Globalization
→ -:- The shift toward a more integrated and interdependent world economy.
Globalization of markets
→ -:- The merging of historically distinct and separate national markets into one huge
global marketplace.
Globalization of production
→ -:- The sourcing of goods and servi...
→ -:- The shift toward a more integrated and interdependent world economy.
Globalization of markets
→ -:- The merging of historically distinct and separate national markets into one huge
global marketplace.
Globalization of production
→ -:- The sourcing of goods and services from locations around the globe to take
advantage of national differences in the cost and quality of factors of production.
Factors of production
→ -:- Labor, energy, land, and capital.
General Agreement on Tariffs and Trade (GATT)
→ -:- Institution created by voluntary agreement between individual nation-states and
their functions are enshrined in international treaties.
World Trade Organization (WTO)
→ -:- -GATT successor
-Primarily responsible for policing the world trading system and making sure nation-states
adhere to the rules laid down in trade treaties signed by WTO member states.
International Monetary Fund (IMF)
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→ -:- -Created in 1944 by 44 nations that met at Bretton Woods, New Hampshire.
-Established to maintain order in the international monetary system.
World Bank
→ -:- -Created in 1944 by 44 nations that met at Bretton Woods, New Hampshire.
-Set up to promote economic development.
-Less controversial than IMF
United Nations
→ -:- -Established October 24, 1945
-Committed to preserving peace through international cooperation and collective security.
UN Charter
→ -:- An international treaty that establishes basic principles of international relations.
UN Four Purposes
→ -:- 1. To maintain international peace and security.
2. To develop friendly relations among nations.
3. To cooperate in solving international problems and in promoting respect for human rights.
4. To be a center for harmonizing the actions of nations.
Group of Twenty (G20)
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→ -:- -Established in 1999.
-Comprises the finance ministers and central bank governors of the 19 largest economies in the
world, plus representatives from the European Union and the European Central Bank.
-Originally established to formulate a coordinated policy response to financial crises in
developing nations.
-2008/2009 it became the forum where major nations attempted to launch a coordinated
policy response to the global financial crisis.
Two main factors that underlie the trend toward greater globalization
→ -:- 1. Decline in barriers to the free flow of goods, services, and capital that has
occurred since WWII
2. Technological change, particularly the dramatic developments in recent decades in
communication, information processing, and transportation technologies.
International trade
→ -:- Occurs when a firm exports goods or services to consumers in another country.
Foreign direct investment (FDI)
→ -:- Occurs when a firm invests resources in business activities outside its home country.
Barriers to international trade
→ -:- High tariffs on imports of manufactured goods.
Consequence of high tariffs
→ -:- "Beggar thy neighbor" retaliatory trade policies.
Countries would progressively raise their trade barriers against one another.
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The Uruguay Round
→ -:- -December 1993
-Extended GATT to cover services as well as manufactured goods.
-Provided enhanced protection for patents, trademarks, and copyrights.
-Established the World Trade Organization to police the international trading system.
GATT effect on average tariff rates
→ -:- Average tariffs rates haven fallen significantly since 1950, now standing above
4%.
The Doha agenda
→ -:- -Cutting tariffs on industrial goods, services, and agricultural products.
-Phasing out subsidies to agricultural producers.
-Reducing barriers to cross-border investments.
-Limiting the use of antidumping laws.
Lowering barriers to international trade
→ -:- -Enables firms to view the world as their market.
-Allows firms to base production at the optimal location for that activity.
World trade growth
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