V\ AN .—J \NANVAAAA oot THE GLOBALIZATION 4 OF ECONOMIC RELATIONS [EARNING OUTCOMES 1, define economic globalization; 2 3. 4, discuss the different kinds of trades; 5 countries; and ‘tthe end of the chapter, the student should be able to: distinguish globalization from internationalization; explairi the important function of World Trade Organization; explain the importance of regional trade organizations and itsimplication to the member 6. assess the situation of the developing countries in terms of their international trades. ECONOMIC GLOBALIZATION is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movements of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. (IME, 2008). INTERCONNECTED DIMENSIONS OF ECONOMIC GLOBALIZATION The Globalization of Trade of Goods and Services When a country exports more than it imports, it runs a trade surplus. When a country imports more than it exports, it runs a trade deficit. The large trade deficits in the middle and the’ late 1980s sparked Political controversy that still persist today. Foreign competition hit U.S. markets hard. Less expensive foreign goods—among them are steel, textiles, and automobiles— began driving U.S. manufacturers out of business, and thousands of jobs were lost in important industries. In more recent times, the outsourcing of software development to India has caused complaints from white- collar workers, For hundreds of years, industries in the U.S. have petitioned governments for protection and societies have debated the pros and cons of free and open trade. For the last century and a half, the principal argument against protection has been the theory of comparative advantage, the advantage in the production of goods enjoyed by one country over another when that good can be produced at lower cost in terms of other goods than it could be in the other country. Contemporary World \ 434—_—_— (tt The Globalization of Financial and Capital Markets ‘A country enjoys an absolute advantage ther country in the production of a 01 over an ae good ifit uses a fewer resources to P that good than the other country does. Suppose country A and country B produce coffee, but A’s climate is more suited to coffee and its labor is more productive. Country A will produce more coffee per acre than country B and use less labor in growing it and bringing it to market Country A enjoys an absolute advantage over country B in the production of coffee. Absolute advantage in the production of goods enjoyed by one country over another when it uses fewer resources to produce that goods than the other country does. Trade barriers—also called obstacles to trade—take many forms, The three most common are tariffs, export subsidies, and quotas. All are forms of protection shielding some sector of the economy from foreign competition. Atariffis a tax on imports. The average tariff on imports into the United States is less than.5 percent. Certain protected items have much higher tariffs. For example, 5m 2009, former President Obama of the United States imposed:a tariff of 35 % on tire imports from China, Export subsidies is 44' Contemporary World -_ of agricultural products. The prevale,, of farm subsidies in the developed wo has become a major rallying poine ¢, Jess developed countries as they strivg compete in the global marketplace. ‘A quota is a limit on the quantity . imports. Quotas can be mandatory voluntary, and they may be legislateq 7 negotiated with foreign -governmen,, The voluntary quota ,, “voluntary restraint”, was negotiated wig, best-known the Japanese government in 1981. Japs, agreed to reduce its automobile exports te the United States by 7.7 %, from the 19%, level of 1.82 million units to 1.68 millig, units. Many quotas limit trade around th: world today. Perhaps the best-known recep: case is the textile quota imposed by th: European Union on import textiles frox China in 2005. The EU blocked the entry o! Chinese produced textiles into Europe; 3: a result, more than 100 million garments piled up in European ports The Globalization of Technology _ and Communication Capital is not the only factor of production required to produce output, 'aboris equally important. To be productive. the workforce must be healthy. Health isnot the only issue but basic literacy as well a B0vernment im many develo technol expenditure Ping nations, In pall logy tr: ey transfer and communicatio"have become part of manpower trainin, in most agricultural countries. ‘This is 7 because of the belief that human resources are the ultimate determinant of economic advance. The Globalization of Production Production is the process which inputs are combined and transformed into output Production technology relates inputs to outputs. Specific quantities of inputs are needed to produce any given service or good. Most outputs can be produced by a number of different techniques. In choosing the most appropriate technology, firms choose the one that maximize the cost of production. For a firm, an economy with a plentiful supply of inexpensive labor but not much capital, the optimal method of production will involve labor-intensive techniques. DISTINCTION OF GLOBALIZATION FROM INTERNATIONALIZATION Dicken (2004) distinguished economic globalization from internationalization by stating that the former is functional integration between internationally dispersed activities while the latter is about the extension of economic activities of nation states across borders. Hence, economic globalization is more on * qualitative transformation than just @ quantitative change. Reich (1991) agrees that global transforms