GlobalizationGlobalizationEQ: How does globalization EQ: How does globalization

encourage economic encourage economic interdependence?interdependence?

Comparative AdvantageComparative Advantage

• Which country can make a good Which country can make a good cheaper.cheaper.

• In the following example, who has In the following example, who has the comparative advantage?the comparative advantage?

Comparative AdvantageComparative Advantage Minimum WageMinimum Wage

– United States $7.25United States $7.25– China $2.00China $2.00

Regulations on ProducersRegulations on Producers– United States EPA, OSHA, many moreUnited States EPA, OSHA, many more– China Few if anyChina Few if any

Corporate TaxesCorporate Taxes– United States 35-39%United States 35-39%– China 25%China 25%

Small Business TaxesSmall Business Taxes– United States 15-34%United States 15-34%– China 20%China 20%

Favorable v. Unfavorable Balance Favorable v. Unfavorable Balance of Tradeof Trade

Imports v. ExportsImports v. Exports United States Balance of TradeUnited States Balance of Trade

ImportsImports ExportsExports

– ChinaChina 296,402 296,402 65,57665,576– France 34,034 France 34,034 26,52226,522– JapanJapan 95,949 95,949 51,17951,179– Mexico 176,537Mexico 176,537 128,997 128,997– EU 281,319EU 281,319 220,776220,776

Protective TariffsProtective Tariffs

Based on what we have learned Based on what we have learned about Comparative Advantages and about Comparative Advantages and prices other countries can charge prices other countries can charge while still making a profit, why does while still making a profit, why does the U.S. Government have to place the U.S. Government have to place Protective Tariffs on imports?Protective Tariffs on imports?

Exchange RateExchange Rate What the U.S. Dollar is worth compared to What the U.S. Dollar is worth compared to

currency of other countries.currency of other countries. $1 = $1 =

– Chinese Yuan $6.82Chinese Yuan $6.82– Mexican Peso $12.32Mexican Peso $12.32– Euro $0.75Euro $0.75– Canadian Dollar $1.00Canadian Dollar $1.00– Japanese Yen $91.99Japanese Yen $91.99– British Pound $0.66 British Pound $0.66

What do these exchange rates mean for What do these exchange rates mean for American tourists to these countries or American American tourists to these countries or American companies who sell goods to these countries?companies who sell goods to these countries?

Price ComparisonPrice Comparison

Price ComparisonPrice Comparison

Types of CountriesTypes of Countries

DevelopedDeveloped DevelopingDeveloping UndevelopedUndeveloped

World MapWorld Map

International OrganizationsInternational Organizations

EUEU NAFTANAFTA WTOWTO IMFIMF World BankWorld Bank

For each one, determine what it stands for For each one, determine what it stands for and tell what it does and why it was and tell what it does and why it was formed.formed.