STRUCTURES OF GLOBALIZATION

Global Economy is also referred to as world economy. This term refers to international
exchange of goods and services that is expressed in monetary units of money.

It may also mean as the free movement of goods, capital, services, technology, and
information.

“global” or “international” economy is distinguished and measured separately from

national economies, while the “world economy” is simply an aggregate of the separate
country’s measurements.
The global economy is the world economy or the worldwide economy.

It is all the economy of the world – the economy of every country – which we consider
together as one giant economic system. It includes everything we all buy, sell, and own in this
planet.
Put simply; the GLOBAL ECONOMY is one giant entity.
The term GLOBAL ECONOMY has two meanings:

1. The economy of the whole planet, i.e., global GDP. GDP stands
for Gross Domestic Product.

2. The way the world is today, with countries’ economies so intertwined and
interdependent that they all seem like parts of one whole. That ‘whole’ we call the ‘global
economy.

When we say Global economy, we are talking about the interdependence of nations.
In today’s global economy, more and more businesses are selling beyond their borders.
The need for effective global marketing strategies has increased significantly.
Global marketing refers to planning, producing or creating, placing, and promoting a
company’s products or services in the global market.

Global Economy or Economic globalization refers to the increasing integration of economies

around the world, particularly through the movement of goods, services, and capital across
borders. It has grown at an increased rate due to an increase in communication and
technological advances.

Economic globalization is a spread of trade, transportation, and communication systems on

global scale in the interest promoting international commerce.

There are two types of economic globalization – protectionism and trade liberalization.
Protectionism is protecting one’s economy from foreign competition by creating trade
barriers.
Trade protectionism comes in two forms:
A quota is a government-imposed trade restriction that limits the number or monetary value of
goods that a country can import or export during a particular period. Countries use quotas in
international trade to help regulate the volume of trade between them and other countries.

Tariffs are required fees on imports or exports.

Example: a pen that’s costs $1 in one country A and in country B, it would be given $5-dollar
tariff. The pen would become $6 in country B.

Trade liberalization is the act of reducing trade barriers to make international trade easier
between countries`

Fair trade is the concern for the social, economic, and environmental well-being of marginalized small
producers. (Downie, 2007)

It aims for a more moral and equitable global economic system.

It is concerned with protection of workers and producers, establishment of more just prices,
engagement in environmentally sound practices and sustainable production, creation of relationships
between producers in the South and consumers in the North, and promotion of safe working
environment.
MARKET INTEGRATON

I. DEFINITION

Market integration exists when prices among different location or related goods follow the same
patterns over a long period of time. Similarly, when groups of prices often move proportionally to each
other and when relation is very clear among different markets it is said that markets are integrated.

Integration is taken to denote a state of affairs or a process involving attempts to combine separate
national economies into larger economic regions.

II. Free Trade

Free Trade wherein international trade (the importation and exportation) left to its
natural course without tariffs and non-tariff trade barriers such as quotas, embargoes,
sanctions or other restrictions.
Tariffs - taxes or duties to be paid on a particular class of imports or exports

Embargo - a government-instituted prevention of exports to a certain country. Official

ban on trade or other commercial activity. (The United States has imposed several long-
running embargoes on other countries including Cuba, North Korea and Iran)

Economic sanctions - commercial and financial penalties applied by one or more

countries against a targeted country, group, or individual

Free trade areas are regions in which a group of countries has signed a free trade agreement,
and invoke little or no price control in the form of tariffs or quotas between each other.
World’s major free trade areas:
1. North American Free Trade Agreement (NAFTA)

 Free trade between the three member nations, Canada, the US and Mexico
 Effective on January 1, 1994 -Although tariffs weren’t fully abolished until 2008
2. Association of Southeast Asian Nations Free Trade Area (AFTA)

 The original members were Brunei, Indonesia, Malaysia, Philippines, Singapore and
Thailand. Four countries have subsequently joined: Vietnam, Laos, Myanmar and
Cambodia
 The AFTA was signed in January 1992 in Singapore
3. Southern Common Market ( MERCOSUR)

 a Latin American single market, its full members are Argentina, Brazil, Paraguay and
Uruguay. Venezuela is a full member but has been suspended since December 1,
2016. Meanwhile, Bolivia obtained its full membership on July 7, 201
 Established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994
4. Common Market of Eastern and Southern Africa (COMESA)
  The member States of COMESA are: Burundi, the Comoros, the Democratic Republic
of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi,
Mauritius, Rwanda, Sudan, Swaziland, Seychelles, Uganda, Zambia and Zimbabwe
 Formed in December 1994
III. Brief History of Global Market Integration in the 20th Century

 The international economic integration achieved during the nineteenth century was
largely unraveled in the twentieth by two world war and the Great Depression.
 World War 1 brought the liberal economic order of the late 19th century to an abrupt
end; 1914 clearly marked a dramatic and discontinuous break in the past
 Import shares fell only marginally in Britain during the war. In France, the import share
rose from 20% before the war to 36.7 % during it; again, exports fell sharply.
 Export ratios rose in neutral economies such as in Sweden, Japan, and North America.,
where grain production expanded sharply during the war years to meet Allied demand.
 The absence of European manufactured exports on world markets stimulated the
expansion of industrial capacity, above all in the United States and Japan, but also in
countries such as India, Australia, and Latin America.
 The end of war did not imply an end to protection. Different tariff acts and restrictions
are made.
 The Great Depression was of course a major reason for the adoption of severe
protection, and not just in the periphery.
 Beginning in 1932, there were several signs that at least some countries were trying to
moderate, if not reverse, the increase in protectionism of the previous year or two.
 Post war economic reintegration was supported by several factors, both technological
and political
IV. The Role of International Financial Institutions in the Creation of Global Economy

- An international financial institution is a financial institution that has been established

by more than one country, and hence are subjects of international law.
- Its owners or shareholders are generally national governments, although other international
institutions and other organizations occasionally figure as shareholders.

