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THE
CONTEMPORARY
WORLD
PROF. DAN LHERY SUSANO
GREGORIOUS, Ph.D, LPT,
SMRIEDr, FMERU,FMERC
PROF. DAN LHERY SUSANO GREGORIOUS,
MAED, LPT, SMRIEDr, FMERU,FMERC
• PRINCIPAL
• RESEARCHER
• EDUCATOR
What is CONTEMPORARY
WORLD?
• Refers to circumstances
and ideas of the present
age, where it deals with
problems and issues
related to environment,
population, wealth,
power, tensions and
conflicts.
Why study CONTEMPORARY WORLD?
a. To be aware about
Contemporary World
problems and issues that all
societies must be
concerned.
b. To developed
competencies and construct
knowledge about problems
and issues and become
aware of our roles and our
responsibilities as citizen.
You, in the 21st century
Should you care if…?
•Brazil allows more people into the rainforest
• Russia rebuilds its military forces
•India raises the salaries of its senior IT workforce
• China buys up the industrial metals of Australia
Globalization
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
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
Thomas Friedman, “The Lexus and the Olive Tree”
• A globalist system has replaced the Cold War system
• The new system has unique rules, logic, pressures and incentives driven by
international capitalism
• Features integration: free flow of capital, goods, ideas more broadly, faster,
deeper than anytime in the past.
• The “Golden Straightjacket”: must abide by goals of free market principles,
efficiency. Rewarded if you do.
• New key players: The “Electronic Herd.”
• Globalization promotes cultural homogenization, the “Big Mac.”
Thomas Friedman’s
Definition of Globalization
Friedman: Globalization’s New Structure and
Balance of Power
• Traditional balance between states (countries), U.S. is
the paramount player
• Balance between states and global markets: states
can’t ignore the market any longer without costs
• Balance between individuals and states: people
influence governments through the market at home
and abroad (for good and evil).
• Globalization produces “super-empowered
individuals
Important Conclusions from Friedman’s Argument
1. Rewards. Those who participate in
globalization are rewarded, though there are
winners and losers.
2. Peace Dividend. Those engaged in
globalization have too much to lose with war.
3. Democratic Dividend. Free movement of
information with markets produces drive for
freedom and liberty—seeds of democracy.
History of Globalization
According to Thomas Friedman
The Stages of Globalization
(From Thomas Friedman in The World is Flat)
• Globalization 1.0 (from 1492 to 1800)
• Globalization 2.0 (from 1800 to 2000)
• Globalization 3.0 (from 2000 to the present)
Globalization 1.0
Christopher Columbus
Globalization 2.0 (first half)
Steam engine
Railroads
Globalization 2.0 (second half)
OpenMoko open source smart phone
Satellites
Apple Mac Pro
Fiber optics
Globalization 3.0
1.0
2.0
3.0
Globalization 3.0 (continued)
Schematic Map of the Internet
Aspects of Globalization
5 ASPECTS OF GLOBALIZATION
1. ECONOMIC
2. TECHNOLOGICAL
3. CULTURAL
4. POLITICAL
5. MILITARY
THESE ASPECTS ARE ALL INTERCONNECTED!
*********************
After this lecture, can you give 1 example of each of the
above?
1. Economic Globalization
• Economic globalization refers to the widespread international
movement of goods, capital, services, technology and information. It
is the increasing economic integration and interdependence of
national, regional, and local economies across the world through an
intensification of cross-border movement of goods, services,
technologies and capital.
• Economic globalization primarily comprises the globalization of
production, finance, markets, technology, organizational regimes,
institutions, corporations, and people
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
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
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
2. Technological
Globalization
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
3. Cultural Globalization
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
3. CULTURAL GLOBALIZATION
McArabia Kofta
4. Political Globalization
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?
• Alternative political gatherings: Annual World Social
Forums since 2001, The Piece Process @ Gav!
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
5. Military Globalization
5. MILITARY GLOBALIZATION
Nuclear Bombs F/A-22 Raptor
5. MILITARY GLOBALIZATION
• Global alliances become clear during war time
• Ex: Today’s US alliance with Britain in wars against
Afghanistan and Iraq
• What will happen with North Korea and nuclear weapons?
