Political Factors on Global Interactions (HL IB Geography)

Multi-Government Organisations

• Multi-Government Organisations (MGOs) are organisations or countries that come together to form a single unit, mostly for trading purposes

• Some are international, such as the UN, World Bank and IMF, while others are regional, such as when Armenia made an agreement with the EU in 2019 to create the EU-Armenia regional trade agreement (RTA)

• MGOs allow state boundaries to be crossed to facilitate the free movement of goods, services, finance and ideas

• Members are encouraged to end tariffs and promote the exchange of ideas in areas of security, trade, etc

• They are seen as promoting global interactions as they encourage different people to become one

• Organisations such as the UN maintain international peace and have substantial influence on global geopolitics

• MGOs such as the WTO and IMF dictate international trade rules and financial regulations, influencing global economic health, trade tariffs and development policies

• The World Health Organisation (WHO) and the United Nations Environment Programme (UNEP) tackle global challenges, from pandemics to environmental issues, and guide national health policies and environmental strategies

• MGOs such as UNESCO promote cultural exchanges, safeguard world heritage sites and set international educational standards

Regional MGOs

• Regional MGOs have agreements between countries within the same geographical area

• These are normally referred to as trading blocs and allow free trade between member countries but impose tariffs on external countries that trade with them

• As of January 2024, there were 361 regional trade agreements in force around the world

• There are different types of trading blocs with different levels of economic integration, ranging from a low level of integration, such as a bilateral agreement between two countries, to a high level of integration, such as the EU

• Free trade areas are blocs in which countries agree to abolish trade restrictions between themselves but keep their own restrictions with other countries

• An example is USMCA: (United States-Mexico-Canada Agreement), previously known as NAFTA (North American Free Trade Agreement),

• Customs unions such as Mercosur in South America operate as a form of economic cooperation by having a common external tariff on overseas imports

• Common markets are custom unions that also allow the free movement of people and capital within the member nations

• Economic unions such as the EU (European Union) allow groups of nations to trade freely but also allow the free movement of people and capital. All member nations must have common policies on various sectors such as agriculture, employment, industry, regional development, etc.

  

Advantages and Disadvantages of Trading Blocs

Free Trade Zones

• Free Trade Zones (FTZs) are specific areas where goods undergo processing, storage, and re-exportation, often without being charged standard customs duties

• FTZs are usually located in areas with global access for trade, such as major seaports, international airports and national borders

• As goods in FTZs are not charged customs tariffs, this makes imports and exports more viable and cost-effective

• FTZs boost exports by offering business incentives to produce goods, mainly for international markets

• FTZs encourage foreign investors, leading to improvements in international businesses, stimulating local economies and increasing employment

• Countries increase trade relations, economic ties and interdependence through the removal of tariffs

• FTZs improve customs procedures and become key hubs/nodes in global supply chains, ensuring faster delivery of goods and refining international logistics

Export-processing zone (EPZ)

• An export-processing zone (EPZ) is a type of FTZ that is usually set up in developing countries by their governments

• EPZs encourage industrial and commercial exports

• The World Bank defines an EPZ as

• Its main purpose is to attract foreign investors, partners, and buyers who can help a country enter the world trade market for industrial goods

• This helps to generate employment and foreign exchange for the host country

• In 1997, 93 countries had set up export processing zones, employing 22.5 million people

• By 2023, more than 5 400 EPZs were in existence worldwide, located both in developed and developing economies, employing more than 70 million people

• The majority are in Asia, with China accounting for more than half of all EPZs