MODULE 36 Since its accession to the WTO, the Philippines has initiated a policy

reform program to achieve macroeconomic stability and long term industrial

The trend towards Globalization
In this module, you will:
1. define terms such as globalization, privatization and
liberalization;
2. identify some world economic organizations and explains their
goal;
3. discuss the effects of globalization on the nation’s economy and
people; and
4. cite advantages and disadvantages of globalization.
Coca-cola, Kentucky Fried Chicken, McDonald’s are synonymous with
American businesses around the world. These are multinational corporations
whose presences are felt all over the world from Tokyo to London to Dubai
and everywhere in between. Corporate symbols from other countries such as
petroleum companies engaged in refining, distribution, export and exploration
of mineral resources have also found their own niche in the world economy.
Classic examples of these corporations are Petron, Caltex, Exxon and Shell.
These big corporations give meaning to the term globalization which refers to
the increased mobilityof goods, services, labor, capital and technology
throughout the world.
The onset of market globalization has dramatically transformed the
world of work. Competition among firms has become fiercer and work itself
has become more intense.
Liberalization and Privatization Defined
Liberalization is an economic policy that involves measures to remove any
barriers from the free flow of foreign goods, services, capital between
countries. In the Philippines for example, the liberalization of the banking
system is in accordance with or countries commitment to the World Trade
Organization (WTO).
restructuring. Through the liberalization of the financial and banking system,
measures have been taken to cut interest rates and improve access to
capital.
In 1994, Congress enacted RA 7221, which encouraged entry of foreign
banks in the Philippines. And in line with the governments drive towards
banking liberalization, the BangkoSentralngPilipinas (BSP) has given the
foreign banks a critical role in consolidating the banking systems by
encouraging foreign buy-ins. Thus, came about the mergers and
consolidations of several banks. The rationale behind this is the premise that
such world result in a stronger and more stable banking system.
Privatization
Privatization is the policy of selling government-owned and controlled
corporations to the private sector.
A country’s banking system is often times referred to as the lifeblood
of the economy. By and large, it is viewed as one of the sector that cold
could contribute to the progress of the nation. With the restructuring f BSP in
1993, the Philippine banking sector has become the most liberalized financial
system in the Asian region. With the liberalization policy f the Philippine
banking system, banks previously owned by the government were gradually
privatized. Transnational banks in the process further engulfed the banking
system. A classic example of this privatization system scheme is that of
Philippine National Bank which was previously owned by the government.
On May 22, the government and Lucio Tan forged an agreement to
rehabilitate the PNB. The two sides agreed to sell their 90% share of the
bank to the public.
International Trade Organizations and Alliances
 Promoting competitiveness and enhancing efficiency of local
corporations and industries are topmost among governments’ goals for
multilateral trade and investment agreements through organizations such as
the World Trade Organization (WTO), Asia-Pacific economic cooperation
(APEC), and Association of South East Asian Nation (ASEAN).
Asia-Pacific Economic Cooperation
APEC is the premiere form for facilitating economic growth, cooperation,
trade and investment in the Asia-Pacific region. It is also the
intergovernmental grouping in the world operating on the basis of non-
binding commitments; open dialogue and equal respect for the views of all
participants. Decisions made within APEC are reached by consensus and
commitments are undertaken on a voluntary basis. APEC has 21 “member-
economies”. The word economies is said to describe APEC members because
the APEC cooperative process is predominantly concerned with trade and
economic issues, with members engaging with one another as economic
entities. Key to achieving APEC’s vision are what are referred to as the “Bogor
goals” of free and open trade and investment in the Asia-Pacific by 2010 for
industrialized economies and 202 for developing economies.
APEC focuses on three key areas known as its “Three pillars”:
1. Trade and Investment Liberalization
2. Business Facilitation
3. Economic and Technical Cooperation
The outcomes of cooperation in these areas enable APEC member-
economies to strengthen their economies by pooling their resources and
achieving efficiency. Tangible benefits are also delivered to the consumers in
the APEC region through increased training and employment opportunities,
greater choices in the market place, cheaper goods, and services and improve
access to international markets.
Trade and Investment Liberalization
Trade and investment liberalization focuses on opening markets to
increase trade and investment among economies, resulting in economic
growth for APEC member-economies and improved standard of living for all.
Business Facilitation
Business helps importers and exporters in the Asia-pacific region to meet
and conduct business more efficiently, thus reducing costs of production.
Conducting business more efficiently will lead to increased trade, cheaper
goods and services and more employment opportunities due to expanded
economy.
