core international interdependence module...3) we can invest internationally easily and capital flow...

1

Core

Module

20

1. What are the factors that promote

economic globalization?

2. Who will benefit from economic

globalization? What should be done so

that more people may benefit from

economic globalization?

International Interdependence Foundation part: Consequences of

Economic Globalization

2

1. What are the products or services provided by international corporations/multi-national

companies that we will come into contact with in our daily life? Complete the following table based

on the observations made from your daily life.

Scope Products/services Company/Brand name The country where the

company based in

Clothes Sneakers, sportswear Nike, adidas Nike: US

adidas: Germany

Food Hamburgers, chocolates McDonald’s, Cadbury McDonald’s: US

Cadbury: UK

Electronic

products

Televisions, mobile

phones Sony, Samsung

Sony: Japan

Samsung: South Korea

Entertainment Foreign films, online

games

20th Century Fox

(Hollywood), Blizzard

20th Century Fox: US

Blizzard: UK

Pre-lesson Activity: How is economic globalization related to us?

Students are expected to understand the fact that economic globalization is

so closely related to our daily life through the pre-lesson activity.

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2. With reference to the information in part 1, do you think Hong Kong possess some

characteristics of a global city?

I think Hong Kong possesses some characteristics as a global city. It is because we always come

into contact with products or services provided by multi-national companies in our daily life.

3. What are the benefits brought by globalization to our daily life?

We can gain easy access to more products and services through globalization so that we can

have more choices and a more convenient life.

4

Compare the two comics below and answer the following questions.

Comic 1: Family life in Hong Kong in the 1970s

Worksheet 1: Characteristics of economic globalization

Students may compare family life nowadays with that in the 1970s

to understand the characteristics of economic globalization.

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Source 2: Family life in Hong Kong nowadays

6

1. Compare the products and services in the 1970s with that nowadays. What are the differences

between them?

1970s Nowadays

Products

(e.g. clothes,

toys and food)

1. Clothes were made in China or

Hong Kong

2. Toys were rather simple and were

made locally e.g. toy blocks

3. Food products included a variety

of local snacks

1. Clothes are of international

brands

2. Toys for children are electronic

games of foreign brands

3. Food products are those from fast

food restaurants such as

McDonald’s

Services

(e.g.

entertainments,

domestic

services and

shopping

services)

1. Mother did the housework

2. Entertainment included watching

traditional Cantonese operas and

local TV productions

1. Foreign domestic helpers do the

housework

2. Entertainment includes watching

Hollywood films

3. People get information and shop

online through websites

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2. Hong Kong people are greatly affected by globalization. With reference to these phenomena in

the comics, summarize some characteristics of globalization.

Suggested answers:

1) We always use products and services provided by multi-national companies.

2) There is labour mobility across countries.

3) We can invest internationally easily and capital flow has grown rapidly.

4) We can easily get access to information of other places through technologies such as

internet and achieve a rapid flow of information.

What is economic globalization?

Economic globalization means cross-boundary economic activities, by which people from different

countries may do business. Driven by free economy and technological advancement, there has been a

huge transaction volume of goods and services across countries. That brings collaborative production

of goods and services by different countries for the consumption of people all over the world.

Meanwhile, the rapid flow of factors such as labour, capital, information and technology across

countries has further promoted economic globalization.

With economic globalization, there are frequent economic activities across countries. With the

technological advancement in logistic, electronic media and the internet, companies today may link

up with the world for trades across countries and forming multi-national

corporations is possible. In a globalized world, multi-national

corporations may participate in real-time transactions across countries.

The concept of “international time zone” becomes less important and

the world becomes smaller as time and space are “squeezed”. Therefore,

international trades are getting faster and there are more opportunities

for the development of international corporations.

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Source 1:

Source 2: Milestones of IT development

1940s The first electronic digital computer was developed

1950s The first satellite was launched by the former Soviet Union

1960s The first fax machine came into the world

1990s World Wide Web

2000s Web 2.0 came into being

2010s More than 2 billion Internet users all over the world

Source: Xinhuanet.com, local news roundup

Worksheet 2:Factors contributing to economic globalization

Teachers may divide students into four groups and use jigsaw reading strategy, i.e. each group

focuses on one of the materials and analyzes the factors contributing to economic globalization.

