bretton Woods
Project explains the drawbacks of policies that deregulate the movement of money across
borders and makes concrete suggestions to regulate financial flows to ensure stability and
development. (Bretton Woods Project)
Possible ‘Peak Population’: A New World Without Borders? (October 18, 2011)
According to demographer Danny Dorling, recent world population projections such as
those by the UN Population Fund (UNFPA), are overstated. Rather than continued
exponential growth towards unsustainable levels, Dorling expects a point of “peak
population”, after which the world population will drop. Additionally, Dorling notes that
inequality between countries (not necessarily within them) appears to be declining. One
of the possible positive effects of these trends is that restrictive migratory policies will
become a thing of the past. Many people will no longer have the need to migrate, and the
freedom of movement across borders can be democratized. (openDemocracy)
Filipino Maids for Export (October 2011)
Every year more than 100,000 Filipinos go abroad to work in the service industry - 22%
of the working age population. Many of those are maids, sent all over the world into
domestic service to support their children back home. With the “supermaid”
program launched in 2006 by former president Gloria Arroyo, the Philippines
government aimed at training domestic servants, doing away with agency fees, ensuring
a $400 minimum wage and reducing the structural violence affecting women. Five years
after the programs establishment, there are training colleges all over the country, but the
promise of basic rights for Filipino overseas workers has proven empty. “Every day the
bodies of six to ten Filipinos who have died working overseas are repatriated. The
Philippines has become a factory producing workers.”(Monde diplomatique)
International Sharing: Envisioning a New Economy (September 29, 2011)
Recent events in North of Africa serve as a crucial reminder that public opinion can
influence government decisions. A united global public can force governments to reorder
their distorted priorities. Prevention of up to 50,000 poverty-related deaths each day is

34
sufficient reason for prioritizing an international program of emergency relief above all
other international concerns. This ought to be followed by longer-term global economic
reforms. Sustainable models for development must come from within developing
countries. The UN must establish a more inclusive international framework, which fully
recognizes our global interdependence. “The time to act is now.” (Share the World’s
Resources)
Green Economic: Fix Our “Ends” Not Just Our “Means” (September 29, 2009)
Crises will continue to persist as long as responses to current interrelated crises remain
anchored in mainstream economics and ecological modernization, Growth continues to
be perceived as the only measure of development; environment and ecosystems continue
to be perceived as unlimited. Fashionable “green turns,” such as green economy, green
growth or sustainable growth will not do the trick. Instead of focusing on means such as
efficiency and technological innovation, policymakers should realize that the main driver
of the crises lies in the end goal of unlimited growth. (Open Democracy)
The Four Horsemen of Economics (September 28, 2011)
Stewart Wallis, executive director of the New Economics Foundation, identifies four
interlinked problems in our contemporary global economy: it is Unsustainable, Unfair,
Unstable, and it’s making individuals Unhappy. These systemic problems are, however,
not only extremely dangerous, but also completely avoidable. Humans are not necessarily
stuck with the economic construct they created. To solve “the four U’s,” policy makers
need to rethink most of our economic orthodoxy. Rather than asking how GDP can be
maximized, the new economic question is “how much well-being can be achieved for
each unit of natural resources?” (Yale Global)
New Rules for the Global Economy (January 10, 2011)
In his new book The Globalization Paradox, author Dani Rodrik puts forth several
principles he feels are necessary to create a sound global economy in today’s world. Rodik
believes markets must be strengthened by social institutions, such as courts, in order for
society to effectively enforce legal policies. Furthermore, the nation state, rather than
transnational institutions, should be central in the deisgn of economic policy. According
to Rodrik, a good global economic structure should be based on the assumption that
“globazation works best when it is not pushed too far.” (Project Syndicate)
Preventing the Next Flash Crash (May 5, 2011)
Market liquidity can vanish in the blink of an eye due to the proliferation of advanced
high-frequency trading platforms, which are able to execute thousands of trades a second.
When liquidity begins to disappear, it can create a cascade effect where other algorithmic
traders automatically sell positions, precipitating a market crash. Market crashes present
a challenge for regulators looking to solve abrupt market disruptions. Unfortunately,
regulators have been slow to react to a glaring gap in oversight which poses systemic risks
to capital markets. (New York Times)
The End of Tunnelnomics (May 4, 2011)
Enterprising Gazans have turned to constructing tunnels to move goods into the territory.
Israel has since 2008, instituted a virtual blockade of the territory. But, like any situation
where goods are outlawed or taxed, supply is reduced while demand increases, and that
provides an irresistible opportunity for risk-taking entrepreneurs. Growing profits will
continue to entice Gazans to join the illicit economy, further driving tunnelnomics.
(Foreign Policy)
The Looming Food Crisis (February 18, 2011)
Developing and developed nations alike are feeling the impact of rising world food prices.
Contributing factors include extreme weather events, speculation on food prices and
subsidies diverting food for the production of biofuel. Rising food prices affect poorer

35
countries disproportionately and sometimes result in political instability. This article
argues that research and technology advances in agriculture can only sustain a growing
population for a limited period, and that a failure to address the needs of the poor could
threaten global security. (Yale Global Online Magazine)
Report Says Developing Nations Lost $6.5 Trillion in Illicit Outflows in Last Decade
(January 18, 2011)
Developing nations are confronting trillions of dollars in illicit outflows from trade
mispricing, crime, and corruption. Global Financial Integrity, a Washington-based
research group, determined that from 2000 to 2008 over $6.5 trillion was drained in this
way from developing economies. China led all nations in illicit outflows. (The Wall Street
Journal)
Eight Reasons Global Capitalism Makes our Lives Worse (January 16, 2011)
The Economics of Happiness, a newly released documentary, offers a critique of the
negative effects globalization on people's lives. The film notes that despite the rise of
material wealth over the past 60 years, studies show that people are less happy. Climate
change, growing insecurity, and exploitation of dwindling natural resources emerge as
byproducts of the unrelenting push of global capital. The filmmakers advocate a return to
localized production of goods and services, with a greater emphasis placed on shared
community resources, in order to escape the juggernaut of the current system. (Alternet)
Hot Money Roils Growth Currencies (January 3, 2011)
"Hot money," or speculative flows of funds which rush into countries to exploit favorable
interest rates, are flooding into emerging markets, leading to major imbalances in the
global economy. Some countries have begun to institute capital controls in an effort to
keep their currencies from appreciating too quickly relative to the dollar, and maintain
export competitiveness. Emerging market policy makers have defended their use of
capital controls to ward off dangerous speculation. (The Wall Street Journal)
2010
After BRICs, look to CIVETS for growth - HSBC CEO (April 27, 2010)
Last decade, the term BRIC (Brazil, Russia, India and China) was used to refer to
emerging markets with high growth potential. In 2010, six more countries have been
included in the rank of these emerging markets, and the group has been designated as
CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa). Emerging
markets are expected to grow three times faster than developed countries this year and are
driving global recovery.
A Fateful Day for the Eurozone (April 24, 2010)
Greece will receive a $40 billion rescue package in what is potentially the biggest bail-
out of a country ever. Two-thirds of the rescue package will come from EU member states,
and one-third from the IMF. The deal is expected to go through by early May once
discussions over the conditions of the rescue package conclude. What does this bail-out
mean for the European monetary union? Critics have come to question how a Eurozone
member was able to accrue such a proportionally large public debt. Obviously, there was
a critical lack of oversight, obligation, and assistance in existing treaties. (BBC)
The Case Against It (February 15, 2010)
President Obama's push for tough bank regulation is not only opposed by Wall Street, but
by international regulators as well. Ministers of the G20, the President of the IMF, and
other big bank representatives voiced their concerns at the recent World Economic Forum
- that such an action would create "regulatory confusion" and form a barrier to
international coordination. Also, they said nation-specific financial regulation would
require cross-border controls to ensure banks do not deviate from legislation, which
would be costly. But Dani Rodrik argues that regulatory diversity is the only way to

36
ensure democratic accountability, and it would empower domestic legislatures to respond
to their domestic environment - which wouldn't be a bad thing. (The Business Standard)
Stop Private Firms Exploiting Poor States (February 5, 2010)
A Canadian Mining company, Pacific Rim, has filed a claim to sue the Government of El
Salvador under a provision in the Central American Free Trade Agreement. Ironically,
Canada is not even a party to the agreement. In 2009, El Salvador refused PacRim's
environmental impact statement denying the company the opportunity to mine for gold.
PacRim now seeks $100 million, double what El Salvador receives in US foreign aid,
using its American subsidiary to take El Salvador to an arbitration panel at the World
Bank. Critics argue that investment rules should allow nations the flexibility to protect
their environment. If instead, investment groups can sue to override domestic laws,
sovereignty has little meaning.(The Guardian)
US Urges European Parliament to Back Data Deal (February 8, 2010)
Under the terms of the Lisbon Treaty, the European Parliament can decide whether or not
to share EU bank transfer information with the US. US Treasury Department official,
Adam Szubin, is pushing hard to convince the EU to go ahead with information sharing
previously agreed. US National Security Advisor, James Jones, has also said that
transparency in trans-Atlantic transfer data have prevented and will prevent terrorist
attacks. (Der Spiegel)
The New Rules: globalization's next wave of integration (January 11, 2010)
The world economic crisis has changed the dynamics of globalization. Outsourcing has
lost its efficiency and nations prefer local initiatives to lower costs. Emerging countries
such as China want to secure long-term access to raw materials. The "middleman" concept
might disappear as end-point retailers contact primary producers directly. (World Politics
Review)
Globalization: after the recession (January 6, 2010)
The World Bank chief economist Justin Lin explains why countries should diversify their
industries if they want to keep pace with the global economy. Referring to India and
China, Lin argues that nurturing industries in line with national advantages such as cheap
labor and rich natural resources, developing countries can adjust to post-crisis economy
dynamics. Governments' capacity in taking countercyclical measures plays an important
role as well. (The Times of India)
Why should the Global Reserve System be Reformed? (January 2010)
Since the US abandoned the gold standard in 1971, the global monetary system has relied
on a dominant faith in the US dollar. José Ocampo argues that this system must be
reformed. He points to the flaws of the current system in which all currency values are
relative and unstable. This puts low and middle income countries with heavy debt-burdens
at a serious disadvantage. Ocampo mentions four possible solutions and discusses two
that the G20 might consider. (Friedrich Ebert Foundation)
2009
Chinese Competition Undermines Integration (October 26, 2009)
The Mercosur trade bloc (Southern Common Market) is in danger of disintegration as
cheap Chinese products are taking hold of the trade markets in South America. In 2008,
Brazil's exports to Argentina and Uruguay shrank by 45 percent. Last week, the Brazilian
government announced a two percent tax on foreign investment as a measure to stem the
rise of the Brazilian currency that is partly responsible for the trade problem. Still,
Brazilian businessmen advocate for a stronger measure to address the Chinese
challenge. (Terraviva Europe)
"Wall Street Treasury Complex" (October 3, 2009)

37
Jagdish Bhagwati, former advisor to the UN on globalization issues, holds "Wall Street
Treasury Complex" responsible for the financial crisis. According to Bhagwati, the
solution lies in taxation on abnormal profits of big investment banks. A professor at
Columbia University, Bhagwati suggests an international board with credibility and
independence under the name of "World Risk Assessment Board." (Financial Post)
Globalization Faces Rocky Road (July 28, 2009)
Globalization of the world economies enabled the big expansion in global financial assets
and increased global financial integration. This caused the state's role to shrink in financial
systems, particularly in developed countries. Today, global financial institutions fail to
meet the challenges posed by the present crisis. This makes it harder for states to recover
their economic growth and overall welfare. (Livemint)
Globalization under Fire (July 22, 2009)
Globalization made the world economy interconnected and interdependent. Now, the
financial crisis raises the question whether we will see a reversal of global economic
integration. Decreased trade flows and a rise in tariffs show the vulnerability of economic
globalization. Policies for the prevention of future economic crisis must take these factors
into account.(Harvard Business)
The EU's Next Target (July 16, 2009)
Brussels is working on a new set of rules to strengthen regulation of hedge funds and
private equity firms operating within the European Union. The framework, requiring
European investors to register with EU authorities, could have major implications for
Western economies. Conservative voices threaten that such a law would harm financial
firms and lead to an exodus. (Sipegel International)
Is there more than one path to Globalization? (July 8, 2009)
The globalized economy involves "everyone, everywhere and everything" but at present
we witness a world economy divided into regions - NAFTA, the EU, MERCOSUR and
ASEAN. Economic activity takes place within these regions, not among them, and these
forms of regional economic activity date back to antiquity. This article argues that by
linking globalization to history, new paths to development and economic growth can be
revealed. (The Globalist)
Globalization in a Turnstile: The Debate Ahead (February 25, 2009)
The editor of Share the World's Resources outlines the academic debate on globalization
and argues that over-simplistic framing of the theory has polarized globalization as
"good" or "bad". He states that we cannot blame globalization for the economic crisis, but
rather "bad economics" and a lack of understanding of international trade. The crisis
presents a turning point for globalization. Re-designing institutional structures, founded
upon bottom-up participation, could create fairer opportunities to re-distribute the benefits
of globalization more equally. Skeptics must move beyond their opposition to free-market
principles, and seek a new global trading system, one which balances protectionism and
liberalization.
Asia: The Coming Fury (February 9, 2009)
As Asia's once booming export-led industrialization faces severe decline, Walden Bello
warns of the rising protests and potential resurgence of social revolution across Asia. He
examines the illusion of "decoupling" – Asia's supposed immunity to economic downturn
and financial crisis arising in the West. This article argues that the US credit crunch brings
an end to Asia's prosperous export era since economic growth in this region is based on
complex export chains: China assembles parts imported from other Asian countries,
which it then exports to the West. Thus, China's consumer-goods industry depends upon
demand from US and Western Europe, which in turn, relies upon the availability of credit
in the West.(Foreign Policy in Focus)

38
Fear and Loathing in Davos (February 3, 2009)
Policymakers at the 2009 World Economic Forum in Davos acknowledged the need to
re-direct economic policy away from American-style, capitalist globalization and pointed
to market failure as a major cause of this crisis. Blaming American financiers for their
irresponsible behavior, which helped spread instability and risk to poorer countries,
Joseph Stiglitz reflects on the role of the US in future global economic policy. As
confidence in the US declines rapidly, and world economic prospects look bleak, Stiglitz
asks whether the US will continue to take the lead in global economic policy, this time
setting an example of heavy protectionism.(Guardian)
The Perils of More Globalization (February 3, 2009)
We should critically examine the globalization of the world economy and its impact on
prosperity over the past thirty years. A UN study shows that poverty increased almost as
much in countries that remained disconnected from the world economy as in those which
fully liberalized their markets. The author challenges the pro-liberalization scare tactics
of Gordon Brown, which imply that a move away from a liberalized economy
automatically entails a retreat to extreme protectionism and autarky. Globalization has led
to increased instability, and world leaders must acknowledge its detrimental impact,
which hits the poorest countries hardest. (Guardian)
2008
Banking on Change: Towards an Economic System that Works for People and the
Planet (November 2008)
The G20, the world's twenty leading countries, should not decide on global economic
politics on behalf of the entire world population. Civil society organizations argue that all
governments and civilians must collaborate to build a new set of principles that strengthen
national and local economies. For instance, governments should renegotiate free trade
agreements, control capital flows, call for debt cancellation and close tax havens. (Choike)
The Economics of Global Democracy (November 4, 2008)
The neoliberal promise of market-led "economic freedom" has not brought wealth and
economic freedom for everyone. Twenty percent of the world's citizens consume more
than eighty percent of the world's goods. Without resources such as education and food
security, the majority of the world's population has fewer possibilities to improve their
situation. (Share the World's Resources)
Food and Markets: A Crisis of Faith (September 30, 2008)
This article argues that the financial crisis provides an opportunity for world leaders to
review their political performance. They can continue to rely on a "self-regulating"
market, which caused the crisis. Or they can put forward a new agenda for food security
and redistribution of the world's resources. (Share the World's Resources)
Wall Street Meltdown Primer (September 26, 2008)
In this article, Walden Bello analyzes the history of finance-driven capitalism and argues
that overproduction, greed and speculation are key factors behind financial crises.
Neoliberal economic policy produces speculative bubbles with short-term profits for very
few actors. The author warns that the collapse on Wall Street will spread and translate
into an Asian recession. (Foreign Policy in Focus)
Shipping Costs Start to Crimp Globalization (August 3, 2008)
Rising fuel prices are forcing companies to rethink their production. Instead of
outsourcing manufacturing, companies like IKEA are opening factories closer to
consumers. Many experts are also concerned about the environmental impact of the
emissions-intensive model that involves far-reaching supply chains. Economists dispute
whether rising oil prices will have a significant impact on global trade. Some say that

39
globalization trends will reverse, while others argue that companies consider factors other
than transport costs, including exchange rates and labor costs. (New York Times)
The Death of the Globalization Consensus (July 2008)
Dani Rodrik reminds us of the collapse of global markets in the 1930s and asks whether
we are likely to see a similar "death" of globalization. Global markets are heavily
interdependent, yet regulatory institutions and other governance systems do not exist at
the global level. The time has come to create new institutions and compensation schemes,
to make globalization fairer and more sustainable.(Project Syndicate)
Spreading the Benefits of Globalization (March 26, 2008)
Increasingly, the public, economists and development analysts are questioning whether
globalization has delivered on its "promised benefits." Various reports show a trend of
increased inequality in the world, between the North and the South, but also within both
poor and rich nations. The author concludes that a tiny group at the top of global society
reaps the rewards of globalization, while the vast majority of people miss out. He supports
drastic re-distribution from the top down, such as increasing income tax for top earners,
and eliminating income tax for those earning less than a given average national income.
(World Economy & Development in Brief)
Spreading the Benefits of Globalization (March 26, 2008)
Increasingly, the public, economists and development analysts are questioning whether
globalization has delivered on its "promised benefits." Various reports show a trend of
increased inequality in the world, between the North and the South, but also within both
poor and rich nations. The author concludes that a tiny group at the top of global society
reaps the rewards of globalization, while the vast majority of people miss out. He supports
drastic re-distribution from the top down, such as increasing income tax for top earners,
and eliminating income tax for those earning less than a given average national income.
(World Economy & Development in Brief)
Globalization 'Localizes' Inequality (March 11, 2008)
Global income inequality between rich and poor countries is decreasing says Inter Press
Service. The UN Conference on Trade and Development (UNCTAD) reports that real per
capita incomes are on average 18 times higher in richer nations than poorer nations,
compared to 24 times higher in 1980. But, this data fails to explain why poverty and
hunger are increasing worldwide. In fact, economic inequality within richer and poorer
nations has also increased markedly, leading to violent protests in India and large-scale
demonstrations in China.
Globalization and War (March 10, 2008)
Political scientist Susan George argues that "corporate-led, finance-driven globalization"
has led to huge and ever increasing inequality. Globalization has been good to those in
the tops of societies, but the system as a whole faces crisis: The World Trade Organization
finds itself in deadlock, and institutions such as the World Bank are less important than
before. George argues that scarcity of food and water, climate change, and the risk of an
economic recession will place further, extreme stress on the world system and will lead
to increased violent conflict. (Transnational Institute)
Widespread Unease about Economy and Globalization: Global Poll (February 7,
2008)
The international polling firm Globe Scan conducted this poll for the BBC World Service,
in order to document attitudes towards globalization and the global economy. According
to Globe Scan President Doug Miller, the results illustrate that "there is real public unease
about the direction of the economy, but it's not only about a downturn. It also has to do
with how fairly benefits and burdens are shared, and the pace of globalization."
2008: The Demise of Neoliberal Globalization (February 4, 2008)

40
Immanuel Wallerstein argues that in the global economic system, two main ideologies
have always been "cyclically in fashion"- neoliberalism and Keynesian thinking. He
argues that neoliberalism and the unrestrained market system it advocates have led to
global financial turmoil. Consequently, the public and economic policy makers are
moving back towards Keynesian and more socialist thinking. Wallerstein asks whether
this shift in ideology will be able to restore economic order despite the damage done by
neoliberal policies. (Yale Global)
Globalization's Positive Power (January 8, 2008)
According to Nobel laureate and economist Joseph Stiglitz, globalization can have a
positive outcome, but only if developing countries are able to "take advantage of
globalization, rather than be taken advantage of." He points out that India and China have
resisted US pressure for neoliberal reforms such as the privatization of state assets and
have created "stronger societies" by doing so. (New Statesman)
2007
The Global Establishment and Global Inequality (November – December 2007)
This World Economy and Development article examines how institutions that
traditionally championed unregulated globalization are now taking a more critical
approach. The International Monetary Fund holds financial globalization responsible for
increased income inequality over the last two decades, while conservative newspapers
such as the Wall Street Journal and the Financial Times have started looking at "how the
other half lives."
Trade Unions and Globalisation: Enlarging Agendas (November 22, 2007)
In response to growing economic globalization, more integrated global markets and
international production systems, trade unions across the globe are joining forces. The
unions increasingly coordinate their work to advocate international labor standards and
rules of conduct for transnational companies. They encourage national governments to
secure "proper regulation, taxation and transparency" for private sectors. (World Economy
and Development)
Wanted: A New Global Paradigm (November 8, 2007)
The author of this open Democracy article is excited about the revival of the Club of
Rome, a group of academics, bankers, development specialist, and former ambassadors
and foreign ministers who meet to discuss development policy. The members of the group
have expressed concern about the unfair international trade system, insufficient measures
taken to reduce climate change and governments' excessive security and military
spending. They call attention to the "real understanding of the underlying causes of
insecurity," such as the unequal access to resources. The author suggests that the ideas of
the elite group have great potential and its resurgence signals progress for reforming
globalization.
Managing Globalization: Isolation Is Not the Answer (October 30, 2007)
This article addresses issues of "economic nationalism," a sentiment that appears to be
growing in the US. Globalization opponents argue that economic independence is vital
for national security. Critics disagree and say that security increases when a country can
draw resources from a wide range of sources. Interdependence and integration in global
markets promote peace, not conflict, they argue. (International Herald Tribune)
Inequality in India and China: Is Globalization to Blame? (October 15, 2007)
The Asian continent has experienced increasing economic inequality over the last two
decades. Critics suggest increased exposure to international market is to blame. On the
other hand, the author of this YaleGlobal article argues that the expansion of
industrialization in countries such as China and India has created many jobs and lifted a
lot of people out of poverty. But, in both countries poverty declined prior to economic

41
liberalization. The author argues that the Indian and Chinese case studies alone cannot
illustrate whether globalization causes inequality or the other way around.
Does Globalization Bring War or Peace? (September 24, 2007)
This AlterNet article explores the relationship between international trade and conflict.
The author finds that high levels of trade acts as an accelerator for either cooperation or
conflict. Whether cooperation or conflict occurs, depends on the structure of a country's
domestic economic institutions and which domestic sectors are dominant in international
exchange - primary, industrial, or even military products. The author also argues that trade
can promote cooperation if the political elite are affiliated with productive and
competitive industries or alternatively whether the elite are involved in industries less
successful in international trade. The author warns against viewing trade and economic
independence as a protection against war or conflict.
Globalization Was Good Then, Not Now (September 17, 2007)
Rich countries have long been preaching to their poorer partners about the supposed
benefits of economic globalization. They have argued that economic growth can only be
achieved through open markets and free trade. Some developing countries such as China
and India have listened to the suggestions and actually achieved substantial growth and
global competitiveness. With the increased influence of these emerging economies, rich
countries are experiencing many of the negative effects following global economic
integration. In the US, protests against outsourcing, foreign investment and increasing
income inequality are growing and politicians skeptical of globalization capture larger
shares of the public vote. (Yalen Global)
The Post-Washington Dissensus (September 17, 2007)
This article from the Inquirer gives a detailed analysis of the trends in international
economic policy following the neo-liberal Washington Consensus. The discussion covers
the World Bank's Poverty Reduction Strategy Papers, neo-liberalism and neo-
structuralism. The article also looks at "global social democracy" as represented by
economists Jeffrey Sachs and Joseph Stiglitz, a take on global economics that values
equity before growth. Although this view is a radical departure from the original
Washington Consensus, Sachs and Stiglitz still argue that economic globalization can
bring benefits. The author argues that globalization as the most recent stage of capitalism
is merely an attempt by capitalists to overcome their "crisis of over accumulation,
overproduction and stagnation," that does not benefit the poor countries.
Globalization: End of the Beginning or Beginning of the End? (September 11, 2007)
This Globalist article compares the US and Chinese economies following decades of
economic globalization. The two countries are experiencing equally worrisome levels of
income inequality and turbulence in their financial markets. This has caused fear, even
among pro-globalization advocates. The author suggests that the global economy is
headed towards a rough patch. He does not necessarily advocate for an end to
globalization but rather a reform of the nature of globalization as we know it. He predicts
that the structure of the global economy will have to change to counter the wide global
and national disparities.
Rescuing Globalisation From its Cheerleaders (August 24, 2007)
This Business Daily Africa article discusses Professor Dani Rodrik's paper "How to Save
Globalization from its Cheerleaders." Rodrik criticizes the "new conventional wisdom,"
which insists that only through further trade liberalization will people in both rich and
poor countries benefit from globalization. Globalization has not provided the benefits its
"cheerleaders" promote. Governments still restrict the movement of labor between
countries – an area which if opened up has huge potential economic benefits. Rodrik

