Module 1 Introduction to Globalization PDF

1 MODULE I INTRODUCTION TO GLOBALIZATION Lesson 1 The Study of Globalization Lesson 2 Structures of Globalization GECC 107 – The Contemporary World Module I ...

1 MODULE I INTRODUCTION TO GLOBALIZATION Lesson 1 The Study of Globalization Lesson 2 Structures of Globalization GECC 107 – The Contemporary World Module I  2 MODULE I INTRODUCTION TO GLOBALIZATION INTRODUCTION This module will discuss the working definitions of globalization and the underlying concepts regarding it. OBJECTIVES At the end of the module, you should be able to: 1. Differentiate the varying concepts of globalization. 2. Explain the role of international financial institutions in the creation of global economy. 3. Relate the relevance of the state amid globalization. DIRECTIONS/ MODULE ORGANIZER 1. There are two lessons in the module. While the lessons may be long and others short, the basic contents are properly presented in every lesson. 2. There is a need to read the lessons one by one without skipping any of them. One lesson is the continuation of the next lesson. For some parts that need further explanation, you may contact your tutor or take note of this topic to be presented for the next meeting. 3. There are evaluation techniques at the end of each lesson. Please answer them and be sure that you get the correct answer. If and when you do not pass the checked learning activity or exercise, do not proceed to the next lesson but instead go over again until you have fully understood all the lessons. This is for your own good. There are also other requirements like giving your ideas or own interpretation of presented concepts, visiting websites and others, it is highly suggested that you undergo these requirements. GECC 107 – The Contemporary World Module I  3 Lesson 1 THE STUDY OF GLOBALIZATION Considering the dynamic world, the study of globalization is important because it is an essential part of our daily involvements in this contemporary generation. As properly explained by Anthony McGrrew, globalization bridges the gaps so that multiplicity of linkages and interconnections between the states and societies will make up the present world system. Thus, globalization means increased competitions among nations in a more closely intertwined international economy, a competition that is continuously enhanced by more rapid communication and computer technology and by way of business thinking that is increasingly global rather than regional or national (Carnoy, 2014). According to Thomas Friedman, globalization is the “shrinking and flattening of the world” due to the ease and accessibility of travel and communication. Hence, he added that, “globalization is not just some economic fashion or a passing trend but an international system”. Others may perceived globalization to be the second industrial revolution, “perceived not only as an economic trend, but a powerful transition that brings out a new world system” (Tamayo, 2013). DEFINITIONS AND PERSPECTIVES OF GLOBALIZATION Globalization may be thought of initially as the widening, deepening and speeding up of worldwide interconnectedness in all aspects of the contemporary social life, from the cultural to the criminal, the financial to the spiritual. Beyond the general acknowledgement of the real or perceived intensification of global interconnectedness, there are substantial disagreements as to how globalization is best conceptualized. Debates on these issues to characterize and distinguish globalization could be possible with the three schools of thought that refer to as the hyperglobalizers, the sceptics and the transformationalist. A. Hyper globalist Perspectives Hyper-globalists (sometimes referred to as global optimists) believe that globalization is happening and that local cultures are being eroded primarily because of the expansion of international capitalism and the emergence of a homogeneous global culture; they (‘optimist’) believe that globalization is a positive process characterized by economic growth, increasing prosperity and the spread of democracy. GECC 107 – The Contemporary World Module I  4 For the hyperglobilizers, such as Ohame, contemporary globalization defines a new era in which peoples everywhere are increasingly subject to the disciplines of the global marketplace (1990; 1995). Hyperglobilizers defines globalization as a new epoch of human history in which traditional nation-states have become unnatural, even impossible business units in a global economy (Ohame, 1995 cf. Wriston, 1992). Hyperglobilizers argue that economic globalization is bringing about a ‘denationalization’ of economies through the establishment of transnational networks of production, trade and finance. In this respect many hyperglobilizers share a conviction that economic globalization is constructing new forms of social organization that are supplanting, or will eventually supplant, traditional nation-states as the primary economic and political units of world society. B. Skeptical Perspectives Sceptics, such as Hirst (1996) and Thompson (1996), argue that globalization is essentially a myth which conceals the reality of an international economy increasingly segmented into three major regional blocs in which national governments remain very powerful. In arguing that globalization is a myth, the skeptics rely on a wholly economistic conception of globalization, equating primarily with a perfectly integrated global market. For most sceptics, if the current evidence demonstrates anything it is that economic activity is undergoing a significant ‘regionalization’ as the world economy evolves in the direction of three major financial and trading blocs: Europe, Asia-Pacific and North America. Sceptics tend also to discount the presumption that international prefigures the emergence of a new, less state-centric world order. In general they take issue with all of the primary claims of the hyperglobilizers pointing to the comparatively greater levels of economic interdependence and the more extensive geographical reach of the world economy at the beginning of the twentieth century. C. Transformationalist Perspectives The transformationalist Giddens (1990) and Rosenau (1997) view the contemporary patterns of globalization are conceived as historically unprecedented, such that states and societies across the globe are experiencing a process of profound change as they try to adapt to a more interconnected but highly uncertain world. In comparison with the skeptical and hyperglobalist accounts, the transfomationalists make no claims about the future trajectory of globalization; nor do they seek to evaluate the present in relation to some GECC 107 – The Contemporary World Module I  5 single, fixed ideal-type ‘globalized world’, whether a global market or a global civilization. Rather, transformationalists emphasize globalization as a long-term historical process which is inscribed with contradictions and which is significantly shaped by conjectural factors. CONCEPTUALIZING GLOBALIZATION: THREE