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Globalization and International Trade. Specialization and Trade. Retaliation for not playing fair.
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Globalization and International Trade Specialization and Trade
Retaliation for not playing fair When two countries enter into an agreement to trade- if one contends the other is “holding back” or not allowing the trade to occur- the other one then imposes strict tariffs on another product. Examples: • Mexican trucks entering the U.S. (NAFTA) • China selling aluminum before fair market- imposed sanctions on China- China retaliated with production of nylon.
Free trade concepts: • Sweatshops in Malaysia • Call centers in Bangalore • Mines in Brazil • Branches of Starbucks and McDonalds all over the world.
Taking a page from history • Globalization has been growing since 1492 in America • Prior to that Europe and the East traded • What was the quest for Marco Polo? • Why do we want to trade? • How can it make us better off?
5 Key factors behind globalization • Free trade – Free trade reform began in the 1980’s and then you saw China remove many restrictions on its export markets.- This meant low wages and an influx into “rich nations” of cheap goods. (i.e. look at your labels - ) • Outsourcing – Manufacturing in U.S. and Europe began shifting their production to cheaper labor areas. Also call centers flourished in countries that were English speaking. Why would a company want to do this? • Communication Revolution – 2 boosts here – (1) Containerization (things could be shipped in huge containers on freighters or planes.) This cut costs and improving transit time. (2) Broadband breakthrough – Internet super highways with fiber optics. I also think another boost (3) bar coding.
Bar Codes = digital Morse code • Bar codes can be used in every business around the world. For example: • to track assets in any building including every desk, computer, telephone, copier and desk accessory. • to track mail from the time it arrives in the mail room to the time it is delivered to each desk or location within an office. • to help security guards identify every employee, every door they enter and every room they work in. • to secure, lock or unlock entrances or exits throughout the plant. • to manage and track your vehicle fleet and each driver • Now, we also can add apps. Information provided by data id systems.
4th – Liberalization – During Cold war many countries kept their borders closed to foreign contacts. Now money can flow freely from one country to another. • 5th – Legal harmonization – Attempt to harmonize laws on property rights and intellectual property so a patent would be recognized among countries and honored as such. Hopefully, international standards of quality will soon be added so we don’t have to experience the latest influx of inferior products from some countries.
Advantages and Criticisms of globalization • Has made many in the world much better off by increasing exports – Brazil, China and India are perfect examples. • Has helped keep inflation world-wide down. – More stability in pricing. __________________ • Even though wealth has been created – not shared equally • Human rights has been an issue- many abused – sweatshops and poor working conditions • Influence of western brands has made it difficult to maintain certain cultural values in certain countries.
One of the strongest links for globalization The countries with strong economic ties are the least likely to engage in war with each other. However, regardless of economic ties – one should never assume that the spread of trade and wealth will eliminate war.
Protectionism • What is it? • Why would a country want to engage in it? • Does it work? Another downside of free trade is dumping. • Dumping = selling a product in a foreign market below market price…. • This is hard to regulate and hard to eliminate. But it is a detriment to the free trade concept.
Terms to know • Tariff = tax on imported goods • Quota = limited amount permitted to be received in trade. • Predatory pricing = lowering the price of one item in a specific area and not throughout the trade area • Price discrimination = special pricing for special people. • Trade deficit = importing more than exporting • Favorable balance of trade = exporting more than importing (show video)