Economic Factor as determinant of Foreign
An increased economic activity warrants that the surplus
Policy:
The level of economic development attained by a country has
deep impact on the foreign policy of the state. One of the middle
range objectives of the foreign policy of a state is to expand,
diversify and strengthen its economic relations with the external
world.
goods, raw material and services of the country have markets
outside the country and that the state may ensure the
procurement of the needed products, raw material and services at
economical rates. Similarly Pakistan is always concerned about
securing markets for its raw material, cotton, rice, leather
products, sports ware and cotton products. The level of economic
development has a direct relationship with the life standard of the
citizens of the given country
What is Importance of Economics in IR.Discuss its Scope
International economics is concerned with the effects upon
economic activity from international differences in productive
resources and consumer preferences and the international
institutions that affect them. It seeks to explain the patterns
and consequences of transactions and interactions between
the inhabitants of different countries, including trade,
investment and transaction.
 International trade studies goods-and-services
flows across international boundaries from supply-and-
demand factors, economic integration, international
factor movements, and policy variables such
as tariff rates and trade quotas.[1]
 International finance studies the flow
of capital across international financial markets, and
the effects of these movements on exchange rates.[2]
 International monetary economics and
international macroeconomics study flows of money
across countries and the resulting effects on their
economies as a whole.[3]
 International political economy, a sub-category
of international relations, studies issues and impacts
from for example international conflicts, international
negotiations, and international sanctions; national
security and economic nationalism; and international
agreements and observance.
 The economic theory of international trade differs
from the remainder of economic theory mainly
because of the comparatively limited international
mobility of the capital and labour.[5] In that respect,
it would appear to differ in degree rather than in
principle from the trade between remote regions in
one country. Thus the methodology of international
trade economics differs little from that of the
remainder of economics. However, the direction of
academic research on the subject has been
influenced by the fact that governments have often
sought to impose restrictions upon international
trade, and the motive for the development of trade
theory has often been a wish to determine the
consequences of such restrictions.
 The branch of trade theory which is conventionally
categorized as "classical" consists mainly of the
application of deductive logic, originating with
Ricardo's Theory of Comparative Advantage and
developing into a range of theorems that depend
for their practical value upon the realism of their
postulates. "Modern" trade analysis, on the other
hand, depends mainly upon empirical analysis.
What is foreign Aid? What are objective of Donor and
Donnie?
Foreign aid, the international transfer of capital, goods, or
services from a country or international organization for the
benefit of the recipient country or its population. Aid can be
economic, military, or emergency humanitarian (e.g., aid
given following natural disasters).
Foreign aid can involve a transfer of financial resources or
commodities (e.g., food or military equipment) or technical
advice and training. The resources can take the form of
grants or concessional credits (e.g., export credits). The
most common type of foreign aid is official development
assistance (ODA), which is assistance given to
promote development and to combat poverty. The primary
source of ODA—which for some countries represents only a
small portion of their assistance—is bilateral grants from one
country to another, though some of the aid is in the form of
loans, and sometimes the aid is channeled through
international organizations and nongovernmental
organizations (NGOs). For example, the International
Monetary Fund (IMF), the World Bank, and the United
Nations Children’s Fund (UNICEF) have provided significant
amounts of aid to countries and to NGOs involved in
assistance activities.
Foreign aid can involve a transfer of financial resources or
commodities (e.g., food or military equipment) or technical
advice and training. The resources can take the form of
grants or concessional credits (e.g., export credits). The
most common type of foreign aid is official development
assistance (ODA), which is assistance given to
promote development and to combat poverty. The primary
source of ODA—which for some countries represents only a
small portion of their assistance—is bilateral grants from one
country to another, though some of the aid is in the form of
loans, and sometimes the aid is channeled through
international organizations and nongovernmental
organizations (NGOs). For example, the International
Monetary Fund (IMF), the World Bank, and the United
Nations Children’s Fund (UNICEF) have provided significant
amounts of aid to countries and to NGOs involved in
assistance activities.
Countries often provide foreign aid to enhance their own
security. Thus, economic assistance may be used to prevent
friendly governments from falling under the influence of
unfriendly ones or as payment for the right to establish or
use military bases on foreign soil. Foreign aid also may be
used to achieve a country’s diplomatic goals, enabling it to
gain diplomatic recognition, to garner support for its positions
in international organizations, or to increase its diplomats’
access to foreign officials. Other purposes of foreign aid
include promoting a country’s exports (e.g., through
programs that require the recipient country to use the aid to
purchase the donor country’s agricultural products or
manufactured goods) and spreading its language, culture, or
religion. Countries also provide aid to relieve suffering
caused by natural or man-made disasters such as famine,
disease, and war, to promote economic development, to help
establish or strengthen political institutions, and to address a
variety of transnational problems including
disease, terrorism and other crimes, and destruction of
the environment. Because most foreign aid programs are
designed to serve several of these purposes simultaneously,
it is difficult to identify any one of them as most important.
Objectives of Donor and Donnie:
A simple promise to donate may be all an organization
needs from a donor. However, before investing substantial
time, money, and credibility in a larger-scale project, an
organization may want to minimize the potential for
misunderstandings and make a donor’s promise to support
the project a legally binding obligation. A carefully crafted
donation agreement can accomplish this; it can ensure that
there is a meeting of the minds between a donor and donee
as to the amount and timing of the donation and other
important issues that may need to be addressed to assure a
mutually satisfactory experience.
A donation agreement is always necessary when the donor
will impose, and donee will accept, certain conditions or
continuing obligations pertaining to the gift. For example,
formal, written agreements are needed for:
 a donation subject to restrictions that allow the
donor control over the future use of the donation
 a donation to be held, invested, or disbursed
pursuant to certain agreed-upon terms
 a donation that will result in naming a property or
project after the donor
Under these and similar circumstances, both the donor and
the donee have a heightened interest in having the terms of
the gift clearly evidenced to avoid future misunderstanding.
The donation agreement is not discretionary and, thus, the
arguments for and against set forth below are irrelevant.
Write note on IMF