- International non-profit agencies are one of the major sources of financing like regional
development banks or banks globally.

- To finance productive development projects or to promote economic development

The International Monetary Fund (IMF) and the World Bank

- IMF and World Bank were founded after World War II.
- Establishment was mainly because of peace advocacy after the war.
- Aims to help the economic stability of the world
- Both of them are basically banks, but instead of being started by individuals like regular
banks, they were started by countries.
- IMF and World Bank were designed to complement each other.
IMF’s main goal was to help countries which were troubled at that time and who could not
obtain money by any means. The World Bank, in comparison, had a more long-term
approach. Its main goals revolved around the eradication of poverty and it funded specific
projects that helped them reach their goals, especially in poor countries.
WORLD BANK

- multinational financial institution established at the end of World War II (1944) to help
provide long-term capital for the reconstruction and development of member countries.

- it provides much of the planning and financing for economic development projects
involving billions of dollars
Purpose:
- To assist in the reconstruction and development of territories of members

- To promote private foreign investment by means of guarantees or participation in loans

and other investments made by private investors

- To promote the long-range balanced growth of international trade and the

maintenance of equilibrium in balance of payments

- To conduct its operations with due regard to the effect of international investment on
business conditions in the territories of members
- To assist in bringing about a smooth transition from a wartime to a peacetime economy

- To strengthen and sustain the fundamental conditions that help to attract and retain
private investment.
INTERNATIONAL MONETARY FUND

- cooperative institution that 182 countries have voluntarily joined because they see the
advantage of consulting with one another on this forum to maintain a stable system of buying
and selling their currencies
- Its policies and activities are guided by its Charter known as the Articles of Agreement.

- IMF lends money to members having trouble meeting financial obligations to other
members, but only on the condition that they undertake economic reforms to eliminate these
difficulties for their own good and that of the entire membership.
Purpose:

- To promote international monetary cooperation through a permanent institution that

provides the machinery for consultation and collaboration on international monetary
problems
- To facilitate the expansion and balanced growth of international trade and to
contribute, thereby, to the promotion and maintenance of high levels of employment and
real income and to the development of the productive resources of all members as primary
objectives of economic policy
 - To promote exchange stability, to maintain orderly exchange arrangements among
members and to avoid competitive exchange depreciation

- To assist in the establishment of a multilateral system of payments in respect of current

transactions between members and in the elimination of foreign exchange restrictions which
hamper the growth of world trade

- To give confidence to members by making the general resources of the Fund

temporarily available to them under adequate safeguards, thus providing them with
opportunity to correct maladjustment in their balance of payments without resorting to
measures destructive to national or international prosperity

- In accordance with the above, to shorten the duration and lessen the degree of
disequilibrium in the international balances of payments of members.
How can IFIs help in Economic Globalization

- They focus on long-term investment projects, institution-building, and on social,

environmental, and poverty issues
- strengthen economic governance

- safeguard the stability and integrity of the international financial system as a global
public good

- encouraging true national ownership of reforms by streamlining the conditions

attached to IMF-supported programs.

- recognizes and values the role of civil society organizations - ensuring the stability of
the international financial system

- helping individual countries take advantage of the investment opportunities offered

by international capital markets, while reducing their vulnerability to adverse shocks or
changes in investor sentiment.
- Trade liberalization
- Reducing debt burden
Global Corporations

- The increase in international trade has both created and been supported by
international regulatory groups.

- There is not a single country that is completely independent. All are dependent to
some degree on international trade for their own prosperity

- International trade agreements often benefit private industries the most. Companies
can produce their goods and services across many different countries.
- These companies that extend beyond the borders of one country are called
multinational or transnational corporations. They are also referred to as global corporations.
 - They intentionally surpass national borders and take advantage of opportunities in
different countries to manufacture, distribute, market, and sell their products.

- Some global corporations are ubiquitous, like Mcdo or Coca-Cola, and yet, they still
market themselves as American companies.

- Global corporations often locate their factories in countries which can provide the
cheapest labor in order to save up for expenses in the marketing of a product.

- The changes a country experiences from international trade are not only economic.
Many of the cultural changes are as important and sometime, even more obvious than the
economic changes the nation can experience.
- Cultural practices and expressions are also passed between nations, spreading from
group to group. This is called diffusion.

- International trade and global corporations, along with the internet and more global
processes, contribute to globalization because people and corporations bring their own
beliefs, their traditions, and their money with them when they interact with other countries.