Republic of the Philippines

SORSOGON STATE UNIVERSITY

College of Engineering Technology

Sorsogon City Campus

Magsaysay St., Sorsogon City

Email Add.: ssc@sorsu.edu.ph

GE-4 The Contemporary World

GROUP2 REVIEWER IN THE CONTEMPORARY WORLD

Market Integration and Global Interstate System

Submitted by:
Buragay, Kem B.

Destajo, Chelsea Mae A.

Desunia, Mark Ian D.

Desuyo, Leo

Detablan, Divine Adelyne V.

Dioquino, Karl Andrei Y.

Dulpina, Shiela D.

Palmenco, Leonelle

BET-DRAFT 1C

Submitted to:

Mr. Christian De Lumen

MARCH 15,2024
 MARKET INTEGRATION

Market integration is the merging of different markets selling the same product

into one, causing prices to become similar across these markets. It's a more efficient

way of doing business.

IMPORTANCE OF MARKET INTEGRATION TO GLOBALIZATION

Market integration is vital for globalization because it equalizes prices globally,

boosts economy, and allows businesses to operate worldwide equally.

 Financial Inclusion:

- It increases access to global financial services, reducing poverty and

inequality.

 Economic Growth:

- It boosts economic efficiency and growth by harmonizing markets.

 Cultural Exchange:

- It enhances interaction between different countries, promoting cultural

exchange.

 Diverse Investment Opportunities:

- It offers a variety of investment options due to unified returns.

 Access to Global Markets:

- It allows businesses to operate globally on equal terms.

 Competition:

- It increases competition, providing consumers with more choices and

better prices.
 HISTORY OF GLOBAL MARKET INTEGRATION

As early as 19th century global market integration became a reality because of

the advance development of technology. From the development of steam engines

down to the development of railroads and ports which paved way to faster world

transport network.

Agricultural Revolution

The first big economic change was Agricultural Revolution. When people learned

how to domesticate plants and animals, they realized that it was much more

productive than hunter-gatherer societies. This became the new agricultural

economy. Farming helped societies build surpluses. This led to major developments

like permanent settlements, trade networks, and population growth.

Industrial Revolution (1800s)

With the rise of industry came new economic tools, like steam engines,

manufacturing and mass production. Factories popped up and changed how work

functioned.

People began working as wage laborers and then becoming more specialized in

their skills. Productivity went up, standards of living rose, and people had access to

a wider variety of goods due to mass production.

There were economic casualties, especially the workers in factories who worked

in dangerous conditions for low wages. It resulted a greater economic inequality

because 19th century industrialists accumulated greater wealth. This is the

beginning of labor unions.

These organizations of workers sought to improve wages and working conditions

through collective action, strikes, and negotiations. Inspired by Marxist principles,

labor unions gave way for minimum wage laws, reasonable working hours, and

regulations to protect the safety of workers.

 Capitalism is one of the two competing economic models the other one is

Socialism. It sprung up around the time of Industrial Revolution, as economic capital

became more and more important to the production of goods.

Capitalism

 is a system in which all-natural resources and means of production are

privately owned.

 It emphasized profit maximization and competition as the main drivers of

efficiency.

 This means that when one owns business, he needs to outperform his

competitors if he is going to succeed. He is incentivized to be more

efficient by improving quality of one’s product and reducing its prices.

From the idea of Adam Smith in the 1770s, that if one leaves a capitalist

economy alone, consumers will regulate things themselves by selecting

goods and services that provide the best value.

In a socialist system, the means of production are under collective ownership. It

rejects capitalist’s private property and hand-off approaches. Instead, in socialism,

property is owned by the government and allocated to all citizens, not only those with

the money to afford it.

Socialism

 emphasizes collective goals, expecting everyone to work for the common good

and placing a higher value on meeting everyone’s basic needs than on individual

profit.

 When Karl Marx first wrote about socialism, he viewed it as a stepping stone

toward communism, a political and economic system in which all members of a

society are socially equal. In practice, this has not played out in countries that

have modeled their economies on socialism like Cuba, North Korea, China and

the USSR.
 The Information Revolution Technology has reduced the role of human labor and

shifted it from a manufacturing-based economy to one that is based on service work

and the production of ideas rather than goods. This has had a lot of residual effects on

our economy. Computers and other technologies are beginning to replace many jobs

because of automation or outsourcing jobs offshore.