With the development of communication

technologies, time and space are no longer problems

when we want to promote our products. People can

get access to our latest information through channels

such as TV and internet instantly. Our products can

then draw their attention. In addition to promotion,

our company has launched an online shopping

platform so that consumers can buy our products

comfortably at home.

Head of Marketing Department

of a multi-national company

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Source 1:

Source 2: Development of transport technologies

The following table shows the speed of transport in different periods:

Period Major transport Hourly rate

1500s-1840s Horse-drawn coaches and sailing ships 1.6km/hr

1850s-1930s Steam locomotive 104km/hr

Steam ships 58km/hr

1930s-1950s Propeller aircraft 480-640km/hr

1960s-21st century Jet passenger aircraft 800-1120km/hr

Source: Harvey (1989). The condition of postmodernity. p. 241

(translated and edited).

Transportation becomes more and more convenient

when transportation cost is getting lower and lower.

That makes us to be able to reach different places

easlier and faster. While we have established our

production bases in places where production costs

are much lower, huge volume of products can be

transported to all parts of the world for sale

conveniently. Moreover, we can conduct frequent

on-site inspection to ensure the quality of products. Head of Logistics Department


10

Source 1

Source 2 Global Wage Report (Extract)

Ranking Country / Region Monthly average wages per person (US$)

1 Luxembourg 4089

2 Norway 3678

3 Austria 3437

4 United States 3263

30 Hong Kong, China 1545

57 China 656

70 Philippines 279

71 Pakistan 256

72 Tajik 227

Source: Integrated report (2012)

To boost our business, we invest worldwide and attract

more talents to our company. We have published

recruitment ads around the world in the hope of attracting

top talents around the world to our US headquarters.

Moreover, we will hire workers and supervisors from

places where we operate our factories. As their wage level

is lower, our production cost is substantially reduced.

Head of HR of a

multi-national company

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Source 2: Functions of organizations for international cooperation (Extract)

Organization Functions

World Trade Organization

(WTO)

Establish trade agreements; resolve trade disputes; review trade

policies.

World Bank Provide loans and technical support to developing countries.

International Monetary Fund

(IMF)

Foster global monetary cooperation; stabilize exchange rates;

provide financial assistance to countries that have trouble.

Organization for Economic

Co-operation and

Development (OECD)

Provide a forum in which governments can work together to share

experiences and seek solutions to common problems, and look at

issues that directly affect the lives of ordinary people.

Source: Xinhuanet., local integrated report

We had been operating most of our factories in the US in the past.

However, as a number of new international organizations have

been providing st rong support to certain developing

countries/territories in their economic development by ways such

as policies favorable to foreign investors and improvement in

infrastructure, we actively invest in these countries. By doing so

we reduce our production cost and provide support to economic

development of these countries. It’s really a win-win situation.

Head of Production Department


12

With reference to the information above, summarize and explain the factors contributing to economic

globalization.

Reading

Material

Factors contributing to

economic globalization Explanation

A Information technology is

well developed

With internet communication services, time and space

are no longer problems in communications among

people. People can get to know the cultures of different

regions, spread information, promote their products or

even run businesses through these new technologies. We

can access to the latest information instantly from

channels such as TV and internet. Meanwhile,

international corporations may bring their products to

the world through mass media. Through mass media

such as internet, TV stations and radio stations, people

around the world can understand different cultures and

bring regions closer to each other.

B Development of transport

technologies

Sea, land and air conveyances have been improving in

terms of goods and passenger capacity as well as speed,

it helps to stimulate the flow of population, capital and

resources across countries/regions and promote the

development of globalization. Different kinds of

conveyances have been improving in terms of speed and

carriage capacity and become more and more popular.

