FACILITATORS OF GLOBALIZATION Facilitators of Globalization and development for example: 1) 2) 3) 4) 5) 6) 7)
World Trade Organization (WTO) Economic Partnership Agreement (EPA) International Monetary Fund (IMF) World Bank Transnational Organizations Technology Ideologies: social, gender, economic, political
World Trade Organization WTO came into being January 1995 as replacement to GATT (in existence since the formation of IMF and World Bank). Its main functions are: •
administering WTO trade agreements
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providing a forum for trade negotiations
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handling trade disputes
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monitoring national trade policies
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providing technical assistance and training for developing countries
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cooperation with other international organizations. BENEFITS OF WTO
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Helps promote peace
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Handles disputes constructively
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Rules make life easier for all
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Freer trade reduces Cost of Living
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Provides more choice of products and qualities
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Trade raises incomes
Trade stimulates economic growth
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The basic principles make life more efficient
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Governments are shielded from lobbying
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System encourages good governance
International Monetary Fund This is an international lending agency/organization based in Washington that provides short term credit to its 184 members. Plans for IMF were drawn up in at 1944 at the Bretton Woods Conference (New Hampshire) and began operation in 1947. It's a specialized agency of the United Nations but in practice Japan, UK, USA, Germany France and Saudi Arabia govern the fund. The fund was established •
to encourage international cooperation in the monetary field and the removal of foreign exchange restrictions
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to stabilize exchange rates
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to facilitate a multilateral payments system between member countries . 1|Page
FACILITATORS OF GLOBALIZATION In formative years it acted as a meeting place for industrial nations to discuss their trade relationship and financial dealings with one another. Since 1970s it has shifted to the economic problems of developing (third world countries) IMF worked to maintain orderly payment arrangements between countries and to promote growth of world economy without inflation. It supports free trade in goods and services. To stabilize economies of its members, the IMF provides policy advice and short term loans when a member encounters financial difficulty. To receive loans members must usually change national economic policies like devaluing its currency so that exports can be competitive in world markets, cut social welfare programmes, reduce budget deficit to reduce inflation. This usually result in short term political unrest, economic hardship within the country. On the other hand the long term benefit include stabilization of the economy, less inflation helps to reassure private banks and investors about the safety of investing in the country.
World Bank Also known as the International Bank for Reconstruction and Development, it came into being following the Bretton Wood Conference in 1944 and began operation in 1946. World Bank provides long term loans to assist economic development. In its early years it was engaged in helping to finance the reconstruction of war damaged Europe. Nowadays, its main role is to channel flows of capital from the rich countries of Western Europe, North America, Japan and the rich oil prodders to the poor and mainly agricultural countries of Africa, Asia and South America. It finances projects such as infrastructural development ( road, communication, power "stations, water supplies, irrigation and rural development, as well as health care, education etc. Its financial assistance takes the form of long term loans. In addition to financial help it can offer a variety of financial and technical services to developing countries. Its engineers, surveyors, accountants, economists and other experts help countries plan and implement their development projects.
Impact of Foreign AID • Funds tied to SAP (Structural Adjustment Policies) where the Caribbean countries are forced to limit spending on 'non-productive' investments such as health, education, social welfare programmes. This can jeopardize the quality of life of the citizens. • Caribbean countries lose their sense of autonomy as lending agencies has the main say in how the aid is spent e.g. which tenders to accept for the project •
Provision of aid creates a cycle of dependency which becomes difficult to break out of.
• Aid is sometimes turned on and off depending on the political and strategic agenda of the donor. This makes funds unpredictable - interruption in development programmes.
Transnational / Multinational Corporations This is a business organization/corporation /enterprise that has its headquarters (parent company) in one country (usually advanced capitalist/industrialized countries) and has branches/ subsidiaries/ franchises and plants in many countries (capitalist companies with branches word wide). They seek out the best profit opportunities and are largely unconcerned with issues such as poverty, inequality and unemployment alleviation. Such organizations carry out substantial amounts of financing, production sales research and development in their foreign operations. They have great economic power (large capital base such as cash, stocks bonds and technology). They are usually based on manufacturing or mineral industries (extractive and primary industries) and operate in fields that involve frequent technological change. Such firms have a large research organization at its headquarters base where they develop new products and processes. They then train workers in foreign plants to use these skills. 2|Page
FACILITATORS OF GLOBALIZATION Some MNCs grant foreign companies licences to use their methods and processes instead of setting up plants of their own. A MNC may have fewer plants in one country that produces complete products to be sold in several countries while in other cases the plants in many countries may produce components or parts of the finished products. This gives MNCs a larger area from which to choose the most economical locations for specialized plants. The companies can then sell products at lower prices than would otherwise be possible. Firms develop into MNC in order to: •
obtain control over the supply of resources,
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take advantage of the lower costs of foreign labour and material,
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avoid paying tariffs on imported goods
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and to avoid high production costs and taxes associated with certain operations in the home country.
