Chapter1: International Economy and Globalization

1. International Finance
International Economy and Globalization
Lecturer: Mam Amnot
Prepare by: Cheang Sok Hor Touch Kalyan
Sun Sokunthea Hi Srey Oun
Sao Sokha

2. International Economy and
Globalization

3. Content
1.Introduction
2.Globalization of Economic Activity
3. Waves of Globalization
4.The United States as an Open Economy
5. Common Fallacies of International Trade
6.Is International Trade An Opportunity or a Threat
to workers
• Backlash Against Globalization
• Terrorism Jolts Global Economy
• Conclusion

4. Introduction
• The high degree of economic
interdependence among today’s economies
reflects the historical evolution of the word’s
economic and political order .
• Export and imports as a share of national
output have risen for most industrial nations,
while foreign investment and international
lending have expanded.

5. Globalization of Economic Activity
What does globalization mean?
• Globalization is the process of greater
interdependence among countries and their citizens.
• In terms of people’s daily lives, globalization means
that the residents of one country are more likely now
than they were 50 years ago to consume the products
of another country, to invest in another country, to
earn income from other countries, to talk by telephone
to people in other countries, to visit other countries, to
know that they are being affected by economic
developments in other countries, and to know about
developments in other countries.

6. Globalization of Economic Activity
Forces are driving globalization:
1. Technology Changes.
2. Continuing liberalization of trade and
investment
3. Lower trade barriers financial liberalization

7. Waves of Globalization
First wave of globalization: 1870-1914
Second wave of globalization: 1945-1980
Latest wave of globalization

8. The United State as an Open Economy
Trade Patterns
• To appreciate the globalization of the U.S. economy, go to a local
supermarket. Almost any supermarket doubles as an international
food bazaar.
•The Table 1.3 show a global fruit basket that is available for
American Consumers.

9. The United State as an Open
Economy_ Trade Pattern

10. The United State as an Open Economy
• As a rough measure of the importance of the
important of international trade in a nation’s
economy, we can look at the nation’s exports
and imports as a percentage of its gross
domestic product (GDP). This ratio is known as
openness
Openness = (Exports + Imports)/ GDP

11. The United State as an Open Economy
• Table 1.4 shows measures of openness for
selected nations as of 2006. In that year, the
United States exported 11% of its GDP, while
imports were 15% of GDP, the openness of the
U.S. economy to trade thus equal 26%.
Although the U.S economy is significantly tie
to international trade, this tendency is even
more stinking for many smaller nations, as
seen in the table.

12. The United State as an Open Economy

13. Labor and Capital
Beside trade of goods and services, movements
in factors of production are a measure of
economic integration. A nations become more
interdependent, labor and capital should
moves more freely across nations.

14. Why is globalization important?
Specialize in the production of things and
To purchase from others those items for
which they are high-cost producers.
provide stability for producers
Corporation, an Ohio-base manufacturer of
wheelchairs and other health.

15. Common Fallacies of International
Trade
1. Trade is Zero sum activity : If one trading party
gains, the other party must lose.
• In fact both partners gain from trade
e.g. Brazil & United State.
coffee
Brazil U.S.A
wheat

16. Common Fallacies of International
Trade
• Brazil specialize in coffee production export
• U.S.A specialize in wheat production export
2. Import reduce employment and export promote growth and
employment.
Example:
German
machinery USA
computer software

17. Common Fallacies of International
Trade
• If German export German import computer
software from U.S.A income U.S.A income
employment in US.
3. People often feel that tariffs, quotas and
other import restriction will save jobs and
promote a higher level of employment.
- when we restrict foreigners from selling
to us, we also are restricting their abilities to
obtain the dollars needed to buy from us.

18. Is International Trade An Opportunity or a
Threat to Workers?
Is International Trade An Opportunity or a Threat to
Workers?
+ Benefits:
- Shop for the cheapest consumption goods and
permits employers to purchase the technologies and
equipment that best complement their workers’ skill.
- Allow workers to because more productive as the
goods they produce increase in value.
- Product goods & for export generate jobs and income
for domestic workers.

19. Common Fallacies of International
Trade
+Threat:
- losing jobs because of cheap export
produce by low-cost, foreign workers.
- Rims are relocating abroad in search of
low wage However, free-trade agreement will
be more easily reach if these who may lose by
new trade are helped by all of the rest of us
who gain.

20. Backlash Against Globalization
• Who are involve with Backlash Against
Globalization?
WTO
World Bank and
International Monetary Fund

21. Advantages and Disadvantage of
Globalization

22. Terrorism Jolts the Global Economy
• What is the result after Terrorism Jolts on The
United State on Sep 11, 2001:
Ignore poor people
Tragic loss of life
Increasingly concerned about safety and
livelihood

23. Key Term
• Agglomeration economies: a rich country
specializes in manufacturing niches and gains
productivity through groups of firms clustered
together, some producing the same product
and others connected by vertical linkages.
• Economic interdependence: all aspects of a
nation’s economy are linked to the economies
of its trading partners

24. Key Term
• Globalization: The process of greater
interdependence among countries and their
citizen.
• Law of comparative advantage: When each
nation specializes in the production of that good
in which it has a relative advantage, the total
output of each good increase, thus, all countries
can realize welfare agains.
• Openness: The ratio of a nation’s exports and
imports as a percentage of its gross domestic
product(GDP).

25. Q&A