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C Mobility of labour and

capital across countries

In a globalized world, companies can raise funds in

different regions and invest them into other countries

conveniently. With business networks around the world,

multi-national corporations may hire labour or

experienced talents from all parts of the world at lower

wages.

D

Emergence of

international

organizations

Intergovernmental bodies and international

non-governmental organizations that promote free trades

and economic development strengthen international

cooperation at different aspects. They also serve as a

bridge to global communication that promotes the

development of globalization.

Factors contributing to economic globalization

Economic globalization has appeared many years ago. However, it has been growing rapidly from

the 1990s onwards. In addition to the change in the mode of doing businesses and worldwide

division of labour, we may also understand the factors that contribute to economic globalization from

the aspect of political and technological developments.

1. Political factors

For political factors, during the period between the end of World War II and early 1990s, the world

was divided into two major camps, the capitalist and the socialist. The gaps and conflict of interest,

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between the two camps had been an obstacle to global economic cooperation and development. In

the early 1990s, the collapse of the Soviet Union and the gradual shift of the communist countries to

capitalist market economies which had brought communications and trade between countries from

the two camps. In addition, the establishment of a number of international economic organizations

had promoted the development of globalization. For example, the World Trade Organization and the

Asia-Pacific Economic Cooperation Conference have been established to eliminate trade barriers

across countries and strengthen the cooperation among countries for a better economic cooperation.

2. Technological factors

For technological factors, the rapid development of internet as a global information network during

the 1990s made the global one world. People around the world can exchange ideas, communicate and

promote global economic trading through internet. For example, with technological development,

people can participate in financial or commercial transactions through a variety of online transaction

platforms. Every individual or multi-national companies can use those online platforms and a variety

of electronic money to deal with people all over the world. This convenient mode of transaction has

promoted economic globalization and the operations of various trading companies.

In addition to internet, the development of transport and logistic services had promoted the rapid

flow of talents and goods across countries. Trade and negotiations can be conducted in a more

efficient and time-saving manner. On the other hand, the reform and opening up of China and the

relaxation of controls on financial systems in the US are also factors contributing to economic

globalization.

15

Positive and negative effects of economic globalization

(Materials for developing countries)

Case study: Positive and negative effects of economic globalization

Guidelines for teaching activities:

1. Divide students into two groups, one focuses on the materials of developing countries and the

other on developed countries.

2. Further divide each group into four small groups. Each group represents a particular type of

stakeholder and is responsible for completing the related worksheet.

3. Hold a forum on the topic of positive and negative effects of economic globalization. Each

group expresses their opinions for the respective stakeholder.

: Worldwide production and sales network of iPhone

Students may read the following information and understand the positive and negative effects of

economic globalization from the perspectives of developing countries and developed countries.

Note: There is no specific or single definition of “developing countries” and “developed

countries”. Different international organizations have complied their own glossary and criteria

for the classification. For example, the World Bank classifies economies by their GNI per

capita as low income (US$ 1,005 or below), lower middle (US$ 1,006-3,975), upper middle

(US$ 3,976-12,275) and high income (US$ 12,276 or above) in 2010.

(http://data.worldbank.org.cn/about/country-classification)

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Date Details

June 1, 2010 Minimum wage of workers increased by 30% from RMB 900 to RMB 1200

October 1, 2010 Workers at Foxconn’s Shenzhen hub can have a wage increase to RMB 2000 if

they pass a performance review

February 1, 2012 16%-25% Pay rise for basic wages of all employees all over China to RMB

2200

Proposed In May 2012, Terry Gou, Chairman of Foxconn, announced the plan to double

the wage of employees in China to RMB 4400

Source: Local integrated report, 2012

The Foxconn suicide incidents which occurred one

after another were unusual. It’s just because the

management treats the young employees in a military

way and didn’t care about their mental wellness.

Moreover, a report shows that workers in Foxconn

have to work for more than 60 hours a week and

sometimes have to work seven days a week

consecutively. This will certainly cause negative

impacts to their physical and mental wellness.

My hometown is famous for its pottery. Our peers had stayed in the

village to produce pottery together in the past years. However, more

and more of my peers migrated to cities now. Some peers told me

that you can earn higher wages if you work in factories in cities.

