Lesson 2: Market Integration 3.

Differences in the prices in the

integrated market should be equal
if they are well integrated.
a. International Financial
Institutions A. International Financial
b. Attributes of Global Corporation Institutions
1. Explain the role of international financial • In the International Financial
institutions Institutions, with the Bretton Woods
2. Describe the global market integration Agreement currencies were pegged to
3. Identify the characteristics of the global the price of gold, and the US dollar was
corporation seen as a reserve currency linked to the
gold standard.
Market Integration
 Market integration is a term that is • According to the study of Moffatt, 2020
used to identify a phenomenon in under the Bretton Woods System the
which markets of goods and services central banks of countries other than
that are somehow related to one the United States were given the task of
another being to experience similar maintaining fixed exchange rates
patterns of increase or decrease in between their currencies and dollar
which they did by intervening in foreign
terms of the prices of those products.
exchange markets
 The term can also refer to a situation in
which the prices of related goods and
• In terms of global trade, a key was the
services sold in a defined geographical
idea of the “ unconditional most -
location also begin to move in some
favored nation ” which “ required
sort of similar pattern to one another.
governments to offer the same trade
 (Tatum, 2020 ) At times, the integration
concessions [reductions in trade
may be intentional, with a government
barriers, non-discrimination against a
implementing certain strategies as a
nation’s products] to all” (Frieden 2006:
way to control the direction of the
288).
economy. At other times, the
integration of the markets may be due
• In terms of the monetary order, it was
to factors such as shifts in supply and
the IMF that took center stage. The goal
demand that have a spillover effect on
was to provide security, as well as
several markets.
flexibility, to the monetary order.
EFFECT of Integration on Market
• In terms of global investment, a key
Development
role was envisioned for the World Bank,
but massive US aid through the
1. Market integration provides an
Marshall Plan, and rapid European post-
opportunity to expand market
war recovery, made its work in that
coverage by selling local products in
period of much less significance than
the global market.
had been anticipated. A key
2. Market integration help to reduce
development in terms of investment
market failure.
involved MNCs, especially American-
based firms in fields like automobiles
 and computers, constructing their own • While GATT focused on tariff reduction,
plants and/or investing in indigenous the WTO has come to focus more on
companies in other countries. non-tariff-related barriers to trade.

General Agreement on Tariffs and Trade International Monetary Fund (IMF)

(GATT) • The goal of the IMF is macroeconomic
• Focused on trade in goods, the WTO stability for both member nations and,
also took on responsibility for the more generally, the global economy
increasingly important trade in services. (Cardim, de Carvalho 2007: 658-6 3)
While GATT was simply a forum for the
meeting of representatives of countries, World Bank
the WTO IS an Independent • The World Bank (officially the
organization. International Bank for Reconstruction
and Development [1BRD]), a specialized
Trade-Related Aspects of Intellectual Property agency of the UN, is the most important
Rights (TRIPS) (Correa 2000) element of the World Bank Group
• Was negotiated through the WTO, (WBG) (Gilbert and Vines 2000; Bradlow
which involves intangible ideas, 2007:1262 - 7).
knowledge, and expressions that • The IBRD was established in 1944 at
require their users to be approved by Bretton Woods and began operations in
their owner. Involved here is a wide 1946. Membership is open to all
range of intellectual property, such as member states of the IMF and as of this
movies, books, music recordings, and writing, it includes 184 nations. It
computer software, which exists, or provides funds to government-
whose value lies, largely in the realm of sponsored or - guaranteed programs in
ideas. so-called Part Il countries (member
states that are middle-income or
Trade-Related Investment Measures (TRIMs) creditworthy poorer nations).
• are a range of operating or
performance measures that host- B. ATTRIBUTES OF GLOBAL
country governments impose on foreign CORPORATION
firms to keep them from having a
distorting effect on trade in goods and • In the world of finance and investing, a
services" (Grimwade,2007:1178). global corporation is one that has
significant investments and facilities in
World Trade Organization (WTO) multiple countries and lacks a dominant
• The WTO is a multilateral organization headquarters.
headquartered in Geneva, Switzerland, • Global Corporations are governed by
with, as of 2008, 152 member nations the laws of the country where they are
(Krueger 2000; Trachtman, 2007: 1308- incorporated.
1 5). • A global business connects its talent,
• Its focus on trade places it at the heart resources and opportunities across
of economic globalization and has made political boundaries. Because a global
it a magnet for those opposed either to corporation is more invested in its
the broader process of trade overseas locations, it can be more
liberalization and promotion or to some sensitive to local opportunities and also
specific aspect of WTO operations. more vulnerable to threats.
• Global companies or MNCs operate on
a global scale which means they have
huge assets in almost all countries in
which they operate. Their turnovers can
also be incomprehensibly large. Also,
these corporations have unity of
control. The management of the offices
in other countries is controlled by one
head office located in the home
country.
• And in order to achieve substantial
growth, they have at its disposal huge
amounts of wealth and capital-intensive
technology. This allows them to use the
best technology available for
production and marketing to boost
their products and their company.
Furthermore, these companies employ
only the best managers, those who are
capable of handling large amounts of
funds, using advanced technology,
managing workers, and running a huge
business entity
• One of the most effective survival
strategies of global corporations is
spending a huge amount of money on
marketing, advertising, and promotional
activities. They target an international
audience, so effective marketing
becomes necessary