Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.3.9 Power in the economy, which explains where power comes from and how it shapes economic relationships
Section 7.1.1 Global exchange as a system, which describes global exchange as a system with parts, relationships, functions and emergence
Section 7.1.2 History of global exchanges, which describes how global exchange systems have evolved over time, shaped by changes in technology, power, and environmental factors
Section 7.1.3 What moves across borders? which describes what flows across borders and explains how visible global flows are linked to less visible social and ecological effects
Section 7.1.4 Multinational corporations and global supply chains, which explains the significance of MNCs and global supply chains for organising global exchanges
Section 7.1.5 How do our actions here affect people and places elsewhere?, which explains how production, policy, financial, and consumer decisions in one place affect people and places elsewhere, and the responsibilities that follow
Section 7.2.1 Why do countries trade and restrict trade? which describes different forms of protectionism and explains arguments for and against freer trade
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems, and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
explain who shapes the rules of global exchange and how various sources of power influence which rules are written and whose interests they reflect
A teenager in Germany and a teenager in the United States can buy the same smartphone, but the companies behind it face very different rules when handling personal data. In the European Union (EU), strict digital privacy laws limit how technology firms collect, store, and use information about users. In the United States, the rules are less strict, which allows companies to use data in ways that are not allowed in the EU. Firms that operate in both places must decide whether to follow EU rules everywhere, build different systems for different markets, or challenge the rules through courts or trade processes. These rules are an important part of how global exchange works and there are many people and organisations involved in writing them.
Figure 1. Teenagers in Germany and the United States may use the same phone and apps, but with very different rules about data privacy.
(Credit: Amparo Garcia, William87, both licensed from Adobe Stock)
Global exchanges link many countries, systems, people and organisations. Shared technical rules make this possible by keeping goods, money and information moving quickly and safely across borders. Cargo ships rely on common container standards and port procedures to load and unload quickly. Payment systems rely on shared digital infrastructure so that money reaches its destination safely. Airlines follow common rules for flight routes and safety checks.
Legal and commercial rules matter just as much. Businesses need contracts that hold up across more than one legal system. Countries agree on product standards and labelling so that goods meet consumer expectations wherever they are sold. Digital services depend on agreements about privacy and data storage, and creative industries depend on copyright rules that protect music, films and academic work across borders. Without these shared rules, global exchange would be like a game where each team follows different rules, making fair play and cooperation impossible.
Figure 2. Busy ports rely on shared rules to keep them running smoothly.
(Credit: chadchai, licensed from Adobe Stock)
With increased trade comes a larger role for the state, in providing the physical infrastructure and the legal and institutional systems that trade depends on. Different actors influence, write, and sometimes challenge these systems.
Section 7.1.5 showed that states, large companies, and financial institutions hold the most concentrated power in global exchange, and carry the greatest responsibility for how that power is used. This section looks at how that power gets exercised, in the writing of the rules themselves.
The rules of global exchange are written by different actors, sometimes working together and sometimes competing. Four groups are especially important.
Individual countries negotiate trade agreements, set their own tariffs and product standards (Section 7.2.1), and form alliances with other countries to increase their bargaining power in international trade negotiations. Large states such as the United States and China have a lot of power to shape global rules in international trade agreements because other countries depend on their large markets and innovative technologies, and because of fear of or dependence on their military capabilities. The European Union (EU), the Association of Southeast Asian Nations (ASEAN), the African Union, and Mercosur are examples of trading blocs formed by small and medium sized countries to coordinate their economic and trade policies and to strengthen countervailing power against larger countries (Section 7.2.3).
International organisations write many of the rules that govern global exchanges. After the Second World War, governments met at a conference in Bretton Woods in the United States to design new institutions that could support peace, reconstruction, and economic cooperation (Section 7.1.2). Several major organisations such as the International Monetary Fund (IMF) and World Bank were created during this period and became central to global exchange rule-making. Others like the World Trade Organisation (WTO) developed later as new challenges emerged. These organisations are formed by agreements among states, but their rules influence businesses, workers, and consumers around the world.
