Introduction to Globalization, Development, andConditions in the Developing World
Globalization generally refers to international integration in commodity, capital, and labor markets. (WTO) Itnot simply a post-WWII phenomenon. What other eras in history have been marked by expansions of trade, capital, and labor markets?http://www.wto.org/english/res_e/booksp_e/ anrep_e/wtr08-2b_e.pdf
What are key events in the latest round of globalization?
Originally,concerned the trade of raw materials, intermediary products, and final goods Now it can also include trade-in-services Offshoring (a subset of outsourcing) Element of the current Doha Round negotiations
Foreign Direct Investment Stock/Bond investments across borders Evenbeing able to take your own money across borders was once universally subject to controls. What political ideologies and structures might explain the origin of controls?
US-1/4 of American Doctors are foreign-born France recruits at the top Senegalese medical school Bottom-line for Skilled Labor: movement is much more common and financially they become better-off in the developed world Integration is also at play. Where does this exist? Refugees?
There are winners and losers in trade liberalization For example, NAFTA caused issues on both sides: Mexican stores and manufacturers struggled with the „Walmart Effect‟ and some US/Canadian manufacturing is now made in maquilladoras. Overall, though total GDP increased in all countries. Human Rights Concerns Environmental Concerns Fears of Neo-Imperialism *Some misatribute their loses to free trade when it was actually technological advances that made them obsolete
AIDS/HIV Spread from a few remote villages to the new factories of Kinshasa, following the colonization of Cameroon (by Germany). Brought by returning UN peacekeepers to Haiti Quickly goes global via jet plane travel “Tinderbox” by Dr. Halperin & Timberg “Dallas” Effect Senegalese television shows & film were very advanced, then came the US soap opera “Dallas” Suddenly, attitudes towards wealth changed and more and more shows were imported rather than locally produced!
1970s-Jamaican Government nationalizes the bauxite industry (raw material for aluminum) American companies continue to buy bauxite at a higher rate, while they secure new sources in Africa THEN suddenly, the companies went elsewhere and Jamaica‟s output went into free fall Lessons: Commodities are hard to nationalize, but does this mean countries must give up everything to MNCs?
Post-conflict Liberia was desperate for investment and gladly accepted Mittal‟s subsidiary‟s FDI contract to mine to find iron ore with nearly no regulations But as the Liberian economy became stronger and a new government came to power, it demanded the company to implement environmental and human rights regulations or leave. Did Mittal Leave?
This is referred to as the “obfuscating bargain” Mittal had already spent a lot of money building mines, processing facilities, and a railroad to export the iron ore. The more fixed infrastructure, the more power shifts more towards Liberia
Chinahas also done very well by allowing MNCs into the country by maximizing the number of backward linkages. Domestic Partners/Suppliers Mandatory Education Factories are part of global supply chain What do all of these strategies have in common
Accept Free Trade Chile, Nigeria Some Free Trade/Some Authoritarianism China, Indonesia, Liberia Reject Free Trade Nationalize Industries Jamaica in 1970s, Venezuela
International Financial Institutions World Bank IMF Free Trade Agreements What countries are most using these? What trends are likely to occur in the future? Multilateral Negotiations WTO Rounds Are there any alternatives? Investment Promotion Agencies Do differing Political Structures impact their success?
IMF Keep international economic stability Traditionally for the developing world Loans are made in SDRs (a basket of major currencies) 1 SDR = $.648 World Bank Group Promotes Development through loans Mostly to the governments Now more loans through public-private partnership
Role is to reduce poverty through loans and suggestions for policy choices Includes IBRD & IDA Great Source of Data:http://povertydata.worldbank.org/poverty/ho me
President Robert ZoellickPermanent Employees Part-timers for amaximum of 6 months per year
Lets see how our case studies have interacted with the IMF: (http://www.imf.org/external/np/fin/tad/e xtarr1.aspx) Zimbabwe Peru Indonesia China
Your country is not geographically near an economic heavyweight like Mexico or Turkey.Nor does it have a large abundance of Natural Resources like Nigeria.But unlike Zimbabwe, your country is well- governed and takes part in the WTO.What policies can the Peruvian government put in place to increase trade and thus its development?
Eliminates tariffs, import quotas, and preferences on most goods and services traded between the countriesDo FTAs apply to imports from other countries?
Signed in 1994, with the intention of fully implementing by 1996 However, as often happens, implementation of the politically sensitive Mexican Trucking Provision, was not finish until a few months ago (2011)! Maquilladoras
Policy priority in several countries Chile leads the world with over 50 The Southern Tiger? China has been increasing its array throughout Southeast Asia (China-ASEAN FTA) Trans-Pacific Partnership Would include most countries around the Pacific rim including US, Japan, Indonesia, & Mexico But do all the political institutions have the strength to implement controversial trade liberalization?
China-Peru FTA Canada-Peru FTA US-Peru Trade Promotion Agreement (PTPA) Not quite an FTA, but made legal frameworks for investors regarding: Intellectual Property Rights Labor Human Rights Environment
1947-United Nations negotiates the General Agreement on Tariffs and Trade 45000 tariff concessions 1964-8:Kennedy Round 1973-1979: Tokyo Round 1986-1994: Uruguay Round World Trade Organization 2001-?: Doha Round
Most tarriffs were reduced in the early rounds Negotiations are now about technical issues and last longer This may explain the spread of FTAs that are bilateral/multilateral – not global
IPAs can be public, private or a public-private partnership Mostpublic bureaus are more like “investment prevention bureaus” Privatetend to not have power to make things happen Public-Private is rare but seems to work Costa Rica convinced Intel to set up manufacturing there in 1996
PublicAgency Website is fancy Unclear if the quality extends to face-to-face Canyou think of any changes to its political structure that might boost its effectiveness?
Up to this point we‟ve dealt only with the Formal Sector. The Informal Sector are those jobs that are not taxed or monitored by the government.Income is NOT included in GDP figures.The majority of jobs in the developing world are in the Informal Sector.Here are some I encountered in Africa..
While many in the Informal Sector do legitimate business, a subgroup is committing crimes.The next three photos refer to one black market I saw throughout Benin. What is it? And make your best guess as to why it sprout up in Benin.
Oil is illegal obtained from pipelines in the Delta.It is then transported on motorcycles to BeninBenin turns a blind eye because its citizens get lower prices at “the pump”Nigeria‟s reasons are less clear: bribery? jobs for the poor?
Low income countries lose out on a lot of potential revenue that could be used for development Most individuals rarely encounter the government Subject, Rather Participatory Relationship Bribery, Bribery, and more Bribery As a result the Millenium Challenge Corporation (US), incentivizes countries to reduce corruption as a prerequisite for funding