Structuring Globalization PDF

STRUCTURING THE ECONOMY REVIEW MUNA TAYO, LODS! CORE SEMI-PERIPHERY PERIPHERY 1. Dependent to the core  CORE SEMI-PERIPHERY PERIPHERY 2. Has labor intensive production and extraction of raw materials  CORE SEMI-PERIPHERY PERIPHERY 3. Higher skill and capital and in...

STRUCTURING THE ECONOMY REVIEW MUNA TAYO, LODS! CORE SEMI-PERIPHERY PERIPHERY 1. Dependent to the core  CORE SEMI-PERIPHERY PERIPHERY 2. Has labor intensive production and extraction of raw materials  CORE SEMI-PERIPHERY PERIPHERY 3. Higher skill and capital and intensive production CORE SEMI-PERIPHERY PERIPHERY 4. Less dependent on the core CORE SEMI-PERIPHERY PERIPHERY 5. Weak states OBJECTIVES: ✔Define the economic globalization and it’s features; ✔Analyze the world market and existing market integration; AND ✔Evaluate the impacts of economic globalization and assess applicable economic globalization for Philippines as developing country The United Nations (UN) tried to address the different problems in the world. Their efforts were guided by the 8 Millennium Development Goals (MDG) which they created in 2000. *Note: there are different standards of living around the world, we can expect different meanings attached to it. ❑ Living in poverty: 275 pesos a day or 100,534 pesos a year (poverty threshold) ❑ Extreme poverty according to UN (2015) is characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information The UN (2015) reported that 836 million people still live in extreme poverty but that is down from 1.9 billion, so there is success or at least a lot of progress The World Bank predicted that by 2030, the number of people living in extreme poverty could drop to less than 400 million. Of course that assumes everything will keep improving as it has been. Climate change has to be considered since it is a threat to these improvements in global poverty Most people who have been lifted out of extreme poverty are still poor and being poor comes with serious problems, from disease to lack of water, income inequality is rampant and one in seven people still live without electricity SO WHY IS EXTREME POVERTY FALLING? Set of factors: ❑ Better access to education ❑ Humanitarian aid ❑ Policies of international organizations like the UN ❑ The greatest contributor: ECONOMIC GLOBALIZATION ❑ The worlds economies have become more interconnected and free trade has driven the growth of many developing economies  What is Economic Globalization? Internationalization Economic Globalization The extension of The functional economic activities of integration between nation states across internationally dispersed borders. activities. Economic globalization is rather a qualitative transformation than just a quantitative change. Dickens (2004:12)  ECONOMIC GLOBALIZATION and GLOBAL TRADE “It is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders…” (IMF, 2008)  ECONOMIC GLOBALIZATION and GLOBAL TRADE “In economic terms, globalization is nothing but a process making the world economy an “organic system” by extending transnational economic processes and economic relations to more and more countries and by deepening the economic interdependencies among them.” Szentes (2003)  WHAT IS ECONOMIC GLOBALIZATION? ▪ Refuses the assumption that the nation (state) is the only unit of analysis and that current trends. ▪ It claims that economic activities and processes can be interpreted in a global context.  WHAT IS ECONOMIC GLOBALIZATION? ▪ Consumption of highly standardized globalized products and services. ▪ National products into global product. ▪ On the other hand, globalization redefined the role of the nation state as an effective manager of the national economy. (Boyer&Drache, 1996)  WHAT IS ECONOMIC GLOBALIZATION? ▪ New actors appear ▪ The major players of present day economy are the Transnational Corporations (TNC’s) ▪ TNC’s are constantly evolving.  ECONOMIC GLOBALIZATION and GLOBAL TRADE Dimensions of Economic Globalization: a. The globalization of trade of goods and services b. The globalization of financial and capital markets c. The globalization of technology and communication d. The globalization of production  ECONOMIC GLOBALIZATION and GLOBAL TRADE globalization: Two types of economic 1. PROTECTIONISM- a policy of systematic government intervention in foreign trade with the objective of encouraging domestic production. This encouragement involves giving preferential treatment to domestic producers and discriminating against foreign competitors (McAleese, 2007) 2. TRADE LIBERALIZATION OR FREE TRADE- is a policy formed between two or more nations that permits the unlimited import or export of goods or services between partner nations. Free trade eliminates tariffs and makes corporations more competitive in foreign markets.  PROTECTIONISM TYPES OF 1. TariffsPROTECTIONISM The taxes or duties imposed on imports are known as tariffs. Tariffs increase the price of imported goods in the domestic market, which, consequently, reduces the demand for them. ✔ Consider the following example, which analyzes the UK market for US-made shoes. Due to the imposition of tariffs, the price for the product increases from GBP100 (P1) to GBP120 500 (P2). The demand for US-made shoes in the UK market decreases (from Q2 to Q4). PROTECTIONISM  PROTECTIONISM 2. Quotas Quotas are restrictions on the volume of imports for a particular good or service over a period of time. Quotas are known as a “non-tariff trade barrier.” A constraint on the supply causes an increase in the prices of imported goods, reducing the demand in the domestic market. 3. Subsidies Subsidies are negative taxes or tax credits that are given to domestic producers by the government. They create a discrepancy between the price faced by consumers and the price faced by producers.  PROTECTIONISM 4. Standardization The government of a country may require all foreign products to adhere to certain guidelines. ✔ For instance, the UK Government may demand that all imported shoes include a certain proportion of leather. Standardization measures tend to reduce foreign products in the market  FREE TRADE ✔ North American Free Trade Agreement (NAFTA), between the United States, Canada, and Mexico is one of the best-known Free Trade Agreement (FTA) ✔ FTAs with other nations which determine the tariffs, duties, and subsidies the countries can impose on their imports and exports  FREE TRADE ✔ In 1948, the United States along with more than 100 other countries agreed to the General Agreement on Tariffs and Trade (GATT), a pact that reduced tariffs and other barriers to trade between the signatory countries ✔ In 1995, GATT was replaced by the World Trade Organization (WTO). Today, 164 countries, accounting for 98% of all world trade belong to the WTO.  FREE TRADE ✔ most governments still impose some protectionist-like trade restrictions such as tariffs and subsidies to protect local employment ✔ “Chicken Tax,” a 25% tariff on certain imported cars, light trucks, and vans imposed by President Lyndon Johnson in 1963 to protect U.S. automakers remains in Lyndon B. Johnson effect today. 36th President of United States ❑ Comparative advantage holds that all countries will always benefit from cooperation and participation in free trade. ❑ David Ricardo and his 1817 book “Principles of Political Economy and Taxation,” the law of comparative advantage refers to a country’s ability to produce goods and provide services at a lower cost than other countries. ❑ Worldwide openness in trade will improve the standard of living in all countries. In the final analysis, the goal of business is to realize a higher profit, while the goal of government is to protect its people. Neither unrestricted free trade nor total protectionism will accomplish both.