Economic and Technical Cooperation(Ecotech)
Ecothech is dedicated to providing training and cooperation to build
capacities in all APEC member-economies. This area builds capacity the
institutional and personal level to assist APEC member-economies and their
people to gain the necessary skills to meet their economic potential.
Self-check
1. What is the primary goal of APEC? How do member-economies promote
its goal?
General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade (GATT) is an international
agreement designed to limit government intervention to restrict international
trade. It was negotiated immediately following WW II and was signed in
October 1947. Its goal is to liberalize trading arrangements. It has a small
bureaucracy located in Geneva, Switzerland. Since the formation of GATT,
several rounds of negotiations have t6aken place, resulting in general tariff
reduction. The Kennedy round in the early 1960’s and the Tokyo Round in
1979reslted in large tariff cuts.
 The Uruguay Road, completed in 1994, was considered as the
most ambitious and comprehensive of the rounds. The 115 members-
countries agreed during this round to lower tariffs and to prevent protections
through subsidies or favorable treatment for government purchases. Another
significant result of Uruguay round are the agreement to phase-out
agricultural subsidies, the strengthening of intellectual property rights
(copyrights and patents) and the creation of a new world trade organizations.
This agreement slowly advanced the growth of multilateral trade negotiations
and international reforms and improves the conduct of trade and investments
across the world. The Philippines ratified the agreement in 1995.
Self-check 2. What is the GATT? Why was it established?
World Trade Organization
The WTO came into being in 199. It is the successor of the GATT which was
established in 1947 and founded until 1994. The WTO is the only
international organizations dealing with global rules on trade between
nations. Its main function is to ensure that international trade flows as
smoothly, predictably and freely as possible. The smooth flow of trade and
commerce then translates to assurance for consumers and producers, in any
part of the world, that they can enjoy secure supplies and greater choice of
finished products, raw materials and services. The underlying principle behind
the very existence of the WTO is that rigorous and harmonious trade result in
higher employment and income generation, which in turn, produces economic
stability in the global setting.
WTO’S underlying principles include:
1. Lowering of trade barriers of the countries;
2. Enjoyment of all nations of the “most favored nations” status;
3. A country that increases its tariffs above the agreed upon levels must be
able to compensate its trading partner for whatever economic injury it cause;
and
4. Settlement of trade conflicts by consultation and arbitration.
Self-check 3. What is the
WTO?
Association of Southeast Asian Nations
ASEAN was established on August 8, 1967 in Bangkok by its five original
member-countries namely. Indonesia, Malaysia, the Philippines, Singapore
and Thailand. Brunei Darussalam joined on January 8, 1989, Vietnam on July
23, 1997, and Cambodia on April 30, 1999.
The objectives of the ASEAN are:
1. to accelerate economic growth, social progress and cultural development in
the region through joint endeavors in the spirit of equality and partnership in
order to strengthen the foundation for a prosperous and peaceful community
of SEA nations; and
2. To promote regional peace and stability through abiding respect for justice
and the rule of law in the relationship among countries in the regional
adherence to the principles of the UN charter.
Economic cooperation
The fourth ASEAN summit in Singapore in 1992 adopted the “framework
agreement on enchanting economic cooperation,” which include the
launching of scheme toward an ASEAN free trade area of AFTA. The strategic
objective as of AFTA is to increase the ASEAN region’s competitive advantage
as a single production unit. The elimination of tariffs and non-tariffs barriers
among the member-countries are expect to promote greater economic
efficiency, productivity and cooperativeness.
This ASEAN cooperation has resulted in greater regional interrogation. Within
seven years from the launching of the AFTA, trade among ASEAN countries
more than doubled from US $44.2 billion in 1993 to US $95.2 billion in 2000,
an average annual growth rate of 11.86%. by the year 2000, intra-regional
exports accounted for 23.3% at ASEAN exports. Tourist from ASEAN
countries themselves has been representing an increasingly important share
to tourism in the region. In 2003, of the 37.4 million tourist arrivals is ASEAN,
16.45 million or approximately 45% come from within ASEAN itself.
winners equation’’ but challenge, and likewise a threat that requires the
strengthening of economy while aggressively taking advantage of
opportunities presented before us.
The pursuit of economic security and stability as well as the continuing
commitment of achieve global interdependence through trade among nations
have resulted in, many claimed, an imbalance economic development. Time
and again, trade-offs play a pivotal role in the assessment and evaluation of
the different nations developmental goals. And since the new economic order
is now in place with the several nations pledging their commitments to its
adoption, let us examine the advantages and disadvantages of such new
world trade order. The new world trade order refers to the globalization,
liberation and privation schemes adopted by many countries, including
Philippines.

