Elements of the Bretton Woods System

3. Establishment of an overseer for these exchange rates; thus the IMF was founded.
4. Eliminating restrictions on the currencies of member states in the International trade
5. U.S. Dollar became the global currency

Creation of 2 financial institutions

• International Bank for Reconstruction Development (IBRD) or World Bank to be responsible for
funding postwar reconstruction projects.
• International Monetary Fund (IMF) which was to be the global lender of last resort to prevent
individual countries from spiraling into credit crises.
• Both are the key players in economic globalization.

The GATT and the WTO

• GATT – Genral Agreement on Tariffs and Trade established in 1947; with 23 members countries;
focused on trade goods through multinational trade agreements conducted in many “rounds” of
negotiation. Objectives of GATT:
a. Promote global trade with minimal or no hindrances at all;
b. Lowering tariffs and quotas on imports; c. Eliminate preferential trade agreements.
• However, “it was out of the Uruguay Round (1986-1993) that an agreement was reached to
create the World Trade Organization (WTO)” (Ritzer, 2015, p.60).
• The WTO was established to serve as the “police” of international trade to settle dispute
between countries.
• Unfortunately, the reputation of these institutions has been dwindling, mainly due to practices
such as lending the corrupt governments or even dictators and imposing ineffective austerity
measures to get their money back.
• Eventually, the policies forwarded by WTO came to be called the Washington Consensus.

Organization for Economic Cooperation and Development (OECD)

• The most encompassing club of the richest countries in the world with 35 member states as of
2016, with Latvia s its latest member.
• It is highly influential despite the group having little formal power. This emanates from the

Organization of Petroleum Expoting Countries (OPEC)

• – 1960 was originally comprised of Saudi Arabia, Iraq, Kuwait, Iran and Venezuela
• - Formed because member countries wanted to increase the price of oil, which in the past had a
relatively low price and had failed in keeping up with inflation. Today, the United Arab Emirates,
Algeria, Libya, Qatar, Nigeria and Indonesia are also included as members.

European Union (EU)

• an international organization comprising 28 European countries and governing common

economic, social, and security policies. Originally confined to western Europe, the EU undertook
a robust expansion into central and eastern Europe in the early 21st century.
 The EU’s members are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lituania, Luxemborg,
Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the
United Kingdom.
• The EU was created by the Maastricht Treaty, which entered into force on November 1, 1993.
The treaty was designed to enhance European political and economic integration by creating a
single currency (the euro), a unified foreign and security policy, and common citizenship rights
and by advancing cooperation in the areas of immigration, asylum, and judicial affairs. The EU
was awarded the Nobel Prize for Peace in 2012, in recognition of the organization’s efforts to
promote peace and democracy in Europe.

• Most members in the Eurozone adopted the euro as basic currency but some Western European
nations like the Great Britain, Sweden, and Denmark did not.

• Critics argue that the euro increased the prices in Eurozones and resulted in depressed
economic growth rates, like in Greece, Spain and Portugal. The policies of the European Central
Bank are considered to be a significant contributor in these situations.

North American Free Trade Agreement (NAFTA)

• First created in 1989 with only Canada and the United States as trading partners.
• On January 1, 1994 when Mexico joined the two other nations.
• NAFTA helps in developing and expanding world trade by broadening international cooperation.
• It also aims to increase cooperation for improving work conditions in North America by reducing
barriers to trade as it expands the markets of the three countries.
• The creation of NAFTA has caused manufacturing jobs from developed nations (Canada or the
United States) to transfer to less developed nations (Mexico) in order to reduce the cost of their
products.

North American Free Trade Agreement (NAFTA)

Positive Consequences
• Lowered prices by removing tariffs
• Opened up new opportunities for small-and medium sized businesses to establish a name for
itself
• Quadrupled trade between the three countries created five million U.S. jobs

Negative Consequences
 Excessive pollution
 Loss of more than 682,000 manufacturing jobs
 Exploitation of workers in Mexico
 Moving Mexican farmers out of business
 Positive Consequences
 Asia Pacific Economic Cooperation (APEC)

 Was established in 1989 as an association of Asia Pacific countries which aim to remove any
hindrances to free trade in the region.
 With the entry of the US as member in 1993, APEC has become more active in its pursuit of free
trade (actually, it wants to block Japanese dominance in Asian trade).
 In its meetings held in Seattle, USA in 1993 and in Bogor, Indonesia in 1994, member-countries
pledged to remove all trade restrictions by year 2010 for industrialized nations and 2020 for
underdeveloped countries to attain complete liberalization.

ASEAN Free Trade Agreement (AFTA)

 The ASEAN Free Trade Agreement was formally put up through the Singapore Declaration of
January 1992 which stipulates that the ASEAN will uphold the principles of free trade and open
trade as represented by GATT through the implementation of the “Common Effective
Preferential Treatment (CEPT) where member-countries will gradually lower taxes and tariffs on
imported goods within a period of 10 years (until 2003).

The Washington Consensus

 The Washington Consensus dominated global economic policies from the 1980s until the early
2000s.

 Its advocates pushed for minimal government spending to reduce government debt.

 The also called for the privatization of government-controlled services like water, power,
communications and transport, believing that the free market can produce the best results.

 Finally, they pressured governments, particularly in the developing world (like the Philippines),
to reduce tariffs and open up their economies, arguing that it is the quickest way to progress.

 Advocates of the Washington Consensus, conceded that, along the way, certain industries
would be affected and die, but they considered this “shock therapy” necessary for long-term
economic growth.

 Advocates of the Washington Consensus made it look like it was as simple as managing the
household. The problem with the household analogy is that governments are not households.
For one, governments can print money, while households cannot.

 Moreover, the constant taxation systems of governments provide them a steady flow of income
that allows them to pay and refinance debts steadily.

 Despite its initial success, the like of Reagan and Thatcher, the defects of the Washington
Consensus became immediately palpable (of a feeling or atmosphere) so intense as to seem
almost tangible.