the national economy a global one because for him there will pnologies ization into be no national products or tee no national corporations, no national industries. On the other hand, hyper- flobalists Ohmar (1995) declared that states ceased to exist as primary econa organization units in the wale of a global market, People are heavily car highly standardized global praduc services produced by global corporation a borderless world On the contrary, Boyer % (1996) admit that global the role of the nation ation is red manager of the national F them, the state is the main perverse effects of a free ma ‘Therefore, it is misleading globalization has brought do state and its policies to an © irrelevant status; as gover the midwives of globalization Milner & Keohane (1998) above notions. They admit th: economic policies and the domestic institutions of stat uniformly influenced by New actors such as the (UN), (NGOs) in a manner produces non-governmental economic entrants as well in term: globalizations. Transnational corpses tions (ENC) ave some of the major Players OF global economy today. Business analysts say that TNCs are constantly evolving as they view that while esononnic integration 4 becoming more intensive, production disintegrates due to the outsourcing activity of multinationals (Feenstra, 1998). According to Gereffi (1999), this move Contemporary World | 45in the Unite 7 Agreement on Tariffs GATT isa treaty among ments agreed, at I States, ae ad iede CAL 423 nations whose ast in principle, oe members. GATT to promote trade among was intended to be a mul i 4d GATT negotiators did Itilateral, global initiative, an succeed in liberalizing world merchandise trade, It was also ai organization that had handled more than 300 trade disputes— many involving food—during its more than half century of existence. GATT itself had no enforcement power (the losing party in a dispute was entitled to ignore the ruling), and the process of dealing with disputes sometimes stretched on for years. That is why, some critics referred to GATT as the ‘general agreement to tall and talk” GATT was based on three principles: : = parse trade m ent for all member nations; * thereduction of tariffs by multilateral negotiation; and Basically, GATT the multilateral trade barriers, Provided a forum for negotiation of reduced ce 46 Contemporary World orld War, membe, nd ” e Seco 4 “rounds” of GATp plete reduce : negotiations of negotiations began The eight . “9a6. After Sever. Year jn Uruguay" in 1993 a ney secussions. discussions, : of complex dis by the 128 nation, ment was + time members of GAT? d agreement took effec since tht om nations have © trade barrier, y Roun The Urugnay "495, and its provisions were 1 on January 1, ‘ed in through 2005- this agreement, oducers were eliminated or 1 tariffs dropping by phas Under thousands of Pr’ reduced, with overal ‘ int, The agreement also liberalized tariffs on 33 percel ‘ government rules that in the past impeded the global market for such services as advertising, legal services, tourist services, and financial services. Quotas on imported textiles and apparel were phased out and replaced with tariffs. Other provisions reduced agricultural subsidies paid to farmers and protected intellectual property (parents, trademarks, and copyrights) against piracy. The successor to GATT, .the World Trade Organization (WTO), came into existence on January 1, 1995. From its i in Gener the WTO provides a forum oe ae The WTO’ as mediators in : oe will also serve WTO has a Dis ee that: oe ce oF ‘sabout unfair trade barrier s and other issues between WTO ane ™plaint are expected ve" 13th negotiations an!nh % ted and ons te ty hts) otld te ution. In case of h an amicable Ne negotiations, the complainant failure eqn ask the nel of trade experts to hear the case panel pehind closes toacton the DSB to appoint a three-member doors. The DSBis empowered panel's recommendations. The serng party has the option of turning to a seyensnernber appellate body. If, after due trade policies are found to violate process; {To rules, the country is expected to change those policies. If changes are not forthcoming, the WTO can authorize trade sanctions against the loser. One of the WTO's first major tasks was hosting negotiations on the General ‘Agreement on Trade in Services, in which 76 signatories made binding market access commitments in banking, securities, and insurance. ‘Trade ministers representing the WTO member nations meet annually to work on improving world trade. At the 1996 meeting in Singapore, agreement was reached concerning tariffs on information technology. For the year 2000, zero tariffs are now slated for 500 products, ranging from éalculators, fax machines, and CD- ROM drives to computer keyboards and ATM machines. The United States, Canada, and several Asian countries benefitted the ‘most because they are home for companies that command 80 percent of world trade in high-tech products, compared with 15 percent share held by Western European companies. The agreement resulted in lower prices for businesses and consumers, especially in Asia and Europe, where tariffs had been relatively high (Cooper & Bahree, “Nations Agree to Drop Computer Tariffs, The Wall Street Journal (December 13, 1996, pp. A2, A6). PREFERENTIALTRADE AGREEMENTS In addition to multilateral initiative of GATT, countries in each of the world’s regions are seeking to lower barriers to trade within their regions. Historically, when countries entered into preference agreements, they notified GATT. Between 1947 and 1992, there were 85 agreements that were