Globalization of Economic Relations

The Globalization of Economic
Relation
 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.

INTERCONNECTED Dimensions of
economic globalization
 The Globalization of trade of goods and services – When a country exports more than It
imports, it runs a trade surplus. When a country imports more than it exports, it runs a trade
deficit. The large trade deficits in the middle and late1980s sparked political controversy
that still persist today.
 Industries in the U.S. have petitioned governments for protection and societies have
debated the pros and cons of free and open trade. For last century and half, the principal
argument against protection has been the theory of Comparative advantage, the advantage in
the production of goods enjoyed by one country over another. That can produced at
lower cost in terms of other goods that could be in other country.

The Globalization of financial and
capital markets
 A country enjoys an absolute advantage over another country in the production of

a good if it uses a fewer resources to produce that good than other country does.
Suppose country A and country B produce coffee, but A’s climate is more suited to
coffee and its labor is more productive. Country A. will produce more coffee per
acre than country B. uses less labor in growing it and bringing it to market Country
A. enjoys an absolute advantage over country B. in the production of coffee.
 Trade Barriers also called obstacles to trade, Three most common are Tariffs ,
Exports Subsides, And Quotas. All forms of protection shielding some sector of the
economy from foreign competition.
The Globalization of technology an d
communication
 Capital is not the only factor of production required to produce output labor
is equally important. To be productive, the workforce must be healthy.
Health is not the only issues but basic literacy as well as specialized
training in farm for example , can yield high returns to both individual
worker and the economy Education has grown become the largest category
of government expenditure in many developing nations. In part of
technology transfer and communication have become part of manpower
training in most agricultural countries this is so because of the belief that
human resources are the ultimate determinant of economic advance.
The globalization of
production
 Production – is the process which inputs are combined and transformed

into output. Production technology relates inputs to output . Specific
quantities of inputs are needed to produce any given services or good .
 Most outputs can be produced by a number of different techniques. In

choosing the most appropriate technology. For a firm, an economy with a
plentiful supply of inexpensive labor but not much capital, the optimal
method of production will involve labor – techniques.
Distinction of Globalization
from internationalization
 Dicken - Distinguished economic globalization from internalization by

stating that the former is functional integration between
internationally dispersed activities while the latter is about the
extension of economic activities of nation states across borders. Hence
economic globalization is more on a Qualitative transformation than
just a Quantitative change.
The world trade of
organization and gatt
 The 50th Year of General Agreement on Tariff and Trade (GATT)
 Gatt is a Treaty among 123 nations whose government agreed, at least

in principle to promote trade among members. GATT initiative , and
GATT negotiators did succeed in liberalizing world merchandise trade.
 GATT itself had no enforcement power (the losing party in a dispute

was entitle to ignored the ruling) and the process of dealing with
disputes sometimes stretched on for years. GATT as the general
Agreements to talk and talk”
GENERAL AGREEMENT AND
TARIFF AND TRADE (GATT)
• GATT was based on three principles: Equal , non-discrimatory trade

treatment for all member nations
• The reduction of tariffs by multilateral negotiation; and
• The elimination of import quotas.
 Basically, GATT provided a forum for the multilateral negotiation of

reduced trade barriers.
preferential trade
agreements
 In addition to multilateral initiative of GATT, countries in each of the world’s

regions are seeking of lower barriers to trade within their regions. Historically
when countries entered into preference agreements, they notified GATT between
1947 and 1992, there were 85 agreements have been added since 1992.
 Free Trade Areas (FTA) - is formed when two or more countries agree to abolish
all internal barriers to trade among themselves. Countries that belong to a free
trade area can do and maintain independent trade policies with Respect to non-
FTA countries. A system of certificate of origin is used to avoid trade diversion on
favor of low-tariff members.
preferential trade
agreements
 Custom Union - Represents the logical evolution of a free trade area. In
addition to eliminating internal barriers to trade members of a customs
union establish common external barriers.
 Common Market – is the next step in the spectrum of economic integration.

In addition to the removal of internal barriers to trade and the
establishment of common external barriers, the common market
allows for free movements of factors of production, including labor,
capital and information.
preferential trade
agreements
 Gulf Cooperation Council – The key regional is the gulf cooperation

Council (GCC) which was established in 1981 in Riyadh, in May 1981 by
Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab
Emirates. The purpose of the GCC is to achieve unity among its members
based on their common objective and their similar political and cultural
identities , which are rooted in Islamic beliefs.
 The GCC provides a means of realizing coordination, integration , and

cooperation in all economic , social and cultural affairs.
Organization of the petroleum
exporting countries (OPBEC)
 Organization of the Petroleum Exporting Countries - is an
Intergovernmental organization of oil – Exporting
developing nations that coordinates and unifies the
petroleum policies of its Member Countries OPEC seeks to
ensure the stabilization of oil prices in the international oil
markets with a view to eliminating harmful and
unnecessary fluctuations. Equally important is OPEC’s role
in securing an efficient , economic and regular supply of
petroleum to consuming nations and a fair return of capital
to those investing in the petroleum industry.
Organization of the petroleum
exporting countries (OPBEC)
 Some conversion subjects should be avoided, as they are considered an

invasion of privacy.
1. Avoid bringing up subjects of business before getting to know your Arab

host. This is considered rude.
2. It is taboo to ask question or make comments concerning a man’s wife or
female children.
3. Avoid pursuing the subjects of politics or religion.
4. Avoid any discussion of Israel.
Developing countries and
international trade
 The United Nations Conference on Trade and Development