Foxconn, for example, pays a wage that is 3 times of my current

wage. Many pottery factories in my hometown closed down now

and I am thinking of working at Foxconn’s factory in Shenzhen.

Political commentator

Migrant worker

: Details of Foxconn’s pay rise

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Greater demand for budget smart phones will push smart phone market to price

war

Smart phone market is big and a variety of latest models of smart phones have been launched by

manufacturers. However, market saturation began in some developed countries. Some manufacturers

forecast that the growth of smart phone market would be recorded mainly in developing countries in

the coming few years. In order to explore these markets, manufacturers have been working hard in

developing relatively cheaper smart phones.

We cannot expect these smart phones to have the same features as those of high-end phones, given

their lower prices. They, however, attract a number of consumers who cannot afford high-end phones.

An example is China. Huawei, a company mainly engaged in the development of budget smart

phones, saw its market share increased to 12% in 2011 from 7.4% in 2010. ZTE, another

manufacturer of budget smart phones, was able to increase its market share from 3.6% to 11%.

Facing the challenges of budget smart phones, certain multi-national brands are expected to lower the

prices of their products. It is believed that consumers can buy smart phones at a lower price in the

future.

Foxconn offers stimulus for the Chinese economy

Following the expansion of the smart phone market, Foxconn as an original equipment manufacturer

(OEM) of smart phones has been expanding its market. With a turnover of not more than RMB 800

million during its early years in Shenzhen, Foxconn had seen its revenue jumped to about RMB 420

billion and had been among the Fortune 500 for a few years time.

The development of Foxconn also fosters the economic growth of China. Foxconn’s products

accounted for over 4% of China’s total exports in 2011 and had been among the top 200 Export

Enterprises in China for consecutive eight years. Meanwhile, according to Foxconn’s announcements,

the company hired 1 million workers from all parts of the world in 2010 when more than 0.9 million

workers are working across China, providing a lot of job opportunities for the people in China. Many

migrant workers had switched to Foxconn’s factories. This fosters China’s economic transformation

and development.

: News headlines

18

In addition, multi-national corporations had brought advanced technologies to manufacturers in

China when they engaged manufacturers in China as their OEMs. In addition to OEM productions,

many manufacturers in China are now working on developing their own smart phones and bringing

their products to the world.

Source: Local integrated report (2011)

Group one

Stakeholder: Consumers in developing countries

With reference to the information above, analyze the positive and negative effects of

economic globalization from the perspective of the following stakeholder.

Stakeholder Positive effects Negative effects

Consumers in

developing

countries

More choices

Prices of products drop as

competition increases

Local specialty products/services may

vanish gradually

Meaning of OEM: Generally, it refers to a manufacturer

produces goods by applying purchasing company’s technology

and according to the required standard. Goods will then be sold

under the name of the purchasing firm.

Record sheet by groups

Hint: What are the impacts to local traditional/specialty industries by

imports of a huge volume of quality goods at a low price? How will

this affect the consumers?

19

Group two

Stakeholder: OEM’s workers in developing countries




OEM’s workers in

developing

countries

Income would be higher

More job opportunities

Change of working environment

Longer working hours to cope with

the needs of global production

Challenges in basic welfare and

protections for labour

Group three

Stakeholder: OEMs in developing countries




OEMs in

developing

countries

More business opportunities

Better business performance

and goodwill

Competition will intensify

Hint: If (i) the social system (e.g. labour law) of those developing countries fails to catch up with

the rapid economic development; or (ii) OEMs only focus on maximizing profits by curbing

costs; or (iii) the government of the developing country fails to enforce the law, how will these

affect those OEM’s workers?

Teachers have to guide students to think if these negative effects are caused

by economic globalization or by a particular factor in the backdrop of

economic globalization (e.g. incomplete labour law) so that student will not

go against economic globalization without careful consideration. This also

helps them find out the core problems and explore possible solutions.