TENDENCIES Hyperglobalists Sceptics Transformationalist ⮚ Trading blocs, ⮚ Historically ⮚ A global age weaker unprecedented What’s new? geogovernance than levels of global earlier periods interconnectedness ⮚ Global capitalism, ⮚ Word less ⮚ Thick (intensive global interdependent than and extensive) Dominant features governance, in 1890s globalization global civil society ⮚ Declining or ⮚ Reinforced or ⮚ Reconstituted, Power of national governments eroding enhanced restructured ⮚ Capitalism and ⮚ Combined forces of Driving forces of ⮚ States and markets globalization technology modernity ⮚ Increased ⮚ Erosion of old ⮚ New Architecture Pattern of marginalization of stratification hierarchies of world order South ⮚ Transformation of ⮚ McDonalds, ⮚ National interest political Dominant motif Madonna, etc. community ⮚ As a ⮚ AS the reordering reordering of ⮚ As of interregional Conceptualization the framework internationalization relations and of globalizations of human and regionalization action at a action distance ⮚ Indeterminate: ⮚ Global ⮚ Regional blocs/ Historical global integration trajectory civilization clash of civilizations and fragmentation ⮚ Internationalization ⮚ Globalization ⮚ The end of the depends on state transforming state Summary argument nation-state acquiescence and power and world support politics REASONS FOR GLOBALIZATION Below are the reasons why we have to globalize in this contemporary world (Ariola, 2018). 1. Rapid shrinking of time and distance across the globe. One can easily GECC 107 – The Contemporary World Module I  6 cross the bridge going to the other side of the market place due to advance tools of technology than before. 2. Domestic markets are no longer rich as a consequence of many interlocking factors. 3. Companies and institutions go global to find political and economic stability which is relatively good in other countries than the country of origin. 4. To get technological and managerial know-how of other countries due to their advancement in science, technology, education, health, and other fields of discipline. 5. To reduce high transportation costs if one goes globally using the advance tools of communication and information. 6. To be close to raw materials and to markets for their finished products which are not available in the country of origin. 7. The nation of the World Trade Organization (WI‘O) had made it possible in stimulating increased cross border trade. There are other world bodies like the UN and several arbitration bodies where countries agree. STAGES OF GLOBALIZATION Ariola (2018), explained the different stages a business go through before reaching the global operations in the international scheme. STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5 domestic based company moves arms length company into a full service activity institution insider position company moves the company of a domestic begins to carry by a complete towards a takes over the company moving out its own business system genuinely global activities on its into new manufacturing with research mode of own markets marketing & and operation. overseas sales in foreign development & markets engineering GECC 107 – The Contemporary World Module I  7 OTHER CONCEPTS RELATED TO GLOBALIZATION Internalization When globalization is interpreted as internationalization, the term refers to a growth of transactions and interdependence between countries. From this perspective, a more global world is one where more messages, ideas, merchandise, money, investments, pollutants and people cross borders between national-state-territorial units (Scholte, 2007). GLOBALIZATION INTERNALIZATION Task/ Result ⮚ A result which is ⮚ The task or process with desired by the global which globalization can be economies achieved. ⮚ Set and Subset ⮚ Structure that people ⮚ A part of that structure want to set up hence can be termed as a subset of globalization. Related to ⮚ More related to ⮚ More related with economies of the individual, firm or nation business for their goods and services. Factors that affect ⮚ Infrastructural setup, ⮚ Cultural taste and telecommunications, preferences, local logistics, etc. highly traditions, etc., plays a affects the major role in the globalization process internalization Example ⮚ Eliminating visa ⮚ Sourcing, producing and obligations for selling materials from one visitors, tariff and or more countries, set up non-tariff trade of branch or subsidiaries barriers and in other countries for Liberalization of carrying out business etc. investment regulations Process ⮚ An economic process ⮚ An improvisation process Organizations Handle ⮚ International ⮚ European Union, Asia Monetary fund, World Pacific Economic Bank, World Trade Cooperation, North organizations, etc’, American Free Trade are handling Agreement, etc. work for globalization boosting the implementation. Internationalization GECC 107 – The Contemporary World Module I  8 Liberalization A second common analytical dead-end in discussions of globalization has equated the notion with liberalization. In this case, globalization denotes a process of removing officially imposed restrictions on movements of resources between countries in order to form an “open and borderless‟ world economy. On this understanding, globalization occurs as authorities reduce or abolish regulatory measures like trade barriers, foreign-exchange restrictions, capital controls, and visa requirements (Scholte, 2007). Liberalization is the process where a state lifts restrictions on some private individual activities. It is a situation in which government regulations and restrictions are relaxed to make room for economic expansion. GLOBALIZATION LIBERALIZATION Economic activities ⮚ Closely related to the scale of ⮚ Mainly concentrated on economic activities across economic activities as a nations result of modernization and development Globalized Setup ⮚ Localities develop direct ⮚ Often involves reductions economic and cultural in taxes, social security, relationships to the global and unemployment system through information benefits. technologies, bypassing and subverting traditional power hierarchies like national governments and markets. Others Access to New Culture and Inward Investments Talents Increased competition will Lower Costs for Products lead to a rise in quality goods for the consumer There are chances of Loss of domestic units due developing nations will be open to the inflow of foreign to exploitation by advanced goods economies Unbalanced economic Adverse effects on local development economies Increased dependency on Cultural Homogenization foreign assistance Universalization Universalization in this case, globalization is taken to describe a process of dispersing various objects and experiences to people at all inhabited parts of the earth (Scholte, 2007). The phenomenon of globalization can be defined as universalization. Here, it refers mainly to a planetary synthesis of cultures, a process of the worldwide spread of culture, ideas, objects and experiences. This is the