3. What is
Globalization?
Global industrialism or
globalization is a process of
forging international political,
economic, religious, and socio-
cultural interconnections
KFC Kuwait
7-11 Beijing
4. GLOBALIZATION DEFINITION
• Variety of definitions, centering around the
world becoming “smaller” and more
interconnected in the areas of commerce,
culture, and politics
• Causes: technological advances in
communication, travel, and computational
power, expansion of trade
8. 1. ECONOMIC GLOBALIZATION
TODAY:
Economies Are Increasingly Linked Together
EXS: NAFTA (MX, CA, US), The EU, WTO (World Trade Organization)
WTO
• Only global international organization dealing with the rules of trade
between nations
• Goal: help producers of goods and services, exporters, and importers
conduct their business
9. 1. ECONOMIC GLOBALIZATION
MULTI-NATIONAL CORPORATIONS
• OLD: Dutch East India
Company?
• 1602 company of Dutch
merchants & independent
trading companies
• Spice trade monopoly in East
Asia
• Power to colonize territories
& enslave indigenous people
• Indonesia & South Africa
10. 1. ECONOMIC GLOBALIZATION
• NEW: Nike, Wal-Mart, Royal/Dutch Shell
• Top 100 multinationals are all US-owned companies!
• Royal/Dutch Shell: global group of energy and petrochemical
companies, operating in more than 140 countries and territories,
employing more than 112,000 people
12. 2. TECHNOLOGICAL
GLOBALIZATION
• “World Wide Web” has exploded in last 10 years
• Computers can move money around world = “finance
capital”
• Silicon Valley is 9th largest economy in world!
Africa
• Number of telephones is decreasing
• More computers in Manhattan than all of Africa!
• Post-colonial infrastructures don’t support technology
14. 3. CULTURAL GLOBALIZATION
• Cultural Imperialism = Dominance of one culture over others
• Hollywood movies, MacDonald’s, Disneyland, Starbucks
• Dominance of the English language and invasion of other languages
• Do people all over the world have the same taste?
Africa
• “Culture Industry” = opportunities for Africans to sell their culture in the “global market” that values
traditional culture
17. 4. POLITICAL GLOBALIZATION
The United Nations: Global assoc. of govts. facilitating
cooperation in international law, security, economic
development, and social equity
• Whose interests does the UN represent?
• The US and the UK were the only nations in support of going to war in
Iraq
• Can a global politics with social values exist?
18. 4. POLITICAL GLOBALIZATION
South Africa
• In 2001, US pharmaceutical corporations sued South African
companies for infringing on AIDS medication patent laws
• In 2003, President George W. Bush announced the
Emergency Plan in 2003 - the largest international health
initiative in history by one nation to address a single disease
• HIV/AIDS Situation in 2004
HIV Infected: 5.3 million
AIDS Deaths: 370,000
AIDS Orphans: 1.1 million
22. GLOBALIZATION CONSEQUENCES/EFFECTS
•Consequences cited by various scholars and
activists (cont.):
•Mixing of cultures:
•Dominant Western culture eroding
traditional cultures
•Backlash from those who want to maintain
traditional cultures
23. GLOBALIZATION CONSEQUENCES/EFFECTS
•Consequences cited by various scholars and
activists (cont.):
•Diseases spread more rapidly
•Economic crises spread more rapidly
•Increased trafficking of humans and drugs
•Terrorism/asymmetric warfare made easier
25. increases economic
prosperity and opportunity
higher degrees of political
and economic freedom in the
form of democracy
Improved standard of living
– reduction in poverty
Improved gender relations
Increased life-span
Pros
26. Cons Increased environmental damage
increased poverty, inequality, injustice
erosion of traditional culture
Corporations are motivated by profit
and have little concern for people
economic globalization developments
feed into ethnic, religious, and factional
tensions that lead to wars and help
breed terrorism
Terrorists now globally interconnected
and empowered with knowledge, create
a whole new category of warfare based,
in part, on the disruption of the
interconnections which are both created
by and necessary for globalization
Corporations shape political policy of
countries e.g. over fishing
28. ROLE OF TRADE WITH GLOBALIZATION
•A key element of economic globalization
•Dramatic increases in trade over the past 200 years
•Technological advances (most notably the steam
engine) powered expansion of trade in 19th and early
20th centuries
•After setback of Great Depression and World War II,
trade grew again, accelerating with collapse of
29. ECONOMIC APPROACHES TO TRADE
•Approaches to trade
•Mercantilist/autarkic practices
•Liberal, “free trade” policies
•A mix of the two extremes (protecting
certain domestic industries, etc.)
