Global Economy: International Trade PDF

Global Economy: International Trade Economic Basis for Trade Nations have different resource endowments Labor-intensive goods Land-intensive goods Capital-intensive goods Specialization and Trade The foundation of Mutual benefit: international trade: Countr...

Global Economy: International Trade Economic Basis for Trade Nations have different resource endowments Labor-intensive goods Land-intensive goods Capital-intensive goods Specialization and Trade The foundation of Mutual benefit: international trade: Countries specialize By trading, countries in producing goods can improve their they can make most economic well- efficiently. being. Two Key Observations 1. No nation trades 2. Trade terms: unless it gains: Countries only The terms of trade engage in trade if it are determined benefits them. between the two trading nations. Absolute and Comparative Advantage Comparative Absolute advantage: advantage: A country's ability The ability to to produce a good produce a good at a at a lower cost than lower opportunity others. cost. Absolute and Comparative Advantage Trade benefits: Even if one country can produce everything cheaper, trade can still be beneficial if countries specialize in what they do best. Comparative advantage is essential for trade to occur, while absolute advantage is not. Arguments for Protection National Infant Low-wage Employment security: industry: argument: argument: Protecting Protecting Addressing Protecting domestic emerging concerns domestic industries for industries about jobs from strategic from foreign competition foreign reasons. competition. from competition. countries with lower labor costs. Tariffs, Quotas, and Export Subsidies Tariffs: Quotas: Export subsidies: Taxes on Limits on Government imports, imports, support for increasing restricting domestic prices for supply and exporters, consumers. raising prices. giving them an advantage in foreign markets. Trade Barriers Tariffs Revenue tariff Protective tariff Nontariff barrier (NTB) Voluntary export restriction (VER) Trade Barriers Economic impact of tariffs Direct effects Decline in domestic consumption Increase in domestic production Decline in imports Tariff revenue Indirect effects 37-10 International Cooperation Recent trends have been toward lowering trade barriers and increasing trade through international trade agreements. Global Trade Agreements Many nations have formed regional trade organizations. These trade organizations establish free-trade zones, or regions where a group of countries has agreed to reduce trade barriers among themselves. World Trade Organization has 151 member nations Liberalize trade through negotiation International Cooperation General Agreement on Tariffs and Trade (GATT) – 1948 established to reduce tariffs and expand world trade. World Trade Organization (WTO) – 1995 to ensure compliance with GATT to negotiate new trade agreements to resolve trade disputes Major Trade Organization Members ATLANTIC OCEAN PACIFIC OCEAN PACIFIC OCEAN INDIAN OCEAN EU CAR ICOM MERCOSUR APEC NAFTA & APEC The WTO Protests Protest groups Labor unions, environmentalists, socialists, anarchists Key issues for the protestors Labor protection and environmental standards Balance of trade The balance of trade measures the difference between a country's exports and imports. Recap Efficient resource Economic Trade barriers: allocation: benefits: International Free trade can Removing tariffs, trade promotes benefit all quotas, and efficient countries other barriers allocation of involved. can improve resources. economic outcomes. What is Economic Globalization DRIVERS OF GLOBALIZATION Two Primary Factors Underlie Globalization Refers to the mobility of people, capital, technology, goods and services internationally. The decline in barriers to the free flow of goods, The spread of Trade, Transportation and services and, capital since the end of World War II. Communication systems on a global scale of Technological Change. promoting international commerce. Effects of Lowering Trade Barriers It is also about how integrated countries are in the global economy. Lowering trade barriers made globalization possible. It refers to how interdependent different countries and Technology accelerated this transformative movement. regions have become across the world. o The World Wide Web has expanded rapidly in the past two decades. What is Economic Globalization (IMF,2008) o Computers can move money around the world, A historical process, resulting from human innovation facilitating “finance capital”. technological progress. o Silicon Valley, the ninth-largest country in the world, as prime example. It entails the increasing integration of economies worldwide, primarily through the movement of goods, services and, capital across borders. How Do Global Corporations Function? It also involves the movement of people (labor) and Contemporary global corporations are often referred to as knowledge (technology) across international boundaries. multinational corporations (MNCs), transnational corporations (TNCs), international companies, or global companies Dimensions of Economic Globalization International Companies - import and export but do not 1. trades and goods and services have investments outside their home country. 2. financial and capital markets 3. technology and communication Multinational Companies – have investments in other 4. production countries but do not have coordinated product offerings in each country. Globalization has existed since the 15th Century. Global Companies – have invested in and are present in European exploration and colonization created global many countries, marketing their products and services to empires and markets. each individual local market. The current level of interdependence and speed of globalization are unprecedented. Transnational Companies – Complex organizations with foreign operations, a central corporate facility, and decentralized decision-making, research and Two Types of Economies development, and marketing powers. Protectionism Emergence of the World System Protecting one’s economy from foreign competition by 1. Result of increasing interdependence among cultures creating trade barriers. and ecosystems. 