Agricultural jobs have fallen drastically over the last century even the manufacturing

jobs also declined over the years. Most the economies shifted to tertiary sector or the

service industry. The service industry is a big and diverse group as defined mainly by

what it produces rather than what kinds of jobs it includes.

The primary labor market includes jobs that provide many benefits to workers:

 like high incomes

 job security

 health insurance

 retirement packages

Secondary labor market jobs provide fewer benefits and include

 lower-skilled jobs

 lower-level service sectors jobs

They tend to pay less, have more unpredictable schedules, and typically do not offer

benefits like health insurance. They also tend to have less job security. Part of the

contemporary economic and political landscape is corporation.

Corporations are defined as organizations that exist as legal entities and have

liabilities that are separate from its members. They are their own thing.

Corporations are operating across national boundaries which means that the

future of most countries’ economies will play out on a global scale

 BENEFITS OF MARKET INTEGRATION IN ECONOMY

Market integration plays several crucial roles in the global economy. It facilitates

free trade, promotes competition, and enables economies of scale, which can lead to

increased production and efficiency.

One of the primary roles of market integration is the facilitation of free trade. By

minimizing trade barriers, market integration promotes the free flow of goods and

services across borders, making it easier for businesses to access wider markets.

Ultimately, this encourages economic growth and prosperity. Furthermore, market

integration also leads to improved efficiency and increased competition.

Businesses that operate in interconnected marketplaces have to contend with

competition from both domestic and foreign enterprises. In the end, this rivalry helps

customers by spurring innovation and encouraging businesses to enhance their goods

and services. Moreover, economies of scale are enabled by market integration. Access

to wider markets enables businesses to create items in higher volumes, hence reducing

the cost of production per unit.

There are numerous advantages to market integration in the global economy.

 Access to Bigger Markets:

- Companies can reach a wider range of consumers by offering their

goods and services, which may boost sales.

 Increased Variety of Goods and Services:

- Access to a more extensive range of goods and services can raise

consumers' standards of life.

 Increasing Competition:

- Businesses now have to contend with global corporations, which

can spur innovation, raise the caliber of their output, and bring

down costs.
 Enhanced Efficiency:

- As businesses aim to compete in bigger markets, market

integration may result in higher output and efficiency.

 GLOBALIZATION OF MARKETS AND GLOBALIZATION OF PRODUCTION

Globalization of Markets

 refers to the merging of Historically distinct and separate national

markets into one huge global market place.

 It no longer makes sense to talk about the “German Market” or the

“American Market”. Instead, there is the “Global Market”.

 In many markets today, the tastes and preferences of consumers in

different nations are converging upon some global norm.

 Examples:

 Coca Cola

 Starbucks

 Sony PlayStation

 McDonald’s hamburger

 Benefits of Globalization of Markets:

 Reduces marketing costs

 New market opportunities

 Levels income stream

Globalization of Production

 Refers to the sourcing of goods and services from locations around

the globe.

 Takes advantage of national differences in the cost and quality of

factors and production like:

 Land
  Labor

 Capital

 Companies can:

 Lower their overall cost structure.

 Improve the quality of functionality of their product

offering.

 Examples:

 Building a car

 Boeing’s 777 and 787 Dreamliner’ commercial

aircrafts

 Komatsu’s construction and mining equipment

 Imaging partners online (IPO) radiology services

 Benefits of Globalization of Production:

 Access low-cost labor

 Acquire technical expertise

 Obtain production inputs

 THE GLOBAL INTERSTATE SYSTEM

The world is composed of many states having different forms of government. It

has been one of the major subjects of scholars of political disciplines because it is

viewed as the institution that sets policies for the country. The study of international

relations is becoming more imperative since it is an attempt to explain behavior that

occurs across the boundaries of states, the broader relationships of which such

behavior is a part, and the institutions (private, state, nongovernmental, and

intergovernmental) that oversee those interactions. This lesson will begin with a short

narration of some events that occurred 400 years ago and the challenges that most

governments face amid globalization. It will also tackle the different institutions that

govern international relations in order to facilitate connections among nation-states.

THE INTERSTATE SYSTEM

The origins of the present-day concept of Sovereignty can be traced back to the

Treaty of Westphalia, which was a set of agreements signed in 1648 to end the thirty

years’ war between the major continental powers of Europe. The Westphalian system

provided stability for the nations of Europe, until it faced its major challenge by

Napoleon Bonaparte. The latter believed in spreading the principles of the French

Revolution- liberty, equality and fraternity to the rest of Europe. Despite the challenge of

Napoleon to the Westphalian system and the eventual collapse of the Concert of

Europe after World War I, present-day international system has traces of this history.

