1. Introduction to
Globalization, Development, and
Conditions in the Developing World
2. Globalization generally refers to
international integration in commodity,
capital, and labor markets. (WTO)
Itnot simply a post-WWII phenomenon. What
other eras in history have been marked by
expansions of trade, capital, and labor
markets?
http://www.wto.org/english/res_e/booksp_e/
anrep_e/wtr08-2b_e.pdf
3.
4. What are key events in the latest round of
globalization?
5. Originally,concerned the trade of raw
materials, intermediary products, and final
goods
Now it can also include trade-in-services
Offshoring (a subset of outsourcing)
Element of the current Doha Round negotiations
6. Foreign Direct Investment
Stock/Bond investments across borders
Evenbeing able to take your own money
across borders was once universally subject
to controls. What political ideologies and
structures might explain the origin of
controls?
7. US-1/4 of American Doctors are foreign-born
France recruits at the top Senegalese medical
school
Bottom-line
for Skilled Labor: movement is
much more common and financially they
become better-off in the developed world
Integration is also at play. Where does this
exist?
Refugees?
11. There are winners and losers in trade
liberalization
For example, NAFTA caused issues on both sides:
Mexican stores and manufacturers struggled with the
„Walmart Effect‟ and some US/Canadian
manufacturing is now made in maquilladoras. Overall,
though total GDP increased in all countries.
Human Rights Concerns
Environmental Concerns
Fears of Neo-Imperialism
*Some misatribute their loses to free trade when it was
actually technological advances that made them
obsolete
12. AIDS/HIV
Spread from a few remote villages to the new
factories of Kinshasa, following the colonization
of Cameroon (by Germany).
Brought by returning UN peacekeepers to Haiti
Quickly goes global via jet plane travel
“Tinderbox” by Dr. Halperin & Timberg
“Dallas” Effect
Senegalese television shows & film were very
advanced, then came the US soap opera “Dallas”
Suddenly, attitudes towards wealth changed and
more and more shows were imported rather than
locally produced!
13. 1970s-Jamaican Government nationalizes the
bauxite industry (raw material for aluminum)
American companies continue to buy bauxite at a
higher rate, while they secure new sources in
Africa
THEN suddenly, the companies went elsewhere
and Jamaica‟s output went into free fall
Lessons:
Commodities are hard to nationalize, but does
this mean countries must give up everything to
MNCs?
14. Post-conflict Liberia was desperate for
investment and gladly accepted Mittal‟s
subsidiary‟s FDI contract to mine to find iron
ore with nearly no regulations
But as the Liberian economy became
stronger and a new government came to
power, it demanded the company to
implement environmental and human rights
regulations or leave. Did Mittal Leave?
15. This is referred to as the “obfuscating
bargain”
Mittal had already spent a lot of money
building mines, processing facilities, and a
railroad to export the iron ore.
The more fixed infrastructure, the more
power shifts more towards Liberia
16. Chinahas also done very well by allowing
MNCs into the country by maximizing the
number of backward linkages.
Domestic Partners/Suppliers
Mandatory Education
Factories are part of global supply chain
What
do all of these strategies have in
common
17. Accept Free Trade
Chile, Nigeria
Some Free Trade/Some Authoritarianism
China, Indonesia, Liberia
Reject Free Trade
Nationalize Industries
Jamaica in 1970s, Venezuela
18. International Financial Institutions
World Bank
IMF
Free Trade Agreements
What countries are most using these?
What trends are likely to occur in the future?
Multilateral Negotiations
WTO Rounds
Are there any alternatives?
Investment Promotion Agencies
Do differing Political Structures impact their
success?
19. IMF
Keep international economic stability
Traditionally for the developing world
Loans are made in SDRs (a basket of major
currencies)
1 SDR = $.648
World Bank Group
Promotes Development through loans
Mostly to the governments
Now more loans through public-private partnership
20. Role
is to reduce poverty through loans and
suggestions for policy choices
Includes IBRD & IDA
Great Source of Data:
http://povertydata.worldbank.org/poverty/ho
me
21. President Robert
Zoellick
Permanent Employees
Part-timers for a
maximum of 6 months
per year
22.
23. Lets see how our case studies have
interacted with the IMF:
(http://www.imf.org/external/np/fin/tad/e
xtarr1.aspx)
Zimbabwe
Peru
Indonesia
China
24.
25. Your country is not geographically near an
economic heavyweight like Mexico or Turkey.
Nor does it have a large abundance of Natural
Resources like Nigeria.
But unlike Zimbabwe, your country is well-
governed and takes part in the WTO.
What policies can the Peruvian government put
in place to increase trade and thus its
development?
26. Eliminates tariffs, import quotas, and
preferences on most goods and services
traded between the countries
Do FTAs apply to imports from other countries?
27. Signed in 1994, with the intention of fully
implementing by 1996
However, as often happens, implementation
of the politically sensitive Mexican Trucking
Provision, was not finish until a few months
ago (2011)!
Maquilladoras
28. Policy priority in several countries
Chile leads the world with over 50
The Southern Tiger?
China has been increasing its array throughout
Southeast Asia (China-ASEAN FTA)
Trans-Pacific Partnership
Would include most countries around the Pacific
rim including US, Japan, Indonesia, & Mexico
But do all the political institutions have the
strength to implement controversial trade
liberalization?
