GLOBAL ECONOMY

LESSON 2
  The Global Economy
 Economic Globalization
 Types of Economies
TOPICS - Protectionism
- Free Trade
 International Trading System
- Trade Alliances
 ECONOMY
- process or system by which goods and
services are produced, sold, and bought
in a country or region.
 GLOBAL ECONOMY
- economies of countries are more
connected from extraction, production,
distribution, consumption, and disposal
of goods and services.
- Most definitions of globalization
centers on economic dimensions.
 - refers to the increasng
interdependence of world
ECONOMIC economies as a result of the
GLOBALIZATIO growing scale of cross-border trade
of commodities and services, flow
N of international capital and wide
(a definition from the United and rapid spread of technologies.
Nations)
 What is Trade?
- a basic economic concept involving the
buying and selling of goods and services, with
compensation paid by a buyer to a seller, or the
exchange of goods or services between parties.
 A product that is sold to the global
market is an export, and a product that
is bought from the global market is an
import.
 ECONOMIC
REASONS FOR
GLOBALIZATIO
N
TRADE
 Why do Countries Trade?
Countries trade with each
other when, on their own, they do not
have the resources, or capacity to
satisfy their own needs and wants.
 Why do Countries Trade?
Some nations trade as a way to have
good relationships with other countries.
A good trade treaty symbolizes a good
relationship among countries.
 Differences in Technology
Advantageous trade can occur between
countries if the countries differ in their
technological abilities to produce goods and
services.
 Differences in Technology
Technology refers to the techniques used to
turn resources (labor, capital, land) into
outputs (goods and services).
 Differences in Resource Endowments
Resource endowments refers to the
skills and abilities of a country’s workforce, the
natural resources available within its borders , and
the sophistication of its capital stock.
Goods and services are imported from abroad for
several reasons:
 Imports may be cheaper, or of better quality.
 They may also be more easily available or simply more
appealing than locally produced goods.
 In many instances, no local alternatives exist, and
importing is essential.
 Differences in Demand
Individuals in different countries may have
different preferences or demands for various
products.
 Differences in Demand
e.g. The Chinese are likely to demand more
rice than Americans, even if consumers face the
same price.
 ECONOMIC
TYPES OF ECONOMIES
GLOBALIZATIO
N under Economic Globalization
 - a policy of systematic
government intervention in
foreign trade with the objective of
encouraging domestic production.
PROTECTIONIS - This encouragement involves
giving preferential treatment to
M domestic producers and
discriminating against foreign
competitors.
 - comes in the forms of
PROTECTIONIS tariffs and quota.
M
 Free trade
- countries sign free trade
TRADE agreements
- transportation and
LIBERALIZATO communication advancements
N facilitate movement of goods and
services around the world.
 - exchange of goods and services
along international borders.
INTERNATION - This type of trade allows for
AL TRADE greater competition and more
competitive pricing in the market.
 - It is a multi-billion dollar activity,
central to the Gross Domestic Product (GDP) of
many countries, and it is the only way for many
people in may countries to acquire resources.
 Countries create trade alliances also known as
trading blocs.
 BUDDY SYSTEM
 European Union
 North American Free Trade
Agreement (NAFTA)
 MERCOSUR (Mercado Común del Sur/
(Southern Common Market)
 Association of South East
Asian Nations (ASEAN)
  Total value of everything produced within a
country’s border
 Final value of the goods and services
GROSS produced within the geographic boundaries
of a country during a specified period of
DOMESTIC time. GDP growth rate is an important
indicator of the economic performance of a
PRODUCTS country.
 It measures the value of economic activity
within a country.
 SOUTH KOREAN ECONOMY
- the 4th largest GDP in Asia and the 12th largest
in the world.
- South Korea is known for its spectacular rise
from one of the poorest countries in the world to a
developed, high-income country in just a few
generations.
KEY CONCEPTS
(in the Economics of
International Trade)
 COMPARATIVE ADVANTAGE
- the ability of an individual or group to carry
out a particular economic activity more
efficiently than another country.
 SPECIALIZATION
- a method of production whereby an entity
focuses on the production of a limited scope
of goods to gain a greater degree of
efficiency.
 - It results to a more
affordable products for the consumer.
- The economy of the world is also
RESULT OF
affected by the exchange of goods as
COMPETITIO dictated by the supply and demand,
N making goods and services obtainabe
which may not be available globally to
consumers.
 - Global trading gives
consumers and countries the
opportunity to be exposed to goods
GLOBAL and available in their own countries.
TRADING Almost every kind of products can
found on the international market aside
from services being traded like banking,
tourism, etc.
 FOCUSES
 ECONOMIC
OF
TRADE POLICY IN
GLOBALIZATIO
INTERNATIONAL
N TRADE
 - These are taxes or duties paid for a
particular class of imports or exports.
Heavy tariffs on imported goods are
levied by some nations for the protection
TARIFFS of their local markets.
- The prices of imported goods in local
markets are inflated due to high imported
taxes to ensure demand of local
products.
 - These are measures that the governments
or public authorities introduce to make
imported goods or services less competitive
than locally produced goods and services.
TRADE - They are state-imposed restrictions
on trading a particular product or with a
BARRIERS specific nation.
- It can be linked to the product, service like
technical requirement and it can also be
administrative in nature.
- Tariffs, duties, subsidies, embargoes, and
quotas are the most common trade barriers.
 Subsidy
- a sum of money that the government
gives to a business
to encourage the firm to do something
that brings external benefits.
 Embargo
- an official ban on trade or other
commercial activity with a particular
country.
 - This ensures that imported products
in the country are of high quality.
SAFETY - Inspection regulations laid down by
public officials ensure the safety and
quality standards of imported products.
ACTIVITY
Midterm
1. Do you think the Philippines is harmed as other
countries transfer their activities to us through
outsourcing?
2. In what ways do international organizations help our
country’s economy?
3. Does the position of rich countries as giants in the
economic chain threaten the status of less developed
countries in the global economy?