ECONOMIC GLOBALIZATION

A. COMMUNICATION – modern communication technology and mass media are global standard
- Its relatively easy and inexpensive to stay in touch
B. TRANSPORTATION – travel and shipping are cheap and safe
C. TRADE – multi-national corporation have global reach and increasing power (ex. MCDONALD CORP.)
- Governments have decreases tariffs and regulation on international trade.

FORMS OF ECONOMY

 PROTECTIONISM – protecting one’s economy from foreign competition by creating trade barriers
 TARIFF – tax levied by a government on imports and exports
CUSTOM DUTY – money collected from tariffs
 IMPORT QUOTA – limits on the number of products that can be imported into a country
 BANS – forbid products on import goods
 TRADE LIBERATION (FREE TRADE)
- Act of reducing trade barriers to make international trade easier between countries.
- No TARIFF, IMPORT QUOTA and BANS

How to make trades more easier?

 FREE TRADE – trading of goods and services between two or more countries without tariffs or taxes.
 TRADE BLOC – agreement between governments to reduce or eliminate trade barriers
Eg. NAFTA (North America Free Trade Agreement) consist of CANADA, MEXICO & U.S
OUTSOURCING – to buy labour or parts from a source outside a company or business rather than using the company’s staff
or plant.

INSTITUTION OF GLOBALIZATION
 WORLD BANK – also known as International Bank for Reconstruction and Development
- Responsible for funding post-war reconstruction projects
 WORLD TRADE ORGANIZATION (WTO) – formerly known as General Agreement on Tariffs and Trade (GATT)
- Deals with the rules of trade between nations, settles trade disputes and conduct straight
negotiations.
 INTERNATIONAL MONETARY FUND – provides short-term loans to countries when an emergency occurs

BENEFITS VS. DRAWBACKS WORLD TRADE ORGANIZATION (WTO)

Solves trade disputes between countries in a peaceful ways
X But only focuses on developed nation
Lowers the cost of goods and service for those developed nation
X To achieve low cost, labour rights and environmental concerns are ignored
Promotes economic growth in developed countries
X Favour the rich nations and powerful trans-national Corporation.
 INTERNATIONAL MONETARY FUND – international organization in Washington,DC consisting of 189 countries
working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world.
 INTERNATIONAL TRADING SYSTEM – exchange of capital, goods and services across international borders or
territories.
 SILK ROAD – oldest known international trade route
- Route between China and the Mediterranean.

WHEN DID THE FULL ECONOMIC GLOBALIZATION BEGIN?

According to DENNIS O. FLYNN and ARTURO GIRALDEZ, age of globalization began when all important
populated continents began to exchange products continuously.
 They trace back the GALLEON TRADE (Manila and Acapulco, Mexico Trade)
- This was the first time that Americans were directly connected to Asian trading routes.
 GREAT DEPRESSION – global economic crisis
- Worst and longest recession ever experienced by Western World.
- Some economist argued that it was largely caused by the gold standard, since it limited the amount
of circulating money and therefore, reduced demand and consumption.

BRETTON WOODS SYSTEM – it was largely influence by the ideas of British economist JOHN MAYNARD KEYNES who
believed that economic crises occur not when a country does not have enough money but when money is not being spent and, thereby,
not moving.
– intended to govern currency regulations and establish legal obligations (through the IMF).
- Set a standard for exchange rates (1 ounce of gold = $35 )
- Money pool from which member nations can borrow funds.
 TWO INSTITUTIONS created by BRETTON WOODS SYSTEM delegates
a. IBRD or WORLD BANK - Responsible for funding post-war reconstruction projects
b. INTERNATIONAL MONETARY FUND (IMF) – global lender of last resort to prevent individual countries
from spiralling into credit crises. If economic growth in a country slowed down because there was not enough
money to stimulate the economy, the IMDF would step in.