They invest heavily in Third World Countries providing that their demands are met which usually include: •
large pool of cheap labour
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tax. holiday on production-
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freedom to bring in all sorts of goods needed
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provision of proper imfrastructure
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politically stable country
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freedom to repatriate profits
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freedom to recruit professionals from outside the country.
Because these companies are wealthy and powerful they usually get their demands met because the governments of third world (developing countries) are always striving to provide jobs for its people. If demands are not met to their satisfaction they will complain to their home government who in turn apply pressure to the country concerned. This may take the form of: •
withholding foreign aid
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withholding loans
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cancellation of contracts
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withdrawal from projects
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sometimes even open de-stabilization
Benefits of MNC to the Caribbean region •
provides jobs
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transfer of technology of productions which we don't have
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diverse business practices
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managerial philosophies
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attract other foreign investors
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FACILITATORS OF GLOBALIZATION •
exploitation of raw materials (in some instances)
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offers variety of goods and services
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provides revenue to government through taxes
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provides social benefit such as scholarship, recreational and health facilities
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earner of foreign exchange
Disadvantages of MNCs to the Caribbean region •
poses a threat to local industries
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creates social cost - pollution
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repatriation of profits to home base
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imports raw materials (in some cases)
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creates competition among countries in region who are vying for MNCs.
Technology Technological developments are conceived as the main facilitator and driving force of most of the globalization processes. New types of communications technologies have been a driving force behind the space and time compression that characterizes globalization and have had a profound impact on the ways in which people around the world relate to one another. Information communication technologies have created what Spanish scholar Manuel Castells refers to as a "space of flows", where global interactions have been rearranged to create what he calls "a new type of space that allows distant synchronous, real-time interaction". (http://e4gi.weebly.com/globalization--technology.html Digital technologies have opened the way towards global networks. Global networks are the networks in which all information and knowledge – also the ideology- necessary for the realization, maintenance and the reproduction of the system – basically the capitalist system. The term “New Economy” is the clearest explanation of how all these information, knowledge and ideology are in close relation to capitalism. Monopolization of economic power –or rather the emergence of oligopoly markets- is also related to the technology, which facilitates the monopoly tendencies in many ways. Electronic banking is at the heart of the global networks system. Electronic Fund Transfer (EFT), is the first operating form of global electronic financial networks. With EFT it is possible to send and receive financial assets among banks. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the organization to assure a reliable global electronic financial system. The satellites today lie at the heart of the global networks. Internet and especially e-commerce are the terms that are basically used for justifying the recent approach of techno-globalism. Techno-globalism can be summarized as the ideology which rationalizes globalism on technological grounds. Source: http://mediaif.emu.edu.tr/pages/atabek/GCS7.html Advances in technology are one of the main reasons that globalisation has escalated in the past decade. In information and communication technology, innovations have become smaller in size, more efficient and often more affordable. In transport technology, vehicles have tended to become larger and faster, as well as becoming more environmentally friendly and cheaper to run. Whether for personal use or for business, technology has made the world seem a smaller place and assisted in the rise of globalisation.
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FACILITATORS OF GLOBALIZATION Information and communication technology Developments in information and communication technology have changed our way of life, whether it is at home, at work, at school or at leisure. The internet and the development of digital technology (computer-based technology) in particular, have made the most significant impact in the field of information and communication technology in the past decade.
