For many years, we observed states interact in an anarchic system enjoying the privilege of world politics as their sole province of sovereignty and power. But what happens when non-state actors, like international organizations, interfere with politics and international political economy? Why are they important? How do they use international law and agreements to bring balance?

Firstly, the increased international contact, produced by the rapid revolutions in transportations of goods and services in the global marketplace, has created the need for well-organized structures to settle disputes and bring order. This means that IGO’s promote the deliberation of trade and the usage of agreements in order to frame a network of trade based on cooperation.

Moreover, the increased global interdependence, especially in the economic sector, renders urgent the interference of IGO’s like IMF and the World Bank. These institutions can address economic issues thoroughly. On the one hand, the World Bank, established after WWII, has created 4 agencies. The IBRD, which provides loans for projects of reconstruction and development charging an interest rate, the IDA with lending to the LDC’s to provide them better services (education, safe environment, shelter, economic productivity), the IFC, with loaning to companies in LDC’s and the help in private investment, and lastly the MIGA promoting flow of private development capital to LDC’s, are these agencies. With the formation of multilateral agreements, like the Financing Agreement for <> funding in Burundi, they touch upon economic, social, environmental, humanitarian issues that states cant control. On the other hand, the IMF’s role is to keep currencies stabilized and it is source for short-term loans to countries with big problems with their economy, with low rates of development of capital and low investment.

Econ.internationalists firmly support their operations and involvement in marketplace policies but econ.nationalists oppose them stating that the World Bank aimed to alleviate poverty by 1980-1990 by providing loans to states but the creation of infrastructure didn’t help to accomplish anything. They also argue that IMF’s economic reforms, like cutting spending and drop of currencies, produce more hardships and can lead to government instability, violence and outburst of criminal activity. Recent examples stated are Greece’s debt burdens of €420 bn. criticized as a result of IMF’s economic restrictions.

Furthermore, the expansion of transnational problems like litigation between states over marketplace or between states and corporations about rights over investments. The 1967 Draft Convention on Protection of Foreign Property, the 1974 Charter of Econ. Rights and Duties of States and the 1995 Multilateral Agreement on Investment are multilateral agreement, never ratified by states, that indicated efforts to codify set of rules in international investment. Therefore, the utilization of Bilateral Treaties, such as the NAFTA, is necessary promoting the National and Most-favored Nation Treatment, Minimum Standard Treatment including the fair and equitable treatment and the full protection and security mechanisms. According to Pfaffermayer (2004) and Neumayer and Spess (2005), not only does this increase establishment of rules but also FDI flows.

Lastly, the failure of current state-centered system in combination with the efforts of small states to gain economic prosperity raises the role of IGO intervention and their usage as a means for cooperation in the interactive arena of marketplace. The mercantilism system alongside with the rise of protectionism during the Great Depression of 1929-1934 brought a 66% decline of world trade and US’s isolation. The need for IGOs was huge. The structure of RTAA (Reciprocal Trade Agreements Act) and the multilateral agreement of GATT was a milestone for lowering barriers to trade, rejecting quotas and reducing non-tariff barriers creating an international marketplace framework based on reciprocal cooperation. The Uruguay Round of GATT brought significant changes by promoting a liberal point of view that no state has competitive advantage by lowering tariffs, something that the previous state-centered system didn’t offer.

The failure of current state-centered system required even more IGO interference and therefore the 1995 Marrakesh Agreement created WTO, the successor of GATT, regulating a more robust dispute settlement system. When a dispute arises between two or more states, a WTO panel is formed composed by 3 judges. This panel renders a decision, which might oppose or agree with the complaint state. Next step is the DSB accept or rejects this decision. Parties may appeal. Appellate decision is rendered. And then this is a binding decision. The 2001 Doha Development Round raised issues like intellectual property, “free trade”, authorized retaliation and payment of compensation. These were issues that states didn’t bring up.

Because of that, trade represents an optimal source in int. political economy. It is important to be in balance so that the imports of countries are the same as the exports. Trade is crucial because not only can it create product instability and currency weakness but also overdependence of a state over another. Since many LDC’s have more imports that exports, the net flow they receive is only 3% of world’s total and this makes them vulnerable to EDC’s.

Despite the fact that trade is a significant issue for int. politics, the lengths that international political economy can reach are tremendous. We see that there are political and cultural differences between the states and this creates high stakes. States can come into disagreements because of litigation over economic patterns. But now the information revolution facilitates the integration of political economy. This is best justified by recent examples, which show that states are in a need of control and are willing to create and utilize institutions, multilateral and bilateral agreements that reduce economic hardships, raise interdependence, form rules in international economy. The creation of World Bank, WTO and the SAP’s of IMF is proof of eagerness to reach broader consensus. Rooted in the idea of liberal institutionalism supporting the functionalist’s opinion, this revolution affects the creation of institutions, handling economy, promoting a nonzero sum game for states.

