Week 9: Politics of Foreign Aid

Amount of ODA in relation to other capital flows to developing countries ---------Difference between bilateral, multilateral assistance
Types of assistance
Technical assistance
Experts sent to advise poor countries, ------Poor country officials study abroad --------Provide advanced equipment. ---------Grants --------Loans ---------Controversies over tied aid
Debt forgiveness for HIPCs
Odious debt
Aid recipients and US foreign policy
Chinas foreign aid mysteries ------------Non-OECD aid provider
Amount, destination, purpose?
0.7% aid target
Original rationale for this target
OECD Development Assistance Committee
Countries meeting this target

Amount of ODA (Official Development Assistance) in Relation to Other Capital Flows to

Developing Countries:
Difference between bilateral and multilateral assistance:
Bilateral aid usually refers to assistance given directly from a donor government to a
recipient country. The donor government may provide this assistance directly to the recipient
government or to non-governmental institutions operating in the recipient country. This aid is
sometimes managed by a government agency charged with this task.
Multilateral aid means between more than two parties. This is used where a donor country
sends funds to multilateral organization such as the World Bank and the United Nations, which in
turn administer aid donations to several recipient countries.

Types of Assistance:
Technical assistance = Development aid (also development assistance, technical assistance,
international aid, overseas aid, official development assistance (ODA), or foreign aid) is financial

aid given by governments and other agencies to support the economic, environmental, social, and
political development of developing countries. It is distinguished from humanitarian aid by
focusing on alleviating poverty in the long term, rather than a short term response.
Aid may be bilateral: given from one country directly to another; or it may be multilateral: given
by the donor country to an international organization such as the World Bank or the United
Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) which then distributes it among the developing
countries. The proportion is currently about 70% bilateral 30% multilateral.
Experts sent to advise poor countries (sorry, couldnt find this)
Poor country officials study abroad (sorry, couldnt find this)
Provide advanced equipment (sorry, couldnt find this)

Grants
Loans
Controversies Over Tied Aid
Tied aid is foreign aid that must be spent in the country providing the aid (the donor
country) or in a group of selected countries. A developed country will provide a bilateral loan
or grant to a developing country, but mandate that the money be spent on goods or services
produced in the selected country. From this it follows that untied aid has no geographical
limitations.
Tied aid increases the cost of assistance and has the tendency of making donors focus
more on the commercial advancement of their countries than what developing countries
need. When recipient nations are required to spend aid on products from the donor nation,
project costs can be raised by up to 30 percent. Tied aid can create distortions in the market and
impede the recipient country's ability to spend the aid they receive. There are growing concerns
about the use of tied aid and efforts to analyze the quality of aid given, rather than simply the
quantity. The Commitment to Development Index, which measures the "development friendliness"
of rich countries, actually penalizes donor governments for tied aid in the calculation of the index.

Others have argued that tying aid to donor-country products is common sense; it is a
strategic use of aid to promote donor countrys business or exports. It is further argued that
tied aid if well designed and effectively managed, would not necessarily compromise the
quality as well as the effectiveness of aid (Aryeetey, 1995; Sowa 1997). However, this argument
would hold particularly for programme aid, where aid is tied to a specific projects or policies and
where there is little or no commercial interest. It must be emphasized however, that commercial
interest and aid effectiveness are two different things and it would be difficult to pursue
commercial interest without compromising aid effectiveness. Thus, the idea of maximizing
development should be separated from the notion of pursuing commercial interest. Tied aid
improves donors export performance, creates business for local companies and jobs. It also helps
to expose firms, which have not had any international experience on the global market to do so.

Debt forgiveness for HIPCs (not sure if this is it)

In October, 1996, the World Bank and IMF reached an agreement on the first ever comprehensive
debt reduction plan to enable the debtor country to pay back its loans without compromising
economic growth and without building up arrears again in the future. The initiative is designed to
reduce the multilateral, bilateral, and commercial debt of HlPCs over a period of about six years to a
sustainable level, a level at which the country is considered able to make debt payments. This
represents the current best effort by the World Bank, IMF, and most importantly, the developed
country nations who play a preponderant role in the two international institutions. Thus, it is very
important to look at what HIPC does and does not do.
The HIPC Initiative was launched in 1996 by the IMF and World Bank, with the aim of ensuring that
no poor country faces a debt burden it cannot manage. Since then, the international financial
community, including multilateral organizations and governments have worked together to reduce to
sustainable levels the external debt burdens of the most heavily indebted poor countries.
In 1999, a comprehensive review of the Initiative allowed the Fund to provide faster, deeper, and
broader debt relief and strengthened the links between debt relief, poverty reduction, and social
policies.
In 2005, to help accelerate progress toward the United Nations Millennium Development Goals

(MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI). The
MDRI allows for 100 percent relief on eligible debts by three multilateral institutionsthe IMF, the
World Bank, and the African Development Fund (AfDF)for countries completing the HIPC Initiative
process. In 2007, the Inter-American Development Bank (IaDB) also decided to provide additional
(beyond HIPC) debt relief to the five HIPCs in the Western Hemisphere.

Odius Debt
also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for
purposes that do not serve the best interests of thenation, should not be enforceable. Such debts are,
thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of
the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

Aid recipients and US foreign policy

(For US foreign policy, I am not sure if ito yun)

The foreign policy of the United States is the way in which it interacts with foreign
nations and sets standards of interaction for its organizations, corporations and individual
citizens. The global reach of the United States is backed by a $15 trillion economy,[1]
approximately a quarter of global GDP, and a defense budget of $711 billion, which
accounts for approximately 43% of global military spending. The U.S. Secretary of State is
analogous to the foreign minister of other nations and is officially charged with state-tostate diplomacy, although the president has ultimate authority over foreign policy; that
policy includes defining the national interest, as well as the strategies chosen both to
safeguard that and to achieve its policy goals. The current Secretary of State is John Kerry.
Foreign assistance is a core component of the State Department's international
affairs budget, which is $49 billion in all for 2014.[61] Aid is considered an essential
instrument of U.S. foreign policy. There are four major categories of non-military foreign
assistance: bilateral development aid, economic assistance supporting U.S. political and
security goals, humanitarian aid, and multilateral economic contributions (for example,
contributions to the World Bank and International Monetary Fund).[62]

In absolute dollar terms, the United States government is the largest international
aid donor ($23 billion in 2014).[61] The U.S. Agency for International Development
(USAID) manages the bulk of bilateral economic assistance; the Treasury Department
handles most multilateral aid. In addition many private agencies, churches and
philanthropies provide aid.
Although the United States is the largest donor in absolute dollar terms, it is actually
ranked 19 out of 27 countries on the Commitment to Development Index. The CDI ranks
the 27 richest donor countries on their policies that affect the developing world. In the aid
component the United States is penalized for low net aid volume as a share of the
economy, a large share of tied or partially tied aid, and a large share of aid given to less
poor and relatively undemocratic governments.

Chinas foreign aid mysteries

Non-OECD aid provider (Amount, destination, purpose?)

Unremittingly helping recipient countries build up their self-development capacity

Imposing no political conditions respect(ing) recipient countries right to select

their own path and model of development

Adhering to equality, mutual benefit and common development

Remaining realistic while striving for the best

Keeping pace with the times and paying attention to reform and innovation

**China doesnt really care. They will give money but thats it

0.7% aid target

0.7 refers to the repeated commitment of the world's governments to commit 0.7% of
rich-countries' gross national product (GNP) to Official Development Assistance.
First pledged 35 years ago in a 1970 General Assembly Resolution, the 0.7 target has been
affirmed in many international agreements over the years, including the March 2002 International
Conference on Financing for Development in Monterrey, Mexico and at the World Summit on
Sustainable Development held in Johnannesburg later that year.
In Paragraph 42 of the Monterrey Consensus, world leaders reiterated their commitment,
stating that we urge developed countries that have not done so to make concrete efforts towards
the target of 0.7 percent of gross national product (GNP) as ODA to developing countries.
Ours is the first generation in which the world can halve extreme poverty within the 0.7
envelope. In 1975, when the donor world economy was around half its current size, the
Millennium Development Goals would have required much more than 1 percent of GNP from the
donors. Today, after two and a half decades of sustained economic growth, the Goals are utterly
affordable.
****0.7% - Target Percentage of OECD Countries GDP going to ODA Normative Should and be
provided
-

Easterly/Sachs Debate Positive Does and Work?

