International Economics

LECTURE 1
GLOBALIZATION & GLOBAL ECONOMY
 CONTENTS

I GLOBALIZATION

II TRADE OPENESS

III INTERNATIONAL TRADE EVOLUTION

 I. GLOBALIZATION

- Take 1 minute to write down your understanding about

GLOBALIZATION
- Share your note with your neighbour
- Compare your notes and draw a conclusion
 What is globalization?

- An integration of: economies, politics, cultures,

education across countries (?)
- The domination of the U.S. in the global scale (?)
- Globalization helps to improve economic growth,
wellbeing, and freedom (?)
- Globalization causes environmental issues, labor
exploitation, and human right restriction (?)
 Examples of globalization
- Look around your daily lives: globalization in
consumption
- Look at the production of a laptop: Globalization in
production
 Examples of globalization
- Globalization in outsource services
 A definition of Globalization

“Globalization is the process of greater interdependence among

countries and their citizens. It consists of the increased interaction of
product and resource markets across nations via trade, immigration,
and foreign investment—that is, via international flows of goods and
services, people, and investments in equipment, factories, stocks,
and bonds. It also includes noneconomic elements such as culture
and the environment. Simply put, globalization is political,
technological, and cultural, as well as economic.”
(Carbaugh, 2019, International Economics, page 3)
 What forces are driving globalization?

- Technological change: productivity improvement,

transportation evolution, information flow exchange
- Trade negotiations: lower trade barriers, financial
liberalization
- Multinational companies
 Globalization waves
The first wave (1870 – 1914)
- Mainly occurred in Europe and North America
- Objective: reducing the trade barriers
- Technological advancements  Lower transportation costs
- Results: trade improvement, increases in GDP per capita
- End before the World War 2 – the period of protectionism
 Globalization waves
The second wave (1945 – 1980)
International trade differed across countries:
- Developed countries: pushing trade with other
developed partners; only trading agricultural
products and non-substitutable products with
developing countries.
- Developing countries: dealt with many types of
trade barriers
Quy mô của thương mại quốc tế từ sau CTTG thứ II

Nguồn: World Trade Organization, International trade and tariff data,

http://www.wto.org/english/res_e/statis_e/statis_e.htm.
 Globalization waves
The third wave (after 1980)
(i) Most of developing countries have joint the global
trade, and shifted to manufacturing trade.
(ii) Foreign outsourcing become more popular (e.g.,
accounting, chip design, engineering, basic
research, and financial analysis)
(iii) Global production network
 Globalization waves
The third wave (after 1980)
Global production network: an example of Boeing
787’s components (Carbaugh, 2019, p.8)
 Discussion

Which factors are the most crucial to push globalization?

What do you think about the conflicts between
globalization and nationalism?
Will Brexit and the U.S. – China trade war end the
globalization?
 Individual exercises

1. Identify the job descriptions in several multinational

companies in Vietnam, for examples, Unilever, P&G, HSBC,
TMA, Intel. Compare them with the job descriptions in the
local counterpart companies.
2. Compose a business plan, which can be relevant to an
international business. Using the template here:
http://idgvv.com.vn/en/download/Writing_the_Business_Pla
n.pdf
 Globalization: pros and cons
Merits of globalization
- To developed countries: economic growth, expanding
production and consumption.
- To developing countries: poverty reduction,
unemployment solving, income improvement.
- And… [your opinions]
 Globalization: pros and cons
Limitations
- Unemployment in the host countries
- Cultural changes. Examples: “crazy” fans of K-pop,
importing product preferences
- Environmental issues
- Child labor

How about your opinion?

 II. TRADE OPENNESS
Concepts Indicators Descriptions
Overall (Export value + Higher indicator value implies higher
openness Import value)/GDP openness in general.

Partial openness Number of tax line Higher partial openness means the
(services, declined, Actual tax reduction in trade barriers, and higher
reduction compared trade openness in specific disciplines.
goods)
to the commitment

Openness in Number of The higher number of projects, amount

investment investment projects, of money, and investors means the
The amount of lower barrier in foreign investment.
investment, Number
of investors

Nguồn: Báo cáo về TMQT của VN (VCCI)

II. TRADE OPENNESS
 Practices

- Collect data of import-export, FDI and GDP of Vietnam

during 1990-present (monthly, quarterly, or annually).
- Calculate the trade openness of Vietnam during this
period. Draw a trending graph and make your
conclusions.
 III. Globalization evolution

1. Rapid growth in terms of volume and velocity

2. Asia-Pacific becomes a center of global trade

3. The dominance of MNCs

4. Changes in trading structure

5. Evolution of global trade

1. Trade volume
2. Asia-Pacific: a center of global trade
 3. The dominance of MNCs

• MNCs: an institutional arrangement of production resources

• 1950s the beginning of the U.S. companies; 1970s Japanese
MNCs; 1980s MNCs from other countries
• 1970: 7.000 MNC within 27.000 foreign subdivisions
2009: 82.000 MNC within 810.000 foreign subdivisions
• 2010: MNCs accounted for a half of the total global trade
value, employed 77 bil labors, acquired 80% total FDI.
10 MNCs HÀNG ĐẦU TG (FORTUNE 2019)

Any comments on:

- Countries?
- Industries?
Fortune 500 evolution
Can you name these MNCs?
Brand family
 4. Trading structure
(i) Technical and manufactured products have been increasing;
traditional products (e.g., agricultural products, light
manufacturing products) have been declining.
 4. Trading structure
(ii) Energy products accounted for a higher proportion of imports-exports in
many countries
4. Trading structure
 4. Trading structure

(iii) Services are increasing

1950s 2000s
Services 5% 20%
Tangible products 95% 80%
100% 100%
 5. Evolution of global trade
WTO as the foundation of the global trade

- 1947: GATT (23 members)

- 1995: WTO (127 members)
- 2016: 164 members
 5. Evolution of global trade
Regional trade agreements:
 5. Evolution of global trade
A different look:
(Friedman, T. (2005) “The World is flat”. Thorndike Press)