The IMF was established on December 27, 1945 in

Washington on the recommendations of Bretton Woods
Conference. But it started working on March 1, 1947. The The fund of the IMF is SDRs 216.75 billion and to replenish
fund has 185 member countries accounting for more than 80
per cent of total world production and 90 per cent of world its resources it borrows from the world financial markets and
trade.

member countries. IMF’s own fund is contributed by member

The purpose of the Fund is to promote international

countries.
monetary cooperation, to facilitate the expansion and

Each member country has a quota based on its economic

balanced growth of international trade, to promote exchange

and financial strength its national income, share in world

stability and to prevent unnecessary exchange

trade and monetary gold held by it. The quota also

depreciations, to remove all exchange controls and

determines the voting power of a member country and its

restrictions and to establish multi-convertibility of all

borrowing power.
currencies and lastly to help member countries with funds to

correct maladjustments in their balance of payments.

Discuss in detail WTO

The World Trade Organization is a global organization made establishment of regulations protecting the trade and
up of 164 member countries that deals with the rules of trade investment of ideas, concepts, designs, patents and so forth.
between nations. Its goal is to ensure that trade flows as
smoothly and predictably as possible.
The purpose of the WTO is to ensure global trade
commences smoothly, freely and predictably. The WTO
As part of his broader attempts to renegotiate the United creates and embodies the ground rules for global trade
States' global trade deals, President Trump has threatened among member nations, offering a system for international
to withdraw from the WTO, calling it a "disaster". If the U.S. commerce. The WTO aims to create economic peace and
were to withdraw, trillions of dollars in global trade would be stability in the world through a multilateral system based on
disrupted. consenting member states (in 2017 there were
164 members) that have ratified the rules of the WTO in their
individual countries as well. This means WTO rules become
The WTO has been under scrutiny before. You may
part of a country's domestic legal system. The rules,
remember seeing news footage of the protests at the doors
therefore, apply to local companies conducting business in
of the World Trade Organization's (WTO) Third Ministerial
the international arena.
Conference held in Seattle, Washington in 1999. Similar
demonstrations against the WTO have also occurred in Italy,
Spain, Canada, and Switzerland. What is the WTO, and why If a company decides to invest in a foreign country by, for
do so many people oppose it? The following article example, setting up an office in that country, the rules of the
addresses these questions and concerns regarding the WTO (and hence, a country's local laws) will govern how that
world's only international organization that deals with the can be done. Theoretically, if a country is a member of the
global rules of trade. WTO, its local laws cannot contradict WTO rules and
regulations, which currently govern approximately 97% of all
world trade.
The WTO was born out of the General Agreement on Tariffs
and Trade (GATT), which was established in 1947. GATT
was part of the Bretton Woods-inspired family, including
the International Monetary Fund (IMF) and World Bank. A
series of trade negotiations, GATT rounds began at the end
of World War II and were aimed at reducing tariffs for the
facilitation of global trade. The rationale for GATT was based
on the most favored nation (MFN) clause, which, when
assigned to one country by another, gives the selected
country privileged trading rights. As such, GATT aimed to
help all countries obtain MFN-like status so no single country
would hold a trading advantage over others.