1958 World Council of Churches

Original rationale for this target (not sure if this is it)

The international goal for rich countries to devote 0.7% of their national income to
development assistance has become a cause clbre for aid activists and has been accepted
in many official quarters as the legitimate target for aid budgets. The origins of the target,
however, raise serious questions about its relevance. First, the 0.7% target was calculated using a
series of assumptions that are no longer true, and justified by a model that is no longer considered
credible. When we use essentially the same method used to arrive at 0.7% in the early 1960s and
apply todays conditions, it yields an aid goal of just 0.01% of rich-country GDP for the poorest

countries and negative aid flows to the developing world as a whole. We do not claim in any way
that this is the right amount of aid, but only that this exercise lays bare the folly of the initial
method and the subsequent unreflective commitment to the 0.7% aid goal. Second, we document
the fact that, despite frequent misinterpretation of UN documents, no government ever agreed in a
UN forum to actually reach 0.7%though many pledged to move toward it. Third, we argue that
aid as a fraction of rich country income does not constitute a meaningful metric for the adequacy
of aid flows. It would be far better to estimate aid needs by starting on the recipient side with a
meaningful model of how aid affects development. Although aid certainly has positive impacts in
many circumstances, our quantitative understanding of this relationship is too poor to accurately
conduct such a tally. The 0.7% target began life as a lobbying tool, and stretching it to become a
functional target for real aid budgets across all donors is to exalt it beyond reason. That no longer
makes any sense, if it ever did.

OECD Development Assistance Committee

The Organisation for Economic Co-operation and Development's (OECD) Development Assistance
Committee (DAC) is a forum for selected OECD member states to discuss issues surrounding
aid development and poverty reduction in developing countries. It describes itself as being
the "venue and voice" of the world's major donor countries.
The work of the committee concentrates on

how international development cooperation contributes to the capacity of

developing countries to participate in the global economy, and

the capacity of people to overcome poverty and participate fully in their societies.

To this end, the committee holds an annual High Level Meeting where the ministers or heads of
the national aid agencies meet to discuss issues related to development and adopt
recommendations and resolutions. It is also attended by senior officials of the World Bank, the
International Monetary Fund and UN Development Programme.

Countries meeting this target

Country

Country

Aid as % of GNI

Australia (*)

Aid as % of
GNI
0.25

Japan (*)

0.28

Austria

0.52

Luxembourg

0.87

Belgium

0.53

Netherlands

0.82

Canada (*)

0.34

New Zealand

0.27

Denmark

0.81

Norway

0.93

Finland

0.47

Portugal

0.21

France

0.47

Spain

0.29

Germany

0.35

Sweden

0.92

Greece

0.24

Switzerland (*)

0.44

Ireland

0.41

United Kingdom

0.48

Italy

0.29

United States (*)

0.22

Week 10: Globalization

3 theses of globalization
Hyperglobalist
Sceptic
Findings against the hyperglobalist thesis --------Transformationalist
Sources of contention in globalization debate
Conceptualization
Causation
Periodization
Impacts
Trajectories
Held et al. analytical framework for globalization
Extensity
Intensity
Velocity
Impact
Outsourcing / offshoring difference
Counterfactuals to The World is Flat (Leamer)
Wage equalization ----------Trade as a neighborhood phenomenon ---------Trade and manufacturing jobs --------Stateside Outsourcing ---------US and the Internet ----------

3 Theses of Globalization
Scholars David Held, Anthony McGrew, David Goldblatt and Jonathan Perraton provide an
overview of different perspectives on globalization dominant in the 1990s. They describe the

general conceptual contours of each perspective and note the limitations of each. The authors
identify identify the perspective as:
The Hyperglobalist perspective,
The Skeptical perspective,
The Transformationalist perspective.
The Hyperglobalist = The authors describe the hyperglobalist perspective as an approach which
sees globalization as a new epoch in human history. This new epoch is characterized by the
declining relevance and authority of nation-states, brought about largely through the
economic logic of a global market. Economies are becoming denationalized.
Held and his colleagues point out, however, that even within this perspective, different authors
assess the value of these changes in very different ways. While hyperglobalist scholars may agree
on the general factors behind globalization and the likely outcome of this process, they disagree
sharply over whether these forces are good or bad. The authors distinguish between neo-liberal
versus neo-Marxist orientations, and describe their different assessments of the outcomes of
globalization.

The Sceptic = Held and his colleagues say that the skeptical perspective on globalization views
current international processes as more by fragmented and regionalized than globalized. In
fact, according to skeptical authors, the golden age of globalization occurred at the end of the
19th century. Current processes show, at best, a regionalization.
The authors say that skeptics also disagree whether old cleavages are becoming increasingly
irrelevant. The third world is not being drawn into a global economy that destroys old lives of
benefit and exploitation. Quite the contrary, the third world, say skeptical authors, is becoming
increasingly marginalized.
In contrast to perspectives that emphasize the growth of global capitalism, scholars in the
skeptical perspective view global capitalism as a myth. The growth of multinational corporations
does not mean that nation-states are no longer relevant for governing the flows of economic
benefits. Held and his colleagues say that skeptical authors point to the fact that foreign
investment flows into the control of a few advanced economies. Multinational corporations
are still tied primarily to their home states or regions, and these ties produce benefits for

these states or regions.

Authors with a skeptical perspective reject the notions of the development of a global culture or
a global governance structure. What is really going on, they argue, is that global governance
structures and culture exist as a disguised version of neo-liberal economic strategies that
benefit the West.

The Transformationalist = Held and his colleagues say that the transformationalist perspective
differs fundamentally from the other two perspectives in that:
There is no single cause (that is, the market or economic logic) behind globalization,
The outcome of processes of globalization is not determined.
So, even though transformationalist authors describe many of the same general changes
involved in globalization, their approach is considerably less certain about the historical
trajectories of these changes and less limiting of the factors driving globalization.
For instance, hyperglobalist authors believe that the power of national governments is waning.
Skeptic authors argue that the power of national governments is growing. Transformationalist
authors, however, view the nature of national governments as changing (being reconstituted and
restructured) but a description of this change as merely growing or waning is oversimplified.
Hyperglobalist authors describe the erosion of old patterns of stratification. Skeptical authors
argue that the global South is becoming increasingly marginalized. Transformationalist authors
understand that a new world order architecture is developing, though the exact nature of the
emerging patterns of stratification are not yet clear.
In general, argue Held and his colleagues, the authors of the transformationalist perspective
have a much less determinate understanding of the processes of globalization than authors from
the other perspectives. For transformationalist authors, the range of factors influencing processes
of globalization is much greater, and the outcomes are much less certain.
Sources of contention in globalization debate
Five principal issues constitute the major sources of contention among existing approaches to
globalization. These concern matters of

conceptualization
causation
periodization
impacts
and the trajectories of globalization.

