Global Business and Society Exam #3

what were the objectives of the treaty of paris (1951)

elimination of internal tariff barriers (setting of prices under certain circumstances), put an end to state subsidization (reduction of restrictive practices in coal and steel), and the harmonization of external commercial policies (imposition of taxation on coal and steel production for budgetary reasons) 

the euro is associated with

the debt crisis

what is fiscal policy?

the set of choices performed by the government pertaining to spending; the use of government spending and taxation to influence the economy, aiming for goals like economic growth, full employment, and stable prices. It involves adjusting government expenditures and revenue (taxes) to manage economic activity; for example, increasing spending or cutting taxes to stimulate a slow economy, or decreasing spending and raising taxes to slow down an overheating one. 

government should only spend the amount of money it 

collect

the WTO focuses on two things

the organization and the secretariat

the WTO is a sort of

pyramid scheme

Russian Federation is made up of three main sectors 

agriculture, industry, and services

what is monetary policy?

the actions a central bank takes to manage the money supply and credit conditions to control inflation, stimulate economic growth, and promote price stability. It influences the economy by adjusting interest rates, which in turn affects borrowing, spending, investment, and ultimately, inflation and employment

what are the main differences between monetary and fiscal policy?

Fiscal poilcy applies to government like government spending while Monetary policy is the fiscal rate and money borrowing 

what happened in 2013?

several economies called PIIGS (portugal, italy, ireland, greece, and spain) almost defaulted on their sovereign debt

what is sovereign debt?

Sovereign debt is money owed by a national government to creditors, which can be domestic or international. Governments borrow by issuing securities like bonds and bills to finance investments, manage spending during economic downturns, or fund long-term projects. The risk of a government defaulting on its debt is assessed by credit rating agencies and can lead to severe economic consequences for the country

why does the acronym PIIGS exist?

this nomenclature because these countries shared similar economic and financial contexts and challenges during the 2008 financial crisis

who signed the treaty of paris?

belgium, italy, germany, netherlands, luxembourg, and france

what did the 1951 treaty of paris establish?

the european coal and steel community (ECSC) → free trade area

what was the ECSC?

• brought together six European countries to pool their coal and steel industries and create a common market

• Created in the aftermath of World War II, its primary goal was to ensure economic expansion and peace by managing these key industries jointly and to lay the foundation for the institutions of the modern European Union (EU)

• Created against the backdrop of a devastated European economy, the ECSC aimed to prevent the resurgence of nationalism that had led to prior conflicts, particularly by integrating the coal and steel industries of its founding members

who signed the treaty of rome?

Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. These six nations were the founding members of the European Economic Community (EEC) and the European Atomic Energy Community (EURATOM), which were established by two parallel treaties signed in Rome

what did the 1957 treaty of rome?

the european economic community (EEC) → customs union

what is the EEC?

an economic and political union created in 1957 to foster economic cooperation and integration among its member states. It was established by the Treaty of Rome and was a key step towards the eventual creation of the European Union (EU), which it evolved into in 1993. The EEC's main goal was to create a common market and remove trade barriers among its six founding members

what were the objectives of the treaty of rome?

• establishing a common customs tariffs 

• establishing a common trade policy and common agricultural policy (CAP)

• guaranteeing free movement of people and goods and equal treatment to all workers

• establishing a European Social Fund (ESF) and a European Investment Bank (EIB)

• After WWII, the main destinations of trade were Germany and Belgium 

• In 1962, several Italian workers migrated in Belgium to find better fortune 

  • They were killed during an accident due to a gas leak that led the mine to explode

1) This situates the economic context in which the Treaty of Rome was signed:

• Post-war Western Europe saw a push toward economic reconstruction.

• Countries like Germany and Belgium were industrial hubs, making them natural trade partners.

Connection:
The Treaty of Rome aimed to formalize and expand this growing economic interdependence by creating a structured common market.

2) This refers to the Marcinelle mining disaster (1962) involving Italian migrant workers in Belgium.