notified while 77 new agreements have been added since 1992. Strictly speaking, few of the trade agreements fully ‘conform with GATT requirements, although none was disallowed. Only Japan, Hong Kong, and South Korea among the WTO members have not signed preferential trade agreements. Free Trade Areas A free trade area (FTA) is formed when two or more countries agree to abolish all internal barriers to trade among themselves. Countries that belong to a free trade area can do and maintain independent trade policies with respect to non-FTA countries. A system of certificate of origin is used to avoid trade diversion in favor of low-tariff members. The system discourages importing goods into the member country with the lower tariff for transshipment to countries within the area with higher external tariffs; customs inspectors police the borders between members. The European Economic Area js an example of a free trade area that Contemporary World | 47P : 500 ranking. The y¢ inc’s Global eee ominant Produce, the 27-nation European Union, ss pe mina Modi © includes: th Lceland companies ter, 20FEHBNE PFO i in, and Heels he compulen nee Norway, Liechtensteir in 7 snimant, medical @quiPmMent, and : entertainments : Union gine industry sectors a ! al engine : tes and Ca 7 represents the mle tn 1988, the United Stal anady Aston ion A on a rhs, 3 ze trade area. I" A a u evolution of a free HaUs 08 vaade, signed & ee greement of CETA),, oman tr Ba Oda Te ce acon fC : atoms wl ally came i : imembers of 3 customs WN" anuary formally comme M0 at $300 billion. : common external Bayt id Turkey helps explain the - and -an Union ag goods and services flows betwee, nin an effort to 1, 1996, the Europe: jated a customs unio a ade above the current rear in ea and tHe United States—the biggos, trading relationship between any ty, ini boost two-way te anquallevelof§20bilion oe nations. Canada takes 20 Percent of Us The 20 alled for elimination os and the United States BUYS ney pledge eine te imported by °80 percent of Canada’s exports. See Table, throug the cost of European goods imp: ea reve Turkey. On August 12, 1992, representatives there | Common Market from the United States, Canada, and Mexico and res ‘A common market is the next step in concluded negotiations forthe NAFTA. The | moverr the spectrum of economic integration. In agreement was approved by both houses of issue © addition to the removal of internal barriers the U.S. Congress and became effective 0, into tht totradeandthe establishments of common January 1, 1994. The result is a free tradey one. T! external barriers, the common market area with a combined population of nearly will er allows for free movements of factors : 400 million and a total GNP of $8.3 trill the ec of production, including labor, capital, ae ‘ : to cor and information. Examples include the pgable 4.1 US. Goods —F _ American Integration System, The et Trading Partners barrier ‘ommon Mi 9 Partner invest : ze farket of the South, the Andean (Export) Percent : Sramunity and the Association of South Geel ae Fast Asian Nations (ASEAN), fees loa traden Nort 7 798 : faee: American Free Trade ae benefit lent c which includ ea North Americ Germany 49.8 2 8s Canada, the Uni Uni aa , te a and Mexico, represents nited States, ited Kingdom 39.0 : A Fegional market, The Unit i «distinctive Netherlands 19.0 omm + The Unite ee © more global i States ishome pen ay forme ee industry leaders. Frank el 162 companies a —a total | WW of iy ordi : ing to Fortune (_Seuthkos | 22 m Beutad, Pies: \ 48 Contemy "porary Source: ~ : World US. Bateau ofthe Cong, Cone,\ entatives d Mexico PTA. The rouses of ective on ec tradet of neatly 3 trillion LALLA AA able 4.2 US Good Imports Trading Partners qaaingPartner | percent (import) Canada a) nen 1219 Mexico 7 china na United Kingdom 347 Taiwan 3341 Germany 262 France 240 South Korea 239) Singapore 183 “Source: US. Bureau of Census ‘The governments of the three countries pledged to promote economic growth through tariff reductions and expanded trade and investment. At present, however, there are no common external tariffs, and restrictions on labor and other factor movements have not been eliminated. The issue of illegal immigration from Mexico intothe United States remains acontentious one. The benefits of continental free trade will enable all three countries to meet the economic challenges of the decades to come. The gradual elimination of barriers to the flow of goods, services, and investment, coupled with strong protection of intellectual property rights (patents, trademarks, and copyrights), will further benefit businesses, workers, farmers, and consumers (Crawford, 1996, p. 8). Andean Community. The Andean Community, formerly the Andean Pact, was formed in 1969 to accelerate development of member states Bolivia, Colombia, Ecuador, Peru, and Venezuela through economic and social integration. Members agreed to lower tariffs on intragroup trade and work together to decide what products each country should produce. At the same time, foreign goods and companies were kept out as much as possible. In, 1988, the group members decided to get fresh start. Beginning in 1992, the Andean Pact signatories agreed to form Latin America's first operating sub- regional free trade zone. More than 100 million consumers would be affected by the pact, which abolished all foreign exchange, financial, and fiscal incentives, and export subsidies at the end of 1992. Common external tariffs were established, marking the transition to a true custom union. A high-level commission will look into any alleged