Conceptualization = Among both the sceptics and hyperglobalizers there is a tendency to

conceptualize globalization as prefiguring a singular condition or end-state, that is, a fully
integrated global market with price and interest rate equalization. Accordingly, contemporary
patterns of economic globalization are assessed, as previously noted, in relation to how far they
match up to this ideal type (Berger and Dore, 1995; Hirst and Thompson, 1996b). But even on its
own terms this approach is flawed, since there is no a priori reason to assume global markets need
to be 'perfectly competitive' any more than national markets have ever been. National markets
may well fall short of perfect competition but this does not prevent economists from
characterizing them as markets, albeit markets with various forms of 'imperfections'. Global
markets, as with domestic markets, can be problematic.
In addition, this 'ideal type' approach is both unacceptably teleological and empiricist:
unacceptably teleological in so far as the present is (and apparently should be) interpreted as the
stepping stone in some linear progression towards a given future end-state, although there is no
logical or empirical reason to assume that globalization - any more than industrialization or
democratization - has one fixed end condition; and unacceptably empiricist in that the statistical
evidence of global trends is taken by itself to confirm, qualify or reject the globalization thesis,
even though such a methodology can generate considerable difficulties (Ohmae, 1990; R. J. B.
Jones, 1995; Hirst and Thompson, 1996b). For instance, the fact that more people in the world
speak (dialects of) Chinese than English as a first language does not necessarily confirm the thesis
that Chinese is a global language. Likewise, even if it could be shown that trade GDP ratios for
Western states in the 1890s were similar to, or even higher than, those for the 1990s, this
evidence by itself would reveal little about the social and political impacts of trade in either
period. Caution and theoretical care are needed in drawing conclusions from seemingly clear
global trends. Any convincing account of globalization must weigh the significance of relevant
qualitative evidence and interpretative issues.
In comparison, socio-historical approaches to the study of globalization regard it as a process
which has no single fixed or determinate historical 'destination', whether understood in terms of a

perfectly integrated global market, a global society or a global civilization (Giddens, 1990; Geyer
and Bright, 1995; Rosenau, 1997). There is no a priori reason to assume that globalization must
simply evolve in a single direction or that it can only be understood in relation to a single ideal
condition (perfect global markets). Accordingly, for these transformationalists, globalization is
conceived in terms of a more contingent and open-ended historical process which does not fit with
orthodox linear models of social change (cf. Graham, 1997). Moreover, these accounts tend also
to be sceptical of the view that quantitative evidence alone can confirm or deny the reality' of
globalization since they are interested in those qualitative shifts which it may engender in the
nature of societies and the exercise of power; shifts which are rarely completely captured by
statistical data.
Linked to the issue of globalization as a historical process is the related matter of whether
globalization should be understood in singular or differentiated terms. Much Of the sceptical and
hyperglobalist literature tends to conceive globalization as a largely singular process equated,
more often than not, with economic or cultural interconnectedness (Ohmae, 1990; Robertson,
1992; Krasner, 1993; Boyer and Drache, 1996; Cox, 1996; Hirst and Thompson, 1996b;
Huntington, 1996; Strange, 1996; Burbach et al., 1997). Yet to conceive it thus ignores the
distinctive patterns of globalization in different aspects of social life, from the political to the
cultural. In ' this respect, globalization might be better conceived as a highly differentiated
process which finds expression in all the key domains of social activity (including the political, the
military, the legal, the ecological, the criminal, etc.). It is by no means clear why it should be
assumed that it is a purely economic or cultural phenomenon (Giddens, 1991; Axford, 1995;
Albrow, 1996). Accordingly, accounts of globalization which acknowledge this differentiation may
be more satisfactory in explaining its form and dynamics than those which overlook it.

Causation = One of the central contentions in the globalization debate concerns the issue of
causation: what is driving this process? In offering an answer to this question existing accounts
tend to cluster around two distinct sets of explanations: those which identify a single or primary
imperative, such as capitalism or technological change; and those which explain globalization as the
product of a combination of factors, including technological change, market forces, ideology and
political decisions. Put simply, the distinction is effectively between monocausal and multicausal

accounts of globalization. Though the tendency in much of the existing literature is to conflate
globalization with the expansionary imperatives of markets or capitalism this has drawn
substantial criticism on the grounds that such an explanation is far too reductionist. In response,
there are a number of significant attempts to develop a more comprehensive explanation of
globalization which highlights the complex intersection between a multiplicity of driving forces,
embracing economic, technological, cultural and political change (Giddens, 1990; Robertson,
1992; Scholte, 1993; Axford, 1995; Albrow, 1996; Rosenau, 1990, 1997). Any convincing analysis
of contemporary globalization has to come to terms with the central question of causation and, in
so doing, offer a coherent view.
But the controversy about the underlying causes of globalization is connected to a wider debate
about modernity (Giddens, 1991; Robertson, 1992; Albrow, 1996; Connolly, 1996). For some,
globalization can be understood simply as the global diffusion of Western modernity, that is,
Westernization. World systems theory, for instance, equates globalization with the spread of
Western capitalism and Western institutions (Amin, 1996; Benton, 1996). By contrast, others
draw a distinction between Westernization and globalization and reject the idea that the latter is
synonymous with the former (Giddens, 1990). At stake in this debate is a rather fundamental
issue: whether globalization today has to be understood as something more than simply the
expanding-reach of Western power and influence. No cogent analysis of globalization can avoid
confronting this issue.

Periodization = Simply seeking to describe the 'shape' of contemporary globalization

necessarily relies (implicitly or explicitly) on some kind of historical narrative.

Such

narratives, whether they issue from grand civilizational studies or world historical studies, have
significant implications for what conclusions are reached about the historically unique or
distinctive features of contemporary globalization (Mazlish and Buultjens, 1993; Geyer and Bright,
1995). In particular, how world history is periodized is central to the kinds of conclusions which
are deduced from any historical analysis, most especially, of course, with respect to the question of
what's new about contemporary globalization. Clearly, in answering such a question, it makes a

significant difference whether contemporary globalization is defined as the entire postwar era, the
post-1970s era, or the twentieth century in general.
Recent historical studies of world systems and of patterns of civilizational interaction bring into
question the commonly accepted view that globalization is primarily a phenomenon of the
modern age (McNeill, 1995; Roudometof and Robertson, 1995; Bentley, 1996; Frank and Gills,
1996). The existence of world religions and the trade networks of the medieval era encourage a
greater sensitivity to the idea that globalization is a process which has a long history. This implies
the need to look beyond the modern era in any attempt to offer an explanation of the novel
features of contemporary globalization. But to do so requires some kind of analytical framework
offering a platform for contrasting and comparing different phases or historical forms of
globalization over what the French historian Braudel refers to as the longue durge - that is, the
passage of centuries rather than decades (Helleiner, 1997).

Impacts = There is an extensive literature implicating economic globalization in the demise of

social democracy and the modern welfare state (Garrett and Lange, 1991; Banuri and Schor, 1992;
Gill, 1995; Amin, 1996; J. Gray, 1996; Cox, 1997). Global competitive pressures have forced
governments, according to this view, to curtail state spending and interventions; for, despite
different partisan commitments, all governments have been pressed in the same direction.
Underlying this thesis is a rather deterministic conception of globalization as an 'iron cage' which
imposes a global financial discipline on governments, severely constraining the scope for
progressive policies and underlining the social bargain on which the post-Second World War
welfare state rested. Thus there has apparently been a growing convergence of economic and
welfare strategies among Western states, irrespective of the ideology of incumbent governments.
This thesis is contested vociferously by a plethora of recent studies which cast serious doubt on
the idea that globalization effectively 'immobilizes' national governments in the conduct of
economic policy (Scharpf, 1991; R. J. B. Jones, 1995; Ruigrok and Tulder, 1995; Hirst and
Thompson, 1996b). As Milner and Keohane observe, 'the impact of the world economy on
countries that are open to its influence does not appear to be uniform' (1996, p. 14). Such studies
have delivered significant insights into how the social and political impact of globalization is
mediated by domestic institutional structures, state strategies and a country's location in the

global pecking order (Hurrell and Woods, 1995; Frieden and Rogowski, 1996; Garrett and Lange,
1996). A number of authors have also contributed to a greater awareness of the ways in which
globalization is contested and resisted by states and peoples (Geyer and Bright, 1995; Frieden and
Rogowski, 1996; Burbach et al., 1997).

In so doing, such studies suggest the need for a

sophisticated typology of how globalization impacts on national economies and national

communities which acknowledges its differential consequences and the signal importance of the
forms in which it is managed, contested and resisted (Axford, 1995).

Trajectories = Each of the three 'schools' in the globalization debate has a particular
conception of the dynamics and direction of global change. This imposes an overall shape
on patterns of globalization and, in so doing, presents a distinctive account of globalization
as a historical process. In this respect, the hyperglobalizers tend to represent globalization as a
secular process of global integration (Ohmae, 1995; R. P. Clark, 1997).

The latter is often

associated with a linear view of historical change; globalization is elided with the relatively
smooth unfolding of human progress. By comparison, the sceptical thesis tends to a view of
globalization which emphasizes its distinct phases as well as its recurrent features. This, in part,
accounts for the sceptics' preoccupation with evaluating contemporary globalization in relation to
prior historical epochs, but most especially in relation to the supposedly 'golden age' of global
interdependence (the latter decades of the nineteenth century) (R. J. B. Jones, 1995; Hirst and
Thompson, 1996b). , Neither of these models of historical change finds much support within the
transformationalist camp. For the transformationalists tend to conceive history as a process
punctuated by dramatic upheavals or discontinuities. Such a view stresses the contingency of
history and how epochal change arises out of the confluence of particular historical conditions and
social forces.

