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Pavitar Parkash Singh, Lovely Professional University Unit 20 : Forms of Economic Cooperation

Unit 20 : Forms of Economic Cooperation Notes

CONTENTS
Objectives
Introduction
20.1 International Economic Cooperation
20.2 Coordination of Macroeconomic Policy and Exchange Rates
20.3 International Trade
20.4 Developing Country Debts
20.5 Summary
20.6 Key-Words
20.7 Review Questions
20.8 Further Readings

Objectives

After reading this Unit students will be able to:
• Discuss the International Economic Cooperation and International Trade.
• Explain Coordination of Macroeconoic Policy nd Exchange Rates.
Introduction

Although some form of economic cooperation has been a part of international political relations
during most of this century, American interest in international economic cooperation has increased
substantially in recent years. This heightened desire to coordinate economic policies with the other
major economic powers is in part a response to the special problems of the 1980s : the sharp fluctuations
in exchange rates, the massive shifts in the trade balance, and the explosive growth of debt among
many of the developing countries.
The increased interest in international economic cooperation also reflects the more fundamental
changes in the world economy that have been evolving over a longer period of time. The world
economy has become more interdependent : international trade has increased relative to production
for domestic markets and international capital markets have become larger and more active. In
addition, the United States has lost the dominant economic position that it enjoyed in the early postwar
years. Japan and the European Economic Community (EEC) have become major economic powers
that compete effectively in trade and finance.
How has policy coordination evolved in this changing environment ? How have the changes in the
world economy altered the problems and possibilities of international economic cooperation ? What
are the prospects and potential benefits and costs of increased cooperation in the future ?
Co–operation in macroeconomic and exchange rate policies generally means redirecting and increasing
the economic role of governments. In contrast, cooperation in international trade involves reducing
the interference of governments in private markets. Experience with the international debt problem
has shown little explicit intergovernmental cooperation except for the Paris Club negotiations that
deal with debts to the governments themselves. It is useful therefore to begin by considering the
macroeconomic and exchange rate coordination and then to turn to cooperation in international
trade and in dealing with international debt.

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