August 17, 2008

Trade and Globalization: (2nd part of chapter two)

First golden age of globalization: - 1890 – 1914 because

a) Great inventions: sewing machines, telephone, electricity.
b) Transportation: steamships, rail roads.
c) Political systems: free trade. (England maintained free trade and many
world power is supported it)

-the great depression (1929) made the United States and England against free trade.
-political systems were against globalization in the inter-war period.

Second golden age: 1949-… Possible because:

a) -General Agreement on Tariffs and Trade (GATT): the first (GAT T) was
made in 1949.
-Doha 2001 (WTO) world trade organization changed from (GATT) in
1993.
b) Innovations in shipping

-Shares of world trade (2005)

Manufacturing: 60 %
Services: 20%
Natural resources: 14%
Agriculture: 6%

- Changes over the last 100 years for the UK:

-Percentage of imports which are manufacturing: - 1910: 25%

- 2002: 80%

- Rise of the LDC’s (less developed countries) manufacturing exports started with:

Asian tigers: Hong Kong, Singapore, Korea, Taiwan.

Southeast Asia: Thailand, Malaysia.
East Asia: China.

Off shoring (moving operation to foreign from home) and outsourcing (subcontracting
out tasks and functions which used to be done internally):

*example:
*-Intel (U.S. Firm) – manufactures chips:
Plants: Costa Rica and China ← (off shoring)
- (it’s called foreign direct investment because Intel owns the factories) ← an
example of off shoring without outsourcing.
 **-Dell computers → Austin
↓ but
Customer service → South Dakota
- if they own the customer service than they didn’t do and outsourcing or off
shoring because South Dakota is still on the U.S.!
- if dell owns the customer service and it sets it in India, then it’s only off shoring
- if it’s given 10 to an Indian company (INFO SYS) it’s off shoring and outsourcing.

-usually in international trade “outsourcing” includes off shoring.

-Supply slow in manufacturing (HD TVs)

-making of the Barbie dolls

U.S Price = 10$

Export Price = 2$
China = 35¢ for wages.