unfair trade practices among countries. The new approach seems to be working; for example, Peru now boasts one of the fastest-growing economies in the region. Common Market of the South (Mercosur). In March 1991, the government of Argentina, Brazil, Paraguay, and Uruguay signed the Asuncion Treaty to form the Common Market of the South (in Spanish, Mercado Comun del Sur, or Mercosur). On August 5, 1994, the presidents of the four countries agreed to begin phasing in tariff reform on January 1, 1995. Internal tariffs were eliminated, and common external tariffs of up to 20 percent were established. Ultimately, goods, services and factors of production will move freely throughout the member countries until such goal is achieved. Mercosur operates as a customs union. Comemporary World 149at of trade, including bout 15 Peres and capital goods #6 electronics @ the agreement. 25, 1996 Chile's Pre eement making Chile 3% Seay of Mercosur effective October 1 t to become @ aoe pecause it already had lower external tariffs than the rest of Mercost¥; fall membership would have required advanced not covered by sident signed associate member ©! Chile chose n°! raising them —_ ‘Asia-Pacific, The Asia-Pacific region refers to the regions of East or Northeast ‘Asia, Southeast Asia, the Pacific Islands, and South Asia. With 56 percent of the world’s population, the 23-country Pacific Rim region merits discussion in its own right. The region accounted for approximately one-third of global income since 1997. Japan's presence looms large in the Asia-Pacific region. Population density and geographic isolation are the two crucial factors that cannot be overstated when discussing Japan. Most of Japan is mountainous that is why the residential atea represents only 3 percent and the industrial area is only 14 percent, Still, Japan generates an a stounding 14 of the world’s GNP! 8 14 percent the point of industria, “Asian fly ¢ in July 1997- The Association of The Association SEAN) is the flagship ent in the Agia. southeast Asian : of Southeas, Nations. ‘Asian Nations (AS rade agreem BAN was established in 1967 ic, political, preferential t Pacificarea. AS! as an organization for econom| social, and cultural cooperation among its members. The United States, which at the time was embroiled in the Vietnam War, played a role in establishing ASEAN with the signing of the Bangkok Declaration. Brunei, Indonesia, Malaysia, __ the Philippines, Singapore, and Thailand were the original six members. Vietnam became the first communist nation in the group when it was admitted to ASEAN in July 1995. Cambodia and Laos were admitted to the ASEAN at the organization's 30* anniversary meeting in July 1997. Burma (now Myanmar) joined in 1998, following delays related to the country’s internal politics and human rights record. Individually and collectively, ASEAN tee ty aaa in regional and global y trade between the United si tates and ASEAN totaled $83.8 billion in ae effort. Althougl Pets are poo, been historica ASEAN me Close, they have graphically lly divided in it | tht ect nal Fre no} of: tral am thr itse 240 Sin, inf the (Ho livii Sing ac ach} not} kno Sing Boa; inte com Sing Mar IBM all, inve thay Withtted 30" rma ving ral sbal ited nin ong eh in many respects. One of the reasons the association remained in existence is that it accomplished almost nothing. However, the situation is changing today. In 1994, economic ministers from the: member nations agreed to implement an ASEAN Free Trade Area (APTA) by 2003 and it is now working. Under the agreement, tariffs of 20 percent or more will be reduced to no more than 5 percent. In 1996, intra-ASEAN trade surpassed $70 billion. Singapore represents a special case among the ASEAN nations. In fewer than three decades, Singapore has transformed itself from a British colony to a vibrant 240-square-mile industrial _ power. Singapore has an extremely efficient infrastructure—the port of Singapore is the world’s second-largest container port (Hong Kong ranks first)—and a standard of living second only to Japan's in the region. Singapore’s 4 million citizens have played a critical role in the country’s economic achievements by readily accepting the notion that “the country with thé mist knowledge will win” in global competition. Singapore’s Economic Development Board has also actively recruited business interest in the nation. The manufacturing companies that have -been attracted to Singapore read like a who's who of global marketing and include Hewlett-Packard, IBM, Philips, and Apple Computers; in all, 3,000 companies have operations or investments in Singapore. Singapore alone accounts for more than a third of U.S. trading activities with ASEAN countries. U.S. exports reaapanta totaled $13 billion, while oeely nan i a Singapore is 32 percent of ‘im a iaiihie other Asian da ; i ‘lett late . to fashion a civil ia Tied debi ‘ety have gained the country some notoriety; crime is nearly nonexistent because of the government severe treatment of criminals. Some People in the United States objected after an American youth living in Singapore was sentenced to a canning after being arrested and convicted of vandalism Singaporeans believe the United States has given individuals too many liberties, while imprisoning American society too much freedom. The European Union. The origins of the European Union éan be traced back to the 1958 Treaty of Rome. The six original members of the European Community, as the group was called then, were Belgium, France, Holland, Italy, Luxembourg, and West Germany. In 1973, Great Britain, Denmark, and