Hint: Do you think OEMs in

developing country can maintain

their interests in the long run? As

profit is the king in the world of

commerce, what will the OEMs

from other countries/territories do?

20

Group four

Stakeholder: Government officials of developing countries




Government

officials of

developing

countries

Support the country in its

economic transformation from

primary production to secondary

production

Accelerate economic growth

Bring more job opportunities for

the country and enhance living quality

of the people

Learn advanced manufacturing

technologies

Develop good relationships with

other countries

May worsen the problem of

uneven distribution of income

Hint: Does everyone in the

developing country has the same

education level, skills and

productivity? Does economic

globalization benefit everyone ?

21

Positive and negative effects of economic globalization

(Material for developed countries)

: Worldwide production and sales network of iPhone

: Opinions of different people

Increasing relocations of production lines from the US to other

countries had caused material impacts to the livelihood of people

in the US. Let’s take iPhone as an example. Nearly 700,000

workers engage in the production and assembly of iPhone and

other Apple’s products. However, most of them are not working

in the US. On the contrary, over 90% of them are hired by

overseas companies in Asia, Europe or other regions. It is such

outsourcing mode of production that pushes up the U.S.

unemployment rate. I think the manufacturers should relocate

their production lines back to the US. A member of the

United States Congress

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Cost or profit %

Profits of Apple Inc., a US company 58.5%

Profits of other US companies 2.4%

Profits of companies in South Korea, European Union, Japan

and Taiwan

6.8%

Uncategorized profits 5.3%

Cost of raw materials 21.9%

Labour cost in China 1.8%

Labour cost in other regions (excluding China) 3.5%

Source: Capturing value in global networks: Apple’s iPad and iPhone (2011)

New smart phones rushed to market in fierce competition

Smart phones have now become the major trend in mobile phones. While the market of smart phones

has been expanding, manufacturers from all parts of the world have been launching new models to

provide more choices for consumers. A survey report in relation to a study on online search traffic for

the latest smart phones shows that “iPhone” ranked first in terms of online search traffic over the past

: Distribution of cost and profit of iPhone

as a percentage of its selling price

Nowadays, we have more and more choices of smart

phones in the market, but less and less choices of

traditional mobile phones. You should understand that

I don’t know how to use smart phones as I am old. My

friends and I want to talk to our family members on

phones that are user-friendly and portable. The phone

manufacturers simply ignore our needs.

A consumer

: News headlines

23

six months, while the search traffic for “HTC” and “Samsung” had increased by 250% and 400%

respectively. The data reflects shows that there’s still keen competition in the smartphone industry.

Manufacturers rush to launch smartphones with new features such as gesture control and 3D camera

to attract the consumers.

Innovative industries as the way out for the US economy

The gains made by products such as iPhone and iPad have pushed the profit of Apple Inc. up to

record highs. Despite the uncertainties in the US economy in recent years, the gains made by Apple

Inc. shows that there is still a huge potential in the market of innovative industries.

When the business of a company is expanding, their employees may earn higher salaries. When a

company grows, it offers more job opportunities for the domestic workers, including those engaging

in the manufacturing industry. In 2010, Apple Inc. hired over 8,000 workers. When the

unemployment rate reached record high in the US, it had been reported that US president Barack

Obama had asked why iPhone cannot be manufactured in the US. However, the management of

Apple explained that they cannot do so, not only because of wages to the workers, but also because

of the fact that local manufacturers are less competitive than overseas contractors in terms of

efficiency and flexibility. Nevertheless, Apple retains its high value-added industries such as

customer services and R&D in the US. Accordingly, Apple has created a lot of quality jobs for the

people in the US, including entrepreneurs engaged in the businesses of developing and selling iPhone

and iPad applications. In the past two decades, it is beyond controversy that developing countries

such as China has taken away a lot of manufacturing jobs in the US. However, some people said that

US workers are not willing to do low-skilled jobs as those in Foxconn’s factories in China, it is

understandable that the US will outsource these jobs to developing countries.

