OUTLINE IN THE CONTEMPORARY WORLD

INTRODUCTION TO GLOBALIZATION

Globalization is the process in which people, ideas and goods spread throughout the
world, spurring more interaction and integration between the world's cultures, governments and
economies.

Globalization is a process of interaction and integration among the people, companies,

and governments of different nations, a process driven by international trade and investment and
aided by information technology.

GLOBALIZATION = (Subject) + (Input) + (Process) <SIP>

SUBJECT = World (Physical and Human)

INPUT/AREAS: (PETS)
Political (law, treaty, policy, rules, agreement)
Economical (finance, trade, supply and demand)
Technological (innovation, machine, software)
Socio-cultural (religion, tradition, language)

PROCESS = Interaction and Integration

CHARACTERISTICS OF GLOBALIZATION: (CASE)

• creation of new social networks (social network: process by which even agents who are
geographically far apart come to interact// common ground or platform)
• acceleration of social exchanges
• subjective plane of human consciousness
• Expansion of social relations (social relation: any relationship between two or more
individuals)

DIMENSIONS OF GLOBALIZATION (PETER C)

Politics, Economics, Technology, Ecology, Religion, Culture

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
FOCUS IN EACH DIMENSION

Political Dimension
Factors:
• principle of state sovereignty
• international organization
• geo-political issues

Economical Dimension
Factors:
• major corporations/ dealers
• economic institution
• trading system

Technological Dimension
Emphasis: determine by the speed of technological diffusion across the global economy

Ecological Dimension
Emphasis: examines the effects of global alliances on ecological issues

Religious Dimension
Emphasis: personal or institutionalized set of attitudes, beliefs, and practices relating to or
manifesting faithful devotion to an acknowledged ultimate reality or deity

Cultural Dimension
Emphasis: cultural diversity often results hybridization

IDEOLOGICAL CLAIMS OF GLOBALIZATION

1. Globalization is about the liberalization and global integration.
2. Globalization is inevitable and irreversible.
3. Everyone is in charge of globalization.
4. Globalization benefits everyone. (conceptually YES)
5. Globalization furthers the spread of democracy in the world. (democracy = free market)

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
 THE STRUCTURES OF GLOBALIZATION

THE GLOBAL ECONOMY

Economic globalization refers to the increasing interdependence of world economies as a result
of the growing scale of cross-border trade of commodities and services, flow of international
capital, and wide and rapid spread of technologies.

Two Major Driving Forces for Economic Globalization

1. productive activity information
2. marketization

Dimensions of Economic Globalization

1. The globalization of trade of goods and services
2. The globalization of financial and capital markets
3. The globalization of technology and communication
4. The globalization of production

Focuses of Trade Policy in International Trade

Tariffs

These are taxes or duties paid for a particular class of imports or exports.
Imposing taxes on imported and exported goods is a right of every country. Heavy
tariffs on imported goods are levied by some nations for the protection of their local
industries. The prices of imported goods in local markets are inflated due to high
imported taxes to ensure demand of local products.

Trade barriers

These are measures that governments or public authorities introduce to

make imported goods or services less competitive than locally produced goods and
services

They are state-imposed restrictions on trading a particular product or with a

specific nation. It can be linked to the product, service like technical requirement
and it can also be administrative in nature such as rules and procedures of
transactions. Tariffs, duties, subsidies, embargoes and quotas are the most common
trade barriers.

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
 Safety

This ensures that imported products in the country are of high quality.
Inspection regulations laid down by public officials ensure the safety and quality
standards of imported products.

Types of Trade Policies

National Trade Policy

This safeguards the best interest of its trade and citizen.
Bilateral Trade Policy
To regulate the trade and business relations between two nations, this policy is
formed. Under the trade agreement the national trade policies of both the nations and
their negotiations are considered while bilateral trade policy is being formulated.

International Trade Policy/ Multi-national

This defines the international trade policy under their charter like the
International economic organizations, such as Organization for Economic Co-
operation and Development (OECD), World Trade Organization (WTO) and
International Monetary Fund (IMF).The best interests of both developed and
developing nations are upheld by the policies.

The World Trade Organization (WTO)

The World Trade Organization (WTO) deals with the global rules of trade between nations
with the main function of ensuring that trade flows smoothly, predictably and freely. It is the
only global international organization dealing with the rules of trade between nations with
WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified
in their parliaments at its heart. WTO is viewed as the means by which industrialized countries
can gain access to the markets of developing countries.

Global Economy Outsourcing

Outsourcing is an activity that requires search for a partner and relation-specific investments
that are governed by incomplete contracts and the extent of international outsourcing depends
on the thickness of the domestic and foreign market for input suppliers, the relative cost of
searching in each market, the relative cost of customizing inputs and the nature of the
contracting environment in each country. Outsourcing is a means of finding a partner with
Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)
Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
which a firm can establish a bilateral relationship and having the partner undertake
relationship-specific investments so that it becomes able to produce goods and services that fit
the firm’s particular needs.

One of the most rapidly growing components of international trade is the

outsourcing of intermediate goods and business services. There are three essential features
of a modern outsourcing strategy.

1. Firms must search for partners with the expertise that allows them to perform
the particular activities that are required.

2. They must convince the potential suppliers to customize products for their own specific
needs.

3. They must induce the necessary relationship-specific investments in an

environment with incomplete contracting.

Possible Determinants of the Location of Outsourcing

1. Size of the country can affect the “thickness” of its markets.
2. The technology for search affects the cost and likelihood of finding a
suitable partner.
3. The technology for specializing components determines the willingness of a
partner to undertake the needed investment in a prototype.
4. The contracting environments can impinge on a firm’s ability to induce a
partner to invest in the relationship.

