1. INTERNATIONAL ECONOMICS
Chapter I: International
Economy and Globalization
By Nguyen Thanh Tung
Hanoi, 2012

2. Globalization of Economic Activity
• Globalization
– Greater interdependence among countries and
their citizens
• Forces are driving globalization?
– Technology change
– Liberalization of trade an investment
– Global acceptance of English as the universal
business language
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3. Globalization of Economic Activity
• Waves of Globalization
– First wave: sparked by deceases in tariff barriers
and declining transportation costs.
– Second wave: 1945 – 1980
– Latest wave:
• Large number of developing countries shifted into
manufacturing trade.
• Foreign outsourcing: manufacturing increasingly moved
to wherever cost were lowest.
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4. Openness of economy
Openness = (Export + Import)/GDP
Country Export (% of GDP) Import (% of GDP) Exp. + Imp. (% of
GDP)
US 11 16 27
Japan 14 13 27
Korea 46 45 91
Germany 45 40 85
Canada 38 34 72
Netherlands 74 66 140
Source: http://www.worldbank.org/data
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5. Globalization of Economic Activity
• Advantages
– People, firms and nations gain from spending
more of time and resources doing those things in
which they have a relative advantage.
– Increased competition from abroad: essential to
both innovation and efficient production.
– Economic growth rates have a close relation to
openness to trade, education and communication
infrastructure.
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6. Globalization of Economic Activity
• Common Fallacies
– Trade is zero-sum activity
– Imports reduce employment and act as a drag on
the economy while exports promote growth and
development.
– Tariffs, quotas and other import barriers will save
jobs and promote a higher level of employment.
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