Major international organisations involved in global exchange include:
World Trade Organization (WTO): develops and enforces rules for international trade in goods and services. Members of the WTO agree to limit tariffs, reduce trade discrimination between trading partners, and follow WTO procedures to settle disputes. WTO rules and decisions help make trade more predictable, but the rules can also restrict how states support domestic industries or pursue social and environmental goals.
International Monetary Fund (IMF): works with countries to support stability in the global economy. It advises states on economic policy and provides loans to countries that are struggling to pay for imports, manage their debts, or keep their currencies stable. When countries borrow money from the IMF, they often have to agree to changes in their economic policies. This gives the IMF significant influence during difficult periods when countries need help.
World Bank Group: provides loans, grants, and technical support for infrastructure and development projects. It funds sectors such as transport, energy, agriculture, health, and education. Because it is a major lender, the World Bank can shape development priorities and long-term investment choices in borrowing countries.
United Nations (UN): develops international agreements across many fields. Specialised agencies coordinate civil aviation, shipping, intellectual property, labour standards, public health, food safety, and environmental cooperation. These include the International Civil Aviation Organization (ICAO), the International Maritime Organization (IMO), the World Intellectual Property Organization (WIPO), the International Labour Organization (ILO), the World Health Organization (WHO), and the Food and Agriculture Organization (FAO). Through these bodies, states negotiate standards that allow global systems to function smoothly.
Organisation for Economic Co-operation and Development (OECD): brings together mostly high-income countries to share data and research, develop standards, and coordinate policies. The OECD influences taxation rules, corporate governance, and education policies, often by defining what ‘good practice’ looks like for member states.
Although these organisations rely on cooperation between states, power within them is unequal. Some use voting systems based on financial contributions, while others follow 'one country, one vote.' In many cases, wealthier countries have greater influence over how rules are written and enforced (Figure 3). The authority of these institutions depends on the willingness of powerful states to fund and support them. In recent years the United States has withdrawn funding from several UN agencies and undermined the WTO's ability to settle trade disputes by blocking the appointment of judges to its appeals body. There are heated debates about reforming these institutions, especially as countries in the Global South seek more voice in global decision-making, and their future is genuinely uncertain.
Figure 3. ‘Core’ countries in the high-income Global North have more voting power in global institutions than the low income ‘periphery’ countries in the Global South.
(Credit: Global Inequality)
Multinational corporations (MNCs) have become powerful rule-makers too. Many companies operate across dozens of countries with sales revenues larger than the budgets of some states (Section 7.1.4). They shape rules in several ways:
lobbying: funding political campaigns and hiring former state officials to push for rules that serve corporate interests in national governments and international negotiations (Section 5.2.3). The financial resources multinational corporations can use in lobbying far exceed those available to trade unions, environmental organisations, and other groups working in the public interest. This difference in financial power gives corporations an advantage in rule-making processes;
sponsored research: commissioning or funding research, often in universities, that supports their preferred policy positions, shaping what counts as expert knowledge in rule-making processes;
revolving door: moving senior staff between corporations and state regulatory bodies or international organisations (called a revolving door), blurring the line between who writes rules and who benefits from them;
standard-setting: technology firms define standards for data, software, and digital platforms; pharmaceutical companies shape rules about patents and access to medicines; agribusinesses influence seed laws, food safety regulations, and export standards; financial institutions set practices for international banking and investment;
supply chain rules: companies write their own internal rules and require suppliers to follow them, so that corporate standards become effectively global rules even without being written into law.
Individuals rarely write rules alone. But acting through the roles introduced in Section 7.1.5, as consumers, employees, investors, and citizens, and connected through networks, individuals feed into the civil society organisations and movements described here. For example, after the Rana Plaza factory collapse in Bangladesh, described Section 7.1.5, workers, trade unions, and human rights activists organised together and launched Fashion Revolution, a movement demanding that clothing brands reveal who makes their clothes and under what conditions.