2. European Age of Discovery played a significant role. Trade Liberalization 3. Capitalism’s orientation towards the world market for Reducing trade barriers to make international trade easier profit. between countries. 4. Colonial Plantations systems led to monocrop production. 5. Colonial commodities production was primarily oriented towards the European market.  Wallerstein’s World System Theory Expansion of capitalism into periphery displaced local landowners. International trade created a capitalist world economy with a social system based on wealth and power Large landowners hired displaced people at low wages. differentials. Bangladesh is an example of this, where British colonialism increased stratification. Suggests that there is a world economic system in which some countries benefit while others are THREE LEVELS OF ECONOMIC INTEGRATION exploited. Global – trade liberalization by GATT or WTO World system arranged according to influence: core, Regional – preferential treatment of member countries semi-periphery and Periphery Bilateral – preferential treatment between two countries Core FORMS OF ECONOMIC INTEGRATION Economically developed and powerful countries. Preferential Trading Agreement (PTA) High industrialization and technological advancement. An agreement between two or more countries to Exploit resources and labor from other regions. reduce tariffs on certain products from each other. Examples: USA, Germany, Japan. Partial Reduction in tariffs, allowing preferential access to specific goods. Example: ASEAN Free Trade Area Periphery Least developed countries. Free Trade Area (FTA) Depend on exports of raw materials and An agreement between two or more countries to agriculture. eliminate all tariffs and quotas on goods traded Exploited by core countries. among them. Examples: Many Sub-Saharan African nations, Complete removal of trade barriers for goods parts of Latin America. within the agreement. North American Free Trade Agreement (NAFTA), Semi-Periphery now known as the United States-Mexico-Canada Intermediate development level. Agreement (USMCA). Moderate industrialization and diversified economies. Customs Union Exploit periphery while being exploited by the A type of free trade area where member countries core. agree to have a common external tariff on goods Examples: Brazil, India, South Africa. traded with non-member countries. Unified trade policy against non-members. Industrial Stratification Example: European Union (EU) Industrialization initially raised the overall standard of living Common Market Factory owners began to recruit cheap labor from the A customs union with the additional free poorest populations. movement of labor and capital among countries. Free movement of factors of production (labor and Marx viewed this as a fundamental capitalist opposition capital). between the bourgeoisie and the proletariat Example: European Economic Area (EEA). Bourgeoisie owned the means of production and promoted industrialization to maintain their position. This led to the disposition of workers (proletarianization). Economic Union The highest level of economic integration, involving a common market with harmonized monetary and fiscal policies. Unified economic policies and institutions. Example: European Union (EU) ECONOMIC EFFECTS OF ECONOMIC INTEGRATION Economic integration brings significant benefits, including more efficient resource allocation. Static Effects: Short Term effects Better use of existing resources Trade creation Dynamic Effects: Long-term effects Cost Reduction due to economic of scale Cost Reduction due to increased competition Contemporary global Global economy – internet marketplaces (ebay, lazada) Trump shipping Foreign exchange market – exchange in money currency Spain Portugal Northern Isalana Concentration in electronics industry Named after in the Silicon End of wwII – 945 GDT Wto world trade org. Contemporary global Dnc Modern Three levels of economic integration Global - wag Regional - Afta – asean free trade agreement – ten countries in asia Bilateral Five Preferential Trading Agreement – agreement between two or more countries that reduce tariffs. Products to choose Free trade agreement – elimination of all tarris (NAFTA --) Customs Union – (eg European Union) Common Market – one big market Economic Union – We form blocks or groups to eliminate tariffs. Bring down the products and free entry. Economic effects of eco integration Static Effects – Short term effects Better use of ecisting resources Dynamic Effects - long term effects Cost reduction Cost reduc Concepts of Globalization Day 2 What is Globalization? The increasing interdependence and interconnectedness of places globally. Compression of the world and the intensification of the consciousness of the world as a whole. It is the interconnectedness of people and business across the world that eventually lead to global, cultural, political, and economic integration. Implications of Globalization The stretching of global connections, relations and networks Making them faster and more intense. Increasing awareness about the world. Globalization and Implication Globalization refers to the increasing connectedness of the world and its peoples. With this connectedness, however, come new bases for identities Globalization and Implication Globalization brings new Much change is influenced materials, new technology, by Western culture through new ideas, and new styles globalization