idea of globalization that this paper suggests as the philosophy for globalization. The synthesis of cultures, ideas, objects and experiences should be world – wide and really global. In this regard we can talk of globalization of ideas, GECC 107 – The Contemporary World Module I  9 economics, politics, decolonization and policies that will develop humanity. This does not rule out cultural identity as a world phenomenon in that it is a philosophy which expects the global world to be structured along respect for others, their cultures, ideas, goals and de-emphasizes of competition for the sake of it: That is, a universalization of ideas that will lead to heterogenization of cultures and not homogenization. Westernization A fourth common conception of globalization has defined it as westernization. As such, globalization is regarded as a particular type of universalization, one in which social structures of modernity (capitalism, industrialism, rationalism, urbanism, etc.) are spread across all of humanity, in the process destroying pre-existent cultures and local self-determination (Scholte, 2007). Globalization in the Modern World If you look at the tag on your shirt, chances are you would see that it was made in a country other than the one in which you sit right now. What's more, before it reached your wardrobe, this shirt could have very well been made with Chinese cotton sewed by Thai hands, shipped across the Pacific on a French freighter crewed by Spaniards to a Los Angeles harbor. This international exchange is just one example of globalization, a process that has everything to do with geography (Stief, 2019). Characteristics of globalization in the contemporary world 1. Improved Technology in Transportation and Telecommunications 2. Movement of People and Capital 3. Diffusion of Knowledge Positive Aspects of Globalization 1. There is a greater chance for the people in the developing countries to economically succeed and increase their standard of living. 2. Global competition encourages creativity and innovation and keeps prices for commodities/services in check. 3. Developing countries are able to reap the benefits of current technology without undergoing many of the growing pains associated with the development of these technologies. 4. Governments are able to better work together towards common goals now that there is an advantage in cooperation, an improved ability to interact and coordinate, and a global awareness of issues. 5. There is greater access to foreign culture in the form of movies, music, food, clothing, and more. In short, the world has more choices. Negative Aspects of Globalization 1. Outsourcing GECC 107 – The Contemporary World Module I  10 2. Greater chance of disease spreading worldwide 3. There is little international regulation 4. Large Western-driven organizations such as the International Monetary Fund and the World Bank make it easy for a developing country to obtain a loan. However, a Western focus is often applied to a non-Western situation, resulting in failed progress. The Triangular Globalization Process Globalization as Economic Process The widespread scholarly emphasis on the economic dimension of globalization derives partly from its historical development as a subject of academic study. For various accounts of economic globalization, some of the earliest writings on the topic explore in much detail how the evolution of international markets and corporations led to an intensified form of global interdependence. These studies point to the growth of international institutions such as the European Union, the North American Free Trade Association, and other regional trading blocs. Economic accounts of globalization convey the notion that the essence of the phenomenon involves ‘the increasing linkage of national economies through trade, financial flows, and foreign direct investment … by multinational firms’ (Gilpin, 2000: 299). Thus, expanding economic identification activity as both the primary aspect of globalization and the engine behind its rapid development. Many scholars who share this economic perspective consider globalization a real phenomenon that signals an epochal transformation in world affairs. Their strong affirmation of globalization culminates in the suggestion that a quantum change in human affairs has taken place as the flow of large quantities of trade, investment, and technologies across national borders has expanded from a trickle to a flood (Gilpin, 2000: 19). Globalization as Political Process An influential group of scholars considers political globalization as a process intrinsically connected to the expansion of markets. In particular, steady advances in computer technology and communication systems such as the World Wide Web are seen as the primary forces responsible for the creation of a single global market. ‘Globalization has happened because technological advances have broken down many physical barriers to worldwide communication which used to limit how much connected or cooperative activity of any kind could happen over long distances.’ According to even more extreme technological-determinist explanations, politics is rendered powerless in the face of an unstoppable and irreversible techno economic juggernaut that will crush all governmental attempts to reintroduce restrictive policies and regulations. Economics is portrayed as possessing an inner logic apart from and superior to politics. As Lowell Bryan and Diana Farrell (1996: 187) assert, the GECC 107 – The Contemporary World Module I  11 role of government will ultimately be reduced to serving as ‘a superconductor for global capitalism’. Globalization as Cultural Process It is one thing to acknowledge the powerful cultural logic of global capitalism, but it is quite another to assert that the cultural diversity existing on our planet is destined to vanish. Emphasizing that cultural globalization is ‘American in origin and content’, they nonetheless allow for ‘any variations and sub-globalizations’ on the dominant US cultural theme in various parts of the world. Roland Robertson (1995: 25–44) has famously argued that global cultural flows often reinvigorate local cultural niches. Contending that cultural globalization always takes place in local contexts; Robertson predicts a pluralization of the world as localities produce a variety of unique cultural responses to global forces. The result is not increasing cultural homogenization, but ‘glocalization’ – a complex interaction of the global and local characterized by cultural borrowing. These interactions lead to a complex mixture of both homogenizing and heterogenizing impulses. Globalization is not an easy task to define. Globalization is the word used to describe the growing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. There are three schools of thought of globalization namely: Hyper- globalization, Skeptical and Transformationalist. In addition, three (3) processes are involved to its completion as follows: economic process, political process, and cultural process. It is an ever-expanding subject; hence, we use these available approaches as to complement the big picture of an obscured impact (in any of its form –concept, process, phenomenon etc.) at the same time framing political agendas by using the right approach for a deontological grasp. LEARNING ACTIVITY A. Building Vocabulary. Define the following terms according to your own understanding. 