42
suggests that in order to better reap the benefits of economic globalization there must be
"legal, institutional, [and] political integration."
Region to Have Single Currency by 2012 (August 20, 2007)
The leaders of six East African countries, Uganda, Rwanda, Burundi, Kenya, Tanzania
and Zanzibar, met to decide whether by 2012 East Africa will have a single currency and
a common market, which will allow the free movement of people. Kenya and Uganda
demonstrated great support for fast-tracking the East Africa political federation, whose
goal is to have a federal president and parliament by 2013. Tanzania on the other hand is
concerned that a federation may threaten its sovereignty and security and lead to
corruption. (New Vision)
Sharing in the Global Economy (August 13, 2007)
An estimated 2.7 billion people live on less than US$2 a day, while the number of
millionaires has increased 80 times since the 1980s. Within the globalized world, power
has moved away from governments to large transnational corporations and global
institutions. Corporate led economic growth and free trade leads to environmental
degradation, growing inequalities and resource depletion. The authors advocate a
principle of sharing, in which decision makers acknowledge universal access to resources
such as food, water, shelter and medicine. (Share The World's Resources)
Going Global for Good (July 9, 2007)
UN Secretary General Ban Ki-Moon argues that whereas the first stage of globalization
benefited mainly rich countries, the second and current stage "the Age of Mobility" of
people, also brings riches to the poor. In 2006, migrants sent $264 billion – "triple all
international aid combined" – in remittances to their home countries. Still, Ban argues,
migration has so far mostly "benefited richer countries and generated worries about brain
drain in poorer ones."(The Washington Times)
In India, Outsourcing Moves to the Top Floor (April 3, 2007)
The migration of low-skill service industry jobs to developing countries has become a
common practice for many transnational corporations. However, this International
Herald Tribune article reports that an increasing number are also outsourcing jobs in
fields "which once epitomized the competitiveness of Western economies," such as
aeronautical engineering, investment banking and drug research. Although some analysts
argue that "the US will progressively become less predominant for US corporations,"
economists predict that this shift will rather encourage the growth of professions in the
West "that must be rendered in person," like the police or clinical medicine.
The Integrated Economy as A Cause of War (February 20, 2007)
This International Herald Tribune article argues that, in addition to causing "a host of
other evils," globalization may contribute to increased civil and international conflict. The
author cites increased inequality and natural resource shortages as factors of globalization
that may "add fuel to war's bonfires."
Inequality Rising Despite Promises of Globalization, UN Expert Says (February 9,
2007)
Although proponents of globalization predicted it would result in a "more equitable world
with equal opportunities," global inequality both between and within countries has instead
increased. A United Nations senior economist has stated that "full, productive and decent
employment “a €”not economic liberalization €”is the only way to effectively reduce
poverty and narrow these global income gaps. (UN News)
Controlling the Locusts: Baby Steps Against Hedge Funds (February 8, 2007)
This Der Spiegel article reports that, without greater international regulation, the collapse
of any one hedge fund could devastate the world's financial markets, hinder economic
growth, and cause mass international unemployment. German Chancellor Angela Merkel

43
has called for the world's leading industrial countries to discuss increased oversight on
the US$1.3 trillion hedge fund industry at the February 10 G8 meeting in Essen, Germany.
The False Promise of Financial Liberalization (January 22, 2007)
Wealthy nations and international economic institutions, such as the IMF, the World
Bank, and the WTO, have long promoted foreign financing as the fastest way to stimulate
growth in emerging economies. In reality, argues this Project Syndicate article, this
financial liberalization has done just the opposite. The surge in capital inflows appreciates
the developing country's currency, causing decreased investment and slowing economic
growth.
Public Interest Demands Hedge Fund Rules (January 12, 2007)
Despite an almost 500 percent growth in the hedge funds market over the past decade,
regulation of the high-yield investment companies has remained stagnant. As these
financial institutions now account for 18 to 22 percent of all trading volume on the New
York Stock Exchange, Randall Dodd, director of Financial Policy Forum, argues that this
lack of oversight may pose a serious threat to public interests, especially considering the
"fraud, embezzlement, and market trading abuses" historically linked with hedge funds.
(Policy Innovations)
2006
The Globalization Index 2006 (November-December 2006)
In this sixth annual Globalization Index report Foreign Policy and A.T. Kearney rank 62
countries, accounting for 85 percent of the world's population, according to their degree
of globalization as measured by 12 variables. The variables fall in the four categories of
economic integration, personal contact, technological connectivity, and political
engagement, revealing also "the very different ways that countries are opening themselves
up." Throughout the report, the authors imply that more globalization is always better.
However, despite this clearly positive and seemingly uncritical view of globalization, the
report acknowledges that "highly globalized nations spew more carbon dioxide per capita
than less globalized countries."
Chain-Gang Economics (October 30, 2006)
In this Foreign Policy in Focus piece, Walden Bello argues that the economic relations
between China and the US chain the global economy together in a "crisis of
overproduction." Restrictive Chinese rules on trade and investment force transnational
corporations (TNCs) operating in China to locate the majority of their production
processes in the country, making the TNCs major "agents of overinvestment." At the same
time, Chinese authorities continue exploiting the country's cheap labor by keeping wages
down instead of expanding people's purchasing power. Thus impeding domestic
consumption, China has chosen breakneck growth feeding the spending appetite of US
consumers over domestic and global stability, argues Bello.
The Three Rounds of Globalization (October 19, 2006)
Identifying "three rounds of globalization," this Globalist article argues that
"globalization is not a new thing." The exchange of ideas between ancient civilizations –
the first round – fueled the rise of the West with industrial revolution and imperialism –
the second round. Likewise, the transfer of Western ideas feeds the present rise of India
and China – the third round. By these dynamics, the world is returning towards global
equity, where India and China have a share of world income roughly similar to their share
of people – as in the early 19th century. While appreciating this return to international
equity as a "moral imperative," the author fails to consider to what extent the economic
development of these Asian countries takes place at the expense of domestic equity and
the environment.
How to Fix the Global Economy (October 3, 2006)

44
World leaders increasingly agree on the unsustainable nature of the global financial
imbalances represented by an enormous US trade deficit and China's growing trade
surplus. Economics professor Joseph Stiglitz appreciates the growing attention given to
the problem, but regrets that responses seem to address only symptoms rather than "the
larger systemic problem." Stiglitz argues that neither a strengthening of the Chinese Yuan
nor a cut in US governmental expenditures alone will solve the problem. Instead,
expenditure cuts combined with increased upper-income taxes and reduced lower-income
taxes in the US will create the necessary incentives. (New York Times)
On the Hedge Fund Question: A Program of Reckless Complacency (October 2006)
In this piece, Randall Dodd of Financial Policy Forum reacts to the "reckless
complacency" of a Bank of International Settlements (BIS) senior official, who states that
hedge fund operations do not constitute any significant problem in the context of
international financial stability. Dodd argues that banks cannot be relied upon to oversee
hedge funds in a way that protects public interests, and makes the case for ‘prudential
regulation' of hedge funds, ensuring codification of registration, reporting and capital
requirements.
Across Latin America, Mandarin Is in the Air (September 22, 2006)
Particularly since Chinese President Hu Jintao's visit to Latin America in 2004, relations
between China and Latin America have strengthened. The total value of trade between
them increased dramatically from US$10 billion in 2000 to US$50 billion in 2005.
Similarly, the number of people across Latin America taking Chinese classes has
increased substantially, this Washington Post
article reports. With Latin America being the prime destination for Chinese investors,
Latin Americans understand the importance of communicating in Mandarin.
Making Globalization Work (September 8, 2006)
Coinciding with the publication of his latest book, "Making Globalization Work," Nobel
laureate and former World Bank chief economist Joseph Stiglitz in this Guardian article
insists he does not oppose globalization, but rather agrees it "has enormous potential."
However, Stiglitz argues that if governments wish to sustain globalization and avoid
voters putting a stop to trade, they must manage it properly. Looking to the Scandinavian
countries, Stiglitz asserts that by investing in education, research and strong social safety
nets, governments can curb rising inequality and create more productive economies with
higher living standards for all.
The Rebirth of Populism in Latin America Poses a Powerful Challenge to the
Neoliberal Order (August 22, 2006)
This Council on Hemispheric Affairs report suggests that the resurgence of populism in
Latin America diametrically opposes the neoliberal reforms trumpeted by the Washington
Consensus in the 1980s. Public figures such as Venezuelan President Hugo Chavez
represent the populist wave. Masses rally behind a charismatic leader who addresses their
social unrest, denouncing the US and its political and trade policies. The author predicts
that this rejection of a universal style of "progress" may increase the prevalence of
populism in poorer countries, even if it detracts from formal democracy.
Why the WTO Doha Round Talks Have Collapsed – and a Path Forward (August
14, 2006)
The question of who to blame dominates analyses of the Doha Round collapse.
This Common Dreams article instead argues that the underlying cause lies in people's
rejection worldwide of the "WTO model of corporate globalization." Trade rules in the
"WTO decade" have only benefited a small corporate elite and have constrained domestic
policy making. The authors argue for an alternative to corporate globalization and
regional trade agreements. They urge US citizens to take action and demand change in

45
their country's position on international trade, as citizens in many other countries have
succeeded in doing.
The Death of Doha Signals the Demise of Globalization (July 13, 2006)
Past World Trade Organization (WTO) rounds have promoted globalization, increasing
freer movement of trade and capital. However, in the Doha Round US, EU, and Japanese
resistance to globalization dominates. The United States increasingly embraces bilateral
trade agreements as poor countries such as China, India, and Brazil gain more clout in the
WTO negotiations. The author notes an "unwillingness to make concessions" among rich
nations amidst growing fears of growing Chinese economic power. (Guardian)
Globalization and Growing Disparities (July 7, 2006)
For two decades, "protagonists" of the Washington Consensus have promised that
neoliberal policies would soon make everyone better off. Yet, these policies have failed
to reduce hunger, malnutrition and poor health conditions. Inequality keeps rising.
Looking at India, the author warns that large inequalities could lead to social unrest that
could undermine the very conditions for economic growth in the country. Some Latin
American countries, on the other hand, "have begun prospering only after discarding the
Washington consensus." (ZNet)
Globalization: When Cure Is Worse Than Malady (June 27, 2006)
The author argues that US and European moves towards nationalism, or "patriotic
globalism," come with more negative consequences than globalization itself. Politicians
who feel pressured to choose between the "efficiency imperatives of economic growth"
and the "personal security desires of an increasingly frightened and disoriented body
public" cannot effectively address the most urgent social and political needs because of a
split electorate. Increasingly rigid US immigration bills and the unsatisfying rule of Silvio
Berlusconi in Italy demonstrate the harms of decisions made out of fear. (Yale Global)
Preface to "Global Poverty or Global Justice?" (June 2006)
Looking at structures of power and inequality in the world, this preface discusses
obstacles to and prospects for achieving global justice. The lack of international
democratic processes and institutions greatly impedes global justice, but it conveniently
suits the interests of the "present masters of mankind." However, the author argues, great
promise lies with the "global justice movement." The author finds encouragement in
tendencies such as a growing realization worldwide of neoliberalism's injustices, the
increasing ease with which global justice alliances can form, and mounting support for
global taxation as a source of funding for development projects. (Transnational Institute)
The Hijacking of the Development Debate (Summer 2006)
This World Policy Journal article criticizes Jeffrey Sachs and Thomas Freidman's
approach to end poverty, which advocates effective aid and open markets to help poorer
nations climb the "development ladder." Donor countries often channel aid in a way that
increases income inequalities and, open markets tend to benefit big corporations. To
redress this, the alter-globalization movement comprised of farmers, students and
environmentalists, promotes development through redistribution of political power and
wealth. Contrary to Sachs and Freidman who use monetary values to assess development,
the movement uses indicators like democracy, sustainability, food security, and human
rights.
Unbridled Capitalism Will Lead to Very Real Problems (April 17, 2006)
In this interview, Harvard economist Kenneth Rogoff warns that the unfair distribution of
wealth within most countries will lead to serious social tensions all over the world. As big
company profits reach record highs, an ever-smaller percentage of the population gains
from high economic growth rates, while most workers see their wages stagnate. As a

46
result, governments could lose public support for policies promoting deregulation of
market activities. (Spiegel)
Could Globalization Fail? (April 13, 2006)
As happened with the "first globalization" and its Wall Street Crash of 1929, an economic
rather than a political crisis could reverse today's process of globalization. But this time,
the crisis is more likely to errupt from global economy's dependence on transnational
corporations (TNCs) than from global financial imbalances. While relying highly on the
middle-class consuming their goods, TNCs at the same time undermine middle-class
people's ability to consume by moving ever more "white-collar" jobs to poorer countries.
(YaleGlobal)
Globalisation, Liberalisation, and Protectionism (April 2006)
This Third World Network report focuses on the role of the International Financial
Institutions (IFIs) and the World Trade Organization (WTO) in causing global economic
imbalances. The report critiques IFI policies such as loan conditionality and suggests that
the WTO could lessen economic imbalances by addressing commodity prices and supply
capacity in poor countries.
Does Globalization Help or Hurt the World's Poor? (March 26, 2006)
This article reviews arguments for and against the idea that globalization has benefited
the world's poor over the last few decades. According to Scientific American, the answer
is neither a simple yes or no. While the spread of foreign trade and investment has
increased work opportunities for many people in poor countries, national political
decisions continue to have the biggest influence on poverty levels.
Political Struggles Will Determine Better Globalisation (March 15, 2006)
Based on the article The Sources of Neoliberal Globalization by Jan Aart Scholte,
this South Centre publication offers a historical-sociological background on the
neoliberal influence on globalization. It looks at four interrelated forces that have
generated and sustained neoliberalism since the late 70s, namely governance, production,
knowledge and social networks. Focusing on the exclusive nature of social networks
supportive of neoliberalism, the article calls for a broader advocacy of alternative ways
to shape globalization.
Meet the Losers of Globalization (March 8, 2006)
Many analysts see India as one of globalization's big success stories due to its economic
growth rate of 7% in 2005. Nevertheless, many people, especially in the poorer northern
regions, can no longer afford their former living standards, since consumer prices grow
around 4% every year. With most Indians not educated sufficiently to compete in the new,
flexible labor market and with environmental damage on the rise, criticism of India's rapid
economic liberalization is getting louder. (Der Spiegel)
The Economics of Outsourcing: How Should Policy Respond? (March 2, 2006)
This Foreign Policy In Focus policy report describes how globalization impacts the US
domestic economy and results in outsourcing of jobs to regions with lower labor
standards. The report suggests that the United States create policies and coordinate with
other countries to address issues of tax competition, undervalued exchange rates, and
productivity. Governments should cooperate on a global scale to create policies that serve
the political and social interests of citizens throughout the world, rather than addressing
only economic growth.
When Globalization Leaves People Behind (February 12, 2006)
With a doubling in incomes since the mid-1980s and foreign investment up five times
since the mid-1990s, India represents a globalization success story by purely economic
measures. But poverty has fallen comparatively slowly and India still has the world's
largest population of malnourished people. As in many poor countries, people could

47
benefit much more from globalization if the government would seriously increase
spending on education, health care and rural development. (International Herald
Tribune)
Unpopular Globalization: Why So Many Are Opposed (February 2, 2006)
Many US and European citizens blame globalization for causing economic problems, like
poor health care services or high unemployment rates. Although economic liberalization
often fails to deliver better living conditions, it is the governments' role to make
globalization meet people's needs. With wages in stagnation since 2000 and corporate
profits increasing constantly, taxing corporations would be a good first step. (YaleGlobal)
2005
What Can a Nation Do? Taming the Globalization Monster (December 26, 2005)
Many people fear that globalization decreases nations' capacities to deal with economic
and social challenges. This article argues that the problem is not the global market, but
rather the absence of national and international regulation of the market, including of
transnational corporations (TNCs). In addition, the author argues that people can exert
power over TNCs through their consumption habits. (Der Spiegel)
Globalization Failing to Create New, Quality Jobs or Reduce Poverty (December 9,
2005)
Neoliberal globalization is failing "to translate into new and better jobs that lead to a
reduction in poverty" says a report from the International Labour Organization (ILO).
According to ILO's figures, half the world's workers do not enjoy decent work conditions,
and cannot lift themselves above the poverty line. The report points out that world leaders
have still not made poverty reduction a priority.
"In a Situation Like This, Who Cares About Human Rights?" (October 5, 2005)
The World Bank views Export Processing Zones (EPZ) as an excellent option for poor
countries to join the global market. This article describes the conditions of an EPZ on the
outskirts of Nairobi, where workers earn three dollars a day without any form of benefits.
Rather than liberate people worldwide, the free market has created a new slavery. (Inter
Press Service)
Monkey-Wrenching the Globalization Gang (August 25, 2005)
Is it possible to trace a parallelism between Colonialism and Neoliberalism, two different
forms of domination? The author affirms that phrases like ‘building freedom through
trade,' ‘good governance,' ‘working for a world free of poverty' actually hide a new
form of imperialism. The World Bank, the International Monetary Fund, the World Trade
Organization, and even the UN lead this process of "neoliberal capture." (Toward
Freedom)
The G8, Globalisation, and the Last Wave (June 30, 2005)
This Ethical Corporation article examines the "three great waves of globalization" and
the role of corporations in shaping human history. "More than any time in history,
humankind faces rival and increasingly incompatible viewpoints and realities, with the
role of corporations front and centre." World citizens face "two dramatically different
roads"— the road that continues the self-serving behavior of global competition for
dwindling resources, championed by corporations, and a road that promotes adaptation
and rethinking of our lifestyles and corporate behavior to ensure a better tomorrow.
China Seeks Known Brands to Go Global (June 30, 2005)
Rather than continue the "race to the bottom" and become the world's "low-cost factory
floor," China is eyeing the global market with newfound ambition. While Japanese brands
took years to gain global recognition, China is taking a shortcut—through acquisitions
and mergers, Chinese companies are obtaining foreign assets and "going global" with the
country's own "famous brands." China has fixed its sights on a higher position in the

48
 global market. Whether or not this will help the plight of exploited Chinese laborers
remains to be seen. (New York Times)
Globalization: It's Not Just Wages (June 17, 2005)
The German workers' quality and expertise are motivating companies to retain production
facilities in Germany, despite high labor costs. While Unskilled laborers do most of the
production in China and Mexico at a fraction of the cost, some companies like the
appliance maker Whirlpool are involved with a "relatively new form of globalization that
emphasizes first-rate centers of production and design in various countries - including the
United States." This appreciation of workers' quality and expertise is protecting German
and US jobs from being outsourced to cheaper labor markets. (New York Times)
Globalization Game (May 31, 2005)
In an attempt to cut the ballooning trade deficit, the US administration has been pressing
China to revalue its currency. But according to this Boston Globe opinion piece, the real
reason behind the trade imbalance does not lie in exchange rates but in the fact that
"globalization is broken." Globalization has evolved into a kind of pyramid scheme, in
which the US must "consume and borrow ever more while foreign banks buy ever more
US Treasuries so their producers can export ever more." Quick fixes like adjusting the
exchange rate will not solve the problem; the only way to avoid a global economic crisis
is to "insist that the globalization game be played the same way by all its players," the
author argues.
Nobel Prize Winner Joseph Stiglitz Speaks on Globalization (April 11, 2005)
In his lecture at Hamilton College, economist Joseph Stiglitz touched upon the
asymmetrical nature of globalization. As examples he mentioned rich nations' agricultural
subsidies that create an uneven playing field for poor countries' exports, and intellectual
property rights that can deprive poor countries of life-saving medicine and technology.
Even in the United States that "has benefited enormously from globalization," only some
people are experiencing the benefits, Stiglitz noted. (Hamilton College News)
Bhagwati, Globalization and Hunger (March 29, 2005)
Could the infamous agricultural subsidies actually benefit consumers in poor countries by
making food imports cheaper? This is what prominent economists like Jagdish Bhagwati
have suggested, but the author of this Dissident Voice article disagrees. Cheaper imported
food will not help the three billion farmers in poor countries as long as rich nations'
subsidies prevent them from earning enough money to buy the imports, the author argues.
Sinking Globalization (March/April 2005)
World War I sank "the first age of globalization" by bringing an abrupt end to the
preceding period of increasing international trade, investment and migration. Could the
rapidly expanding global economy we live in suddenly disintegrate in a similar manner?
Pointing out similarities and differences between the present and 1914, this Foreign
Affairs article argues that such a scenario is indeed possible, although it is virtually
impossible to predict its likelihood.
Shut Up and Shop! Thinking Politically About Consumption (January 5, 2005)
This paper addresses the consumerist aspects of globalization by examining the links
between global consumption, environmental politics and political economy. It argues that
consumerism leads to environmental degradation and hinders sustainability. The author
also investigates the role of consumption in reproducing global capitalism. (Political
Theory Daily Review)
Lecture International Trade and Nation’s Standard of Living
2 Current International Economic problems & Challenges
The Globalization of the World Economy

49
 The globalization of the World in economic terms providing many opportunities
as well as giving major challenges to nations and the people of the world.

Opportunities & Challenges:

In a Global economy we are connected with all corners of the globe through our
cell phones and e-mails and instant massages.
Tastes and habits around the world are converging and more people around the
world are liking generally the same things for their daily usages – food, dress and other
consumables.
Many goods we consume are either made abroad or have many imported parts and
components.
Many services we use are provided by foreigners and many people with different
skills have migrated around the world and thousands of jobs have moved from advanced
nations to emerging markets across the continents, especially to China and India.
Small and large firms are facing international competition from other small and
large nations.
Finance has also globalized. We can invest in companies anywhere in the world
and purchase financial instruments from any company from almost anywhere in the
world.
Many pension funds are invested in other countries. And financial centers quickly
spread across the world at the click of the computer mouse.
Currencies like UD dollar, EU’s Euro and others can be quickly and efficiently
exchanged over the internet and therefore prices of these currencies across the world are
becoming uniformed and often their exchange rates can change quickly and drastically in
a very short period of time
In short tastes, production, consumption, labor markets and financial markets are
rapidly globalizing and this effects all of us deeply as consumers, producers, workers,
investors as well as politically and environmentally, because we live in a global economy
Challenges:
All advantages bring with them disadvantages also.

50
 Cheaper goods from abroad bring with them losing jobs or lower wages at home
Better skilled labor from other countries might take away jobs from local
population
There is ‘brain drain’ when better skilled people leave a country for ‘greener
pastures’ in other countries and leave an economy with less skilled, less innovative, or
less efficient managers, entrepreneurs and managers.
Similarly, financial globalization and unrestricted capital flow leads to more
efficient use of capital throughout the world, as well as provides new opportunities for
higher returns and risk diversification for individuals and corporations alike
But this also can lead to periodically reoccurring global financial crisis of 1997,
and 2008-2009
More importantly rapid globalization and use of advance technologies
everywhere, and with cheaper supply of goods for a 7 billion and above population of the
Globe the world is rapidly running out of resources, especially energy resources (Oil and
gas and other minerals) and at the same time creating colossal amounts of pollution and
wastages and even Global warming and Climate Change.
Negative aspects of Globalization gave rise to Anti-Globalization movements and
rethinking of age-old beliefs against free trade and rekindled concepts of protectionism,
nationalism and self-reliance and self-sufficiency because many humans believe that
economic, environmental and political problems at home are a direct result of corporate
profits of multinationals and political policies of industrially advanced countries.

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 Problems and Challenges of Globalization can be stated as:
1. Deep Financial and Economic Crisis
2. Trade Protection in Advance Countries in a Rapidly Globalized World
3. Excess Fluctuation and Misalignment in Exchange rates and Financial Crisis
4. Structural Imbalances in USA, slow growth in EU and Japan and insufficient
Restructuring in Transition Economies like China, India and Russia
5. Deep Poverty in Many Counties of Asia and Africa like Pakistan and India
6. Resource Scarcity, Environmental Degradation, Climate Change and
Unsustainable Development around the World

Lecture International Flow of Goods, Services, Finance, Labor & Capital:

4 The Gravity Model
International Trade Theories:
The Theory of Mercantilists – Thomas Munn
Trade based on Absolute Advantage – Adam Smith
International Flow of Goods, Services, Finance, Labor & Capital:
The Gravity Model
International Trade and Finance has an important part in a nation’s wellbeing.
Large nations (with greater GDP and bigger impact on world trade and Prices) trade
between each other as well as with small nations (with relatively smaller GDP and smaller
impact on world trade and Prices) and with nations that are geographically closer than
with nations that are geographically at a distance and therefore carry greater transportation
costs and with nations with greater open economies rather with nations that have amore
closed economies and with nations with similar language and cultural backgrounds than
with nations with different languages and different cultural back grounds.
In its simplest form the Gravity Model states that with other things being equal
(Constant) the bilateral (between two nations) trade between two countries is
proportional, or at least positively related to the product of the two countries’ GDP and to
be smaller or greater the distance between the two countries (Newton’s Law of Gravity
in Physics) “That is the larger (and the more equal in size) and the closer the two
countries are, the larger the volume of trade between them is expected to be.”
According to the Gravity Model USA should be trading more with Canada and Mexico
and Pakistan more with China and India.
International Trade Theories:
The Theory of Mercantilists – Thomas Munn
The Theory of Mercantilists – Thomas Munn (1571-1641) in his article English
Treasures by Foreign Trade: “Sell to others but do not buy from them unless absolute
necessary. The difference get in Gold Bullion & Precious Metals”. Which meant:
1. Export aggressively
2. Restrain Imports through Protectionism
3. Protect domestic Industry and Markets through Commercial Policy
4. Protectionism means Government Control of the Economy and the Markets –
strict government control over all economic activity and preached economic
nationalism because they believed that a nation could gain only at the expense of
other nations
5. Gold Bullion & Precious Metals = Wealth of a Country
6. Gold Bullion & Precious Metals = Gold Standard in the Economy
7. More Gold would mean More economic activity as more coins are minted
8. More Gold would mean bigger armies as more coins are minted
9. Bigger Armies would mean more colonialization of the rest of the world

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 10. Mercantilists’ measured the wealth of a nation by the stock of precious metals it
possessed. In contrast today we measure the wealth of a nation by its stock of
human, man-made and natural resources available for producing goods and
services. The greater the stock of useful resources, the greater the flow of goods
and services to satisfy human wants, and therefore larger the standard of living
in that nation.
11. Mercantilists’ thus preached economic nationalism, believing as they did that
nations interest was in conflict with other nations
12. Mercantilists thought and doctrine although declining is alive even today Trump’s
USA and Briexit of UK from Europe, Pakistan and India trade relations are all
examples of Mercantile thought and protectionism in International Trade
Trade based on Absolute Advantage – Adam Smith:
Adam smith gave his theory in his book “An Enquiry into the Causes of Wealth and
Welfare of Nations (Wealth of Nations) in 1776.
According to Adam Smith: Trade between two nations is based upon Absolute
Advantage.
“Under Free Trade (Laissez Faire or no government intervention in economic and trade
activity) both nations A & B will gain if nation A sells to Nation B the goods of its
absolute advantage (goods that nation A can produce efficiently and cost effectively)
and buy from Nation B the goods of its absolutely disadvantage (goods that Nation A
can produce less efficiently but are goods of absolute advantage of nation B). Both
nations will gain in international trade and exchange of their goods of absolute
advantages’.
Example:
If Nation A produces commodity x in 4 labor hours and commodity y in 6 labor hours,
than nation A has absolute advantage in production of commodity x
and
If Nation B produces commodity x in 5 labor hours and commodity y in 3 labor hours,
Nation B has absolute advantage in production of Commodity y,
than
Both nations would gain if Nation A exports to Nation B commodity x and imports from
nation B commodity y.
1. The basis for Theory of Absolute Advantage was Free Trade, Division of labor
and Specialization in each nation
2. Free Trade was the basis for all modern trade theories
3. Theory of Absolute Advantage of Adam smith paved the grounds for the modern
theories of International Trade
Drawback of the Theory of Absolute advantage:
There is no basis for trade between nations if nation A has an Absolute Advantage over
nation B in producing both the commodities x and y. For Example If Nation A produces
commodity x in 5 labor hours and commodity y in 6 labor hours, and If Nation B
produces commodity x in 4 labor hours and commodity y in 3 labor hours, than there is
no basis for trade as nation A has an absolute advantage over nation B in producing both
the commodities x and y.
Also theory of Absolute Advantage explains only a very small part of world trade today
and most of the world trade today cannot be explained by this theory
Lecture Trade based on Comparative Advantage – David Ricardo
5
Trade based on Comparative Advantage – David Ricardo

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In 1817 David Ricardo in his book Principles of Political Economy and Taxation gave
the Theory of Comparative Advantage correcting Adam Smith’s Theory of Absolute
Advantage.
Theory of Comparative Advantage is still the most important and unchallenged theory
of International Trade
According to the Theory of Comparative Advantage: “Even if one nation has an
absolute advantage over another nation in producing both the commodities x and y, both
nations will gain under Free Trade if Nation A specializes, produces and exports to
nation B, the commodity of its comparative advantage and buys from Nation B the
commodity of its comparative disadvantage and vice versa”.
Gains from Trade with Comparative Advantage
If Nation A produces commodity x in 5 labor hours and commodity y in 6 labor hours,
nation A has a comparative advantage in producing and exporting commodity x. and
If Nation B produces commodity x in 4 labor hours and commodity y in 3 labor hours,
nation B has a comparative advantage in producing and exporting commodity y. Both
nations exchange 12 x for 12 y
12 units of x (Sold by Nation A) and 12 Units of y (Sold by Nation B)
If Nation A sells to Nation B 12 units of x and buys from nation B 12 units of y, than
Nation A will produce
12x for (5 X 12 = 60 labor hours) and 12y for (6 X 12 = 72 labor hours), thus by
specializing and producing only x commodity Nation A will save (72 – 60 = 12 labor
hours). Also
Nation B will produce
12 x for (4 X 12 = 48 labor hours) and 12y for (3 X 12 = 36 labor hours), thus by
specializing and producing only y commodity nation B will save (48 – 36 = 12 labor
hours)
Thus through specialization and international division of labor each nation through the
production of its commodity of respective comparative advantage can produce more
efficiently the commodity that it specializes and therefore exchange through
international trade and buy the commodity that it is not comparatively efficient in
producing at home.
Difference between
Theory of Absolute Advantage & theory of Comparative Advantage
 Theory of Absolute Advantage looks into the Absolute Advantage between
nations A & Nation B or what can Nation A specialize and produce efficiently than
Nation B and what can Nation B specialize and produce more efficiently than Nation A
in labor hours
 Theory of Comparative Advantage looks into the advantage of each nation in
their own production capacity and efficiency. In other words what commodity between
x and y can Nation A produce more efficiently and cost-effectively in labor hours and
should specialize, produce and export the commodity of its comparative advantage and
import the commodity of its comparative disadvantage from Nation B. The same is true
for Nation B.
Case of No Comparative Advantage
There is only one case where there is no comparative advantage among nations when
both nations produce in each country each commodity x and y with the same amount of
labor hours.
For example:
Nation A and B both produce Commodities x and y with 6 labor hours. There is no
comparative advantage, and therefore no basis for trade between nations.

