Lecture 2

1.3) Forces driving globalization

1.4) Globalization debate
1.5) Current issues: Globalization of the world economy

1-1
 Forces Driving Globalization
1. Declining trade and investment barriers
◦ The General Agreement on Tariffs and Trade (GATT)
◦ World Trade Organization (WTO)
◦ The Role of World Bank (WB) and International Monetary
Fund (IMF)
2. Technological Innovation
◦ Email and videoconferencing
◦ Internet and World Wide Web
◦ Company intranets and extranet
◦ Advancement in transportation technology (Air, Sea and Land)

1-2
 Declining Trade and Investment
Barriers
The decline in trade and investment
barriers refers to the reduction or
elimination of obstacles that hinder
the flow of goods, services, and capital
across international borders.
 Technological Innovation
▪ Innovations in information technology and transportation
methods are making it easier, faster, and less costly to move data,
goods and equipment around the world.
▪E-business (e-commerce) – the use of computer to purchase; is
making it easier for companies to make their products abroad.
▪ Lower transportation costs make a geographically dispersed
production system more economical and allow firms to better
respond to international customer demands
▪Lower information processing and communication costs - firms
can create and manage globally dispersed production systems
 Declining Trade and Investment
Barriers
➢Trade Liberalization: After world II countries began to increase policies
aimed at reducing tariffs, quotas, and other trade barriers through
negotiations in bilateral, regional, and multilateral forums. Examples
include the General Agreement on Tariffs and Trade (GATT) and its
successor, the World Trade Organization (WTO), which have played
central roles in promoting free trade.
➢Regional Trade Agreements: Many countries have entered into
regional trade agreements (RTAs) or free trade agreements (FTAs) to
liberalize trade within specific geographic regions. Examples include
NAFTA (North American Free Trade Agreement), the European Union
(EU), ASEAN (Association of Southeast Asian Nations), and Mercosur
(Southern Common Market).
 Declining Trade and Investment
Barriers
➢Investment Treaties: Bilateral investment treaties (BITs) and
multilateral investment agreements aim to protect foreign investors
and promote investment flows by providing assurances against
expropriation, ensuring fair and equitable treatment, and facilitating
dispute resolution.
➢Technological Advancements: Innovations in transportation,
communication, and information technology have reduced the costs
and barriers associated with international trade and investment. E-
commerce, digital payments, and supply chain management systems
have made it easier for businesses to engage in cross-border
transactions.

1-6
 The Globalization Debate
Debates about Job and Wages
Critics worry that globalization will cause
▪Job losses in developed nations
▪Lower wages in developed nations
▪Exploits workers in developing nations.

1-7
 The Globalization Debate
Debates about Job and Wages
Supporters believe that globalization will
▪Increases wealth and efficiency in all nations
▪Generates labor market flexibility in developed nations
▪Advances the economies of developing nations

1-8
 The Globalization Debate
Debate About Income Inequality
Critics worry that globalization will cause
▪Inequality Within Nations
▪Inequality Between Nations
▪Global Inequality

1-9
 The Globalization Debate
Debate About Culture, Sovereignty, and the
Environment
Disadvantages of globalization
▪Homogenizes our world and destroys our rich diversity
of cultures
▪Empowers supranational institutions at the expense of
national governments
▪Western firms exploit lax environmental laws abroad

1-10
 The Globalization Debate
Debate About Culture, Sovereignty, and the
Environment
Advantages of globalization
▪Allows us to profit from our differing circumstances and
skills
▪Globalization spreads democracy worldwide
▪Most international firms today support reasonable
environmental laws

1-11
Q&A

1-12