ULI459U-GLOBAL POLITICAL ECONOMY
Chapter 7: The Impact of International Organizations in a Global Economy
Introduction
The international system necessitates cooperation in the context of elements such as war, conflict, peaceful settlement of problems, security and national interest. This cooperation is often economic or political and increases the interaction of countries in the light of regionalization and globalization. It can be said that the historical development of globalization began with the research aimed at discovering the region and the environment where people live. After the World War II, the emergence of international organizations, regional activities of countries together for a specific purpose in a particular region, and international communication have developed and increased globalization. In fact, although globalization and regionalization seem to be contradictory concepts, it has the ability to develop each other.
In the 1980s, the adoption of neoliberalism in economic policies became a result of globalization and regionalization activities, and neoliberalism supported globalization and regionalization. In this process, international organizations and non-state actors have important roles. In particular, international and regional organizations such as the European Union (EU), Shanghai Cooperation Organization (SCO), The General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA), the Organisation for Economic Cooperation and Development (OECD) and multinational corporations (MNCs), which are the product and result of globalization, can influence the global political economy as non-state actors. For example, the fact that some multinational corporations’ assets are higher than the GDP of some countries, and that they can create economic and political crises can make these non- state actors equally powerful with the state.
International organizations, which are a means of globalization or regionalization, often come together for economic reasons and carry these cooperations to political areas. There are many reasons why international organizations have impacts on the global political economy. These can be summarized briefly as access to globalization, facilitating communication, losing the impact of loneliness policies on the international system with globalization and gaining the importance of cooperation, creating pressure elements through the political and economic forces of international organizations, and the existence of political or economic reasons on the basis of existing institutions.
Regionalization-Globalization Debate Today
The concept of regionalization is the political administrative process of the regions for economic and political activities and welfare and service delivery (Magel, 2011: 1). It is also used to refer to the formation of political groups or blocks aimed at reducing regional barriers to trade and investment (Haggard, 1993: 48-49). It is the result of political, economic, ethnic, cultural
closeness and cooperation efforts with the participation of states and non-state actors. Regionalization is the concentration of trade in goods and services, the means of production and the economic, political and social activities of individuals in a particular region or country (Shujiro, 2019).
The importance of regionalization in terms of global political economy is the impact of economic and political regionalization on the international system. The first stage of economic regionalization is that a group of national states form a system of markets that are larger and more tightly connected, giving less importance to their national borders with economic objectives. These systems include free trade zones and customs unions. The next stage is the economic union (Balaam & Dillman, 2015: 395-397). The actors involved in economic regionalization create a common market by liberalizing and standardizing the circulation of goods, services and means of production within the regional structure in which they are involved.
The development of the global political economy in the process of globalization has gained momentum as a result of the interactions between international relations, politics and economy. In this context, with the international organizations envisaged by neoliberalism and the economic policies proposed by these organizations, the dissolution of power and welfare, the transfer of authority of nation states and transnational capital policies, changes occur in both the policies of the countries and global governance institutions (Özaslan & Akbulut, 2017: 105).
European Union (EU)
While ideas for the unification of Europe have been around for a long time, the end of the World War II with a major destruction in Europe has been a turning point. In this context, Jean Monnet, in 1946, introduced a plan that included European economic, political and cultural unification and the establishment of the United States of Europe, the liberalization of trade and the establishment of economic and political ties between Europe and the United States (Akalın, 2006). This plan was based primarily on the idea that political integration would take place in Europe after the economic integration. In accordance with Jean Monnet’s plan, Robert Schuman announced a declaration on the establishment of the European Coal and Steel Community (ECSC) in 1950. In the context of the Schuman Declaration, on 18 April 1951, the Treaty of Paris was signed between France, Germany, Italy, Belgium, the Netherlands, and Luxembourg, and the ECSC was established (Akdemir, 2014: 47- 48). Thus, the first step was taken towards the free movement of coal and steel. Coal and steel, the raw materials of war, has become the tools of peace and 6 European states, with their free will, transferred some of their sovereignty to a supranational institution.
The EU organized a summit in Amsterdam in 1997 and the objectives of addressing the deficiencies of the
Maastricht Treaty were defined as the Amsterdam Treaty. The establishment of the European Security and Defense Identity has been given importance, changes have been made regarding the institutional structure of the CFSP, the decision-making process and the types of savings, and a CFSP High Representative has been identified. It was decided to evaluate the Petersberg Missions (humanitarian aid and rescue, peacekeeping, intervention in crisis management and attempts to ensure peace) within the scope of CFSP (Özdal, 2008: 5). As a result of the agreement signed at the Nice summit held in 2000, changes were made in the size and composition of the Commission, in the Council of Ministers, the weight of votes, decision-making procedures and strengthened cooperation in the institutional structure (Akdemir, 2014: 54).