Figure 4. Indigenous communities protested at the 2025 COP 30 climate summit in Brazil, advocating for agreement on climate protection. (Credit: UNFCCC/Kiara Worth)
These civil society organisations and movements contribute to global rule-making, though with far less financial and staffing resources and influence than states and multinational corporations. Trade unions campaign for worker rights across supply chains. Environmental organisations push for restrictions on harmful practices. Indigenous groups demand recognition of customary land rights and cultural knowledge. Consumer groups advocate for fair trade, ethical sourcing, and supply chain transparency.
These actors rarely write formal rules, and their ability to shift the agenda depends heavily on whether they have a seat at the table during the rule-making process in a given country or international meeting. In some cases sustained campaigning has led to real changes in rules or corporate behaviour in the public interest, but progress is slow and often reversed when political conditions change in favour of corporations.
Global rule-making is not a neutral process. Some actors have more influence than others, and their preferences shape how rules are written and enforced. Power in global exchanges comes from several sources. Some are material, such as control over resources or financial systems. Others are institutional, such as the legal authority to write rules or settle disputes. Still others are more invisible, such as the ideas and norms that shape what people see as legitimate or normal.
These sources of power reflect those introduced in Section 1.3.9, but here they operate across borders and at a global scale:
market size: countries or regional blocs of economic integration like the European Union with large consumer markets can influence global standards because other countries want access to their consumers (Section 7.1.3);
control over resources and technology: actors that dominate essential technologies, infrastructure, or intellectual property can set rules about who may use them and on what terms (Section 7.3.5 coming soon);
financial and currency power: countries that issue widely used currencies like the US dollar (Section 7.4.6 coming soon), or host major financial centres like London or Hong Kong shape rules for banking, investment, and financial capital flows.
rule-setting authority: states and international organisations write and enforce rules for trade, investment, and dispute settlement.
ideas, norms, and legitimacy: narratives about 'sound policy,' 'good governance,' or 'free markets' shape what rules seem natural or desirable, making some arrangements look inevitable rather than chosen (Section 1.3.12).
historical ties, alliances, and colonial relationships: European empires once ruled large parts of the world and wrote many of the rules that shape global exchange today (Section 7.1.2). They did this at a time when power was very unequal and most countries had no voice. Even after colonised countries became independent, these systems remained in place. Old trade relationships, infrastructure, legal rules, and economic structures continue to favour some countries and restrict the influence of others in global rule-making.
Coalitions and coordination: smaller countries can increase influence by acting together through regional blocs or diplomatic alliances, helping shift the balance of power (Subtopic 7.4)
Of all the sources of power listed above, ideas are among the hardest to see. After the Second World War, the most powerful economies used their position in international organisations to promote a particular set of ideas about how development works (Section 7.3.10 coming soon). For low-income, ‘less developed’ countries, they proposed: opening markets to foreign trade, called trade liberalisation; reducing the role of the state in the economy through cutting state spending and privatising public services; and protecting private foreign investment. These structural adjustment programs (SAPs) became known as the Washington Consensus, named after the city in the United States where the IMF and World Bank are based.
These ideas shaped the policies that those institutions promoted across lower-income countries for decades. Wealthy countries and their multinational corporations benefitted directly because removing trade barriers gave them access to cheaper labour, raw materials, and new consumers. Removing state intervention made it harder for poorer countries to protect their own workers and industries, or to invest in their own development priorities.
Figure 5 shows the effect of these SAPs on national income in Latin America and Sub-Saharan Africa. Incomes rose steadily during the earlier developmentalist period, when states used tariffs, planning, and industrial policy to support their own industries. Incomes fell after 1980, when the IMF and World Bank imposed SAPs as a condition of loans. Incomes only recovered once mass protests from civil society forced the IMF and World Bank to scale back their most aggressive conditions in the early 2000s.
Figure 5. Impact of Washington Consensus policies on incomes in the periphery in the 1980s and 1990s
(Credit: Global Inequality)
Both the IMF and the World Bank have since acknowledged serious problems with this approach. The World Bank has recently and very publicly reversed its long-standing opposition to industrial policy, the use of state investment, subsidies, and protectionism to develop specific industries. That reversal shows these were policy choices that were treated as common sense which made them much harder to question or resist.
Figure 6. For decades the IMF and World Bank has advised countries facing economic crises about reform. Today, these organisations themselves are criticised for damaging economic mandates.