MARKET INTEGRATION

Market integration refers to how easily two or more markets can trade with each other. It occurs
when prices among different locations or related goods follow similar patterns over a long
period of time.

The term is further used in identifying related phenomenon of market of goods and services
experiencing similar patterns of increase or decrease in prices of products. It may also refer to

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
the movement of prices of related goods and services sold in a defined geographical location in
similar patterns.

Example: China produces toys at a cheaper price than the US. If foreign trade increased between
the two countries, toys could be sold to the US more easily, making them more available, thus
reducing price.

Types of Related Markets where Market Integration Occurs

Stock Market Integration This is a condition in which stock markets in different countries
trend together and depict same expected risk adjusted returns. Two markets are perfectly
integrated if investors can pass from one market to another without paying any extra costs and if
there are possibilities of arbitration which ensures the equivalence of stock prices on both
markets.

Financial Market Integration It is an open market economy between countries facilitated by

a common currency and the elimination of technical, regulatory and tax differences to
encourage free flow of capital and investment across borders.

Global Corporation
A global corporation is a business that operates in two or more countries. It also goes by the
name "multinational company"

The Finance Function in a Global Corporation

As corporations go global, capital markets open up within them, giving companies a powerful
mechanism for arbitrage across national financial markets. Chief financial officers (CFOs) must
balance the opportunities with the challenges of operating in multiple environments in managing
their internal markets in building an advantage. These three functions can be created by CFOs
through exploiting their internal capital markets.

Financing
A group’s tax bill can be reduced by the CFO like borrowing in countries with high tax
rates and lending to operations in countries with lower rates.

Risk Management
Global firms can offset natural currency exposures through worldwide operations instead
of managing currency exposures through financial markets.

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
 FINANCIAL OPPORTUNITY in EXCHANGE RATE
Let:
1 dollar = 50 pesos
1 dollar = 120 yen
1 peso = 2 yen

120 yen = 60 pesos

60 pesos = 1.2 dollar
1.2 dollar = 144 yen

144 yen – 120 yen = 24 yen

144 yen = 72 pesos

72 pesos = 1.44 dollars
1.44 dollars = 172.8 yen

172.8 yen – 120 yen = 52.8 yen

(note: conversion between currencies may continue depending on the availability of

variables needed for the successive exchange rate process)

Capital budgeting
Getting smarter on valuing investment opportunities CFOs can add value.

THE GLOBAL INTERSTATE SYSTEM

Neoliberalism and Economic Sovereignty

Neoliberalism is the intensification of the influence and dominance of capital. It is the

elevation of capitalism as a mode of production into an ethic, a set of political imperatives, and a
cultural logic. It is a project to strengthen, restore, or, in some cases, constitute anew the power
of economic elites.

Economic sovereignty on the other hand is the power of national governments to make
decisions independently to those made by other governments. Globalization as an increase in
the international integration of markets for goods, services, capital and labor, is also a
counterpoint of national sovereignty. In a globalized world economy, governments have no

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
alternative but to adopt neoliberal economic policies of privatization, deregulations, and
reductions in public expenditures.

Four Different Concepts of Sovereignty

International Legal Sovereignty It refers to the acceptance of a given state as a member of the
international community.

Westphalian Sovereignty It is based on the principle that one sovereign state should not
interfere in the domestic arrangements of another.

Interdependence Sovereignty It is the capacity and willingness to control flows of people,

goods and capital into and out of the country.

Domestic Sovereignty It is the capacity of a state to choose and implement policies within the
territory.

Global economic trends are influenced by economic sovereignty of an individual

member. The increase of the number of international organizations and the expansion of their
functions have undeniably restricted an individual country's sovereignty to certain extent. The
most typical example is the increasingly extensive involvement of the world's three leading
financial institutions the World Bank (WB), the International Momentary Fund (IMF) and the
World Trade Organization (WTO) in domestic economic affairs of their members.

Many underdeveloped nations that resorted to foreign assistance and interventions

resulted to the deprivation of government as regard control of their economy due to the
disorderly domestic economic establishments. Due to this, some scholars predicted the loss of
their economic sovereignty under this form neo-colonialism.

Economic integration can be described as a process and a means by which a group of

countries strives to increase their level of welfare. It is an arrangement between different regions
that often includes the reduction or elimination of trade barriers, and the coordination of
monetary and fiscal policies. Reducing costs for both consumers and producers and increasing
trade between the countries involved in the agreement are the aims of economic integration.

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World
Seven Stages of Economic Integration

1. Preferential trading area - an agreement on reducing or eliminating tariff barriers on

selected goods
2. Free trade area - eliminate import tariffs as well as import quotas between signatory
countries
3. Customs union - removal of tariff barriers between members, and acceptance of a
common or unified external tariff against non-members
4. Common market - all barriers are eliminated to allow the free movement of goods,
services, capital, and labor, including removal of tariffs and reduced non-tariff barriers
5. Economic union - common market between members, and a common trade policy
towards non-members
6. Economic and monetary union - involves a single economic market, a common trade
policy, a single currency and a common monetary policy
7. Complete economic integration - member states completely forego independence of both
monetary and fiscal policies// single economic market, a common trade policy, a single
currency, a common monetary policy, together with a single fiscal policy, including
common tax and benefit rates among others

Compiled and Prepared by: Romar Andrade Mandahuyan (Sir Taht)

Learning outline intended for SE 1101, SE 1102, SE 1103, CE 1113, CE 1114, CE 1115, CE 1116, Geod. Eng 1201,
Geol. Eng 1201, and Tran. Eng 1201 A.Y. 2021-2022 under the course of The Contemporary World