Chapter 6 Globalization
What is Globalization?
* Globalization- is a process involving the integration of world economies, facilitated by bodies such as NAFTA, EU, APEC, ASEAN etc.
* It is a process of involving the integration of world markets, products like Gap or Nike
* The free movement of good/services capital and labor is critical to globalization
* Increased cross border transactions and economic independence
* The purchase sale or exchange of goods or services across countries
* Mercantilism (1500-1800): encourages trade surpluses where exports of goods or services exceeds imports
* Trade Protectionism: protects domestic economies through import restrictions.
* Tariffs – tax placed on goods entering a country
* Quotas – limits the amount of imports
* Subsidies to domestic industries/firms to encourage exports
* What is the problem with mercantilism and trade protectionism?
* Trade retaliation
* Increased costs to consumers
* Limits competitiveness of domestic firms
* See handout on Tariffs
* Impact on exporting country:
* Lower production, job losses, economic decline…
* Impact on importing country:
* Less competition for domestic firms, rising sales, prices, employment, spending, government revenues…
* Increased costs to consumers, less spending on other industries, economic decline, costs of imposing + collecting tariffs, possible costs of retaliation and trade wars…
Trade Agreements and International Bodies
* GATT (1948) – 100 countries agreed to reduce tariff levels.
* WTO (1995) – took over from GATT, to manage world trade agreements.
* IMF – provides short term aid to developing countries.
* World Bank – seeks to provide long-term loans for development.
* Regional Economic Integration - Trading Blocs
* 1. Free Trade Area – removing subsidies & quotas... [continues]
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