Content1.Introduction2.Globalization of Economic Activity3. Waves of Globalization4.The United States as an Open Economy5. Common Fallacies of International Trade6.Is International Trade An Opportunity or a Threatto workers• Backlash Against Globalization• Terrorism Jolts Global Economy• Conclusion
Introduction• The high degree of economic interdependence among today’s economies reflects the historical evolution of the word’s economic and political order .• Export and imports as a share of national output have risen for most industrial nations, while foreign investment and international lending have expanded.
Globalization of Economic ActivityWhat does globalization mean?• Globalization is the process of greater interdependence among countries and their citizens.• In terms of people’s daily lives, globalization means that the residents of one country are more likely now than they were 50 years ago to consume the products of another country, to invest in another country, to earn income from other countries, to talk by telephone to people in other countries, to visit other countries, to know that they are being affected by economic developments in other countries, and to know about developments in other countries.
Globalization of Economic ActivityForces are driving globalization:1. Technology Changes.2. Continuing liberalization of trade and investment3. Lower trade barriers financial liberalization
Waves of GlobalizationFirst wave of globalization: 1870-1914Second wave of globalization: 1945-1980Latest wave of globalization
The United State as an Open Economy Trade Patterns • To appreciate the globalization of the U.S. economy, go to a local supermarket. Almost any supermarket doubles as an international food bazaar. •The Table 1.3 show a global fruit basket that is available for American Consumers.
The United State as an Open Economy_ Trade Pattern
The United State as an Open Economy• As a rough measure of the importance of the important of international trade in a nation’s economy, we can look at the nation’s exports and imports as a percentage of its gross domestic product (GDP). This ratio is known as openness Openness = (Exports + Imports)/ GDP
The United State as an Open Economy• Table 1.4 shows measures of openness for selected nations as of 2006. In that year, the United States exported 11% of its GDP, while imports were 15% of GDP, the openness of the U.S. economy to trade thus equal 26%. Although the U.S economy is significantly tie to international trade, this tendency is even more stinking for many smaller nations, as seen in the table.
Labor and CapitalBeside trade of goods and services, movements in factors of production are a measure of economic integration. A nations become more interdependent, labor and capital should moves more freely across nations.
Why is globalization important? Specialize in the production of things and To purchase from others those items for which they are high-cost producers. provide stability for producersCorporation, an Ohio-base manufacturer of wheelchairs and other health.
Common Fallacies of International Trade1. Trade is Zero sum activity : If one trading party gains, the other party must lose.• In fact both partners gain from tradee.g. Brazil & United State. coffee Brazil U.S.A wheat
Common Fallacies of International Trade• Brazil specialize in coffee production export• U.S.A specialize in wheat production export2. Import reduce employment and export promote growth and employment. Example: German machinery USA computer software
Common Fallacies of International Trade• If German export German import computersoftware from U.S.A income U.S.A incomeemployment in US.3. People often feel that tariffs, quotas and other import restriction will save jobs and promote a higher level of employment. - when we restrict foreigners from selling to us, we also are restricting their abilities to obtain the dollars needed to buy from us.
Is International Trade An Opportunity or a Threat to Workers?Is International Trade An Opportunity or a Threat to Workers? + Benefits: - Shop for the cheapest consumption goods and permits employers to purchase the technologies and equipment that best complement their workers’ skill. - Allow workers to because more productive as the goods they produce increase in value. - Product goods & for export generate jobs and income for domestic workers.
Common Fallacies of International Trade +Threat: - losing jobs because of cheap exportproduce by low-cost, foreign workers. - Rims are relocating abroad in search oflow wage However, free-trade agreement willbe more easily reach if these who may lose bynew trade are helped by all of the rest of uswho gain.
Backlash Against Globalization• Who are involve with Backlash Against Globalization? WTO World Bank and International Monetary Fund
Terrorism Jolts the Global Economy• What is the result after Terrorism Jolts on The United State on Sep 11, 2001: Ignore poor people Tragic loss of life Increasingly concerned about safety and livelihood
Key Term• Agglomeration economies: a rich country specializes in manufacturing niches and gains productivity through groups of firms clustered together, some producing the same product and others connected by vertical linkages.• Economic interdependence: all aspects of a nation’s economy are linked to the economies of its trading partners
Key Term• Globalization: The process of greater interdependence among countries and their citizen.• Law of comparative advantage: When each nation specializes in the production of that good in which it has a relative advantage, the total output of each good increase, thus, all countries can realize welfare agains.• Openness: The ratio of a nation’s exports and imports as a percentage of its gross domestic product(GDP).