(Credit: Gado / Godfrey Mwampembwa, gadocartoons.com, permission pending)
Global exchanges work through rules, but those rules are shaped by people, institutions, and history. Over time, the relationships and rules of global exchange have contributed to a system in which power has become more concentrated, inequalities between countries have grown, and risks have accumulated unevenly. Subtopic 7.3 examines these conditions in more detail.
Concept: Systems, power
Skills: Thinking skills (transfer)
Time: 30-40 minutes
Type: Individual, pairs, or small group
Global exchanges depend on many different kinds of rules, written by different actors at different levels. Sometimes these rules support each other. Sometimes they clash. When rules collide, actors must negotiate, challenge, or adapt to them, often through international organisations such as the WTO or through political or legal processes.
For each case below, answer the six questions using information from the case and from this section.
Use this question set for each case:
Which actors are involved?
(Use categories: states, blocs, firms, international organisations, civil society)
What rules or standards are in conflict?
(e.g. food safety rules, IP rules, climate rules, privacy rules, trade rules)
What interests or goals is each actor trying to protect?
(e.g. public health, national security, profit, climate policy, consumer rights)
Who benefits from the existing rules? Who is disadvantaged or constrained?
Which sources of power are visible in this dispute?
(use the list in this section: market size, control over resources, etc.)
How might this dispute be resolved and who would influence the outcome?
(future orientation + systems perspective)
Case 1: US-EU food safety dispute
The European Union bans imported chicken from the United States that has been washed in a chlorine solution. US poultry producers use this method because chickens are often processed in large facilities where chlorine solutions help kill bacteria quickly and cheaply. EU regulators argue the process may pose health risks and that consumers would reject it. The US government argues the method is safe and supported by scientific studies.
Food safety rules like this are an example of a non-tariff barrier, which hinders trade in a way other than tariffs (taxes on imports). The US argues that this food standard violates trade agreements, and has challenged it in the World Trade Organization (WTO).
Actors involved: States (US, EU), regional bloc (EU), firms (US poultry producers, EU retailers), international organisation (WTO), civil society (consumer groups).
Rules or standards in conflict: EU food safety and consumer protection rules vs. US agricultural and food processing standards; and WTO trade rules concerning non-tariff barriers (any barriers that hinder trade other than taxes).
Interests or goals protected: EU aims to protect consumer health and maintain confidence in food standards. US aims to protect export markets and defend its production methods as safe and efficient.
Beneficiaries / disadvantaged: EU consumers benefit from tighter standards. US producers face restricted market access and may lose sales. EU retailers may have fewer suppliers to choose from.
Sources of power visible: Market size (EU market access), rule-setting authority (EU food standards and WTO dispute settlement), ideas, norms and legitimacy (consumer norms about 'safe food').
Possible resolution and influence: The dispute could be addressed through trade negotiations between the EU and the United States, by reviewing scientific evidence about food safety, or through decisions linked to the World Trade Organization. The EU’s large consumer market gives it strong influence, since exporters want access to EU consumers.
Case 2: COVID-19 vaccines and patent rules
Patents give companies the legal right to control how an invention is made and sold for a period of time. For medicines and vaccines, this usually means that only approved companies can produce them. These patent rules form part of global trade rules linked to the World Trade Organization.
During the COVID-19 pandemic, many countries argued that these patent rules limited how quickly vaccines could be produced. India, South Africa, the United States, and more than 100 other countries supported a temporary waiver, meaning a pause to some patent rules so more factories could make vaccines. The European Union, Switzerland, and many pharmaceutical companies opposed the waiver. They argued that weakening patent protection could reduce incentives to develop new medicines. The debate affected how widely vaccines were produced and shared during the pandemic, and took years to resolve.
Actors involved: States (India, South Africa, US, EU, Switzerland), regional bloc (EU), firms (pharmaceutical companies), international organisation (WTO), civil society (public health NGOs, treatment access movements), international organisations (WHO in advocacy role).
Rules or standards in conflict: IP rules under TRIPS vs. global public health goals during a pandemic.