1. Globalization ____________________________________________________________ ___________________________________________________________ 2. Contemporary world GECC 107 – The Contemporary World Module I  12 ____________________________________________________________ ___________________________________________________________ 3. Triangular globalization process ____________________________________________________________ ___________________________________________________________ B. Identification. Below are definitions of globalization according to different authors. Identify the best school of thought on globalization based on the scholar or author’s definition. ___________________ 1. Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society (Martin Albrow, 1990). ___________________ 2. Globalization is the process of economic integration of countries, through the increasing flow of goods, services, capital and labor (Joseph Stiglitz, 2003). ___________________ 3. Globalization is a complex web of social processes that intensify and expand worldwide economic, cultural, political and technological exchanges and connections. (Campbell, MacKinnon, & Stevens, 2011, p.4) ___________________ 4. Globalization is a historical process which is characterized by a growing engagement between peoples on all corners of the globe (Modelski , 2003). ___________________ 5. Globalization is “bringing about a denationalization of economies through the establishment of transnational networks of production, trade and finance” (Held et al, 2000). ___________________ 6. Globalization as the establishment and intensification of – in particular, economic – interdependencies among different nations, which, in his opinion, would contribute to the prevention of violent conflicts (Thomas Friedman, 1999). ___________________ 7. Globalization is dominated by transnational firms and financial institutions, operating independently of national boundaries or domestic economic considerations (Milberg 1998). ___________________ 8. Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society (Albrow, 1990). ___________________ 9. The world-wide interconnectedness between nation-states becomes supplemented by globalization as a process in which basic social arrangements (like power, culture, markets, politics, rights, values, norms, ideology, identity, citizenship, solidarity) become disembedded from their spatial context (mainly the nation-state) due to the acceleration, massification, flexibilisation, diffusion and expansion of GECC 107 – The Contemporary World Module I  13 transnational flows of people, products, finance, images and information (Beerkens 2004). ___________________ 10. Globalisation may indeed mean the end of the nation-state if the nation-state fails to redefine itself to meet the new conditions it faces in the global environment (Carnoy, 2001). ___________________ 11. The global economy is an economy with the capacity to work as a unit in real time on a planetary scale (Castelles , 1996). ___________________ 12. The state as a ‘competition state' plays a fundamental role in promoting globalization. However, this does not mean that, once the genie is out of the bottle, globalization is reversible (Cerney, 1990). ___________________ 13. Globalisation can be defined as a material set of practises drawn from the world of business combined with a neo-liberal market ideology (Curry & Newson 1998). ___________________ 14. Globalization is A social process in which the constraints of geography on social and cultural arrangements recede and in which people are increasingly aware that they are receding (Waters, 1995). ___________________ 15. Globalization has by and large become synonymous with state power erosion. This zero-sum logic drives the reasoning process to the irresistible conclusion that global and national are antinomies rather than interdependent, competing rather than complementary. (Weiss, 1999) C. Application Experiential learning on Globalization: How globalized are you? Narrate your experience with globalization. Start it with your everyday encounter with globalization from morning to evening, from the essential things you wear, food you eat, places you have been into or wanting to see, to the equipment or technology you have. In the process, discuss how these experiences with globalization give you either advantages or disadvantages in life. Write your answer here: __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ GECC 107 – The Contemporary World Module I  14 __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ GECC 107 – The Contemporary World Module I  15 Lesson 2 STRUCTURES OF GLOBALIZATION GLOBAL ECONOMY Global economy is also referred to as world economy. This term refers to the international exchange of goods and services that is expressed in monetary units of money. It may also mean as the free movement of goods, capital, services, technology, and information. In some contexts, ”global” or ”International” economy is distinguished and measured separately from national economies while the ”world economy" is simply an aggregate of the separate country’s measurements. Global economy or economic globalization is concerned on the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labor. While economic globalization has been expanding since the emergence of trans-national trade, it has grown at an increased rate due to an increase in communication and technological advances under the framework of General Agreement on Tariffs and Trade and World Trade Organization, which made countries gradually cut down trade barriers and open up their current accounts and capital accounts. GLOBALIZATION AS A PROCESS, CONDITION, AND IDEOLOGY With the absence of a generally accepted definition, Steger (2005) added that Globalization pertains as either a process, a condition, or an ideology. Globalization as a process –this process is every form of connectivity around the globe. Therefore, you can connect globalization all the way back to 3000 BC. The more recently you think globalization started, the more likely you have a westernized view (presentism, Eurocentric view). Globalization as a condition- ideas of globalization reveal little new when it is accounted to mean internationalization, liberalization, universalization or westernization. It is a contemporary phenomenon because how global connections take place is different – time and space becomes irrelevant (supraterritoriality). Transplanetary connectivity – just connections anywhere in the world; not new it has always been there – referred to as GLOBALITY (a condition for globalization) Supraterritoriality connectivity – connections around the globe transcending time and space. A new GECC 107 – The Contemporary World Module I  16 phenomenon; thus, supraterritoriality is what makes globalization a recent phenomenon (e.g. World Cup) Globalization as an Ideology-a concept referring to people’s growing consciousness of belonging to a global community, destabilizes and unsettles the conventional parameters of understanding within which people imagine their communal existence. *Steger’s six (6) claims: 1. Globalization is about the liberalization and global integration of markets. 