Globalization

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Overview of Globalization
The historical origins of globalization are the subject of

on-going debate. Several scholars situate the origins of globalization in the modern era, others regard it as a phenomenon with a long history. The term globalization is relatively new and didnt enter common usage vocabulary until mid-1980s.Before that global process were referred to primarily as international relations rather than global relations (Bahira, 2010).

Definition
Globalization is a process that encompasses the causes,

course, and consequences of transnational and transcultural integration of human and non-human activities. Human activities encompass the linguistic, cultural, economic, and political aspects of human life that are a part of the human and social sphere. It is also important to include non-human activities, which incorporate the spread of bacteria and non-human diseases such as bird flu, as well as natural disasters.
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Factors that enhance globalization

Economic factors: - the concentration of huge capital, rise of

Multi National Corporations and extensive global trade patterns create the opportunities to go beyond national borders. International factors:- the formation of organizations like International Monetary Fund, the World Bank and United Nations Development Program, World Trade Organization and formation of regional economic integrations. Social factors: - the increase in the movement of people in geographical context. Technical factors: - the development of means of transportation, communication and technological change facilities movement of people, goods & services, ideas and knowledge from one country to the others. Political factors: - weakening and removal of national boundaries through preferential trade areas and custom unions.
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Features of globalization
Liberalization: The free exchange of capital, goods, service

and technologies between countries; Free Trade: between countries; absence of excessive governmental control over trade; Connectivity: localities being connected with the world by breaking national boundaries; links between one society and another, and between one country and another through international transmission of knowledge, literature, technology, culture and information; Borderless Globe: Breaking of national barriers and creation of inter- connectedness; Multi dimensional process: it includes economical, political, social, ecological and cultural dimensions and International cooperation.
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Globalization and Ethiopia

GDP grew by 8.6 % in the fiscal year 2011/12 & 11 %

average growth for the last eight years(MOFED)

380 US dollar GNI per capita in year 2012 (World Bank data)
The value of export reached 3.1 billion USD, the

value of imports reached 11.06 billion USD. (EEA) FI(56.8%), PDI(36.5%), PI (6.7%) (2011/12) (EEA) (IGAD), (COMESA), (AU), (UN) and other institutions Darfur, Liberia, Abey and Somalia.
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Globalization and Ethiopia

WTO, AGOA, EBA and other global markets. 1-2 million Ethiopians

Shift in music, movie

Valentine day, women day Jeans, caps, t-shirts and brand names

English and other languages

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Opportunities of Globalization to Ethiopia

Promotes economic growth Coordinate and better work together towards common

political and economical goals with other countries Competition and world wide market, opportunities. Customer bargaining power. Technologies, direct access to Producers, suppliers and customers Employment , educational opportunities and income generation Educational institutions Other nations culture & to show its diverse culture & tradition
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Challenges of Globalization to Ethiopia

Export Import un equal exchange, unfavorable terms of trade and

to flow money Challenge to private sector to compete both internally and externally on a sustainable base Traditional cultures are begun to fade up and cultural conflict to rise law and policies of our country Loss of tariff revenue (33 billion birr revenue from import duties and taxes 2011/12) More health risks and fast spreading diseases Global warming, air, land and water pollution. Brain drain and affecting family & community structure
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Globalization and Markets

Global marketing is marketing on a worldwide scale

reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives. There are arguments for and against the idea of the globalization of markets.
People are gradually seeking high quality/low cost products

due to the advancement of technology and communication this facilitates a higher degree of product standardization Markets are more likely to become increasingly fractured by culturally and/or environmentally-based preferences, though not necessarily organized on a national basis.
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Globalization and domestic market in Ethiopia

Domestic marketing is a marketing restricted to the

political boundaries of the country which only considers domestic competition. The import value to the domestic market in the year 2011/12 is 11.06 billion USD which shows substantial increase of 34.02%. The majority of commodities which imported are consumer goods, capital goods, raw materials, semifinished goods and fuel

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Globalization and foreign market in Ethiopia

The export, franchising, joint venture or full direct

entry of a marketing organization into another country known as international marketing, which includes exporting a company's product into another location. In 2011/12 the value of export reached 3.1 billion USD with a growth rate of 14.8% compared to the year 2010/11. Major products are coffee, gold, oilseeds, chat, flower, live animals, leather and leather products and pulses. The major destination are Germany, Japan, Saudi Arabia, Holland, United States of America, Switzerland & neighborhood countries like Somalia & Djibouti.
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Advantage & disadvantage of international marketing for Ethiopia

Advantages An opportunity to manipulate its Economies of scale Products with low prices Give an ability to leverage good ideas Helps to establish relationships outside of the political arena Using e-Marketing Disadvantages

Differences in consumer needs, wants, and usage patterns

for products. The response for marketing mix elements is not satisfactory and little known about international brands. Differences in the legal environment, institutions available, administrative procedures and product placement occur.
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Globalization and Production

Overview of Globalization and Production

Globalization of production refers to

o The sourcing of goods and services from locations around the globe o To take advantage of national differences in the cost and quality of

factors of production (such as labor, energy, land, and capital)

o By doing this, companies hope to lower their overall cost structure or

improve the quality or functionality of their product offering

Globalization and production in Ethiopia

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For this section Ethiopian floriculture sector can be taken as a good example