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 Comparative advantage with Money
Comparative Advantage between nations can change when Money is introduced to
measure the cost of production rather than labor hours.
For example
If wage rate in USA (Nation A) is $ 6 per hour than for USA 12x for (5 X 12 = 60 labor
hours X $6 = $360) and 12y for (6 X 12 = 72 labor hours X $6 = $432), thus by
specializing and producing only x commodity Nation A will save ($432 - $360 = $72).
Also
If Wage rate in UK (Nation B) is £1 for one labor hour than for UK 12 x for (4 X 12 =
48 labor hours X £1 = £48) and 12y for (3 X 12 = 36 labor hours X £1 = £36), thus by
specializing and producing only y commodity nation B will save (£48 – £36 = £12).
If Exchange Rate for £1 = $2 than Nation B (UK would be producing x commodity for
S96 and commodity y for $72 thus saving ($96 -$72 = $24)
And it becomes cheaper for UK to produce both x and y commodity than USA.
In other words, the inefficiency of UK’s labor relative to USA’s labor to produce x and
y commodities is compensated in favor of UK through the exchange rate as a result the
dollar price to produce x in UK (Nation B) is less than in USA (Nation A) as also for y
commodity.
Thus the argument in USA that it has to protect the high wages and standard of living in
USA from relatively cheaper goods due to relatively cheaper wages in UK is generally
false
Similarly faulty is the opposing argument that in UK its labor needs protection against
more efficient USA’s labor
Both these arguments are inconsistent and basically false
Comparative Advantage & Labor Theory of Value
Assumptions of Ricardo’s Comparative Advantage Theory
1. Only Two Nations A & B
2. Only two Commodities x and y
3. Free Trade between nations
4. Perfect Mobility of Labor within each nation but immobility of labor between
Nations
5. Constant Costs of Production
6. No Technical Changes in each Nation, and
7. Labor theory of Value
Labor Theory of Value is based on the following Assumptions:
1. Labor is the only Factor of Production. This is false (not true) because there are
4 factors of production – Land, Labor, capital and Entrepreneurship
2. Labor is Homogeneous (of the same kind and quality). This is false (not
true)because there are different kinds of labor – unskilled, semi-skilled, skilled and
highly skilled, each with different productivity
3. Labor is used in the same position in producing x and y commodities in each
nation. This is false (not true) because different kinds of labor skills and efficiency are
needed to produce different commodities. For example some labor are more efficient as
carpenters and some more efficient as iron mongers and vice versa. The same is the case
with engineers and doctors etc.
4. Labor is used in the same position in producing x and y commodities in Nation
A and in Nation B. This is false (not true) because each nation has its own factor
endowment and climatic conditions and labor might be more efficient in producing x in
a relatively colder nation than in a relatively warmer nation and y might be produced
better in a warmer climate than in a cooler climate etc.

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 Note: As all 4 Assumptions of Labor Theory of Value are false and therefore rejected,
therefore the Theory of Comparative Advantage which is based on Labor Theory of
Value stands rejected by modern economists.
Lecture Opportunity Costs Theory & Relative Commodity Prices with trade
6 Basis of Trade under Constant Costs
Opportunity Costs Theory & Relative Commodity Prices with trade
Haberler 1936 Explained the Comparative Advantage Theory as Opportunity Cost
Theory. Or
Law of Comparative (Opportunity) Costs
The Opportunity Cost of a Commodity is the amount of the second commodity that
must be given up to release just enough resources to produce an additional unit of the
first commodity.
Labor Theory of Value is not part of the assumptions in this theory.
Therefore nation with lower Opportunity costs (with all four factors of production) of a
commodity has a comparative advantage in that commodity (and a comparative
disadvantage in the second commodity)
For example Nation A (USA) should specialize, produce and export the commodity that
it can produce comparatively cheaper (commodity x) and import from Nation B (UK)
the commodity of its comparative disadvantage (commodity y)
Note: Law of Comparative Costs is an extension of Law of Comparative advantage
except that the costs theory calculates the cost of all four factors of production while the
advantage theory takes only labor wages as basis of calculating the comparative
advantage between the two commodities in each nation.
Basis of Trade under Constant Costs
Constant Opportunity Costs
Constant Opportunity costs arise when
1. Resources or factors of production are either perfect substitutes for each other or
are used in a fixed proportion in the production of both commodities
2. All units of the same factor are homogeneous or exactly of the same quality
Than if each nation transfers resources from producing more of x and less of y or less of
x and more of y. the cost of producing one commodity for another will be the same
(Constant)
Production Possibility Frontier (PPF) Curve:
PPF (Production Possibility Frontier is a curve that shows alternative combinations of
the two commodities that a nation can produce by fully utilizing (employing) all of its
resources with the full utilization of the best technology available to that nation.
Figure below shows the PPF of Nation A, where on the horizontal axes the quantity of x
commodity is shown and on the vertical axis the quantity of y commodity is shown.
The slope of the PPF is negatively sloping from left to Right. The downward slope of
the curve show that if each nation wants to produce more of x commodity, than they
have to give up producing more of y commodity (produce less of y commodity) and if
more of y has to be produced, than less of x has to be produced in each nation to release
enough resources (labor and capital) in order to produce that extra unit of x or y
commodities.
At all points of the PPF the productivity of the nation’s resources and existing
technology is the same whether the nation produces more of x and less of y or more of y
and less of x, or equal units of x and y commodities.
The PPF under constant costs will be a downward sloping straight line in each nation.
(As in the Ricardo’s Theory of Comparative Advantage where Labor is the only factor

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 of production and is homogeneous and is used in a fixed position to produce x and y in
both nations)
Where, N = Labor inputs

The PPF of Nation A (USA) and Nation B (UK) are obtained by plotting the values of
production of x and y commodities in each nation. The PPF are downward (negatively)
sloped indicating that each nation in order to produce more of x or more of y, it must
give up production of the other commodity in its nation in order to release enough
resources to produce that extra unit of x or y. the PPF is a straight line because of
Constant Opportunity Costs of production in each nation.
Because of Constant costs of Production each nation can achieve complete
specialization: In other words each nation can produce all of x commodity and nil of y
commodity (Nation A) and all of y commodity and nil of x commodity in nation B and
then exchange under Law of Comparative Advantage with Nation A specializing,
producing and exporting Commodity x (the commodity of its comparative advantage)
and nation B specializing, producing and exporting commodity y (the commodity of its
comparative advantage). Both nations import their respective commodities of
comparative disadvantage from the other nation.
Lecture Standard Theory of International Trade
7 Production Possibility Frontier & Increasing Costs & Marginal Rate of Transformation

Standard Theory of International Trade

Production Possibility Frontier With Increasing Costs
Marginal Rate of Transformation
Increasing Opportunity Costs mean that the nation must give up more and more of
one commodity to release just enough resources to produce each additional unit of
another commodity.
Increasing opportunity costs result in a production possibility frontier that is
CONCAVE from the origin (rather than a straight line)
Production Possibility Frontier (PPF) Curve:

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PPF (Production Possibility Frontier is a curve that shows alternative combinations of
the two commodities that a nation can produce by fully utilizing (employing) all of its
resources with the full utilization of the best technology available to that nation.
Figure below shows the PPF of Nation A, where on the horizontal axes the quantity of x
commodity is shown and on the vertical axis the quantity of y commodity is shown.
The slope of the PPF is negatively sloping from left to Right. The downward slope of
the curve show that if each nation wants to produce more of x commodity, than they
have to give up producing more of y commodity (produce less of y commodity) and if
more of y has to be produced, than less of x has to be produced in each nation to release
enough resources (labor and capital) in order to produce that extra unit of x or y
commodities. Slope of the PPF is measured by MPN/MPK or marginal productivity of
labor divided by marginal productivity of capital and vice versa.
The CONCAVE PPF shows the increasing opportunity costs of production or the
increasing MRT = Marginal rate of Transformation between labor (N) and capital (K) =
Δ𝑦 Δ𝑘
− Δ𝑥 = − Δ𝑛

At point B the nation is producing a combination of the two commodities inefficiently,

because B is below the PPF and more of both the commodities can be produced by fully
employing all the resources and technology available to that nation. The nation cannot
produce at point C because it is over and above the PPF (in blue shade) and the
resources of the nation are fully employed at PPF. In order to produce at point C the
nation with have to increase its stock of technology, labor skills and capital inputs to
expand the PPF from PPF1 to PPF2.
At all points of the PPF the productivity of the nation’s resources and existing
technology is the same whether the nation produces more of x and less of y or more of y
and less of x, or equal units of x and y commodities.

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The PPF of Nation A and Nation B with Increasing Costs. Concave production
possibility Frontier reflects increasing opportunity costs in each nation in the production
of both the commodities x and y. Nation A must give up more of y for each additional
batch of production of x commodity, while Nation B must give up more and more of x
commodity in order to produce additional units of y. This is shown by the length of the
axis where each nation is going to produce more of a commodity at the cost of the other
commodity. Nation A has a longer horizontal axis, while Nation B has a lengthier
vertical axis
Marginal Rate of Transformation (MRT): of x for y refers to the amount of y that has
to be given up in Nation A for producing an additional unit of x. And refers to y for x to
the amount of x that has to be given up in nation B for producing an additional unit of y
in Nation B. Thus MRT is another name for the opportunity costs and is given by the
absolute slope of the PPF at the point of production.. Thus a movement along the PPF of
Nation A from left to right involves an increase in slope (MRT) from ¼ to ½ to ¾ and
subsequently to 1 and reflects the increasing opportunity costs while producing more of
x and less and less of y in Nation A.
Also a movement along the PPF of nation B from right to left involves an increase in
slope (MRT) from 1 to 2 to 3 and subsequently to 4 and reflects the increasing
opportunity costs while producing more of y and less and less of x in Nation B and
reflects the increasing opportunity costs while producing more of x and less and less of
y in Nation A.
Reasons for Increasing Opportunity Costs and Different Production Frontiers
Increasing Costs arise because resources or factors of production:
 Are not homogeneous (are not identical)
 Are not used in the same fixed proportions or intensity in the same quality)
1. This means that as the nation employs more and more resources to produce x or
y commodity, it employs rescores that become less and less efficient and at full
employment levels has to employ even lazy labor and old machines
2. This also means that after a certain point even resources that are efficient in
producing the other commodity (y in Nation A and x in Nation B) are employed

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 to produce x or y in each nation and therefore might not be able to produce that
particular commodity efficiently and cost-effectively.
In other words as more resources are demanded their price increases but at full
employment levels the marginal productivity of these resources decline and therefore
more costs with relatively less efficient production, thus increasing costs of production
in each nation.
Note: PPf shows the producer behavior of a Nation. Consumer behavior has to be seen
from Community Indifference Curves (CIC).

Lecture Community Indifference Curves (CIC)

8
Community Indifference Curves (CIC)
Community Indifference Curve: Shows the various combinations of two commodities
x and y that yield equal satisfaction to the community of a Nations A or B in their
consumer behavior.
Indifference Curves are curves that show the substitution effect of the consumer’s
behavior from a set of two commodities x and y. The curves are called Indifferent Curves
because the consumer is INDIFFERENT at any set of the two commodities, because he
or she likes them equally
Indifferent curve: an indifferent curve shows all combinations of goods that a consumer
will use or buy in order to derive equal satisfaction from these goods. If the total utility
or satisfaction derived from different combinations of two goods are equal for the
consumer, than it is said that the consumer will be indifferent to all these sets of the same
two commodities. In other words, the consumer will derive the same satisfaction on all
points of the same indifference curve. But, if the consumer will try to derive greater
satisfaction or total utility from different sets of the two same commodities, than he or
she will have to increase the amount of use of both these commodities, therefore they can
not remain on the same indifference curve, rather will move up to a higher indifference
curve to measure the increase in satisfaction of their consumption of different sets of the
same two commodities; and vice versa.
Assumption of CIC: The consumers in each Nation are rational and likes both the
commodities equally. Therefore by using (buying or consuming) more of one commodity,
the consumer has to forgo (leave) the use of the other commodity and vice versa which
he or she does not want to forgo one for the other
ICC’s are a MAP of closely knit curves that incline towards infinity and are
CONVEX to the origin. Higher the ICC, greater is the satisfaction of the consumer
from a set of two commodities. Lower the ICC, lower is the satisfaction of the
consumer from a set of two commodities. On all points of the same ICC the
satisfaction of the consumer is the same from any set of the two commodities x and
y.
While all consumers have different tastes, habits, likes and dislikes about one or the other
goods, and at the same time some goods are preferred more above other goods, we say
the each consumer has a scale of preferences in his or her's unlimited wants. Indifferent
would literally mean lacking any preference, therefore the economists assume that the
consumer is indifferent between combinations of two sets of different or alike
commodities. In other words the consumer has no preference between two commodities.
This is shown by the development of the indifference curve analysis in order to explain
the theory of consumer’s choice. The indifference curve theory is meant to replace the

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utility analysis for showing the consumers choices of one commodity over another
commodity, but both these analysis show the same results. The assumption to the
preference theory is that always in normal conditions, the consumer will prefer more to
less.
Characteristics of an indifference curve:
Slope of an indifference curve: an indifference curve is down wards sloping curve from
left to right. This indicates that when the consumption of a commodity is decreased, than
only the consumption of another commodity can be increased. The condition to the down
ward slope or steepness of an indifference curve is than every time the consumer has to
make a choice between commodities, than he or she will prefer more to less only.
Therefore The indifference curve is a down ward sloping and
ICC are Down Ward Sloping: because the increase in use of one commodity x or y results
in decrease in the use of the other commodity y or x, therefore ICC is a downward sloping
curve.
An upward sloping curve, increase in one commodity does not result in decrease in the
use of the other commodity therefore does not satisfy the definition of the ICC
With parallel to horizontal or vertical axis curves the increase in one commodity does not
result in decrease in the use of the other commodity therefore does not satisfy the
definition of the ICC
Slope of the Curve is MUx /MUy or Marginal Utility of X / Marginal Utility of y
Shape of an indifference curve: an indifference curve is convex to the origin, because
of diminishing rate of substitution. It is also called a bowed in indifference curve.
Therefore the indifference is CONCAVE to the origin
Indifference Curves are CONVEX to the Origin Curves: Because the consumer
jealously likes both the commodities, he or she would decrease the decrease of the use of
one of the commodities till the rate of decrease is zero and he or she can not substitute
any more
With a straight line, the rate of decreases is constant. With a Concave curve the rate of
decrease increases. The Rate of Decrease should Decrease as in Convex to origin curve
Intersection of two indifference curves: two indifference curves do not intersect each
other And is convex to the origin. Therefore CIC’s are parallel to each other
Two ICC’s do not Intersect each other : They are parallel to each other At point B the two
curves intersect, therefore there is same satisfaction on ICC1 and ICC2 which is not part
of our definition Point A on ICC2 is below point B of ICC1 and Point C on ICC2 is above
point B on ICC1, therefore they have different satisfaction levels and cannot be on the
same ICC
MRS = ∆x / ∆y
Where
∆ = Rate of Change
x & y = commodities
MRS = Marginal Rate of Substitution: of x for y in consumption refers to the amount
of y that the nation could give up for use of an extra unit of x commodity and still remain
on the same indifference curve. This is given by the (absolute) slope of the community

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indifference curve at the point of consumption and declines as the Nation moves down
the curve. Declining MRS or absolute slope of an indifference curve is shown by the
convexity of the curve from the origin.

An indifference Curve Map: indicates the consumer’s preference among all

combinations of goods and services. The higher one goes on an indifference curve, the
greater is the satisfaction that the consumer will derive from different sets of the same
two commodities. "An indifference map, located in the positive quadrant of a graph,
indicates the consumer’s preferences among all combinations of goods and services. The
further from the origin an indifference curve is, the more the combination of goods along
that curve are preferred". The indifference map reveals only the conditions of goods and
services that a consumer prefers or is indifferent to and what he or she are willing to buy.
A particular set of CIC or map of Indifference curve represents a particular income
distribution in each nation.
The Compensation Principle: The fact that in real world economics at full employment
and production levels. A gain of one is the loss of another, therefore the gainer has to
compensate for the loss of the other to maintain economic relationship. The nation
benefits from trade if the gainer would be better off (retain some gain) even after fully
compensating the losers for their losses
Budget Constraint & Consumer’s Equilibrium Condition
Budget Constraint: An Indifference map can tell us what a consumer is willing to buy,
but it cannot tell us what he or she is able to buy. What a consumer is able to buy will be
determined from the extent of his or her's income levels as well as the market price of
both the commodities. The income of the consumer will determine their buying power in
money terms, while the prices of both the commodities will ensure the extent of that
buying power in real terms. Both the income constraints and the price constraints together
constitute the budget constraints for the consumers and that is shown by the income-price
or the Budget Line.
The Budget Line is a line showing all combinations of goods that can be purchased with
a given level of income and existing prices in the market.

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Budget Line (income-Price Line)
Budget line is the RESTRAINT to the Maximization of Satisfaction levels of the
consumer. The restraint is the Income levels of the consumer and the prices of both the
commodities x and y in the market or the DEMAND Curve of the consumer

Slope of the Budget line = Px / Py

Equilibrium Levels of The Consumer
Equilibrium Level (Optimum Level) is the point of TANGENCY between the Budget line
and the Highest possible Indifference Curve
MUx / MUy = Px / Py

At the point of Tangency the slopes of the two curves are equal. The Tangency between
the two curves is a necessary condition for the equilibrium. This tangency should be at

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 the point of the Convexity of the IC curve is a secondary condition. Which means that the
rate of change between the two commodities should be zero
Consumer’s Equilibrium Condition: If we place the consumer’s budget line MN on his
or her's indifference map, we will derive his or her's equilibrium condition. A consumer
is in equilibrium when his or her's budget line is tangent to the highest possible
indifference curve. This will allow us to determine the one combination of both the goods
and services that the consumer is willing and at the same time is able to buy, given his or
her's budget constraints.
The consumer maximizes his or her's satisfaction by purchasing the combination of ice
cream and chocolates that is on the indifference curve furthers from the origin but
attainable, because they are within the consumer’s budget line margin.
Lecture Equilibrium in Isolation &
9 Standard Theory of International Trade - Equilibrium under open Economy
(International Trade)
Equilibrium in Isolation for Nation A and Nation B

Equilibrium in Isolation (Without Trade): Nation A is in Equilibrium in AUTARKY

= no trade position at point A where all its people produce and consume both the
commodities x and y at Community Indifference Curve CIC1. At point A Nation A
produces and consumes maximum (y3) of its commodity of comparative disadvantage
and minimum (x1) of its commodity of its comparative advantage and the relative
commodity equilibrium prices Px/Py = 1/4 . Which means that Nation A relative price
of y commodity Py = 1 and relative commodity price of x is Px = ¼. Therefor in
isolation (without trade or Autarky) Nation A is producing and consuming both
commodities inefficiently, spending relatively more on y commodity (the commodity of
its comparative disadvantage) and less of x commodity (the commodity of comparative
advantage for Nation A.

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 X2

Equilibrium in Isolation (Without Trade): Nation B is in Equilibrium in AUTARKY

= no trade position at point A where all its people produce and consume both the
commodities x and y at Community Indifference Curve CIC1. At point A Nation B
produces and consumes maximum (x3) of its commodity of comparative disadvantage
and minimum (y1) of its commodity of its comparative advantage and the relative
commodity equilibrium prices Px/Py = 4 . Which means that Nation B relative price of
y commodity Py = 1 and relative commodity price of x is Px = 4. Therefor in isolation
(without trade or Autarky) Nation B is producing and consuming both commodities
inefficiently, spending relatively more on x commodity (the commodity of its
comparative disadvantage) and less of y commodity (the commodity of comparative
advantage for Nation B.
Equilibrium Relative Commodity Prices (ERCP) and Comparative Advantage:
Equilibrium Relative Commodity Prices (ERCP) and Comparative Advantage is given
by the slope of the common tangent common to the Nation’s PPF as cost price Pk/Pn
(price of capital relative to the price of labor) o ERFP (Equilibrium Relative Factor
Prices) and the Nation’s CIC as commodity price Py/Px (price of commodity y relative
to Price of commodity x) or ERCP (equilibrium Relative Commodity Prices). In the
above Figures, for Nation A the ERCP Py/Px = ¼ and for Nation B the ERCP Py/Px =
4.
Lecture Standard Theory of International Trade - Equilibrium under open Economy
10 (International Trade)
Standard Theory of International Trade - Equilibrium under open Economy
(International Trade)

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With International Trade (Open Economy) of Nation A: Nation A production
(Supply) moves from point A (Autarky) from producing y2 (maximum of commodity of
its comparative disadvantage) and x3 (minimum of commodity of its comparative
advantage) to point B down the PPF and produces y1 (minimum of commodity of its
comparative disadvantage) and x3 (maximum of commodity of its comparative
advantage). With Trade Nation A produces at point B and consumes at point E on CIC3
(three times more than the production capacity of Nation A). At point E (CIC3) Nation
A will consume commodity y (imported commodity) from point y2 to point y3 and
commodity x (the exportable commodity) from point x1 to point x2 and export surplus
of commodity x (commodity of comparative advantage) x2x3 and import commodity y
(commodity of comparative disadvantage y1y3. The ERCP Py/Px will increase from
Py/Px = ¼ at point A to Py/Px = 1 at point B.

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With International Trade (Open Economy) of Nation B: Nation B production
(Supply) moves from point A (Autarky) from producing x2 (maximum of commodity of
its comparative disadvantage) and y3 (minimum of commodity of its comparative
advantage) to point B down the PPF and produces x1 (minimum of commodity of its
comparative disadvantage) and y3 (maximum of commodity of its comparative
advantage). With Trade Nation B produces at point B and consumes at point E on CIC3
(three times more than the production capacity of Nation B). At point E (CIC3) Nation
A will consume commodity x (imported commodity) from point x2 to point x3 and
commodity y (the exportable commodity) from point y1 to point y2 and export surplus
commodity y (commodity of comparative advantage) y2y3 and import commodity x
(commodity of comparative disadvantage x1x3. The ERCP Py/Px will decrease from
Py/Px = 4 at point A to Py/Px = 1 at point B.

Gains from International Trade

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Following are the Gains from International Trade in Each Nation: With Free
International Trade and Exchange,
1. Production Effect: Nation A would specialize and increase the production of x
commodity (the commodity of its comparative advantage) at point B on its PPF from x1
to x3 and reduce the production of y commodity (the commodity of its comparative
disadvantage) from y2 to y1. Nation B would specialize and increase the production of y
commodity (the commodity of its comparative advantage) at point B on its PPF from y1
to y3 and reduce the production of x commodity (the commodity of its comparative
disadvantage) from x2 to x1.
2. Supply Effect: With International Trade the supply of x from Nation A will
increase from x1 to x2 for internal demand and from x2 to x3 for Exports in order to
satisfy the demand of nation B. With International Trade the supply of y from Nation B
will increase from y1 to y2 for internal demand and from y2 to y3 for Exports in order
to satisfy the demand of nation B.
3. Demand Effect: With International Trade the demand for both commodities in
both nations would increase threefold from CIC1 At point A to CIC3 at point E. Nation
A would increase the domestic demand of x commodity from x1 to x2 and of y
commodity from y2 to y3. Nation B would increase the domestic demand of x
commodity from y1 to y2 and of x commodity from x2 to x3.
4. Consumption Effect: Nation A would increase the consumption of commodity
x from x1 to x2 and also increase the consumption of y commodity from y2 to y3 from
CIC1 at point A to CIC3 at point E. Nation B would increase the consumption of
commodity y from y1 to y2 and also increase the consumption of x commodity from x2
to x3 from CIC1 at point A to CIC3 at point E.
5. Trade Effect: Nation A would sell (Export) its surplus product of x commodity
(the commodity of its comparative advantage) (x2x3) to Nation B and buy (import) the
y commodity (the commodity of its comparative disadvantage) from Nation B (y1y3).
Nation B would sell (Export) its surplus product of y commodity (the commodity of its
comparative advantage) (y2y3) to Nation A and buy (import) the x commodity (the
commodity of its comparative disadvantage) from Nation A (x1x3).