Ireland were admitted, followed by Greece in 1981 and Spain and Portugal in 1986. Beginning in 1987, the 12 countries that were original members set about the difficult task of creating @ genuine single market in goods, services and capital. Adopting the Single Puree” ‘Act by the end of 1992 was a malor t: the Council of Ministers ; of legislation and the single market @ achievemen adopted 282 pieces regulations to make reality. ember The objective © BU m if the i I laws: ses is to harmonize nation® countries st Contemporary World |pec s, services, Apna ae that boots eat iually money across national poundaries. Tt was y 31, 1992 that marked the 1a in Europe: and regul , and even can flow peopl freely on Decembel f the new economic ¢ trade area, customs ality dawn of ‘This is more thana free n market came into re union, or commo ; yuntries tizens of the member Col and the ci ie orders within are now able to freely cross b the union. The BU is encouraging the development of a community wide labor pool; it is also attempting to shake up urope’s cartel mentality by handling down tules of competition patterned after U.S. antitrust law. Improvement to highways and rail networks are now being coordinated as well The (BU) , now represents a formidable market size with than 400 million people and a combined GNP of $ 9 trillion and a 39 percent share of world exports. Even though not European. Union all restrictions have been dropped as envisioned, the well-being of EU members has increased substantially since the bloc’s formation notwithstanding the exit of Great Britain in 2016. As of July 13, 2013, there are 28 members of the BU namely: Austria, Belgium, Bulgaria, Croatia, Czech, Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Latvia, Ireland, Italy, Lithuania, Luxembourg, Malta, Netherlands, Polar , Poland Slovakia, ind, Portugal, Romania, Slovenia, Spai » Spain, United Kingdom. (UK moved BU in the middl le of 2016 wi BREXIT), — Sweden, and out from the lely termed as 62 | Contemporary Worta | sone 199i Maastricht Teeaty Set thy gil? eee toe ean a the EMS ty oes 7° an economic and monetary union My, typi ar tjnelades a European Central Bank gach © and a single European currency know, —gast has a juro, In May 1998, Austria, Belgian, pe diffe Finland, Ireland, The Netherlands, France, social Germany,, Italy, Luxembourg, Portugal, wealth. and Spain were chosen as the 11 charter guests Z wrambers of the Eurozone. The single with 28 currency era, which officially began on size 204 January 1, 1999 is expected to bring many Middle benefits to companies in the euro zone, trusted such as eliminating costs associated with prefer ‘ currency conversion and exchange rate Middle uncertainty. As of 2013, 17 members of euro clannist area (Austria, Belgium, Cyprus, Estonia, Busi Finland, France, Germany, Greece, Ireland, bY the | Italy, Luxembourg, Malta, the Netherlands, ave hig Portugal, Slovenia, Slovakia, and Spain) use Kuwait, the euro na a common ctierency. Notably, “* Se Denmark and Sweden have opted not touse "*°tV® the common currency, at least for now. But 8°P bet foe Bean Pe (Gon ae ee Italian liras, and other national currencies ‘Polit that were once used by Eurozone countries. | $4 The Middle East. The Middle Eat ‘P*" 14 includes 14 countries namely Afghanistan, the wor Bahrain, Iran, Iraq, Israel, Jordan, Kuwaity Lebanon, Oman, Qatar, Saudi Arabia), Gul Syria, United Arab Emirates, and the a +e ae Yemen. Persians and most Arabs oe thesame religion, beliefs, and Islami¢ lis traditions, making the population 95 Y Bah, Percent Muslim and § percent Christian Sata, and Jewish. * Purpog, Despite thi Nong espite this apparent homogeneity: sbicers diversity i i ¥ exists within each country ant!ty | within reglous BFOUPS. ‘The Middle Bast thy does not have a single societal type with 1h | 4 typical belief behavior, and tradition, hy, | Bach capital and major city in the Middle tay fast has a variety of social groups that can ang be differentiated on the basis of religion, eal, social class, education, and degree of tte, | wealth. Tribal pride and generosity towards ing, | guests ate basic. beliefs. Authority comes on with age, and power is related to family Many | 8 and seniority. In business relations, ai |. Middle Easterners prefer to act through vith | trusted third parties, and they’ also | prefer oral communications. .In general, Tate | jyiddle Easterners are warm, friendly, and ‘Uta | clannish. Nia, Business in the Middle East is driven ind, by the price of oil. Eight of the countries ds, | have high oil revenues. Bahrain, Iraq, Iran, use Kuwait, Oman, Qatar, UAE, and Kingdom bly, of Saudi Arabia hold significant world oil use reserves. Oil revenues have widened the But gap between poor and rich nations in the ks, es, ast :n, it, ia, he bs ic 5 fn Middle East, and the disparities contribute to political and social instability in the area. Saudi Arabia, a monarchy with more than 16’million people and 25 percent of the world’s known oil reserves, remains the most important market in this region. Gulf Cooperation Council. The key regional organization is the Gulf Cooperation Council (GCC) which was established in 1981 in Riyadh, in May 1981 by Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab Emirates. The is to achieve unity ,don their common ilar political and purpose of the GCC among its members base objectives and their sim cultural identities, which are rooted in Islamic beliefs. Presidency of the council rotates annually. Arguably the most important article of the GCC charter is Article 4, which states that the