INTERNATIONAL TRADE POLICY 1

INTRODUCTION TO TRADE POLICY AND THE WTO Globalization and Trade Module 1 INTRODUCTION TO TRADE POLICY AND THE WTO Globalization and Trade 2

Globalization Economic Globalization means the increasing integration of economies – Refers mainly to trade and financial flows – Also refers to movement of labors and technology – Also often used to refer to the emergence of a “world culture” which some fear may threaten local or traditional values and customs.

Then and Now – Globalization is not new. - There have been two great waves of globalization - the first from 1840 to 1914 and the second over the last 25 years. – During the period between the two world wars and especially during the Great Depression of the 1930s, protectionism increased and trade contracted.

Then and Now Recovery began after 1945, supported by multilateral trade liberalization. – But British trade did not recover to pre - World War I levels until 1970. – Globalization has been advanced considerably in recent years by Technological developments, particularly in transportation, telecommunications and IT.

Economic Globalization Facilitates the extension of market forces beyond local or national level Allows countries to focus on what they do best Permits access to larger markets around the region or world Promotes efficiency and economic well- being through competition and division of labour.

Economic Globalization Provides access to more capital, technology, cheaper imports and larger export markets Although economic globalization has gone on for years, some still oppose it because free markets cannot ensure benefits will be equitably shared Some of the poorest need help to share in benefits

A Look at Some Aspects of Globalization Trade: Developing countries increased their share of world trade from 19% in 1971 to 29 % in 1999, but not all countries shared in this. – Strongest rise in manufactured goods – Share of primary product declined (includes food and raw materials) – LDC merchandize exports increased by ½ to $62 billion

A Look at Some Aspects of Globalization Capital movements to developing countries have increased but levels are not stable – Development assistance is declining relative to other capital flows – Direct foreign investment is the most important category, but most goes to a few countries. – Both portfolio and bank credit rose but they are more volatile

A Look at Some Aspects of Globalization Movement of people: from 1965 to 1990 proportion of foreign born labour force increased by half (50%) Most migration to developed countries comes from developing countries Short term movement of laborers, often unskilled or semi-skilled is important in S.E Asia.

Benefits From Globalization Macroeconomic stability encourages investment and savings Outward-oriented policies promote efficiency through increased trade and investment Structural reforms encourage competition Good governance assures supportive environment Productivity growth through education, training, R&D Cautious debt management provides flexibility

Assignment In your working group develop your views on the following issues for presentation to the class as a whole for discussion. – Your views about or experience with globalization (Provide examples on how globalization has affected you personally, or your country, either positively or negatively) – Impact increased trade has or could have on poverty in your country