The document discusses globalization and the international economy. It describes how globalization has occurred in waves due to decreases in trade barriers and transportation costs. More recently, developing countries have increased manufacturing trade and companies have outsourced production overseas. Several countries' levels of exports and imports as a percentage of GDP are provided as a measure of openness. The advantages of globalization are greater specialization and increased competition. However, some common misconceptions are that trade is zero-sum and import barriers create jobs.

1. INTERNATIONAL ECONOMICS
Chapter I: International
Economy and Globalization
By Nguyen Thanh Tung
Hanoi, 2012

2. Globalization of Economic Activity
• Globalization
– Greater interdependence among countries and
their citizens
• Forces are driving globalization?
– Technology change
– Liberalization of trade an investment
– Global acceptance of English as the universal
business language
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3. Globalization of Economic Activity
• Waves of Globalization
– First wave: sparked by deceases in tariff barriers
and declining transportation costs.
– Second wave: 1945 – 1980
– Latest wave:
• Large number of developing countries shifted into
manufacturing trade.
• Foreign outsourcing: manufacturing increasingly moved
to wherever cost were lowest.
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4. Openness of economy
Openness = (Export + Import)/GDP
Country Export (% of GDP) Import (% of GDP) Exp. + Imp. (% of
GDP)
US 11 16 27
Japan 14 13 27
Korea 46 45 91
Germany 45 40 85
Canada 38 34 72
Netherlands 74 66 140
Source: http://www.worldbank.org/data
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5. Globalization of Economic Activity
• Advantages
– People, firms and nations gain from spending
more of time and resources doing those things in
which they have a relative advantage.
– Increased competition from abroad: essential to
both innovation and efficient production.
– Economic growth rates have a close relation to
openness to trade, education and communication
infrastructure.
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6. Globalization of Economic Activity
• Common Fallacies
– Trade is zero-sum activity
– Imports reduce employment and act as a drag on
the economy while exports promote growth and
development.
– Tariffs, quotas and other import barriers will save
jobs and promote a higher level of employment.
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