Today ASEAN economic cooperation covers the following areas: trade, Globalization, liberation and even the creation of multilateral agreement or
investment, industry, services, finances, agriculture, forestry, energy, regional trade areas like the AFTA are not disadvantageous per se. but
transportation and communication, intellectual property, small and medium member-countries must see to it that the welfare of the citizens and the
enterprises, and tourism. dynamism of their local industries and economies are not satisfied to
accommodate corporate interest. The Philippine government for example
must focus its economic direction to a level where the general welfare of its
people is paramount and attained
Self-check
Advantages Disadvantages
4. What are the objectives of the ASEAN?  When the demand for labor in  Liberalization of trade has
5. Give at least two positive result of the economic cooperation among ASEAN developing countries increases, turned the Philippines, an
member countries. the wage arte also increases. agrarian country into a net
Therefore liberalization improves importer of what were
the opportunities of workers in previously produced in
the developing world and abundance like rice and sugar.
Impact of new world trade order increases their income. Cheap imports now compete
 By liberalizing trade, the market with local produce.
Globalization as an objective phenomenon of increasing economic integration for the things that we sell  Intensified the “race to bottom”
in global trade, finance and investment must be addressed no as “loser- expands. trend among transnational
 Globalization and free trade cost companies. “Race to bottom”
 some jobs but also creates other
jobs. It brings about the global
rationalization of labor and
allocates labor resources to their
highest-value activity.
 The creation of multilateral trade
organizations provides the
mechanism for monitoring and
providing surveillance of issues
that affect international trades in
goods and services.
 With globalization, tourism as an 
industry is touted as a major
source of employment
worldwide and in fact
considered as the world biggest
industry. According to the world
travel and tourism council, the 
tourism industry employs
directly more that 269 million
people around the world.
READ-A-LINK
Virgin Coco Oil Exports Surge
Bye: Ronnel W. Domingo
means search for countries with Virgin coconut oil (VCNO) exports are continually swelling as demand has
the lowest possible labor cost short up following manufactures’ adoption of production standards,
and weakened environmental according to an industrial try group
safeguards. The United Coconut Association of the Philippines said that in the first
 Commitment to reduce tariffs
half of 2005 alone, 340 metric tons VCNO were shipped to foreign
result in the free entry of
agricultural products. The markets. The figure was 92 % higher than the 177 MT exported for the
country’s traditional agricultural whole of 2004. Forecast for 2005 show that at least 500 MT will be sold to
products such as onions, garlic markets abroad.
and the like flood the local The United States took in 331 MT or about 97% of the export market. In
market. 2004, the US imported about 170 MT or 96% of total shipments. Other
The liberalization of the
markets bought limited quantities, including Singapore, Ireland, South
Philippine banking system
resulted in massive Korea, Saudi Arabia, Australia, Malaysia, Hong Kong and Germany.
retrenchment of bank According to the Virgin Coconut Oil Producers and Traders Association
employees. Contractualization is of the Philippines (VCNO Philippines), world demand was surging as more
now widely practiced banks. countries turn to the product as an alternative food supplement. VCNO
Tourism is being viewed as a Philippines data showed that 2003, the group exported an estimated 200
shortcut to rapid development. MT or double the 100 MT it shipped out in 2002. Source:
Especially in the third world