alliance was formed to strengthen relations among its member countries and to promote cooperation among the countries’ citizens. The GCC also has a defense planning council that coordinates military cooperation between member countries. The highest decision-making entity of the GCC is the Supreme Council, which meets on an annual basis and consists of GCC heads of state. Decisions of the Supreme Council are adopted by unanimous approval. The Ministerial Council, made up of foreign ministers or other government officials, meets every three months to implement the decisions of the Supreme Council and to propose new policy. The administrative arm of the alliance is the office of the Secretariat-General, which monitors policy implementation and arranges meetings. Some of the most important achievements of the GCC include the creation of the Peninsula Shield Force, a joint military venture based in Saudi Arabia, and the signing of an intelligence-sharing pact in 2004. a ‘The GCC provides a means of realizing coordination, integration, and i in all economic, social, a s a affairs. Gulf finance ministers : jon agreement covering the abolition of of banking economic cooperat troleum, Qe investment, P' et harmonization customs duties, Contemporary World |53regulations, and finanel . jon, GCC comn trade development in the agricultural policy and prices. word in conduc Those who key coordinat region, tn rl uniform strategy, petroleum policies Connection isa key Pg ee Med eee mie ime to develop relationships") rrasiness and government Figures 2 Jb red tape th Ling, an those likely to cut throug an who don't. Bstablishi respect nt factors leading to a ing personal rapports sential mutual trust, and are essentially the most importa ; successful business relationship. Decisions are usually not made by, correspondence The Arab businessman does or telephone, business with the individual, not with the company. Most social customs are based on the Arab male-dominated society. Women are usually not part of the business or entertainment scene for traditional Muslim Arabs. Some conversation subjects should be avoided, as they are considered an invasion of privacy (Harris & Moran, 1991). 1. Avoid bringing up subjects of business before getting to know your Arab host. This is considered rude, 2 Iti Itis taboo to ask questions or make comments concerning a man’s wife or female children, 3. aa : woid Pursuing the Subjects of Politics or religion, a ic ‘ Avoid any discussion of Israel, Senomic Cooperation of Tican States. The “Ty s eaty of Lagos establishi shing Economic Cooper ‘ration 641 ‘ 4 !Contemporary Wortg an sraten CHEL WAS) 0 ag Weal ee hy 1b grater: WED TIE objug) in May : ie omotingt trade, coor West Africa, ‘The ne mihery : », Cape Verde, Garni, Winn, and ye f pre a : ite Burkina Ghana, Gui nria, Bene Mali, Niger, Niner, i (loft 2002), and ono. 1 Ly, r Benin, 4, Gitinea Biiiaa, Liber yal, Biers Lean Mauritania vor gountrien agreed 1o.establlsh the mem od agriculting 1 for unpro« handicrafts, ‘T: free trade are itty products and : industrial goods were By January 1990, tariffs on 25 iten aufactured in ECOWAS member stat also abolished mar had been eliminated. The organization em to installed a computer proces and to calculate “OWAS customs and trade statistic: the loss of revenue. In June 1990, F adopted measures that would create a single monetary zone in the region. Despite such achievements, economic development his occurréd unevenly in the region, In recent years, the economies of Benin, Ivory Coas and Ghana have performed impressively On the other hand, Liberia and Sierra Leone are still experiencing political conflict and economic decline. South African Developmen! Community (SADC). In 1992, the SADE supers: : uperseded the South African Developme! Coordination Council by which the could as a mechanist! region's. blacker Promote trade, economic inte, Angol led states cooperation, au! gration, Th a, Botswan, Congo (former) he members a! #, Democratic Republic"! ly Zaire), Madagas sotho, Malavt agasca Namie Maueitins, — Mozanigt! % South —Afyj tel ca, Seychelle tl yinil devel pron! goutlt repre there agpor oO Hxpo! Orga Count organ natior petrol OPK oil pri with uunnec riven produy securi impor efficie petrol return rok ol 1960, place attend the Or Arabia Agreen, pe Signed Nation fallowSwaziland, Tanzania, Zambia, and Zimbabwe. The ultimate goal is a fully developed customs union; however, real progress toward integration has been slow. South Africa joined the community in 1994 representing 75 percent of the income in the region and 86 percent of intraregional exports. Organization of the Petroleum Exporting Countries (OPEC). Organization of the Petroleum Exporting Countries is an intergovernmental organization of oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries. OPEC seeks to ensure the stabilization of oil prices in the international oil markets, with a view to eliminating harmful and unnecessary fluctuations, due regard being given at all times to the interests of oil- producing nations and to the necessity of securing a steady income for them. Equally important is OPEC's role in securing an efficient, economic and regular supply. of petroleum to consuming nations and a fair return on capital to those investing in the petroleum industry. OPEC was founded on September 14, 1960, the result of a meeting that took place in the Iraqi capital of Baghdad, attended by the five Founder Members of the Organization: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Once the original agreement for establishing OPEC was signed, it