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CHAPTER 1GLOBALIZATION What is GlobalizationGlobalization The shift toward a more integrated and interdependent world economyThe Globalization of Markets The merging of historically distinct and separate national markets into one huge global marketplaceFalling barriers to crossborder trade have made it easier to sell internationallyA company does not have to be the size of a multinational giant to facilitatebenefit from globalizationThe Globalization of Production Sourcing goods and services from locations around the globe to take advantage of national differences in the cost and quality of various factors of productionBy doing this companies hope to lower their overall cost structure or improve the quality of functionality of their product offeringThe internet is a great facilitator for the globalization of productionCanada is highly globalized one of the highest in the world indicators exports imports FDI and divide by GDP what does it look like It grows Thats globalizationThe Emergence of Global InstitutionsGlobal institutions have been created to help manage regulate and police the global marketplaceGeneral Agreement on Tariffs and Trade GATT International treaty that committed signatories to lowering barriers to the free flow of goods across national borders led to WTOWorld Trade Organization WTO The organization that succeeded the GATT and now acts to police the world trading systemoAs of 2006 149 nations that collectively accounted for 97 percent of world trade were WTO members thereby giving the organization enormous scope and influenceInternational Monetary Fund IMF International institution set up to maintain order in the international monetary systemoThe IMF is seen as the lender of last resort to nationstates whose economies are in turmoil and currencies are losing value against those of other nationsoIn return for the loan the IMF requires nationstates to adopt specific economic policies aimed at returning their troubled economies to stability and growthWorld Bank International organization set up to promote economic development primarily by offering lowinterest loans to cashstrapped governments of poorer nationsoWas set up to promote economic developmentUnited Nations UN An international organization made up of 191 countries charged with keeping international peace developing cooperation between nations and promoting human rightsoWhen states become members of the United Nations they agree to accept the obligations of the UN Charter an international treaty that established basic principles of international relationsFactors Leading to Greater GlobalizationReduction in tariffs quotas etc on tradingObstacles to FDI have been reduced dramatically hardly any countries now that say no to FDITransportation costs came down standards and quality of moving goods went up less theft faster less breakage etcCommunication and information technology costs decreased internationally by 99Emergence of common tastescommodification people like to consume the same thingsGlobalization of production brought about because of technological changes leads to larger economies of scaleIncreasing importance of multinational corporations production activities in 2 or more countriesThe Globalization DebatePrinciple Controversies Over GlobalizationJob securityLoss of jobs from companies moving production to other countries The benefits outweigh the costsglobalization will result in more countries specializing in ps they can produce most efficiently while importing ones they cannot produce efficientlyWage and income levels Gap between the rich and poor nations of the world has gotten wider from globalization There are factors outside globalization that has led to this widening totalitarian governments corruption no property rights warLabour and environmental policies Globalization means companies will move production to countries with little to no regulations to protect the people and environment from abuse Tougher environmental and labour laws go hand in hand with economic progress as countries get richer they enact tougher regulationsNational sovereignty Interdependent economy shifts power away from governments toward national orgs like WTO Power of national orgs is limited to what nationstates collectively agree to grantGlobal economic managementPrincipal Advantages of GlobalizationConsumer prices and choice every consumer in Canada winsbetter choices in terms of price quality different types of products etc Only people that lose are households that offer their factors of production in industries that are highly tradedReturns to capitalPayoff to innovationsLabour mobility and returns to human capitalGreater levels of competitionCountry as a whole benefits benefits outweigh the costs
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