Philippine Daily Inquirer, November 15, 2005
countries, its effects have been
SYNTHESIS
profound: eviction of indigenous
people from their lands,  Globalization refers to the increased mobility of goods, services,
breakdown of traditional values, labor capital and technology around the world.
pollution, environmental  Liberalization is an economic policy which involves measure to
degradation and the disruption remove any barriers to the free flow of foreign goods, services
of ecological balance. and capital between and among countries.
 Privatization refers to the selling of government-owned or
controlled corporations to the private sector.
 Multilateral agreements like General Agreement on tariffs and
trade are enforced to raise living standards through substantial
reduction of tariffs and other barriers to trade as well as
elimination of discriminatory treatment in international
commerce
  The impetus of the Philippine government is more than ever, to If you were a government policy-maker, how will you promote economic
reexamine and reassess its economic and development policies. stability and security and at the same time protect the environment?
The positive attributes of liberalization and globalization must
not only be confined to the economic security and stability of Answers to Self-check questions
the people but to the upliftment of their dignity as well. 1. The Asia Pacific Cooperation aims to facilitate economic growth,
cooperation, trade and investment in the Asia Pacific region. Members focus
MODULE REVIEW on three key areas, name and trade investment liberalization, business
A. Vocabulary. Define the following terms and use each in a sentence. facilitation and economic and technical cooperation.
1. Privatization 3. Globalization 2. The General agreement on tariffs and trade (GATT) was establish to
2. Liberalization 4. Regional integration liberalize trading activity and provide an organization to administer more
liberal trading arrangements. It is designed to limit government intervention
B. Review Questions. Answer the following questions. to restrict international trade.
3. The World Trade Organization (WTO) is the only international organization
1. What is the Implication of globalization to the world economy? dealing with global rules on trade between nations. It is the successor of the
2. What is the importance of various trade agreements to the Philippines? GATT.
3. Are you in favor of liberalization? Justify your answer. 4. The association of South East Asian Nations (ASEAN) aims to promote
4. What are the "three pillars" of APEC? regional peace and stability in Southeast Asian.
5. Do the advantages of globalization outweigh its advantages? Explain your
answer.
5. a. Greater regional integration
C. Activities b. greater economic cooperation
1. List down at least 10 products or items that can be considered as "global". 6. a. expansion of markets
Explain why they are considered such. b. creation of jobs
2. Interview at least five individual and ask how liberalization has affected 7. A. Proliferation of import products
them with regard to the following: B. retrenchment of employees and labor contracting.
a. Wage
b. Working condition
c. Security of tenure
d. Fringe benefit

D. Valuing
 Glossary

APEC- APEC is the premiere form for facilitating economic growth,

cooperation, trade and investment in the Asia-Pacific region.

GATT- meaning is an international agreement designed to limit government

intervention to restrict international trade.

Globalization- refers to the increased mobility of goods, services, labor capital

and technology around the world.

Liberalization- is an economic policy which involves measure to remove any

barriers to the free flow of foreign goods, services and capital between and
among countries.

Privatization- refers to the selling of government-owned or controlled

corporations to the private sector.

WTO- The WTO is the only international organizations dealing with global
rules on trade between nations.