Source: Xinhuanet.com, local news roundup (2010)

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Group five

Stakeholder: Consumers in developed countries




Consumers in

developed

countries

More choices



Local specialty products/services may

vanish gradually

Group six

Stakeholder: Workers in developed countries




Workers in

developed

countries

Workers who are skilful and

are capable of acquiring

new knowledge and skills

are more competitive. They

are more likely to have job

offers within and outside

their countries

Their salary packages and

pay would be more

attractive.

As manufacturers relocate their

production lines to the developing

countries, the number of low-skilled

jobs available would be reduced

Record sheet by groups

Hint: What are the impacts to local traditional/specialty industries

by imports of a huge volume of quality goods at a low price? How

will this affect consumers?

25

Group seven

Stakeholder : Manufacturers in developed countries




Manufacturers in

developed countries

For multi-national

companies, economic

globalization can help

manufacturers lowering

their production costs

Globalization of markets

Increase in profits

For SMEs, they might be less

competitive than the overseas firms.

Group eight

Stakeholder : Government officials of developed countries

With reference to the information above, analyze the positive and negative

effects of economic globalization from the perspective of the following

stakeholder.


Government

officials of

developed

countries

Foster the development of

the high value- added

industries across the country

It may bring an increase in

GDP

The country will be able to

outsource its low-skilled

jobs to developing countries

Rise in unemployment rate

Social instability

Hint: What are the effects of economic globalization on large

scale multi-national corporations and SMEs?

26

Listen to the presentation of your classmates. Jot down and summarize the points in the following

table.


Dev

elop

ing

cou

ntries

Consumers

More choices



Local specialty products/services

may vanish gradually

OEMs’workers

Income would be higher

More job opportunities

Change of working environment

Longer working hours to cope

with the needs of global

production

Challenges in basic welfare and

protections for labour

OEMs

More business opportunities

Better business performance and

goodwill

Competition will intensify

Government

officials

(Positive effects on country)

Support the country in its

economic transformation from

primary production to secondary

production

Accelerate economic growth

Bring more job opportunities for the

country and enhance living

quality of the people

People may learn advanced

manufacturing technologies

Develop good relationships with

other countries

(Negative effects on country)

May worsen the problem of

uneven distribution of income

Forum: Does economic globalization bring positive or negative effects?

27


Dev

elop

ed co

un

tries

Consumers

More choices

Prices of product drop as


Local specialty products/services

may vanish gradually

Workers

Workers who are skillful and

capable of acquiring new

knowledge and skills are more

competitive. They are more likely

to get more job offers within and

outside their countries.

Their salary packages and pay

would be more attractive.

As manufacturers relocate their

production lines to the developing

countries, the number of

low-skilled jobs would be reduced

OEMs

For multinational companies,

economic globalization can help

manufacturers lowering their

production costs

Globalization of markets

Increase in profits

For SMEs, they might be less

competitive than the overseas

firms.

Government

officials

(Positive effects on country)

Foster the development of the

high value-added industries across

the country

It could bring an increase in GDP

The country would be able to

outsource its low-skilled jobs to

developing countries

(Negative effects on country)

Rise in unemployment rate

Social instability

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Does economic globalization bring more positive effects or negative

effects to the people and the countries?

Suggested answers:

Economic globalization may have different effects on different stakeholders. Some of them may

benefit more while some of them may suffer. As a result, it is hard to decide whether economic

globalization brings more positive effects or negative effects. Meanwhile, we should not decide the

matter solely based on the benefits or loses made to a particular stakeholder. What we can make sure,

however, is that economic globalization brings an increase in total goods and services produced in

the world, though there maybe an uneven distribution of benefits. Therefore, the thing deserves more

consideration is how to achieve a more even distribution of benefits among the stakeholders through

negotiations and cooperation.

Positive effects of economic globalization:

Economic globalization brings more job opportunities and improve the life of people in the

developing countries. It also brings technologies and capital to developing countries to help them

shake off poverty in the long run. From the perspective of developed countries, economic

globalization helps companies outsource the production processes to lower their production costs,

while consumers can buy what they need at a lower price. Outsourcing low-skilled production

processes helps developed countries to have economic transformation and to develop their high

value-added industries.

