IDST 1001H Lecture Notes - Lecture 6: Wage, List Of Charmed Characters, Final Good
14 Jun 2018
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Lecture 6: Globalization
• Globalization: increasing global integration of production, trade, and finance
• From 1950-1994, world trade grew more rapidly than global production
• From 1997-2007 merchandised exports grew more quickly than world production
• World economy is becoming more trade intensive
• Manufacturing trade has grown more rapidly than of mining or agricultural
Since 1950:
• Positive growth in world production
• Positive growth in world trade
• Growth in world trade is always faster than growth in world production
• Countries are exporting and importing more than ever before
• Growth in world trade is driven by manufactures
Who Trades what:
• Machinery, exported by Europe and Japan
• Chemicals, exported by Europe, Japan, and North America
• Medicine, exported by Europe
• Finance and insurance, exported by Europe
• Royalty and license fees, exported by US, Europe, and Japan
• Clothing, exported by China, South Asia, and Europe
• Toys, exported by China
The Triad: European union, Japan, countries of NAFTA
• Dominate world trade flows
• Bulk of world trade takes place between developed countries, developing countries
provide particular components of the manufactured good, or lower value goods
• Intra-industry trade: trade that takes place between a single industry
• Intra-firm trade: trade that takes place within companies
Why has intra-firm trade grown?
• Manufactured goods are global products, parts are produced around the world
• Outsourcing: outsourcing of tasks from the country of origin of the manufacturer
making the good to the country where relative unit labour cost is lowest
Relative unit labour costs:
• Labour productivity as a ratio of wages
• Companies are seeking low relative unit labour costs
Global Production supply networks or global value chains
Transnational corporations: companies that conduct a significant share of their business in
countries outside their country of origin
Foreign direct investment: buying or setting up of a production facility that is owned or controlled
by a company which is headquartered in a different country
• Money can flow out of countries
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