In this lecture, we review some of the major institutions with power over international trade and finance. These include the World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank (WB). Peripheral bodies such as the United Nations (UN) are also mentioned. We end the lecture with a review of the current debate on globalization, its pros and cons.

1. Lecture 2
Globalization and Internationalization
Lecturer: Dr. Preston Teeter
BUSS 2067
International Business Environment

2. Before we start:
1) Phones/electronics silent, off, and away!
2) Say hello to the people around you;
you need a small group to discuss
questions
BUSS 2067
International Business Environment

3. Outline
• Lecture 1 quiz
• The World Trade Organization (WTO)
• The International Monetary Fund (IMF) and
the World Bank
• The globalization debate

4. LECTURE 1 QUIZ

5. Question 1
True or False:
Australia and North America score relatively
high in terms of economic freedom.

6. Question 2
True or False:
Diesel (jeans) was an SME that grew over 20
years to become a premier fashion company.

7. Question 3
What categories of IB risk were most involved
in the SE Asia financial crisis?
A. Commercial and Export risk
B. Commercial and Cross-cultural risk
C. Currency and Import risk
D. Currency and Country risk

8. Question 4
Which statement best describes Diesel’s (jeans)
circumstances in 2015?
A. They achieved enormous growth and profits after years
of struggling.
B. They were forced into bankruptcy.
C. After years of struggling, the company decided to copy
the moves of competitors such as GAP, but such moves
had yet to pay off.
D. Their growth and popularity hurt their appeal with
teenagers and young adults, forcing them to reposition
their products and focus on brand diversification.

9. THE WORLD TRADE
ORGANIZATION (WTO)

10. WTO
Over the past few years, Australia has signed
numerous free trade agreements with nearby
countries such as South Korea and Japan.
See the following articles.
And this link.

11. Source: http://www.afr.com/opinion/editorials/championing-a-world-of-
trade-20170306-gurf66

12. Source: http://www.smh.com.au/world/push-for-australian-university-campuses-in-
indonesia-under-free-trade-deal-20170222-guiwhp.html

13. WTO
But why is this even necessary? Doesn’t the WTO govern
world trade? In small groups, discuss the following:
1) What is the WTO? Where does its authority lie?
2) Why are nations signing bilateral or multilateral free
trade agreements as opposed to negotiating under the
WTO?
If online, consult your textbook and other sources. We
will reconvene in 4 minutes to discuss as a class.

14. WTO
• Preceded by GATT (1948)
– General Agreement on Tariffs and Trade
• Responsible for policing the world trading
system
• Promotes lowering barriers to trade
• 164 nations as of 2016, HQ: Geneva

15. Source:
https://www.wto.org/english/thewto_e/countries_e/org6_map_e.htm

16. WTO
• Goods
– 1947 to 1994: GATT
– Lowering duties and
barriers
• Services
– GATS: General Agreement
on Trade in Services
– Freer and fairer trade of
services such as banking,
insurance, and hotels.
• Intellectual property
– Copyrights, patents,
trademarks, etc.
– Protected when trade is
involved
• Dispute settlement
– 300 cases in a recent
8-year period
– Panel of experts rule on
trade infringements

17. Source: https://www.nytimes.com/2016/01/01/opinion/global-trade-
after-the-failure-of-the-doha-round.html?_r=0

18. Source: http://in.reuters.com/article/uk-trade-wto-idINKBN0G41LJ20140804

19. Source: http://review.chicagobooth.edu/magazine/winter-2015/is-the-wto-a-
failure-or-a-success

20. Source: http://review.chicagobooth.edu/magazine/winter-2015/is-the-wto-a-
failure-or-a-success

21. THE IMF AND
THE WORLD BANK

22. IMF/WB
The International Monetary Fund (IMF) and the World
Bank formed out of the Bretton Woods Agreement in
1944, near the end of the second world war. While
certainly being able to claim many success stories, both
organizations have experienced their fair share of
controversy. See the following videos and articles.
Protests in Peru
Protests in Ireland

23. Source: http://www.rawstory.com/2015/10/protesters-march-against-world-bank-
imperialists-during-annual-meeting-in-peru/

24. Source: https://www.theguardian.com/world/2010/nov/27/ireland-bailout-angry-
demonstrators-dublin

26. IMF/WB
Were these issues foreseeable and avoidable? In small
groups, discuss the following:
1) What is the purpose of the IMF and the World Bank?
2) Why are these organizations controversial? What can
be done about these issues?
If online, consult your textbook and other sources. We
will reconvene in 6 minutes to discuss as a class (extended
break).

27. IMF/WB
IMF
• Maintain order in int’l
monetary system
• Lender of last resort
– Argentina, Indonesia,
Mexico, Russia, etc.
• HQ: Washington, DC
World Bank
• Promote economic
development
• Low-interest loans to
developing nations
• HQ: Washington, DC

28. IMF/WB
Why are these organizations somewhat
controversial?
• Strings attached  Loss of sovereignty
• Claims of misguided economic theory
• Large % of voting rights to developed countries
• Sovereign immunity
• Prefer large-scale investments when sometimes
small-scale investments would better suit
conditions

29. Source: https://www.bloomberg.com/view/articles/2013-01-07/why-austerity-works-
and-fiscal-stimulus-doesn-t

30. Source: http://knowledge.wharton.upenn.edu/article/does-austerity-work-or-does-it-
make-things-worse/

31. Source: https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-
austerity-delusion

32. THE
GLOBALIZATION DEBATE

33. Globalization
Over the past two decades, and increasingly in the
past few years, a debate is raging across the world
over the benefits and consequences of globalization.
There are many groups who feel that the cons
outweigh the pros.
One of the earliest protests against the forces of
globalization was in Seattle in 1999, where various
groups protested a WTO meeting.

36. 1999 Seattle WTO Protests
• Largest U.S. demonstration against world
meeting
• At least 40,000 protesters
• Participants: NGOs, unions, students, etc.
• Outcomes
• Resignation of police chief
• 157 arrests (released and paid $250k total)
• Known as “The Battle in Seattle”
• Watch video

37. Globalization
Globalization was meant to be a win for everyone, but
such a backlash forces us to step back and consider:
1) What exactly are the pros and cons of globalization?
2) What are the trends? Do the pros outweigh the cons?
Please discuss in small groups or, if online, consult your
textbook and other sources. We will reconvene in 4
minutes to discuss as a class.

38. Globalization
Pros
• Lower prices of G&S
• Creates jobs
• Higher incomes
• Stimulates growth
• Success stories
– East Asia and South
America
Cons
• Global sweatshops
• Job losses
• Lower incomes
• Resource plundering
• “Cultural imperialism”
• Hot money flows

39. Globalization
• Child Labor
– Declined by one third since 2000, from 246 million to
168 million children
– Child labor among girls fell by 40% since 2000,
compared to 25% for boys
– Still prevalent in Asia-Pacific and Sub-Saharan Africa,
particularly in agriculture and the “informal economy”
Source: International Labour Organization (www.ilo.org), 2017

41. Gross National Income in US Dollars, 2012

42. Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=XD-XO

43. Source: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=XD-XO

44. The Growth of GDP, 2003-2012

45. Source:
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2015&locations=XD-
XO&start=1961&view=chart

46. Source: http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=XD-XO

47. Source: http://data.worldbank.org/indicator/EN.ATM.GHGT.KT.CE?locations=XD-XO

48. Questions?