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6. Cost Effect: With increasing costs, the cost of production Pn/Pk or wages /
interest (w/i) in Nation A would increase from ¼ to 1 (in other words as demand for
labor (n) producing x commodity increases because of the demand for x in Nation B, the
wages (Price of labor) would increase in Nation A. At the same time as demand for
capital (k) in Nation A would decrease because the production of y decreases, the price
of capital or interest (i) in nation A decreases until at point B prices of both factor of
production equalizes and the producers become indifferent whether they produce x or y
in this nation. Therefore with International trade the Pn/Pk = w/i = 1 (equalizes). With
increasing costs, the cost of production Pk/Pn or interest / wages (i/w) in Nation B
would decrease from 4 to 1 (in other words as demand for capital (k) producing y
commodity increases because of the demand for y in Nation A, the interest (Price of
capital) would increase in Nation B. At the same time as demand for labor (n) in Nation
B would decrease because the production of x decreases, the price of capital or interest
(i) in Nation B decreases until at point B prices of both factor of production equalizes
and the producers become indifferent whether they produce y or x in this nation.
Therefore with International trade the Pk/Pn = i/w = 1 (equalizes).
7. Price Effect (Not discussed in this Model): Price of x in Nation A without trade
at point A (CIC1) were Px/Py = ¼. As demand for x in B nation increases due to
international trade, the prices of x would increase and at point E (CIC3) they would
equalize on the international market to Px/Py = 1. Price of y in Nation B without trade at
point A (CIC1) were Py/Px = 4. As demand for y in A nation increases due to
international trade, the prices of y would decrease and at point E (CIC3) they would
equalize on the international market to Py/Px = 1.
8. Employment Effect: due to International Trade the employment of labor (n)
which is the abundant factor in Nation A would increase due to increase in production
of x commodity (commodity which is labor intensive) and employment of capital (k) the
scarce factor in Nation A would decrease as the production of y (commodity which is
capital-intensive) decreases in Nation A. The employment of capital (k) which is the
abundant factor in Nation B would increase due to increase in production of y
commodity (commodity which is capital intensive) and employment of labor (n) the
scarce factor in Nation B would decrease as the production of y (commodity which is
capital-intensive) decreases in Nation B.
9. Income Effect: As the wages in Nation A and interest in Nation B increases due
to demand effect because of International Trade, the income of producers producing the
exportable commodity in each nation would increase, while the income of the
importable commodity (Import Substitution Industry) in each nation would decrease.
10. Balance of Payment Effect (Not discussed in this Model): As trade between
Nation A and Nation B stabilizes, the Balance of Payment (BOP) in each nation and
Terms of Trade (ToT) between both nations stabilizes and theoretically equalizes.
11. Exchange Rate Effect (Not discussed in this Model): As trade between Nation
A and Nation B stabilizes, the Exchange Rate between Currencies of both nations (ER)
stabilizes
12. Growth Effect: Because of International Trade, as production, consumption,
employment and incomes in both nations increase the GDP growth rate in both nations’
increases.
13. Welfare Effect: As income levels in both nations and consumption levels for
both commodities x and y increases due to international trade there would be a raised
standard of living, reduction in poverty levels, increase in consumer surpluses, increase
in producers surplus and if government taxes sales of goods an increase in government

69
revenue, than there would be a welfare effect in each nation (welfare = consumer
surplus + producers surplus + revenue to the government).
Equilibrium Relative Commodity Prices with Trade (ERCP)
Equilibrium Relative Commodity Prices with Trade: ERCP is the common relative
prices in both nations at which trade is balanced. This is Px/Py = Py/Px = 1.
At this relative price the amount of x that nation A wants to export is equal to the
amount of x that Nation B wants to import.
The Equilibrium Relative Commodity Prices are determined by trial and error.
If the pre-trade Relative Prices had been the same in both nations, there would be no
basis for trade, because there would be no comparative advantage.
Incomplete Specialization:
Under Constant Costs both Nations specialized completely in the production of the
commodity of their comparative advantage, i.e. Nation A would specialize and produce
all of x and zero of y and Nation B would specialize and produce all of y and zero of x.
With Increasing Opportunity Costs there is Incomplete specialization in production of
both commodities in each nation. In Nation A the cost of production to produce x would
increase and the cost of production to produce y would decrease as we go down the PPF
until at point B the cost of production to produce x and y (Px/Py = 1) would equalize. In
Nation B the cost of production to produce y would increase and the cost of production
to produce x would decrease as we go down the PPF until at point B the cost of
production to produce y and x (Py/Px = 1) would equalize. Therefore at point B both
nations would produce both commodities x and y. Nation A maximum (x3) of x and
minimum of y (y1) and Nation B maximum (y3) of y and minimum of x (x1). The
reason for this is that in each nation there also exists factors that are intensive and
specialized to produce the other commodity (commodity of comparative disadvantage).
Gains from Trade based on Different Tastes and Habits

Nation A and nation B have identical PPF shown by a single PPF curve. But different
tastes (indifferent curves). In isolation (Autarky) nation A and nation B produces and
consumes at their respective points A. Since prices in both nations are different, Nation
a has comparative advantage in x and nation B has comparative advantage in y. With

70
 trade Nation A specializes in production of x and produces at point B and nation b
specializes in y and produces at point B. By exchanging equal amounts of x and y
commodities with each other. Each nation ends up at consuming at their respective
points E on CIC3 with international price equalization Px/Py = Py/Px = 1.
Small Country Case with Increasing Costs
Small Nation is a nation which cannot influence Demand, Supply or Price on the
international level, while a Large Nation can influence Demand, Supply or Price on
International levels.
If Nation A is a small Nation and Nation B is a large Nation and the International price
Px/Py = 1 is not effected by the trade with small nation (Nation A) and Nation A (Small
Nation) has a comparative advantage in commodity x and Nation B (Large nation)
comparative advantage in commodity y. The basis for trade between both the nations
will be as in the case when both nations were large nations, nation a would specialize,
produce and export commodity x and import from Nation B commodity y, except now
nation a cannot influence International prices in Nation B or the rest of the world and
therefore Nation A (small Nation) captures all the benefits from trade and this helps the
small nation to grow and in te long run transform itself into a Large nation.

Lecture Demand & Supply and International Prices

11
Demand & Supply and International Prices of x commodity

The Equilibrium Relative Commodity Prices with trade with Partial Analysis:
Panel 1 shows the Demand and supply of commodity x in nation A where at Point A the
ERCP in Nation A Px/Py is ¼ and as the Nation specializes and produces x commodity
at point B, it exports BE commodity to nation B at ERCP Px/Py = 1 where by getting 4
times larger price on the international market than at home because of excess demand
for x in nation B. Panel 3 is the demand and supply of commodity x in Nation B where
at point A the ERCP in nation B Px/Py = 4 and as the Nation B forgoes production of
commodity x at point B and imports BE from nation A at Px/Py = 1 saving 4 times of
what Nation B had to buy at home on point A because of excess supply of commodity x

71
 by nation A. Panel 2 is the demand and supply curves of commodity x on the
international market and the International price of commodity x (through trial and error)
would stabilize at Px/Py = 1 at point E (the equilibrium point of international demand
and international supply of commodity x). Note: the same would be the case for
International prices (Equilibrium point between demand and supply) of commodity y on
the international market/
Offer Curves – General & Partial Equilibrium Analysis and
Terms of Trade
Lecture Offer Curves – General & Partial Equilibrium Analysis and
12 & !3 Terms of Trade
Offer Curves – General & Partial Equilibrium Analysis
ERCP with Trade – Partial Equilibrium Analysis
Derivation of Offer Curves for commodity x from PPF of Nation A

Offer Curves of each nation (in this case of Nation A commodity x) will be derived
from their respective PPF and CIC. At point A the price ray Px/Py = ¼ (shown in the
offer curves). At point D on the PPF the price Ray of Nation A commodity x would be
Px/Py = ½ (increasing opportunity costs) as shown in the offer curves). At point B
(point of semi-specialization and production) the nation A would produce and offer
commodity x to Nation B at International Price (ERCP) Px/Py = 1 (as shown in the offer
curves.
ERCP with Trade – General Equilibrium Analysis
Offer Curves of Both A and B nations for commodities x & Y
Nation B on the other hand would not offer any commodity to sell at the international
market at point A Py/Px = 4 and would start offering commodity y at point D at ERCP
py/Px = 2 and consequently stabilize its offer of commodity y to Nation a at ERCP
Py=Px = 1 (International market prices). As shown by offer curves below.

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 The Price Rays show the ERCP Px/Py = ¼ (No Trade price at point A where the nation
produces and consumes both the commodities) of Nation A; Px/Py = ½ producing at
point D and selling & consuming at point C and ERCP with International Trade Px/Py =
1 for commodity x. At the same time the Price Rays show the ERCP Py/Px = 4 (No
Trade price at point A where the nation produces and consumes both the commodities)
of Nation B; Py/Px = 2 producing at point D and selling & consuming at point C and
ERCP with International Trade Py/Px = 1 for commodity y.
Nation A will not sell below point Px/Py = ¼ and Nation B will not sell below Py/Px =
4 because these are prices they will get at home. After these prices, both nations will
start offering (exporting and selling) their respective commodities of their comparative
advantage (Nation A commodity x and Nation B commodity y) on the international
market and through trial and error at point E the ERCP Px/Py = Py/Px will equalize = 1.
Terms of Trade
Terms of Trade of a nation are defined as a Ratio of the prices of its exports to the
prices of its imports. Or Dollar value of Exports / Dollar Value of Imports
Lecture Factor Endowment Theory and Heckscher – Ohlin (H-O) Theory
14 & 15 Assumption of the Model
Factor Intensity, factor abundance & Shape of the PPF
Factor Endowment Theory
Factor Price Equalization and Income Distribution
Factor Endowment Theory and Heckscher – Ohlin (H-O) Theory
Assumption of the Model are made to simplify the model to two dimensions or
Assumptions Are:
Assumption 1: 2 X 2 X 2 Model
2 nations A & B
2 Commodities x and y, and
2 factors of Production N (labor) and K (Capital)
Assumption 2. Both Nations have the same technology
Assumption 3: Commodity x is labor intensive and commodity y is capital intensive

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Assumption 4: There are constant returns to scale in the production of both
commodities in both nations
Assumption 5; Incomplete specialization in production of both commodities in both
Nations
Assumption 6: Equal tastes and habits in both nations
Assumption 7: Perfect competition in both commodities and in factor markets in both
nations
Assumption 8: Perfect internal factor mobility in each nation but no (zero)
international factor mobility
Assumption 9: No transport costs, tariffs, or any other costs or obstructions to the free
flow of international trade
Factor Intensity, Factor Abundance & Shape of the PPF
In a Two factor, Two Commodity, Two nation world (2 X 2 X 2 Model) we say that
commodity y is capital intensive and capital –labor ratio (K/N) is used in the production
of y where capital is used in greater numbers and labor in relatively less numbers than in
the production of x, where commodity x is labor intensive and labor-capital ratio (N/K)
is used in the production of x where labor is used in greater numbers and capital in
relatively less numbers than in the production of y.
Note: it is not the absolute amount of capital or labor used in the production of
commodities x and y that is important in measuring the capital-labor or labor-capital
intensity of the to commodities, but the amount of capital per unit of labor for
production of y commodity (or the amount of labor per unit of capital for production of
x commodity).
If we plotted the capital (K) along the vertical axis of the graph, and the labor (N) along
the horizontal axis of the graph, and production took place along a straight line ray from
the origin, the slope of the line would measure the capital-labor ratio (K/N) in the
production of the commodity.
Factor Intensity: In a 2X2X2 (2 nation, 2 commodity and 2 factor) world
Commodity y is capital intensive or the capital-labor ratio (K/L) used in production of y
is greater than K/L used in production of x.
With 2 units of K and 2 units of L required to produce y than 2/2 = 1 or K/L ratio to
produce y =1 therefore y is K-intensive and l- in-intensive
and commodity x is labor intensive or the labor-capital ratio (L/K) used in production of
x is greater than L/K used in production of y – the capital-labor ratio is 1.
If K/L=2/2=1 for production of y, then 1 unit of K and 4 units of L are required to
produce one unit of x in nation B and therefore K/L = ¼ for commodity x in nation A.
Since K/L = 1 for y in both nations, and k/L is 4 in nation B and ¼ in nation A for
commodity x, we can safely say that y is K intensive and x is labor intensive, and nation
A is L- abundant and nation B is K- abundant

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Factor Abundance: There are two ways to define factor abundance.
One way is in terms of physical units or in terms of overall amount of capital or labor
available in each nation.
Another way is in terms of relative factor price or in terms of the rental price of capital
and the price of labor time in each nation.
The definition in terms of physical units considers only the supply of factors. The
definition in terms of relative factor price considers both demand and supply of factors
of production.
The principle of economics in terms of factor of production is considered in terms of
their Derived Demand.
Derived Demand means that factors of production are only demanded when they
produce a commodity which is demanded in the market. In other words higher the
demand for x commodity, higher would be the demand for labor (N/K) or higher the
demand for y commodity, than higher would be the demand for capital (K/N) in each
nation and vice versa.
In Nation A, the capital-labor ratio (K/L) = 1 for y and K/L = ¼ for commodity x. These
are given by the slope of the price ray from the origin for each commodity in Nation A.
In Nation B, K/L = 4 for y and K/L = 1 for x
Thus Commodity x is labor-abundant and commodity y is capital abundant in both
nations. Nation B uses a higher K/L than Nation A in the production of both
commodities because the relative prices of capital (r/w) is lower in nation B.
If r/w declines producers would substitute K for L in the production of both
commodities to minimize their costs of production. As a result K/L would rise for both
commodities
Therefore, Factor abundance would, mean:
A) physical units of capital and labor available in each nation
B) Relative Factor Prices (RFP) or rental prices of capital (i) and the price of labor time
(w) in each nation
Factor Abundance in Physical Units

75
Nation B is capital abundant if the ratio of the total amount of capital to the total amount
of labor (K/L) available in nation B is greater than in nation A. (It is not the absolute
amount but the ratio of the total amount of K & L)
Thus nation B can have less capital than Nation A and still be the capital abundant
nation if K/L in Nation B exceeds K/L in nation A
Factor Abundance as per Factor Prices
Nation B is capital abundant if the ratio of the rental price of capital to the price of labor
time (PK/PL) is lower in nation b than in nation A ( if PK/PL in Nation B is smaller than
PK/PL in Nation A)
Rental price of capital is interest rate (r) and the price of labor time is wage rates (w),
than PK/PL = r/w. (again it is not the absolute level of r that determines whether or not a
nation is K-abundant but the r/w.
Factor Abundance and Shape of the PPF

The shape of PPF in Nation A is flatter than the PPF in Nation B. This indicates that
nation A can produce relatively more of commodity x (labor-intensive commodity)
because nation A is relatively more labor (N) abundant than Nation B. The shape of PPF
in Nation B is steeper than the PPF in Nation B. This indicates that Nation B can
produce relatively more of commodity y (Capital-intensive commodity) because nation
B is relatively more capital (K) abundant than Nation A.
Factor Endowment Theory
Factor Endowment: means what is more God Gifted or Manmade Resource in a
country
Factor Endowment Theory states “a Labor (N) Abundant Nation (A) would specialize,
produce and export Labor (N) intensive commodity (x) while a Capital (K) Abundant
Nation (B) would specialize, produce and export Capital (K) intensive commodity (y)
and each Nation would import the commodity produced by its scarce resource”.

76
Because in Nation A which is more labor abundant the supply of labor (N) is more than
its demand at point x1. While the demand for Capital (K) the scarce resource in Nation
A is more than its supply at point y2 on CIC 1 (point A) the ERFP (Equilibrium
Relative Factor Pricing Pk/Pn = Pn/Pk = w/i at point A is ¼. Therefore it is relatively
cheaper for nation A to specialize, produce and export commodity x (the commodity of
its comparative advantage, produced by its abundant resource) and relatively expensive
to produce and consume at home commodity y (the commodity of its comparative
disadvantage, produced by its scarce resource).
It is recommended that Nation A specializes, produces and exports commodity x at
point B (x3) and import commodity y at CIC3 (y3) at point E. Where labor (N) in
Nation A would be employed at point N3 and capital (K) at point K1.

77
Because in Nation B which is more capital abundant the supply of capital (K) is more
than its demand at point y1. While the demand for labor (N) the scarce resource in
Nation B is more than its supply at point x2 on CIC 1 (point A) the ERFP (Equilibrium
Relative Factor Pricing Pk/Pn = Pn/Pk = i/w at point A is 4. Therefore it is relatively
cheaper for nation B to specialize, produce and export commodity y (the commodity of
its comparative advantage, produced by its abundant resource) and relatively expensive
to produce and consume at home commodity x (the commodity of its comparative
disadvantage, produced by its scarce resource).
It is recommended that Nation B specializes, produces and exports commodity y at
point B (y3) and import commodity x at CIC3 (x3) at point E. Where capital (K) capital
(K) capital (K) capital (K) capital (K) capital (K) capital (K) capital (K) capital (K) in
Nation B would be employed at point K3 and labor (N) at point N1.
Factor Price Equalization and Income Distribution

The General Equilibrium Framework of H-O theorem; begins with the

1. Distribution of ownership of factors of production (Factor Endowment) or 2. Income
levels and Tastes determined by the demand of the commodity Demand; 3. The demand
for factor of production is then derived from the demand for the final commodities.
The demand for and supply of factors of production determine the price of factors. The
price of factors and technology determines the price of final commodities in the market.
The difference in relative commodity prices among nations then determines
comparative advantage and the pattern of trade.

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 H-O-S Model: The conclusion reached by the specific factor Model is that trade will
have an ambiguous effect on the nation’s mobile factor, benefit the immobile factor
specific to the nation’s export commodity or sector and harmful to the immobile factor
specific to the nation’s import- competing commodity or sector.

Lecture Empirical test of H-O Model and Leontief Paradox

16
Empirical test of H-O Model
Empirical Test of the H-O-S model is important because many of the simplifications
and assumptions on which the H-o (and S) model rests do not hold in the real world.
One thing that factors are not homogeneous and for example wages are much higher for
doctors and other specialists than laborers and then there is a huge differences in wage
mechanism between USA, different European nations, and countries of Asia like China,
South Korea and Japan not to talk about the less developed nations of the world where
manual labor is relevantly very cheap. Also transport and other logistic (storage and
transaction costs) are different in different countries of the world. Furthermore many
industries operate under conditions of imperfect competition and non-consistent returns
to scale.
Therefore it should not be surprising that International trade has not equalized wages,
and interest rates for homogenous factors in different nations. Therefore it is realistic to
say that International trade has reduced, rather than completely eliminated the
international differences in the returns to homogeneous factors. While international
trade seems to have reduced differences in real wages in manufacturing among the
leading industrial nations of the world but thesis no a clear cut proof that this has
happened
The first empirical test of H-O Theory was conducted by Wassily Leontief in 1951 using
USA data of 1947 with the assumption that USA is capital intensive and should be
exporting capital-intensive commodities and importing labor-intensive commodities.
Therefore Leontief compared USA’s export intensity with USA’s import substitution

79
industry’s intensity rather than factor intensity of USA’s imports (He received the Nobel
prize in 1973).
Import Substitution Industry: are industries producing commodities produced at
home for the home market and are theoretically produced by the scarce factor in the
country (at x1 produced by N1 in Nation B and y1 produced by K1 in Nation A). Import
substitution commodities are assumed to be more expensive and of lesser quality than
highly efficient and relevantly cheaper foreign imported goods produced by the
abundant factor in the other nation.

Leontief Paradox
The results of Leontief’s empirical test showed that USA’s import substitute industry
was 30% more K-intensive than USA’s export industry. In other words USA was
importing relatively more K-intensive commodities and exporting relatively less K-
intensive commodities. This was opposite to what HO theorem predicts, therefore it is
known as Leontief Paradox
Leontief tried to rationalize his results rather than reject H-O theorem.
His arguments are:
1. The data used (of 1947) was too close to the WWW II state of affairs, therefore
could not give wanted results and calls this an optical illusion
2. That USA’s labor is three times as productive as foreign labor and therefore
USA is also a N-intensive nation when we multiply USA’s labor by 3 and
compare it with foreign labor productivity
These explanations were not acceptable and subsequently Leontief himself withdrew
them.
Capital –Labor; Skills and land Requirements & issues in H-O Model
3. It is Important to note that H-O Model uses 2 factors (K and N) and abstracts
from using land, natural resources, entrepreneurship in to the model which
makes it biased and imperfect
4. Not taking into account the USA’s commercial policy (tariffs and taxes) was
another bias in Leontief’s study

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 5. More importantly Leontief concentrated upon physical Capital and totally
ignored the importance of USA’s Human Capital and took labor as
homogeneous which was a mistake.
Human Capital: refers to education, job training and health of the workers which
increases their productivity. The implication is that as a Nation (USA) increases its
stock of capital it also increases the education and skill levels of its labor force in order
to work with highly sophisticated machines and technology. Therefore after a certain
level of training and skills labor ceases to remain labor but transforms into human
capital. In other words with human capital on the horizontal axis and physical capital on
the vertical axis nations like USA are substituting one form of capital (K) with another
form of human capital (NK)
Factor Intensity Reversal Model: refers to the situation (after point B) where a given
commodity is labor intensive in Nation B and capital intensive in Nation A because of
semi specialization.
6. Factor Intensity Reversal occurs because of the Elasticity of Substitution which
measures the degree or ease with which one factor can be substituted with
another factor of production. When factor Price Reversal is present, neither the
H-O theorem, nor he factor price theorem holds. This means that it is much
easier to substitute N for K (or vice versa) in the production of commodity x the
N-intensive commodity than in the production of y the K-intensive commodity.
 Factor Intensity reversal is more likely to occur when the greater is the
difference in the elasticity of substitution of N for K in the production of the two
commodities.
 Since the two nations cannot export to each other the same homogeneous
commodity, the H-O model no longer predicts the pattern of trade.
 With the factor intensity reversal, the factor equalization theorem also fails to
hold
 This factor intensity Reversal does not occur in real world is beyond doubt

Lecture New Theories of Internal Trade

17 Economies of Scale & International Trade
Imperfect Competition & International Trade
Trade based on Dynamic Technological Differences
Transportation, Environmental Standards & Non-Traded Commodities
New Theories of Internal Trade
In this section we relax the Assumptions of the H-O Theorem
 Relaxing the Assumption 1: 2 X 2 X 2 Model. 2 nations A & B; 2 Commodities
x and y, and 2 factors of Production N (labor) and K (Capital) to include more
than 3 nations, more than 2 commodities and more than 2 factors will certainly
complicate the analysis. But including 4 factors of production is possible by
constructing the Factor intensity Reversal Model.
 Relaxing the Assumption 2. Both Nations have the same technology. This
assumption is not generally valid. Usually each nation uses different levels of
technology for their production process in the real world. To calculate trade
based on different technologies, technology can be viewed as a factor of
production and then trade differences between nations can be calculated.
However, trade based on changes in technology in different nations over time
are explained by technological gap and production cycle models. These models
can be regarded as dynamic extension of the H-O Model

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 Relaxing the Assumption 3: Commodity x is labor intensive and commodity y
is capital intensive implies the absence of factor intensity reversal. While
empirical studies indicate that factor intensity reversal is not very common in
real world. Therefore Leontief paradox can be eliminated by the inclusion of
human capital (NK) instead of labor (N), exclusion of commodity intensive in
natural resources and comparing the K/N ratio in production versus consumption
rather than exports versus imports.
 Relaxing the Assumption 4: There are constant returns to scale in the
production of both commodities in both nations. International Trade is also
based on increasing returns to scale and therefore can be regarded as
complementary to the H-O Theorem and can explain a portion of trade not
covered by H-O Theorem.
 Relaxing the Assumption 5: Incomplete specialization in production of both
commodities in both Nations. If trade brings about complete specialization in
production in one of the nations, relative commodity prices will be equalized,
but factor prices will not.
 Relaxing the Assumption 6: Equal tastes and habits in both nations. This
assumption has more or less been verified empirically. Tastes are certainly not
sufficiently different across nations to overcome differences in the relative
physical availability of factors of production in explaining different relative
commodity prices and trade among nations.
 Relaxing the Assumption 7: Perfect competition in both commodities and in
factor markets in both nations in all products and all factors is more
troublesome. It seems that significant of trade in manufactured goods among
industrialized nations is based upon product differentiation and economies of
scale, which does not seem easily reconcilable with the H-O factor endowment
model as intra-industry trade (or trade based on differentiated products).
 Relaxing the Assumption 8: Perfect internal factor mobility in each nation but
no (zero) international factor mobility. International factor mobility can be a
substitute or international trade in bringing about equality of relative commodity
and factor prices among nations. With some, but less than perfect, international
factor mobility, the volume of trade required to bring about relative commodity
and factor-price equalization would be less. This modifies basic H-O Model but
does not take away its validity.
 Relaxing the Assumption 9: No transport costs, tariffs, or any other costs or
obstructions to the free flow of international trade. Cost of transportation and
other non-prohibitive obstructions to the flow of international trade reduce the
volume and the benefits of international trade, but they only modify, (rather than
lead to rejection of) the H-O theorem and the factor-equalization theorem. Costs
of transportation and environmental standards are part of each nations trade
paradigm.
 Relaxing Assumption 10. With resources not fully utilized, a potential
comparative advantage based on unutilized or underutilized resources might not
show through or emerge. The H-o Theorem would then incorrectly predict the
pattern of trade, however, aside from temporary economic recessions and
frictional unemployment, the full employment assumption is for the most part
satisfied, at least in the industrial countries.
 Relaxing the Assumption 11. That international trade among nations is balanced
could lead a nation with trade deficit to import some commodities in which it

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 would have a comparative advantage and it would in fact export with balanced
trade. Since most trade imbalances are generally not very large in relation to
GDP, the charge that H-O model might be unable to correctly predict the pattern
of trade is true only for those commodities in which the nation has only a very
small comparative advantage.
In conclusion, relaxing most of the assumptions o the H-O Model (Theory) only
modifies but does not invalidates the theory.
However relaxing the assumption of constant economies of scale and perfect
competition requires new, complementary trade theories to explain the significant
portion of international trade that the H-o theory leaves unexplained. International
trade based on differences in technological changes over time among nations also
calls for new trade theories.
Economies of Scale & International Trade
Increasing Returns To Scale refers to the production situation where output grows
proportionally more than the increase in inputs or factors of production. In other words
if all inputs are doubled, output will more than double. With increasing returns to scale,
each worker can specialize in performing a simple, repetitive task with a resulting
increase in productivity. Furthermore, a large scale of operations may permit the
introduction of more specialized and productive machinery than would be feasible at a
smaller scale of operations. Researchers found out that a third of all goods-producing
industries are characterized by increasing returns to scale.