THE EFFECTS OF GLOBALIZATION TO GOVERNMENTS

One of the key aspects of state sovereignty is the government. It is a group of

people who have the ultimate authority to act on behalf of a state. Each state has its
own right to self- determination and that other country should not intervene in the affairs

of that state unless there are extraordinary reasons to do so. Globalization has, in a way

reshaped the role and functions of nation-states as governing bodies in their particular

territories.

 Firstly, globalization is seen to impose a forced choice upon nation-states.

Either they Conform to the neo-liberal ideas and free-market principles of

deregulation, privatization, and free trade or run the risk of being left behind in

terms of development. Of course, nation-states, in this contemporary age, are

forced to submit themselves to the demands of globally accepted free-market

principles.

 Secondly, is the establishment of economic and political integrations. One

good example is the European Union (EU) and the North America Free Trade

Agreement (NAFTA). EU has a single currency and monetary system, parliament

with legislative powers, with common citizens’ rights to live, work, vote and run

for office. The statehood of the members is not dissolved, what has changed is

only how the nation- states function, in terms of economy and politics, as part of

a whole.

 Thirdly, is the establishment of international laws and principles. This is

observable in the establishment of the UN that operates as a forum for nation-

states to air their differences and try to resolve them.

 Fourthly, is the rise of transnational activism (TNA). Such happens when

activist groups of nation-states connect with their counterparts in other states.

For example, an advocacy-based organization in the Philippines may connect

itself with and get support from other human rights groups in Europe to pressure

the Philippine government to realign its stance and actions in upholding human

rights.

INSTITUTIONS THAT GOVERN INTERNATIONAL RELATIONS

 There are several international organizations that governments of countries

around the world and individuals participate in. In order to facilitate connections among

nation-states, intergovernmental organizations (IGOs) were established. Their aim is to

foster strong economic, political, cultural, educational, and technical intergovernmental

relationships. There are also nongovernmental organizations promoting social and

economic growth. Let us look at them one by one.

 Peace Treaties and Military Alliances: The United Nations (UN) and North

Atlantic Treaty Organization (NATO)

The global politics entails relationship of countries and different governments and

non- governmental organizations, The United Nations (UN) is one of the leading political

organizations in the world where nation-states meet and deliberate. However, it remains

as an independent actor in global politics. Generally, it functions in four areas: military

issues, economic issues, environmental issues, and human protection. It is made up of

close to 200 countries from around the world, 193 member states to be exact. (United

Nations, 2011).

 Global Economic Associations: The World Trade Organization (WTO) and

North America Free Trade Agreement (NAFTA).

The next group is an economic association-WTO which was created with the

goal of increasing free trade. Countries, therefore, can buy and sell goods from one

another without placing takes on imports or tariffs. In addition, tariffs are used to protect

businesses and companies inside their country. Another famous economic organization

is NAFTA. This is an economic treaty between the United States, Canada, and Mexico

in which the three countries trade freely without taxing each other. NAFTA is not without

critics either. Some American autoworkers protested against NAFTA as several car

companies moved their factories to Mexico in search for cheaper labor. NAFTA, like

WTO, represents the challenge in America of keeping manufacturing factories.

 Association of Southeast Asian Nations (ASEAN)

 Established in 1967, now has 10 member states. Its aims are to accelerate

economic growth, social progress and cultural development in the region; promote

regional progression; advance peace and sustainability; promote active and beneficial

cooperation and mutual assistance on matters of common interest in the economic,

technical, cultural, administrative and scientific fields.

 European Union (EU)

An IGO with 28- state members was established in 1993. Its goals are to

promote peace, its values, and well-being of its citizens; offer freedom, security and

justice without internal borders; uphold sustainable development; combat social

exclusion and discrimination; promote scientific and technological progress; enhance

economic, social and territorial cohesion among member countries; respect cultural and

linguistic diversity; and establish an economic and monetary union.

 Non-Governmental Organizations (NGOs)

Another example of an international organization that was developed out of war

is the Red Cross (Red Crescent in Muslim countries). NGOs are not tied to any country.

This allows them to operate freely throughout the world. They provide emergency relief

such as food, water, and medical supplies for those whose homes or towns have been

destroyed by disaster or war. They also monitor the treatment of prisoner of wars and

go to conflicts to make sure that no war crimes are taking place. In fact, the Red Cross

began as an organization to help those who were wounded during wars.