Information technology The internet is essentially a network of computers across the world which is linked through global telecommunications. Although it was originally only used by defence personnel in the United States, easy access to computers and related technology have made using the internet a common activity in more recent times. The World Wide Web (www) is a collection of interconnected documents which are accessible using the internet. It enables people from almost anywhere in the world to access information on almost any topic from shopping to weather forecasts; and from research to downloading music and movies. In addition to the internet, global media networks (corporations which include television and media companies with branches in multiple countries) also bring news and information about current events to people all over the globe. It is now possible for someone in the Caribbean to pick up a copy of an American fashion magazine, or for someone in the United States to watch the Caribbean news. Communication technology The last decade has seen dramatic developments in telecommunication technology. Communication has moved on since the days of 'snail mail' where it would take several weeks for mail to arrive from overseas. The internet has had an important role in connecting people. It allows people in countries around the world to instantly contact each another through email, chat programs and video calls. This instant communication has revolutionised business and social lives. In addition to the internet, mobile phones, voice mail, and text messaging allow instant contact across states and countries. In 2003, 31 percent of 10- to 14-year-olds owned a mobile phone and almost half of Australia's 10- to 14-year-olds sent text messages every day. Satellites have outgrown their original use in government activities and research and are now used by people in a variety of ways. Global Positioning Systems (GPS) use the information provided by satellites to provide accurate information on locations on the land, in the sea and in the air. Satellites are also used to provide information on weather patterns around the world; tracking hurricanes or tropical cyclones. This information helps meteorologists make better predictions about the weather and also warn the public of any dangerous weather systems.
Transport technology Developments in transport technology have played a major role in globalisation. Over 100 years ago, the Industrial Revolution changed the nature of transport with the invention of the steam engine and the combustion engine. Since then, technological development in the transportation industry has affected transformation in road, rail, sea and air travel. Transport for personal use has improved dramatically. Cars are now built to be faster, safer, more fuel efficient and therefore cheaper to run, as well as being more environmentally friendly and costing less to purchase.
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FACILITATORS OF GLOBALIZATION Airline transport has also enabled the expansion of tourism and trade across continents. Although passenger planes only began to move groups of people around half a century ago, they have dramatically improved within that time. Airline travel has not only become more affordable in the last 20 years but it has also become faster. In the mid-1930s, eleven people could fit into an aircraft on a flight from London to Bangkok which took eight days. In 2002, almost 400 passengers could take the same journey in just ten hours. Transport has also changed the way we do business. Super tankers have increased the scale of trade between countries, as these massive container ships are able to carry larger quantities of goods, including oil and grain. As a result, trade has become increasingly international. Innovations in transport often involve the use of information and communication technology. Larger aircraft and container ships use satellite navigation systems, GPS and computers to function. Attempts are also being made to make transport more affordable and also more environmentally friendly by utilising things such as solar power, electricity and ethanol fuel. Source: http://www.skwirk.com/p-c_s-16_u-185_t-493_c-1813/nsw/geography/globalchange/globalisation/the-role-of-technology-in-globalisation
Economic Partnership Agreement The Economic Partnership Agreement (EPA) signed in 2008 signalled a new era of trade relations between the European Union (EU) and the Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM). It is the new trade agreement which replaces the chapters on trade in the Cotonou Agreement. This initiative is a response to the challenges of globalization and development, and establishes a new trading relationship with the 27 members of the EU in conformity with World Trade Organisation (WTO) rules and regulations. This will bring closure to the preferential, non-reciprocal trade regimes which previously governed trade between CARIFORUM and the EU. Caribbean exporters previously had greater duty-free access to the EU market than European exporters enjoyed in the Caribbean, along with quotas that enabled them to avoid price competition with rivals from outside the Lomé ACP (Africa, Caribbean and Pacific) bloc. Objectives: The objectives of this Agreement are: (a) Contributing to the reduction and eventual eradication of poverty through the establishment of a trade partnership consistent with the objective of sustainable development, the Millennium Development Goals and the Cotonou Agreement; (b) Promoting regional integration, economic cooperation and good governance thus establishing and implementing an effective, predictable and transparent regulatory framework for trade and investment between the Parties and in the CARIFORUM region; (c) Promoting the gradual integration of the CARIFORUM States into the world economy, in accordance with their political choices and development priorities; (d) Improving the CARIFORUM States' capacity in trade policy and trade related issues; (e) Supporting the conditions for increasing investment and private sector initiative and enhancing supply capacity, competitiveness and economic growth in the CARIFORUM region; (f) Strengthening the existing relations between the Parties on the basis of solidarity and mutual interest. To this end, taking into account their respective levels of development and consistent with WTO obligations, the Agreement shall enhance commercial and economic relations, support a new trading dynamic between the Parties by means of the progressive, asymmetrical liberalisation of trade between them and reinforce, broaden and deepen cooperation in all areas relevant to trade and investment.