Pa

Trade Based on Economies of Scale; With identical and convex to the origin (because
of economies of scale) production frontiers (PPF) and indifference map, the no-trade
equilibrium-relative commodity price in the two nations is identical and given by Pa.
With trade, Nation A could specialize completely in the production of commodity x and
produce at point Bx. Nation B would then specialize completely in production of
commodity y and produce at point By. By exchanging equal amounts of x for y with
each other, each nation would end up consuming at point E on the indifference curve
CIC2 thus both nations would gain in trade.
Several additional aspects of the above analysis should be clarified.

83
 First, it is a matter of complete indifference which of the two nations specializes in the
production of commodity x or commodity y.
In real world this may result through historical accident.
Second, it should be clear, that the two nations need not be identical in every respect for
mutually beneficial trade to result from increasing returns to scale.
Third, if economies of scale persist over a significantly long range of outputs, one or a
few firms in the nation will capture the entire market for a given product, leading to
Monopoly or Oligopoly situations.
Fourth, since 1980, here has been a sharp increase in international trade in parts and
components out sourcing and offshoring, and these are the source of new and significant
International Economies of Scale.
Outsourcing refers to the purchase by a firm of parts and components abroad in order
to keep its costs down.
Offshoring refers instead to a firm producing in its own plants abroad some of the parts
and components that it uses in its production.
While Outsourcing and Offshoring leads to international economies of scales, they also
lead to political complaints from inside a nation that a significant number of high-profile
and high-paid jobs are transferred abroad.
Fifth. Increasing Economies of Scale should also be distinguished b from External
Economies.
External Economies, refer to the reduction (downward shift) in each firm’s average
costs of production curve as the entire industry output expands.
Sixth, is the hypothesis advanced that a nation’s exports those manufactured products
for which a large domestic market exists. These are products that appeal to the majority
of the population and in the process of satisfying the home market, the nation acquires
the necessary experience and efficiency to be able to subsequently to export these
commodities to other nations with similar tastes and income levels.
The nation will import those commodities that appeal to some low and high income
minorities.

Lecture New Theories of Internal Trade

13 Economies of Scale & International Trade
Imperfect Competition & International Trade
Trade based on Dynamic Technological Differences
Transportation, Environmental Standards & Non-Traded Commodities
Imperfect Competition & International Trade
Trade based on Dynamic Technological Differences
Transportation, Environmental Standards & Non-Traded Commodities ies
Lecture Economic Growth & International Trade
14 Growth factors of Production
Rybcznski Theorem& Samulson Theorem
Technical Progress and International Trade
Large and Small Country Cases
Growth, Change of Tastes and International Trade
Economic Growth & International Trade
Growth factors of Production
Rybcznski Theorem& Samulson Theorem
Technical Progress and International Trade
Large and Small Country Cases
Growth, Change of Tastes and International Trade

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Lecture Technical Progress and International Trade
15 Large and Small Country Cases
Growth, Change of Tastes and International Trade
Technical Progress and International Trade
Large and Small Country Cases
Growth, Change of Tastes and International Trade
Mid Term Exam
Lecture International Trade Policy:
16 Trade Restrictions and Tariff
Effect of Tariff on Consumer and Producers Surplus – Welfare effect
Theory of Tariff Structures
Optimum Tariff
International Trade Policy:
Trade Restrictions and Tariff
Effect of Tariff on Consumer and Producers Surplus – Welfare effect
Theory of Tariff Structures
Optimum Tariff
Lecture Non-Tariff Barriers and New Protectionism
17 Political Economy of Protectionism
Non-Tariff Barriers and New Protectionism
Political Economy of Protectionism
Commercial policy in International Trade
Infant Industry Argument
Lack of
Financial Resources
Technological Resources
Better quality machines & equipment
Lack of better quality Raw material
Skilled & Educated Labor
Work habits & productivity of labor
Natural Resource Management
Energy resources
Qualified & Efficient Managers
Innovating, Risk takers
Marketing practices

The Import Substitute Industry

Also provides jobs to the people of the country
Also produces goods and services for the markets of the country
Also gives income to the labor of the country
Also helps increase the GDP of the country
Therefore why are they being dissertated against
And why the government is good to foreigners (importers) and being bad to the
producers of the nation
Protectionist Commercial policy
Tools of Commercial Policy:
Tariffs
Add Val rum (Value Added Tax)
Specific

85
 Compound
Quotas and Trade Barriers
‘New’ Commercial policy

Lecture Economic Integration, Custom Unions and Free Trade Areas

18
Economic Integration, Custom Unions and Free Trade Areas
Lecture Welfare effect of International labor Migration
19
Welfare effect of International labor Migration
Lecture Balance of Payments
20
Balance of Payments
Balance Of Payments (BOP)
Balance of payments A double accounting system which shows the dollar value of a
comprehensive record of all the transactions of the people of a country with the rest of
the world and of all the transactions of the rest of the world with the people of that
country
Balance of payments include
I. Current Accounts are transactions made and paid during the current fiscal year
II. Capital accounts are transactions made in that year but to be paid in future dates and
years (differed payments = debt)
I. Current Accounts include:
Trade Balance (Net Exports = Exports – Imports)
Exports of physical goods
Imports of physical goods
Services (Intangible transactions) include: payments for transportation; banking,
insurance, patents, licensing, engineering, property rights fees, IT related services,
payments for analytical articles and research etc.
Remittances: are money sent by compatriots working abroad home to their families
Foreign Public & Private payments:
Returning of principle & interest on debt by the government (Debt servicing); payments
for ships and aero planes touching foreign ports; payments of embassies and diplomatic
staff’s expenditure abroad. and grants and foreign help coming into the country due to
disasters, floods and earthquakes
Private people sending in foreign countries gifts to their relatives home;
II. Capital Accounts include
Direct Foreign Investments (FDI’s)
Portfolio Investments
Long Term Loans (for Investment purposes) usually from World Bank & Asian
Development Bank
Short Term Loans (for balance of payment purposes) usually from IMF
Central Bank Transactions
Errors and Omissions
Part III of the BOP
Not part of Balance of Payments, but written with the balance of payments under the
line.
This is Foreign Exchange Reserves

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 If Foreign Exchange Reserves are with a plus sign than they have been earned through
the Current account transactions and are added to the GDP of the country
If the Foreign Exchange Reserves are with a minus sign, than they are left over from the
capital account transactions and are a loan to the country to be paid back at some future
date

Deficit & Surplus

in Current Accounts of Balance of Payments

Deficit in Current Accounts = when the people of the country owe more to the world
than what the world owes the people of that country
Surplus in current Accounts = when the world owes the people of the country more than
what the people of that country owe to the world
Economic Effects of Deficit
Depreciation in local currency against foreign currency
Exports become cheaper
imports become expensive
Domestic production of exports rise
Employment increase if demand for exports rise
Incomes increase
Consumption rises
Deficit in BOP tends to decrease (Automatic mechanism) due to increase in exports and
decrease in imports
Local prices will become high
Foreign direct investments will become cheaper
Foreign Loan becomes expensive

Economic effects of Surplus

Appreciation in local currency against foreign currency
Exports become expensive
imports become cheaper
Domestic production of exports fall Employment decreases if demand for exports falls
Incomes decrease
Consumption decrease
Surplus in BOP tends to decrease (Automatic mechanism) due to increase in imports
and decrease in exports
Local prices will become cheaper
Foreign direct investments will become expensive
Foreign Loan becomes cheaper

Lecture Foreign Exchange markets and Exchange rates

21 Exchange Rate and Balance of Payments
Spot and Forward Exchange Rates; Currency swaps and
Future Options
Foreign Exchange markets and Exchange rates
Exchange Rate and Balance of Payments
Spot and Forward Exchange Rates; Currency swaps and
Future Options
Exchange Rates & Foreign Exchange Markets

87
 Exchange Rates
Exchange Rates are the Price of one Currency reflected in another currency
Currency is the part of M1 circulated by central bank on behalf of its government and
includes
Coins
Bank notes
Securities of the Government

Gold Standard: when the international payments were done in gold bullion (1kg 24 K
pure gold)
Officially abolished in 1944 under Breton Woods
Fixed Exchange Rates: (1944-1980) Fixing the value of the local currency against
foreign currency by an act of the government or parliament
Devaluation: When the value of the local currency against the dollar is decreased
Revaluation: When the value of the local currency against the dollar is increased
Free Exchange Rates (Basket of currencies) = Floating Exchange Rate: (1980- to date)
The Price of one currency is determined in another currency through free market forces
of demand and supply
Depreciation of Currency: Decrease in price of one currency against the other
Appreciation of currency: Increase in Price of one currency against the other

Difference between Fixed & free Exchange Rates

Under Fixed Exchange Rate the value of the local currency is changed; the value of the
foreign currency remains constant. While Under Free exchange Rates the Price of both
the currencies moves in opposite to each other direction, i.e. if one depreciates, the other
appreciates
Fixed exchange rates are an act of government under instructions of IMF, while Free
exchange rates are an act of the Market
Under Fixed exchange Rates there exists a black market while there is no such black
market in free exchange rates

88
Under Fixed Exchange Rates no person, Institution, business or bank is allowed to keep,
buy or sell foreign currency without the permission of the Central Bank, while in Free
exchange rates all are allowed to keep, buy or sell foreign exchange without permission
Why devaluation(depreciation) or Revaluation (Appreciation)
Currency depreciates Simply because of the Current account Deficit in Balance of
Payments: or when the people of a country owe more to the rest of the world than what
the rest of the world owes to the people of that country
Currency Appreciates Simply because of the Current account Surplus in Balance of
Payments: or when the people of a country owe less to the rest of the world than what
the rest of the world owes to the people of that country

Foreign Exchange markets

Foreign Exchange Markets are where currencies of different countries are freely bought
and sold
Why do we need Foreign Currency?
Every Entrepreneur in any country needs their own currency in order to pay for the food
of their house holds, for fees of their children and to pay the wages of their labor
The exporters earn foreign currency but need local currency therefore they sell foreign
exchange
The importers need foreign currency but have local currency therefore they buy foreign
exchange
Usually exporters and importers are not the same people
Buying and selling of foreign exchange creates Foreign Exchange Market
Tiers of Foreign Exchange Market
Foreign Exchange Market is an inverted Pyramid and on the top
Buyers and sellers of Foreign Exchange (Users of Foreign Exchange) Traders,
Diplomats, students, travelers to other country
Arbitrage (Brokers = foreign currency dealers) those who buy foreign exchange from
where it is relevantly cheaper and sell where it is relevantly expensive for a profit. They
help equalize exchange rates at different currency markets
Intra- Bank Market. Buying & Selling of foreign currency between commercial banks
The Creators of Currencies (Central Banks)

Forward (Future) Trading, Spot & Forward Exchange Rates Risk & Hedging
Forward ( Future) contracts are contracts today for a certain amount of currency to be
fulfilled (or not to be fulfilled) at a certain future date in time
Why do banks & Big Business trade in Forward contracts?
Forward contracts made by large firms or banks to buy a certain amount of foreign
currency at some future date in time with an option not to buy the currency
Spot Rates: are Todays foreign exchange rate in the market
Risk: Risk of loosing a large amount on future date when the future exchange rate is
more or less than the spot rate
If future rate is more than the spot rate, than the seller looses and the buyer gains
If the future rate is less than the spot rate, than the buyer looses and the seller gains
Hedging Protection against Risk = Insurance
Future contracts are also about speculative motive of saving
Trading Options
Put Option: Option to buy or not to buy at a certain forward date
Pull Option: Option to sell or not to sell at a certain forward date

89
 European Option to buy a certain amount of foreign currency at a specific date in time
on the European Currency Market
American Option To buy specific amount of foreign currency sold by the American
currency market at a specific date in time

Lecture Foreign Exchange Risk, Hedging and Speculation

22 Interest Arbitrage & the Efficiency of Foreign Exchange markets
Currency markets and offshore Financial Markets
Foreign Exchange Risk, Hedging and Speculation
Interest Arbitrage & the Efficiency of Foreign Exchange markets
Currency markets and offshore Financial Markets
Lecture Exchange rate Determination
23 Purchasing Power Parity Theory
Exchange rate Determination
Purchasing Power Parity Theory
Lecture Monetary approach to Balance of payments & Exchange Rates
24 Portfolio balance Model & Exchange Rates
Monetary approach to Balance of payments & Exchange Rates
Portfolio balance Model & Exchange Rates
Lecture International Monetary System – Past and Present
25 Breton Woods System and its evolution
World Bank & IMF
International Monetary System – Past and Present
Breton Woods System and its evolution
World Bank & IMF
Lecture WTO, Principles, Objectives and Agreements
26 International Economics and Financial System - Present and Future
Principles of WTO and Environment Protection under Globalization
The United Nations Conference on the Human Environment at Stockholm 1972
declared, “Man is both creature and molder of his environment, which gives him physical
sustenance and affords him opportunity for intellectual, moral, social and spiritual growth.
In the long and tortuous evolution of the human race on this planet a stag has been reached
when, through the rapid acceleration of science and technology, man has acquired the
power to transform his environment in countless ways and on an unfrequented scale. Both
aspects of man’s environment, the natural and the man-made are essential to his well
being and to the enjoyment of basic human rights – even the right to life itself”.1
Pakistan is part of this fast changing world in this era of globalization. Today the
economic activity of each nation is governed not only by how much needs of the local
population will be satisfied by the productive capacity of each country, but by the fact
that what are the factor endowments of each nation and how much each country can
produce for the international markets, so that the country can not only increase its
productive capacity by selling into expanded global markets, but also increase
employment as well as income levels through international trade. It is also a fact today
that the increased export capabilities of each nation have to match with the potential to
import those products that are either expensive to produce at home or are not produced,

1
Declaration of the United Nations Conference on the Human Environment, Stockholm Declaration Stockholm,
1972 p 1

90
 because of the scarce resources that produce these products. The Charter of the World
Trade Organization governs international trade and subsequently economic activity in
each country. The preamble of the WTO says that the parties will try to make relations in
the field of trade and economics by conducting the following measures:
 Raising standards of living;
 Ensuring full employment;
 Ensuring a large and steady growing volume of real income and effective demand;
 Expanding the production of and trade in goods and services; and
 Optimal use of world’s resources in accordance with the objectives of
 Sustainable development
 Protect and preserve the environment and enhance the means for doing so; and
The manner to do all these in a way consistent with the respective needs and
concerns, etc.2
In order to meet these objectives, the WTO agreement provides the following
means to achieve its objectives:
To reduce tariff
To reduce non-tariff barriers, and
To eliminate discriminatory treatment and practices in international economic
relations.
Today our industry has not only to produce for the internal market; it has also to
produce for the international market in order to survive in a highly competitive economic
environment. It is interesting to note that where WTO goes for free trade and an
international economic regime without restrictions and governmental control, the WTO
documents and agreement provides for protection of natural resources and the
environment from degradation and calls for sustainable development. The general
exceptions in this regard are among other things, trade and economic activity which
effects “human, animal, plant life and health; natural resource conservation, national
treasures, etc.”3 The benefits of the WTO trading system to the industry in any country
are:
Free Trade helps keep peace in the world;
WTO system allows disputes to be handled constructively;
WTO system is based on rules agreed upon by every member, rather than power
of one nation over other nations, which makes economic and political relations easier for
all;
Free trade cuts the cost of living;
Free trade gives the consumer more choices, and a broader range of qualities to
choose from;
International Trade raises income of the local labor and producers which produce
for foreign markets;
International Trade stimulates economic growth, and that can be good for
enhanced employment activity in each country;
The basic principles of free trade and competition make the system economically
more efficient, and subsequently that cuts costs of production;
The system shields governments from narrow national interests,
WTO system encourages good governance; and

2
Munir, M. A & Nadeem Ahmad Sohail Cheema, From GATT to WTO: A Legal Analysis, Pakistan Company
& Tax Law Reports Journal 2000, p 290
3
WTO Agreement and The GATT based Framework for International Trade, 1994, p 16

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 WTO regime also helps international cooperation for environmental protection
and sustainable development
Motivation for International Capital flows
There are two types of foreign investments in any country: Direct investments (in
real assets and productivity) and international portfolio investments (in stocks, share,
capital and currency markets). The motivation for both types of foreign investments is
basically the same, i.e. to earn higher returns (profits) abroad. According to the theory of
economics (H-O Theorem) returns on capital are originally higher in the nation having
lower overall capital-labor ratio.
Another reason for investing (capital) abroad is that the investors are interested
not only in the rate of returns but also in the risk associated with a particular investment,
i.e. the investors maximize returns for a given level of risk and generally accept a higher
risk only if returns are high. Risk diversification can thus explain a two way international
portfolio investment.
Motives for international direct investments are generally the same as for portfolio
investments; that’s is to earn higher returns possibly resulting from higher growth rates
abroad, or a more favorable tax treatment, or greater availability of infrastructure as well
as to diversify risks.
It has been found that firms with a strong international orientation either through
exports or through foreign production and / or sales facilities are more profitable and have
a much smaller variability in profit than purely domestic firms.
Question can be asked, why residents fo a nation do not borrow from one nation
and themselves make real investments in their own nation rather than accepting direct
investments from abroad?
There are several possible reasons for this. The most important is that many large
corporations (usually in monopolistic and oligopolistic markets) often have some unique
production knowledge or managerial skills that could easily and profitably be utilized
abroad and over which the corporation wants to retain direct control. This involves
horizontal integration, or the production abroad of a differentiated product that also can
be produced at home of the corporation. Example IBM’s or Gillette or Toyota or Xerox
and many other multinational corporation’s direct foreign investments in developing
nations.
Another important reasons for direct foreign investments are to obtain control of
a needed raw material and thus ensure uninterrupted supply at the lowest possible costs.
This is referred to s vertical integration. Example, direct investments of MNC are in
mineral rich developing nations.
Still another important reasons for direct foreign investments are to avoid tariffs
and other restrictions that nations impose or to take advantage of various governmental
subsidies to encourage direct foreign investments. Example large-scale direct investments
of multinationals in developing nations
Direct foreign investment can also be explained by some industries being more
advanced in one nation (computer industry in USA) and other industries as more efficient
in other nations (car industry in Japan).
Also to be noted is the facts that direct foreign investment has been greatly
facilitated and therefore made possible by the very rapid advances in transportation, like
jet travel, and communications like cell phones and internet facilities or so called
information technologies.
Effects of International capital flows
From the point of view of the world as a whole, total production increases, because
theoretically speaking (H-O Theorem and Marshalian Cross of Supply and Demand)

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international capital flow increases the efficiency in the allocation of resources
internationally and increases world output and welfare.
Effects in the investing and Host country
Assuming capital and labor fully employed before and after capital transfers, the
total and average return to capital increases, where as average returns to labor decreases
in the investing country. Thus while the investing country gains from investments abroad,
there is a redistribution of domestic income from labor to capital. It is for this reason that
labor unions in the USA are opposed to US investments abroad. Theoretically speaking
the host country also gains from receiving foreign investments, because they lad to a
redistribution of domestic income from capital towards labor. If we allow for less than
full employment, then foreign investments tends to depress the level of employment in
the investing country and increase it in the host country.
International capital transfers also affect the balance of payments of the investing
and host countries. In the years that investments are received, they lead to worsening in
the investor’s nations BOP’s and an improvement in the BOP’s in the host nation. In other
words in the years foreign investment takes place the investor country’s BOP goes in a
deficit while the host country’s BOP’s deficit is reduced. However the initial capital
transfers and increased expenditures abroad of the investing country are likely to be
mitigated by increased exports of capital goods, spare parts, and other products of the
investing country. But while the immediate effect on the BOP’s of investing country are
negative and on the host country positive, the long run effects of foreign investments are
positive for the investing country and not necessarily positive for the host country.
Another important welfare effect on both the investing and host nations results
from different rates of taxation and foreign earnings in various countries. Foreign
companies theoretically pay (through their subsidiaries) taxes in countries where the arte
is lower than in countries where they are higher, therefore tax base and revenues should
rise in host nations while they should decline in investor nations.
Foreign investments by effecting output and the volume of trade of both investing
an host nations are also likely to affect the terms of trade. However these changes will
depend upon conditions in both nations. Foreign investments may also effect the investing
nations technological lead and the host country’s control over its economy and ability to
conduct its own independent economic policy.
Time has come to implement international quality standards as laid down both by
ISO 14000 and the Pakistan Government for cleaner products which can sustain
development as well as protect our physical and social environment for this and the future
generation.
Harmful effects of MNC’s
In home nation
The most controversial and harmful effects of MNC’s on the home nation is the
loss of domestic jobs resulting from foreign investments
Related problem is the export of advanced technology to be combined with other
cheaper foreign factors to minimize corporate costs and maximize corporate profits.
Harmful effect is to concentrate R&D in home nation and thus allows it to
maintain technological lead
Through transfer pricing and shifting their operations in low-tax nations the
MNC’s reduce tax revenue to home country.
MNC’s can circumvent domestic monetary policies and therefore make
government control over the economy more difficult both in home and host nation.
In host nation
MNC’s dominate the economies of less developed countries through

93
 The unwillingness of a local affiliate of an MNC to export to a nation deemed
unfriendly to the home nation or the requirement to comply with a home nation law
prohibiting exports
The borrowing of funds abroad to circumvent tight domestic credit conditions nd
the lending of funds abroad when interest rates are low at home
The effect on national tastes of large-scale advertising for products as Coco Cola,
jeans etc
The siphoning off R&D funds to home nation from host nation
Keeping the country technologically dependent
MNC’s also absorb local savings and entrepreneurial talents, thus preventing them
from being used to establish domestic enterprises
MNC’s also extract from host nations most of the benefits that occur from their
investments, either through tax and tariff benefits or through tax avoidance.
Foreign direct investments in minerals and raw materials production have often
given rise to complains of foreign exploitation in the form of low prices paid to the host
nation
Also MNC’s use high capital-intensive production techniques, inappropriate for
labor-abandoned developing nations, which lack trained local labor
MNC’s over-exploit natural resources and
MNC’s create highly dualistic ‘enclave’ economies in LDC’s
Joseph Stiglitz in his book underlines the following points:
Globalization and the introduction of a market economy have not produced the
promised results.
Not only in trade liberalization but also in every other aspect of globalization even
seemingly well-intentioned efforts have often backfired.
The policies that have been imposed on developing countries in the process of
globalization need to be radically rethought.
Unfortunately we have no world government, accountable to the people of every
country, to oversee the globalization process in a fashion comparable to the way national
governments guided the nationalization process.
We have a system that might be called global governance without global
government, in which many of those affected by their decisions are left almost voiceless.
The IMF has made mistakes in all the areas it has been involved in.
There are alternatives to IMF-style programs, other programs that may involve a
reasonable level of sacrifices, which are not based on market fundamentalism, programs
that have had positive outcomes.
Time has come to ‘grade’ the international economic institution’s performance
and to look at some of those programs.
Privatization needs to be part of a more comprehensive program, which entails
creating jobs in tandem with the inevitable job destruction that privatization often entails.
That without the appropriate legal structures and market institutions, the new
owners might have an incentive to strip assets, rather than use them as a basis for
expanding.
American government is pushing nations to live up to agreements that were vastly
unfair to the developing countries, and often signed by corrupt governments in these
countries.
Eliminate government intervention, reduce taxes, get inflation as low as possible,
and invite foreign entrepreneurs.
The ‘adjustment policies’ in country after country forced cutbacks in education
and health.

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 When government policies abrogate that social contract, citizens may not honor
their ‘contracts’ with each other, or with their governments.
Understanding the choices require understanding the cause and nature of poverty.
The task of the international economic institutions to provide the countries the
wherewithal to make these informed choices on their own, with an understanding of the
consequences and risk of each. The essence of freedom is the right to make a choice –
and to accept the responsibility that comes with it.
The political, social, and historical context of each country differs. One attribute
of the success cases is that policies of change are ‘homegrown’, designed by the people
within each country, sensitive to the needs and concerns of their countries.
Abandoning globalization is neither feasible nor desirable.
Globalization can be reshaped to realize its potential for good and the international
economic institutions can be reshaped in ways that will help ensure that this is
accomplished.
Weak governments and too-intrusive governments have both hurt stability and
growth.
International public institutions, which would mean that the international
institutions should, of course, focus on issues where global collective action is desirable,
or even necessary.
Stiglitz advocates a globalization with a more human face. Caring about the
environment, making sure the poor have a say in decisions that affect them, promoting
democracy and fair trade are necessary if the potential benefits of globalization are to be
achieved.