Lots of concern is centered on the capital development. Loans is one of the categories of capital and source of hard economy which is utilized by states to finance their development needs by borrowing heavily from external resources. It’s standard measurement to states ability to meet debt payments. Econ. Internationalists believe LDC’s (and not only) are in a minor position because not only, if they are in risky position, they have high interest rates but also because it increases inflation, unemployment and lowers currencies. (Rouke 414). Private investment is another concern of international political economy. It includes, FDI that means buying and investing on goods, and services across borders making them funds with short term investments. If investors lose confidence then the flow can turn sharply negative. On the other hand, FPI is the mechanism that keeps money in constant motion and promotes investment in stocks, public and private debts are below the level where bond-holder can exercise control. That’s why in international political economy states are considered major economic actors.

Another important aspect of international political economy is that states can’t function and prosper alone. They need cooperation with other states. Because of that compliance with the set of rules formed by states is significant. States comply because of reciprocity, which means that if one state does it others will follow too. They might do it also because they want to keep their reputation in the international arena safe. In the same concept they want to establish or strengthen international relations with other states. An example that justifies such a case is the reasons that states comply with WTO arbitration panel’s decision. In a legal binding way they enforce their relations and if there is a bridge of obligation then the state that broke has to change its rulings and behavior otherwise trade is retaliated.

That is why sanctions contribute to the intern. Political economy. They can be either economic punishments or reducing the rights of states examined in the 1933 Montevideo Convention. Some of these sanctions are denying access into the market and cutting off like the US Agreement of Section 103 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 used as a way to deter Iranian aggression. In order to be effective, sanctions must be limited in scope and have a focused and targeted goal.

The spectrum of international political economy cant be complete without mentioning that states “cant maximize”. This means that they can’t have everything like fairness, justice, human rights and capital development. All these are contradicting interests that can’t be accomplished at the same time and there is no democracy or autocracy who has achieved the perfect equilibrium in balance them.

The enhancement of international political economy is created through the notion of “Free Trade”. Free trade is a policy followed by some international markets in which countries’ governments do not restrict imports from or exports to other countries. Free trade is epitomized by the European Economic Area and the North American Free Trade Agreement (NAFTA) and has established open markets. On the one hand, econ. internationalists support it because it has schedules for reducing tariff and non-tariff barriers to trade. Its advocates claim that it reduces or eliminates many restrictions on foreign investments and financial transactions and facilitates transportation by allowing trucking across borders (Rouke 434). Moreover, they confirm that this lowers competitiveness in the global market and offers widespread opportunities to LDC’s but especially to developing countries, such as Brazil, Colombia and Argentina. These countries, alongside with others, have created the Southern Common Market “Mercosur” in order to expand their treaties and trade agreements, form unity and enlarge negotiations.

However, this specific case example rises up many questions from the opponents of Free Trade point of view. They observe that since Argentina’s, Colombia’s, Chile’s financial crisis, Brazil demonstrates the most influential and powerful role in Mercosur by having the ability to slow down negotiations. Going back to NAFTA, opponents of the notion believe that this agreement has been very beneficial for US and Canada leaving Mexico in some ways ‘injured’. This means that central and southern Mexico has suffered from the arrival of subsidized US corn, increased by 1400% 1993-2004(Rouke 436). Therefore, Econ. Nationalists establish some basic arguments. The first is that industries must be protected from free trade and its unfettered regulations. They also say that free trade is worsening the environment and introduces labor exploitation. But there main argument is that rich states use it to become richer and richer by transforming economic development to political power and exploitation of economically disadvantaged states.

But “Free Trade” has taken over much more international dimensions that we could ever imagine. Many of the debates of Free Trade are associated with environmental issues. Many advocates of free trade argue that drivers of environmental pollutions can be deterred by the usage of trade agreements like CITES which is a multilateral agreement between governments that ensures that free trade won’t threaten rare species any more. They also say that treaties in combination with IGO’s, summits, awareness campaigns and financial, technological and capacity building assistance will improve environmental problems.

The UNCHE (1972) was a pollution conference that wealthy states and the notion of free trade was worsening environmental problems by polluting water and air and making the life dangerous for humans. The UNCED in Rio (1992) was a UN Conference on Environment and Development as well as the 2002 World Summit Sustainability Development in Johanessberg. They both agreed on the crucial role that free trade might play and reflected that because of that there was more cooperation, more ambition, more discussion and willingness to finance projects for nature and species protection, protection of any kind of life on Earth.

Additionally, there were a lot of agreements considering the worth of free trade to regimes like the ozon layer or the climate change. The 1987 Montreal Protocol listed specific conditions including reduction of consumption and carbon emissions targeting mostly the industrialized EDC’s by pushing restrains to free trade negotiations. The 1990 London Amendments presented the 3 Ban Lists, which increased free trade incentives and boosted campaigns. This treaty pursued states to comply with it because the states who signed it and ratified would have trade benefits like reduction of costs and tariff barriers. The UNFCCC of 1992 including the Kyoto Protocol of 1997 presented the COP, which stated that if states ratify they are members of the Treaty Agreement to reduce the Annex I countries’ carbon emissions by less than 8% by 2012. In order to achieve compliance “green” investment was strongly encouraged through the CDMs.

Lastly, a large percentage of criticism that free trade has seen is in the humanitarian rights regime. Advocates of human rights believe that free trade opens more opportunities to violations of rights. They say that by allowing free trade we are enhancing the rapid creation, buying, selling and transfer of weapons. This might have destructive consequences for the Human Rights “Vulnerable Population” such as children, women, refugees and even stateless persons. People supporting the Genocide Convention are also against free trade.