Its relevance to the Treaty of Rome:

• The free movement provisions encouraged labor migration within the EEC.

• Italy and Belgium already had bilateral labor agreements even before the EEC, but the Treaty strengthened the framework for migrant workers’ rights.

• The disaster exposed poor labor conditions and unequal treatment, which fueled pressure within the EEC to improve:

  • worker safety,

  • social protections,

  • enforcement of equal treatment (a Treaty of Rome principle).

Connection:
The tragedy illustrated why the Treaty’s principles on equal treatment and worker protection were essential—and partly drove later EU social policy developments

who established the EFTA?

Iceland, Liechtenstein, Norway, and Switzerland

was the EFTA created as a result of the treaty of rome?

No, the European Free Trade Association (EFTA) was not established because of the Treaty of Rome, but it was created as a result of its existence. The Treaty of Rome established the European Economic Community (EEC), and the seven EFTA founding members created EFTA in 1960 as an alternative to the EEC and to liberalize trade among themselves, without adopting the political and economic integration commitments of the EEC. EFTA's establishment was a direct consequence of the failure to create a broader free trade area that would have included the EEC countries. 

Agreements with EEC -> 1994: European Economic Area (EEA)

Possibility to enter the internal market of the EU 

when was the single european act signed?

1986

the single european act is the first

major revision of the Treaty of Rome

the single european act was designed to

help the original 6 (and the later members) move from a common market toward a fully integrated single market.

Why?
Because by the mid-1980s:

• the original Treaty of Rome’s goals weren’t fully achieved,

• barriers still existed for goods, capital, and people,

• and the original 6 (France, Germany, Italy, Belgium, Netherlands, Luxembourg) + later entrants needed a new legal framework to finish the job.

The SEA created the mechanisms (more majority voting, harmonization of laws) needed to let these countries cooperate effectively.

what were the objectives of the single european act?

• Setting out timetable to get to a single market by 1993 for 

  • Goods and services

  • Capital

  • Citizens 

ESSENTIALLY:

The Treaty of Rome (1957) aimed for a common market, but by the 1980s:

• many barriers still existed,

• there was no unified regulatory system,

• and internal borders made trade slow.

The SEA fixed this by setting a detailed plan to complete the Single Market by 31 December 1992.

This included eliminating the remaining barriers to:

1. Goods and services

• Harmonizing product standards

• Removing border checks

• Ensuring services could be offered freely across countries

2. Capital

• Allowing money to move freely within the EEC

• Removing restrictions on investments

3. Citizens (people)

• Strengthening the free movement of workers

• Starting the idea of EU citizenship (fully realized later in the Maastricht Treaty)

when was the treaty on European Union - Maastricht signed?

1992

who signed the treaty of maastricht?

the 12 member states of the European Community on February 7, 1992. These countries were Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom

the treaty of maastricht was the turning point in the integration process, as it 

streamlined the market

The Maastricht Treaty (1992) established

(1) The Three-Pillar Structure

1. European Community (EC)

   • Managed and expanded the single market created after the Single European Act.

   • Included economic integration, social policy, environment, and eventually the path toward a single currency.

2. Common Foreign and Security Policy (CFSP)

   • Coordinated diplomacy, foreign policy, and defense cooperation.

3. Police and Judicial Cooperation in Criminal Matters (PJCC)

   • Cooperation on crime, policing, border control, justice, and asylum.

⭐ (2) Economic and Monetary Union (EMU) → the path to the Euro

Maastricht set:

• convergence criteria (inflation, debt, deficits, exchange-rate stability)

• rules for adopting the single currency (the Euro)

• macroeconomic coordination mechanisms

⭐ (3) Higher competitiveness of firms

This refers to:

• benefits of the single currency

• reduced exchange-rate uncertainty

• easier cross-border operations

• a more efficient internal market

⭐ (4) Removal of transaction costs

This comes directly from the move toward a single currency.
Before the euro, companies paid:

• conversion fees

• hedging costs

• risk premiums for exchange-rate fluctuations

Maastricht aimed to remove these.

what would euroskeptics like to do?

