INTERNATIONAL

TRADE

OPENING THE
MARKET:
THE GLOBAL
GROCER

What is GLOBALIZATION
REFERS to the shift toward
a more integrated and
interdependent world
economy.
It has several different
facets, including the
globalization of markets &
production.

GLOBALIZATION
We are moving away from
a world in which:
National economies were
contained entities,
Isolated from each other by
barriers in cross-border
trade and investments,
either by

GLOBALIZATION
distance, time,
zones/languages
By differences in
government regulations,
culture and business system,
And we are moving towards
a world in which barriers to
cross-border trade and
investments are tumbling.

GLOBALIZATION
Perceived distance is
shrinking
due to advances in telecom,
transportation technology
Material culture is starting to
look similar the world over
And national economies are
merging into interdependent
global economic system.

GLOBALIZATION
Example:

A Filipino might drive to

work in a car designed in
Sweden that was
assembled in Thailand by
Ford from components in
U.S. and Japan that were
fabricated from China
steel and Malaysian
rubber.

GLOBALIZATION
Example:

This is the world we lived in.

It is a world where the
volume of goods, services
and investment crossing
national borders expanded
faster than world output
every year during the last
2 decade of the 20th
century.

GLOBALIZATION
Example:
A world where more than $1.2
billion in foreign exchange
transactions are made daily.
It is a world where symbols of
materials & popular culture
are increasingly global:
COKE, SONY, NOKIA, MTV
shows, etc.

GLOBALIZATION
Example:

It is a world which
international institutions
such as WTO & gatherings
of leaders from worlds
most powerful economies
have called for even lower
barriers to cross-border
investments.

U.S.A. In Perspective
USA has 4.7 percent of
worlds population.
It produces 31.2 % of
global GDP.
Accounts 40.6% of global
research and development
investment
Has 36.3 % of global
defense expenditures.

What is Globalization of
Markets
Refers to the merging of
historically distinct and
separate national markets
into one huge global
marketplace.
Falling barriers to crossborder trade have made it
easier to sell
internationally.

What is Globalization of
Markets
A company does not have to be
the size of multinational giants
to facilitate and benefit from
the globalization of markets.
The Philippines has more than a
thousand small businesses
with fewer than 100
employees registered foreign
sales.

What is Globalization of
Markets
Examples:

Cinderella Aparrell,
RPs foodstuffs, like
Barrio Fiestas food
ingredients in sachet,
Jollibees hamburger
chain, Goldilocks, etc.

What is Globalization of
Production
Refers to 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 (such as
labor, energy, land,
capital).

What is Globalization of
Production
By dong this, companies
hope to lower their
overall cost structure
and/or improve the
quality of functionality of
their product offering thereby allowing them to
compete more effectively.

What is Globalization of
Production
Example:

Consider Boeings latest

commercial jet. 8
Japanese suppliers makes
the doors for nose landing
gear, 3 supplies in Italy
makes and manufacture
wing flaps and so on.

EMERGENCE OF GLOBAL
INSTITUTIONS
During the past 50 years, a number of
important global institutions have been
created
1) Help perform globalization,
2) Increase proportion of business activity
3) Transcends national borders & institutions
4) Manage, regulate and police global
marketplace, and
5) Promote the establishment of
multinational treaties to govern the global
business system.

EMERGENCE OF GLOBAL
INSTITUTIONS
1)General Agreement on Tariffs
and Trade (GATT) its successor
World Trade Organization (WTO)
2)International Monetary Fund
(IMF)
3)World Bank
4)United Nations

EMERGENCE OF GLOBAL
INSTITUTIONS
WTO is primarily responsible for
policing the world trading
system and make sure nationstates adhered to the rules laid
down in trade treaties signed
by WO members.
As of 1s Jan. 2002 there are 144
nations members of WTO (including
significant trading nations, which
gives the WTO enormous scope and
influence)

EMERGENCE OF GLOBAL
INSTITUTIONS
Functions of WTO
a) Facilitate the establishment
of additional multinational
agreements between WTO
members
b) WTO promotes the lowering
of barriers to cross-border
trade and investment.

