Lesson 2:

STRUCTURES OF
GLOBALIZATION
Ms. Angelica Macalinga

GED 104 - THE CONTEMPORARY WORLD

TOPICS:
• GLOBAL ECONOMY
• MARKET INTEGRATION
• GLOBAL INTERSTATE SYSTEM
• GLOBAL GOVERNANCE
 Economic
GLOBALIZATION
• It refers to the increasing interdependence
of world economies.
• According to IMF, it refers to the increasing
integration of economies around the
world, particularly through the movement of
goods, services, and capital across borders.
• Result of human innovation and
technological progress.
 Economic
GLOBALIZATION
• Produces its own major players in
the form of transnational
corporations (TNCs), otherwise
known as multi -national
corporation.
 Economic Globalization
AND INTERNATIONALIZATION
Economic globalization - the integration and Internationalization - the process by which
interdependence of national economies companies, institutions, or countries extend
through the free flow of goods, services, their operations or influence beyond their own
capital, labor, and technology across borders. borders, typically through trade, investment, or
cultural exchange.
Example: Global operations of multinational
corporations like Toyota. Example: Apple has extended its operations
far beyond the United States through trade,
investment, and cultural exchange.
 International
MONETARY SYSTEM
• A system that forms rules and standards for facilitating international
trade among the nations. It is the global network of the government and
financial institutions that determine the exchange rate of different
currencies for international trade.

Example: Bretton Woods System where global currencies were tied to

the U.S. dollar and, indirectly, to gold. It laid the foundation for today’s
financial institutions like the IMF and the World Bank.
• European Monetary Integration - A 30-year long process that began at
the end of the 1960s as a form of monetary cooperation intended to reduce
the excessive influence of the US dollar on domestic exchange rates, and
led, through various attempts, to the creation of a Monetary Union and a
common currency. This Union brings many benefits to Member States.

• European Financial Stability Mechanism (EFSM) - A permanent fund

created by the European Union (EU) to provide emergency assistance to
member states within the Union. It raises money through the financial
markets, and is guaranteed by the European Commission.
International TRADE
• The exchange of goods, services and capital across
national borders. The only way for many people in many
countries to acquire resources.
• This type of trade allows for a greater competition and more
competitive pricing in the market
• Two key concepts in the economics of international trade
are specialization and comparative advantage.
 International TRADE
• Specialization - Countries as well as individual businesses can
maximize their welfare by specializing in the production of those
goods where they are most efficient and enjoy the largest
advantages over rivals.
International TRADE
• Comparative Advantage – The ability of an actor to produce
a good or service for a lower opportunity cost than a
competitor.

Opportunity cost - Refers to what you have to give up to buy

what you want in terms of other goods or services.
 International TRADE
Ex: Michael Jordan could paint his house in eight hours. In those same
eight hours, though, he could also take part in the filming of a television
commercial which would earn him $50,000. By contrast, Jordan's
neighbor Joe could paint the house in 10 hours. In that same period of
time, he could work at a fast food restaurant and earn $100.

- Joe has a comparative advantage to Michael Jordan even though

Michael Jordan can paint his house more faster than Joe.
 International TRADE
• Absolute Advantage – A country has an Absolute Advantage if it can
produce MORE of the good than another country can, with less resources.
Examples:
- France can produce 10 liters of wine in 30 hours. Italy can produce 10
liters of wine in 20 hours. Italy has an absolute advantage over
France.
- Philippines can produce clothing with less resources (money) used than
the USA. Philippines has an absolute advantage over the USA in
clothing production.
 Trade POLICIES
• Refer to the regulations and agreement of foreign countries. It defines
standards, goals, rules, and regulations that pertain to trade relation between
countries.
Focuses on Trade Policy in International Trade
• Tariffs - These are taxes or duties paid for a particular class of imports or
exports.
• Trade barriers - These are measures that governments or public authorities
introduce to make imported goods or services less competitive than locally
produced goods and services.
• Safety - This ensures that imported products in the country are of high quality.
TOPICS:
• GLOBAL ECONOMY
• MARKET INTEGRATION
• GLOBAL INTERSTATE SYSTEM
• GLOBAL GOVERNANCE
 MarketINTEGRATION
• Refers to how easily two or more
markets can trade with each other.
It occurs when prices among
different locations or related goods
follow similar patterns over a long
period of time.
 Global
CORPORATION
• A business that operates in two or more
countries. It also goes by the name
"multinational company"
• Several advantages are offered by global
expansion of business over running a strictly
domestic company.
Example: Coca-Cola, one of the largest and most
well-known multinational companies.
Foreign Direct
INVESTMENT
• It was of corporate origin and a major driver of extended global
corporate development.
• It is an investment made by a company or individual in one
country in business interests in another country, in the form of
either establishing business operations or acquiring business
assets in the other country.
 BRICS
ECONOMIES
• Brazil, Russia, India, China, and South Africa (BRICS) These five countries were among the
fastest growing emerging markets as of 2011.
• Further, Brazil, Russia, India and China (BRIC) refer to the idea that China and India will, by
2050, become the world's dominant suppliers of manufactured goods and services,
respectively, while Brazil and Russia will become similarly dominant as suppliers of raw
materials.
• Due to lower labor and production costs in these countries now including a fifth nation, South
Africa, many companies have also cited BRIC as a source of foreign expansion opportunity.
 General Agreement on Trade
and Services (GATS)