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FACILITATORS OF GLOBALIZATION Hence, the private sector in the region will need to become more competitive through diversification of product lines, moving up the value chain, and adopting best practices in order to build new and existing markets. The new arrangement should lead to more open trade between Europe and the Caribbean, and poses both opportunities and challenges. In recognition of the differences in size and competitiveness of EU and CARIFORUM industries, transitional periods of up to 25 years for sensitive products have been agreed. This is expected to give the CARIFORUM nations enough time to develop and become competitive in sensitive sectors. With the advent of the World Trade Organization (WTO) in 1995, the EU and the Caribbean were forced to negotiate new terms of engagement. The EPA represented a shift towards a more liberal trading regime in which greater reciprocity is the norm. Critics of the EPA believe the new trade regime will inhibit the development of new (particularly manufacturing) industries in the region and worsen the fiscal accounts of Caribbean countries. According to CAPRI (2015) the aggregate negative impact of the EPA on Caribbean states will be modest, although it will likely produce challenges for smaller Caribbean governments. In particular, the EPA will not be effective without the successful implementation and operation of the Caribbean Single Market Economy (CSME), which requires Caribbean governments to plan and coordinate economic activities together. The EPA provides the opportunity for the region to build the framework that will allow it to compete in a liberalized global economy, where a competitive environment is necessary for survival.
Ideologies Ideologies underlying globalization that endows it with value and meaning Social, gender, economic, political
Social – idea of global citizen, global awareness everything happening in another country impacts you Gender: The significant gender differences and disparities with respect to decision-making powers, participation, and returns for effort that prevail in different societies need to be taken into account when responding to the forces of globalization. Because of gender inequalities and discrimination in all parts of the world, women can be affected negatively by globalization processes to a greater extent than men. On the other hand, there can be significant gains for women with globalization. The extension of the market can have both positive and negative effects for women’s situation and gender relations. Positive effects may include increased employment opportunities for women in non- traditional sectors, thus enabling them to earn and control income. This is potentially empowering and may contribute to enhancing women’s capacity to negotiate their role and status within the household and society. Negative effects can include increased exploitation and dependency on direct engagement with the market, and particularly on the vagaries of the market. At the policy level, the impact of globalization on women and gender relations continues to be neglected nationally and internationally. Economic- free trade/ liberalization, removal of preferential treatment, Political- democracy, (capitalism)
Globalization and gender
Globalization Impact on the Caribbean Impact of Globalization on Caribbean Economies Definition: ‘Globalisation is often described as a historical process that entails the increasing integration of, and interaction between countries as national borders become less significant.’ Globalisation entails economic, cultural, political and environmental integration, however for this course; the focus will be on economic integration 7|Page
FACILITATORS OF GLOBALIZATION Factors leading to the recent acceleration of the globalization process: Internationalization of finance; i.e. liberalization of capital markets and financial flows Internationalization of production and distribution; offshore production, the subcontracting of work to firms in other countries Technological, Information and Communication revolution Globalization: The Caribbean experience: 1. Caribbean countries have been fairly open as trade including import and exports accounts for more than a 100% of GDP for most countries 2. Large volume of foreign capital is being invested, usually in the form of FDI in industries developed from our natural resource base eg. TOURISM 3. Free trade is gradually replacing the existing system, which poses barriers to protect the local markets from imports, and save infant industries from multilateral giants. 4. the regions trading relationships is now being made more complex as the region tries to diversify its trading relationships beyond traditional partners for example, US , UK and Canada to include Latin America and other counties. 5. There is increase cross border investment within CARICOM, Trinidad and Tobago is the leader 6. Firms are now reorganizing and restructuring businesses to operate more efficiently and more effectively in the Global environment. This includes formation of alliances, takeovers and regional expansion. 7. Restructuring and reorganization of government activities; greater focus on macro-economic stability and greater focus on creating an investment friendly environment 8. There has been a negative impact on businesses and individuals
The Vulnerability of Small States to the Negative Effects of Globalisation 1) The lack of diversification of exports, over-dependence on specific overseas markets, and dependence on imported technology and intermediate goods. 2) Small States cannot influence the international prices of their exports. 3) SIDS rely heavily on taxes on international trade to generate revenue. The WTO effort to achieve extensive tariff reduction could cause increased fiscal deficits 4) Relatively high transportation costs cause a loss of competitiveness Source: http://www.scribd.com/doc/53202323/Impact-of-Globalization-on-CaribbeanEconomies#scribd
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