ps 5 midie 2

Civil War-

A war in which the main participants are within the same state, such as the government and a rebel group.

• The lack of a central government in Somalia led to internal rebel groups fighting to assume power.

Terrorism-

The use or threatened use of violence against noncombatant targets by individuals or nonstate groups for political ends.

• Example: ISIS is a group in the Middle East that has launched many attacks in Iraq and Syria with the goal of establishing a caliphate.

Asymmetrical warfare -

armed conflict between actors with highly unequal military capabilities such as when rebel groups or terrorists fight strong states

•  During the Iraq war after Saddam Hussein’s fall, the United States fought insurgent groups from Iraq. The insurgent groups utilized guerrilla warfare to combat the United States’ military power.

Separatist -

An actor that seeks to create an independent state on territory carved from an existing state.

• Example: Certain groups in Kashmir wish to break away from India and join Pakistan or form their own nation.

Irredentist -

rebel groups seeking to join their land to a neighboring state

• Example: China seeks to annex Taiwan, as it believes that the two share cultural history.

Proxy wars -

Conflicts in which two opposing states fight” by supporting opposite sides in a war, such as the government and rebels in a third state. US giving supplies to South Korea and South Vietnam while Soviet Union gave supplies to North Korea and North Vietnam,

Insurgency -

A military strategy in which small, often lightly armed units engage in hit-and-run attacks against military, government, and civilian targets.

Al-Rehman corps in the Syrian war against the government

Extremists -

Actors whose interests are not widely shared by others; individuals or groups that are politically weak relative to the demands they make.

• Example: Al-Qaeda believed in using terrorism and violence to impose Islamic law, and they did so by launching lethal attacks, such as 9/11 and the 2015 Paris attacks.

Coercion-

A strategy of imposing or threatening to impose costs on other actors in order to induce a change in their behavior.

• Example: In the 2005 London bombings, Al-Qaeda threatened that its attacks would continue until the UK withdrew its forces from Iraq and Afghanistan.

Provocation -

A strategy of terrorist attacks intended to provoke the target government into making a disproportionate response that alienates moderates in the terrorists’ home society or in other sympathetic audiences.

• Example: Following 9/11, many Americans supported the Bush Administration striking back.

Spoiling -

A strategy of terrorist attacks intended to sabotage a prospective peace between the target and moderate leadership from the terrorists’ home society.

Example: During the late 1990s and early 2000s, the Israeli government and Palestinian Authorities pursued a peace agreement, but Hamas attacks undermined the trust between the two.

Outbidding -

A strategy of terrorist attacks designed to demonstrate superior capability and commitment relative to other groups devoted to the same cause.

• Example: Fatah and Hamas have been in constant competition for the support of the Palestinian people.

Comparative advantage -

The ability of a country or firm to produce a particular good or service more efficiently than it can produce other goods or services, such that its resources are most efficiently employed in this activity. The comparison is to the efficiency of other economic activities that the actor might undertake given all the products it can produce—not to the efficiency of other countries or firms. Example: The United States has a comparative advantage in capital-based production, so it specializes in production and exportation of airplanes.

Absolute advantage -

The ability of a country or firm to produce more of a particular good or service than other countries or firms can produce with the same amount of effort and resources.

• Example: Saudi Arabia has an absolute advantage in oil production, as it has greater access to resources than other nations do.

Neo-mercantilist -

A belief that national economic policy should encourage exports and discourage imports, and that the country should aim to run a trade surplus. So called in relationship to the classical mercantilism of the colonial powers, which aimed at running trade surpluses with their colonies.

• Example: China’s trade policies encourage exports and restrict foreign imports. 

Heckscher-Ohlin trade theory -

a country will export goods that make intensive use of the factors of production in which it is well endowed. For example, a labor-rich country will export goods that make intensive use of labor

• Example: The United States is rich in capital, so it will export machinery; Bangladesh is rich in labor, so it will export clothing

Protectionism -

The imposition of barriers to restrict imports.

• Example: The U.S. placing tariffs on imported steel to protect its scarce factors of production.

Trade barriers -

Government limitations on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments buy only domestically produced goods, and health and safety standards that discriminate against foreign goods.

• Example: The U.S. placing tariffs on imported clothing to protect its scarce clothing production.

