Foreign Direct Investment: Legal and Policy Issues;

It consists two essay problems. The total number of pages should not exceed TWENTY TWO, double spaced, divided as you wish between the two problems. You are not limited to the materials used in the class. problems should identify sources. Foot notes or end notes are equally acceptable. However, this is not a law review article. Source are not needed for every paragraph.

1) Fundamental assumption that underlay the government of international economy has been that the economies of the world would converge around a capitalist model. The details of such a capitalist model may differ but the essentials will remain the same: market allocation of resources, Privatization of state owned assets, preference for private investment over state direction of the economy. This model was sufficiently flexible that it can encompass different style if capitalism: the free market of the U.S., the social market of Europe, state directed capitalism of Japan and South Korea, the hybrid economy of China.
Beginning with secretary of the Treasury Baker’s speech in Seoul Korea in October 1985 to joint annual meeting of the World Bank and IMF, the United States determined the use of the IFIs to impose a single model of capitalism on their borrowing member countries: the United States model. The principles outlined in Baker speech were then codified in Washington Consensus and became the basis of the “conditionality” which attached to the financing of the World Bank and IMF.

What were the Factors that led to undermining this strategy? Could the tolerance for different strategies of development be reconciled with desire for a rule based system of international trade? Does a tolerance for different strategies of development undermine the conditions which have accompanied IFI financing of the 80s and 90s? Do you see a role for the IFIs in the future? If so, what is it?

2) International oil has been describeed as the lifeblood of industrial society. A National Security Council paper in 1953 noted that American Based multinational oil companies were instruments of U.S. foreign policy. The underlying assumption of the paper (and U.S. policy in 1954) was the interests of the companies and the U.S. government were parallel, if not identical. Is this assumption still valid? If not, how has the role of the companies changed over time? What were the main factors that contributed to the changes? Is it likely that international oil will always be mainly governed by geopolitical rather than economic factors and hence that the role of governments will become increasingly dominant in the governance of international oil?