Lecture Price Adjustment Mechanism with Flexible and Fixed exchange Rates
27
Price Adjustment Mechanism with Flexible and Fixed exchange Rates
Lecture Income Adjustment Mechanism & Synthetics of Automatic Adjustment
28
Income Adjustment Mechanism & Synthetics of Automatic Adjustment
Lecture Open Economy Macroeconomic Adjustment Policies
29
Open Economy Macroeconomic Adjustment Policies
Lecture IS_LM BP Model with Flexible exchange Rates
30 Policy Mix in the Real World
IS_LM BP Model with Flexible exchange Rates
Policy Mix in the Real World
Lecture Economic Relations (Trade & Finance) of Pakistan
31 Trade (Export & Import) Balance and Balance of Payments of Pakistan
Direction of Trade and Classification of Trade of Pakistan
Economic Relations (Trade & Finance) of Pakistan
Trade (Export & Import) Balance and Balance of Payments of Pakistan
Pakistan External Trade & Balance
• the exports of Pakistan in 2012-2013 were US$ 24.8 billion (Rs. 2480.0 billion)
while the imports were US$ 40.2 billion (Rs. 4020.0 billion) , therefore the trade
deficit of the country was US$ (-) 5.4 billion and the Current account deficit was
US$ (-) 2.5 billion (Rs. 2500 billion).
• In 2013-2014 exports of the country increased to US$ 25.1 billion (Rs. 2510.0
billion) while Imports increased to US$ 41.7 billion (Rs. 4170.0 billion thus

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 increasing the trade deficit to US$ (-) 16.6 billion (Rs. 1660.0 billion) and the
Current accounts Deficit to US$ (-) 3.1 billion (Rs. 310.0 billion).
• In 2014-2015 exports of Pakistan and imports decreased to US$ 24.0 billion (Rs.
240.0 billion) and imports decreased to 41.3 billon (Rs. 4130.0 billion) thus
increasing the trade deficit to US$ (-) 17.2 billion (Rs. 1720.0 billion). Balance
of Payments Current Account Deficit decreased to US$ (-) 2.6 billion (Rs. 260.0
billion)

Direction of Trade and Classification of Trade of Pakistan

Lecture Pakistan Economic Relations with
32  EU
 India; Bangladesh and (SARC)
 OPEC
 China (CPEC) and Shanghai Economic Agreement
 Other Economic Blocks (EU; USA; ASIAN and G-20)
Pakistan Economic Relations with
European Union
Pakistan EU Trade, GSP Plus and Pakistan
Dr. Qais Aslam
What is GSP (plus) +
GSP+ is a concession given by the European Union (EU) to Pakistan.
The EU helps developing countries by giving them trade preference in the form of
reduce tariff for their goods when entering the EU market. These preferences are called
Generalized Scheme of Preference(GSP) Plus

Pakistan was given GSP+ status in 2012. This status is awarded for a period of 10
years.
The status will be reviewed after every three years.

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 GSP- different regimes
Reformed GSP ( GSP +)
Context
 focus on countries in need
 promote core principles
 stability and predictability
 selected beneficiaries
Criterion
 economic vulnerability
 27 international conventions rectified and enforced
 ten year time frame
 Only 13 countries beneficiaries
Thematic Focus of 27 EU Treaties that Pakistan MUST comply with to keep its GSP +
Status for 10 Years

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 Required Human Rights Conventions for GSP+ Status

What are the benefits of the GSP+

GSP + will result in Duty Free access for Pakistan in EU for 91% of its total imports.
The overarching goal of this preferential access to the EU market is to assist developing
countries in their efforts to reduce poverty and promote good governance and sustainable
development.

Pakistan & GSP Plus

 Granted The Status In January 2014
 Economic Benefits-euros 1-2 Billions Per Annum

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  20% per year Increase In Exports To EU
 Textile Sector Is Big Beneficiary
Opportunity To Expand Export Base

Sectoral Coverage under GSP Plus:

The GSP+ provides tariff concessions in 6200 plus tariff lines. These products fall in the
following sectors:
 Agricultural Products
 Mineral Products
 Chemical and related Products
 Non - Consumable Animal and Plant Products
 Textiles and Apparel
 Non - Metallic Mineral Products
 Metals and manufactured articles made mostly of metal
 Other Highly Manufactured and Special - Purpose Goods
Benefits of GSP + Status
Massive opportunities to provide employment due to increase in exports.
Massive possibilities to earn foreign investment by inviting entrepreneurs from China and
other countries to invest in industries with potential for rapid export expansion through
GSP +.
Due to this GSP + status now Pakistani products have a comparative advantage compared
to India, China and Thailand because Pakistani exporters do not have to pay 14 % duty to
sell their products in the EU markets.
According to the Economic Survey of Pakistan 2014-2015
In 2014-2015,”
 The Pakistan “GDP growth accelerated to 4.24 %
 “The Agriculture sector grew at the rate of 2.9 % The Industrial sector expanded
by 3.6 %
 while Large Scale Manufacturing posted a growth of 2.4 %
 The Services sector grew at 5.0 %
 The Per Capita Income in 2013-2014 was US $1,512.0 or Rs. 1,51,200 per
annum, which is Rs. 12,600 per month or Rs. 420.0 per day
 Source: Ministry of Finance, Government of Pakistan, 2014-2015
 Service sector grew by 5.0% in 2015-2016.
 Services sector contributes 58.8% to the GDP of Pakistan
 The share of services sector to GDP of Pakistan has been steadily increasing at
the cost of Industrial and especially agricultural sectors of the country – the latter
two collectively contribute almost 41% of the GDP while services sector
contributes near 59%.
 According to the Economic Survey of Pakistan, all components of services
contributed positively in growth as
 Wholesale and Retail Trade grew at 3.38%;
 Transport, Storage and Communication at 4.21%;
 Finance and Insurance at 6.18 %;
 Housing Services at 4.0 %;
 General Government Services at 9.44 % and
 Other Private Services at 5.94 %.”

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 Industrial growth rate of Pakistan in 2012=2013 was 0.6%, which increased to
4.5% in 2013-2014, and then decreased to 3.6% in 2014-2015 and is 6.85% in
2015-2016.
 Contribution of Industrial Sector to GDP growth of Pakistan is almost constant
at 20.3% in 2012-2013 and 2014-2015 while slightly increased to 20.4% in
2013-2015.
 In 2014-2015 many of the Industries in the manufacturing sector like Textiles
and Wood industry showed negative growth
 while others like Pharmaceuticals, Food processing, Cement, non-metallic
mineral industry and Automobiles industry etc. showed positive growth.

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The contribution of Pakistan’s Agriculture to its GDP in 2012-2013 was 21.4%, in
2013-2014 it declined to 21.1% and was 21.0% in 2014-2015 and further declined to
20.88% in 2015-2016. The growth rate of agricultural sector of Pakistan in 2012-2013
was 2.7%,
it remained at 2.7% in 2013-2014 and slightly increased to 2.9% in 2014-2015,
while in 2015-2016 it shows a drastic decrease of -0.2%.
Pakistan’s Trade Statistics in Billion Rs.
(July - March 2014-2016)
Source: Pakistan Bureau of Statistics, http://www.pbs.gov.pk/agri-stat-publications
Total Pakistan's Export 2014-2016 in Billion Rs.
Source: Pakistan Bureau of Statistics, http://www.pbs.gov.pk/agri-stat-publications
Pakistan’s Exports to Country’s of Europe (EU)
Source: Pakistan Bureau of Statistics, http://www.pbs.gov.pk/agri-stat-publications
Pakistan’s Exports to EU as Percentage of Total Pakistan’s Exports
Source: Pakistan Bureau of Statistics, http://www.pbs.gov.pk/agri-stat-publications

101
102
 Pakistan’s Compliance to 27 HR & Environmental Treaties in 2015-2016
According to Democracy Reporting International (GSP + In Pakistan): Human Rights
Treaties: Status of Compliance
All of the international conventions relevant to GSP+ have already been ratified by
Pakistan;
However, Pakistan has stipulated certain reservations to the conventions, particularly in
regards to human rights.
Pakistan also lags behind in complying both with the content of the conventions and the
associated reporting 22 requirements of the UN treaty bodies
The Government of Pakistan in April 2016 announced that 60 million Pakistanis are living
below the poverty line, Or 1/3rd of the population is poor

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Corruption in Pakistan in 2016 is $ 133 million daily or Rs. 13.3 billion daily = Rs. 4.8
trillion yearly which is near 50% of the GDP of Pakistan
Challenges
In order to ensure consistent exports to the EU Pakistan must overcome many challenges
some of which are:
Quality control and consistency in product standards (Quality & Environmental )
Continue innovation in textiles, clothing and leather sectors
Lack of European customer’s confidence due to poor security environment and lack of
trust in Pakistan’s Brand name
Internal Challenges for Pakistani businesses to meet EU standards:
 Corruption & bad Governance
 Institutional Fragility
 Lack of Transparency & Accountability
 High cost of production
 Lower productivity of labor
 Volatile prices of raw materials in the textiles and plastics sectors
 Lack of training of employees to know and achieve EU standards
 High cost of product certification
 Lack of Compliance of 27 Treaties
Problems of Pakistan’s Economy are:
 Low transparency indicators and good governance
 Large transaction costs because of inefficiency of institutions and administrative
bottlenecks
 Law and Order Situation and Terrorism
 Bad profile of Pakistan in the world
 Lack of skills and education
 Bad work habits
 Low implementation of standards
 Lack of Energy resources
 Lack of infrastructure
 Low participation of women in economic activity
 High cost of doing business due to high utility costs
 Mismanagement of resources
 Small Markets,
 increase in marginal labor cost because of low skills
 Cultural and traditional restraints – traditional socio-economic setup
 Low institutional role in Markets
Pakistan Population by Age Groups; (Millions Nos.)

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105
 Vision of Growth should be
A Shift in production paradigm to technology and knowledge based industrialization
which focuses on the quantitative and qualitative growth of an integrated industry in the
private sector
Knowledge and technology incentives in
 Engineering
 Electronics
 Pharmaceuticals
 Chemicals
 Non-metallic mineral production
 Textiles
 Food processing
 Should be strengthened with international partners
What is Needed for 2015-2020
A Comprehensive Energy Policy
 To Produce Uninterrupted Power from Locally and International Sources
 To produce Cheap Electricity
 To produce clean and environmentally friendly electricity
 To cater for the energy needs of future economic growth of the Country
 To export Electricity
 A Comprehensive Industrial policy showing
 An Agricultural policy that can Ensure
 Increase cash Crop Sufficiency &
 increase food Self -sufficiency
 To enhance more efficient usage of Land; Labor; and capital inputs on agricultural
farms
 Productivity & Growth oriented land Reforms and Water management
In Conclusion
GSP Plus is a boon for Pakistani Investors and business
This boon has come at cost of EU businesses and employment

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Pakistani business should look at the demand side and find out new value added products
that can be exported to EU with existing resources and factor endowment
Pakistani Investors should enhance the capacity of its existing export oriented industry,
get ISO certification and export
Pakistani import substitute industry and SME’s should also re-orientate and restructure
for better availing of this opportunity
Government of Pakistan, Pakistan’s Industry and our civil society should ensure
compliance of the 27 EU conventions that Pakistan is a signatory off to avail GSP Plus
opportunities for a longer time
In 2016 there is a review and in August 2105 we have as yet to understand the restraints
and opportunities involved and to get our house in order.
India;
Pakistan and India comparative Advantages in Trade with specific
reference to Economic Cooperation
Prof. Dr. Qais Aslam
In these 70 years both Pakistan and India have come a great distance from
breaking their fetters of colonial rule and embarking on the path of independence, building
up institutions, trying to achieve economic viability and catering for the needs of their
people in different ways. Both these nations have achieved a lot of economic and social
progress, (According to World bank Report 2007, the average GDP growth rate of South
Asia in 2005-2007 was 6.4% (The World Bank,, 2007) but both these nations have also
lagged behind the world economic and social indicators because one of the priorities of
governments and policy makers in both these nations was to keep the revelries between
the people of the two nations alive, resulting in armed conflicts, cold war, and colossal
military expenditures from both sides that did not bring the much needed economic and
social prosperity to a larger portion of the population of Pakistan and India.
Indicators show that after sub-Sahara Africa, South Asia remains the most
illiterate, the most poor and the most disintegrated region in the World.
During 2005 relative per capita incomes of India was $720 and of Pakistan was
$690 (The World Bank,, 2007); Pakistan and India in 2008 are far from meeting the
millennium development goals set by UNO for Eradicating Extreme Poverty and Hunger;
to Achieve Universal Primary Education; to Promote Gender Equality & Empower
Women; to Reduce Child Mortality; Improve Maternal Health; to Combat HIV/AIDS,
Malaria, and Other Diseases; to Ensure Environmental Sustainability; and to Develop A
Global Partnership for Development. For example in 2005 in south Asia, a) the percent
age of population living below US$ a day was 31.7 per cent – only above sub-Sahara
Africa; b) (Report, 2007).
This political and ideological revelry between the two neighborly states, has
placed a heavy burden on the economies and peoples of the two neighboring provinces of
Pakistan and India, namely the Pakistani Punjab and the Indian Punjab – areas and people
who for millenniums share the same culture, the same history, the same language, the
same traditions, and the same socio-economic problems.
Pakistan and India are both members of WTO and SAARC and have signed
SAFTA and are both aligned together in the LMG of countries who have the same
objectives and aims at Doha round of talks. Trade Agreement (SAFTA) in many ways
has the potential of integrating the economies of the countries of the region and providing
new opportunities for trade and economic cooperation and integration. Regional
integration would provide opportunities in making progress in areas that otherwise would
not have taken place in the absence of regional cooperation

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 The wind of change has brought new initiatives and new incentives for
governments and policy makers in both nations to solve their differences and to embark
upon a new road for establishment of a better future for the people of both these nations.
These new policy measures are in fact backed by a new generation of Pakistanis and
Indians, - their youth - who were born and bred in the fresh air of their respective
independences and look at each other not as adversaries, but as partners in starting fresh
initiatives for a peaceful region, a peaceful world for a prosperous region and a prosperous
world. A world where these young people can play with opportunities of cooperation,
opportunities of trade, opportunities of cultural exchanges and opportunities of exploring
new vistas of innovations and production, that should help the people of these countries
and region to live a better, prosperous and peaceful life, without fear of fire raining on
their workplaces, homes, families and children, without fear of hatred and mistrust,
without fear of bloodshed, rape and plunder.
This fear is real in the hearts and minds of the people living in the two sides of the
Punjab, with their governments on both sides being equipped with the latest of weaponry,
strongest of armies in the region as well as both being members of the elite nuclear club
and the people of the Punjab on both sides neighboring each other sharing a common
border of these two states.
The military and nuclear capability of self-destruction of the two south Asian
Giants is a reality. The poverty levels of the people of these two countries are also a
reality. But what is more reality of the high economic growth rates in peaceful times in
both these nations.
Whereas in ASEAN exports within members have been at around 23% of their
total exports, SAARC as a region has not been able to increase its share in the world
export market. Pakistan & India accounts for 90% of South Asia GDP. The regional trade
of South Asia remains dismally low at 4% as compared to the regional trade. For example,
the regional trade of APEC accounts for- 73% of the world trade; the regional trade Of
EU accounts for - 61% of the world trade; the regional trade Of NAFTA accounts for
57% of the world trade; the regional trade Of ASEAN accounts for 23% of the world
trade; the regional trade Of COMESA accounts for 22% of the world trade; the regional
trade Of GCC accounts for 8% of the world trade; the and regional trade Of ECO accounts
for 6% of the world trade, while SAARC as a block shows the least figure as a trading
block in the world trade - only 4% (The World Bank,, 2007). Regional trade between the
seven SAARC countries in 2002 was $ 5 billion out of which the share of India was 76%
($3.8 billion) and Pakistan’s share was 8% ($ 0.4 billion).
Annual trade between India and Pakistan, which make up more than four-fifths of
the $1.2 trillion South Asian economy, is currently at about $1 billion. With trade
liberalization, it can be as much as $9 billion, according to the Washington-based
institution (Thomas, Aug. 4, 2007). Table 1. Shows the Volume of Trade between India
and Pakistan between 1967/8 and 2007/8
Table 1. Volume of Trade between India and Pakistan between 1967/8 and 2007/8
Year Volume of Trade
1967-1968 $ 3.6 million
1977-1978 $ 818 million
1987-1988 $ 824 million
1997-1998 $ 1.0 bill
2002-2003 $ 1.4 billon
2007-2008 $ 2.0 billion
Source: Economic Survey of Pakistan 2007-2008

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 The table shows that in 1967-1968 the volume of bilateral trade between Pakistan
and India was only US $ 3.6 million, and in 1977-1978 this volume increased to US $ 818
million and remained relatively constant in the next ten years with a slight increase of
only US$ 6 million. In 1997-1998 the volume of this trade between these two South Asian
Giants rose to US $ 1 billion and till recently remained constant near the one billion US
dollar mark with slight increase of only 4 million US dollars in 2002-2003. But in the last
few years as trust and people’s to people’s contacts have increased and cold relations
thawed, the volume of trade between India and Pakistan has increased US 4 2 billion mark
with tendencies of rising as bilateral political problems between the two nations are
resolved and as understanding that both nations gain and their people become more well
off when trade becomes important between these two nations and between SAARC as a
regional block.
Some Results from researches about Pak-India Trade (literature Review)
• Kavita Sangani and Teresita Schaffer in South Asia Monitor, published by the
Center for Strategic and International Studies (CSIS), a private, tax-exempt
institution focusing on international public policy issue ,in its paper ‘India-
Pakistan Trade: Creating Constituencies for Peace’ highlights Who stands to
gain? in case of Pak –India trade. According to this study one estimate of the
impact of complete free trade within the South Asian region puts the total at $14
billion. In the short term, a more realistic benchmark is the $1 to $2 billion that
now moves through other channels. India-Pakistan trade will be doing well if it
can exceed these levels. Legalizing trade that now moves through third markets
would cut transport costs and transit time for goods, resulting in lower prices for
the consumers. Bringing smuggling into official channels would provide a much
needed revenue stream to both governments (Schaffer).
• ‘Impact of India Pakistan trade on Engineering Sector’ (1998) by Aunjum
Nasim and Jawaid A.Ghani of LUMS(Lahore University of Management
Sciences) reaches to the conclusion that in auto parts opening of trade with India
will be mutually beneficial due to the existence of multiple niches in which a
variety of vendors can specialize. In the area of consumer durables, Pakistani
goods hold a competitive advantage in the quality conscious segment. However
this advantage may soon erode with the recent greater liberalization of the Indian
economy (A.Ghani, 1998)
• ‘Who gains from trade between India and Pakistan?’by Amir Ullah Khan in
India Development foundation (March 2004) it has been discussed that the trade
taking place between the various trading blocs like ASEAN, MERCOSUR and
NAFTA is much more that what the countries of south Asia do and this flow has
dramatically increased in the last decade with the liberalization of trade being
accomplished in the other trade blocs. In recent years, there has been increased
consensus regarding the significant trade potential that exists between the two
countries. India’s unofficial and smuggled exports to Pakistan are estimated at
US$1 billion, while the official figures are a mere US$ 94 million. Though
officially only 600 items (now revised) upwards to about a 1000) are under the
list of imports to Pakistan, a much larger number find their way into Pakistan,
from India to Bandar-e-Abbas in Iran, to Kabul and later to Rationalizing India-
Pakistan Trade Peshawar. The selling price of these goods in Pakistan’s markets
is that much more inflated due to this circuitous trading route. Pakistan imports
iron ore at a higher cost from Brazil and Australia. Cars and scooters produced in
Pakistan are priced 50 per cent higher than Indian vehicles. Pakistan is the second-
largest consumer of tea in the world, a market that can be exploited by India.

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 Indian drugs are 30 per cent cheaper. At present there is very little trade between
India and Pakistan. India’s exports to Pakistan are just 0.2% of its total exports
and that of Pakistan to India are 0.4% of their total world exports. The huge trade
potential exists between the both countries. Pakistan has a large market of tea,
tires, steel, diesel, live stock and many other things, where as India is a surplus
producer of these goods. Pakistan has also surplus production in many areas,
which can be exported to India. Pakistan has excess installed capacity of 3000
MW of power; where as only Punjab in India is having a shortage of 2500 MW.
The excess power in Pakistan can easily be wired in India. Similarly Pakistan has
huge reserves of natural gas, marbles, precious stones, lime stone as industrial
inputs and leather products, molasses, cotton yarn, surgical equipment and sports
goods as finished products, which can find a ready market in India. To facilitate
trade, tariff and non-tariff barriers in both the countries should be removed. It is a
fact established by the World Bank that when two countries trade, it is the smaller
one which gains. Therefore there is a complete win-win situation, which should
be exploited by both the countries (Khan, March 2004).
The basis of that cooperation is economic and cultural cooperation.
Let us then think of ways that under this new era of peaceful initiatives and
economic growth, as well as the quest of the people of both the countries, especially in
the Punjab for a real pace and cooperation of how the people of the two countries and the
two Punjab in particular can make peace and prosperity a reality.
Officials said the new truck crossing between the two countries in the Punjab from
October 2007, would lead to more trade between the South Asian rivals and mark a major
turning point in their fitful peace process. Officials expect roughly 150 trucks to cross the
border in each direction every month. The first truck, on Monday of October 2007,
carrying tomatoes, crossed from India into Pakistan at the Wagah border crossing (Daily
Dawn)
Main Categories of the Light Engineering Sector in Pakistan
1. Metal Products
• Table, kitchen and other cutlery, knives, Hand tools, files, hammers saws, garden
tools, surgical, medical, and dental instruments, sanitary fittings, Aluminium
utensils, copper and brass utensils, Steel utensils, Bolts, screws, and nuts, Light
steel fabricated structures, ducts, metal doors, windows and grills, steel furniture,
stampings and simple pressings, Non-electric household appliances (gas heaters
and cookers) Steel fencing wire, barbed wire, ropes, nails, metal trunks,
agricultural implements, plumbing and sanitary fittings, drums, small containers,
tin plate cans, steel cans, non-ferrous cans and containers, metal boxes Locks,
padlocks, general hardware, Bicycle and Bicycle parts, jogging machines etc.
Motor vehicle and motor cycle parts
2. Electrical Equipment
• Ceilings, wall extraction, circo, pedestal , and table fans, Switchgear and circuit
breakers, construction of switchboards and control equipment for transmission
and distribution of electrical energy, Distribution oil filled transformers, diesel
power generator sets and large and small electric motors, Domestic refrigerators
and deep freezers, air-conditioners and washing machines, TV & Radio, Wire &
cables industry PVC insulated, enamelled and power transmission types, electrical
bulbs and tubes, dry and wet cell batteries, electrical accessories such as plastic
sockets, plugs, miniature circuit breakers and electric meters, Tube lights & bulbs.
3. Mechanical Equipment

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 • Diesel engines (Non-Stationery), Metal and woodworking machinery, Textile
machinery Industrial Machinery (excluding agricultural, metal and textile
machinery), Sewing machines as well as agricultural machinery, pumps,
compressors, service industry machines, etc, but exclude farm tractors.
4. Base Metal
• Mild steel ingots and billets , Mild steel bars, rods, light and medium sections, and
transmission towers, Iron, steel and non-ferrous castings, Steel tubes and pipes,
Steel forgings & casting,
5. Electronics
• Radios and TV sets, tape recorders, equipment, VCRs, dictation machines,
Telephone and telephone carrier system, defence communications equipment,
6. Non Metals
• Bottles, jars etc., Sheet glass, Tableware, Pharmaceutical containers, Fluorescent
Tubes, etc., Ceramic insulators, Tableware, wall tiles, sanitary ware, etc.)
7. Other Products:
• Rubber and rubber products, Plastic products
Pakistan can export its products of the Engineering Goods Sector to India like,
Surgical Goods/Medical Instruments; Cutlery; Electric Fans; Transport Equipment,
Electric Machinery; Machinery specialized for particular industries; Auto Parts; Other
Machinery (Ministry of Commerce, 2007)
Some of the points that should be taken into account in promoting cooperation
between India and Pakistan and particularly between the two Punjab are:
• Industry in both countries should not be afraid of their compotators. Competition
increases efficiency and reduces costs as well as increases the demand of the
products by lowering the prices in each country, therefore enhancing overall
welfare and profits of the firms.
• When trade opens, Lahore & Amritsar would become a hub of trade activity
• Pakistan can become a transit route between India and Central Asia and gain from
transit trade. India would gain markets in ACRS and Middle East
• transport costs would come down with increase in trade between two countries
• the time to trade would shorten
• turnover would increase
• We assure you that there would not be any security or insurance problems in
Pakistan
• fruits of trade are imminent under SAFTA to all countries
• Best CBMs would be trucks going between the two countries
• Tourism like religious, cultural etc. would be promoted
• Movement of people should be free, therefore liberalize of visa regime
• let us look into the future and not the past
• The industrialized world takes 85% of the world trade in intra-industrialized goods
and differentiated goods. Why India and Pakistan cannot do it
• Look beyond comparative advantage and talk about mutual advantage
• Common R&D and indigenous research between the two countries should be
financed by the respective industries and done through the academia
• Let’s look into the consumer surplus, because the consumer is only interested in
low prices and better quality goods, which come through competition
• Outsourcing of parts and production activity to both the countries in the SMEs
sector is possible, which should resorted to under free trade

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 • Real issue is political, which can be determined through people to people contacts.
While pattern of industry would change on both sides under WTO and free
competition
• Tourism should be more specialized in art, poetry, culture and should be packaged
as a whole and sold. Cultural activities, love affection and peace is a pre-condition
to trade
• To promote tourism, art and culture, joint boards of both the countries should be
setup to do things together. These boards should not be represented by the
autocrats, but by independent thinkers and representatives of stake holders
• Joint exhibitions should be held in India and Pakistan
• warehousing facilities should be upgraded and infrastructure should be provided
to facilitate trade
• Since transport is a must for trade, therefore all kinds of transport should be
allowed and facilitated
• R&D facilities in the field of industry must be encouraged through industry-
academia linkages in both countries
• Students should be admitted to the Elite Institutes like GCU, Lahore from India
and such Institutes in Amritsar and Chandigarh from Pakistan to learn newer ideas
from each other (SAFMA, 2007 )
Conclusion
Regional and bilateral trading arrangements are becoming important policy
instruments in the emerging economic paradigm of the world. This comparative analysis
shows that the light engineering sector of Pakistan can flourish if India takes necessary
steps by removing various tariffs and non tariff barriers which are still in place, despite
India’s provision of MFN status to Pakistan. The argument of the Intra industry trade
carries great weight. It calls for the attention of the policy makers because it is in this
arena, that the most of the policy issues are involved. This will not only help remove
distortions but will create a level playing field for the business community of the two
counties engaged in fans and bicycle industries. The resolve of the regional leadership to
go for the establishment of the SAPTA followed by SAFTA is a step in the right direction.
What is required at this critical juncture, a more concerted campaign to create awareness
among the producers to equip themselves with the relevant techniques and tools for
competing in the changing world by introducing relevant changes in their respective
industrial structures? This will not only ensure benefits to them but to the people of the
region at large. It is suggested that the policy makers need to gear up the domestic
industries to deal with the new situation as the regional economic integration changes the
dynamics of the regional and bilateral trade with the establishment of regional trading
blocs. . The focus of the solution should change from protection and patronage to
production and productivity. The findings of the partial equilibrium approach, policy
issues identified in the analysis, and problems of the industry should be addressed as
quickly as possible. . This will help improve the consumer welfare, enhance efficiency
and productivity of the domestic industry in terms of production and finally creating an
enabling environment for the free trade. . The sooner the policy makers address these
issues, the greater the gains in the free trade and the higher will be the net welfare.
The Cultural and Social Dimensions of Bilateral Trade between India and
Pakistan
By culture we means civilisation. By culture we also mean all modes and results
of human activity over the ages in a particular society: the values that we create over a
long period of time. These cultural values are both material and intellectual in their form
and nature.

