The term “globality” primarily refers to a social condition, potentially the

end-point of globalization, whereby individual and collective consciousness is

focused increasingly at the global level and away from the national level. As in
the sixteenth and seventeenth centuries when collective consciousness shifted
away from religious affiliations towards national affiliations, in the era of
globalization there is speculation that we are witnessing a shift away from
national allegiances towards a global consciousness or “imaginary” (Steger
2008), whereby individuals will feel a greater connection with the global
community than with presently existing national communities.
Globalization refers to a multidimensional set of social processes that
create, multiply, stretch, and intensify worldwide social interdependencies and
exchanges while at the same fostering in people a growing awareness of
deepening connections between the local and the distant (McGrew, 2003).
For Justine Rosenberg’s definition of globalization, he argues that
globalization as a phenomenon gave rise to the interconnectedness of human
society that replaced the sovereign state system with multilateral system of
global governance. His definition centers on the process, condition, time, and
age of this condition.
From the lens of Ritzer (2008), he described this phenomenon as the
spread of worldwide practices, relations, consciousness, and organization of
social life. The interconnectedness of social segments from macro institutions to
the smallest sectors of the world have coincided the fabrics of globalization.
Globalization, as a theory lies in the works of many 19th and 20th century
scholars and intellectuals like Karl Marx, MacKinder, and Robertson who began
to introduce the term “globality”. However, it was in the 1960’s and 1970’s when
this term gained worldwide attention.

Globalization simply puts it as a social process of reshaping and

remaking the world order. Operations of social institutions transcend across
territories and boundaries with the goal of expanding its reach – economic,
political, and technological fibers. Understanding the term globalization, requires
a critical examination of its origin, development, and usage as part of our
understanding of social change within the spectrum of contemporary world. Thus,
the deployment of new ideas in trans-planetary setting and the structural
emergence of nation state project moved communities to be included in a trans-
state and transnational domain.
FORCES AND DRIVERS OF GLOBALIZATION
 Technology
 Economics
 Politics
 Culture
 Environment
 Individuals and Institutions

THEORETICAL APPROACHES TO GLOBALIZATION/ 3 SOCIOLOGICAL

PERSPECTIVE THAT WILL BEST EXPLAIN GLOBALIZATION

1. REALISM - The realist perspective explaining globalization focuses on the

shifting distribution of power among states (Walt, 1998 and Synder,
2004). They explained that the core idea of dominating the world through
the employment of power. This force comes from different angles,
depending on the power availability of a nation. However, realists warn that
countries may suffer, and struggle to maintain its power it will be
overreached and used wrongly.
2. LIBERALISM - Liberalism is a perspective in international relations where
actors and institutions emphasize relationships, and negotiations.
Liberalists observe the importance of interaction and communication
and focus on solving problems and conflicts affecting them. This idea
is very evident in countries where democratic governance and institutions
play major roles in maintaining national cohesiveness in managing
domestic and international affairs.
3. IDEALISM - Idealists and constructivist hold the notion that values, and
norms play pivotal roles in sustaining and reforming the process and works
of individuals, group, and nations. This theory emphasizes on the
functions of ideologies, frameworks, systems, and identities in
understanding globalization and international order. Its core beliefs
centers on the centrality of ideas, beliefs, emotions, and collective values
that shape the political and economic landscapes of the world.

ARGUMENTS OF GLOBALIZATION CRITICS

1. HYPERGLOBALISTS- Hyper-globalists (sometimes referred to as global
optimists) believe that globalization is happening and that local cultures are being
eroded primarily because of the expansion of international capitalism and the
emergence of a homogeneous global culture; they (as the ‘optimist’ part of the
label implies) believe that globalization is a positive process characterised by
economic growth, increasing prosperity and the spread of democracy.
2. REJECTIONIST- Rejectionists maintain that existing scholarly accounts of
globalization are imprecise and even exaggerated. Thus, they contradict the
usefulness and validity of globalization as an analytical concept (Steger 2009,
2014).
3. SKEPTICS - The skeptics argue that the side effects of globalization on the
society are much greater than its positive effects. One of the greatest skeptics,
Ralph Dahrendorf, foresees a threat to social cohesion due to increase in
individualism and competition. People become greedy and sometimes dishonest.
-While skeptics acknowledge that there exist some manifestations and forms of
globalization, they nevertheless underline the limited nature of current globalizing
processes (Steger 2014). Skeptics primarily point out that ‘the world is not as
nearly integrated as many globalization proponents believe’ (Steger 2009: 24).
4. MODIFIERS- Modifiers are critics of globalization who disagree with the
understanding that this process is a recent and novel phenomenon. Pointing out
that the term globalization has been understood in a historically incorrect
manner, they maintain that globalizers who believe that globalization is a new
process are significantly devoured by their short-sighted historical framework
(Steger 2009, 2014)