to many parts of the world Attempts by colonialists to eradicate certain indigenous art forms and activities Globalization and Implication Change in marriage Decrease in arranged marriages and increases in elopements Spread of globalization and western ideas of finding “the one” by yourself and falling in love and living happily ever after Increasing number of marriages between people of different nations and ethnicities Globalization and technological advances - Ease of communication and travel across long distances Globalization and Implication Change in descent Decline of matrilineal descent due to colonialism and globalization Males were named as household heads, and land was registered in their names Increasing desire for the ideal, western-like, fairy tale wedding ceremonies Globalization and Language Change Global languages 96% of the world’s population speaks 4% of the world’s languages English is the most globalized language in history British colonial expansion influenced this – the British made English the official language of the colonies Takes on regional variations – Spanglish, Japlish, and Tex-Mex Pros – ease of communication, more economic opportunities Cons – linguistic imperialism Globalization and Medicine Some traditional healing roles may become endangered due to globalization With globalization, health problems move around the world and into remote locations and cultures more rapidly than ever before Also get the spread of Western biomedicine with globalization Globalization is not one way – we also get the spread of non- Western forms of healing into new areas Globalization and Medicine Starting in the 1950’s with the development of many new antibiotics and vaccines there was the hope that Western medicine would eradicate infectious disease throughout the world (it has not happened) New Infectious Diseases HIV/AIDS in humans likely started in Cameroon from eating a chimpanzee or getting cut by a chimpanzee HIV/AIDS has now become a global epidemic Globalization and Medicine Old infectious diseases are still a problem Malaria and tuberculosis are still leading killers in many 3rd world countries With globalization and migration these diseases are once again becoming a problem in the U.S. Globalization and Medicine Diseases of Development Are health problems (both diseases and illnesses) caused or increased by economic development activities Include… Diseases often associated with poor diets (high in saturated fat, sugar, salt, low in fiber and fruits, vegetables, and healthy fats) and/or lack of exercise and inactivity Cancer Hypertension Diabetes mellitus Heart disease Respiratory disease Globalization and Medicine Diseases of Development Diseases brought about by “development projects” changing the environment The construction of dams and irrigations systems Diseases increased by standing water or slowing rate of water flow, such as malaria Globalization and “development” brings these disease to many new areas of the world Globalization and Religion No world religion exists as a single, homogenous entity Each world religion comprises many local variants May have religious syncretism – elements of two or more religions blended together This may raise a predicament for centrally organized religions in terms of how to maintain a balance between standardization based on core beliefs and the local variations Religious pluralism – when various religious beliefs coexist together, but do not blend elements Globalization and Migration more countries involved in international migration, leading to increased cultural diversity in sending and receiving countries Interdependence of Places Place have become increasingly interdependent. Caused by a set of interrelated forces or processes that we call globalization. Globalization helps to extend and deepen linkages between sets of places (and peoples) Globalization and Economics A complex and highly dynamic process. New industrial regions. New markets. Global products. Three main poles of the global economy.  Poles of the Global Economy Western Europe North America East Asia Economies Underdeveloped Developing Newly Industrializing Advanced Oil Export / Rent  Industrialization and Globalization After WWII, nations industrialize, East-West global economy— Regional economies trade increases nations are merge, global - “Made in China,” interdependent for economy develops “Made in Japan” labels are goods, services common Japan imports East Asian nations use resources, exports cheap labor to manufactured goods become worldwide manufacturing powers Globalization and Economics Lure of western goods/foods Gives people access to nifty goods/foods they never had access to before May become dependent on items or they may lead to loss of some traditional activities Increased use of credit cards / formal credit Has both pros and cons Globalization and Economics Failing to overcome cultural biases and understand other cultures’ economic systems can have serious economic and social consequences, especially in this era of globalization When there is no understanding of the local culture and economic systems, international development plans which seek to increase incomes and the health of local populations generally fail  The Expansion of Economic Globalization Impact on People's Lives Bottled Water: A $100 billion industry in just ten years. Multinational Corporations: Sales exceed GDP of some countries. Genetically Modified Food: Longer shelf life. Faster transportation, but increased fuel Technology: consumption. Transnational Corporations Sales Exceeding GDP: Many transnational corporations (TNCs) have sales that surpass the Gross Domestic Product (GDP) of individual countries. This highlights their immense economic power and influence on a global scale. Transnational Corporations Impact on the Global Economy: TNCs can shape