Question

Explain two domestic and two external factors that shape the foreign policy of any two countries. give references

the countrie should be Jamaica and USA

Answer 1

For Jamaica, domestic factors are savings rate and high government internal debt. And external factors are trade liberalization and foreign direct investment which influence foreign policies.

For the USA, the domestic factors are demography and education. Whereas, external factors are NATO and international trade which are determinants of foreign policies.

References are attached below.

Explanation:

Jamaica

Domestic factors:

1.Saving rate:- In Jamaica, the domestic savings rate is very low and this fell by 18% in 1998. Due to lower savings rate, the financial capital market shattered and thus created a financial crisis as Jamaica could not raise enough funds for capital accumulation. As economic growth majorly depends on the access to physical capital and it was quite difficult for Jamaica to maintain the flow of physical capital and investment, it was not able to gather foreign aid and some sort of foreign direct investment which would be profitable for the country.

2. High government debt:- Along with low savings rate, higher internally funded government debt is one of the crucial factors that shapes the foreign policies. Increase in government internal debt raises interest rates to a higher level and thus leads to the crowding out of domestic borrowers. Higher interest rate causes exchange rate to rise and thus favors import rather than export. So, the income of Jamaica falls down.

External factors:

1.Trdae liberalization:- Due to liberalization, the tariff and several trade barriers have been lifted up from the overseas trade decisions of Jamaica. Foreign direct investment liberalization has made Jamaica an interest of investors. Thus, export of traditional primary goods and services has increased by a huge amount. So, trade policies have improved the relation of Jamaica with the global market.

2.Foreign direct investment:- Foreign direct investment or FDI has become successful in recent years in Jamaica. If compared with three small countries like Hong-Kong, Singapore and Ireland, the amount of FDI received by Jamaica is smaller. Performance of Jamaica is not so impressive yet it is competing with other countries to improve its situation. In the 1990s, the amount of FDI increased by 5% which is quite remarkable. FDI in the bauxite industry has an upward trend, along with this information, technology(IT) is also growing to attract investors.

Reference:

Bloom, D., Mahal, A., King, D., Lee, A. H., & Castillo, P. (n.d.). Globalization, Liberalization and Sustainable Human Development: Progress and Challenges in Jamaica (Rep.).

USA

Domestic factors:

1. Demography:- In terms of population USA is more likely as a developing country and USA has a diverse demography compared to other developed countries. The number of immigrants is also high as many foreigners stay here and thus the voting population is increasing in the USA and thereby influencing the US foreign policy..
2. Education:-Education is one of the domestic factors which determines as college students are more active about the foreign policies.More educated people are more they tend to support various foreign policies like free trade, globalizations etc.But the limitation is that sometimes Americans lack college degrees.

External factors:

1. Trade: The USA being the world's largest economy, globalization has been accepted a long time back and the political influence in trade is very important.Globalization has enabled the US to cover the world market and it is good to influence foreign policies through international trade.The international trade and its widespread global market has attracted many investors from other countries.
2. NATO agreement: USA is closely attached with Europe through NATO (North Atlantic Treaty organizations) agreement and 65% of the residents supported that NATO is really helpful for US as Europe can help in terms of taking various decision policies and other international issues related to the US.Americans have faith on the problem solving abilities of Europe while various issues in the world. They are sharing 60 years of relationship in terms of international policies through NATO.

Conclusion:

Trade liberalization has improved the export and import of Jamaica as several tariff barriers have been removed. The international relation is improving for Jamaica. Being a developing nation Jamaica is not in a good position to attract various investors and its global market is small.

Being a developed and well positioned global market USA can influence the global market of export and in terms of trade USA is in the top position.So relationship with various other developed economies are quite strong

So in terms of trade of course USA is in better position as it dominates the global market yet Jamaica is improving its position in the world front.

Reference:

Hamilton, D., & Tiilikainen, T. (Eds.). (n.d.). Domestic Determinants of Foreign Policy in the European Union and the United States (Rep.).