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 The difference in material and intellectual forms of culture comes only because of
the use of cultural activity - the satisfying of the material or intellectual needs of the
people. While the creation of both the material as well as intellectual culture requires
intellectual activity. Intellectual culture comprises the results of the people's intellectual
activity in all spheres of social relations, morals, law, natural sciences and fine arts.
Intellectual culture signifies the actual levels of intellectual, aesthetic, social, and
moral development of a certain race, ethnic group, country or the entire humanity as a
whole on a certain date or time in its history.
Culture therefore presupposes the acquisition of knowledge and experience in one
or another sphere of activity, the assimilation and adoption of a certain system of values,
the evolution of certain norms of behaviour.
Every individual from their early life is formed in a certain cultural environment
comprising the objects, ideas, values and patterns of behaviour created by people in that
certain environment or society. The very upbringing and education of every individual in
a society actually consists in assimilation of the knowledge, skills and standards of
behaviour in that society.
People are not only consumers of the cultural behaviours of the society that they
live in, they actually are the creators of the existing and future cultural behaviours of that
society. Therefore every individual not only grows up adopting the culture of his or her's
ancestors and the norms of the society that he or she lives in but also in return actively
participates in preserving the same culture, adding to its wealth, and at the same time
helps create new forms of material and intellectual cultural activity.
The same is true for the society as a whole, and expanding the argument, to the
entire human race towards the culture of the world which comprises of the contradicting
and assimilating process of all the past and present, material and intellectual cultural
activity of all the ethnic groups, races, and countries on the Globe.
Second half of the Twentieth century and the beguiling of the Twenty-first century
have been the period of advancement of human knowledge to the outer brink of the
universe itself. An era where all spheres of human knowledge and physical endurance
have been tested and tested again. An era of change in thought, productivity, war and
peace.
These processes, changes and influx of knowledge have influenced lives of
individuals and states alike as no other era known to humans before. Implications of
changes in scientific knowledge and philosophical thought during this century have
influenced and threatened the very fabrics of life and its purpose of existence itself.
At the end of the twentieth century and the beginning of the new millennium, old
ideas, morals, cultural values, and social consciousness clash with a vengeance with the
rapid influx of newer models of living and other more flexible social norms. These
cultural norms of the future are supported by scientific discoveries in social and natural
sciences, newer technologies that were never even known to humans some fifty years ago,
and a bigger international economic and information co-operation between the countries
and nations of the Globe.
The beginning of the 21st Century has become the century of Scientific and
Technological Revolution. Knowledge today is not mechanical, but dialectical and
scientific. With the World wide Web, satellite Communication Systems, the laptop
computer, Mobile phones, fiber optics, mapping of the human genome and inventing new
materials in space, coupled with newer and environmentally friendly energy sources,
better, stronger and lighter materials, advancement in all types of scientific fields around
the globe, humans have risen themselves from the stature of producers to the stature of
creators. Things that looked like science fiction are scientifically possible.

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 As Alvin Toffler puts it, World around us is changing in countless ways and only
blind people are resisting that change.
All this is due to the fact that human have grasped the rains of nature. On the
consumption side the transformation from tying one’s shoes with a string to fixing them
with Velcro strips; from buttons in clothes to zippers etc; and genetically engineered foods
that can not only eradiate hunger around the globe, but also can increase nourishment
many folds, houses that are energy efficient and self regulatory through computers, to
offices, market places and parks all situated in one buildings; hovercrafts or family
helicopters replacing motor cars and other such means of transportation are all visions of
the near future made possible through advancement in technologies.
What have become more important as a resource are not natural resources, or
technological resources, but human resource – human mind and its unlimited capacity to
innovate and create.
The nations that can assimilate modern knowledge in such a way that they can
translate the fiction of yesterday into reality of today are the nations that are and would
rule the world. Nations that still are the consumers of technology, rather those producers
of it would follow suit.
Only nations and people that do not even grasp the idea of the fast changing,
scientific and technological world would be left behind, how ever exotic their believes,
culture or heritage might be. In the words of Desmond Morris, The irony of the ancient
(but exotic) cultures is that when they fight with the modern (but vulgar) culture they get
destroyed by the more scientifically advanced and therefore acceptable culture, and if the
exotic culture want to join hand with the modern culture, they tends to be dilute within
the mainstream culture.
What has to be remembered is that technological advancement is a double edged
sword. On the one hand this cutting edge of technology helps and can help sustain life in
a more beautiful and purpose manner, provided it is used in a sensible and peaceful
manner.
On the other hand modern technology and it’s destructive capacity, indiscriminate
and senseless usage has the capability of not only diminishing our natural and energy
resources, polluting our waters, land and sea, but also has the capability of destroying life
on this planet itself.
The future is upon us, but are we prepared to meet it even half way? Do the norms
of the future bring good news or bad tidings for us?
The clash of ideas, cultures, life styles and believes have always happened even
in the past. Wars were fought upon conflicting principles and believe. Families were
broken on the interpretations of cultural values, individual and social consciousness. This
conflict is nothing new. Our parents used to call it the "Generation gap". Now most of
them have accepted the so-called "Westernization" of culture and values. Commercialism
is the word of today's economic, and democratisation - of today's political thought.
But have we accepted from our hearts the influx of new cultural values, individual
and social consciousness of the future, brought about with the influx of science,
technology and globalisation of information and unification of cultures and ethnic
diversity, especially through free trade relations under WTO and SAFTA?
The uniform culture and social consciousness of each society or country bears the
imprint of the characteristics and features of the socio-economic classes that have created
it.
The material economic relations, the social conditions in which people live their
everyday activity in the forms of feeling, moods, thoughts, motives and habits is the social

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psychology which directly influences and is influenced by the economic and social
conditions in which they live their daily life.
Social psychology is part of their ordinary and individual consciousness. This
inevitably bears the stamp of the features and conditions of the life styles, income
generation and behaviours of others among which the individual lives in his or her's
immediate environment.
Psychological difference of individual are not only different in the same family
and income group, they are different in the same individual during different times of his
or her's life depending upon the pleasant or unpleasant socio-economic behaviours of his
or her's immediate environment on certain day or time.
Common individual behaviours lead to social and cultural behaviours of different
ethnic groups, races and societies as a whole over a longer period of time.
These social behaviours of different groups and classes in turn constitute specific
psychological, cultural, and social behaviours and consciousness of countries and nations
in the family of nations on the Globe, leading towards a universal culture and
consciousness of human norms, morals, laws and behaviours.
Social consciousness assumes various forms; economic, social, political, legal,
morals, beliefs, scientific, philosophical, religious, artistic, etc. Each of these forms has
its own particular object and mode of reflection, influences people's social existence and
consciousness in its own particular way.
Human lives have changed a lot over the years and a large part of the change has
been driven by the economic exploitation of culture and its products: film, radio,
television and, most recently, digital technology, have proved to be excellent distribution
mechanisms for certain types of artifact. They have found ready markets, not just in the
wealthy countries of the North but across the globe.
Morality plays a special role in moulding consciousness and will and regulating
human behaviours. The rudiments of morality appear even in primitive societies. As the
moral life of the society becomes more complex, specific moral codes and doctrines
become redundant and new moral codes and doctrines take their place. Previously and
even today, most of the human morals were and are based on religious principles, but with
the development of philosophy, economics and even the fast growing influence of
scientific methods and technologies in every day life, morals have become a part of ethics
and much more a question of ecstatic and even of politics. Business and commercial
morals differ from those of the feudalistic and aristocratic morals.
Although with constant increase of the individual's knowledge and with an
increase in his or her's contact with their outside world their personal values and morals
change, this social consciousness and values are apt to change more distinctly because of
the economic strength and ability of the individual and his or her's family.
More secure economic environment would give a more loose interpretation of the
world outlook and social values. Less secure economic environment would give more
rigid moral values and a smaller world outlook of the individual and their family unit.
Apart from the economic factors, political and social factors play an important role in
having more flexible moral or more rigid moral values.
The social environment and the believes of the individual's ancestors also play an
important role in establishing the person's norms and values and weather the individual
will sacrifice more for defending these values or less.
Formal education system through out the society and the influence of the ruling
classes through the strata structures also determine the fact that the collective
consciousness and moral values of the society and the individuals in that society are rigid
or flexible and apt to accept newer ideas from other cultures and sources of knowledge.

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 If a country or nation is more economically advanced, than its political system and
its formal educational systems would adapt more scientific and democratic methods of
accumulating world knowledge and the society will be more flexible to fast growing
changes in personal and collective moral codes, values and behaviours.
On the other hand if a country or nation is economically backwards and weak,
than the moral values and social consciousness of its people is also rigid towards internal
changes and processes as well as intolerant to the outside influences from other cultures,
societies and scientific knowledge.
This paper examines the cultural and social aspects of bilateral trade between India
and Pakistan.
The main objective of this paper is to analyze how bilateral trade between India
and Pakistan would influence the cultural and social customs and traditions of the people
in the two counties.
It looks at the issue from the perspective of globalization, liberalization and
advances in technology across the world.
Free trade is not the only factor which affects the culture of a society.
This paper explores the trade dimensions of such industries in order to determine
their role in freedom of expression, cultural diversity and economic development.
This paper identifies problems and issues, challenges and opportunities by
exploring the link between cultural and development in the wake of the increasing
bilateral trade between India and Pakistan.
There are many other factors like economic development, information revolution
and technology which bear on the ways of lives of the people.
The issue of culture has become significant in economics and is known as cultural
industries. With the possibility of increased trade relations between India and Pakistan,
not only goods and services would influx each other’s markets, but also culture of each
other would be exchanged, both as economic goods as well as non-economic goods.
Some of this exchange has already happened through the means of modern
information channels, which cross borders and bypass state imposed restrictions, using
the air waves and the World Wide Web. Indian films and songs are popular in Pakistan,
while Pakistani TV soaps are often seen across the border.
Many of the cultural exchanges between the two neighboring countries of South
Asia would enhance the understanding and life styles of the people – some thing that has
not been there for the younger generations of both nations to experience due to the cooling
of political relations since 1947.
There are commonalities between the two cultures, especially in the bordering
states and provinces of the two countries. It is also true that both these nations have also
taken culturally different roads after their respective independences.
There are commonalities between the two cultures, especially in the bordering
states and provinces of the two countries. It is also true that both these nations have also
taken culturally different roads after their respective independences.
Pakistan evolved on the lines of a mono-cultural state, having and enforcing
certain moral and cultural standards of its Islamic ideology.
While India, being a culturally and religiously diverse and secular nation did
evolve in some form of mixing as well as preserving the different and diverse religious
practices and cultural relationships.
When trade relations between the two countries would open under SAFTA there
would be also an export of cultural activity by each nation.
Pakistan’s Muslim identity would be tested, but would not be influenced by the
Indian secular and multi-religious identity for the following reasons:

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 Pakistani Muslims have already established a code of conduct and a way of life
for themselves which has in the past, and would stand in the future the test of influences
of other cultures and norms
Pakistani culture and social norms have had been exposed to and have been
influence by the Western philosophy and science and to a greater degree has accepted
certain Western ways of life and at the same time have rejected a lot of what the Pakistani
society does not like in the Western culture and ways of life. They would do the same
with the Indian cultural norms and ways of life.
Indian films and dances have had their influx and impact on the Pakistani society
through the electronic media even before the relations between the two countries were
warming up, and opening up of trade relations under SAFTA would not make much of a
difference
India has a large population of Muslims living in its territory and it has been seen
that they have been successful in preserving their heritage, norms, culture and believes
under the secular Indian political system and have been able to live along other religions
and culture without compromising their own way of living. This shows that the influence
of Indian religions and cultures on Pakistani Muslims would be minimal and therefore
there is very little threat on the Islamic identity of Pakistan because of trade with India
and other nations of SAARC under SAFTA.
The same above arguments are also true in reverse, i.e. the influence of Pakistan
Islamic norms and culture might have an impact on the Muslims living in India, but would
not substantially impact the people of other religions living in India
When we talk about exchange of culture for economic gains, then there is certainly
a great deal of scope and space for both countries to trade in cultural goods where ever
there is a comparative advantage and for a mutually beneficent economic activity: The
Cultural Industrial goods which can be mutually exchanged under SAFTA are:
Publishing:
Indian publishing houses are well established and both newspapers and books are
cheaper in India than Pakistan. Indian newspaper of 20 pages is just 1 Indian Rupee while
Pakistani newspaper of 20 pages is more than Rs. 10. Pakistani consumers would gain,
while Pakistani publishing houses would loose out on costs.
Music and dances
India has a comparative advantage in the Music as well as dancing Industry and
have the capability of sending to Pakistan much of its traditional music and dancing
groups. But Pakistani musicians and cultural groups also have a niche and would expand
their business activity once they are allowed to perform in India
Audiovisual technology
Both countries have the capability of selling to each other different aspect of
audiovisual programs, Indian industry is more skilled and have an access to its own bigger
market, but Pakistan industry has the capability of exporting its skills to Indian market
once trade is opened. There is a potential of joint projects also.
Electronics
Multinational companies have already accessed the Indian market and have through
satellite technology and cable providers had access to the Pakistani air waves. Therefore
they are selling products to both India and Pakistan. The opening of trade might just boost
the new Pakistani channels to increase their market and have a relatively plainer playing
field in south Asia
Video games
Both India and Pakistan do not have the capability of competing with Western and

117
Japanese products and video games. Opening of trade under SAFTA would not make a
lot of difference
The Internet
Internet continue to grow rapidly in the world and SAFTA would not have any
positive or negative effect, as both the Indian as well as the Pakistani governments are
already promoting the use of Internet. Internet connections after SAFTA would just make
the trade and people to people contacts faster and real
Common Folklore dress and Heritage
There is a lot of common folklore and heritage in India and Pakistan and that
becomes the focal point of increased tourism and cultural exchanges. There are many Sikh
holy sites in Pakistan and many Muslim holy sites in India. Many Indians have migrated
from their accessional places from areas that are now Pakistan and many Pakistani’s still
crave to visit their homes and towns on the Indian side. Although all this would be short
lives, till those that were alive on 1947 live, but the heritage and culture which is common
to both nations becomes an important pivot in strengthening tourist activity and economic
relations for the future
Language
Language between the bordering states and provinces between the two Countries has
many common roots and travel of people and traders become a lot easier when they do
not have to converse and communicate in a third language. Common language is a boon
to trade and tourism
Youth and Women
What would be most important when trade between the two neighbors open and
flourish under SAFTA is its impact on youth and women of the two countries – those that
have not have contacts between each other except through films, media and official
disinformation on both sides.
Women and educated youth in India are more emancipated and have a greater
participation in economic life. Women and educated youth in Pakistan are also
emancipated and take part in economic life, although at a lesser degree. Opening of trade
would enhance economic opportunities in both nations for women and skilled youth to be
employed and to earn an income through trade, through exchange of services, exchange
of education, culture. SAFTA would be an instrument for removing poverty, illiteracy, for
greater gains and standard of living for the present and future generations of both nations
References
A.Ghani, A. N. (1998). “Impact of India Pakistan trade on Engineering Sector’.
LUMS (Lahore University of Management Sciences) .
Khan, A. U. (March 2004). Who gains from trade between India and Pakistan? .
India Development foundation .
Ministry of Commerce. (2007). Statistical data on pakistan's externaal Trade.
Islamabad: Government of Pakistan.
Report, G. M. (2007). Millennium Development Goals. Washington DC: The
World Bank.
SAFMA. (2007 ). Punjab-Punjab Consultations – Exploring Complementarities.
Lahore: SAFMA.
Schaffer, K. S. (n.d.). India-Pakistan Trade: Creating Constituencies for Peace.
South Asia Monitor, .
The World Bank,. (2007). World Development Report, 2007, Development and
The Next Generation,. Washington DC: Oxford University Press.
Thomas, A. O. (Aug. 4, 2007). India, Pakistan to Cut Trade Barriers in Wake of
WTO Collapse. Bloomberg TV .

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 Amir Ullah Khan (March 2004) Who gains from trade between India and
Pakistan? India Development foundation
Anusha Ondaatjie and Cherian Thomas, India, Pakistan to Cut Trade Barriers in
Wake of WTO Collapse, Aug. 4 (Bloomberg TV)
Aunjum Nasim and Jawaid A.Ghani (1998) “Impact of India Pakistan trade on
Engineering Sector’ LUMS(Lahore University of Management Sciences)
Economic Survey of Pakistan 2007, ministry of finance, government of Pakistan,
Islamabad
Kavita Sangani and Teresita Schaffer ‘India-Pakistan Trade: Creating
Constituencies for Peace’ South Asia Monitor, the Center for Strategic and International
Studies (CSIS),
Ministry of Commerce, Government of Pakistan
Punjab-Punjab Consultations – Exploring Complementarities, 2007 SAFMA,
World Bank report on Regional Cooperation in South Asia (2006). The world
Bank, Oxford University Press, Washington
World Development Report, 2007, Development and The Next Generation, The
World Bank, Oxford University Press
Bangladesh
Economic Cooperation between Pakistan & Bangladesh
Prof. Dr. Qais Aslam
South Asian Region
South Asia is a region with diversity in culture, language, religious thought,
ethnicity, political and social thinking and at the same time is a region with almost similar
historical and economic past and in many ways an integrated economic future.
It is a region where there are similar problems and almost similar examples of
successes and failures.

Characteristics of Pakistan & Bangladesh Economies

Pakistan
Population 160 Mill.
GDP $475.6 bill (2006)
HDI index 134th (2006)
Rural poverty
Real GDP Growth rate (PPP) 6.9 in 2006
Electricity Consumption needs 71.54 TWh
Agricultural country: Cotton, Wheat, Rice, Sugarcane, Fruits, Vegetables, milk,
beef, mutton, eggs, fish, shrimp,
Industry: Cotton textile, cement, fertilizer, edible oil, sugar, steel, tobacco,
chemicals, machinery, and food processing
Bangladesh
Population 130 Mill.
GDP $306 bill (2005)
HDI Index 137th (2004)
Rural poverty
Real GDP Growth rate (PPP) 6.7% in 2006
Electricity Consumption needs 12.5 bill KWh
Agricultural Country: Fish, sea food, Jute, Rice, tea
Industry: Garment, Sugar, tea, leather goods, newsprint, pharmaceutical,
feterlizers Sugar, tea, leather goods, Newsprint, pharmaceutical, cheramics, leather &
Cement

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 Energy Potential
Pakistan
Pakistan has extensive energy resources, including fairly sizable natural Gass
reserves, some proven oil reserves, coal (Pakistan has the fourth-largest coal reserves in
the world]), and a large hydropower potential. She has also solar and wind power potential
Bangladesh
Bangladesh has hydropower, wind power, sea power and solar power potential. It
also has potential of off-shore oil exploration and exploitation.
Trend for last 30 years trade relations Between Pakistan & Bangladesh
Trend of Imports of Pakistan (Exports of Bangladesh) in last 30 years (See Table
2 and Fig 2) shows that in 1975-1976 Pakistani imports from Bangladesh (Bangladeshi
Exports to Pakistan) were a little above US $ 1 million, which rose to a little above US $
14 million in 1985-1986 and then to almost US $ 20 million in 1995-96 and now in 2005-
2006 are about US$ 64.4 million. Or Pakistani imports from Bangladesh rose from US $
1 million to US $ 64.4 million in the last 30 years. (Economic Survey of Pakistan 2005-
2006)
Pakistan’s exports stood at $19.24 billion in 2006, include textile goods – garments,
bed linen, cotton cloth and yarn; rice, lather and sports goods, chemicals
manufactures, carpets and rugs, furniture, cotton fiber, cement, tiles, marble, footballs,
surgical instruments, fans, electric appliances, software, ice cream, livestock, meat,
chicken, milk, seafood, shrimps, Suzuki parts and defense equipment (submarines,
tanks, radars), salt, marble, onyx and light engineering goods
Pakistan major Export partners in 2006 were USA- 22.4%, UAE - 8.3%, UK - 6%,
China - 5.4%, Germany - 4.7%
Pakistan’s imports in 2006 were $28.58 billion, and included Petroleum, Petroleum
products, Machinery, Plastics, Transportation equipment, Edible oils, Paper and
paperboard, Iron and steel, Tea.
Pakistan’s major import partners are China - 14.7%, Saudi Arabia - 10.1%, UAE-
8.7%, Japan - 6.5%, USA - 5.3%, Germany - 5%, Kuwait - 4.9%
The demand for Cement has increased due to reconstruction after the earthquake.
Pakistan received nearly $4 billion dollars in remittance in 2005.
Pakistan's Service sector accounts for about 51% of GDP. Transport, storage,
communication, finance, and insurance account for 24% of this sector, and wholesale
and retail trade about 30%. Pakistan is trying to promote the information industry and
other modern service industry.
Bangladesh has made an impressive stride in its garment industry and has managed
to create about 1.5 million new jobs mainly for women in its garment industry.
Garment exports of Bangladesh have impressively increased much more than its
revenue from its traditional jute exports. Bangladesh also has increased production of
leather, shrimp, pharmaceuticals, and ceramics
“The labor-intensive process of shipbreaking for scrap in Bangladesh has developed
to the point where it now meets most of Bangladesh's domestic steel needs”.
Bangladesh export commodities are garments, jute and jute goods; leather, frozen fish
and seafood
Bangladesh export partners are US (31.8%), Germany (10.9)%, UK (7.9%), France
(5.2%), and Netherlands (5.2%).
Bangladesh’s import commodities include machinery and equipment, chemicals, iron
and steel, textiles, raw cotton, food, crude oil and petroleum products, cement
her import partners are India (10.5%), EU (9.5%), Japan (9.5%), Singapore (8.5%),
and China (7.4%).

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 Trend for last 30 years trade relations Between Pakistan & Bangladesh
Trend of Imports of Pakistan (Exports of Bangladesh) in last 30 years (See Table 2
and Fig 2) shows that in 1975-1976 Pakistani imports from Bangladesh (Bangladeshi
Exports to Pakistan) were a little above US $ 1 million, which rose to a little above
US $ 14 million in 1985-1986 and then to almost US $ 20 million in 1995-96 and now
in 2005-2006 are about US$ 64.4 million. Or Pakistani imports from Bangladesh rose
from US $ 1 million to US $ 64.4 million in the last 30 years. (Economic Survey of
Pakistan 2005-2006)
Trend of Trade Deficit of Bangladesh or Trade Surplus of Pakistan in last 30 years
(See Table 3 and Fig 3) shows that The trade deficit of Bangladesh against Pakistan
or Trade Surplus of Pakistan against Bangladesh in 1975-1976 was US $ -2.38
million; in 1985-1986 was – US $ -3.35 million; in 1995-1996 was – US $ -46 million
and in 2005-2006 was – US $ -203.5 million. (Economic Survey of Pakistan 2005-
2006)
a significant increase in trade relations between the two countries in the last decade,
but also shows trade surplus in favor of Pakistan.
however this Bangladeshi trade deficit does not show the real picture, and that is that
Bangladesh imports a large quantity of cotton and raw materials from Pakistan, that
are transformed into manufactured goods in Bangladesh and exported elsewhere in
the world in form of readymade garments and therefore this value addition contributes
to a large extent to the income and employment generation in the garment industry of
Bangladesh.
Challenges that are faced by the Two Economies
1. To Eradiate Absolute Poverty in their respective countries
2. To reduce illiteracy in their respective countries
3. To invest in human capital at all levels, especially scientific education in
schools of rural areas; purposeful and productive vocational education and highly
specialized, market based higher education that can cater for the service sector and
produce efficient managers as well as create modern corporate level work habits in their
respective human resource
4. To invest in a more technology based Research and Development and deeper
linkage between university research and their respective Industries
5. To invest in health for a more healthy and productive labor force in all sectors
of the economy
6. To ensure environment protection for a more sustainable future of their
children as well as to protect the water, mineral and forest resources for a more sustainable
economic and social growth
Potential for Economic Cooperation between Pakistan & Bangladesh
• Pakistan and Bangladesh have a potential in expanding trade links and economic
cooperation in many fields
• Both nations can achieve mutual economic and social benefits form exporting
from each other their traditional products as well as can find new avenues of
producing newer products that are tailored especially for the needs of each other
countries and economies
• It should be remembered that not only both nations have to cope up with
reducing poverty and illiteracy levels, they have at the same time increase
investments and cooperation in giving technology and technological education to
their young generation in order to keep up with the fast changing global
technological requirements and needs, therefore both nations can specialize in a
few modern sectors and exchange teachers and students from both sides for

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 studying modern subjects, rather than each nation trying to spend much needed
else where resources in order to built up its own capacity for many, if not all the
technological disciplines in their respective Universities and research centers.
• Business people from both nations can start joint ventures or can outsource some
of the production processes of their respective export outputs to third country in
order to use the socialization and comparative advantage in the other nation.
These joint ventures would enable them to compete with much larger
competition from businesses in larger neighbors and other countries.
• There is a large potential for joint researches and investments in health sectors as
most of the illnesses in both nations might have the same root causes and
investments and cooperation in health and education in each other’s economy
would pay long term social and economic dividends for both nations
• One big area for mutual economic cooperation is cultural exchanges that would
not only expand the market for young artists and craftsmen from both sides, it
would also help break the ice in building up cultural relations and people to
people contacts between both the Muslim countries in the region
• Tourism – business, sports, sightseeing and religious as well as personal would
expand the earnings of foreign exchanges of this vital industry in both nations
and would help bring the people of the two countries closer
• Bangladesh would have a large experience in managing river transport, which is
lacking in Pakistan and Pakistan might have an expertise in managing efficiently
and cost effectively road transport in its private sector. Both nations can cash in
on each other’s comparative advantage for mutual gains if they share their
experience by investing in each other’s transport sectors. Expansion of air and
sea links – both passenger and freight – in private sector as well as the public
sector would enhance the capacity of economies of both countries to expand and
increase the volume of trade activity and markets of the region. Bangladesh can
become a take off point for Pakistani businesses to make their inroads into East
Asian Markets and Pakistan can become a pivot for Bangladeshi entrepreneurs
to go into the Central Asian, and Middle Eastern markets.
• More important is the relaxing visa regimes between both nations so that the
business communities and people that promote and sell cultural activity can go
and find for themselves their respective market niches and expand their
respective businesses through an active interaction of stake holders from both
sides
• Both Pakistan and Bangladesh export labor to the Gulf as well as induce Brain
Drain to the Industrially advanced countries, they can, if managed properly
attract both skilled labor as well as educated managers and teachers from each
other for greater integration and economic cooperation
•
Conclusion
The experience of East Asian Countries and European Countries has shown that apart
from macro-economic stability, investment in scientific education at grass root level;
establishing viable and democratic institutions, implementing social reforms,
ensuring good governance, and international and regional cooperation between
nations goes a long way in increasing economic growth many fold; as well as reducing
poverty, creating safety nets for the poor and establishing peace, security and mutual
trust between nations and in the country, therefore it is in the interest of the people,
businesses and governments of Pakistan, Bangladesh, and even India to start serious
economic cooperation and integration and to open each other markets to labor and