And it informs the transformationalist tendency to describe the process of

globalization as contingent and contradictory. For, according to this thesis, globalization pulls and
pushes societies in opposing directions; it fragments as it integrates, engenders cooperation as
well as conflict, and universalizes while it particularizes. Thus the trajectory of global change is
largely indeterminate and uncertain (Rosenau, 1997).

Clearly, a convincing attempt to construct an analytical framework which moves the

globalization debate beyond its present intellectual limits has to address the five major points of
contention described above. For any satisfactory account of globalization has to offer: a coherent
conceptualization; a justified account of causal logic; some clear propositions about historical
periodization; a robust specification of impacts; and some sound reflections about the trajectory of
the process itself. Confronting these tasks is central to devising and constructing fresh ways of
thinking about globalization.

Held et al. analytical framework for globalization

To say anything meaningful about either the unique Attributes or the dominant features of
contemporary globalization requires clear analytical categories from which such descriptions can
be constructed. Building directly on our earlier distinctions, historical forms of globalization can
be described and compared initially in respect of the four spatio-temporal dimensions:

the extensity of global networks

the intensity of global interconnectedness

the velocity of global flows

the impact propensity of global interconnectedness.

Such a framework provides the basis for both a quantitative and a qualitative assessment of

historical patterns of globalization. For it is possible to analyse (1) the extensiveness of

networks of relations and connections; (2) the intensity of flows and levels of activity
within these networks; (3) the velocity or speed of interchanges; and (4) the impact of
these phenomena on particular communities.

A systematic assessment of how these

phenomena have evolved provides insights into the changing historical forms of globalization; and
it offers the possibility of a sharper identification and comparison of the key Attributes of, and the
major disjunctures between, distinctive forms of globalization in different epochs.

Such a

historical approach to globalization avoids the current tendency to presume either that
globalization is fundamentally new, or that there is nothing novel about contemporary levels of
global economic and social interconnectedness since they appear to resemble those of prior
periods.

Building on the framework above, a typology of globalization can be constructed. Global flows,
networks and relations can be mapped in relation to their fundamental spatio-temporal
dimensions: extensity, intensity, velocity and impact propensity. Figures 1.1 and 1.2 set out the
relations between these four dimensions.

In these figures high extensity refers to

interregional/intercontinental networks and flows, and low extensity denotes localized networks
and transactions. Accordingly, as figure 1.3 indicates, there are different possible configurations
of these dimensions; the four uppermost quadrants in this figure represent, at one spatial extreme,
different types of globalized worlds (that is, different configurations of high extensity, intensity,
velocity and impact) while the lower quadrants represent, at the other spatial extreme, different
configurations of localized networks. This simple exercise delivers the groundwork for devising a
more systematic typology of globalization which moves the debate beyond the economistic ideal
type and 'one world' models of the sceptics and hyperglobalizers. For the four upper quadrants of
figure 1.3 suggest that there are a multiplicity of logical shapes which globalization might take
since high extensity can be combined with different possible values for intensity, velocity and
impact.
Four of these potential shapes are of particular interest since they represent the outer limits of
this typological exercise, combining high extensity with the most extreme values of intensity,velocity and impact. In this regard, figure 1.4 identifies four discrete logical types of globalization
which reflect very different patterns of interregional flows, networks and interactions. They
constitute a simple typology of globalization which shows that it has no necessarily fixed form:

Outsourcing / offshoring difference

Outsourcing refers to an organization contracting work out to a 3rd party, while
offshoring refers to getting work done in a different country, usually to leverage cost
advantages. It's possible to outsource work but not offshore it; for example, hiring an outside law

firm to review contracts instead of maintaining an in-house staff of lawyers. It is also possible to
offshore work but not outsource it; for example, a Dell customer service center in India to serve
American clients.

Offshore outsourcing is the practice of hiring a vendor to do the work offshore,

usually to lower costs and take advantage of the vendor's expertise, economies of scale, and large
and scalable labor pool.

Counterfactuals to The World is Flat (Leamer)

Geography, flat or not, creates special relationships between buyers and sellers who reside in
the same neighborhoods, but Friedman turns this metaphor inside-out by using The World is Flat
to warn us of the perils of a relationship-free world in which every economic transaction is
contested globally. In his flat world, your wages are set in Shanghai. In fact, most of the footloose
relationship-free jobs in apparel and footwear and consumer electronics departed the United
States several decades ago, and few U.S. workers today feel the force of Chinese and Indian
competition, notwithstanding the alarming anecdotes about the outsourcing of intellectual
services. Of course, standardization, mechanization, and computerization all work to increase the
number of footloose tasks, but innovation and education work in the opposite direction, creating
relationship-based activitieslike the writing of this review. It may only be personal conceit, but I
imagine there is a reason why the Journal of Economic Literature asked me to do this review.
(still looking through this, pero hindi ko mahanap..I think basahin talaga rdg)
Wage equalization
Trade as a neighborhood phenomenon
Trade and manufacturing jobs
Stateside Outsourcing
US and the Internet

Week 11 The logic of economic integration

Intraregional vs extraregional trade
Reasons for PTA proliferation
Emulate Europe, North America in 1990s
Stalling of multilateral trade negotiations

Pressure from domestic constituencies

European Union (EU)
Historical milestones
Customs union features
Remove tariffs within collective borders
Common external tariff (CET)
Revenue sharing mechanism
Criticisms as an elite-driven project
Low turnout in MEP voting
High input from elite interests
Theoretical gains from integration
Specialization
Economies of scale
Competition
Higher growth = higher living standards
Economic Integration in the Asia-Pacific
Mysteries concerning PTA proliferation
Many deals between nations with little trade with each other
Few PTAs involving major nations
Redundancies of overlapping deals
Noodle bowl effect Low utilization rates of preferential tariffs
Non-economic motives for integration
ASEAN Economic Community
ASEAN Free Trade Agreement (AFTA)
ASEAN Framework Agreement on Services (AFAS)
Mutual Recognition Agreements [7]
ASEAN Investment Area (AIA)

Be able to compare EU with ASEAN economic integration in terms of institutional capacity, depth of
integration

Intraregional vs extraregional trade

Intra-regional trade refers to trade which focuses on economic exchange primarily between countries
of the same region or economic zone. (ex. Phil-Vietnam)
Extraregional trade refers to trade which focuses on economic exchange between countries of different
region or economic zone ( ex. Phil-USA)
Reasons for PTA proliferation
Preferential Trading Agreement -- > A trade pact between countries that reduces tariffs for
certain products to the countries who sign the agreement. While the tariffs are not necessarily
eliminated, they are lower than countries not party to the agreement. It is a form of economic
integration.

1. PTAs foster political stability and economic prosperity, thereby supporting the continuation of
the democratic process and reducing the likelihood of political and social disruption in those
countries that are economically or politically important to the strategic interests of the United
States.

