International

Trade and
Agreements
BMGT26A

Sharon C. Matilla

Instructor
 Chapter 1

 Globalization
 Basic distinction between interregional (domestic) vs.
International Trade
• discuss “how is globalization increasing interdependence in the
international community”.
Globalization

 is the process where the economies of different countries are interconnected, and
consumers in one country can easily buy products from other countries.
 Globalization and interdependence between countries
– Globalization is a process of international integration, and its development is due to
increased exchange of products, services, etc. at global level, also with the influences of
other aspects related to cultural and social environment.

 Globalization is a complex process having social, environmental, cultural implications,

being strongly connected with economic mechanisms, and various aspects related to
markets, production, etc. which need to be discussed and considered when developing
specific marketing activities beyond the borders of a country
 KOF INDEX OF GLOBALIZATION
KOF INDEX OF GLOBALIZATION
Konjunkturforschungsstelle
of ETH Zurich, in Switzerland.
Figure 1 shows that –
except for
some Eastern
Globalization Report 2020
European countries –
most BTI countries Development of globalization between 1990 and 2018
included in the
Globalization Report
show a low degree of
international
integration. This
means that these
countries still have
considerable potential
for increasing their
economic, social, and
political globalization.

BTI – bertelsmann
Stiftung’s Transformation
Index
 Absolute globalization-induced
GDP gains
(Fig. 3): The largest
average income gains
per capita and per year
are in Japan (around
1,790 euros), Ireland
(about 1,610 euros)
and Switzerland
(approximately 1,580
euros). The large
emerging markets are
clustered at the lower
end of the scale when
measuring
globalization gains like
this.
 Relative globalization-induced
GDP gains

Nine BTI countries

are among the top
ten countries in
Figure 4. 16 out of
22 countries are
ranked in the upper
half of this ranking,
illustrating the
importance of
advancing
globalization for
these countries.
Implications for economic
policy

– It would be helpful if industrialized countries opened their markets to processed

products from developing countries without demanding the same in return (since
developing countries are generally unable to enter into competition with
industrialized countries on equal terms).
– Industrialized countries should reduce, or even discontinue, their subsidies for
agricultural products to eliminate the distortion of competition towards developing
countries depending heavily on agriculture.
– A fairer distribution of trade profits could also be achieved by expanding the
financial support of rich industrialized countries to less-developed economies to
enable these countries to afford the required infrastructure, education, and
production facilities.
GLOBALIZATION AND INTERNATIONAL
INTERDEPENDENCE

– “how is globalization increasing interdependence in the international

community”.
– About how countries depends on one another for goods and services
 Economic interdependence
 Environmental interdependence
 Political interdependence
 Socio-Cultural interdependence
The Difference between Inter
Regional and International Trade

1. Factor Immobility
2. Differences in Natural Resources
3. Geographical and Climatic Differences
4. Different Markets
5. Mobility of Goods
6. Different Currencies
7. Problem of Balance of Payments
8. Different Transport Costs
9. Different Economic Environment
10. Different Political Groups
11. Different National Policies
Conclusion:

– Therefore, the classical economists asserted on the basis of

the above arguments that international trade was
fundamentally different from domestic or inter-regional trade.
Hence, they evolved a separate theory for international trade
based on the principle of comparative cost differences
End…..

Question?