Globalization of the World Economy

• Focus on interconnectedness of global economic, political, and governance structures to evaluate implications of globalization.
• Demand depends on price.
• Cost depends on quantity produced.
• Price depends on yield.
• Output depends on input.

Global Economy

• Global economy involves wealth and resources moving across national borders.
• Includes goods, services, people, skills, and ideas.
• Economic globalization refers to increasing integration of economies via movement of goods, services, and capital across borders.
• This also refers to the movement of people (labor) and knowledge (technology) across international borders.

Economic Globalization

• Internationalization: Increased cross border movements of people, goods, money, investments and ideas.
• Liberalization: Progressive removal of border controls.
• Globalization: Patterns of production, exchange & consumption become increasingly uncoupled from geography of distances and borders.

Components of Economic Globalization

• Global trade: Changes in how goods & services are produced and exchanged worldwide.
• Global finance: Changes in valuation and trade of money (currencies), banking (savings and credit), and investment.

Economic Globalization Interconnected Dimensions

• Globalization of trade of goods and services
• Globalization of financial and capital markets
• Globalization of technology and communication
• Globalization of production

Agglomeration

• Agglomeration describes a densification of firms, population, infrastructure, and interactions between them.
• Results in a larger, deeper, more specialized labor pool enabling workers to better match their skills to firms' needs.
• Creates knowledge spillovers where firms and workers learn from each other and incentivizes investment in human capital.

Agglomeration Characteristics

• Legal: Basis for subsidies.
• Political: Expression of intent for horizontal cooperation between territorial authorities.
• Problem-related: A spatial bracket for traffic/transport or central local issues/problems.
• Functional: Commuters, linking of value chains, employment.
• Spatial: Coherent settlement area, morphology.

Trade Agreements of the Philippines

• 2010 ASEAN Trade in Goods Agreement (ATIGA) consolidated Common Effective Preferential Tariff/ASEAN Free Trade Area (CEPT/AFTA) commitments related to trade in goods.
• Seeks to establish a single market and production base with free flow of goods in the ASEAN region, a major component of the ASEAN Economic Community (AEC).
• Covers initiatives in tariff liberalization, trade facilitation, simplification of rules of origin, and establishment of an ASEAN Trade Repository.
• The Philippines and Japan entered into a free trade agreement in 2008.
• PJEPA is the Philippines' only bilateral free trade agreement, covers trade in goods/services, investments, movement of natural persons, intellectual property, customs procedures, business environment and government procurement.
• EFTA members (Iceland, Liechtenstein, Norway, and Switzerland) signed a free trade agreement with the Philippines in 2016. Agreement entered into force in 2018.
• Involves trade in goods/services, investment, competition, intellectual property, government procurement, and trade and sustainable development.
• The Philippines is party to the Regional Comprehensive Economic Partnership with 14 Asia-Pacific countries (Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, Singapore, Thailand, and Vietnam).
• Proposed in 2020, it went into effect in 2022 which covers trade in goods and services, investment, intellectual property, e-commerce, competition, small and medium enterprises and government procurement.
• In February 2023, the Philippine Senate ratified its membership to the RCEP which will enable it to source raw materials from fellow RCEP countries, process products locally, export to RCEP countries at preferential rates leading to enhanced market access.
• Other expectations from the agreement include wider area for accumulation of raw materials; trade facilitation.
• Time-bound consultations to resolve issues on Sanitary and Phytosanitary(SPS) measures as well as technical bearers to trade.
• Improved market access to services included financial and telecommunication services, clear rules to attract investment, and stronger protections for Micro, Small, and Medium Enterprises and intellectual property rights.
• Opportunity for economic/technical cooperation among the parties.
• Regional integration is key to improving economic resilience without harming growth.
• It could preserve and expand the international trade that powers the global economy.

Market Integration

• A situation in which separate markets for the same product become one single market, for example through removing an import tax in one of the markets.
• The removal of barriers between two markets for the same product, the prices on said markets become more closely linked, and trade liberalization contributes to international market integration.
• Market Integration: Provides a number of social benefits, including broadening the range of financial services and investment opportunities available to consumers and increasing competition in the provision of those services.
• Standard regulatory mandates, such as pursuing financial stability or ensuring consumer protection in a specific jurisdiction, may occasionally conflict with achieving international regulatory consistency.

Global Interstate System

• International Relations (IR), World Affairs (IA), and International Studies (IS): the scientific study of interactions between states.
• The United Nations is an international organization founded in 1945, made up of 193 member states.
• The UN and its work are guided by the charter.
• The WTO is an international organization that opens trade for the benefit of all.
• The WTO provides a forum for negotiating agreements aimed at reducing international trade obstacles by ensuring a level playing field for all.
• The WTO currently has 166 members, of which 117 are developing countries.
• The IMF is a global organization, it works to achieve sustainable growth and prosperity for all of its 191 member countries.
• The IMF supports economic policies that promote financial stability and monetary cooperation.
• The IMF is governed by and accountable to its member countries.

Global Governance

• Governance means the process of decision-making and the process by which decisions are implemented (or not implemented).
• The United Nations Development Programme (UNDP) defined governance as the exercise of economic, political and administrative authority to manage a country's affairs at all levels.
• It comprises the mechanisms, processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations and mediate their differences.
• Good governance is the way a society organizes itself to make and implement decisions-achieving mutual understanding, agreement and action, UNDP defines good governance as governing systems that are capable, responsive, inclusive, and transparent.

Good Governance Characteristics

• Participatory, consensus oriented
• Accountable, transparent
• Responsive, effective and efficient
• Equitable and inclusive and follows the rule of law
• It assures that corruption is minimized

Key Points of Global Governance

• Global governance is the combination of intentional and patterned human interactions that regulate action worldwide for the common good.
• A purposeful order emerges from institutions, processes, norms, formal agreements, and informal mechanisms providing a field of action for human activities.
• Governance is based on shared expectations, as well as on intentionally designed institutions and mechanisms.

World-Systems Theory

• Created by Immanuel Wallerstein in the 1970s, the theory refers to an interpretive framework that offers a generalized model of human interaction, encompassing economic, political, and social dimensions.
• It analyzes the connection between different levels in a regional and interregional system and describes the nature of integrated systems.
• World system is a social system that has boundaries, structures, member groups, rules of legitimation, and coherence.
• Integrated through the market rather than a political center, in which two or more regions are interdependent with respect to necessities like food, fuel, and protection, and two or more policies compete for domination without ever emerging as a single center.
• States that rich core capitalist societies succeed by exploiting poorer peripheral ones.
• There are semi-peripheral societies, a precarious global middle class.
• The periphery can only advance through global revolution that will end the world capitalist system.