Exit euro area, resume old currency called the Lira (feel like they could print as much as they want), so much to completely repay our public debt 

Introduction of the Euro both allows the country to save a lot of money on inflation 

Macroeconomic stability and Lower unemployment

who is the only body in the US with the authority to print money?

the federal government

the amount of money people could buy was limited

so the risk premium was high

if a government defaults

its entire economy will collapse

greece entered the EU on cooked books, thus they used 

falsified numbers 

After Covid, inflation in Italy increased because

we filled the pockets of our citizens with money 

There’s only one way to repay public debt: taxes

You can’t collect them today, you have to collect them tomorrow and tomorrow is future generations 

the european integration

• Different degrees of integration 

  • Free trade area -> European Coal and Steel Community (ECSC)

    • Established the first free trade area, belgium, netherlands, luxembourg, germany, italy, netherlands, and france 

  • Customs union -> European Economic Community (EEC)

  • Common market -> European Community (EC)

  • Economic union -> Single European Act (SEA)

  • Political union -> Yet to be achieved 

• The post-WWII Germa-French alliance for an Integrated Market: The European Project 

• Facilitating cross-border domestic and foreign business activities in Europe 

• Reinforcing European business opportunities abroad 

• Giving Europe and its corporation a positive role internationally

• Supporting collaboration on complex challenges for a healthy, safe and prosperous region 

  • Treaties after treaties were signed, more and more coutnries joined the EU, and so the challenges increased

    • Lead to a smooth economical and political area 

what was the main aim of the WTO

to ensure that trade flows as smoothly, predictably and freely as possible

when was the WTO establsihed?

1995

who created the WTO?

the Uruguay Round negotations (1986-94)

the WTO is the only international organization dealing with the

global rules of trade

how many members are in the WTO?

164 members, accounting for 98% of world trade (a total of 25 countries are negotiating membership)

decisions of the WTO are made by

the entire membership (typically the consensus)

WTO agreements are

ratified in the parliaments of the members

WTO levels of decision making (pyramid scheme organization) - TOP

ministerial conference → meets usually every two years 

WTO levels of decision making (pyramid scheme organization) - MIDDLE

• general council → meets several times a year in the Geneva headquarters

• also meets as the Trade Policy Review Body and Dispute Settlement Body

WTO levels of decision making (pyramid scheme organization) - BOTTOM

• goods council

• services council

• intellectual property (TRIPS) council → report to the general council

• numerous specialized committees, working groups and working parties → environment, development, regional trade agreements

WTO secretariat

• Based in Geneva → Does not itself have a decision-making role

• 620 staff headed by a Director-General (Ngozi Okonjo-Iweala) → Annual budget of roughly 197 million Swiss francs

what are the main duties of the WTO secretariat?

• To supply technical support for the various councils/committees and the ministerial conferences

• To provide technical assistance for developing economies

• To analyse world trade and to explain WTO activities to the public and media

• To provide some forms of legal assistance in the dispute settlement process

• To advise governments wishing to become members of the WTO

what are the main functions of the WTO?

WTO overriding objective → To help trade flow smoothly, freely, and predictably

• Administering trade agreements

• Acting as a forum for trade negotiations

• Settling trade disputes

• Reviewing national trade policies

• Building the trade capacity of developing economies

• Cooperating with other international organizations

what is the secretariat of the WTO?

• The Secretariat of the World Trade Organization (WTO) is the administrative and technical support body of the WTO.
  It is not a decision-making organ — member governments make all the rules — but the Secretariat ensures the WTO actually functions on a day-to-day basis.

• The WTO Secretariat is the administrative engine that supports negotiations, dispute settlement, research, and training, ensuring the WTO operates smoothly — but it has no decision-making power.

• A permanent administrative body based in Geneva.

• Staffed by international civil servants (around 600–700 employees).

• Headed by the Director-General of the WTO.