Negative effects of economic globalization:

While economic globalization brings job opportunities to developing countries, workers are usually

facing exploitation as manufacturers seek to curb their production costs. As a result, their pay and

working conditions are usually far from satisfactory. For the people in developed countries, even if

they can gain access to products at lower prices, their jobs may be taken away by people from the

developing countries. The operating costs of SMEs in many developed countries are far higher than

that in developing countries. As a result, many of them shut down simply because they are less

competitive. Thus, the developed countries may have to deal with the problem of serious

unemployment.

Class work

29

Effects of economic globalization

Economic globalization brings positive and negative effects to both producers and consumers. We

can study the effects of economic globalization from the economic perspective in evaluating the

positive and negative effects of economic globalization. On the other hand, economic globalization

not only brings effects to individuals, but also brings positive and negative effects to the countries.

Positive effects

Through economic globalization, companies in the developed countries can engage certain

developing countries as the manufacturers of their goods for lowering their production costs and

having greater profits. Meanwhile, there would be business opportunities for the developing

countries. Consumers can buy products at a lower price and choose from a variety of goods around

the world. Developed and developing countries may cooperate and attain economic transformation

easier. There will be transfer of production technologies, greater flow of capital mobility and higher

GDP for accelerating economic development and lower unemployment rate, which bring positive

effects to the development of the developing countries.

Negative effects

International division of labour comes from economic globalization, workers who are less

competitive may find their wages lowered or benefits and protections deprived in such international

division of labour. International division of labour leads to competitions among countries, and lower

production cost is the selling point that attracts foreign investors. As a result, working conditions in

developing countries may be worsened. On the other hand, international division of labour means

that some jobs from the developed countries are taken by the developing countries. As a result, there

is a rise in the unemployment rates of developed countries. For consumers, products at low prices

flow across countries and compete with local products, and may even squeeze the local products out

of the market. As a result, consumers can only choose imported goods and their interests are affected

in that sense.

30

The following news articles are related to international organizations. Read the following news

carefully and answer the questions below.

The International Monetary Fund (IMF) had announced that Cyprus, a country in Europe, had made

a formal request for financial assistance from the IMF.

The Cyprus Government had decided to apply for financial assistance from

the European Union to help it to deal with the country’s banking crisis.

Christine Lagarde, Managing Director of IMF, announced on the same day

that IMF stands ready to help Cyprus to attain stable and sustainable

economic growth and to restore its financial sector.

Source: Integrated report, June 2012.

The World Bank has recently officially launched its education project in Yunnan, China. The World

Bank would provide a loan of over 300 million dollars to support nine vocational training schools in

Yunnan in enhancing the quality of education and economic development.

Jim Yong Kim, president of the World Bank, stated that the World Bank will

continue to help developing countries such as China to fight poverty and

will provide developing countries with various kinds of support such as

personal training, financial management and funding.

Source: Integrated report, June 2012.

Worksheet 3: International organizations

contributing to economic globalization

Students can read the following

news to understand the work of

the international organizations

contributing to economic

globalization.

: International Monetary Fund

: World Bank

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According to the report recently released by OECD, the number of people in the US receiving higher

education as a percentage to the total population did not increase for the past 30 years. It was

reported that among the members, there were 22 economies which have higher percentages of

technological and engineering graduates than that of the US. OECD warned that it reflects a gradual

vanishment of the advantages of the US in its innovative industries, which will cause negative effects

to the long-term economic development of the US. The report further states that the gap between the

rich and the poor has been widening and has caused impacts to the improvement of quality of life of

the US people.

In that regard, OECD suggests that the US should strengthen the training of engineering and

technological talents to restore its status as a leader in innovative industries by training of top talents.

OECD had published a number of reports in relation to the developments of different countries as

part of its efforts in enhancing competitiveness of the countries and improving the quality of life of

their people.