The WTO replaced GATT as the world's global trading body

in 1995, and the current set of governing rules stems from
the Uruguay Round of GATT negotiations, which took place
from 1986 to 1994. GATT trading regulations established
between 1947 and 1994 (and in particular those negotiated
during the Uruguay Round) remain the primary rule book for
multilateral trade in goods. Specific sectors such as
agriculture have been addressed, as well as issues dealing
with anti-dumping.

The Uruguay Round also laid the foundations for regulating

trade in services. The General Agreement on Trade in
Services (GATS) is the guideline directing multilateral trade
in services. Intellectual property rights were addressed in the
Note on North South Dialogue

The North-South Dialogue refers to the process through U.S. policies and relations with the other Northern powers
which the developing and newly independent nations of the inevitably served to help or hinder progress in the dialogue.
"third world," predominantly in Asia, Africa, and Latin For example, changes in trade policies between the United
America, engaged the industrialized countries of North States and Western Europe could serve to distract these
America and Western Europe in negotiations over changes countries from their negotiations with the industrializing
to the international economic system during the 1970s. countries or cause them to extend new levels of control over
their interactions within their respective spheres of influence
in the developing world. Late in the 1970s, the increasing
After World War II, many nations of Latin America became
conflicts between the United States and the Soviet Union
increasingly frustrated with U.S. trade and tariff policies. At
finally served to sour the prospects for continuing North-
the same time, nationalist movements in Asia and Africa
South discussions, as the industrialized nations renewed
helped lead to widespread decolonization. Membership in
their focus and redirected their resources to the Cold War
the United Nations had risen from 51 countries in 1945 to
and paid less attention to development issues. By
100 in 1960 and 150 by 1979. The sudden influx of new
September of 1980, the discussions in the United Nations
countries changed the balance of power in the General
that had characterized this dialogue had lost their
Assembly and made possible the establishment of the
momentum. Although some dialogue on these issues
United Nations Conference on Trade and Development, or
continued, it remained a series of discussions on economic
UNCTAD, in 1964. UNCTAD created a forum through which
issues and never presented the workable solution that its
the "southern" or "third world" nations could propose
proponents had hoped it would.
economic policies, engaging industrial democracies of the
"north." The term "North-South Dialogue" was used to
distinguish this dynamic from the East-West conflict of the There are many ways to interpret the high point of the North-
Cold War, and to stress the point that development issues South Dialogue in the 1970s. Some economists have
were just as pressing as the ideological conflict between reviewed the southern proposals for broad changes in world
communists and capitalists. economic policy and concluded that they were either
fundamentally unworkable or designed to benefit only certain
segments of the Third World; others counter that the
Several factors increased the willingness of the industrialized
proposals were necessarily extreme in order to establish a
nations to negotiate. One was the rising power of oil-
firm position from which to open negotiations with the
producing countries in the Arab world, and another was the
industrialized North. Either way, the exact implementation of
U.S. loss in the war in Vietnam, which demonstrated to both
the proposals presented through UNCTAD was always
the world and the industrialized North that not even wealth
unlikely, because they centered on the Southern ideal and
and power were enough to guarantee military victory. Both of
would have required the economically-powerful North to
these issues drew Western attention toward the global
concede every point. The North-South Dialogue can also be
balance of economic power. Additionally, the dialogue began
viewed as a political struggle between the world's "haves"
in a period of relaxed East-West tensions, which meant that
and "have-nots." In this view, the discussions became a
the industrialized world could give more attention to issues
vehicle through which the South could unite and assert
like development. The Newly Industrializing Economies,
power within the United Nations and other international
meanwhile, believed the entrenched international economic
organizations to counter the ability of the North to dictate the
system benefited developed countries at the expense of the
course of world affairs.
developing world. They hoped to facilitate a reorganization of
the international economic system to rectify this imbalance.

The North-South Dialogue addressed issues pertaining to

trade and tariffs, international finance, foreign aid, and the
governance of multinational companies and institutions.
During the era of detente in the 1970s, when East-West
tensions were more relaxed, there was a willingness among
industrialized nations to cooperate. Even as detente began
to falter in the mid-1970s, the parties to the North-South
Dialogue continued their discussions.