Definition of Globalization
In the area of academe, there is no single definition of globalization. There are
various competing interpretations emerged vying for dominance and universal
recognition. The inception of the term globalization brought much attention to the
public especially among intellectuals who have interest to delve the contending
forces of this notion. But what is this term globalization? Is this a phenomenon?
Is globalization a global trend?
Globalization refers to a multidimensional set of social processes that create,
multiply, stretch, and intensify worldwide social interdependencies and
exchanges while at the same fostering in people a growing awareness of
deepening connections between the local and the distant (McGrew, 2003).
For Justine Rosenberg’s definition of globalization, he argues that globalization
as a phenomenon gave rise to the interconnectedness of human society that
replaced the sovereign state system with multilateral system of global
governance. His definition centers on the process, condition, time, and age of
this condition.
From the lens of Ritzer (2008), he described this phenomenon as the spread of
worldwide practices, relations, consciousness, and organization of social life. The
interconnectedness of social segments from macro institutions to the smallest
sectors of the world have coincided the fabrics of globalization.
Globalization, as a theory lies in the works of many 19th and 20th century
scholars and intellectuals like Karl Marx, MacKinder, and Robertson who
began to introduce the term “globality”. However, it was in the 1960’s and 1970’s
when this term gained worldwide attention.
Globalization simply puts it as a social process of reshaping and remaking the
world order. Operations of social institutions transcend across territories and
boundaries with the goal of expanding its reach – economic, political, and
technological fibers. Understanding the term globalization, requires a critical
examination of its origin, development, and usage as part of our understanding of
social change within the spectrum of contemporary world. Thus, the deployment
of new ideas in trans-planetary setting and the structural emergence of
nationstate project moved communities to be included in a trans-state and
transnational domain.

1.2 Qualities and Characteristics of Globalization (Held & McGrew, 2002)

1. Creation and Multiplication of social networks and cultural activities which
break the traditional norms and practices in the political, economic, and cultural
realms of most communities
2. Expansion and Stretching of social operations and connections which is seen
in the financial markets and trading operations around the globe. (Examples:
World Trade Organization, ASEAN Economic Community, World Economic
Forum and European Union)
3. Intensification and Acceleration of human activities which describes the
process of world and individual connection works. Consumer markets and
consumerism continue to rule in this postmodern aera where the farthest have
the access to reach the central portion of global events.
4. Consciousness and Awareness. People, as the primary actors of globalization
are the frontliners as reflected in their experiences. The human consciousness is
critical on how they impact the growing outcomes and markets of globalization.
1.3 Is Globalization the same as Westernization?
NO. The concept of Westernization is deeply rooted in the Western World where
often associated with the Western culture and values (Sairin, 2011). This concept
is famously used in referring the western value system and it influences countries
outside its territory and sovereignty. The political, economic, and technological
prowess of United States and European countries are best described in the idea
of Westernization.
CHAPTER 2
COMPETING THE THEORETICAL APPROACHES
Learning Objectives:
After studying this chapter, the student will be able to:
1. Discuss the definition of three leading theories explaining globalization
2. Familiarize the known leading theorists and standpoint on globalization.
3. Discuss the origin of the three theories and its relevance to the study of
globalization.
4. Apply the three theories on the current political, economic, and
technological situations of the world.
We see globalization in the field of international relations through number of
perspectives and explanations. Examining the causes of events and analyzing
the levels of events require sufficient facts to better explain the narratives of the
situation. In our understanding on the lens and interpretations, it would be more
interesting if we are going to look into the three prominent theories. The three
sociological perspectives that will best explain globalization are realism,
liberalism, and idealism.
2.1 Realism
The realist perspective explaining globalization focuses on the shifting
distribution of power among states (Walt, 1998 and Synder, 2004). They
explained that the core idea of dominating the world through the employment of
power. This force comes from different angles, depending on the power
availability of a nation. However, realists warn that countries may suffer, and
struggle to maintain its power it will be overreached and used wrongly.
Realists argue that countries open their economies to the world is because
of two contending reasons:
1. Financial returns of expanding markets offer new economic opportunities
to the capitalist (origin country). (Examples: McDonald’s, Chevron, Ford,
Coca-Cola, Citibank, Microsoft, and H&M)
2. The continued centrality of political power and military strength are obvious
forces of interdependence and realistic behavior of the more and most
powerful countries.