2. Globalization is inevitable and irreversible. 3. Nobody is in charge of globalization. 4. Globalization benefits everyone. 5. Globalization furthers the spread of democracy in the world. 6. Globalization requires a global war on terror. MARKET INTEGRATION Definition of Market Integration According to the Cambridge Business English Dictionary, Market Integration is a situation in which separate markets for the same product become one single market, for example when an import tax in one of the market is removed. Integration is taken to denote a state of affairs or a process involving attempts to combine separate national economies into larger economic regions (Robson, 1998, p.1) Definition of Market Integration According to the Cambridge Business English Dictionary, Market Integration is a situation in which separate markets for the same product become one single market, for example when an import tax in one of the market is removed. Integration is taken to denote a state of affairs or a process involving attempts to combine separate national economies into larger economic regions (Robson, 1998, p.1) When prices among different location or related goods follow the same pattern over a long period of time, market integration exist. Similarly’ when groups of prices often move proportionally to each other and when this relation is very clear among different markets it is said that the markets are integrated. Hence, it could be concluded that market integration is an indicator that explains how much different markets are related to each other. GECC 107 – The Contemporary World Module I  17 FREE TRADE Definition Free Trade wherein international trade (the importation and exportation) left to its natural course without tariffs and non-tariff trade barriers such as quotas, embargoes, sanctions or other restrictions. ✔ Tariffs - taxes or duties to be paid on a particular class of imports or exports ✔ Embargo - a government-instituted prevention of exports to a certain country. Official ban on trade or other commercial activity. (The United States has imposed several long-running embargoes on other countries including Cuba, North Korea and Iran) ✔ Economic sanctions - commercial and financial penalties applied by one or more countries against a targeted country, group, or individual Free Trade Areas - a group of countries within which tariffs and non-tariff trade barriers between the members are generally abolished but with no common trade policy toward non-members. Both in the sense of geography and price, is the foundation of these trading agreements. However, tariffs are not necessarily completely abolished for all products. Free trade areas impose exclusivity among its members since the world is not entirely a free trade economy. WORLD’S MAJOR FREE TRADE AREAS 1. North American Free Trade Agreement (NAFTA) 2. Association of Southeast Asian Nations Free Trade Area (AFTA) 3. Southern Common Market (MERCOSUR) 4. Common Market of Eastern and Southern Africa (COMESA) Here are not Free Trade Areas yet Union and Partnership Agreements 5. European Union 6. Trans-Pacific Partnership 7. Transatlantic Trade and Investment Partnership – not yet ratified North American Free Trade Agreement (NAFTA) Free trade between the three member nations, Canada, the US and Mexico Effective on January 1, 1994 -Although tariffs weren’t fully abolished until 2008 by 2014 total trilateral merchandise trade exceeded US$1.12 trillion trade with Canada and Mexico supports more than 140,000 small and medium-size businesses and over 3 million jobs in the US Gains in Canada are reportedly even higher, with 4.7 million new jobs added since 1993.Canada is also the largest exporter of goods to the US GECC 107 – The Contemporary World Module I  18 Association of Southeast Asian Nations Free Trade Area (AFTA) The original members were Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Four countries have subsequently joined: Vietnam, Laos, Myanmar and Cambodia The AFTA was signed in January 1992 in Singapore The bloc has largely removed all export and import duties on items traded between the nations. It has also entered into agreements with a number of other nations, including China, eliminating tariffs on around 90% of imported goods. The AFTA nations had a combined GDP of US$2.3 trillion in 2012, and they're home to600 million people. Southern Common Market (MERCOSUR) a Latin American single market, its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member but has been suspended since December 1, 2016.Meanwhile, Bolivia obtained its full membership on July 7, 2015. Established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. The four have a combined gross domestic product (GDP) of roughly $2.9 trillion Latin America’s second-largest trade group, the Pacific Alliance, which comprises Chile,Colombia, Mexico, and Peru, has a combined GDP of about $1.8 trillion Common Market of Eastern and Southern Africa (COMESA) The member States of COMESA are: Burundi, the Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Seychelles, Uganda, Zambia and Zimbabwe Formed in December 1994 an annual export bill in excess of $80 billion, the organization is a significant market place, both within Africa and globally COMESA ultimately aims to remove all barriers to intra-regional trade, starting with preferential tariffs and working towards a tariff-free common market and economic union. European Union (EU) is a single market, which is similar to a free trade area in that it has no tariffs, quotas or taxes on trade The 28 member countries of the EU Austria, Italy, Belgium, Latvia, Bulgaria, Lithuania, Croatia, Luxembourg, Cyprus, Malta, Czech Republic, Netherlands, Denmark, Poland,Estonia, Portugal, Finland, Romania, France, Slovakia, Germany, Slovenia, Greece, Spain, Hungary, Sweden, Ireland, United Kingdom The European Union's GDP was estimated to be €14.8 trillion or $17.1 trillion (nominal) in2016 In 1957, the Treaty of Rome established the European Economic Community (EEC) or Common Market. However, it was not until 1986 that the Single European Act was signed. This treaty formed the basis of the single GECC 107 – The Contemporary World Module I  19 market as we know it, as it aimed to establish the free-flow of trade across EU borders. By 1993 this process was largely complete. Trans-Pacific Partnership (TPP) Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam have just signed the trade pact formerly known as the Trans-Pacific