2. PTAs hasten the progress of multilateral trade negotiations, such as GATT; the achievement
of timely, substantial reduction in barriers to trade, particularly agriculture, intellectual property
rights, services, nontariff barriers, and dispute settlement procedures; and stimulate economic
growth and development.
3. PTAs counter the economic and political power created in Europe by further expansion
and integration of the EU and the prospects for trade and economic cooperation with
former Soviet and Eastern bloc nations.
The short term effects of creating a PTA are measured in terms of trade creation and trade diversion. In
the case where there is full employment of domestic resources, trade creation increases the economic
well-being of member nations because it leads to greater specialization in production and trade, lower
consumer prices, and higher disposable incomes
Long term effects.
Increased Competition. Possibly the most important single gain from a PTA is the potential for
increased competition
With the formation of a PTA, trade barriers among members are greatly reduced or eliminated, and
producers must become more efficient to effectively compete with foreign firms.
Economies of Scale. Another benefit of PTAs is that substantial economies of scale may become
possible in the enlarged market area
Stimulus to Investment. The formation of a PTA is likely to stimulate outside investment in production
and marketing facilities
Efficient Resource Use. Finally, if the PTA is a common market, the free movement of labor and capital
is likely to stimulate more efficient use of the economic resources of the entire bloc.
The negative effects of PTA would be to the detriment of the local producers. It may increase
competition but it may also drive local producers out of the market due to incapability to compete with
international industries. Also with PTA, multilateral trade negotiations are challenged. PTAs effect
would be the discrimination of other parties thus contradicting the entire idea of multilateral trade
negotiations.
European Union (EU)
The European Union (EU) is an economic and political union of 28 member states that are
located primarily in EuropeThe EU operates through a system of supranational independent institutions
and intergovernmental negotiated decisions by the member states
Milestones
The EU has developed a single market through a standardised system of laws that apply in all member
states. Within the Schengen Area (which includes 22 EU and 4 non-EU states) passport controls have
been abolished EU policies aim to ensure the free movement of people, goods, services, and capital,
enact legislation in justice and home affairs, and maintain common policies on
trade,[19] agriculture,[20] fisheries, andregional development.
in 2012 generated a nominal gross domestic product (GDP) of 16.584 trillion US dollars, constituting
approximately 23% of global nominal GDP and 20% when measured in terms of purchasing power

parity, which is the largest economy by nominal GDP and the second largest economy by GDP (PPP) in
the world
recipient of the 2012 Nobel Peace Prize.[34]
Customs union features
Unity, common standrads, mutual respect for Members, Associated countries, ccordinated aid for
developed countries, free movement of goods, services and labour ; and being able to drive from
one country into another without slwoing down at the motorway borders... a common currency,
common harmonised defence policy
import quotas, preferences or other non-tariff barriers to trade apply to all goods entering the
area, regardless of which country within the area they are entering.
Common external tariff - The single tariff rate agreed to by all members of a customs
union on imports of a product from outside the union.
Revenue sharing mechanism Own resources provide the EU's main revenue. There are three kinds
of own resources
Traditional own resources
- mainly customs duties on imports from outside the EU and sugar levies.
own resource from value added tax (VAT)
A standard percentage is levied on the harmonised VAT base of each EU country.
own resource based on gross national income (GNI)
A standard percentage is levied on the GNI of each EU country. It is used to balance revenue and expenditure

Criticisms as an elite-driven project

The European project was an elite-driven, top-down affair from the outset. Its leaders took the view,
often explicitly, that Europe's voters did not know what was good for them and would have to be led to
enlightenment. There was never any willingness to let public indifference or outright hostility moderate
the pace. For the most part, voters were not consulted. When they were, and voted No in the occasional
referendum on further transfer of power to Brussels, governments resolved to keep on asking until voters
got it right. Germany adopted the euro despite a sustained majority opposed to monetary union.
In short, elites were the ones who pushed for the European Union. They masked it by saying people
needed to be enlightened. In voting, if people would react negatively in terms of saying no.
Governments would push forth until it got the answer it needed. Basically the elite interest were seen
especially in Germany wherein the elites pushed for euros but the majority did not want it to happen.
This would lead to increase apathy to the parliament which would explain the low turnout in Member of
European Parliament elections.

Theoretical gains from integration

Specialization
Theoretically, specialization will happen in integration. People who can produce something better will
stick to that to increase national wealth. However the problem here is the loss or risk of losing in other
industries. (kunyari expert ang Germany sa corn, yun lang gagawin nila thus losing economies of scale
in cars which is another industry. Ito kung baga yun problema ng specialization).
Economies of scale
Competition
These are stated in the upper half. Basahin niyo nalang ulit yun. Technically pareho lang yun.
Higher growth = higher living standards
Obviously, with integration, more investments and cheaper goods will come in. It will improve the less
developed ones but will greatly benefit the developed ones more. But overall they both gain to a higher
standard of living and social welfare.
Economic Integration in the Asia-Pacific
Asia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim member economies[1] that
seeks to promote free trade and economic cooperation throughout the Asia-Pacific region
The proposal for a FTAAP (Free Trade Area of the Asia Pacific) arose due to the lack of progress in
the Doha round of World Trade Organization negotiations, and as a way to overcome the "noodle bowl"
effect created by overlapping and conflicting elements of the copious free trade agreements there
were approximately 60 free trade agreements in 2007, with an additional 117 in the process of
negotiation in Southeast Asiaand the Asia-Pacific region.[22] In 2012, ASEAN+6 countries alone had
339 free trade agreements - many of which were bilateral.[23]
Some criticisms include that the diversion of trade within APEC members would create trade
imbalances, market conflicts and complications with nations of other regions
Even with the economic integration happening (APEC), some of the major countries (Japan, China) are
not heavily involved.
Noodle bowl effect
phenomenon of international economic policy that refers to the complication which arises from the
application of domestic rules of origin in the signing free trade agreements across nations. The effect
leads to discriminatory trade policy because the same commodity is subjected to different tariffs and
tariff reduction trajectories for the purpose of domestic preferences.
the Asian noodle bowl of FTAs has been sketched as a map of chaotic lines representing an intertwined
mass of preferential trading arrangements
To make things simpler, noodle bowl effect is when bilateral agreements FTAs and such are overlapping
and sometimes contradicting with the international or regional agreements (basta may contradiction)

Asias economic integration is composed of sub-agreements between countries which makes it difficult
for a true regional integration.
One non-economic motive would be that it was established out of fear of Japan dominance in economic
activity in the Asian region (ito lang nakikita ko. If you guys can add go ahead)
ASEAN Free Trade Agreement (AFTA)
A trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing
in all ASEAN countries
ASEAN Framework Agreement on Services
(AFAS)
Aims to:

Facilitates the establishment of free flow of services in the AEC by 2015

Creating a competitive, more efficient services delivery network to facilitate further growth in other
sectors in the economy
Strengthen cooperation among service suppliers in ASEAN;
Eliminate substantial barriers to trade in services;
Progressively liberalise trade in services beyond those undertaken under GATTS of WTO; and
Provides mutual recognition of qualifications and experience through MRAs.
Focus to progressively liberalise trade in services to complement goods sector
Prepare AMS for closer integration of ASEAN into the global economy

ASEAN Investment Area (AIA)

is an agreement between the Member States of the Association of South East Asian Nations (ASEAN) to
promote mutual direct investment.
it is one of the agreements to a ASEAN Economic Community

if you are to compare EU with ASEAN, one can see that EU is far better as compared to ASEAN. The
reason being that EU has reached a common policy on a lot of things such as having a common external
tariff and a shared revenue mechanism. ASEAN on the other hand is still in the progress towards
achieving a level that EU has. It still lacks any coherent and inclusive policy for all its member
countries. As seen, there is a noodle bowl effect that prevents a true regional intergration in Asia. The
overlapping of bilateral agreements is detrimental to the ultimate goal of a regional policy especially on
tariffs.
In terms of capacity, ASEAN is a little more capable of being economically developed as compared to
EU. The reason being that investments and trade are slowly shifting from the West (Europe countries) to
the East (specifically Japan and China). But what hinders Asia from reaching a higher level would be
that they are still dependent on imports coming from outside countries. They still produce products
which are completed in other countries and sold back to them.
(this is my point of view, feel free to make your own)

Week 12 Multinational corporations (MNCs)

Difference in definition between TNCs & MNCs
First MNCs - imperial joint-stock corporations
British East India Corporation
Dutch East India Corporation (VOC)
FDI origin and destination (North or South)
Regional patterns of FDI
Investment location decisions
Product life cycle (PLC) theory
New product
Maturing product
Standardized product
Appropriability theory (Caves)
Stephen Hymer (monopoly preservation)
International division of labor
Law of uneven development
Sovereignty-at-bay (Vernon)
Obsolescing bargain (Kobrin)

Difference in definition between TNCs & MNCs

Multinational (MNC) and Transnational (TNC) companies are types of international
corporations. Both maintain management headquarters in one country, known as the home
country, and operate in several other countries, known as host countries.
Most TNCs and MNCs are massive in terms of budget and are highly influential to globalization.
They are also considered as main drivers of the local economy, government policies,
environmental and political lobbying
An MNC have investment in other countries, but do not have coordinated product offerings in each
country. It is more focused on adapting their products and service to each individual local market. A
TNC, on the other hand, have invested in foreign operations, have a central corporate facility but
give decision-making, R&D and marketing powers to each individual foreign market.
British East India Corporation
The East India Company (EIC), originally chartered as the Governor and Company of Merchants of
London trading into the East Indies, and more properly called the Honourable East India Company, was
an English and later (from 1707)British joint-stock company formed for pursuing trade with the
East Indies but which ended up trading mainly with the Indian subcontinent, Qing Dynasty
China, North-West Frontier Province and Balochistan.
Commonly associated with trade in basic commodities, which included cotton, silk, indigo dye,
salt, saltpetre, tea and opium, the Company received a Royal Charter from Queen Elizabeth in 1600,
making it the oldest among several similarly formed European East India Companies. Shares of the
company were owned by wealthy merchants and aristocrats. The government owned no shares and had
only indirect control. The Company eventually came to rule large areas of India with its own private
armies, exercising military power and assuming administrative functions. Company rule in India
effectively began in 1757 after the Battle of Plassey and lasted until 1858 when, following the Indian
Rebellion of 1857, the Government of India Act 1858 led to the British Crown assuming direct control
of India in the era of the new British Raj.

