Globalization: Markets, Instututions & Policy SIPA U6355 Professor O’Halloran

What is Globalization? u Globalization is the Buzz-word of the 90’s –Refers to anything from the globalization of weather and global warming to currency crises and contagion. u Definition –The increased movement of goods, services and capital across national borders.

Volume of World Trade & GDP u Key: Volume of Trade is 16 times what it use to be in 1950, while total output is only 5 1/2 times as big.

Tariff & Non-Tariff Barriers, u As tariffs have declined, Non-tariff barriers have steadily increased.

Percent of Imports Covered by NTBs u Percent of Imports covered by NTBs is increasing

Anti-Dumping Measures u The use of Anti-dumping measures is spreading…

Index of Capital Controls in Emerging Markets u Limits on capital movement in developing countries have significantly declined.

Total Net Capital Flows into Emerging Markets as a % of GDP u Money is now flowing into emerging markets more quickly than before.

Gross Product of Foreign Affiliates, as a percent of GDP u Today 3/5ths of FDI goes to wealthy countries 2/5ths to developing, but composition has changed.

Who am I? u “There should be lunatic asylums for nations as well as individuals,” one investor wrote in the The Morning Post of London, denouncing the defaulting country as “a nation with whom no contracts can be made.” Quoted in the New York Times September 20, 1998

Capital Mobility & Variation, u Capital mobility is not new, but the sums have greatly increased.

Inflows of Immigrants as a percent of population u As costs of globalization increase, labor demands protection.

Dimensions of Globalization u Increased International Trade u Integration of Capital Markets u Increase in Multi-national Firms u Expanded and Strengthened Role of International Organizations

Levels of Globalization World National Governments Firms

Normative Issues of Globalization u Fairness and Equity Issues –Redistribution and Compensation u National Sovereignty –Cultural Values –Role of International bodies (IMF, World Bank, WTO) in dictating national policies u Different Social Regulations –Environmental Issues –Health and Safety Standards

Approach u Preferences derived from economic fundamentals, u Aggregated through political institutions, u To produce public policy outcomes. PreferencesInstitutionsPolicies Step 1Step 2Step 3

Outline u How firms and governments respond to the pressures and opportunities of globalization. u Analyze the relevant political institutions. u Finally, we will look at how these elements combine to produce policy. è Goal: Develop analytical tools

Peanut Example u What are the different frameworks we might use to explain the persistence of peanut quotas?

Mechanics u Course Materials –In Bookstore –On reserve at Meyer u Requirements –Class Participation (40%) F Prepare Case before Class –Final Group Project (60%) F Approve Topic with Instructor F 5 minute Presentation on October 14th F Final Project due December 9th

Levels of Globalization u International –The structure and scope of international organizations u National Governments –The demands placed on national governments u Industries –The structure of industries and sectors –number of competitors –prices u Firms –The allocation of production and mar

What is Globalization? u Levels –International –National Governments –Industries –Firms –Telecommunications u Dimensions –International Trade –Integration of Capital Markets –Expanded role of international organizations –Increase in Multi-national Firms Point: This has lead to more complexities and more difficult for firms and governments to respond to changing environment.