Realists see economic alliance and corporation as medium of flourishing

activities under favorable security conditions. Economies tend to forge
partnership if they see advantages from other countries. In some cases, political-
military alliances are sometimes used especially within the bipolar world where
economic power is utilized to strengthen military capability.

2.2 Liberalism
Liberalism is a perspective in international relations where actors and
institutions emphasize relationships, and negotiations. Liberalists observe
the importance of interaction and communication and focus on solving
problems and conflicts affecting them. This idea is very evident in countries
where democratic governance and institutions play major roles in
maintaining national cohesiveness in managing domestic and international
affairs.

Example:
When Chinese government asserted its rights over the contested West
Philippine Sea, Realist China has shown its military strength to its
neighbors through giving signal of its advantageous capability. On the
other hand, Liberalist Philippines utilized soft approaches through
protesting in the International Criminal Court the act of China pertaining to
its aggressiveness over the West Philippine Sea.
Liberalists believe that to avoid international conflict and problems, and
negotiations and dialogues are potential mechanisms in confronting issues
among parties.

Three Factors that describe the Transformation of Political-Economic

Structure and Development of Global Interconnectedness:
1. Spread of Democracy and Institutions
 Democracy as a frontline of liberalism has been utilized as a
sociopolitical apparatus in challenging political actors who act
beyond their power and control. The strong participatory presence of
citizens in key issues affecting the interest and welfare of the public
could be used as a reference in balancing the interest of
stakeholders.
 Liberalists see that democracies are venues of not using threat to
intimidate and harm other nations. Many liberals believe in the vital
function played by the rule of law as safeguard of self-respect and
social stability

2. Global Economic Ties

 Liberalists see economic ties and cooperation such as market
integration and economic alliances are fitting fixtures of
globalization. The core belief of liberalism is that economic alliance
and integrating the domestic economy into a regional or economic
bloc will deliver prosperity and security. Opening to markets to other
countries is described as an act of country’s commitment to global
consciousness and moral understanding of multistate interests.
(Examples: European Union’s Eurozone and Association of
Southeast Asian Nations Economic Community (AEC)).
3. International Organizations
 Liberals believe that the formation of leading regional and
international organizations like global commerce and governance
are main instruments in the maintenance of peace and solidarity.
(Examples: Organization of Petroleum Exporting Countries (OPEC)
and North Atlantic Treaty Organization (NATO))

2.3 Idealism
Idealists and constructivist hold the notion that values, and norms play
pivotal roles in sustaining and reforming the process and works of
individuals, group, and nations. This theory emphasizes on the functions of
ideologies, frameworks, systems, and identities in understanding
globalization and international order. Its core beliefs centers on the
centrality of ideas, beliefs, emotions, and collective values that shape the
political and economic landscapes of the world.

Alexander Wendt and Hugh Ruggie are the two most prominent
founders of this school of thought. Idealism presents the changing norms
and evolutions of individuals, groups, and states with the goal of
influencing the dynamics and pattern of social structure.

Furthermore, they value the importance of “appropriateness” and

“transparency” in reshaping and framing rules affecting the general
welfare of its members, may it be individual or collective. Idealists
emphasize appropriate policies and decisions during the state of conflict as
it advances the moral aspects and ethical dynamics of actions.

Role of Ideas and Technology in Globalization

Ideas are non-material entities of culture; it embodies one’s perception of

his social world or environment. It defines on how values, norms, and
beliefs are used by governments and institutions in hold and exercising of
power (Nau, 2008).