Dutch East India Corporation (VOC)

was a chartered companyestablished in 1602, when the States-General of the Netherlands granted it a
21-year monopoly to carry out colonial activities in Asia. It is often considered to have been the
first multinational corporation in the world [2] and it was the first company to issue stock.[3] It was
also arguably the firstmegacorporation, possessing quasi-governmental powers, including the
ability to wage war, imprison and execute convicts,[4] negotiate treaties, coin money, and establish
colonies.[5]
FDI origin and destination (North or South)
is a direct investment into production or business in a country by an individual or company of another
country, either by buying a company in the target country or by expanding operations of an existing
business in that country
Usually done by a developed country (USA) to a developing country (Philippines).
Regional patterns of FDI
The bulk of FDI globally takes place between industrialized nations, specifically between
multinational corporations (MNCs) of the developed countries and their subsidiaries located
in other developed countries. However, a significant and growing amount of FDI occurs
between developed countries and developing countries.
a new phenomenon - South-South Foreign Direct Investment - has
emerged, with many developing countries themselves becoming sources of foreign
investment, instead of mere recipients.
Pero basically, ang origin would be industrialized countries.
Investment location decisions
Product life cycle (PLC) theory
There are five stages in a product's life cycle:

Introduction
New products are introduced to meet local (i.e., national) needs, and new products are
first exported to similar countries, countries with similar needs, preferences, and incomes.
If we also presume similar evolutionary patterns for all countries, then products are
introduced in the most advanced nations. (E.g., the IBM PCs were produced in the US
and spread quickly throughout the industrialized countries.)
Growths
A copy product is produced elsewhere and introduced in the home country (and
elsewhere) to capture growth in the home market. This moves production to other
countries
Maturity
The industry contracts and concentratesthe lowest cost producer wins here
Saturation

This is a period of stability. The sales of the product reach the peak and there is no further
possibility to increase it.
Saturation of sales (at the early part of this stage sales remain stable then it starts
falling).
It continues until substitutes enter into the market.
Marketer must try to develop new and alternative uses of product

Decline

Poor countries constitute the only markets for the product. Therefore almost all declining
products are produced in developing countries.

Investments happen during introduction, growth, maturity and saturation.

Appropriability theory (Caves)
The appropriability theory of the multinational corporation emphasizes the conflict
between innovators and emulators of new technologies
Appropriability is "high," and innovators can protect their profits more easily for sophisticated
technologies and on breakthroughs that can be transmitted worldwide through the innovator's own
subsidiaries.
appropriability is "low," and multinationals find it less profitable to create simple technologies and
ideas that require market transfer.
Stephen Hymer (monopoly preservation)
an approach in international business which explains why firms can compete in foreign settings
against indigenous competitors
a direct foreign investor possesses some kind of proprietary or monopolistic advantage not
available to local firms which is why they can compete with local firms/industries.
International division of labor
Explains the spatial shift of manufacturing industries from advanced capitalist countries to
developing countries
A spatial division of labor which occurs when the process of production is no longer confined to
national economies
As developing economies are merged into the world economy, more production takes place in these
economies
Law of uneven development
A Marxist concept to describe the overall dynamics of human history
Different countries, Trotsky observed,[7] developed and advanced to a large extent independently from
each other, in ways which were quantitatively unequal and qualitatively different
In other words, countries had their own specific national history with national peculiarities.

But at the same time, all the different countries did not exist in complete isolation from each other;
they were also interdependent parts of a world society, a larger totality, in which they all coexisted together, in which they shared many characteristics, and in which they influenced each
other through processes ofcultural diffusion, trade, political relations and various spill-over effects
from one country to another.
The effects:

a more backward, older or more primitive country would adopt parts of the culture of a more
advanced, or more modern society, and a more advanced culture could also adopt or merge with
parts of a more primitive culture with good or bad effects.

Cultural practices, institutions, traditions and ways of life belonging to both very old and very new
epochs and phases of human history were all combined, juxtaposed and linked together in a rather
unique way, within one country.

In turn, this meant that one could not really say that different societies all developed simply through
the same sort of linear sequence of necessary developmental stages, but rather that they could
adopt/utilize the results of developments reached elsewhere, without going through all the previous
evolutionary stages which led up to those results. Some countries could thus "skip", "telescope" or
"compress" developmental stages which other countries took hundreds of years to go through, or,
very rapidly carry through a modernization process that took other countries centuries to achieve.

Different countries could both aid or advance the socio-economic progress of other countries
through trade, subsidies and contributing resources, orblock and brake other countries as competitors
from making progress by preventing the use of capital, technology, trading routes, labour, land or
other kinds of resources. In Trotsky's theory of imperialism, the domination of one country by
another does not mean that the dominated country isprevented from development altogether, but
rather that it develops mainly according to the requirements of the dominating country. For example,
an export industry will develop around mining and farm products in the dominated country, but the
rest of the economy is not developed, so that the country's economy becomes more unevenly
developed than it was before, rather than achieving balanced development. Or, a school system is set
up with foreign assistance, but the schools teach only the messages that the dominating country
wants to hear.

The main tendencies and trends occurring at the level of world society as a whole, could be also
found in each separate country, where they combined with unique local trends but this was a
locally specific mix, so that some world trends asserted themselves more strongly or faster, others
weaker and slower in each specific country. Thus, a country could be very advanced in some areas
of activity, but at the same time comparatively retarded in other areas. One effect was that the
response to the same events of world significance could be quite different in different countries,
because the local people attached different "weightings" to experiences and therefore drew different
conclusions

Sovereignty-at-bay (Vernon)
This part deals with the changing relationship between transnational corporations (TNCs) and the State.
Transnational corporations are "the primary 'movers and shapers' of the global economy. "It has been the

rise of the TNC - especially of the massive global corporation - which is seen to pose the major
threat to the autonomy of the nation-state.
Obsolescing bargain (Kobrin)
A model of interaction between a multinational enterprise and a host country government, which
initially reach a bargain that favors the MNE but where over time as the MNEs fixed assets in the
country increase, the bargaining power shifts to the government.

Week 13:

Global Production Chains

Fragmentation
3 key determinants of value chain governance
Complexity of transactions
Codifiability of transactions
Capability of suppliers
5 basic types of value chain governance
Market
Modular value chains
Relational value chains
Captive value chains Hierarchy
Commodity chain research (compare and contrast)
Modern-world systems theory
Global commodity chains (GCC) / Global value chains (GVC)
Global production networks (GPN)
Development via upgrading
Move up same value chain by increasing range of functions performed
Product upgrading
Process upgrading
Upgrading more difficult moving up value chain

Fragmentation
-

Arndt and Kierzkowski (2001)

o Used fragmentation to describe the physical separation of different parts of a
production process, arguing that the international dimension of this
separation is new.