Africa
• “Trade in Arms” = US sold $227 million in arms to AF in
1990s
• US train and provide weapons for African armies on both
sides of their civil wars (ex. Mobutu civil war in Congo)
• US is the #1 exporter of weapons globally
• US is the last on the list of exporters of non-military aid to
the developing world
5. MILITARY GLOBALIZATION
Smart Bombs Sidewinder Missiles
Consequences/Effects of
Globalization
Globalization Consequences/Effects
•Consequences cited by various scholars and
activists:
•Cheaper goods and services
•Growing wealth for certain actors
•Environmental damage
•Exploitation of labor
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
• “Lexus and the Olive Tree” (Friedman)
• “McWorld vs. Jihad” (Barber)
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
Globalization Consequences/Effects
Global Culture: Homogenization
 Technology (Internet, TV, cell phones etc.) is sweeping away cultural
boundaries creating the possibility and even the likelihood of a global
culture.
 Global entertainment companies shape the perceptions, values, and
dreams of people, everywhere.
 This spread of values, norms, and
culture tends to promote Western ideals
of capitalism and consumerism.
 Resulting in the disappearance of local
cultures, traditions, and identities
replaced by a single commodity/ single
identity world – the Westernization of
culture
Ladies only line Saudi Arabia
 Coca-colonization: Coke, McDonald’s, Levi’s, MTV, Disney, computer games,
American (or American style) TV shows, look-alike shopping malls with look-
alike goods
 the meaning of good, appropriate, success changes
Globalization Consequences/Effects
Asymmetry in Power Relations and Flows
 Banana Republicanization
 Move from the dominant to the weaker
like to teach the world to sing
Big Bird does China
Summary of
Consequences/Effects
Pros and Cons to Globalization
 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
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
Trade
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 communist bloc
and advances in information technologies
•Institutions such as GATT (later WTO) have facilitated trade
globally
•Growth of regional free trade blocs
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.)
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
lecture #10)
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)
•Regional free trade agreements (e.g., NAFTA)
•Conflict with WTO goals
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%
See Supplemental Readings
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
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
•North American Free Trade Agreement
(NAFTA)
Slide 2-68
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
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
•Canada
•European Union
Global Institutions that
Affect IPE
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…
IMF
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.
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 payments
adjustment
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 borrowings
•IMF conditionality – requirement for the
borrowing member to carry out economic
reforms in exchange for a loan
The World Bank
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
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.)
WTO
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;
•has a more effective dispute settlement
mechanism; and
•monitors national trade practices more
consistently
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
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
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
(nondiscriminatory) protection
recognized.

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Defining-Globalization [Autosaved].pptx

  • 1. THE CONTEMPORARY WORLD PROF. DAN LHERY SUSANO GREGORIOUS, Ph.D, LPT, SMRIEDr, FMERU,FMERC
  • 2.
  • 3. PROF. DAN LHERY SUSANO GREGORIOUS, MAED, LPT, SMRIEDr, FMERU,FMERC • PRINCIPAL • RESEARCHER • EDUCATOR
  • 4. What is CONTEMPORARY WORLD? • Refers to circumstances and ideas of the present age, where it deals with problems and issues related to environment, population, wealth, power, tensions and conflicts.
  • 5. Why study CONTEMPORARY WORLD? a. To be aware about Contemporary World problems and issues that all societies must be concerned. b. To developed competencies and construct knowledge about problems and issues and become aware of our roles and our responsibilities as citizen.
  • 6. You, in the 21st century Should you care if…? •Brazil allows more people into the rainforest • Russia rebuilds its military forces •India raises the salaries of its senior IT workforce • China buys up the industrial metals of Australia
  • 7.
  • 8.
  • 9.
  • 10.
  • 11.
  • 12.
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  • 15.
  • 17. 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
  • 18. 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
  • 19. Thomas Friedman, “The Lexus and the Olive Tree” • A globalist system has replaced the Cold War system • The new system has unique rules, logic, pressures and incentives driven by international capitalism • Features integration: free flow of capital, goods, ideas more broadly, faster, deeper than anytime in the past. • The “Golden Straightjacket”: must abide by goals of free market principles, efficiency. Rewarded if you do. • New key players: The “Electronic Herd.” • Globalization promotes cultural homogenization, the “Big Mac.”
  • 21. Friedman: Globalization’s New Structure and Balance of Power • Traditional balance between states (countries), U.S. is the paramount player • Balance between states and global markets: states can’t ignore the market any longer without costs • Balance between individuals and states: people influence governments through the market at home and abroad (for good and evil). • Globalization produces “super-empowered individuals
  • 22. Important Conclusions from Friedman’s Argument 1. Rewards. Those who participate in globalization are rewarded, though there are winners and losers. 2. Peace Dividend. Those engaged in globalization have too much to lose with war. 3. Democratic Dividend. Free movement of information with markets produces drive for freedom and liberty—seeds of democracy.
