ECONOMIC INTERDEPENDENCE.- “ When the U.S sneezes, the economies of other nations catch a cold” GLOBALIZATION . Is the process of greater interdependence among countries and their citizens. Agglomeration Economies.- are a powerful force that help explain the advantages of the "clustering effect" of many activities ranging from retailing to transport terminals. (Urbanization, Industrialization, Localization economies) FOREIGN OUTSOURCING.- Certain aspects of a product’s manufacture that are performed in more than one country. The United States as an Open Economy: The US economy has become increasaingly integrated into the world economy. Trade of goods and services , Financial markets , Labor force, Ownership of production facilities, Dependence on imported materials Trade Patterns: As a rough of measure of the importance of international trade in a nation´s economy, we can look at the nation´s exports and imports as a percentage of its GDP. This ratio is known as opennes. OPENNES= (Exports+ Imports) / GDP
Why is Globalization Important?: According to the law of comparative advantage, the citizens of each nation can gain by spending more of their time and resources doing those things in which they have a relative advantage. Globalization increased competition from abroad: Economist recognize that globalization and free trade can provide benefits to many firms, workers, and consumers. Common Fallacies of International Trade:
1. That trade is zero-seem activity – if one trading party gains the other must lose. 2. That imports reduce employment and act as a drag on the economy, while exports promote growth and employment. 3. Often people feel that tariffs, quotas, and other import restrictions will save jobs and promote a higher level of employment. Does Free Trade Apply to cigarettes?: The free trade with cigarettes can cause more smoking disease and death. The World Health Organization contend that the benefits of free trade do not apply to cigarrets and that they should be treated as an execption to trade rules. Current trade rules permit countries to enact measures to protect the health and safety of their citizens. As long as all goods are treated equally. Is International trade an Opportunity or a threat to Workers?: Most of the world’s population now lives in a countries that either are integrated into world markets for goods and finance. International trade benefits workers. As an economy opens up to international trade domestic prices become more aligned with international prices. Wages tend to increase for workers. Backlash Against Globalization: Proponents of free trade and globalization observe how it has helped countries to prosper. Advantages: Increase productivity, Increase living standards, Imports with low cost, Inflation is less likely to affect economic growth, Promotes technological development , Low interest rate. Disadvantages: People lost jobs, and most of them find new jobs that pay less, Workers face demands of wage concessions from their employers, which often threaten to export jobs abroad if wage concessions are not accepted , American employees can lose their competitiveness when companies build state- of-the- art factories in low wage countries, making them as productive as those in the United States. Trade policies ignore the concerns of the: Environment, American workers, International Labor standards. Terrorism Jolts the Global Economy: Some critics point to the terrorist attack on the United States on September 11, 2001. as what can occur when globalization ignores the poor people of the world. With continuing terrorism, companies will likely have to pay more to insure and provide for overseas staff and property. Many countries belives globalization as : Life expectatives and per capita income have increased, and local economies have flourished. Globalization could well become slower and more costly.
Modern trade theory: is the product of an...
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