Interests or goals protected: Supporters of the waiver aimed to increase global vaccine production and speed up recovery. Opponents aimed to protect innovation incentives, patent rights, and industry profits.
Beneficiaries / disadvantaged: Pharmaceutical firms benefited from existing IP rules. Countries without vaccine production suffered slower access and higher dependence. Countries with manufacturing capacity (e.g. India) stood to benefit from the waiver.
Sources of power visible: Control over resources and technology (vaccine knowledge), coalitions and coordination (waiver coalition of over 100 countries), market size (EU), rule-setting authority (WTO), ideas, norms and legitimacy (innovation narrative).
Possible resolution and influence: After two years of negotiation, WTO members agreed a limited waiver in June 2022, covering vaccine patents only and not the wider set of medicines and treatments some countries had wanted included. Supporters of a broader waiver argued it came too late and covered too little to change vaccine access during the pandemic itself. This shows how governments and large pharmaceutical companies, as WTO members with strong bargaining power, can shape not only whether a rule changes but how much and how quickly.
Case 3: EU Carbon Border Adjustment Mechanism (CBAM)
The European Union has introduced a carbon price for some high-polluting industries, such as steel, cement, fertilisers, and aluminium. This means that companies in the EU must pay more if they produce goods using methods that release large amounts of carbon dioxide.
The EU has also said that imports of these products from countries without similar climate rules will face an extra charge at the border. The goal is to prevent carbon leakage, where companies move production to countries with weaker climate rules to avoid higher costs.
Producers in countries such as Turkey, India, Brazil, and South Africa argue that the policy is unfair and makes their exports more expensive. Environmental groups support the policy, saying it treats domestic and foreign producers more equally and encourages cleaner production. Trade officials are debating whether the policy fits within global trade rules linked to the World Trade Organization.
Actors involved: States (EU members, Turkey, India, Brazil, South Africa), regional bloc (EU), firms (steel, cement, fertiliser producers), civil society (environmental groups), international organisation (WTO).
Rules or standards in conflict: Climate policy rules vs. trade rules; carbon pricing standards vs. free trade principles.
Interests or goals protected: Sources of power visible: Market size (EU import market), rule-setting authority (EU carbon policy and WTO oversight), ideas, norms and legitimacy (climate norms), coalitions and coordination (affected exporting countries).
Beneficiaries / disadvantaged: EU firms benefit from protection against carbon leakage. Exporters without carbon pricing face higher costs and barriers. Climate advocates benefit from stronger incentives for emissions reduction.
Sources of power visible: Market size (EU import market), rule-setting authority (EU carbon policy), ideas/legitimacy (climate norms), alliances (coalitions of affected exporters), international organisation (WTO oversight).
Possible resolution and influence: The dispute could be addressed through rulings linked to the World Trade Organization, through climate agreements, or by giving exemptions to some developing countries. Another option is for the EU to share some of the money it collects from the carbon charge with affected countries, for example to support cleaner production. The EU’s large market gives it strong influence over the outcome.
Case 4: Data rules and digital sovereignty
Some countries set strict rules about where digital data can be stored and how it can be used. China places strong limits on how personal data collected inside the country can be shared across borders, especially for large companies or sensitive data. In many cases, this data must be stored locally or approved by the authorities before it can be transferred abroad. The government argues that these rules help protect national security and maintain oversight of key information systems.
The European Union takes a different approach. Its rules focus on protecting people’s privacy and limiting how companies collect and use personal data. In the United States, the rules are looser, which allows firms to use personal data more freely for business purposes.
Global technology companies that operate in many countries must follow these different systems of rules. In some cases, they build separate data systems for different markets. This case shows that digital exchange depends on rules about security, privacy, and profit, and that these rules differ widely between countries.
Actors involved: States (China, EU member states, US), regional bloc (EU), firms (Apple, Meta, Tencent), civil society (privacy advocates, consumer groups).
Rules or standards in conflict: Privacy rules, data localisation rules, national security rules, and commercial data rules.
Interests or goals protected: China aims to protect national security and state control over data. EU aims to protect privacy and consumer rights. US firms aim to maximise data use for commercial purposes (profit maximisation).