markets, industries, and even government policies. They often have significant bargaining power with governments and can influence trade agreements. Their operations can create jobs and economic growth, but also raise concerns about labor practices, environmental impact, and tax avoidance. Genetically Modified Food Altering DNA for Longer Shelf Life: The agribusiness industry has developed the technology to modify the DNA of food products. Tomatoes are one example of produce that can have their shelf life extended through genetic modification. The Group of Eight (G8) Informal group of eight major industrial democracies. Previously known as the G7 until Russia joined in 1998. Annual summits to discuss economic and foreign policy issues. The Group of Eight (G8) Members: Canada France Germany Italy Japan Russia United Kingdom United States G8 Influence on Global Governance Not a formal institution like the WTO or UN. Significant influence on official global institutions. Shapes global agendas and policies. The Global Divide North-South Divide: Gap in development and wealth. Causes of the Global Divide Political Power Unequal distribution of political influence. Economic Dependency Reliance on wealthy nations for trade and resources. Resource Uneven access to natural resources. Importation/Exportation Industrial Production Shift Transition to cheaper labor markets. International Media and Globalization has both narrowed and widened gaps. Trade The Global Divide The Global North More economically developed countries (MEDCs). Generally richer and more stable. Canada, United States, Greenland, Russia. Technological advancement, medicine, industries, transportation. Wealthier nations Developed economies Greater political influence Advantages of the Global North Technological Superiority Economic Development Weaponry Industrialization Advanced military technology Focus on industries, businesses, facilitated colonization. commerce, and finance. Medicine Manufacturing Superior medical advancements Production of textiles, lumber, improved health and longevity. clothing, machinery, leather, and wooden goods. Infrastructure Extensive railroad network for efficient transportation. The Global North Developed Status North America, Western Europe, Australia, Japan. Known as "First Class" nations. Home to four to five permanent members of the UN Security Council High Standard of Living: 95% have adequate food, shelter, and education. The Global South Poorer nations Limited political influence Emerging term in transnational and postcolonial studies. Countries previously known as the "Third World," "Developing Countries," "Less Developed Countries," or "Less Developed Regions." The Global South Africa, Asia, Latin America. Diverse group of countries. Facing economic, social, and political challenges. Striving for development and self-determination. Global South A Dynamic Concept Not a fixed definition. Changes with geopolitical shifts. Lack of Consensus No universal agreement on who belongs to the Global South. Debates on the usefulness of the term itself.  The global south countries are home to 85 percent of the world’s population but possess only 20 percent of the globe’s wealth. World Bank “Zone of Turmoil” The Global South's Quest for Power The Global South remains dominated by great powers. International organizations like the UN and World Bank play a significant role. Understanding these factors is crucial for understanding global politics The Global South's Quest for Power Four Nonalignment Avoiding alignment in major superpower conflicts. categories National Security Addressing internal and external threats. Arms Acquisition Acquiring modern weapons. Environmental Protecting natural Vulnerability environments. Four major categories Reducing Vulnerability Nonalignment National Security Arms Acquisition to Environmental Disasters Avoiding entrapment Betrayal and invasion Addressing ongoing Protecting natural in Cold War rivalries. by superpowers. conflicts. environments. Both the US and Zones of turmoil and Acquiring modern Addressing climate USSR sought to failed states. weapons, including change and natural attract uncommitted Poverty and conflict nuclear weapons. calamities. Global South reinforcing each High military countries. other. spending burden. 1955 Bandung Neglect of health Conference: 29 and education. nonaligned states formed a strategy against colonialism. The Bandung Conference The Bandung Conference, held in April 1955, brought together leaders of 29 African and Asian nations. To address issues of race, religion, colonialism, national sovereignty, and world peace. A pivotal event in shaping the future of cold war and identity politics. The Lessons of the Bandung Conference Strengthening independence from Western imperialism. Creating the "Non-Aligned" Movement and "Third World." Addressing social and economic well-being. Promoting world peace. The Lessons of the Bandung Conference The conference's principles and ideals continue to influence international relations and the struggle for social and economic justice. The lessons of Bandung remain pertinent in addressing contemporary global challenges. The Bandung Conference Leaders Ahmed Sukarno (Indonesia), Jawaharlal Nehru (India), Kwame Nkrumah (Ghana), Gamal Abdel Nasser (Egypt), Chou En-lai (China), Ho Chi Minh (Vietnam), Adam Clayton Powell (USA). Participating Indonesia, Ceylon (Sri Lanka), Burma (Myanmar), nations Philippines, Algeria, Morocco, Tunisia, Lebanon, Syria, Japan, and others. The Bandung Conference The Strategy of Militant Afro-Asian States To maintain independence from Western imperialism and the Soviet Bloc. Formation of the "Non-Aligned" Movement of a bloc of nations independent from the superpowers. It is the birth of the "Third World“ becoming a new geopolitical concept representing developing nations.