Due to emphasis the government has provided for foreign direct investment which is one of the major indicators of globalization
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Cont.
In the 80s, there was only a single flower farm on about 25 hectares

of land near the town of Zeway According to the Ethiopian Horticulture Development Agency (EHDA), Land size is also expanding every year o In the year 2012 the total land allotted for floriculture was 2844.09 Ha o In the year 2004, it was only150 hectares. 2,500,000,000.00 Figure 1- Export of Flower by Value and volume
2,000,000,000.00 1,500,000,000.00 Total Export Quantity 1,000,000,000.00 Total Export Value

500,000,000.00

1998 1999 2000 2001 2002 2003 2004

Source: EHDA (December, 2012)

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 Globalization and trade in Ethiopia

o As a result of international trade, consumers around the world enjoy a

broader selection of products than they would if they only had access to domestically made products Export trade o Due to the emergence of globalization Ethiopia has benefited In trading its items in the global market the foreign currency generated through export being revealed in the table here in under
Figure 2 Export performance of Ethiopia on major export items

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Import trade
o No country today can be totally self-sufficient without suffering a high cost

o All countries need toor choose toimport at least some goods and

services for the following reasons Goods or services that are either a) Essential to economic well-being b) Highly attractive to consumers but are not available in the domestic market Goods or services that satisfy domestic needs or wants can be produced more inexpensively or efficiently by other countries, and therefore sold at lower prices
Table 1 Ethiopian import for the past three years

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 Is a succession of GATT and was established in

1995 after the completion of the Uruguay round negotiations with the objective of promoting free trade. World Trade Organization (WTO) is a global trade body that has 150 member states, off which 34 members are LDCs. E.g. Chad, Tanzania, Nepal...etc Now,24countries are currently negotiating their WTO membership. E.g. Afghanistan,Ethiopia,Liberia...etc WTO mainly serves as a forum for trade negotiations, and it administers trade agreements ratified by member states. WTO reviews national trade policies. It offers technical support to developing countries on trade policy issues. The most important function of the WTO, however, lies in its role on settlement of disputes.

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Fundamental principles of WTO

Trade without discrimination: A country should note

discriminate between its trading partners and similarly it should note discriminate its own and foreign products and services. Predictability and market access ensured through binding tariffs, removing quantitative restrictions and non tariff barriers. Fair competition: the rules on non - discrimination provide a level playing field and also WTO also allows the use of such measures as anti-dumping duties and countervailing measures to ensure a level playing field. Promoting development: WTO recognize special needs of developing and LDCs, binding tariffs and WTO calls for an enhanced market access conditions for LDCs and seeks increased technical assistance from developed countries.
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WTO Accession Process Procedure for accession to the WTO comprises four phases; Phase 1: Request for membership Phase 2: Fact finding stage Phase 3: negotiation stage Phase 4: adoption/ acceptance/membership
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Ethiopia WTO accession Status

Ethiopias interest in multilateral international trading bodies dates back to the time of GATT in 1984. Two years after WTOs establishment Ethiopia formally submitted an application for the status of observer coupled with a declaration of intent to

apply for accession. The WTO General Council accepted this application at a meeting in October 1997. Ethiopia remained an observer until 2002 and then formally submitted a request for accession to the organization in January 2003.
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COND
In 2007:
Ethiopia submitted its Memorandum of Foreign Trade

Regime to start to multilateral track negotiations. February 2008: Ethiopia responded to questions posed by members of the working party on its trade regime. The working party has met twice to discuss these responses. Summer2008: Ethiopia receives 2nd round questions from WTO members. In March 2009 : Ethiopia replies to WTO members In July 2009 : Ethiopia submitted draft legislative action plan and document showing agriculture support programs. In 2011 Ethiopia receive 3rd round question from WTO members on market access and tariff rates and finally Ethiopia submitted its views on 17th February 2013 .
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Challenges of WTO accession

Supply Side Constraints: - Producing exportable goods with

the required quality and other standards making developing countries with more competition for domestic as well as international market. Trade in goods: - as tariff is the most important policy tools and source of revenue needed to be handled carefully, WTO accession will reduce further the existing tariffs. Trade in service: - poor quality and in adequate services such as in finance, transport, telecom service will be opened for foreign competition. The major challenges are how to identify the sectors opened for foreign competition, the modes and conditions for their competition. Intellectual property rights: - many developing countries have providing legal protection for IPRs which needs compatible with TRIPS (Trade Related Intellectual property rights) agreements. TRIPS contain flexibility for WTO member countries which demands identifying for these flexibilities and making effective use of them has been a challenge for LDCs.
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Prospects of WTO accession

Market access;- membership in WTO enables export

trade more predictable, secure and have better market information in international markets. Predictability and security:- WTO accession brings with commitments which could not easily reversed, disciplining government in dealing with business, greater policy and stability in commercial policy and practice as well as enhanced confidence for investments. Accession as an impetus for reforms: accession in WTO reforms brings towards many economic reforms which the reform measures may be consolidated in the reforms coming with WTO. Dispute settlements: WTO members that have access to the binding of dispute settlement mechanism whose decision has been significant chance of being enforced.
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