Partnership In the absence of the US, it has been renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Signed February 04, 2016 The deal covers a market of nearly 500 million people, despite the US pullout. The Transatlantic Trade and Investment Partnership The Transatlantic Trade and Investment Partnership is a deal currently being negotiated between the EU and the US. It would cover 45% of global GDP. The Center for Economic Policy Research has estimated that the deal would be worth $134billion a year for the EU and $107 billion for the US – although opponents have disputed these figures. HISTORY OF GLOBAL MARKET INTEGRATION The integration of labor market in Southeast Asian countries namely: Burma, Malaysia and Thailand occurred between 1882 and 1936. By the 1805 steamships had largely replaced sailing vessels for transport within Asia as well as to Western markets, and shipping fares had begun to fall sharply. Also, already underway was the mass migration of Indian and Chinese workers, principally from the labor-abundant areas of Madras in India and the provinces of Kwangtung (Guangdong) and Fukien (Fujian) in Southeastern China, to land-abundant but labor-scarce parts of Asia. Chief among the immigrant-receiving countries were Burma, Malaya and Thailand (Siam) in Southeast Asia. Indian and Chinese labor inflows to these countries constituted the bulk of two of three main late nineteenth and early twentieth- century global migration movements, the other being European immigration to the New World. Immigration to Southeast Asia was almost entirely in response to its growing demand for workers which, in turn, derived from rapidly expanding demand in core industrial countries for Southeast Asian exports. Studies by Latham and Neal (1983) and by Brandt (1985, 1989) established the development of an integrated Asian rice market beginning in the latter part of the nineteenth century. ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS IN THE CREATION OF GLOBAL ECONOMY International Financial Institution (IFIS). An international financial institution is chartered by more than one country and therefore are subjects to international law. Its owners or shareholders are generally national governments, although other international institutions and other organizations occasionally figure as shareholders. The most prominent IFIs are GECC 107 – The Contemporary World Module I  20 creations of multiple nations, although some bilateral financial institutions (created by two countries) exist and are technically IFIs. The best known IFIs were established after World War II to assist in the reconstruction of Europe and provide mechanisms for international cooperation in managing the global financial system. A. WORLD BANK - Multinational financial institution established at the end of World War II (1944) to help provide long-term capital for the reconstruction and development of member countries. - It provides much of the planning and financing for economic development projects involving billions of dollars Purpose for the setting up of the Bank - To assist in the reconstruction and development of territories of members - To promote private foreign investment by means of guarantees or participation in loans and other investments made by private investors - To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balance of payments - To conduct its operations with due regard to the effect of international investment on business conditions in the territories of members - To assist in bringing about a smooth transition from a wartime to a peacetime economy International Bank for Reconstruction and Development (IBRD) - The IBRD was set up in 1945 along with the IMF to aid in rebuilding the world economy and it was owned by the governments of 151 countries and its capital is subscribed by those governments - It provides funds to borrowers by borrowing funds in the world capital markets, from the proceeds of loan repayments as well as retained earnings. - At its funding, the bank’s major objective was to serve as an international financing facility to function in reconstruction and development. - Lends money to a government for the purpose of developing that country’s economic infrastructure such as roads and power generating facilities - Also, funds are lent only to members of the IMF, usually when private capital is unavailable at reasonable terms. - Generally, bank loans are made to cover only import needs in foreign convertible currencies and must be repaid in those currencies at long-term rates. - The government assisted in formulating and implementing an effective and comprehensive strategy for the development of new industrial free zones and the expansion of existing ones - Lays special operational emphasis on environmental and women’s issues. International Development Association - The IDA was formed in 1960 as a part of the World Bank Group to provide financial support to LDCs and has 137 member countries, although all members of the IBRD are free to join the IDA. GECC 107 – The Contemporary World Module I  21 - IDA’s funds come from subscriptions from its developed members and from the earnings of the IBRD. - Credit terms usually are extended to 40 to 50 years with no interest. - Repayment begins after a ten-year grace period and can be paid in the local currency, as long as it is convertible. - Although the IDA’s resources are separate from the IBRD, it has no separate staff. Loans are made for similar projects as those carried out by IBRD, but at easier and more favorable credit terms. - The present emphasis seems to be on helping the masses of poor people in the developing countries become more productive and take an active part in the development process. Greater emphasis is being placed on improving urban living conditions and increasing productivity of small industries. International Finance Corporation - The IFC was established in 1956. There are 133 countries that are members of the IFC and it is legally and financially separate from the IBRD Main responsibilities are: (i) To provide risk capital in the form of equity and long-term loans for productive private enterprises in association with private investors and management; (ii) To encourage the development of local capital markets by carrying out standby and underwriting arrangements; and (iii) To stimulate the international flow of capital by providing financial and technical assistance to privately controlled finance companies. Loans are made to private firms in the developing member countries and are usually for a period of seven to twelve years. - The key feature of the IFC is that its loans are made to private enterprises and its investments are made in conjunction with private business. - In addition to funds contributed by IFC, funds are also contributed to the same projects by local and foreign investors. What does the World Bank do? - The World Bank is the world’s largest source of development assistance, providing nearly $30 billion in loans, annually, to its client countries. - The