(UNCTAD) came into being in 1964, that was the first major
change in the state of affairs of developing nations into
international trade, most of developing countries did not
manage to integrate into the post – world war II trading
system successfully because they followed an inward – looking
import substitution industrialization strategy. The Aim was to
promote trade and cooperation between the developing
countries and the developed nations
SOME KEY TRADE FACTS:
A trade deficit occurs when imports exceed exports. the united

states has a trade deficit in goods in 2012 US imports of goods
exceeded US exports gods by $735 billion.
Trade surplus occurs when exports exceed imports. the united

states has a trade surplus in services such as air transportation
services and financial services. in 2012 US exports of services
exceeds US imports of services by $196 billion.
Canada is the united states most important trading partner

quantitatively . in 2012 about 20% of US exported goods were sold
to Canadian, who in turn provided 15% of imported US goods.
The united states has sizeable trade deficit with china. in 2012 it
was $315 billion and in 2017 it was $375 billion.
SOME KEY TRADE FACTS:
China has become a major international trader, with an

estimated $2.05 trillion of exports in 2017. other Asian economies
including S. Korea, Taiwan, and Singapore are also active in
international trade. their combined exports exceed those of
France, UK, and Italy
International trade links world economies. Through trade, changes
in economic conditions in one place on the globe can quickly affect
other places.
International trade is often at the center of debates over economic

policy. Both within the united states and internationally.
Trade Barriers and Exports Subsidies
Tariffs are excise taxes or duties on the dollar values or

physical quantities of imported goods
A protected tariff is implemented to shield domestic

producers from foreign competition.
Trade Barriers and Exports Subsidies
An import quota is a limit on the quantities or total

level values of specific items that are imported in some
periods
Import quota are more effective than tariffs in

impending international trade
McDonaldization of Society
Our culture is becoming

“McDonaldized” an awkward
way of saying that many
aspects of life are modeled on
the famous restaurant chain.
Basic Organizational Principles
EFFICIENCY - Value virtually without criticism in our society. We

tend to think that anything done quickly is, for that reason alone,
good.
CALCULABILITY – Not just our environment but our life

experiences, are now more deliberately planned than ever
before.
UNIFORMITY AND PREDICTABALITY – Uniformity results from a

highly rational system that specifies every action and leaves
nothing to chance.
CONTROL THROUGH AUTOMATION – To minimize the
unpredictable human element, McDonald’s has automated their
equipment to cook food at a fixed temperature for set lengths of
time.

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The Globalization of Economic

 ECONOMIC GLOBALIZATION - is a historical process, The

that still persist today.

lower cost in terms of other goods that could be in other country.

 A country enjoys an absolute advantage over another country in the production of

 Production – is the process which inputs are combined and transformed

 Most outputs can be produced by a number of different techniques. In

 Dicken - Distinguished economic globalization from internalization by

 The 50th Year of General Agreement on Tariff and Trade (GATT)

 Gatt is a Treaty among 123 nations whose government agreed, at least

 GATT itself had no enforcement power (the losing party in a dispute

• GATT was based on three principles: Equal , non-discrimatory trade

• The reduction of tariffs by multilateral negotiation; and

• The elimination of import quotas.

 Basically, GATT provided a forum for the multilateral negotiation of

 In addition to multilateral initiative of GATT, countries in each of the world’s

 Common Market – is the next step in the spectrum of economic integration.

 Gulf Cooperation Council – The key regional is the gulf cooperation

 The GCC provides a means of realizing coordination, integration , and

 Some conversion subjects should be avoided, as they are considered an

1. Avoid bringing up subjects of business before getting to know your Arab

 The United Nations Conference on Trade and Development

A trade deficit occurs when imports exceed exports. the united

Trade surplus occurs when exports exceed imports. the united

Canada is the united states most important trading partner

China has become a major international trader, with an

International trade is often at the center of debates over economic

Tariffs are excise taxes or duties on the dollar values or

A protected tariff is implemented to shield domestic

An import quota is a limit on the quantities or total

Import quota are more effective than tariffs in

Our culture is becoming

EFFICIENCY - Value virtually without criticism in our society. We

CALCULABILITY – Not just our environment but our life

UNIFORMITY AND PREDICTABALITY – Uniformity results from a

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