Presentation at La Salle Green Hills, Honors Class students

1. Globalization, Mobility and Inequality
Bienvenido “Nonoy” Oplas Jr.
Presentation at the Honors Class, 4th Year HS
La Salle Greenhills, Mandaluyong, M.Manila
17 February 2014

2. Outline
I. Globalization, Theory and Definitions
II. Goods and Services Mobility
III. Inequality
IV. Conclusions

3. I. Definitions of Globalization
• International, global integration of human
activities -- generic, common defn.
• World shrinkage, distances getting shorter,
things moving faster, ideas spread quicker
• Big fims, multinationals’ global profiteering
and further exploitation of workers, minorities
– leftist defn.
• Globalization = Mobility = Freedom

4. Early Stage of Globalization: The Silk Road, 1450s
(Red is land route, blue is water/sea route)
* Image source: Wiki

5. Theory: Free Trade results in Commodity Price
Equalization (CPE) Theorem

6. Factor Price Equalization (FPE) Theorem
another result of free trade
• Substitute prices of goods with prices of labor, capital,
technology, other factors of production, in the above
graphs
• Free mobility of people and services across countries and
continents will result in FPE over the long term, all other
things being equal.
• Countries with expensive labor due to labor deficit and low
population will experience decline in labor cost once
additional and competing labor of similar skills from abroad
come in.
• And countries with cheap labor due to high supply of
workers, high population, will experience increase in labor
cost once the excess labor goes out and work abroad.

8. Anti-Globalization and Trade Protectionism
results in consumers’ diswelfare
Commodities that are
otherwise cheap
become expensive due
to protectionism and
government tariff and
taxes. This is wrong.

9. II. Globalization and Goods Mobility
In 1989, only 9 out
of the world’s top
20 biggest ports
were in Asia…
20 years after, 15
of the top 20 were
in Asia, including
that in Dubai.
Economies with
larger consumers
and producers,
with freer trade
policy, benefit.

10. Philippines’ Exports Markets Diversifying
(in $ billion, except %)
From a “UScentric” to
Asiancentered or
focused
exports
policy and
reality.

11. D

12. Rank
3
1
4
5
6
7
8
2

13. Top 10 Exporting Countries by 2050, Citigroup study, 2011
1. China
Trade in 2050: $52.2 trillion
Percent of world trade: 18.2%.
6 Indonesia
Trade in 2050: $8.8 trillion
Percent of world trade: 3.1%
2. India
Trade in 2050: $25.7 trillion
Percent of world trade: 9%
7 Hong Kong
Trade in 2050: $8.5 trillion
Percent of world trade: 2.3%
3. USA
Trade in 2050: $19.1 trillion
Percent of world trade: 6.6%
4. Germany
Trade in 2050: $9.9 trillion
Percent of world trade: 3.5%
5. Korea
Trade in 2050: $9.7 trillion
Percent of world trade: 3.4%
8. Japan
Trade in 2050: $7.6 trillion
Percent of world trade: 2.7%
9. Singapore
Trade in 2050: $6.8 trillion
Percent of world trade: 2.4%
10. UK
Trade in 2050: $6.02 trillion
Percent of world trade: 2.1%

14. Foreign Direct Investment
FDI Inward Stock (million US$), ASEAN and China
FDI inward stock (million US$)
1990
2000
2010
2012
Indonesia
8,732
25,060 154,158 205,656
Malaysia
10,318
52,747 101,510 132,400
Philippines
4,528
18,156
26,319
31,027
Singapore
30,468 110,570 461,417 682,396
Thailand
8,242
29,915 137,191 159,125
Viet Nam
1,650
20,596
65,348
72,530
China
20,691 193,348 587,817 832,882
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics), accessed on 6 October

15. On Rice Smuggling: Rice protectionism should be
abandoned, allow full liberalization
Price/kilo
P3
Full protectionist price
P3 > P2 > P1
P2
P1
Smuggling price
Free trade price
Why make otherwise cheap imported rice become expensive?
Rice export powerhouses Vietnam and Thailand have natural advantages that are not
present in the Philippines: (a) huge, generally flat rice land, about 10 M hectares each,
vs. the PH’s 4.5 M hectares; (b) contiguous land irrigated almost whole year by Mekong
River and other river systems, ours is scattered in an archipelago; and (c) they have only
1 or 2 typhoons a year, we have about 20 on average. Crop damage there is lower.

16. III. Inequality
• Anti-globalization groups highlight the rising inequality among
people and among countries with more trade and investment
openness, goods and people mobility.
• Somehow they are correct because globalization and free trade
will result in more efficiency + more inequality.
• About 20-30 years ago, the Filipino poor and even the middle class
could not afford a landline, much less a cell phone, the rich can
own several units of thick, heavy/bulky mobile phones, several
cars.
• Now the Filipino poor, from ordinary jeepney drivers to farmers
have cell phones, more sophisticated kids can even have smart
phones, gift from some relatives or godparents. The super rich use
hi tech mobile phones, can own several private choppers or jets.

17. Illustration:
• In a scale of 1 to 1,000 units of
wealth, the poorest owned 1
and the richest owned 80
(1:80 ratio).
• Today, the poorest own 5 while
the richest own 1,000 (1:200
ratio). Inequality has worsened
• Tomorrow, the poorest will
own 10 units while the richest
will own 3,000 (1:300 ratio).
• Bottom line is the condition of
the poorest, how they can be
uplifted from controllable
diseases and misery.
• Middle class condition
improving too.
Inequality: Before
Now

18. • Life expectancy rising worldwide,
many infectious and fatal
diseases now easily controlled;
the poor live longer.
• Infant mortality also declining.
Poor children dying less than
before.
• These two improving health
outcomes coincided with
openness to world trade of
countries.
• Source: EMHN, “How free trade
improves health”, 2012,
http://www.emhn.org/sites/default/
files/EMHN_Healthytradev2.pdf

19. IV. Concluding Notes
• Globalization = mobility = freedom. People, their
products, services, talent, technology, are given
opportunity to reach other users and consumers
worldwide.
• Governments should reduce restrictions on people and
goods mobility. These include: (a) reducing tariffs and
non-tariff barriers (NTBs) like customs bureaucracies; (b)
simplifying visa requirements and issuance, reduce the
cost of migration; (c) focus on rule of law function, go
after real criminals and not ordinary migrants who only
wish to improve their condition through hard work.

20. • PH restrictions and bureaucracies on labor migration
should be drastically reduced, some should be
eliminated. The Philippine Overseas Employment
Authority (POEA) can be shrunk if not abolished.
• Inequality is here to stay. Prosperity and poverty is
generally a form of rewards and punishment in
society, corresponds with individual freedom and
personal responsibility.
• Protectionist PH constitution should be amended to
allow more foreign investments and competition.