The EU has been founded on certain values and has taken its current form. It has the basic principles it expects from member states in order to ensure full integration. These principles defined in Lisbon Treaty: human dignity, freedom, peace, democracy, equality, the rule of law, respect for human rights and minority rights. These values are common to the Member States in a society in which pluralism, non-discrimination (EUR-Lex, 2007). In summary, as can be understood from the articles of the agreement, these principles briefly cover principles such as cohesion, equality, peace, freedom of movement, solidarity, respect for national identity, security, commitment to law, and transnationalism.
The Functions of the International Organizations
In this section, information about the organization and functioning structures, and functions of some international organizations that are important for the global political economy will be given. These organizations are as follows: the Shanghai Cooperation Organization (SCO), the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), and the North American Free Trade Agreement (NAFTA).
Shanghai Cooperation Organization (SCO)
The Shanghai Five, founded in 1996 by Russia, China and three independent Central Asian countries, to achieve both common goals and their specific goals, and to solve their problems, in which the summit meetings held every year at the level of heads of state and the decisions taken at these summits are very important in terms of understanding the overall framework of the organization and reading its basic goals. The summits formed the institutional structure of the Shanghai Five and the purpose of its establishment, and in a sense, the constitution of the organization was created.
General Agreement on Tariffs and Trade (GATT) and World Trade Organization
The GATT was signed on 30 October 1947, and entered into force on 10 January 1948. From 1948 to January 1,
1995, GATT, which has been accepted by many countries, has been the only multilateral contract to regulate international trade.
128 countries have joined the GATT until the WTO was established. The period in which GATT was in force coincided with the Cold War period. The entry into force of the GATT, which will form the free trade order after the World War II, corresponds to one year after the adoption of the Marshall Plan and one year before the establishment of NATO.
World Trade Organization (WTO)
The establishment of the WTO took place in the Uruguay Round two years after 1991, when the USSR was officially dismantled. The agreement signed for the establishment of the ITO was not achieved, and in 1995, it gained an institutional structure and became the WTO. It has a total of 159 members throughout the world and has many agreements and protocols (Simayi, 2014: 2). The objectives of GATT are divided into two as general and specific. Although it is a trade agreement on its basis, it has gained the feature of being an “international organization” due to its multilateral nature, and the necessity of acting in order to implement its provisions. This is why its general objective, just like other international organizations, is to raise the welfare levels of member states, to ensure the full use of world resources through stable growth, and to help the development of production and international trade. Its specific objective is to minimize the barriers to international trade with tariffs in order to achieve the general objectives (Çeştepe, 2013: 239-240).
The North American Free Trade Agreement (NAFTA)
NAFTA was signed between the US, Mexico and Canada, after four years of negotiations (Hufbauer & Schott, 1992: 3), and entered into force in January 1994. However, the ground for the establishment of a free trade zone between these countries was created earlier. For example, after the negotiations since 1985, the US and Canada signed a free trade agreement in 1989. On the other hand, Mexico and the US made three agreements between 1985-89 on taxes, trade and investments. In 1990, Canada and Mexico made 10 different agreements in the field of agricultural industry. In all three countries, there was a deficit in payments balance before the NAFTA, there were external debts, and therefore export-oriented development strategy was needed. NAFTA is considered to be the natural course of increasing commercial integration between the private sector in North American countries, and the elimination of obstacles to such integration (Cohen, Raul & Blecker, 1996: 239). However, it is important to note that NAFTA is not similar to the EU as a model (Baer & Weintraub, 1994: 9).
Objectives of WTO are as follows: raising the living conditions of the member states, provide full employment, ensuring the steady growth of real income, supporting the
market demand of member states, improving the production of goods and services, expanding their trade and to do this by ensuring optimal use of world resources in accordance with the target, protecting the environment and finally developing its own resources to meet the needs of member states at different economic levels (Ertürk, 1993: 225). While implementing the trade policies, WTO is acting in the light of the fact that it has made transparent, predictable and indifferent arrangements. The system allows other members to complain to the Dispute Settlement Body (DSB), which is an administrative solution body for dispute resolution, when the commercial arrangements of the member states do not comply with the WTO rules.
