globalization and the world economy economics. what is globalization? globalization is the...
TRANSCRIPT
Globalization and the
World Economy
Economics
What is Globalization?Globalization is the integration of economic activities through a market and across borders
The creation of a single world market
What Has Caused Globalization?
Technology
Improved transportation of goods
Improved communication around the world
Government Policies
Can set policies to open up or close trade with other countries
How can the government affect globalization?
Barriers to free trade and globalization
Limiting imports
Embargos- refusing to trade with a particular country
Tariffs- taxes on any goods that are imported into a country
Used to make these goods equal to prices of domestic goods or higher than domestic goods prices
Quotas- limit the number of certain goods allowed into a country at a specific time
Restricting workers- limiting work permits for migrant workers
Developing Free Trade and Globalization
Cutting Tariffs
Usually will increase exports as well as imports
Other countries become more willing to trade and will drop their own tariffs
How can the government affect globalization?
How can the government affect globalization?World Trade Organization (WTO)
Based off of numerous trade agreements (International Monetary Funds, World Bank, and General Agreement on Tariffs and Trade 1944)
Protects trade on goods and services
Services include: Insurance, telecommunications, hotels etc.
Helps develop the economies of other countries
Protect intellectual property- ideas and designs (copyrights)
How can the government affect globalization?
WTO Controversies
Labor
Issues over poor labor conditions and child labor
Some countries have an “unfair” labor advantage
Environment
Pollution concerns (China)
Food Safety
Concerns over how safe imported food is (GMO Food)
How can the government affect globalization?
European Union (EU) 1993
Trade agreement between European countries
Opened trade between European countries
Created a single currency
How can the government affect globalization?
North American Free Trade Agreement (NAFTA)
Formed in 1993
Meant to increase trade between Mexico, US and Canada
What are Multinational Corporations?
Multinational Corporation- a firm that has factories, offices or branches in two or more countries
Ex. Microsoft, Toyota, Sony, Wal-Mart, McDonalds, Sony etc.
Numerous large companies are becoming multinational due to Globalization
What are Multinational Corporations?
Many companies produce their products in other countries or will build a plant in in the country the export their products to
Why?
Cheaper labor
Save on shipping cost
Cut import/export tariffs
Exchange Rates
Foreign Exchange Market- where currency, from numerous countries, are bought and sold
Exchange Rate- The value of a country’s currency in relation to another country’s currency
Ex. 1 Euro = $1.294
Ex. 1 CAD = $0.978
Ex. 1 MX Peso = $0.080
Exchange Rates
Fixed Rate of Exchange
Currency values did not change daily and were set in regards to gold reserves (until 1971)
Governments can set the value of their currency
Flexible Exchange Rate
Currency values are set in relations to supply and demand
Traded in a manner similar to the stock market
Exchange Rates
What impact does the Foreign Exchange Rate have on our economy?
Can influence the cost of goods imported/exported
Can lower or increase the price of finished goods due to cost of raw materials
Exchange Rates
Balance of trade
Currency depreciates (decreases in value)- export more goods due to other countries being more willing to buy at the “lower price”
Currency value increases- import more goods due to foreign goods “costing less”
Trade Surplus- export value is higher than import value
Trade Deficit- import value is higher than export value
Major US Imports and Exports
Imports
Crude Oil
Electronic equipment
Cars
Precious Metals and Gems
Exports
Food Products
Electronic Equipment
Cotton
Vehicles
Major US Imports and Exports
Imports Exports
Potential Short-Answer Questions
What are some causes for Globalization
Why do companies produce their goods outside of their home country?
How are trade patterns established?
How can the US Dollar exchange rate affect our economy?