was registered with the United Nations Secretariat on November 6, 1962, following UN Resolution No. 6363. Currently, the Organization comprises 15 Member Countries - namely Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, State of Qatar, Kingdom of Saudi Arabia, United Arab Emirates and Venezuela. The Bretton Woods System In July 1944, .delegates from 44 countries gathered in Bretton Woods, New Hampshire to start negotiations about a new international monetary regime in the framework of the United Nations Monetary and Financial Conference. The delegates of the 44 countries maintained to agree on adopting an adjustable peg system, the gold- exchange standard. The U.S. dollar was the only convertible currency of the time, sothe United States committed itself to sell and purchase gold without restrictions at USS 35 dollar an ounce. All other participating but non-convertible currencies were fixed to the U.S dollar. However, it was not only the gold-exchange standard that was the competing idea on the table that time as British economist, John Maynard Keynes, proposed ambitious reforms for the post- war era and recommended the creation of an international clearing union, a kind of global bank, along with the introduction of a new unit of account, the bancor. The proposal was not entertained by the United States as it insisted on its own plan and branded the British proposal as a serious blow to national sovereignty. Keynes afgued that when economies slow down, governments have to reinvigorate markets with infusions of capital. The active role Contemporary World | 56in efficient spending digm for £ global hat would be called a 5) g! wha ments i ara‘ nance) served as the P: oe ystem © of gover! Keynesianism. i Delegates establishment institutions. | elo} for Reconstruction and Dev: (IBRD) became responsible for post-war while the explicit mandate agreed 0D international Banks also of two The International pment reconstruction, for the International Monetary Fund (IMF) was to promote international financial cooperation and buttress international trade. The IMF was expected to safeguard the smooth functioning of the gold- exchange standard by providing short-term financial assistance in case of temporary balance of payment difficulties. DEVELOPING COUNTRIES AND INTERNATIONAL TRADE When the United Nations Conference on Tradeand Development (UNCTAD) came into being in 1964, that was the first major change in the state of affairs of developing nations into international trade as they did not participate actively in multilateral trade negotiations forarelatively ong time. Most of the developing countries did not Manage to integrate into the Post-World War Il trading system successfully because they followed an nward-looking import 4 rt industrialization | developed natig, | ‘ d the ns ing ani ete objectives after 1964 Were The fol os id down as follows: P? we ae countries’ markets, renegotiatin, advan ig international commodiyy ferential access , debt, establishin: ” ! sioner (to stabilize. primary produ! na providing transfer of technology | ef increasing aid substantially (Salvatore | = t 2007). ‘ ‘The Uruguay Round that took place jy, 1986 participated by 123 nations changed, the behavior of developing countries |” as the round was meant to be a grand: bargain between developed and developing countries (Ostry, 2002). The developed countries were expected to open their markets, especially to agricultural and textile products, whereas the developing countries accepted the new regulation on intellectual property rights and services, Unfortunately, while developing countries have opened up their service markets, their exports of agricultural products are still blocked by advanced nations. Sad to say, without the liberalization of agriculture, it is simply impossible for developing nations to fully integrate into the global economy. Hertel, et al, (1998) have also 5 faee Some Key Trade Facts te ‘The following are several important ti facts relating to international trade: aig P + A trade deficit occurs when imports tu exceed exports. The United States og has a trade deficit in goods. In 2012, ni ; U.S. imports of goods exceeded U.S. fs exports of goods by $ 735 billion. _ - + A trade surplus occurs when exports ein, exceed imports. The United States "Bed has a trade surplus in services such tieg|* as air transportation services and fang financial services. In 2012, US. Ping exports of services exceeded U.S. bed imports of services by $196 billion. hee) + Canada: is the United States and! most important trading partner ping; quantitatively. In 2012 about 20 1 on percent of U.S. exported goods were ices sold to Canadians, who in turn rea provided 15 percent of imported U.S. heit goods. still « The United States has a sizeable trade say, deficit with China. In 2012 it was eit $315 billion and in 2017, it was $375 7 billion. + China has become a ° major i international trader, with an estimated $2.05 trillion of exports i in 2012. Other Asian economies— a including South Korea, Taiwan sil and Singapore—are also active in 7 international trade. Their combined a exports exceed those of France, ie! United Kingdom, and Italy. 