When ideas are used well based on their intended application,

development takes place. It could be utilized for linking and transfer of
knowledge in a transnational community of nations, scientific, and social
innovation, and increase in the understanding of people in their day-to-day
life. Ideas are necessary in this particular scene because the definitions
and concepts constructed are used in interpreting how people act and
behave

Three Important Technological Trends that made Significant Changes

in the Interaction of Nations and People:
1. Knowledge and technology are significant determinants of wealth
and power.
 The success of economy of a country requires pool of resources like
ideas and technology. The technological advancement of a nation is
an identity of its economic power.
2. The fast pace of technological change
  From industrialization to modernization, technology has taken a
significant role in business, government, and individuals. The
countless forms of technological breakthrough change the cycle of
the 21st century. The advent of fourth industrial evolution, the global
community is expected to embrace multiple technical changes and
technological developments.
3. Dispersed knowledge and technology.
 The increasing trends in communication revolution make it more
possible to move data and ideas from people to people and country
to country at faster and more convenient way.
Innovation
as a product of technological advancement have rendered national borders
irrelevant in international system. Discoveries and changes in science and
technology make markets around the world a borderless contact, making the
global economic structure more intertwined. Because of global reach, economies
find this trend as a ground of tough competition, with rivals’ states and institutions
who have vast resources of wealth and power. In addition, resourcepoor
countries are prone to the damage of these changes. Technology in this day of
postmodernity can be used to project global power at the same time intimidates
countries that are technologically behind.
For example, African States and countries from part of the global south
have the difficulty to rise and compete with resource-rich countries.
2.4 Institutions and Globalization
Institutions
Consist norms, set of activities, and regulate structures that provide meaning
and stability to the social behavior of a group (Peter, 2012). Norms like the
rules, guidelines, programs, and the types of activities constitute the operation
of an institution. They are understood as structures that are parts of a society.
Meyer and Rowan (1977) describe the formation of institution as a symbolic
manifestation on the needs of society. The actions and behavior of the group
members can change and alter the movement of community and its people.
A different view explained by Giddens (1979), states that institutions will not
be recognized as institutions if they do not shape the behavior of individuals.
As a set of systems and norms, institutions convey individuals on how to
behave and conform to the practices of the group as a way of accepting the
legitimacy of the norms and values of the organization.
Global governance is directed by two important institutions: political and
economic institutions. The operation of the political and economic life of
globalization depends on how plans are implemented and how accountable
these institutions are in their actions. Liberalists emphasize the importance of
institutions in international order and stability.
Domestic and international institutions have various roles in maintaining
growth and development in both political and economic realms
International institutions
are classified intergovernmental organizations that are formed by national
governments. These are international formal organizations that set rules and
with the purpose of regulating the flow of communication and movement of
resources. Governments engaged in internationalizing their organizations
because of retaining and asserting control over global activities and networks
brought by global changes and transformations.
Example:
The International Monetary Fund (IMF) performs globally and countries
around the world depend on the common rules set by the body. Like IMF,
World Trade Organization (WTO) is an international institution that plays key
role in the management of global trade. Its member-economies are bound to
adhere and behave in accordance to its guidelines in the conduct of
international trade.
SS1D Quiz No.1 HM 3A| HM 3B
Introduction to Globalization
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Points:
17/50
1.Globality is
(0/1 Point)
a social process characterized by tight economic, political, cultural,
environmental interconnectedness and flows, making currently existing borders
and boundaries relevant
a social process characterized by tight economic, political, cultural,
environmental interconnectedness and flows, making currently existing borders
and boundaries irrelevant
a social condition characterized by tight economic, political, cultural,
environmental interconnectedness and flows, making currently existing borders
and boundaries irrelevant
a social condition characterized by tight economic, political, cultural,
environmental interconnectedness and flows, making currently existing borders
and boundaries relevant
None of the above
2.According to Friedman, globalization is a/an:
(1/1 Point)
trend
phase
international system
international herd
3.Which of the following does NOT happen when barriers fall according to
Friedman?
(0/1 Point)
Barriers to entry collapse and every one are in each other's business
The sense of identity and traditional norms are preserved
Rise of the Golden Straitjacket
 Rise of electronic herd
Interaction with electronic herd
4.According to Friedman, the following are the forces that blew the walls away,
EXCEPT:
(0/1 Point)
Democratization of finance
Democratization of technology
Democratization of politics
Democratization of information
5.According to Friedman, the Fall of Berlin Walll is a European event rather than
a universal event.
(0/1 Point)
True
False
6.Friedman's gas station theory of the world includes the following, EXCEPT:
(0/1 Point)
Russia
Japan
America
Western Europe
Developing world
Communist
7.Innovations and breakthroughs in the traditional norms manifest which
characteristic of globalization as a phenomenon?
(1/1 Point)
Creation and Multiplication
Expansion and Stretching
Intensification and Acceleration
Consciousness and Awareness
None of the above
8.People’s response to the outcomes of globalization as a paramount
consideration is highlighted by which characteristic of globalization as a
phenomenon?
(0/1 Point)
Creation and Multiplication
 Expansion and Stretching
Intensification and Acceleration
Consciousness and Awareness
None of the above
9.Consumer markets and consumerism continue to rule where the farthest have
the access to reach the central portion of global events illustrates which
characteristic of globalization as a phenomenon?