: Organisation for Economic Co-operation

and Development (OECD)

32

1. Match the objectives and work of the following international organizations.

International

organizations

Objectives and work

Organisation for

Economic

Co-operation

and

Development

(OECD)

‧ ‧ A specialized agency of the United Nations which is

responsible for stabilizing exchange rates and

promoting international cooperation on monetary

issues. It also grants various kinds of loans to

countries in trouble or potential difficulties, helps

members stabilize their monetary position, improving

international income and expenditure and supervises

members which apply for loans in launching fiscal and

financial reforms to solve their structural economic

problems.

World Bank ‧ ‧ An organization with the mission of supporting

countries in reducing poverty and achieving

sustainable development. It comprises two institutions

managed by some 180 member countries: the

International Bank for Reconstruction and

Development (IBRD) and the International

Development Association (IDA). The IBRD aims to

reduce poverty in middle-income and creditworthy

poorer countries, while IDA focuses exclusively on

the world’s poorest countries.

It provides low-interest loans, interest-free credits and

grants to developing countries. These support a wide

array of investments in such areas as education, health

and infrastructure. It also offers support to developing

countries through policy advice, research and analysis,

and technical assistance.

International

Monetary Fund

‧ ‧ It is an inter-governmental international economic

organization formed by 34 countries of market

economy. It provides a forum in which governments

can work together to share experiences and seek

solutions to common problems.

It also looks at issues that directly affect the lives of

ordinary people, e.g. how much they pay in taxes and

social security, and how much leisure time they can

take. Furthermore, it recommends policies designed to

make the lives of ordinary people better.

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2. Summarize the information above. What are the things these international organizations had

done in promoting economic globalization?

Suggested answer:

1) Establish trade agreements, resolve trade disputes, review trade policies.

2) Provide loans and technical support to the developing countries.

3) Promote international cooperation on trade and financial matters.

Contributions of international organizations (OECD, the World Bank and IMF)

to economic globalization and their work

Countries around the world had established a number of international organizations to provide

essential platforms for joint efforts in achieving international trades and economic development,

fostering trade agreements across the borders and dealing with international economic issues. The

well known organizations among them are OECD, the World Bank and IMF.

OECD

Founded in 1961, OECD aims at enhancing the economic and social living

conditions of the people all over the world. Through a series of studies, OECD

works with governments from all parts of the world to see what can be done in

driving positive economic, social and environmental changes. OECD analyzes,

measures and applies various statistics for economic development in the aspects

such as trade, investment and productivity to set international standards for

different countries’ reference.

The World Bank

Founded in 1944, the World Bank aims at improving living conditions of the needy

countries. Through providing financial assistance such as low interest loans and

34

borrowings, the World Bank offers financial support to poor countries in the aspects

of education, medical services, infrastructure and agriculture, helps these countries

in the transfer of technologies and knowledge and helps them in their economic

development.

IMF

Founded in 1945, IMF aims at helping people from all parts of the world to solve

their economic problems and offer support to the developing countries by giving

economic policy advice. IMF supports all financial policies that maintain the

stability of exchange rates and open financial policies. It helps the countries to

maintain sustainable and stable development in their international financial systems.

It also helps countries with difficulties in development and helps them improve

their conditions such as economic development, unemployment rate and income.

35

Positive effects Negative effects

Producers

Relocation of production lines to regions

where production cost is lower for greater

profits; more jobs for developing

countries and higher wages to workers

The number of jobs in developed

countries reduced and wages to

low-skilled workers lowered

Consumers Products at lower prices Fewer choices of products (particularly

local products that are less competitive)

Countries Promote economic development Number of jobs reduced; facing global

competitions

Internet promotes trades

at any time and any

place

Factors contributing to economic globalization

OECD

經濟全球化的影響

End of cold

war, opening

up of markets IMF

World Bank

Concept map of International interdependence

International organizations

contributing to economic

globalization

Technological

development

International politics

Economic globalization Labour mobility across

countries

Effects of economic globalization

Huge transaction volume

of goods and services

Rapid flow of capital,

information and

technology

core international interdependence module...3) we can invest internationally easily and capital flow...

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