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 business of the other. This will enhance both the demand side as well as the supply
side economic activity in the region as a whole and would go a long way in resolving
historical issues in South Asia.
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South Asia: Growth and Regional Integration – A Report based on First SAARC
business Leaders Conclave (2007) The World bank Publication, Washington DC
Wignaraja, Ponna & Sirivardana Susil Ed. (2004) Pro Poor Growth and
Governance in South Asia – Decentralization and participatory Development. SAGE
Publications, New Delhi, London
Wikipedia Free Encyclopedia (2007) MSN, World Wide Web
World Bank Development Indicators Database, 2006
World Bank Publications and Reports 1999-2000; 2001-2000; 2003; 2004; &
2005 Washington DC
Zaidi, S. Akbar. (1999). Issues in Pakistan’s Economy. Karachi: Oxford
University Press
(SARC)
OIC
Free Trade between OIC Members Countries
Dr. Qais Aslam
International Trade & Growth
GDP Growth, in an open Economy increases when international trade as per theory of
comparative advantage and cost theories is increased.
Modern Economists advocate trade blocks and trade zones and at the same time
advocate ‘free trade’ between nations
Researches have shown that countries that have
• Educated their people and
• Indulged in Free Trade
have economically grown faster than countries where large part of the population are
illiterate, unskilled or uneducated and have ‘closed economies’ or have more trade
barriers are slow to grow in economic terms and in social terms.
The Annual Report of OIC 2010
The current 57 OIC countries are dispersed over a large geographical region spread out
on four continents, extending from Albania (Europe) in the north to Mozambique

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(Africa) in the south, and from Guyana (Latin America) in the west to Indonesia (Asia)
in the east.
As such, the OIC countries as a group account for one sixth of the world area and more
than one fifth of the total world population.
The OIC member countries constitute a substantial part of the developing countries,
and, being at different levels of Resource
combined with a potential to find mutual gains from free trade between OIC and exploit
all the gains from trade in
• Consumer Surpluses
• Producers Surpluses
• Trade Surpluses
• Terms Of Trade Benefits
• Price Benefits
• Cost Benefits
• Exchange Rate Benefits
• Balance Of Trade Benefits
• Non - Economic
• Benefits gains
Economic Characteristics of Few OIC Nations
Out of the world’s 49 least-developed countries, 22 are OIC countries almost all of
which depend for their growth and development on the exports of a few non-oil primary
commodities, mostly agricultural commodities.
On the other hand, 19 OIC countries are classified as fuel-exporting countries, for
which the prospects of growth and the development of their economies are dependent
mainly on producing and exporting of only oil and/or gas”

GDP share of top 10 OIC countries

GDP share in total OIC GDP (in 2009) of the top 10 OIC countries which include: -
1. Turkey;
2. Indonesia,
3. Saudi Arabia,

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4. Iran,
5. UAE,
6. Malaysia,
7. Egypt,
8. Nigeria,
9. Pakistan
10. and Algeria
GDP share of top 10 OIC countries
Top 10 OIC Exporting countries
Top 10 OIC Exporting countries which include
1. Saudi Arabia,
2. Malaysia,
3. UAE,
4. Indonesia,
5. Turkey,
6. Iran,
7. Nigeria,
8. Kuwait,
9. Algeria,
10. and Qatar

Top 10 OIC Exporting countries

Top 10 OIC Importing countries
Top 10 OIC Importing countries which include
UAE,

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1. Turkey,
2. Malaysia,
3. Indonesia,
4. Saudi Arabia
5. Iran,
6. Egypt,
7. Nigeria,
8. Algeria
9. and Pakistan

Assessment of Current trade Patterns within OIC members

Intra-OIC exports
According to the OIC Annual Report 2010 that 74.9 percent of the intra-OIC exports
were undertaken by only 10 OIC countries Turkey (14.3 percent of the total intra- OIC
exports)
1. Saudi Arabia,
2. United Arab Emirates,
3. Malaysia,
4. Indonesia
5. Egypt,
6. Syria,
7. Iran,
8. Pakistan
9. and Kuwait,

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Fig Importing OIC countries in Intra-OIC below shows the 10 Top exporting and Trade
Geo-Political Significance of OIC
(Members of OIC by regions) are
South Asian - Afghanistan , Bangladesh, Maldives & Pakistan
Central Asian – Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, &
Uzbekistan
Middle-Eastern – Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar,
Saudi Arabia, Syria, UAE, & Yemen
Countries of the Maghreb - members are – Algeria, Egypt, Libya, Morocco, Mauritania,
& Tunisia
Other Asian are – Indonesia, Iran, & Malaysia
European member Countries are – Albania, and Turkey
African Members are - Benin , Brunei Darussalam , Burkina Faso , Cameroon , Chad ,
Comoros , Côte d'Ivoire , Djibouti , Gabon , Gambia , Guinea , Mali, Mozambique,
Niger, Nigeria, Sierra Leone, Somalia, Sudan, Suriname, Togo, & Uganda
Latin American - Guyana

Challenges and Problems that confront OIC countries

The already established trade relations of individual OIC countries with their
trading partners in the NORTH and Industrially Developed Nations
The relatively less developed in value addition and in technological levels of exports
from OIC countries
One of the problem in OIC Countries is that the private sector of these countries have
less or none branded trading items and quality control that can create a niche for the
businesses of each country in other OIC markets
The relatively similar nature of agriculture and textile base in OIC countries
Problems of ‘difficult’ visa regimes between many OIC nations that has to be made
free and accessible at least for business communities, cultural exchanges and for
educational cooperation between OIC countries
Problems of currency exchange systems and rates that have still to be established and
developed for a free and cost-effective trade between OIC countries.

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It is recommended that OIC nations should trade in ‘Barter’ or in their own respective
currencies, rather than in the known International currency ($) for greater facilitation of
trade between themselves
Political and cross-border issues, mistrust and problems that have still to be resolved
between many of the OIC members, that hinder the development of economic relations
and free trade between these countries
Lack of political and economic Will in many OIC countries and governments for
signing of relative bi-lateral and multi-lateral trade-related and economic-related and
cultural-related agreements and their ratifications
Characteristics of Export and export Potential from OIC to other Developed Nations
Iran, is member of OPEC and houses one of the most productive and educated
population in OIC after Turkey.
Nations of Gulf & Middle East (Arab) States and Nigeria are all part of OPEC and
largely export OIL and Gas and related products to non-OIC countries
Central Asian States are also Energy Hub and have largely economic cooperation with
Russia, China, Iran and many components of aircraft and automobile Industry of Europe
and USA are produced in these countries.
Central Asian States also have per capita the largest concentration of scientists, doctors,
teachers and nurses in the world.
They (Central Asian States) sit geographically between Europe and Asia linking
Turkey, China, Russia, Iran, Afghanistan and Pakistan by road (Ancient Trade routes) –
most of the border with Russia and China are also predominately Muslim population
Nigeria has the richest oil reserves in Africa and the largest Muslim nation of Africa,
along with Egypt, Algeria, Morocco, Tunisia, Syria, and Libya with a large relative to
the region productive population and reasonable agricultural production that can be
shared within OIC on mutually advantageous basis
Other African nations OIC Members are rich in Mineral resources, Natural resources
like wild life, tourism opportunities as well as in land resources, but lack political
stability or economic skills and opportunities to exploit their own resources. It is for this
reason that USA, China, Russia and leading industrial Economies of Europe, France,
Italy and UK are competing through their traditional colonial contacts for a foothold in
the economic and resource potential of these OIC member nations
Indonesia, Pakistan and Bangladesh are the largest by population Muslim Countries,
While with Malaysia and Turkey have relatively developed agriculture, service sector
and an industrial base, and are one of the economic leaders in OIC as non-oil producing
exporting countries within OIC
A large part of OIC members have access to fresh water seas and the Indian Ocean
(Modern Trade Routes) which is full of oil , gas as well as marine life
Potential areas of Trade within OIC
Also OIC Countries can form a large
as well as trade region for
Potential area of Trade within OIC
(Resource Base significance of OIC)
As a group, the OIC countries are well-endowed with potential economic resources in
different fields and sectors such as:
Agriculture
Arable land,
Energy
Mining,
Human resources,

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 and they can form a large strategic Industrial as well as trade region.
• (1) Agricultural Products
• Food Grains, Prepared Food products
• Fruits, and Vegetables
• - Meat products
• Halal Meat, Poultry
• Fisheries
• - Dairy Products
• Dairy
• Milk & products
• (2) Energy and Mining
• (3) Industrial Consumer Goods
• (4) Labor And Human Resources, Knowledge And Education Related Services
• (5) Financial Services and Islamic Banking Services
• (6) Health Related Services
• (7) Tourism and cultural exchanges
• (8) Freight And Transportation’ And
• (9) Information and IT related Services
as well as for
• Strategic Industrial Areas
• Co-production Of Many Products
• Outsourcing
to each other many processes and commodity production.
The point being made is that it is the
OIC Countries
should make use of each other Absolute Advantage For Their
Mutually Beneficial Economic Advantage
To Invest In Productive and modern industrial base in each other countries for a greater
economic and trade gains in
Recommendations
The punch line is that
trade between OIC members can be made more cost-effective and growth oriented for
each nations if the business communities of these nations feel profit margins as an
incentive for mutually beneficial trade and economic relations
References
Krugman, P. R. (1994). International Economics - Theory and Policy. New Your: harper
Collins College Publishers.
Mustafa ACAR, S. A. (2009). South - East Asian Integration in the Context of OIC:
Implications of Free Trade among Malaysia, Indonesia and Bangladesh. Journal of
Economic Integration, Vol. 24, No. 1 (March 2009),Center for Economic Integration,
Sejong UniversityStable , 1-18.
OIC General Secretariat. (2011). TPS-OIC: IMPLEMENTATION AND PROSPECTS.
OIC Regional Workshop on Trade Facilitation with Emphasis on Cross-Border
Cooperation and Roles of Customs Administrations. Ankara: A Presentation by the OIC
General Secretariat .
Said, N. W. (2008). Explaining Malaysian Bilateral Trade with OIC Members. journal
of Department of Economics, Faculty of Economic and Management, University Putra
Malaysia .

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SESRIC. (2010). ANNUAL ECONOMIC REPORT ON THE OIC COUNTRIES 2010.
Ankara: Statistical, Economic and Social Research and Training Centre (SESRIC), OIC
Center.
Winters, L. A. (1992). International Economics. New York: Harper Collins Acadeic /
Routledge.

China (CPEC) and Shanghai Economic Agreement

China Pakistan Economic Corridor
Prof. Dr. Qais Aslam
China - Pakistan Economic Corridor would give China an economic outlet to the
Persian Gulf, Asia, Africa, The Far East, Australia Europe and America, especially USA
& North America through the warm waters of the Indian Ocean and the Pacific Rim. This
Corridor would also link China to Iran, Afghanistan and Central Asia, Russia and Europe
through the land route The Economic Corridor gives businesses in Pakistan and China a
cost advantage under gravity approach as it shortens the distance between exporting and
importing nations. This new investment in Infrastructure and energy should create jobs
and business for many related industries in Pakistan. This link also should induce regional
SME’s in Pakistan to take advantage and create clusters that can enhance income
generating capabilities of people of the region and areas that would be directly linked to
this corridor. Many new avenues and opportunities should arise especially for
International truckers and drivers (TIR) etc. This corridor would also give access to EU,
USA and other foreign business to invest in mineral rich Baluchistan and the KPK as well
for their firms to invest in tourism in these areas. This corridor should increase the peace
dividends over war dividends and therefore create more regional stability and peace.
But my fears are that the uneducated and unskilled Pakistani’s would be left
behind, if our federal and regional governments and business managers do not prepare the
capacity of our people for this change and opportunity. Also if the contracts to the
Pakistani businesses and stake holders would not be given transparently and regional
economic preferences would not be considered as well as issues of bad governance would
not be addressed as in past cases of Pakistan’s economic performances and international
commitments than the entire gains of this opportunity would go to China and the rest of
the world and Pakistan would remain the Elitist state that it has shown to have become in
the past 63 years where the rich and powerful are misappropriating the resources and
economic advantages in their favor leaving the poor and the marginalized people of
Pakistan backward, deprived and in poverty than all the opportunities from this Pakistan-
China Partnership would be lost for Pakistani masses”.
China has signed with Pakistan a 62 to 72 billion US dollar worth of contracts for
China’s investment in Infrastructural and energy projects in Pakistan, linking China to the
warm waters of Indian Ocean and beyond through Pakistan.
This gives China an economic outlet to the Persian Gulf, Asia, Africa, The Far
East, Australia Europe and America, especially USA through the Pacific Rim. This
Corridor would also link China to Iran, Afghanistan and Central Asian Counties – all this
gives China which is the fastest growing Economy in the world (now the second largest
Economy) a strategic edge against its economic rivals – USA, Japan and EU – the last
two are receding economies due to aging population and lack of natural resources.
It should be remembered that this is not the only such investment that China has
done in the developing world and the region. China offered such a corridor to India (India
politely refused) but Sri Lanka and Bangladesh did oblige China. Also African states are
where China has seriously started investing in development projects which means that

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China has started showing its economic strength and influence in the region. Only unlike
Colonial Europe and USA, China has expanded its influence through economic means
and not through gun boat diplomacy as was the case of the past Colonial masters of these
nations in Asia and Africa.
It should be understood that part from long-term economic and trade advantages
to China, the immediate impact was also reinvesting the vast money accumulated by
China’s state owned and private businesses in their banking system needed an outlet,
otherwise this money would have lost its value in money terms. Creating an International
Investment Bank by China recently was also in the same direction. Also Chinese firms
would have secured businesses and investments in Pakistan for the near future
1. What will be the impact of Pakistan-China Economic Corridor?
The Economic Corridor gives businesses in both countries a cost advantage under
gravity approach as it shortens the distance between exporting and importing nations
Construction of this road and rail link should create jobs and business for many
related industries, starting from construction, cement to metal works etc. This link also
should induce regional SME’s in Pakistan to take advantage and create clusters that can
enhance income generating capabilities of people of the region and areas that would be
directly linked to this corridor/ Many new avenues and opportunities should arise
especially for TIR’s or International truckers and drivers to pin point just one such job
creating industry.
2. Will the economic corridor affect Pakistan's relationship with US?
It should be noted that China has been very particular in investing in those areas
of Pakistan which were least developed and where for the last 65 years USA or European
and to that matter even local investment had not been seen to have happened. This
corridor through China’s investment would also give access to USA and other allied
business to invest in mineral rich Baluchistan and KPK as well for their firms to invest in
tourism in these areas.
China has kept away from areas where USA has been investing traditional,
especially the urban Pakistan and strategically USA and China are linked in a way that
USA is the largest foreign investor in China with 50% of USA’s foreign investments are
in China and 50% of China’s export are for USA’s markets. Also China has a large
Chinese population living in USA and Chinese students and researchers are the biggest
contingent of foreign students studying in USA’s Universities. Thirdly Pakistan buy’s
Military hardware from USA which is not affected by this Pakistan-China Economic
Relationship.
Rivalry between American and Chinese firms will exist but that is the spirit of
Free Market Competition and should give Pakistani consumers better quality and
relatively cheaper goods from all markets concerned. USA has already commented to tis
relationship officially by stating that China has learnt from USA’s mistakes when
American investments in Pakistan were too little of about 7 billion US dollars for a period
of 5 years making it a little more than 2 billion US dollars a years for many projects which
had no significant impact on Pakistan’s growth and poverty and at the same time USA
could not befriend ordinary Pakistani’s on the street, where as China has made large
investment in few relevant projects which would impact lives and economics of ordinary
Pakistani’s going a long way in warm relations between the people of Pakistan and China.
3. Hope will it help in achieving Regional peace stability and prosperity?
China, India and Russia are already part of BRICS economies as well as part of
Canton Declaration to which Pakistan, Iran and Central Asia are also members or have
observers’ nations’ status creating a market as important as that of Europe. Most of these
countries, except Pakistan and Iran are also in G-20 nations to which USA, EU and Japan

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are also members and 85% of world trade in between G-20 nations. It should be
remembered that USA has already a presence in Afghanistan, its MNC’s have direct
investments in CAR nations and in a strategic partner of Pakistan. USA has also started
warming up its relations with India as another rising power in the region and with Iran,
therefore this Corridor would cement economic ties with all the economic, political and
territorial giants of this region and enable their firms to cooperate for a greater economic
stability and And yes this should increase the peace dividends over war dividends and
therefore create more regional stability and peace
4. What will be the pros and cons of this project?
Pro’s for Pakistan are all the opportunities that investment in energy and
infrastructure can bring to and region of the world – modernization and expansion. This
corridor for Pakistan is like the building of Rail (Iron Horse) in the Wild West of
American heartland linking USA from coast to coast. My fears are that like USA progress
is going to come to Pakistan and every one and all would be able to fill their cup from the
‘river of gold’ that would flow through Pakistan in the shape of this economic corridor,
but like USA where the indigenous Americans have been left behind the American river
of progress, in Pakistan too the indigenous Pakistani’s from the region would be left
behind, if our regional governments and stake holders do not prepare the capacity of our
people for this change and opportunity.
The about 10% of the elite Business class of Pakistan are efficiently linked to the
markets of EU, USA and Japan and are reluctant to change direction in economic and
psychological terms from their traditional trade partners towards China. The about 75%
of the industry of Pakistan is import substitute industry and already struggling against free
trade from the world and therefore would be decimated by better quality, cheaper Chinese
goods that are to come to Pakistani markets. Only the rest 15% of relatively smaller or
medium entrepreneurs and new businesses would be able to in the initial stages gain from
Pakistan-China economic relationship, but for that they will have to learn new ways to do
businesses, bring their labor to learn international level skills and work habits and for
firms to create better environmentally friendly and innovative management skills and
quality standards. Only than this youth bulge of Pakistan’s population can gain from this
blessing in shape of Pakistan China Economic Corridor. But if we do not change to this
changing economic environment than only China would send its own excess labor to
finish the job and Pakistani’s would remain unemployed and in poverty selling
strawberries and dry fruits at small business outlets to passing truckers and cars enjoying
just droplets of the trickledown effect of this economic opportunity. I am also assuming
that the contracts to the Pakistani businesses and stake holders would be given
transparently and regional economic preferences would have more preference over
political preferences and issues of bad governance would not rise. Otherwise the entire
gains of this opportunity would go to China and the rest of the world and Pakistan would
remain the Elitist state that it has shown to have become in the past 63 years.
5. Will it help Pakistan in becoming a regional hub?
Pakistan is in the middle of this network of Economic giants and therefore if
intelligently handled from Pakistan’s side we can gain both in political as well as
economic stature due to this meeting of the world through our territory. But linking
Karachi to Gawadar and Gawadar to Peshawar and down to the Silk Rout to China has a
great strategic advantage and economic advantage for the Western and Northern part of
Pakistan that should transform these less developed regions into economically viable
areas of both local as well as foreign linkages. But this linkage should undermine the
importance of the old road and rail link from Peshawar to Karachi through Punjab and the
Canal Colonies where the traditional economic heart of Pakistan lies. It should be

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remembered that Punjab produces vegetables and light engineering goods and services
for rest of Pakistan and imparts energy resources from other areas of the country. With
the trade routes taking shape away from heartland of the Punjab, the only option that
would be left would be to open its economic borders with India, otherwise the flourishing
urban centers of West Punjab would be left out of the economic advantages that Pakistan
has to gain from the Economic Corridor that China would develop

Other Economic Blocks ; USA; ASIAN and G-20)

Final Term Exam

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 CV of Prof. Dr. Qais Aslam
 Prof. Dr. Qais Aslam is PhD in Economics from University of National & World Economy (Higher
Institute of Economics), Sofia, Bulgaria
 And is LLB from PU Law College, Lahore & Diploma in Environmental Law.
 Currently - is working as Professor of Economics at the University of Central Punjab, Lahore; and
was the former Chairman, Department of Economics at GC University (GCU), Lahore.
 Has 30 years teaching and Research experience at Post-Graduate (University) levels and an
administration experience of more than 8 years.
 Dr. Qais Aslam has 23 Published Research papers in HEC’s Recognized Journals and 40 other
publications.
 Dr. Qais Aslam - is the HEC’s approved PhD supervisor in Economics.
 Is Member of the Editorial Board of The International Journal of Pluralism and Economics
Education, USA
 Is Member of the Editorial Board CRESD Research Journal, India.
 In 2012-2013 was DS at Kashmir Institute of Management (KIM) Muzafarabad
 Prof. Dr. Qais Aslam is on the panel of external PhD examiners to a five Indian Universities including
the Aligarh Muslim University, India, And has supervised many theses at Masters and M. Phil levels
and one at PhD level.
 Prof. Dr. Qais Aslam contributed to HEC’s syllabus committees on Economics and Commerce as well
as the Lahore Text Book Board
 Prof. Dr. Qais Aslam has been visiting professor to various departments of the University of the
Punjab, Lahore; PU Law College, Lahore, Kinnaird College for Women, Lahore; NUML, Lahore and
University of Animal Health Sciences, Lahore. He has also delivered lectures at Administrative Staff
College, Lahore; NIPA, Lahore and Civil Services Academy, Lahore, KIM Muzafarabad; NIM,
Islamabad, as well as the Custom, Excise and Revenue Department’s Institutes at Lahore, and in April
2012
 Prof. Dr. Qais Aslam is the member of PIDE Islamabad; PELA Pakistan, Pakistan Economic Forum,
National Geographic Society USA, Human Rights Commission of Pakistan; PODA, Islamabad to
name a few.
 He read his paper in the OIC Ambassador’s conference at Bhurban, Murree.
 Prof. Dr. Qais Aslam has attended International Conferences and read papers in USA, UK, France
Bulgaria, India, and Bangladesh and also read numerous papers and delivered lectures on local
conferences and NGO forums on Environmental Issues, Social Economics and Economy of Pakistan at
Lahore, Islamabad, Multan, Faisalabad and Karachi.
 Has also visited almost all the countries of Europe and South Asia USA and a few in Central Asia and
in Middle East on his personal capacity.
 Prof. Dr. Qais Aslam has written many research articles in local and International journals and written
chapters in a number of books on Economic Issues and a chapter on Mughal Economic Growth in the
Encyclopedia Economica, UK.
 Prof. Dr. Qais Aslam has also written newspaper articles and has numerous Radio & TV talks on local
and BBC channels, Radio BBC, BBC World TV, Al Jazeera TV, and Radio Germany on issues relating
to the Economy of Pakistan in the current political and Global scenario.

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 He has written a book on economic Issues Titled Selected Essays in Political Economy of Pakistan
 His recent publications include Social Protection & the Informal Sector in Pakistan – Review of
Federal & Provincial Budgets 2013-2014 and Gender Issues of Women Home Based Workers in the
Informal Sector – Review of Federal & Provincial Budgets 2014-2015.
 Dr. Qais Aslam Assessment of Annual Provincial Budget Punjab 2015-2016 – process, Priorities &
Citizen’s Participation
 Dr. Qais Aslam Analysis of Federal & Provincial Budgets 2015-2016 – A Gender perspective of
Informal Economy
 Prof. Dr. Qais Aslam has also written many short stories under the caption “Nothing but the Truth”.
 Prof. Dr. Qais Aslam specializes in Environmental Economics; Poverty, Social Economics Issues,
and Development Issues with reference to Economy of Pakistan and International Economics with
reference to WTO. He also teaches History of Economic Thought and Philosophy of Social Sciences,
Business & Economics.
 Was Delegate to Pakistan & India Solidarity meeting on their independence days under SAFTA to
Amritsar, India on 14th & 15th August 2007
 Was Delegate to Conference on Pakistan – Bangladesh Economic Relations at Dhaka in May 2006
 Was Delegate to Punjab-Punjab Trade and Culture Exchange under SAFTA delegation to India in
December 2005
 Was Delegate and presented paper to 11th World Congress on Social Economics June 2004 Albertville,
France
 Was Guest of Department of Economics, Strathclyde University, Glasgow UK, on Link Program
between Government College, Lahore and Strathclyde University, Glasgow between 15 th January 2002
and 1st February 2002
 Was Delegate to the Conference: `Youth Towards the 21st Century' 24th - 31st May 1987, Sofia,
Bulgaria.
 Was Deputy Leader of the Pakistani Delegation to the 12th World Youth Festival in Moscow, August
1985.
 Was Delegate to the WFTU Asian-Pacific Seminar on Rural Development 15th - 17th January 1990,
Karachi, and Pakistan Delegate to the 17th FAO Conference for Asia and the Pacific, April 24 - May 3,
1984 Islamabad
 In 2014; 2015 and 2016 Dr. Qais Aslam has participated in numerous TV debates on different channels
on the issues pertaining to Economy and Budget of Pakistan
 He has read his papers on the Federal and Punjab Budgets; on GST Plus and Pakistan; on Fight against
Torture in Pakistan; on Gender and Home based Issues in Pakistan’s and Provincial Economies; and
written articles on Pakistan-China Economic Corridor; on Pakistan-Iran Economic Prospective and on
Federal Budget of Pakistan.
 He also co-authored a Research paper published in the Lahore Journal of Business Volume 3 (2) titled
Workplace Bullying and Employee Performance among Personnel in Pakistan
 In 2015-2016 Dr. Qais Aslam has chaired sessions and has been a key speaker on GSP Pus in context
to Environment & Human Rights; Climate Change, and China-Pakistan Economic Corridor as well as
Issues of Poverty and sustainability in Pakistan
 Dr. Qais Aslam Participated in International Workshop as Climate Leader in. Climate Reality Project
as Climate Leader, Miami, Florida, USA Conducted by Al Gore (Former Vice President of USA)
September 2015
 Dr. Qais Aslam Participated in International Workshop as Climate Leader in. Climate Reality Project
as Climate Leader, Houston Taxes, USA Conducted by Al Gore (Former Vice President of USA)
August 2016

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