(1/1 Point)
Creation and Multiplication
Expansion and Stretching
Intensification and Acceleration
Consciousness and Awareness
None of the above
10.Which among the following is not one of the forcers/drivers of globalization?
(1/1 Point)
Politics
Technology
Environment
Health
People and Institutions
Economics
11.Which among the following is/are considered as the primary force/driver of
globalization?
(0/1 Point)
Politics
Technology
Environment
Health
Culture
People and Institutions
Economics
12."Global imaginary" refers to :
(1/1 Point)
A condition of growing interdependencies across borders
 Consciousness of belonging to a global community
Process of internalizing one’s nationality
Growing knowledge about the global issues
13.Which of the following points is contrary to the qualities of globalization as a
phenomenon?
(0/1 Point)
The daily actions of the people such as global interdependence provide
large-scale implications to the norms and practices of the borderless world
The digital age as part of the Fourth Industrial Revolution is considerably the
fitting form of globalization’s structure
The formation of international organization brought light for global
economies to open
The sense of parochialism among nations have tightened in a way that it
vitiates a growing concern of globalization.
Social networks and cultural activities break practices in the political,
economics and cultural realms of most communities.
14.Which of the following does not demonstrate globalization as an economic
process?
(1/1 Point)
Increasing linkages through trade, financial flows and FDIs
Proliferation of multi-national companies
Militarization as a means of forming alliances
Evolving structures global markets and institutions
15.Main issue concerning globalization as a cultural process is
whether_____________
(0/1 Point)
It has hasten the pace of consumerism therefore elucidating the paradox of
progress
It increased homogeneity or led to greater heterogeneity
It allowed hybridization and creolization
It promoted migration and colonial mentality within local distant
16.Appadurai’s ethnoscape is concerned with_______________
(1/1 Point)
Ideologies of state and social movements
Flow of global capital
 Shifting populations
Electronic capabilities to produce and disseminate information
Development of technologies
17.Appadurai’s mediascape is concerned with________________
(1/1 Point)
Ideologies of state and social movements
Flow of global capital
Shifting populations
Electronic capabilities to produce and disseminate information
Development of technologies
18.The Starbucks' theory posits that________________
(1/1 Point)
Starbucks earn more from developed countries because of the status
symbol attached to their products
Starbucks earn equally from developed countries because of the status
symbol attached to their products
Starbuck earn less from developing countries because of the diminishing
marginal utility of  their products
Starbuck earn more from developing countries because of the status symbol
attached to their products
None of the above
19.The philosophy of the “Post-truth Era” suggests that________________
(1/1 Point)
emotional or ideological motivations are often considered more valid than
objective criteria or facts.
emotional or ideological motivations are often considered less valid than
objective criteria or facts.
emotional or ideological motivations are often considered equally valid with
objective criteria or facts.
emotional or ideological motivations are often nor objective criteria or facts
are considered valid.
20.The “Post truth-Era” is an example of a study that can be examined
in______________
(1/1 Point)
Ethnoscapes
 Mediascapes
Technoscapes
Ideoscapes
Finanscapes
21.Bush doctrine is the idea that as a security strategy, countries
________________
(0/1 Point)
“ will act with allies, to make possible”
“will act with the world, to make stability”
“will act fairly, to promote justice”
“will act alone, if necessary”
22.Arguments disputing the novelty and the historical framework of globalization
are the points usually raised by __________________
(1/1 Point)
Hyperglobalist
Rejectionist
Skeptics
Modifiers
23.Arguments disputing that globalization is a myth is contended by
______________
(1/1 Point)
Hyperglobalist
Rejectionist
Skeptics
Modifiers
24.The terms “Americanization” and “Westernization” is often used by
____________
(0/1 Point)
Hyperglobalist
Rejectionist
Skeptics
Modifiers
25.The belief that globalization is the answer to all men’s needs and that
globalization has no reservations maybe considered as ________________
(0/1 Point)
 Hyperglobalist
Rejectionist
Skeptics
Modifiers
26.Statism is a sytem in which ______________________
(1/1 Point)
The people has the substantial centralized control over social and economic
affairs
The global community has the substantial centralized control over social and
economic affairs
The state has the substantial centralized control over social and economic
affairs
The culture has the substantial centralized control over social and economic
affairs
27.Which of the following is not a feature of a liberalist approach?
(0/1 Point)
Democracy
Diplomacy
Self-Help
Relationship and Negotiations
28.For Questions 23-25. There is a territorial dispute among countries X, Y and
Z. Country X proposes a new way of partitioning the territory so that each
countries would have a fair share and according to them, is the new standard
that must be conformed by other states in cases of territorial disputes. Country Y
on the other hand, having comparative advantage of supplying oil among the
three decided cut-off its economic ties with the two. Country Z opted to seek an
advisory opinion from duly recognized international bodies and likewise
channeled its grievances to the other two claimants through Exchange of Notes.
Country X is most likely a ____________________
(0/1 Point)
Realist
Liberalist
Idealist
Pragmatist
29.(Refer to Question 23). Country Y is most likely a _______________
(0/1 Point)
 Realist
Liberalist
Idealist
Pragmatist
30.(Refer to Question 23). Country Z is most likely a ________________
(0/1 Point)
Realist
Liberalist
Idealist
Pragmatist
31.Negotiation and diplomatic talks are examples of power used by realist.
(1/1 Point)
True
False
32.Liberalism is described when actors and institutions emphasize relationships
and negotiations, rule of law, and democracy
(1/1 Point)
True
False
33.Idealism sees economic alliance and cooperation as medium of flourishing
activities under favorable security conditions
(1/1 Point)
True
False
34.Institutions are non-material entities of culture, it embodies one’s perception of
his social worls or environment
(0/1 Point)
True
False
35.Innovation as a product of technological development have resulted national
borders more powerful in international system
(0/1 Point)
True
False
36.Based on Friedman's book "The Lexus and the Olive Tree", discuss the
distinction between the Cold War System vis-a-vis the Globalization system.
(-/5 Points)

