Globalization and International Trade

• International trade agreements and organizations are important

Globalization and International Trade

• It is defined as the movement of goods, services, technology, investment, ideas, and people worldwide

Positive Effects

• Outsourcing
• Lower Prices
• Improved Human Rights
• Increased Productivity
• Innovation
• Better Jobs
• Increased Capital Flow

Negative effects

• Lost Canadian Jobs
• Fear of Job Loss
• Loss of Productivity
• Exploitation of Cheap Labour
• Increased Pollution
• Unhealthy Products
• Spread of Disease
• Widening Income Gap
• Influence of Multinational Corporations on Governments

Globalization Strategies

• Global strategy consists of uniform products/marketing worldwide, benefits from economies of scale, and ignores local culture
• Multidomestic Strategy customizes products/services for local culture, reduces political complications, and minimizes exchange-rate risk
• Transnational Strategy is a mix of global and multidomestic strategies with manufacturing in cost-effective locations and localized marketing and HR

Trade Agreements

• These are treaties between countries to facilitate trade by reducing barriers and encouraging investment

Types

• Multilateral agreements involve three or more countries
• Bilateral agreements are between two countries.

Key Trade Agreements

• NAFTA (North American Free Trade Agreement) launched in 1994 between Canada, U.S., and Mexico
• NAFTA eliminates tariffs/trade barriers and promotes fair competition
• NAFTA's advantages: increased trade, higher-paying jobs in Canada, and better access to resources
• NAFTA's disadvantages include job losses to Mexico, Mexican farmers unable to compete, and foreign corporate takeovers
• Tax Treaties prevent double taxation and tax evasion between countries
• The European Union (EU) was established in 1993, includes 27 countries, and has a common currency (euro) and shared financial and security policies
• Pros of a Common Currency: larger market, price transparency, reduced exchange-rate risks
• Cons: High implementation costs, loss of national control, and risk of losing cultural traditions

Trade Organizations

• Groups facilitate free trade globally or help domestic businesses enter foreign markets

Major Trade Organizations

• The World Trade Organization (WTO) (1995) promotes global trade liberalization handles trade negotiations and dispute resolution
• Asia-Pacific Economic Co-operation (APEC) (1989) comprises 21 Pacific Rim countries working together to improve trade and economic growth
• Group of Eight (G8) includes France, U.S., Canada, U.K., Italy, Germany, Japan, and Russia and focuses on economic growth, trade, and developing countries
• Group of Twenty (G20), formed during the 1990s economic crisis, focuses on goals include economic growth, reducing trade barriers, and financial institution reforms
• Organization for Economic Co-operation and Development (OECD) has 34 member countries, established in 1961, and works to prevent fraud, bribery, and money laundering
• The World Bank has 186 member countries and provides loans/grants for education, infrastructure, health, and economic development
• The International Monetary Fund (IMF) promotes financial stability, prevents economic crises, and provides loans, technical training, and economic policy guidance

The Role of the United Nations (UN) in International Business

• Main purposes: maintain global peace, promote international cooperation, fight poverty, hunger, and disease, and act as a hub for global development efforts
• Influence on Business: manages economic initiatives through the IMF, World Bank, and International Labour Organization (ILO)
• Focuses on global economic stability, trade, and poverty reduction

Purpose of the UN in International Trade

• The United Nations (UN) plays a significant role in shaping international trade through its global influence, economic policies, and specialized organizations

This lesson explores the definition, positive effects, and negative effects of globalization and international trade. Globalization strategies such as global, multidomestic and transitional strategies are also covered.