main focus is on helping the poorest people and the poorest countries hut for all its clients, the Bank emphasizes the need for: ∙ investing in people, particularly through basic health and education; ∙ protecting the environment; ∙ supporting and encouraging private business development; ∙ strengthening the ability of the governments to deliver quality services efficiently and transparently; ∙ promoting reforms to create a stable macroeconomic environment conducive to investment and long-term planning; GECC 107 – The Contemporary World Module I  22 ∙ focusing on social development, inclusion, governance and institution building as key elements of poverty reduction - The Bank is also helping countries to strengthen and sustain the fundamental conditions that help to attract and retain private investment. What does the World Bank do? ✔ The World Bank is the world’s largest source of development assistance, providing nearly$30 billion in loans, annually, to its client countries. ✔ The main focus is on helping the poorest people and the poorest countries hut for all its clients, the Bank emphasizes the need for: investing in people, particularly through basic health and education; protecting the environment; Supporting and encouraging private business development; strengthening the ability of the governments to deliver quality services efficiently and transparently; promoting reforms to create a stable macroeconomic environment conducive to investment and long-term planning; focusing on social development, inclusion, governance and Institution building as key elements of poverty reduction ✔ The Bank is also helping countries to strengthen and sustain the fundamental conditions that help to attract and retain private investment. ✔ They are investing in human resources, infrastructure and environmental protection which enhance the attractiveness and productivity of private investment. INTERNATIONAL MONETARY FUND - IMF is a cooperative institution that 182 countries have voluntarily joined because they see the advantage of consulting with one another on this forum to maintain a stable system of buying and selling their currencies - Its policies and activities are guided by its Charter known as the Articles of Agreement. - IMF lends money to members having trouble meeting financial obligations to other members, but only on the condition that they undertake economic reforms to eliminate these difficulties for their own good and that of the entire membership. -Contrary to widespread perception, the IMF has no effective authority over the domestic economic policies of its members - There are several major accomplishments to the credit of the International Monetary System. For example, it sustained a rapidly increasing volume of trade and investment; GECC 107 – The Contemporary World Module I  23 displayed flexibility in adapting to changes in international commerce; proved to be efficient (even when there were decreasing percentages of reserves to trade); proved to be hardy (it survived a number of pre-1971 crises, speculative and otherwise, and the down-and-up swings of several business cycles); allowed for a growing degree or international cooperation; established a capacity to accommodate reforms and improvements - To an extent, the fund served as an international central bank to help countries during periods of temporary balance of payments difficulties by protecting their rates of exchange. Because of that, countries did not need to resort to exchange controls and other barriers to restrict world trade Purpose of IMF To promote international monetary cooperation through a permanent institution that provides the machinery for consultation and collaboration on international monetary problems To facilitate the expansion and balanced growth of international trade and to contribute, thereby, to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy To promote exchange stability, to maintain orderly exchange arrangements among members and to avoid competitive exchange depreciation To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustment in their balance of payments without resorting to measures destructive to national or international prosperity In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members HOW CAN IFIS HELP IN ECONOMIC GLOBALIZATION? - They focus on long-term investment projects, institution building, and on social, environmental, and poverty issues - strengthen economic governance - safeguard the stability and integrity of the international financial system as a global public good- encouraging true national ownership of reforms by streamlining the conditions attached to IMF-supported programs. - recognizes and values the role of civil society organizations - ensuring the stability of the international financial system GECC 107 – The Contemporary World Module I  24 -helping individual countries take advantage of the investment opportunities offered by international capital markets, while reducing their vulnerability to adverse shocks or changes in investor sentiment. -Trade liberalization- Reducing debt burdens- Setting the stage for the 2030 development agenda GLOBAL CORPORATIONS Definition of Corporation A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence (Batas Pambansa Blg. 68 the Corporation Code of The Philippines, Section 2 – Corporation defined). According to Investopedia, a corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. A global company is generally referred to as a multinational corporation (MNC). An MNC is a company that operates in two or more countries, leveraging the global environment to approach varying markets in attaining revenue generation. These international operations are pursued as a result of the strategic potential provided by technological developments, making new markets a more convenient and profitable pursuit both in sourcing production and pursuing growth. The Effects of Globalization on Multinational Corporations Multinational corporations are agents of globalization. At the same time, many multinational corporations are also affected by globalization in ways they may or may not like. This reality stems from the fact that multinational corporations have many subsidiaries, some of which benefit from globalization and others that do not (Button & Thompson, 2018). 1. Access to New Markets. Globalization gives businesses access to markets that would have been difficult to reach in the past. Because of the internet, customers from anywhere in the world can order products from companies anywhere else in the world, and have those products delivered by airplane in just a few weeks. This is naturally a tremendous advantage to businesses, which stand to increase their potential customer base by millions by reaching out to foreign buyers. 