Organization for Economic Co-operation and Development (OECD)
The Organization for Economic Cooperation and Development (OECD) is an international organization that works to create better policies for better living standards and creates welfare, equality, opportunity and welfare policies for all (http://www.oecd.org/about/ DoA: 29.01.2019). Accordingly, the establishment, structure, and organs of OECD will be examined under this heading.
Under the Marshall Plan, OEEC (Organisation for European Economic Cooperation) was established in 1948 for the reconstruction of Europe, which was devastated during the World War II, and in 1960, with the participation of Canada and the US, gained global prominence. Following the completion of the OEEC, the OECD was established in 1961, which was more comprehensive and more functional than its successor. The foundation agreement of the OECD was signed in Paris on 14 December 1960. The OECD has 20 founding members. These are; USA, Austria, Canada, France, the Netherlands, Luxembourg, Germany, Italy, England, Belgium, Denmark, Ireland, Greece, Switzerland, Sweden, Spain, Iceland, Norway, Portugal, and Turkey (https://www.diplomasi.net/ekonomik-isbirligi-kalkinma- teskilati-oecd/ DoA: 29.01.2019).
The mission of the organization is defined as: working with governments to understand what drives economic, social and environmental change, measuring productivity and global flows of trade and investment, analyzing and comparing data to predict future trends, setting international standards on a wide range of things, from agriculture and tax to the safety of chemicals. It also looks at issues that directly affect everyone’s daily life, like how much people pay in taxes and social security, and how much leisure time they can take. It compares how different countries’ school systems are readying their young people for modern life, and how different countries’ pension systems will look after their citizens in old age, and so on (http://www. oecd.org/about/ DoA: 29.01.2019).
Turkey’s membership to the OECD, which is one of the twenty founding members, could have explained through simply political reasons for many years, but in recent
years, it has gradually started to gain an economic meaning in accordance with the organization’s core functions. Turkey, like other programs, contributes to the creation of OECD programmes, policies and priorities. The fact that the organization works with the voting system allows each member to take into consideration its own interests in the search for common interests. One of the most striking examples of the current cooperation between Turkey and the OECD is the OECD Istanbul Private Sector Development Center, which was established in 1994 with the decision of the OECD Council. The training programs of the Black Sea Economic Cooperation Organization members’, and Caucasian, Central Asian, Mediterranean, Middle Eastern, and South East European countries’ private sector and government representatives are organized in cooperation with OECD and TIKA (Turkish Cooperation and Coordination Agency). To date, approximately 3,000 people have received training at the Center in the legal and structural areas of the private sector. The Center contributes to the dissemination of OECD norms in the above-mentioned regions and the development of cooperation between the private sectors of the region. The Center has a function in the regional sense, increasing the cooperation among the private sectors, strengthening the economic and political independence of the countries in Central Asia and the Caucasia and integrating them with the world economy. It is thought that the increasing interest of the OECD in Central Asia and the Caucasia will increase the effectiveness of the Istanbul Private Sector Development Center in the coming period as well as its visibility within the OECD. On the other hand, the OECD Ankara Multilateral Tax Center, established in 1993, provides tax training to senior tax officers of developing countries under the leadership of OECD member states in order to provide technical assistance in the process of transition to the market economy.
Multınatıonal Corporatıons (MNCs) and Globalızatıon
MNCs are gaining importance every day in today’s world where economic integration and market economy on a global scale are increasing in all parts of the world and liberalization of international trade and financial activities are taking place. With the effective functioning of MNCs, radical changes in the structure and functioning of the global economy occur. With their global strategies, MNCs determine the level of international trade flows and investments and the places where economic activities will intensify. In short, MNCs that shape international trade are gaining more and more strength in the global economy. In addition to their strategic capabilities, the MNCs, which played an important role in the development of mass production technologies in industrialized countries and the increase in national wealth, have increased their importance over time, and become a true global actor on a global scale. MNCs producing technological infrastructure and operating in the global economy have become
economic units that increase the standard of living by creating welfare and employment. MNCs are actors who determine which countries or regions to invest in, where new production units will be built and new technology will be taken, and determine sustainable competitive power and living standards. With the tools and the power they have, multinationals are becoming the routers of the area in which they operate. MNCs, which are also used in borrowing and lending, are contributing to the host country’s export opportunities, foreign exchange inflows, capital accumulation and production capacity by direct means thanks to their extensive experience in foreign markets and the sales and marketing organizations distributed across the world. The MNCs that contribute to the economies of the countries they go to as mentioned above are requested by the countries (Özcan, 2011: 28).