Fragmentation allows production in different countries to be formed into crossborder production networks that can be within or between firms

3 key determinants of value change governance

-

Complexity of Transactions required to sustain a particular transaction, particularly

with respect to product and process specificatios

Codifiability of Information transmitted efficiently without transaction-specific

investment between the parties to transaction

Capability of Suppliers actual and potential suppliers in relation to the requirements of

the transaction

 The complexity of information transmitted between firms can be reduced through the
adoption of technical standards that codify information and allow clean hand-offs between
trading partners. Where in the flow of activities these standards apply goes a long way
toward determining the organizational break points in the value chain. When standards for
the hand-off of codified specifications are widely known, the value chain gains many of the
advantages that have been identified in the realm of modular product design, especially the
conservation of human effort through the re-use of system elements or modules as new
products are brought on-stream (Langlois and Robertson, 1995; Schilling and Steensma,
2001; Sturgeon,2002).
In the realm of value chain modularity, suppliers and customers can be easily linked and
de-linked, resulting in a very fluid and flexible network structure. While the dynamics are
market-like, the system remains qualitatively different because of the large volumes of
non-price information flowing across the inter-firm boundary, albeit in codified form.
Furthermore, a high-level of product differentiation can be accommodated with limited
information exchange as long as differentiation is defined by a set of unambiguous and
widely accepted parameters. Institutions, both public and private, can both define grades
and standards and (in some cases) certify that products comply with them.8

The

development of process standards and certification in relation to quality, labor and

environmental outcomes perform similar functions.9
At the same time, the integration of new suppliers into global value chains also increases
coordination challenges. Keesing and Lall (1992) argue that producers in developing
countries are expected to meet requirements that frequently do not (yet) apply to their
domestic markets. This creates a gap between the capabilities required for the domestic
market and those required for the export market, which raises the degree of monitoring
and control required by buyers.

5 basic types of value chain governance

Market purely arms length company buys the products from other firms.
They do not make the products; DRAMA chip would exemplify arms length
relationship
Modular value chains makes product for other firms

Relational value chains something regularly made

Captive value chains - suppl ies f irms de pen de nt on the le a d firms
Hierarchy everythings made in house
** Just In Time Production (JIT)
You only makes thing when you need it. The components only are made only when an
instance came. More problematic when they are disrupted.

Table 1 Key determinants of global value chain governance

Governance type Complexity

of Ability to codify Capabilities

transactions

transactions

in Degree

the supply base

of

explicit
coordination and
power
asymmetry

Market

Low

High

High

Low

Modular

High

High

High

Relational

High

Low

High

Captive

High

High

Low

Hierarchy

High

Low

Low

High

Commodity chain research (compare and contrast)

Modern-world systems theory

o Anti-development;
o Unit of Analysis: Whole Economy

Global commodity chains (GCC) / Global value chains (GVC)

o Unit of Analysis: Sectoral/Industry

4 GCC dimensions

Input output structure - from raw materials to finished goods

Territoriality - Geographic scope

Governance Structure - Make or buy, level of integration

Institutional context

Global production networks (GPN)

o Unit of Analysis: Sectoral/Industry

Production + services

Economic, political, social, cultural

Circulation (logistics)

Consumers, labor, NGP

Development via Upgrading

Move up same value chain by increasing range of functions performed
Product upgrading
Process upgrading
Upgrading more difficult moving up value chain

Week 15 Migration governance

Migration vs immigration
Migration-related international law
Universal Declaration of Human Rights
1990 Convention on Migrant Workers
Lack of receiving-country signatories
Definition of temporary migration
Skilled and unskilled migrants
Developed country migration policies
Skill-based schemes
Investor schemes
Global migration governance
Lack of WTO / IMF equivalent
GFMD is consultative, non-UN agency, non-binding process
Sociocultural controversies over migration
Multiculturalism
Assimilation
Debates over the nature of migration
Migration as kind of development
Brain drain / brain gain / brain circulation
Remittance flows
Compared to ODA, FDI
Uses for remittances
Dutch disease-like effects on exports
*** Be able to apply liberal, realist and critical perspectives on migration
5 immovable forces driving migration
Wage differences
Differing demographics
All but labor globalization
Low-skill, hardcore non-tradables
Lagging growth in ghost countries
8 immovable ideas blocking migration, especially:
Nationality as a basis for discrimination
Morality based on proximity
Development as being national development
Labor movements not necessary for raising
living standards
Unskilled labor migration depresses native
wages in destination countries
Migrants take more than they contribute
Movement creates crime, terrorism risks
Culture clash
6 accommodations
Bilateral instead of multilateral arrangements
Temporary status for labor mobility
Rationing, using job-/region-specific quotas

Enhance devt impact in sending countries

Sending country involvement in enforcement
Protection of migrants fundamental rights

Migration vs Immigration
Migration- movement of people from on place of region, often a different country, to
another.
Immigration- people come to live in a different country. (Its about the arrival of a
person to a specific place, country.)

Migration-related international law

Universal Declaration of Human Rights

Used as basis for the 1990 Convention of Migrant Workers

The first rights used for Migrant Workers
Basic rights that are applied to Migrant Workers

1990 Convention on Migrant Workers (UN)

that persons who qualify as migrant workers under its provisions are entitled to enjoy
their human rights regardless of their legal status.

aims at protecting migrant workers and members of their families; sets a

moral standard, and serves as a guide and stimulus for the promotion of migrant
rights in each country
does not create new rights for migrants but aims at guaranteeing equality of
treatment, and the same working conditions for migrants and nationals as well
as guaranteeing the rights of migrants to maintain ties to their countries of origin
Migrants are not only workers, they are also human beings
it relies on the fundamental notion that all migrants should have access to a
minimum degree of protection. The Convention recognizes that legal migrants have
the legitimacy to claim more rights than undocumented migrants, but it stresses that
undocumented migrants must see their fundamental human rights respected, like all
human beings.

proposes that actions be taken to eradicate misleading information inciting people to

migrate irregularly, and through sanctions against traffickers and employers of
undocumented migrants
I. Lack of receiving-country signatories
Most of the signatories of the convention came from countries that are sending
migrant workers abroad

Policy decisions on the number, selection, and rights of migrant workers can also be
influenced by their consequences for the interests of migrants and their countries of
origin, whose actions and policies can play an important role in supporting, sustaining, or
undermining particular labour immigration policy decisions in migrant-receiving
countries.
major immigration countries, are clearly reluctant to ratify international conventions that
limit their discretion and ability to restrict the rights of migrants living and working in their
territories.

Some of the rights can run contrary to the host countrys national interests
like that of their policies regarding immigration control
o Ex. UK resists signing the convention because UKs policies has already
established a policy that ensures the rights of the migrant workers but also
immigration control

Definition of temporary migration

A move made for a short period of time with the intention of returning to the
place of usual residence. An important group of circular migrants consists of seasonal
migrants, those who combine activities in several places according to seasonal labour
requirements. Six months is generally used as the maximum duration of a temporary move.

Skilled and unskilled migrants

1. Low-skilled: Less than Highschool
2. Skilled: High school or equivalent (Skilled trades)
3. Highskilled 1: Bachelor degree or equivalent
4. Highskilled 2: Higher degree or equivalent
Skilled Migrants: most preferred by host countries. Given the most importance. High
paying jobs. Usuall legal migrants
Unskilled Migrants: usually, the host country does not give that much focus on them,
blue-collared jobs, usually illegal migrants
***in recent studies, there are now skilled migrants doing low-skilled works in their host
countries
Developed country migration policies
Skill-based schemes

Getting high-skilled workers to work for the host country by attracting them using
the visa scheme. GreenCard scheme

Investor schemes

Global migration governance

Lack of WTO / IMF equivalent

GFMD is consultative, non-UN agency, non-binding process
Global Forum on Migration and Development, is a forum based
international community to address migration.
it is not as established as WTO or IMF wherein everyone follows their
advice

Sociocultural controversies over migration

Multiculturalism
1. soft view- seen as a natural extension of liberal democracy and the democratic
values of tolerance and respect for diversity.
2. hard view- as a threat to liberal democratic values by extension the view that
economic migrants or political migrants and refugees may be seen as endangering the
unity of society
3. middle view- the acknowledgement and toleration of a variety of cultural expressions
as one, possibly the only, feasible means for the Western nations to cope with the
issues raised by globalization, mass immigration and the growth of large and
increasing vocal ethnic minorities within their borders.