2. Access to Labor at Cheaper Prices. Outsourcing and off-shoring allow businesses to hire employees in foreign countries, where labor and real estate costs may be lower than in the business' home country. While these practices can have negative effects on workers looking for full-time jobs, there is no doubt that they decrease costs, and therefore increase profits, for businesses. GECC 107 – The Contemporary World Module I  25 3. Minimize Costs through Partnership Formation. Companies affected by globalization are able to form partnerships with organizations all around the world. Many American, European, and Asian companies have corporate partnerships that stretch across continents. 4. Opportunities for Tax Reduction. Globalization gives multinational corporations the ability to seek out foreign countries for their investments when their current country adopts a tax policy they find to be unfavorable. Countries with low corporate tax rates are sometimes called "tax havens," as they allow corporations and individuals to lower their tax rates by moving assets offshore. 5. Coordination Challenges. Multinational corporations may have a difficult time coordinating activities in a globalized economy. A company that operates in America, Japan and Europe, for example, will need to hire employees who speak many different languages, and it may be difficult for that company to make sure all employees are on the same page when only a few of them speak the same language. GLOBAL INTERSTATE SYSTEM The modern world-system is structured politically as an interstate system–a system of competing and allying states. Political scientists commonly call this the international system, and it is the main focus of the field of International Relations. CONTEMPORARY GLOBAL GOVERNANCE The term global governance is sometimes called as world governance. Global is a movement towards political cooperation among transnational actors, negotiating, and responses to problems that affect more than one state or region. The term “global governance” and “globalization” have come into frequent use over the past two decades. Globalization- which we take to refer not only to the intensification of global economic integration but also the increasing volume and rapidity of flows of people, ideas, and cultures across the traditional territorial boundaries of nation-state—is typically used as a catch-all for describing the erosion of our ability to govern human societies effectively and fairly. Global governance has both an aspirational and analytic inflection, referencing the possibility of more just and democratic ordering of an increasingly integrated world, as captured in the following quotes: The very language of global governance conjures up the possibility and the desirability of effecting progressive change in global life through the establishment of a normative consensus- a collective purpose…(Barnette and Duvall, 2005, p.1) The idea that societies are capable of democratic self-control and self- realization has until now been credibly realized only in the context of the nation- state…What would a political response to the challenges of a post national constellation look like? (Harbenas, 2001, p.61) GECC 107 – The Contemporary World Module I  26 The United Nations says that the rapid globalization over the recent decades happens due to the rapid movement of science and technologies. This mobility of people, capital, technology, goods and services internationally is called economic globalization. United Nations, stated economic globalization as the increasing interdependence of world economies as a result of growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. It reflects the continuing expansion and mutual integration of market frontiers, and is an irreversible trend for the economic development in the whole world at the turn of the millennium. Thus, it includes improvements in literacy, life expectancy and people well-being. LEARNING ACTIVITY 1. Differentiate global economy from world economy. 2. What is the importance of international financial institution to countries of the world? 3. What is the significance of global corporation? Global economy or economic globalization is concerned on the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labor. While economic globalization has been expanding since the emergence of trans-national trade, it has grown at an increased rate due to an increase in communication and technological advances under the framework of General Agreement on Tariffs and Trade and World Trade Organization, which made countries gradually cut down trade barriers and open up their current accounts and capital accounts. TRUE OR FALSE. Write TRUE if the statement is correct and FALSE if it is incorrect. __________ 1. There is a greater chance for the people in the developing countries to economically succeed and increase their standard of living. __________ 2. Global economy refers to the international exchange of goods and services that is expressed in monetary units of money. __________ 3. Multinational corporations may have a difficult time coordinating activities in a localized economy. __________ 4. Globalization is the increasing interaction of people, states or countries through the growth of the international flow of money, ideas, and culture. __________ 5. Multi-corporations are agents of globalization. GECC 107 – The Contemporary World Module I  27 __________ 6. The term global governance is sometimes called as world governance. __________ 7. Companies and institutions go global to find political and economic stability which is relatively good in other countries than the country of origin. __________ 8. Globalization gives businesses access to markets that would have been difficult to reach in the past. __________ 9. When prices among different location or related goods follow the same pattern over a long period of time, market integration exist. __________ 10. The modern world-system is structured politically as an interstate system – a system of competing and allying states. APPLICATION A. Construct. Create an infographic poster showing Asia as a site and agent of globalization. Rubric: Content – accurate and detailed information is provided and supports the argument/thesis/purpose Focus – all content (visual and textual) concisely complements the purpose of the infographic Organization – information is systematically organized and supports readers' comprehension of the main message Visual appeal – fonts, colors, layouts, and visual elements meaningfully contribute to the infographic's ability to convey the overall message Argument – the infographic effectively informs and convinces the reader of its intended purpose Citation – proper citations are included for all sources referenced Artwork message-an impactful meaning to set as a revelation to our current society B. Essay. As the COVID-19 pandemic has affected all parts of the world last 2020, elaborate and evaluate how Asia became the: (1) subject (site or agent) of the global pandemic and; (2) object of (impacted by) the said global pandemic. __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ GECC 107 – The Contemporary World Module I  28 __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ GECC 107 – The Contemporary World Module I