37.State three (3) advantages and (3) disadvantages of globalization.

(-/5 Points)

38.Analyzing what is happening now in the Philippines and considering

government policies and actions with the international community, what
THEORETICAL APPROACH does the Philippines adhere to? Explain.
(-/5 Points)

Lecture 3: Economic Globalization

 

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 movement of goods, services, and capital
across borders. The term sometimes also refers to the movement of
people (labor) and knowledge (technology) across international borders.
(IMF, 2008]
 In economic terms globalization is nothing but a process making the world
economy an “organic system” by extending transnational economic
processes and economic relations to more and more countries and by
deepening the economic interdependencies among them.’ (Szentes.
2003:69)
Global Economy/ World Economy
 Large geographic zone within which there is a division of labor and hence
significant internal exchange of basic or essential goods as well as flows of
capital and labor. A defining feature of a world-economy is that it is not
bounded by a unitary political structure. Rather, there are many political
 units inside the world-economy, loosely tied together in our modern world
system in an interstate system.
ECONOMIC SYSTEMS
• Economic systems must be analyzed within the context of the overall social
system of a country and, indeed, within an international, global context as well.
• “Social system” - the interdependent relationships between economic and non-
economic factors
 
 MIXED ECONOMY

  
GOVERNMENT INTERVENTION

 
International Trade
 is the process and system when goods, commodities. services cross
national economy, and boundaries in exchange for money or goods of
another country (Balaam and Veseth, 2008)
 International Trade is the process by which nations export and import
goods, services and financial capital
 international trade is vital to economic growth because it expands a
nation’s consumption possibilities.
GDP = C + I + G + ( X-M)
Where:
GDP: gross domestic product
C: consumption spending
I: investment
G: government spending
(X-M): trade balance, s.t. X= exports & M=imports
 GNI = C + I + G + ( X-M) + NFIA

Where:
GNI: gross national income
C: consumption spending
I: investment
G: government spending
(X-M): trade balance, s.t. X= exports & M=imports
NFIA: net factor income from abroad

GNH
INTERNATIONAL TRADE

 
INTERNATIONAL TRADE
(THEORIES AND PERSPECTIVE IN INTERNATIONAL TRADE)
GENERAL TYPES OF TRADE THEORIES
 DESCRIPTIVE
 PRESCRIPTIVE