  • 24. The Stages of Globalization (From Thomas Friedman in The World is Flat) • Globalization 1.0 (from 1492 to 1800) • Globalization 2.0 (from 1800 to 2000) • Globalization 3.0 (from 2000 to the present)
  • 26. Globalization 2.0 (first half) Steam engine Railroads
  • 27. Globalization 2.0 (second half) OpenMoko open source smart phone Satellites Apple Mac Pro Fiber optics
  • 31. 5 ASPECTS OF GLOBALIZATION 1. ECONOMIC 2. TECHNOLOGICAL 3. CULTURAL 4. POLITICAL 5. MILITARY THESE ASPECTS ARE ALL INTERCONNECTED! ********************* After this lecture, can you give 1 example of each of the above?
  • 33. • Economic globalization refers to the widespread international movement of goods, capital, services, technology and information. It is the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital. • Economic globalization primarily comprises the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and people
  • 34. 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
  • 35. 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
  • 36. 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
  • 38. 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
  • 40. 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
  • 43. 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? • Alternative political gatherings: Annual World Social Forums since 2001, The Piece Process @ Gav!
  • 44. 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
  • 46. 5. MILITARY GLOBALIZATION Nuclear Bombs F/A-22 Raptor
  • 47. 5. MILITARY GLOBALIZATION • Global alliances become clear during war time • Ex: Today’s US alliance with Britain in wars against Afghanistan and Iraq • What will happen with North Korea and nuclear weapons? Africa • “Trade in Arms” = US sold $227 million in arms to AF in 1990s • US train and provide weapons for African armies on both sides of their civil wars (ex. Mobutu civil war in Congo) • US is the #1 exporter of weapons globally • US is the last on the list of exporters of non-military aid to the developing world
  • 48. 5. MILITARY GLOBALIZATION Smart Bombs Sidewinder Missiles
  • 50.
  • 51. Globalization Consequences/Effects •Consequences cited by various scholars and activists: •Cheaper goods and services •Growing wealth for certain actors •Environmental damage •Exploitation of labor
  • 52. 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 • “Lexus and the Olive Tree” (Friedman) • “McWorld vs. Jihad” (Barber)
  • 53. 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
  • 54. Globalization Consequences/Effects Global Culture: Homogenization  Technology (Internet, TV, cell phones etc.) is sweeping away cultural boundaries creating the possibility and even the likelihood of a global culture.  Global entertainment companies shape the perceptions, values, and dreams of people, everywhere.  This spread of values, norms, and culture tends to promote Western ideals of capitalism and consumerism.  Resulting in the disappearance of local cultures, traditions, and identities replaced by a single commodity/ single identity world – the Westernization of culture Ladies only line Saudi Arabia
  • 55.  Coca-colonization: Coke, McDonald’s, Levi’s, MTV, Disney, computer games, American (or American style) TV shows, look-alike shopping malls with look- alike goods  the meaning of good, appropriate, success changes Globalization Consequences/Effects Asymmetry in Power Relations and Flows  Banana Republicanization  Move from the dominant to the weaker like to teach the world to sing Big Bird does China
  • 57.  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
  • 58. 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
  • 59. Trade
  • 60. 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 communist bloc and advances in information technologies •Institutions such as GATT (later WTO) have facilitated trade globally •Growth of regional free trade blocs
  • 61. 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.)
  • 62. 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 lecture #10)
  • 63. 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) •Regional free trade agreements (e.g., NAFTA) •Conflict with WTO goals
  • 64. 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%
  • 66. 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
  • 67. 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 •North American Free Trade Agreement (NAFTA)
  • 68. Slide 2-68 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
  • 69. 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 •Canada •European Union
  • 71.
  • 72. 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…
  • 73. IMF
  • 74. 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.
  • 75. 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 payments adjustment
  • 76. 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 borrowings •IMF conditionality – requirement for the borrowing member to carry out economic reforms in exchange for a loan
  • 78. 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
  • 79. 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.)
  • 80. WTO
  • 81. 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; •has a more effective dispute settlement mechanism; and •monitors national trade practices more consistently
  • 82. 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
  • 83. 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
  • 84. 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 (nondiscriminatory) protection recognized.