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Driving Forces BehindGlobalization and International Trade

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Globalization

The term was popularized by Theodore Levitt in his article, “Globalization of Markets”, published in the Harvard Business Review, 1983, May-June issue.

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Globalization

Five Factors – • Increase in the Volume of Trade• Mobility of Labor• Changes in What is Traded• Changes in Technology• Changes in Trade Policies

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Globalization: driving forces

1. Dramatic growth in international trade.– Between 1960 - 2002, US imports grew from

4.2% to 13.8% of GDP. Exports grew from 4.9% to 9.3% GDP.

– Since 1950, world trade has increased 20 fold.– Between 1997-1999, world trade doubled from

$468b. to $827b.

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Globalization: driving forces

2. Mobility of Labor– In 2001, the US had 20 million immigrants,

comprising 13.9% of the labor force—approximately twice as high as in the l970s

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Net Migration Flow by Region, 1995-2000

Region

North AmericaEuropeOceaniaAfricaLatin

America/CaribbeanAsiaSource: UN Population Division

Average Annual Net flow of migrants

1,394,000 769,000

90,000

-447,000 -494,000-1,311,000

Globalization: driving forces

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Globalization: driving forces

3. Evolution of Trade– Changes in what is traded

– Changes in how trade is conducted

– Growth of Multi-National Corporations

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Fortune Global 500, 2006Top 10, ranked by revenues

Exxon Mobil Wal-Mart Stores Royal Dutch Shell BP General Motors Chevron DaimlerChrysler Toyota Motor Ford Motor ConocoPhillips

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Globalization: driving forces

4. Changes in Technology– Use of Internet and www– Increased sales of PCs—almost 200%

between 2000 and 2006– eCommerce—from $130.2 billion in

1999 to $1.640 trillion in 2003– Impacts worker productivity

Driving Forces of Trade

Communication Technology

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Globalization: driving forces5. Changes in Trade Policies

– Freer trade—over 40 years, GATT lowered world-wide tariff rates from about 40% to 5%

– Open economies– Trade agreements

• NAFTA• ASEAN• European Union

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The Global Top 20—2006 Rankings

1. Singapore 2. Switzerland 3. United States 4. Ireland 5. Denmark 6. Canada 7. Netherlands 8. Australia 9. Austria10. Sweden

11. New Zealand12. United Kingdom13. Finland14. Norway15. Israel16. Czech Republic17. Slovenia18. Germany19. Malaysia20. Hungary

Source: www.atkearney.com

Blessing?…or Curse?

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Some controversial issues

• Health Pandemics• Migration• Outsourcing/Off-shoring• Cultural Differences• Environmental Degradation• Trade Deficit• Global inequality: growth and poverty• Protectionism

What does trade/globalization mean to me?

Lilburn, Georgia Population 11,307…

International Businesses in Lilburn, Georgia

Company Nation Products

Binswanger Glass Company Mexico glass and glazing work

Bull HN Information Systems, Inc. France computer hardware/software

Ecotech Machinery, Inc. China grinding machines

Ferguson Enterprises, Inc. United Kingdom

plumbing & heating equipment

Hailun Distribution China pianos

Shaw-Almex USA, Inc. Canada rubber vulcanizing

T & R Enterprise USA, Inc. Taiwan vinyl and rigid film

Thomas Concrete of Georgia, Inc. Sweden ready-mixed concrete

What it means to me…

A Global Transition

• In the last 20 years we have seen a major transformation of global economies and wealth.

• Numerous countries around the world have embraced free market principles.

Moscow, Soviet Union 1988

Moscow, Russia 2008

Old China

New China

Beijing, Los Angeles, Moscow

2009

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What is Globalization?

• no commonly accepted definition• means different things to different

people• a complex phenomenon which

includes a variety of topics and issues

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Globalization defined

“a process of interaction and integration among people, companies and governments of different nations, a process driven by international trade and investments and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic developments and prosperity and on human physical well-being in societies around the world.”

Globalization101.org

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Globalization defined“…the worldwide phenomenon of

technological, economic, and cultural change as brought about by expanding facilities for intercommunication and interdependency between traditionally isolated cultures. The term refers to the overall integration, and resulting increase in interdependence, among global actors, be they political, economic, or otherwise.”

http://en.wikipedia.org

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Globalization defined “Globalization refers to increases in the

degree of integration between national economies. Integration encompasses all of the ways national economies are connected in international markets, including trade in goods, services and ideas; international movements of the factors of production; and coordination of public policies.”

Focus: Globalization, NCEE, 2006.

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What is Globalization?

THEN• World trade has existed for centuries.

NOW• “Globalization is farther, faster,

cheaper, and deeper.”

- Thomas Friedman