To what extent do opportunities and challenges of economic globalization affect people’s lives? Chapter 12 Challenges and Opportunities of Economic Globalization

International Trading Blocs – To seek better trade arrangements A.South American Trading Blocs Top 20% own more than 60% of the wealth Poorest 20% own less than 5% of the wealth i.MERCOSUR - Common Market of the South (Mercado Comun del Sur) – One of the major trade organizations in South American – Includes Argentina, Brazile, Paraguay, Uruguay, and Venezuela (2012) – Main objective is to improve its member’s economies Opening markets, promoting economic development, and conserving the environment

ii.CAN – Andean community of Nations (Communidad Andina de Naciones) – Trading bloc established in 1969 – Includes Bolivia, Columbia, Ecuador, and Peru iii.CSN – South American Community of Nations (Communidad Sudamericana de Naciones) – Negotiation between MERCOSUR & CAN to form a South American free trade area – Plans to eliminate all tariffs by 2019 – Hopes to model after the European Union Share common currency, parliament & passport – Hopes to increase investments in their economies – HOWEVER, instability in the region threaten these arrangements (p. 252)

B. The European Union Established in 1992 (Maastricht Treaty) Largest and most powerful common market Includes 25 European countries and a population of Has a flag, anthem, founding date, and currency (the Euro) Common foreign and security policies Address other issues – Citizens’ rights – Regional development – Environmental protection

European Union Government – Parliament and Council share responsibilities Passing laws Making policy decisions – Democratic elections every 5 years for the Parliament – The Council is made up of ministers from the national governments of all the EU countries Number of votes = size of population Trade within the EU – No restrictions on the movement of people, capital, goods, and services Facilitate trade among EU countries – More than 50% of each country’s trade is within EU – Read “EU Expansion” on pages

Country % Belgium (BE) 76.4 Czech Republic 84.2 Denmark (DK) 70.5 Germany (DE) 63.4 Estonia (EE) 77.9 Ireland (IE) 63.4 Greece (EL) 52.9 Spain (ES) 71.8 France (FR) 62.6 Italy (IT) 58.6 Cyprus (CY) 71.7 Latvia (LV) 76.4 Country % Lithuania (LT) 65.3 Luxembourg (LU) 89.4 Hungary (HU) 76.3 Malta (MT) 51.6 Netherlands (NL) 79.2 Austria (AT) 69.3 Poland (PL) 77.2 Portugal (PT) 79.8 Slovenia (SI) 66.4 Slovakia (SK) 85.4 Finland (FI) 56.0 Sweden (SE) 58.4 United Kingdom (UK) 56.9 Also EU accounts for 20% of global imports and exports Only 7% of world’s population

Regulating International Trade A.The role of the World Bank Provides financial assistance to less developed countries (ch. 10) – Usually aimed to improve education or health systems, or its infrastructure (roads, sewers, etc.) Made up of 2 institutions – International Bank for Reconstruction and Development (IBRD) – helps low and middle income countries – International Development Association (IDA) – focuses on the world’s poorest countries

World Bank claims to have accomplished many things over the past 20 years: – Proportion of people living in less developed countries fell by half (from 40% to 21%) – Life expectancy in less developed countries has increased by 20 years – # of children dying before the age of 5 has been reduced by 50% – Adult illiteracy has been halved to 25% World Bank has also been criticized – Assumption that free market system works for everyone (it doesn’t) – Under the political influence of more developed countries, such as the US

B.The role of the IMF Monitoring exchange rates and providing short- term financial assistance (ch. 10) Different perspectives on the policies of the IMF – Supporters argue that the IMF works to: foster global monetary co-operation secure financial stability facilitate international trade Promote high employment Promote sustainable growth Reduce poverty

Some critics claim that the IMF: – Deliberately supports capitalist military dictatorships friendly to American and European corporations – Advocates austerity programs for countries in financial trouble Reducing government debt by increasing taxes and cutting social programs (Hayek-economics) – Does not actively promote democracy, human rights, and labour rights Dictatorships are given loans to support their regime – Is controlled by the US and other more developed countries Main focus is to protect their own interests

The Impact of Economic Globalization in Canada A.Trade Liberalization Process of reducing barriers to trade – Privatizing Crown corporations (government- owned companies) – Encouraging foreign investment – Outsourcing jobs Deregulation & Privatization – Opening an industry to more competition by removing government regulations Selling government-owned industries to private businesses – i.e. Air Canada, Petro Canada, Ontario Hydro, CN Rail, etc.

Foreign Investment in Canada – Foreign companies own Canadian companies Esso – ExxonMobil GMC – GM – 1960s & 1970s - Cdn governments were worried – Today – Canada actively seeks foreign investment No restrictions for how foreign companies spend their profits made in Canada Read “The Privatization of Water” on p. 263

Outsourcing – Major concern of trade liberalization – Occurs when one company hires another to fulfill certain tasks in production Contractors; sub-contractors, etc. – Controversial in Canada - : job loss, high unemployment and unemployment insurance, drop in standard of living + : creates as many jobs as are lost, more free competition = better for the economy and consumers – Common practice in Canada Call centres cost at lower cost in less developed countries – Every country has a comparative advantage