Tariff -

A tax imposed on imports. Tariffs raise the domestic price of the imported goods and may be applied for the purpose of protecting domestic producers from foreign competition.

• Example: The U.S. may place tariffs on imported clothing to protect the economic profit of domestic clothing manufacturers.

Quantitative restriction (quota) -

A limit placed on the amount of a particular good that is allowed to be imported and sold domestically.

• Example: Japan only allows a certain number of foreign rice imports each year, which may help protect its domestic rice production.

Nontariff barriers to trade -

regulations targeted at foreign goods or requirements that governments purchase from domestic producers. In all instances, the effect of these policies is to shelter domestic producers from foreign competition.

• Example: “Buy American” laws govern what state and local governments can buy.

Stolper-Samuelson theorem

The theorem that trade protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin theory: if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization.

• Example: Bangladesh is a labor-rich country, so its capital and land factors of production are scarce. Therefore, those industries would oppose free imports of capital and land goods, and they would favor protectionism.

Ricardo-Viner (specific factors) model -

A model of trade relations

that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin theory, in which the nature of the factor—labor, land, capital—is the principal consideration.

• Example: The U.S. is a capital intensive country, so it will import clothing and export cars. The car industry benefits, as the demand for cars increases, and the clothing industry faces a loss, and clothing imports increase competition. However, machinery in the clothing industry can’t be easily moved to the car industry to make profit.

Reciprocity -

In international trade relations, a mutual agreement to lower tariffs and other barriers to trade. Reciprocity involves an implicit or explicit arrangement for one government to exchange trade-policy concessions with another.

• Example: USMCA (US-Mexico-Canada Agreement): the US allows tariff-free imports of Mexican auto parts as long as Mexico provides similar access for US agricultural exports

Most-favored nation (MFN) status -

A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties.

• Example: If the United States offers Japan a 5% tariff rate, it must offer that to all WTO members.

World Trade Organization (WTO) -

An institution created in 1995 to succeed the GATT and to govern international trade relations. The WTO encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes.

• Example: The WTO works to reduce subsidies and tariffs that hurt developing countries’ exports. It also acts as a global court for trade conflicts between countries, such as disputes between China and the United States over tariffs and intellectual property.

General Agreement on Tariffs and Trade (GATT) -

An international institution created in 1947 in which member countries committed to reducing barriers to trade and providing similar trading conditions to all other members. In 1995, the GATT was replaced by the WTO.

• Example: Its goals were very similar to those of the WTO, but GATT had a looser structure that did not accommodate the entry of all countries into the international trading system.

Regional trade agreements (RTAs) -

Agreements among three or more countries in a region to reduce barriers to trade among themselves.

Example: The USMCA (formerly NAFTA) is made up of the United States, Canada, and Mexico and keeps trade mostly tariff-free between the three

Portfolio investment -

Investment in a foreign country via the purchase of stocks (equities), bonds, or other financial instruments. Portfolio investors do not exercise managerial control of the foreign operation.

• Example: If a bank lends money to an Indian company, the company is responsible for making principal and interest payments, but the bank cannot dictate what the company does with the borrowed money. Investors will earn profits from interest or dividends.

Sovereign lending -

Loans from private financial institutions in one country to sovereign governments of other countries.

• Example: Governments of Indonesia or Brazil taking loans out from European or American financial institutions.

Foreign direct investment (FDI) -

Investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. Direct investors maintain managerial control of the foreign operation.

• Example: Toyota owning a truck factory in Thailand; if the factory is not profitable, Toyota loses the money.

World Bank -

An important international institution that provides loans at below-market interest rates to developing countries, typically to enable them to carry out development projects.

• Example: The World Bank funds road and school construction projects in Kenya.

Recession -

A sharp slowdown in the rate of economic growth and economic activity.

• Example: During the 2008 global financial crisis, the U.S. economy entered a recession when GDP fell, unemployment rose, and consumer spending sharply declined.

Depression -

A severe downturn in the business cycle, typically associated with major declines in economic activity, production, and investment; a severe contraction of credit; and sustained high unemployment.

• The Great Depression of the 1930s saw U.S. unemployment rise above 20% and industrial production fall by nearly half.

Default -

To fail to make payments on a debt.

• In 2012, Greece nearly defaulted on its government bonds during the European debt crisis before receiving bailout assistance.

