This paper examines the financial effects of globalization through the lens of international partnerships. It discusses how global partnerships generate mutual benefits by pooling complementary assets, while also acknowledging their inherent constraints and costs. Using NAFTA and the Trans-Pacific Partnership as key examples, the paper explores how partnership agreements can affect not only the signing parties but also third-party stakeholders, including governments and non-profit organizations. A particular focus is placed on investor-state dispute mechanisms and their potential to undermine governmental sovereignty, illustrated through the Kenex v. United States case.
Global partnerships are developed in order to capture a number of different benefits. The partners will typically each bring assets that the other partners need — skills, resources, competencies, or even things like market access. The partnership therefore works when the partners have mutually beneficial assets that they can contribute. As a result, the partnership has a lower cost, or greater potential benefits, than would be achievable if either party pursued the opportunity alone.
Understanding how these partnerships function at a financial level is central to evaluating the broader effects of globalization on economies and institutions. When structured effectively, such agreements allow each party to leverage the other's strengths in ways that create value beyond what independent action could generate.
Financially, a partnership usually offers either a higher revenue ceiling, lower costs, or both. If the partners did not believe this to be the case, they would not enter into a partnership, because there are costs associated with running a partnership that might not otherwise exist. The financial benefits, therefore, are expected to be greater — or the partners believe that they will be greater — than the cost of maintaining the partnership.
There are, of course, limitations to partnerships. In a general sense, a partnership will be limited in terms of opportunity. The key to the partnership is that by working together, the parties expand their opportunity, but that expansion is not infinite — there are still constraints. For example, NAFTA was designed as a three-way partnership, but it is only beneficial to the extent of the economies of the three constituent nations. It can only grow so much without incorporating other nations.
While some constraints are natural, others are built into the text of a partnership agreement. The parties agree on the extent of the partnership, the roles, and the disposition of rewards gained from it. Many such partnership agreements contain extensive dispute resolution mechanisms because of the difficulty in interpreting the precise nature of the partnership. The agreement itself therefore provides many of the constraints to its operation. Using NAFTA as an example, not all goods were covered under the agreement, and others were only partially covered. Thus, there are constraints to free trade within NAFTA that would require a subsequent addendum to the agreement in order for those constraints to be removed.
"Effects on non-profits, governments, and voter sovereignty"
"How Kenex v. US illustrates risks to government power"
You’re 53% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.