29. China-Peru FTA
Canada-Peru FTA
US-Peru Trade Promotion Agreement (PTPA)
Not quite an FTA, but made legal frameworks for
investors regarding:
Intellectual Property Rights
Labor Human Rights
Environment
30. 1947-United
Nations negotiates the General
Agreement on Tariffs and Trade
45000 tariff concessions
1964-8:Kennedy Round
1973-1979: Tokyo Round
1986-1994: Uruguay Round
World Trade Organization
2001-?: Doha Round
31. Most tarriffs were reduced in the early
rounds
Negotiations are now about technical issues
and last longer
This may explain the spread of FTAs that are
bilateral/multilateral – not global
33. IPAs
can be public, private or a public-private
partnership
Mostpublic bureaus are more like
“investment prevention bureaus”
Privatetend to not have power to make
things happen
Public-Private is rare but seems to work
Costa Rica convinced Intel to set up
manufacturing there in 1996
34. PublicAgency
Website is fancy
Unclear if the quality extends to face-to-face
Canyou think of any changes to its political
structure that might boost its effectiveness?
35. Up to this point we‟ve dealt only with the
Formal Sector. The Informal Sector are those
jobs that are not taxed or monitored by the
government.
Income is NOT included in GDP figures.
The majority of jobs in the developing world
are in the Informal Sector.
Here are some I encountered in Africa..
36.
37.
38.
39. While many in the Informal Sector do
legitimate business, a subgroup is committing
crimes.
The next three photos refer to one black
market I saw throughout Benin. What is it?
And make your best guess as to why it sprout
up in Benin.
40.
41.
42.
43. Oil is illegal obtained from pipelines in the
Delta.
It is then transported on motorcycles to Benin
Benin turns a blind eye because its citizens get
lower prices at “the pump”
Nigeria‟s reasons are less clear: bribery? jobs
for the poor?
44. Low income countries lose out on a lot of
potential revenue that could be used for
development
Most individuals rarely encounter the
government
Subject, Rather Participatory Relationship
Bribery, Bribery, and more Bribery
As a result the Millenium Challenge Corporation
(US), incentivizes countries to reduce corruption
as a prerequisite for funding
Notas del editor
Containerization of Goods, Computers, Internet (ARPANET) combined with fiber optics, Jet Planes- “Tinder Box”, new open international system “experts in Tanzania, UN peacekeepers
Beginning of American Hegemony after WWII, 1973 Oil Crisis, Fall of the Soviet Union, 2008-2009 Recession
Mercantilism, Protectionism-colonies were only for the benefit of the colonizer, Now neo-liberalism
As you see the total wealth worldwide increased at at least double the rate of population growth.Trade clearly increased.Labor was mobile, and has been increasing even further. Finally, capital is being distributed much more now than before as both a percentage and in total amount. One big beneficiary of Taiwan, Korea, Singapore’s FDI has been China (we are talking close to a trillion dollars between 1984 and 2001)
Interactive Activities
They lead to increased capacity and human capital that can then be used by domestic producers (multiplier effect)
Established after WWII-they are traditionally headed by a European and American, respectivelyThe World Bank Group is now composed of for smaller agencies which all help develop countries
President Robert Zoellick replaced Paul Wolfiwitz in 2007-the biggest improvement appears to be diversifying their business model -e.g. efforts to better adapt to local situations (post-conflict, middle income, strong private sector)Then also notice how part-time employees are integral to this IFI- this is not how the IMF is. If you go to the HR page, don’t bother applying because they almost always promote friends from within (there is a big risk of cronyism)
Bi-yearly-it offers guidance to the international economic communityRecently updated-downward in both the developing and developed world-argued the epicenter is where? Europe-Asia is still doing well but is being held back
Pretend you are PresidentHumala – the average developing country
No, in fact, they usually use a system of certification of origin (rules of origin) to determine if a good meets a minimum extreme of local merial inputs and local transformations adding value to the goods.These policy-focused regulatory requirements has led to a lot of strange arrangements: Foxconn has a massive facility in Mexico so that the final goods are tariff free in Canada and the US markets. In Europe, Belarusian produce many of the finest coats in Europe – how? They are shipped German-made cloth and stitch it together. Likewise, expensive German steel is taken to Ukraine to produce cars.
Maquilladoras have brought Mexico into the global supply chain and improved the lives of the workers and the quality of Mexican productsMeanwhile, Walmart has absolutely destroyed many producers who could not lower their price enough
Council on Foreign Affairs- has begun arguing that FTAs will increasingly affect trade flowsASEAN-China FTA has the largest population of any such agreementAnswer of Question is debatable – think back to the trucking example; now think of the rule of law
Kennedy Round: tarrif concessions worth $40 billion, anti-dumpingTokyo: tarriff reductions worth more than $300BUruguay: First where developing countries have an active role=>it increased agricultural access to developed markers -Cairns Group: included ag exporters including Australia, Brazil, Canada, Peru, and Indonesia! -Established the World Trade Organization (most favored nation status) excluded China until 2001 and Russia even today
Intel chose Costa Rica over Brazil, Mexico, and ChileWhy?: Government was willing to install infrastructure and power to Intel’s requirements. Bureau was professionally run by bilingual, business professionals who received competitive wages
No tax revenues. In India, 90% of the population has an informal job – vendors, construction, small farmersBut much more labor flexibility than occurs in labor-controlled countries (Peru)China