Beneficiaries / disadvantaged: Consumers in the EU benefit from privacy protections. Firms face higher compliance costs. Smaller firms may struggle to adapt to different rules across markets.
Sources of power visible: Market size (EU, China, US), control over resources and technology (tech firms), coalitions and coordination (privacy advocacy coalitions), ideas, norms and legitimacy (privacy norms vs security vs innovation), rule-setting authority (state regulations).
Possible resolution and influence: Countries could try to resolve these differences by making agreements on how data is handled across borders. Some agreements help different systems work together, even if the rules are not the same. Large technology companies may also design systems that become widely used, turning company practices into informal global standards. Major markets such as the European Union, the United States, and China have strong influence because firms want access to their consumers. Large technology firms also have influence because many people depend on their platforms.
Ideas for longer activities and projects are listed in Subtopic 7.5
What is the WTO? — A short explainer from the World Trade Organization's own website about what the WTO does, how its rules work, and how countries join and participate. Useful for students who want to understand the institution in more depth. Difficulty: easy.
About the IMF — An overview from the International Monetary Fund's own website explaining its purpose, how it supports countries in financial difficulty, and how it is governed. Difficulty: easy.
World Bank: What we do — An overview from the World Bank's own website explaining the kinds of projects it funds and the countries it works with. Difficulty: easy.
TRIPS and public health — Background from the WTO on how its intellectual property rules interact with access to medicines, directly relevant to the COVID-19 vaccine case study in this section. Difficulty: medium.
Bretton Woods Conference — A short article from Encyclopaedia Britannica on the 1944 conference that created the IMF and World Bank, explaining why these institutions were set up and what problems they were designed to solve. Difficulty: easy.
What is the Washington Consensus? - A short explainer from the Peterson Institute for International Economics about the idea of the Washington Consensus, the ‘common sense’ ideas about what countries need to do to grow their economies and become more ‘developed’. Difficulty: medium.
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Chang, H.-J. (2011). Institutions and economic development: Theory, policy and history. Journal of Institutional Economics, 7(4), 473–498. https://doi.org/10.1017/S1744137410000378
Edwards, B. (2026, September). Nurture, then prosper. Finance & Development, International Monetary Fund. https://www.imf.org/en/publications/fandd/issues/2026/09/cafe-economics-nurture-then-prosper-ha-joon-chang-bruce-edwards
Encyclopedia Britannica. (2025, June 24). Bretton Woods Conference. https://www.britannica.com/event/Bretton-Woods-Conference
European Commission. (n.d.) Carbon border adjustment mechanism. https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
European Commission. (n.d.) Data protection. https://commission.europa.eu/law/law-topic/data-protection_en
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Tang, P. (2025, September 8). Data protection and cybersecurity laws in China. CMS. https://cms.law/en/int/expert-guides/cms-expert-guide-to-data-protection-and-cyber-security-laws/china?utm_source=chatgpt.com
International Monetary Fund. (n.d.). About the IMF. https://www.imf.org/en/About
Mazzucato, M. (2026, April 14). Beyond floppy disk economics: How to rewrite the global economic framework for a progressive multilateralism. Foreign Policy. https://foreignpolicy.com/2026/04/14/bretton-woods-world-bank-g20-trade-economic-order/
Mercosur Secretariat. (n.d.). What is MERCOSUR? https://www.mercosur.int/en/about-mercosur/what-is-mercosur
Organisation for Economic Co-operation and Development. (n.d.). About. https://www.oecd.org/about/
United Nations. (n.d.). About us. https://www.un.org/en/about-us
van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.
World Bank Group. (n.d.). What we do. https://www.worldbank.org/en/about/what-we-do
World Trade Organization. (n.d.). European Communities — Certain measures affecting poultry meat and poultry meat products from the United States (DS389). WTO Dispute Settlement. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds389_e.htm
World Trade Organization. (n.d.) TRIPS and public health. https://www.wto.org/english/tratop_e/trips_e/pharmpatent_e.htm
World Trade Organization. (n.d.). What is the WTO? https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
Coming soon!