Chapter 2

IPE

By: Nestor Jeremy B. Moreno

1. A hegemon is a country that produces a disproportionately large share of the world's total
output that leads in the development of new technologies.
2. Hegemonic stability theory states that international political-economic system more likely to
remain stable when a single nation-state is the dominant world power, or hegemon.
3. A hegemon assumes responsibility of establishing international rules and regulations of
international trade and commerce. It exerts influence through the vast resources it possesses in
establishing a world order.
4. In parallel with assuming the primary responsibility of establishing world order, a hegemon's
gain from trade is so large that it is willing to bear the full cost of creating trade rules.
5. The two periods of rapid growth of world trade occurred under two periods of clear hegemony,
one that of Great Britain and the other, the United States.
6. Great Britain was by far the world's largest and most innovative economy throughout the
nineteenth century. The home of the first and second industrial revolution, trade within Europe
and between Europe and the rest of the world, grew at what were then an unprecedented pace.
7. British hegemony, therefore, created and sustained an open, liberal, and highly stable global
economy in which goods, capital and labor flowed freely across borders.
8. In the twentieth century, United States exited World War II as an undisputed hegemon. It played
the leading role in GATT, and it led the push for negotiations that progressively eliminated
barriers to trade. The result was the most rapid increase in world trade in history.
9. Hence, the two regimes are characterized by stable trade and the rapid growth of international
trade.
10. Hegemonic transition, in one instance, be attributed with the collapse of the world trade
system.
11. After World War I, Great Britain, badly in debt because of its massive war expenditures, could
no longer assume the responsibility of a hegemon, being weakened economically, financially
and militarily of the war. By the end of World War II, she was effectively replaced by the United
States as the new hegemon of the world order.
12. Great Britain tried to reconstruct the world economy in the 1920's but lacked the resources and
the United States having such, are reluctant to do so.
13. Hence, hegemonic transition has been associated with considerable instability of international
trade.
14. By the 1960's, Japanese economy grew tremendously that it posed a direct threat to the
economic hegemony of the United States. United States on the other hand, suffered from
increasing budget deficit and a rising foreign debt, as well as decrease in manufacturing output.
15. For a time, it was clear that the United States is losing ground to Japan.
16. In the 21st century, China's rise posed another threat to the US's hegemony. 21st century was
called the Asian Century.
17. Two changes in WTO became evident. The emergence of developing countries as a powerful
bloc within the organization and the emergence of NGOs as a powerful force outside of the
organization.
18. The membership expanded in included the vast majority of the world's developing and third
world countries.
19. As a powerful bloc, it transformed the process of bargaining within the organization.
Concessions are now less likely to be disadvantageous to satellite countries. Brazil, India and
China are the three biggest developing country member of the WTO.
20. Developed countries are capital-intensive, and competitive in high-technology products and
services. Developing countries are labor-intensive and competitive in the labor market.
21. Health and environmental concerns is increasing used as a nontariff barrier to protect local
industries and consumers from foreign competition.
22. Regional Trade Agreement (RTA) is a trade agreement between two or more countries, usually
located in the same region of the world, in which each country offers preferential market access
to the other.
23. It comes in two basic forms: Free trade areas and customs unions. In a free trade area,
governments eliminate tariffs on other member's goods, but each member retains independent
tariffs on goods entering their market from nonmembers. In custom union, member
governments eliminate all tariffs on trade between customs union members and impose a
common tariff on goods entering the union from nonmembers. Thus, RTA is inherently
discriminatory.
24. After the disintegration of the Soviet bloc, came the proliferation of RTAs.
25. It can be attributed to the desire to gain more secure access to the market of a particularly
important trading partner. Others emphasize a government's need to signal a strong
commitment to economic reform. They convince foreign partners that they will maintain open
markets and investor-friendly policies. Some argue that it is purposed to increase bargaining
power in multilateral trade negotiations. It can also serve as protection to other RTAs.