Austerity - 

the application of policies to reduce consumption, typically by cutting government spending, raising taxes, and restricting wages.

• After the 2008 financial crisis, Spain adopted austerity measures by reducing public sector salaries and cutting social welfare spending.

Bank for International Settlements -

One of the oldest international financial organizations, created in 1930. Its members include the world’s principal central banks, and under its auspices they attempt to cooperate in the financial realm.

• The BIS helped coordinate central bank policies during the 2008 financial crisis to stabilize global credit markets.

International Monetary Fund -

A major international economic institution established in 1944 to manage international monetary relations. It has gradually reoriented itself to focus on the international financial system, especially debt and currency crises.

• The IMF provided financial assistance and policy guidance to Argentina during its 2018 currency crisis.

Multinational corporation (MNC) -

An enterprise that operates in a number of countries, with production or service facilities outside its country of origin.

Apple designs products in the U.S. but manufactures components in China and assembles them in multiple other countries.

Global supply chains -

A network of customers and suppliers involved in the production and distribution of a product. Parts of it may be inside a multinational corporation; parts may also involve links between corporations.

• The production of an iPhone involves parts from Japan, South Korea, and Taiwan, assembled in China, and sold worldwide.

Bilateral investment treaty -

an agreement between two countries about the conditions for private investment across borders. Most of these treaties include provisions to protect an investment from government discrimination or expropriation without compensation as well as mechanisms to resolve disputes.

• The U.S.–Vietnam Bilateral Investment Treaty encourages U.S. companies to invest in Vietnam by guaranteeing legal protections.

Exchange rate -

The price at which one currency is exchanged for another

• If 1 U.S. dollar equals 150 Japanese yen, the exchange rate is 1 USD = 150 JPY.

Appreciate -

In terms of a currency, to increase in value relative to other currencies.

• When foreign investors buy U.S. assets, demand for dollars rises, causing the dollar to appreciate against the euro.

Depreciate -

in terms of currency, to decrease in value relative to other currencies.

• When inflation increases in Turkey, the Turkish lira depreciates against the U.S. dollar.

Devalue -

to reduce the value of one currency relative to other currencies

• In 1994, Mexico devalued the peso to make its exports cheaper and more competitive abroad.

Monetary policy -

An important tool of national governments to influence broad macroeconomic conditions such as unemployment, inflation, and economic growth. Typically, governments alter their monetary policies by changing national interest rates or exchange rates.

• The U.S. Federal Reserve lowered interest rates in 2020 to stimulate the economy during the COVID-19 pandemic.

Central bank -

The institution that regulates monetary conditions in a country’s economy, typically by raising or lowering interest rates and the quantity of money in circulation.

• The European Central Bank sets interest rates for countries that use the euro. 

Fixed exchange rate -

An exchange-rate policy under which a government commits itself to keeping its currency at or around a specific value relative to another currency ora commodity, such as gold.

• Hong Kong maintains a fixed exchange rate where the Hong Kong dollar is pegged to the U.S. dollar.

Gold standard-

the monetary system that prevailed between about 1870 to 1914 in which countries tied their currencies to gold at a legally fixed price

• Under the gold standard, the U.S. government guaranteed that one ounce of gold was worth $20.67.

Floating exchange rate -

an exchange-rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention

• The U.S. dollar has a floating exchange rate that fluctuates based on supply and demand in global markets.

Bretton Woods monetary system -

The monetary order negotiated among the World War II Allies in 1944, which lasted until the 1970s and which was based on a U.S. dollar tied to gold. Other currencies were fixed to the dollar but were permitted to adjust their exchange rates.

• Under Bretton Woods, the British pound and French franc maintained fixed rates to the U.S. dollar, which was backed by gold.

Adjustable peg -

A monetary system of fixed but adjustable rates. Governments are expected to keep their currencies fixed for extended periods but are permitted to adjust the exchange rate from time to time as economic conditions change.

• Example: In the late 1960s, Britain devalued the pound within the Bretton Woods system after economic pressure made its fixed rate unsustainable.

International monetary regime -

A formal or informal arrangement shared by most countries in the world economy to govern relations among their currencies.

• Today’s international monetary regime is based on floating exchange rates and cooperation through institutions like the IMF and G20.