Mercantilism
• Higher exports than import : used this mechanism to support their trade
objectives and strengthen their colonial rule and possession
• Export less high valued product and import less high valued product:
prevented and monopolized the production and manufacturing operation of
the colonies
• Beneficial to colonial powers
Economic Liberals
(ABSOLUTE ADVANTAGE VS. COMPARATIVE ADVANTAGE)

Structuralist
Why Countries Engage in International Trade?
1. Use of Excess Capacity in Demand

2. cost reduction and increase profit

3. Cheaper supplies
4. Addition to Product Line
5. Reduction of Risk
6. Foreign Policy Tool
Domestic and Foreign Economic Policies (Henry Nau, 2008)
1. Macroeconomic policies
 MONETARY POLICY
 FISCAL POLICY

2. Microeconomic Policies
 precautionary measures in price controls
 monitoring consumer behavior & private firms operations
3. Governance Policies
 4. Exchange rate policies
5. Trade Policies
6. Foreign Capital Investment Policy
7. Migration Policies
The Power of Transnational Corporations
Transnational Corporations
• refers to business organizations and firms that compete in regional, or
global markets.
• operates in countries and makes investments in research, technology,
facilities, distribution and production
• can control and monopolize the global market especially if it has huge pool
of resources making it one of the most powerful economic actors in the
world
THE FORTUNE 2016 GLOBAL 500 COMPANIES
International Economic Institutions and Market Integration
Free Trade Area (FTA)
• Is a trading bloc which involves the reduction of internal tariffs to zero of
member economies while retaining its different external tariffs
• Tariffs: tax on imports or exports
• This policy aims to promote free flow of goods and services as well as to
increase the volume of trade within the region (trade liberalization)
Unfair Trade
• Is the conduct of trade by a business firm or government that violates and
breaks the international trade agreements that are unjustifiable and
discriminatory
International Economic Institutions
World Trade Organization (WTO)
• After WWII, the US initiated the structuring og global economy through the
establishment of multilateral trade negotiations under thye General
Agreement on Tariffs and Trade
• Main umbrella responsible for economic liberalization around the world
• 151 members as of 2008 and accounts for 90% of the world’s trade
• Based in Geneva, Switzerland and led by a director-general selected by
consensus among its members
Functions of the WTO
• Implementation of latest GATT agreements
• Venue for trade negotiations
• Dispute settlement body for resolving trade problems
• Review and assess national and international trade laws and policies
• Assist members and developing economies by providing technical
assistance and training programs
1999 Seattle WTO Protests (Battle of Seattle)
World Bank
• Formerly, International Bank for Reconstruction and Development (IBRD)
• 189 member-countries operating in 130 countries worldwide
World Bank Functions

Criticisms raised by members of some NGOs and civil society on the

operation of WB
• Its function is limited only to poverty which has some similarities with IMF
• It concentrate to macro scale projects where micro and small projects
affecting the lives of communities are excluded and not given proper
attention
• The organization fails to address the global problem of inequality
• Rampant case of corruption in the organization\
• Employees and staff are overpaid; salaries are higher than a banker’s pay.
International Monetary Fund (IMF)
• Responsible in supervising exchange rate system, providing loan
programs to economies experiencing balance of payments adjustments
and review of domestic monetary policies.
• Mandated to ensure the stability of the international monetary system
including exchange rates and international payments
• Operates through “weighted voting basis”
Regional Economic Blocs
European Union (EU)
• Political economic organization of 28 member countries in Europe
• Founded in 1958, European Economic Community was formed by six
countries: Belgium, Germany, France, Italy, Luxembourg and Netherlands
EU’ Value Orientations
• Human dignity
• Freedom
• Democracy
• Equality
• Rule of Law
• Human rights
Association of Southeast Asian Nations (ASEAN)
• Founded on 1967 in Bangkok Thailand with Indonesia, Malaysia,
Philippines, Singapore and Thailand as its founding fathers
• 10-member-countries
• 3 Main Pillars of ASEAN
– ASEAN Political-Security Community
– ASEAN Economic Community
– ASEAN Socio-Cultural Community
6 Fundamental Principles of the ASEAN
1. Mutual respect for the independence, sovereignty, equality, territorial
integrity, and national identity of all nations;
2. The right of every State to lead its national existence free from external
interference, subversion or coercion
3. Non-interference in the internal affairs of one another;
4. Settlement of differences or disputes by peaceful manner;
5. Renunciation of the threat or use of force; and
6. Effective cooperation among themselves

SIZE OF ECONOMY BASED ON GDP