 GLOBAL CORPORATION

A global corporation, also known as a global company, is coined from the base

term glober, which means all around the world. It makes sense to assume that a global

company is a Company that does business all over the world: Global companies

conduct some form of business in more than one part of the world. To be considered

international or global, a company generally must have some sort of presence in two or

more countries. Exactly what constitutes a presence, however, is subject to debate.

While merely purchasing a product from another country probably won’t make a

company global, visiting that country and conducting business the low a company to call

impel “global

The Increase in international trade has both created and been supported by

International regulatory groups, like WTO, and transnational trade agreements, like

NAFTA There is not a single country that is completely indecency. All are dependent to

some degree. On international trade for their own prosperity. Without international trade,

there would be no need for international regulatory groups.

Without the international regulatory groups, international trade at the current

massive scale would be impractical. The trade regulatory groups and agreements

regulate the flow of goods and services between countries. They reduce tariffs, which

are taxes on imports, and make customs procedures easier. This make trading across

national borders much more feasible

The 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 borders of one country are called multinational or

transnational corporations (MNCs or TNCs). They are also referred to as global

corporations. MNC has headquartered relational Identity as belonging to a particular

home country where they are

A transnational company Is borderless, Its base, home or headquarters. Any

particular country as transnational corporations (TNCSI are a type of multinational

importation Global corporations intentionally surpass national borders and take

advantage of opportunities in different countries to manufacture, distribute, market, and

sell their products.

Global corporations often locate their factaries in countries which can provide the

cheapest labor in order to save up for expenses in the making of a predlact. As a result

developing nations will provide incentives, like tax free trade zones or cheap labor. In

the end, these incentives often hurt the working population of the developing nation.

The global corporations also influence politics and allow workers to be exploited.

Positive effects of global corporations include:

 better allocation of resources,

 lower prices for products,

 more employment worldwide,

 higher product output.

The changes a country experiences from international trade are not only economic.

Many of the cultural changes are as important and sometimes, 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. Nowadays, mass

media and the internet allow the transfer of ideas almost instantaneously. This is most

commonly seen in the transmission of scientific knowledge and spreading of the North

American culture, which dominates the Internet. 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
 THE BRETTON WOODS AGREEMENT

The objectives of the 1944 Bretton Woods Conference were to create a stable foreign

exchange market, stop currency devaluation, and encourage global economic expansion. The

World Bank and the International Monetary Fund (IMF), which were established as a result of

the accord, are still essential for transnational currency trade. The goal of the Bretton Woods

Conference, chaired by John Maynard Keynes, was to create a strong worldwide central bank

and a new international reserve currency. White's concept was ultimately adopted.

 The Bretton Woods Agreement established a collective international currency exchange

regime from the mid-1940s to the early 1970s.

 The Bretton Woods System established a currency peg to the U.S. dollar, which was then

pegged to the price of gold.

 The IMF and World Bank were established as a result of the Bretton Woods System,

which failed in the 1970s and had a huge impact on international currency exchange and

trade.

The goals of the 1944 Bretton Woods Agreement, which was negotiated by representatives

from 44 nations, were to foster global economic expansion, prohibit competitive currency

devaluations, and establish an effective foreign exchange system. The World Bank and the

International Monetary Fund (IMF), which were established as a result of the accord, have

continued to be important foundations supporting currency trade between nations. Between

the middle of the 1940s until the beginning of the 1970s, the Bretton Woods System mandated

that all currencies be indexed to the value of gold.

 The IMF and World Bank were disbanded as a result of the collapse of the Bretton Woods

System in the 1970s, although the system's creation had a long-lasting impact on global trade

and currency exchange. The IMF, a key player in the Bretton Woods System, has been

instrumental in regulating and promoting international trade, managing currency exchange

rates, and aiding nations globally.

Five Key Elements of Bretton Woods Systems:

1. The expression of currency in terms of gold or gold value to establish a par value

(Boughton, 2007)

2. The official monetary authority in each country (a central bank or its equivalent) would

agree to exchange its own currency for those of other countries at the established

exchange rates, plus or minus a one-percent margin

3. The establishment of an overseer for these exchange rates; thus the International

Monetary Fund (IMF) was founded

4. Eliminating restrictions on the currencies of member. states in the international trade

5. The US dollar became the global currency

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