• The GATS provides a framework of rules

governing services trade, establishes a
mechanism for countries to make
commitments to liberalize trade in services
and provides a mechanism for resolving
disputes between countries.
TOPICS:
• GLOBAL ECONOMY
• MARKET INTEGRATION
• GLOBAL INTERSTATE SYSTEM
• GLOBAL GOVERNANCE
• European Integration - The process of industrial, political, legal,
economic, social and cultural integration of states wholly or partially in
Europe. European integration has primarily come about through the
European Union and its policies.
• European Union (EU) - international organization comprising 28
European countries and governing common economic, social, and
security policies.
 Economic INTEGRATION
It is an arrangement between different regions that often includes the reduction or
elimination of trade barriers, and the coordination of monetary and fiscal policies.
Seven Stages of Economic Integration
1. Preferential trading area (PTA)
2. Free trade area
3. Customs union
4. Common market
5. Economic union
6. Economic and monetary union
7. Complete economic integration
 Preferential
TRADE AREAS
• When there’s an agreement on reducing or eliminating
tariff (tax or duty to be paid on a particular class of imports or
exports) barriers on selected goods imported from other
members of countries within the geographical region or areas.
• Agreement can either be bilateral (between two countries),
or multi-lateral (several countries).
 AGREEMENT
• FTAs are formed when two or
more countries in region agree
to reduce or eliminate trade
barriers on all goods imported
from other members.
Example: North American Free
Trade Agreement (NAFTA)
3. Customs Union – Member countries adopt a common external tariff
on imports from non-member countries.
4. Common Market – Free movement of goods, services, capital, and
labor among member countries.
5. Economic Union – A type of trade bloc where member countries
integrate their economies for free movement of goods, services, capital
and labor across borders.
Example. European Union (EU) using euro as common currency)
6. Economic and Monetary Union – involves a single economic market, a
common trade policy, a single currency and a common monetary policy.
- Means to provide stability and for stronger, more sustainable and inclusive
growth across the euro area and the EU as a whole for the sake of improving
the lives of EU citizens
7. Complete Economic Integration – single economic market, a common
trade policy, a single currency, a common monetary policy, together with a
single fiscal policy, including common tax and benefit rates or the complete
harmonization of all policies, rates, and economic trade rules.
TOPICS:
• GLOBAL ECONOMY
• MARKET INTEGRATION
• GLOBAL INTERSTATE SYSTEM
• GLOBAL GOVERNANCE
 Global
GOVERNANCE
• Is sometimes referred to as “world governance”
• A global movement towards political cooperation among transnational actors,
negotiating responses to problems that affect more than one state of region.
Example: United Nations (UN) serves as a platform where countries come
together to address global issues such as peace and security, climate change,
human rights, and sustainable development.
Four Main Purposes of
THE UN CHARTER
1. Maintaining world peace and security
2. Developing relations among nations
3. Fostering cooperation between nations in order to
solve international problems
4. Providing a forum for bringing countries together
 Challenges of Global
GOVERNANCE IN THE 21ST

CENTURY
• Ethnic conflicts
• Infectious diseases
• Terrorism
• Climate Change, Energy security, Food and water scarcity,
international migration flows, and new technologies
 Globalization’s Impact
ON THE STATE
• Factors which lead to the increase and acceleration of
movement of people, information, commodities, and capital.
1. Lifting of trade barriers
2. Liberalization of world capital markets
3. Swift technological progress (Information technology,
transportation and communication)
 Globalization’s Impact
ON THE STATE
• Cannot be solved at the national level or state to state
negotiations:
1. Poverty
2. Environmental Pollution
3. Economic Crisis
4. Organized Crime and Terrorism
 THANK
YOU!

GED 104 - THE CONTEMPORARY WORLD