ECONOMICS Johnson Hsu July 2014

The global economy 1.Macroeconomic performance 2.Trade and integration 3.Development and sustainability 4.The economics of globalisation

Globalisation  The processes that have resulted in ever-closer links between the world’s economics  is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. world viewsculturetransportation telecommunicationstelegraph Internetinterdependenceworld viewsculturetransportation telecommunicationstelegraph Internetinterdependence

Two different ways on globalisation manifest  Global brands  are a visible characteristic of globalisation. Not only is the same brand available in mot national markets, the product is also standardised.  Global sourcing  is less obvious. The term refers to the ways in which global companies now source their operations through worldwide production. In many cases, ‘local’ domestic production has been replaced by manufacturing capacity on a global scale. Often, the capacity has replaced the domestic productive capacity of a company, a clear consequence of de- industrialisation.

Factors promoting globalisation  A reduction in protection  A reduction in international capital movement restrictions  Developments in IT and falling communication costs  A fall in real transport costs  liberalisation

Foreign direct investment  The establishment of branches and productive processes abroad, or the purchase of foreign firms; investment made by multinational corporation in a country other than where its operations originate

Multinational companies  Firms that produce goods and services in more than one country

The three branches of conflict of laws are  Jurisdiction – whether the forum court has the power to resolve the dispute at hand  Choice of law – the law being applied to resolve the dispute  Foreign judgments – the ability to recognize and enforce a judgment from an external forum within the jurisdiction of the adjudicating forum.

Why India’s become global leader in 2006?  A highly educated, young workforce, all of whom speak English  Wages for professional workers that are 10 to 25 per cent of those in Europe and the USA  Good Internet access in all major cities  A deregulated market that has allowed firms like Del, Hewlett-Packard and IBM to set up operations

Benefits of globalisation  Higher living standards for more people  Enjoyment of global brands  Spreading best practice and technology transfer  Improved medical supplies that could increase life expectancy

Benefits and costs of foreign direct investment  An injection into the circular flow of income  Effects on the balance of payments  An increase in tax revenue for the government  Improved productivity  Technology transfer and acquisition of specialist equipment  The employment created may be only short term and could be less than expected

Benefits and costs of foreign direct investment  7) MNCs may invest in labour-saving technology  8) Net effects on the balance of payments being less than anticipated  9) Taxes received by the government may be expected  10) Productivity gains and transfer effects could be very limited depending on the type of FDI  11) Environmental costs associated with certain types of FDI, especially mineral extraction and natural gas production

World Trade Organization  A global organisation that regulates world trade

Characteristics of WTO  Non-discrimination  Free trade  Predictability  Promoting fair competition  Special provision for developing countries

Three main areas for Uruguay Round Agreement  Tariff cut  More binding tariff  Agriculture

The International Monetary Fund  A global organisation that aims to promote international monetary co-operation and international trade

Purposes and responsibilities of IMF  To promote international monetary co- operation  To facilitate the expansion and balance growth of international trade  To provide exchange stability  To assist in setting up a multilateral system of payments  To make resources available to members experiencing balance of payments difficulties, provided adequate safeguards are provided

Doha Development Round  is the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001 under then director-general Mike Moore. Its objective is to lower trade barriers around the world, and thus facilitate increased global trade. Since 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.[1] The most significant differences are between developed nations led by the European Union (EU), the United States (USA), and Japan and the major developing countries led and represented mainly by India, Brazil, China, South Korea, and South Africa. There is also considerable contention against and between the EU and the USA over their maintenance of agricultural subsidies [1]agricultural subsidies[1]agricultural subsidies

Transition economy  One that is changing from a centrally planned to a free market economy  is an economy which is changing from a Soviet-type centrally planned economy to a market economy.

The main ingredients of the transition process are:  Liberalization – the process of allowing most prices to be determined in free markets and lowering trade barriers that had shut off contact with the price structure of the world's market economies.  Macroeconomic stabilization – bringing inflation under control and lowering it over time, after the initial burst of high inflation that follows from liberalization and the release of pent-up demand. This process requires discipline over the government budget and the growth of money and credit (that is, discipline in fiscal and monetary policy) and progress toward sustainable balance of payments.

The main ingredients of the transition process are:  Restructuring and privatization – creating a viable financial sector and reforming the enterprises in these economies to render them capable of producing goods that could be sold in free markets and transferring their ownership into private hands.  Legal and institutional reforms – redefining the role of the state in these economies, establishing the rule of law, and introducing appropriate competition policies.

Transition economy

Functions of IMF  The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.  to oversee the fixed exchange rate arrangements between countries, thus helping national governments manage their exchange rates and allowing these governments to prioritise economic growth, and to provide short-term capital to aid balance-of-payments.

World bank  A global organisation that provides development funding

Goal of World Bank  the reduction of poverty

the Millennium Development Goals targets for 2015  Eradicate Extreme Poverty and Hunger  Achieve Universal Primary Education  Promote Gender Equality  Reduce Child Mortality  Improve Maternal Health  Combat HIV/AIDS, Malaria, and Other Diseases  Ensure Environmental Sustainability  Develop a Global Partnership for Development

Loans areas of world bank cover  Health and education  to enhance human development in a country – for improving sanitation and combating AIDS  Agriculture and rural development  for irrigation programmes and water water-supply projects  Environmental protection  for reducing pollution and for ensuring that there is compliance with pollution regulations  Infrastructure  roads, railways, electricity  Governance  for anti-corruption reason

Anti-capitalist movements