Think of it as the “civil service” or “bureaucracy” that keeps the WTO running.

what are the key characteristics/institutions of every market based economy or system?

1) Private property at the individual level

• I can possess what is mine 

• Also at the level of business (means of production) 

  • All resources available to business are private 

2) Based on market

• Central institution

• Split into buyers and sellers

  • Through their interaction, determine prices for everything 

3) Prices

The existence of privately owned businesses, free markets, and decentralized systems

centrally planned system

• Instead of letting consumers express their preferences through demand and allowing prices to determine, through the interaction between supply and demand, the government determined, on the basis of multi-annual plans, which things should be produced and in what quantity 

• No private property, no private business

  • The Soviet Union government thought about any possible thing consumers would need, they planned the quantity and quality of every good in society through a planning committee 

• Production plans 

  • Means that the complexity of the choices, how to allocate resources in a certain economic system, are substituted in a centrally planned system by the choices of the government 

Is a centrally planned system able to replicate the complexity of a market based system?

• Harder for government to respond to things they didn’t expect

• No incentive to innovate 

  • These reasons are why the Soviet Union crashed, trying to replicate things that are naturally provided in a market-based system 

• By eliminating private property and the market, every incentive to innovate and compete, to upgrade the quality of the service was non-existent 

• The difference between a market system and a centrally planned system goes beyond 

russia agriculture

• Contribute 3.3% of the national GDP and employ around 6% of the total working population 

• 10% of the world’s agricultural land is available -> relatively little arable land due to unfavorable climatic conditions 

• Grain exports 0=-> record of 72 million tons in 2024 

• Main crops cultivated

  • Wheat as the flagship crop -> Russia as the world’s largest exporter of wheat

  • Barley, oats, and rye also produced in significant quantities

  • Oilseed crops such as sunflowers, rapeseed, and soybeans

  • Fodder crops for feeding livestock

  • Industrial crops like sugar beet and various vegetables  Root crops grown in more favourable regions

russia industry

Accounts for 30.6% of Russia's GDP and employs 26% of the workforce

• Diverse range of industries and resources  Modernization efforts aimed at enhancing efficiency, productivity, and competitiveness

• Energy

• World's leading producers of oil, natural gas, and coal

• Manufacturing sector

• Metallurgy, machinery, and aerospace

• Automotive

• Technology and innovation

• Biotechnology and nanotechnology

russia services 

Employs 68% of the population and generates 56.9% of the GDP

• Dominant sectors

• Finance and banking → Moscow serving as a prominent financial centre in the region

• Retail and wholesale

• Tourism industry → Hindered by the COVID-19 pandemic and the conflict with Ukraine

• Information technology (IT)

• Digital services → Russia seeks to capitalize on its skilled workforce and technological capabilities

• Healthcare and education services → Government aims to improve access and quality in these areas

what was the euro debt crisis?

The Euro Debt Crisis was a severe financial emergency in which several eurozone governments could not repay their debt, forcing EU-IMF (a club of countries that helps member governments manage financial crises, stabilize economies, and implement reforms) bailouts, harsh austerity, and major reforms to save the euro. The Euro Debt Crisis (2009–2015) occurred when several eurozone countries, especially Greece, Ireland, Portugal, Spain, and Cyprus, could no longer repay or borrow money at affordable rates. It was caused by high government debt, weaknesses in the euro’s design (shared currency but national budgets), the 2008 global financial crisis, and loss of investor confidence. The crisis was managed through EU/IMF bailouts, strict austerity measures, and interventions by the European Central Bank, including government bond purchases. It led to high unemployment, deep recessions, social hardship, and political tensions between northern and southern Europe, but also strengthened eurozone governance through the European Stability Mechanism and banking supervision reforms.

what is the significance of TROIKA?

The Troika was the group of the European Commission, European Central Bank, and IMF that managed bailouts during the Euro Debt Crisis, providing loans and monitoring austerity reforms in countries like Greece, Ireland, and Portugal. It coordinated a financial rescue but was controversial due to the social and economic hardship caused by its measures