Assimilation
becoming more similar over time in norms, values, behaviors, and
characteristics.
Benchmarks:
1.
2.
3.
4.

Socioeconomic status
Spatial concentration
Language attainment
Intermarriage

Debates over the nature of migration

Migration as kind of development
International migration in the development context relates both to people who have
chosen to move of their own accord, and forced migrants who can ultimately end up
contributing to both their country of resettlement and possibly their country of origin if it
is ever safe to return.

Brain drain / brain gain / brain circulation

1. Brain drain- migrant-sending countries lose vital skilled workers (ex. Nurses,
engeerings etc.) to different countries
2. brain gain- the gain of intellectual capital of host nations receiving this skilled labor.
3. brain circulation- as the circular movement of skilled labour across nations. Skilled
migrant workers come back to their country of origin to apply what they have learned
from the host country. Go abroad and come back

Remittance flows
Compared to ODA, FDI
***All are financial flows gained by the country.
*** billions of dollars of aid have rarely achieved their intended aim in terms of economic
development and poverty alleviation
*** International remittances and market-driven capital flows, on the other hand, meet
economic objectives far better than public foreign aid, doing a better job in channeling
funds directly to the poor, and often providing the economy with a greater amount of
capital.
RF international remittances prove to be a greater contributor of economic
growth. Its flows exceed ODA and FDI.
Developing countries: represents a large % in their GDP.
ODA(Official Development Assistance)Economy does not flow according to
market-mechanisms.
Decisions regarding the allocation of public foreign assistances are made by
governments and multilateral lending institutions.
FDI(Foreign Direct Investments)The inflow of funds provides additional resources to
the market

 It can influence host country infrastructure through the effects of technology

spillovers, industry structure, and indigenous technology development.

FDI also affects the natural environment, society, and government economies.

Uses for remittances

Dutch disease-like effects on exports

***Dutch disease- refer to any situation in which a natural resource boom, or large
foreign aid, or capital inows, cause real appreciation that jeopardizes the prospects of
the tradable sector.
Remittances tend to increase household income and thus result in a decrease in the
labor supply. A shrinking labor supply is associated with higher wages (in terms of the
price of tradable output), that in turn leads to higher production costs and a further
contraction of the tradable sector.

* Be able to apply liberal, realist and critical perspectives on migration

5 immovable forces driving migration

Wage differences
1. the differences in wages of individuals is explained by their locations
2. developed countries has higher wages than developing countries

Differing demographics
radically different demographic futures implied by at least the current
differences in birth rates. Nearly all of Europe, some parts more rapidly
and dramatically (Italy, Germany) than others (France, UK) is embarked
on a truly remarkable demographic experience--fertility behavior that
implies a massive and entirely voluntary contraction in national
populations.
All but labor globalization
like trade, labor globalization has been happening around the world
thus its has international influence
Low-skill, hardcore non-tradables

 Generally, business owners benefit from having a flexible

workforce. Immigrants swell the labor pool, especially for unskilled jobs
which tend to be more seasonal and/or sensitive to business cycle
fluctuations. A larger labor pool means that businesses can increase and
decrease employment as needed, gaining and shedding workers as labor
needs change. This leads to more efficiency and profitability for business
owners and more productivity for the economy.
Everyone benefits when immigrants fill jobs that are difficult to
fill. Known as the 3Ds dirty, dangerous, and difficult many jobs filled
by recent immigrants do not generally attract native workers. Yet, the
economies of developed countries are dependent on these manual labor
and service sector jobs construction workers, custodians, home health
care workers, etc. Having immigrant labor fill these lower-end jobs frees
native workers up to take jobs on the next rung of the ladder.
Lagging growth in ghost countries
Developed destination countries are currently struggling
demographically to maintain their population levels and age
structures. With low fertility and longer life spans, many MDCs are in
danger of developing skewed dependency ratios in the future (number of
people in the workforce to the number of people too young or too old to
work). Immigrants are an answer to this dilemma, as they are usually of
working and childbearing age. They keep the population growing,
boosting the dependency ratio in a favorable direction.
Pag masyadong bata or masyadong matanda ang population, solution is
immigrants who are of child bearing age.

8 immovable ideas blocking migration, especially:

Nationality as a basis for discrimination
The governments of nation-states have, for a variety of reasons, much
more interest in that happens to the incomes of the people (and firms) that
reside within the geographic space they control than with the well-being of
all nationals. This leaves the international system and all of its agencies
almost exclusively concerned with what happens within national
boundaries.
Immigrants are a threat to national boundary.
Morality based on proximity
United Arab Emirates (73.8), Kuwait (57.9), Singapore

(33.6), Oman (26.9). Saudi Arabia (25.8)--have done so by creating clear

legal distinctions between citizens and non-citizens such that
workers in those countries are, metaphorically, second class
citizens. These levels of distinctions between residents of the same
country would be extraordinarily difficult to manage in more democratic
countries.
Development as being national development
The presence of large ethnic immigrant interest groups impacts the
foreign policy of the host country toward their countries of origin. US
lawmakers develop policies toward Mexico with the American Hispanic
communities in mind; few politicians make statements regarding US policy
on Israel or the Middle East in general without regard for the sentiment of
American Jewish groups.
Labor movements not necessary for raising living standards
1. Convergence If one believes the natural state of affairs is that income levels
will converge without labor mobility then it is easier to rationalize barriers to labor
mobility.
2. Trade is a substitute for labor mobility Trade in goods could be a substitute for
movements of factors (including people) and hence reducing trade barriers to
imports from country X could be seen as the substitute for allowing people from
country X. However, there is no evidence that trade is in fact a substitute for
labor flowsand some evidence from history that trade was a complement
3. Aid is a substitute for migration. In contrast to increased migration foreign aid
appears to be quite popular.
4. The worlds poor are not so poor. One of the most pernicious myths is that richer
people in poor countries are not so poor. But any non-money indicator of wellbeingchild mortality, malnutrition, schooling--suggests that the richest fifth in
poor countries has much lower living standards than the poorest fifth

Unskilled labor migration depresses native wages in destination countries

In addition, when a large potential labor pool exists, companies have
less incentive to make jobs attractive in terms of employment benefits and
perks, as well as working conditions. Business owners generally save
money on their labor costs immigrants will often work for less money,
and their willingness to accept a lower salary impacts the wages of native
laborers.
rarely do immigrants steal jobs from native workers; they are more
likely to steal jobs from each other with newly arrived immigrants taking
jobs from those already in the labor market. Yet, there is a small negative
effect on native wages, mostly among unskilled workers (particularly those
without a high school diploma), as immigrant wages drive down the value

of labor in lower pay grades where workers are plentiful. However,

percentage declines in native worker wages attributed to immigration must
be weighed against the benefits native workers gain in lower priced
consumer goods and from general economic growth attributed to
immigrant labor.
Migrants take more than they contribute
illegal migrants in the host country benefit from government services
and goods but does not contribute anything to the country because they
do not pay taxes.
Movement creates crime, terrorism risks
migration has a higher chance of immigrating Bad apples into their
state and may highly increase the chance of terrorism.

able to facilitate the transport of enemies of the state and radical

ideologies. Major terrorist events occurring in destination countries, such
as the US and UK, carried out by foreign nationals and/or 1st and
2nd generation immigrants feed this fear.
Host nations are adversely affected when internal conflicts within
the home countries follow immigrants to their new homes. The
violence that accompanies rivalries between different Italian mafia
families in the US or between Russian exiles in the UK creates criminal
and public safety concerns for host nations.
Culture clash
Culture (religion, norms, values, etc. of the migrants is different from the
locals.
Some natives fear immigrant populations will alter the religious and
socio-cultural foundations of their nation.
ex. France: The case of French islams in the country.

6 accommodations
Bilateral instead of multilateral arrangements
bilateral agreements between host and sending countries
Temporary status for labor mobility

 allow for temporary movement of persons in a regime separate from

immigration
Rationing, using job-/region-specific quotas
have numerical quotas for specific occupational categories
Enhance devt impact in sending countries
enhance the development impact of the labor movement through agreements
with the sending country government
Sending country involvement in enforcement
impose automatic penalties on the sending country (and host country
employer) for laborers who overstay
Protection of migrants fundamental rights
protect the fundamental human rights of laborers