0 «International trade links world Through trade, changes conditions in one place economies. in economic © on the globe can quickly affect other places. + International trade is often at the center of debates over economic policy, both within the United States and internationally. Trade Barriers and Export Subsidies Tariffs are excise taxes or “duties” on the dollar values or physical quantities of imported goods. They may be imposed to obtain revenue or to protect domestic firms Arevenue tariffisusually applied toa product that is not being produced domestically. For example, tin, coffee, or bananas in the case of the United States. Rates on revenue tariffs tend to be the modest and are designed to provide the federal government with revenue. A protective tariff is implemented to shield domestic producers from foreign competition. These tariffs impede free trade by increasing the prices of imported goods and therefore shifting sales toward domestic producers. Although protective tariffs are usually not high enough to stop the importation of foreign goods, they put foreign producers at a competitive disadvantage. A tariff on imported auto tires, for example, would make domestic produced tires more attractive to consumers. ‘An import quota is a limit on the quantities or total values of specific items that are imported in some period. Once a quota is filled, further imports of that product ‘are denied. Import quotas are more effective than tariffs in impeding international trade. With a tariff, a product Contemporary World | 57TH “OF SOCIETY MeDonakl i cponaLDIZATION can be found ahng yarn the United Ito, all nnyents ayer yavhere (hese wa Prana ventaurant HEAD «I, frag move tha ! of Tite, Ny se soasonnestic re gy Americans way 0 Noy gmat to abl (ha 8 : Ho paaple anonnd (Hie Wor 350i ee bythe United S605, by, sanetion + MeDonald jomestic frm Da ery home, all more one poll found that yy for ove oe eat achool children identity Ronaly perce ; yy hiny as well lnown 4. MeDonald, mak: world’s biggest Santa Claus, isabove ; . Aven more important, thy ational principles that underly organit McDonak most societies, Our culture are coming to dominate becom ascompared B). China has also. “MeDonaldized” an awkward way of saying ME). China also modeled on the that many aspects of life famous restaurant chain, Parents buy toys je chain of stores ; people drive economy grew at world ated with India’s in for a ten-minute oil change’ face-to-face communication is sliding more and more toward voice mail-e-mail, and junk mail; 2018 (In Trillion USS) more vacations take the:form of resort and | County | 2017 | 2018 tour packages; television presents news in 1 United states | is 204 the form of ten-second sound bites; college i 2 China 7 7 i L w 14 admission officers size up students they 3. Japa {_ 3. Japen [aa St have never met by glancing at their GPA and 4. Germany 34 42 SAT scores; and professors assign ghos! Ls ioe | - s; and p s assign ghos! United k 2. 2. itten text! a ingdom 9 94 written textbooks and evalu. 6. France ol ate students 2.93 it 7 [7 india nh ae tests mass-produced for them by ie i 2.85 Publishing companies, The list goes on and = 18 218 on, 9. Brazil | [he cond] Canada is] ;-——*_| : 16 1 Basic izati oe Source: World Bank ang eee | Organizational Principles Visual Capitals wine forum era/agend 2015 Ahttps: 7 What do all so RO Aaa esac OOH Re in eon CBSE developments hi! ihe mmon? Ac, cording té G Rite a p, reorgpe Ritzet (1993; 2003), the McDonaldiv, 98! Contemporary Wong ansociety involves four basic organizational principles: Efficiency, _calculability, uniformity and predictability, and control through automation. Efficiency. Ray Kroc, the marketing genius behind McDonald's, set out with one goal: to serveahamburger, French fries, and milkshake to a customer in 50 seconds or Jess. In the restaurant, most customers bus their own trays, or, better still, drive away from the pick-up window taking whatever mess they make with them. Efficiency is a value virtually without criticism in our society. We tend to think that anything done quickly is, for that reason alone, good. Calculability. The first McDonald’s operating manual declared the weight of a regular raw hamburger to be 1.6 ounces, its size to be 3.875 inches across, and its fat content to be 19%. A slice of cheese weighs exactly half an ounce, and French fries are cut precisely 9/32 of an inch thick. Think about how many objects around the home, the workplace, or the campus are designed and mass-produced uniformly according to a standard plan. Not just our environment but our life experiences—from traveling the nation’s interests to sitting at home viewing television—are now — more deliberately planned than ever before. Uniformity and predictability. An individual can walk into a McDonald’s restaurant almost anywhere and buy the same sandwiches, drinks, and desserts prepared in precisely the same way. Uniformity results from a highly rational system that specifies every action and leaves nothing to chance. Control through automation. The most unreliable element in the McDonald's system is human beings. People, after all, have good and bad days, sometimes, let their minds wander, or decide to try something a different way. To minimize the unpredictable human element, McDonald’s has automated their equipment to cook food at a fixed’ temperature for set lengths of time. Even the cash register at a McDonald’s is keyed to pictures of the items, so that ringing up a customer's order is as simple as possible. Similarly, automatic teller machines are replacing banks, highly automated bakeries produced bread with scarcely any human intervention, aind chicken and eggs emerge from automated hatcheries. In supermarkets, laser scanners are phasing out human checkers. Most of our shopping now occurs in malls, where everything from temperature and humidity to the kinds of stores and products are subject to continuous control and supervision (Ide & Cordell, 2004). Contemporary World 159