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Globalization: Shrinking the World

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on 23 April 2013

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Transcript of Globalization: Shrinking the World

Shrinking the World Americanization? DR-CAFTA and the case of
El Salvador Specializing in producing goods that a state can be relatively efficient
The increase in total world production The emergence of an international network of social and economic systems; is the process of international integration arising from the interchange of worldviews, products, ideas, and other aspects of culture

describes the interplay across cultures of social forces such as religion, politics, and economics.
can erode and universalize the characteristics of a local group
also responsible for the interdependence of economic and cultural activities of countries around the world Economic Globalization increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, services, technologies, and capital. Components of Economic Globalization What is globalization? Production
Migration Patterns Positive effects of Globalization Increased Competition Diffusion of Knowledge The spread of democracy, civil rights, feminism, etc.
Spread of capitalism and free market philosophy
Growth of GDP for the world as a whole

A "Shrinking World"
Greater access to foreign culture in the form of music, movies, food, clothing, and more – the ability to choose (for some) is increasing!
Increase in social media Rise of Customer Service
Rise of Standards and Customer Satisfaction
Survival of the Fittest Innovations and Inventions spread much quicker around the world
Knowledge of better practices, medicines, etc. reaching other parts of the world
Industrialization/Automation diffusion Negative effects of Globalization Outsourcing
Low-skilled workers in a rich country suffer when trade expands with a poorer country with plenty of low-skilled workers
The case in Galax, West Virginia Loss of Culture and Identity (de)regulation? Globalization has not created a “flatter” world but actually has expanded the gap between the top and bottom countries (Conley, 2008).

The number of developing countries that have benefited from economic globalization is smaller than 20, that the average trade deficit of developing countries in 1990s increase by 3% as compared with that in 1970s, and that over 80% of the capital is flowing among the US, Western Europe and East Asian Countries (Gao, 2000). Unequal Distribution Homogenization of the World?

The threat of native languages
Melting Pot Theory
Metaphor for a heterogeneous society becoming more homogenous – a push towards harmony or a push for oppression and domination? Multinational Companies
Oligarchy – OPEC
Power of the U.N.
Power of International Governmental Bodies Americanization? American Exceptionalism? The Global Ceiling Turning from the benefactors of globalization to the sufferers of globalization
The case of China hitting the “wall”
Developing to Developed? Or developed enough?
Can there be a new #1 or is the battle of #2?
GapMinder The power and influence of the United States to shape other cultures with its own popular culture, cuisine, technology, business practices, or political techniques Slowing Globalization? The proposition that the United States is different from other countries in that it has a specific world mission to spread liberty and democracy (Winfried, 2011)

Based on: liberty, egalitarianism, individualism, populism, laissez-faire (Tocqueville, 1840)

“To this day, the United States remains the only superpower capable, and at times willing, to commit real resources and make real sacrifices to build, sustain, and drive an international system committed to international law, democracy, and the promotion of human rights. Experience teaches that when the United States leads on human rights, from Nuremberg to Kosovo, other countries follow.” – Harold Hongju Koh, 2003. International Trade Absolute Advantage
- The ability to be more productive than other countries International Trade (Economic Theory) Comparative Advantage
- Fundamental force for international trade
- The ability to produce at a lower opportunity cost than other countries Specialization State A benefits State B benefits Equilibrium (T-shirt) in a Market with Imports (Parkin, 2012, p. 153) Gains and Losses from Imports –
State A (Parkin, 2012, p. 153 Equilibrium (Airplane) in a Market with Exports (Parkin, 2012, p. 153 Gains and Losses from Exports – State B (Parkin, 2012, p. 156) State B benefits State A benefits Redistribution of Total Surplus Dependency Theory Free trade and comparative advantage
in production within states provide benefits only to core countries
(Rist, 1997).

Inequality in exchange Inequality in Exchange International Trade Restrictions Four sets of tools to influence international trade and protect domestic industries from foreign competition

1. Tariffs
2. Import Quotas
3. Other Import Barriers
4. Export Subsidies Free Trade in Developing Countries
Who really benefits? Developing Countries Free Trade Agreements Comparative Advantage
vs. Displaced Work/Workers Free Trade and
Developing Countries Dominican Republic-Central American Free Trade Agreement On August 5, 2004, the United States signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic. The CAFTA-DR is the first free trade agreement between the United States and a group of smaller developing economies. This agreement is creating new economic opportunities by eliminating tariffs, opening markets, reducing barriers to services, and promoting transparency. It is facilitating trade and investment among the seven countries and furthering regional integration. Highly agricultural and highly rural
-Environmental disruption resulting from mining
-Change into service industry (human rights issues?)

Major Exports: Coffee, sugar, textiles and apparel, gold, ethanol, chemicals, electricity, iron and steel manufactures Investor State Provisions Mining Ban: President Mauricio Funes reaffirms that no metals mining would be permitted during his administration.

DR-CAFTA: "Foreign investor protections"

Trans-Pacific Partnership: New trade and investment act, which will include "investor-state" provision.

Will we see the same effects? Free Trade Agreements (FTAs) have proved to be one of the best ways to open up foreign markets to U.S. exporters. Trade Agreements reduce barriers to U.S. exports, and protect U.S. interests and enhance the rule of law in the FTA partner country.

The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to export their products and services to trading partner markets. Forty-one percent of U.S. goods exports went to FTA partner countries in 2010, with exports to those countries growing at a faster rate than exports to the rest of the world from 2009 to 2010, 23% vs. 20%. (International Trade Administration, 2013 The theory of comparative advantage would be successful when applying free trade to developing countries if displaced workers and capital were reinstated into more “efficient” activities.

However, the theory assumes there will be no significant transition costs would occur, which is not the case. Additionally, the costs to consumers and businesses in developing countries outweigh the gains when they have to pay more for previously cheaper products. Countries involved:
United States, El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic, Costa Rica Benefits Large income gains by reducing trade barriers to low levels
Also collectively experience large income gains by removal of exports barriers from rich countries Costs Loss in tariff revenue
Often amounts to 10-20% of government revenue
Governments make up this loss through alternative taxes (Example: sales tax, income tax)

Disruption in agricultural and rural sectors for communities that are highly reliant on agricultural income

Attributed to rise in competing imports
Results in transition from agricultural to industrial economy

Heavier disruption will occur for those countries under higher pressure to remove agricultural protection infant industry sectors which are left vulnerable by lack of protection El Salvador Trade and Economy Key points Discussion Questions The Debate of Globalization The move from Global to Local
Pushing back against a globalized world
Local farmers’ markets
"Made in USA” marketing
Free Trade vs. Fair Trade shift?
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