30. EFFECTS OF TRADE
•Differences in countries’ exports (primary
products vs. high-tech manufactured goods)
can lead to dependency relationships and
inhibit development of poorer countries
•“Free trade” vs. “fair trade”
•Comparative and absolute advantage (see
31. FREE TRADE CONTROVERSY
•Free trade and barriers to trade
•WTO (previously GATT)
•Most favored nation and reciprocity principles
•Efforts to reduce tariffs, subsidies, quotas, and
other barriers to free trade (and ongoing
disputes, such as agricultural subsidies by
wealthy countries)
32. Summary of GATT Rounds
Round N of
Countries
Subjects and
Modalities
Main Outcomes Value of Trade
Covered
Average
Tariff Cut
Average Post
Round Tariffs
Geneva
1947
23 Tariffs;
Item-by-Item
Negotiation
Concessions on
45,000 tariff lines
$ 10 billion 35%
Annecy
1949
33 Tariffs;
Item-by-Item
Negotiation
Modest tariff
reductions
37%
Torquay
1950
34 Tariffs;
Item-by-Item
Negotiation
8,700 tariff
concessions
26%
Geneva
1956
26 Tariffs;
Item-by-Item
Negotiation
Modest tariff
reductions
$2.5 billion 15%
Dillon
1960-1961
26 Tariffs;
Item-by-Item
Negotiation
Tariff adjustments
following creation of
EEC
$4.9 billion 20% 17%
Kennedy
1962-1967
62 Tariffs;
Linear cuts
30,000 tariff lines
bound
$40 billion 35% 8.7%
Tokyo
1973-1979
102 Tariffs; NTBs;
Linear cuts;
Codes
$155 billion 34% 6.3%
Uruguay
1986-1994
103 start,
128 end
Tariffs; NTBs;
Item-by-Item and
Linear;
WTO
WTO
Dispute Resolution
$3.7 trillion 39% 4.0%
34. REGIONAL TRADE AGREEMENTS
• Besides economic organizations, regional trade
agreements form a key part of the institutional
structure of the world economy
• Regional trade agreements have proliferated
around the world since the beginning of the 1990s
35. FIVE TYPES OF REGIONAL TRADE AGREEMENTS
•1. Partial trade agreement – two or more
countries liberalize trade in a selected
group of product categories
•2. Free trade area (FTA) – trade in goods
and services fully liberalized between
two or more countries
36. FIVE TYPES OF REGIONAL TRADE AGREEMENTS
(CONT.)
• 3. Customs union (CU) – an FTA plus a common external
tariff (CET)
• European Union in the 1970s and 1980s
• MERCOSUR in South America
• 4. Common market – a CU plus free mobility of factors of
production
• European Union in the 1990s
Slide 2-
36
37. FIVE TYPES OF REGIONAL TRADE AGREEMENTS
(CONT.)
•5. Economic Union – common
market with coordination of
macroeconomic policies (including
common currency, harmonization
of standards and regulations)
•United States
40. INTERNATIONAL INSTITUTIONS
• The three global organizations playing a major role in international
economic relations are:
• The International Monetary Fund (IMF)
• The World Bank
• The World Trade Organization (WTO)
Let’s take a closer look at the functions
of these organizations…
42. THE IMF
• Founded by the Bretton Woods meetings between the Allies in
July 1944
• Each of the 184 members charged a quota
• 25% in SDRs or convertible currencies
• US quota is SDR 37,149.3 million (largest)
• Palau quota is SDR 3.1 million (smallest)
• The size of the quota determines the member’s voting power
• 250 basic votes + 1 voter/SDR 100,000 quota
• US has 371,743 votes (17.11%) Palau 281 votes.
43. THE IMF
•The IMF was established to:
•Promote international monetary
cooperation;
•Promote exchange stability and orderly
exchange arrangements
•To foster growth and high levels of
employment, and
•to provide temporary financial assistance
to countries to help ease balance of
44. THE IMF
•Fundamental disequilibrium and
exchange crisis
•Crisis occurs when a country runs out
of foreign exchange reserves – a major
currency or gold that can be used to
pay for imports and international
46. THE WORLD BANK
•Also founded at the Bretton Woods
Conference
•Founded as the International Bank for
Reconstruction and Development (IBRD)
•World Bank has 184 members
47. THE WORLD BANK
•Main functions: development lending
•Today, IBRD is one of the five subgroups making up the
World Bank Group
•IDA (International Development Assn.),
•IFC (International Finance Corp.),
•MIGA (Multilateral Investment Guarantee Agency),
•ICSID (Int’l Cent. For Settlement of Investment Disp.)
49. FROM GATT TO WTO
•Uruguay Round Agreement signed in
1994
•The round established the WTO:
•144 members as of 1 January 2002
•reaches beyond GATT to new trade
issues;
50. THE WTO
• Main Tasks of the WTO
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for LDCs
• Cooperation with other international agencies
51. THE WTO
Interdependence Norms
Liberalization – negotiations to reduce protection.
Nondiscrimination – enshrined in the concept of most
favored national status (MFN): every WTO member must
treat each of its trading partners as it treats its most
favored partner
National treatment – imports must be given a similar
treatment on the domestic market as domestically
produced goods
52. THE WTO
•Sovereignty Norms
•Reciprocity – negotiations proceed in
terms of exchange of “concessions” of
substantially equivalent value.
•Safeguards – right of government to
preserve economic stability through
