GLOBALIZATIONThere is only one Earth Presented by: Public Relations & Events Committee Sally Hall – VP
The world has entered a new phase in its economic development as a result of the policy and technological developments of the past few decades, which have created increases in cross-border trading, investing and migration. Since 1950 the volume of world trade has increased by 20 times, and from 1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion. To help control globalization, many Governments have adopted free-market economic systems, negotiated reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investments.
The International Monetary Fund, an organization of 184 countries, states that globalization 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 trade and financial flows. The terms sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders.” Globalization has been around for thousands of years. During the Middle Ages Eastern lands traded their goods and wares to other countries via ship and land. Policy and technology have been the driving factors in globalization. A defining feature is an international industrial and financial business structure.
Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure. Globalization Law & Legal Definition
World Trade Organization Established: January 1, 1995 Location: Geneva Switzerland Created by: Uruguay Round negotiations (1986-94)
The goal of the World Trade Organization (WTO)is to help producers of goods and services, exporters, and importers conduct their business. BUDGET: 189 million Swiss francs for 2009 (184,138,875.75 US Dollars) MEMBERSHIP: 153 countries on 3 July 2008 FUNCTIONS Administering trade agreements Forum for trade negotiations Handling trade disputes FUNCTIONS Monitoring national trade policies Technical assistance and training for developing countries Cooperation with other international organizations
USTR- United States Trade Representative. The legal basis of this was the Trade Expansion Act of 1962 and recently the Trade and Development Act of 2000. Agreements include: APEC (Asia-Pacific, Economic Cooperation, signed in 1989) NAFTA (North American Free Trade Agreement, effective 1994) CAFTA (Central American Free Trade Agreement, Effective in 2005) Initiatives include: FTAA Initiative (Free Trade Area of the Americas, begun 1994) ASEAN Initiative (Association of Southeast Asian Nations, begun 2002) MEFTA Initiative (Middle East Free Trade Area, begun 2003) The U.S. also has 13 bilateral agreements with Australia, Bahrain, Chile, Colombia, Israel, Jordan, Malaysia, Morocco, Oman, Panama, Peru, Singapore, and the South African Customs Unit U.S. Treaties & Initiatives
APEC is the only inter governmental grouping in the world operating on the basis of non-binding commitments, open dialogue and equal respect for the views of all participants. Unlike the WTO or other multilateral trade bodies, APEC has no treaty obligations required of its participants. Decisions made within APEC are reached by consensus and commitments are undertaken on a voluntary basis. APEC (Asia-Pacific Economic Cooperation)
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free trade area (in terms of GDP). NAFTA was launched 15 years ago to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace. NAFTA (North American Free Trade Agreement)
CAFTA–DR is a comprehensive trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States. U.S. government policy has granted these countries relatively open access to U.S. markets for their goods, while protecting their own markets with tariffs and other barriers. This agreement has eliminated all tariffs on 80% US manufactured goods. CAFTA (Central American Free Trade Agreement)
Congress called for the President to appoint a Special Representative for Trade Negotiations to conduct U.S. trade negotiations. The Act provided for the Special Trade Representative to serve as chair of a new interagency trade organization established to make recommendations to the President on his trade agreement program. Trade Expansion Act of 1962
The measure includes the Africa Growth and Opportunity Act (AGOA) and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA) and other important provisions. This package advances U.S. economic and security interests by strengthening our relationship with regions of the world that are making significant strides in terms of economic development and political reform. Trade and Development Act of 2000
Types of Trade Documentation used in global trading are: NAFTA – North American Free Trade Agreement. Certificate of Origin US Import Export Forms Export Tariff Codes World Tariffs and Taxes Inspection Documents CAS Information – Chemical Abstract Service. Chemical substance Information EINECS Information – European Chemical Substance Information Systems. Commercial Invoices MSDS – Material Safety Data Sheets Banking and Payment Documents
Pros & Cons of Globalization PROS CONS -- Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage. Living standards can go up faster.-- Global competition and cheap imports keep a lid on prices, so inflation is less likely to derail economic growth.-- An open economy spurs innovation with fresh ideas from abroad.-- Export jobs often pay more than other jobs.-- Unfettered capital flows give the U.S. access to foreign investment and keep interest rates low. -- Millions of Americans have lost jobs due to imports or production shifts abroad. Most find new jobs--that pay less.-- Millions of others fear losing their jobs, especially at those companies operating under competitive pressure.-- Workers face pay-cut demands from employers, which often threaten to export jobs.-- Service and white-collar jobs are increasingly vulnerable to operations moving offshore.-- U.S. employees can lose their comparative advantage when companies build advanced factories in low-wage countries, making them as productive as those at home.
International Forum on Globalization (IFG) Peoples' Global Action Network Corporate Watch Friends of the Earth(WB) Public Citizen (Founded by Ralph Nader) Anti-Globalization Organizations
World Bank (WB) International Monetary Fund (IMF) World Trade Organization (WTO) World Economic Forum (WEF) North American Free Trade Agreement (NAFTA) Organization for Economic Co-Operation and Development (OECD) Pro-Globalization Organizations
Effects of Globalization in the Business World Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. Selling into a global market allows for enormous economies of scale Competition: Foreign businesses buy into domestic markets Global companies in the US and Europe take advantage of the cheaper labor and highly-skilled workers that countries like India and the Philippines can offer Deregulation opens up markets to competition. Consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations.
Effects of Globalization in the Accounting World CPAs need to become conversant in global business practices and strategies so they may better advise their clients in these areas Accountants will be able to provide services in the international arena such as cross-border tax planning, multinational company mergers, joint ventures, etc. U.S. accountants will find themselves at a severe disadvantage to the many foreign accounting professionals who have already mastered international accounting standards The rules of U.S. GAAP have changed and will continue to change so as to converge with international standards. international accounting standards have begun to overshadow U.S. standards in significance,
The GAAP was created to protect companies, investors and other stakeholders, especially as the accounting practices of businesses can sometimes be questionable. These general accounting principles help hold companies responsible for their financial reporting activities. GAAP Objective
International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements. IFRS Objective
Great strides have been made by the FASB and the IASB to converge the content of IFRS and U.S. GAAP. The goal is that by the time the SEC allows or mandates the use of IFRS for U.S. publicly traded companies, most or all of the key differences will have been resolved. Because of these ongoing convergence projects, the extent of the specific differences between IFRS and U.S. GAAP is shrinking. Yet significant differences do remain. For example: GAAP (Generally Accepted Accounting Principals)IFRS (International Financial Reporting Standards)
Differences that remain: The biggest difference is that IFRS provides much less overall detail. Its guidance regarding revenue recognition, for example, is significantly less extensive than GAAP. IFRS also contains relatively little industry-specific instructions. IFRS does not permit Last In First Out (LIFO) as an inventory costing method. IFRS uses a single-step method for impairment write-downs rather than the two-step method used in U.S. GAAP, making write-downs more likely. IFRS has a different probability threshold and measurement objective for contingencies. IFRS does not permit curing debt covenant violations after year-end. IFRS guidance regarding revenue recognition is less extensive than GAAP and contains relatively little industry-specific instruction.
The United States will follow the lead of over 100 countries around the world and abandon the GAAP in favor of the London-based International Financial Reporting Standards. A formal statement of intent was issued by the Securities and Exchange Commission in 2008; disbanding the U.S. GAAP, as it is known, permanently within the United States by 2016. HEADS UP!