EMERGENCE OF GLOBAL
INSTITUTIONS
2) International Monetary Fund
(IMF) & World Bank
a)Were created in 1944 by 44
nations Bretton Woods, New
Hampshire U.S.A.
b)Task to maintain order in the
international monetary system
c) Promote economic
development

EMERGENCE OF GLOBAL
INSTITUTIONS
World Bank
b) Is often seen as the lender
of last resort to nationstates whose economies
are in turmoil and
currencies are losing value
against those of other
nations.

EMERGENCE OF GLOBAL
INSTITUTIONS
WORLD BANK
a) Focus on making low interest
rate loans to cash-strapped
governments in poor nations
that wish to undertake
significant infrastructure
investment (such as building
dams or road systems).

EMERGENCE OF GLOBAL
INSTITUTIONS
IMF
b) IMF Loans comes with string
attached, in rturn for loans
- it requires nation/states to
adopt specific policies aimed at
returning their troubled
economies to stability and
growth.

EMERGENCE OF GLOBAL
INSTITUTIONS
UNITED NATIONS
a)Established in Oct. 24, 1945 by
51 countries committed to
preserving peace through
international cooperation and
collective security.
b)When states become members o
the U.N. they agree to accept
the obligations of the UN
Charter.

GLOBAL INSTITUTIONS
PURPOSE OF U. N.
1) Maintain international peace and
security
2) Develop friendly relations among
nations
3) Cooperate in solving
international problems
4) Promote respect for human rights
(and to be center for harmonizing
the actions of nations.

DRIVERS OF
GLOBALIZATION
2 Factors underline the trend
toward greater globalization:
1) Decline in barriers to the free flow
of goods, services and capital
2) Technological change, particularly
the dramatic developments in
recent years in communication,
information process and
transporting technologies.

MOOREs LAW
The power of microprocessor
technology doubles and its
costs of production fall in half
every 18 months.
As this happens costs of global
communications are going
down which lowers the cost of
coordinating & controlling a
global organization.

Changing Demographics of
Global Economy
Because of globalization there
were dramatic change in
demographics of global economy
over the past 30 years.
There are 4 demographic style
facts of global economy that
occued:
FIRST US dominance in the world
economy and world trade picture

Changing Demographics of
Global Economy
2ND U.S. dominance in world
foreign direct Investment
3RD - was the dominance of large
multi-national US firms on
international business scene
4th roughly half the globe the
centrally planned economies of
Communist world was off limits
to Western international
businesses.

Changing Pattern of
World Output and Trade
Share of World Output,
COUNTRY
1963

Share of World Output,

2000

Share of World EXPORT,

2001

U.S.A.

40.30%

20.00%

11.90%

Japan

5.5

14.2

6.6

Germany

9.7

7.3

9.2

France

6.3

5.2

5.2

U.K.

6.5

4.1

4.4

Italy

3.4

4.1

3.9

4.3

China

NA

3.2

4.3

South Korea

NA

1.4

2.4

Canada

Changing World Output

and World Trade Picture
Early 1960s, US was still by far the
worlds dominant industrial power. It
accounted for 40.3% of world output.
2000 US accounted for 27% of world
output
U.S was not the only developed nation
to see its relative standing slip the
same occur to Germany, France and
U.K. (Note all nations was the first to
Industrialized)

DEFINITIONS:
International Trade occurs when a
firm exports goods or service to
consumers in another country.
Foreign Direct Investment - occurs
when a firm invest resources in
business activities outside its
home count.
Stock of Foreign Direct Investments
refers to the total cumulative value
of foreign investments.

DEFINITIONS:
Multinational enterprise is any
business that has productive
activities in 2 or more countries.
International Business is any firm
that engages in international
trade or investment

ASSIGNMENT - Define &

List their main functions
1. Foreign Direct investment
2. GATT
3. Internaitonal B usiness
4. IMF
5. International Trade
6. Moores Law
7. Multinational Enterprises
8. United Nations
9. World Bank
10. Stock of foreign Investment