Globalization: Markets, Instututions & Policy SIPA U6355 Professor O’Halloran.

Globalization: Markets, Instututions & Policy

SIPA U6355

Professor O’Halloran

What is Globalization?

Globalization is the Buzz-word of the 90’s– Refers to anything from the globalization of

weather and global warming to currency crises and contagion.

Definition– The increased movement of goods, services and

capital across national borders.

Volume of World Trade & GDP

100

500

900

1300

1700

Year

World GDP

World Trade

Key: Volume of Trade is 16 times what it use to be in 1950, while total output is only 5 1/2 times as big.

Tariff & Non-Tariff Barriers, 1950-86

As tariffs have declined, Non-tariff barriers have steadily increased.

0

1

2

3

4

5

6

7

8

1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983

Year

Tariff s

NTBs

Percent of Imports Covered by NTBs

0 10 20 30 40 50 60 70 80

Al l Countr ies

E U

Belgium

Denmar k

Fr ance

Ger many

Ir eland

Italy

Nether lands

UK

Finland

J apan

Nor way

Switzer land

United States

Percent

1966

1986

Percent of Imports covered by NTBs is increasing

Anti-Dumping Measures

The use of Anti-dumping measures is spreading…

New Actions Measures in ForceSouth Africa 30 31Argentina 23 30EU 23 153United States 21 311India 20 15Austrial 17 47Brazil 17 24Korea 13 14Indonesia 8 naIsrael 6 naCanada 5 96Pure 5 4New Zealand 4 27Chile 3 0Mexico 3 95Venezuela 3 3Malaysia 2 naColombia 1 7Guatemala 1 naThailand 1 1Japan 0 3Singapore 0 2Turkey 0 37Total 206 900

Anti-Trade: Summary of Anti-Dumping Actions, 1996

Index of Capital Controls in Emerging Markets

Limits on capital movement in developing countries have significantly declined.

0.56

0.58

0.6

0.62

0.64

0.66

0.68

1982 1984 1986 1988 1990 1992 1994 1996

Total Net Capital Flows into Emerging Markets as a % of GDP

Money is now flowing into emerging markets more quickly than before.

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

Gross Product of Foreign Affiliates, as a percent of GDP

Today 3/5ths of FDI goes to wealthy countries 2/5ths to developing, but composition has changed.

0 2 4 6 8 10 12

Latin America andthe Caribbean

Asia*

Africa

Western Europe

North America

Central and EasternEurope

1994

1982

*Excluding Japan

Who am I?

“There should be lunatic asylums for nations as well as individuals,” one investor wrote in the The Morning Post of London, denouncing the defaulting country as “a nation with whom no contracts can be made.”

Quoted in the New York Times September 20, 1998

Capital Mobility & Variation, 1870-1985

Capital mobility is not new, but the sums have greatly increased.

0

1

2

3

4

5

6

18

70

18

80

18

90

19

00

19

10

19

20

19

30

19

40

19

50

19

60

19

70

19

80

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Capital Mobility

Variance

Inflows of Immigrants as a percent of population

As costs of globalization increase, labor demands protection.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1985 1990 1995

Germany

Australia

Canada

Sweden

BritainFrance

J apan

United States

Belgium

Dimensions of Globalization

Increased International Trade

Integration of Capital Markets

Increase in Multi-national Firms

Expanded and Strengthened Role of International Organizations

Levels of Globalization

World

National Governments

Firms

Normative Issues of Globalization

Fairness and Equity Issues– Redistribution and Compensation

National Sovereignty– Cultural Values– Role of International bodies (IMF, World Bank,

WTO) in dictating national policies Different Social Regulations

– Environmental Issues– Health and Safety Standards

Approach

Preferences derived from economic fundamentals,

Aggregated through political institutions,

To produce public policy outcomes.

Preferences Institutions Policies

Step 1 Step 2 Step 3

Outline

How firms and governments respond to the pressures and opportunities of globalization.

Analyze the relevant political institutions.

Finally, we will look at how these elements combine to produce policy.

Goal: Develop analytical tools

Peanut Example

What are the different frameworks we might use to explain the persistence of peanut quotas?

Mechanics

Course Materials– In Bookstore – On reserve at Meyer

Requirements– Class Participation (40%)

Prepare Case before Class

– Final Group Project (60%) Approve Topic with Instructor 5 minute Presentation on October 14th Final Project due December 9th

Levels of Globalization International

– The structure and scope of international organizations

National Governments– The demands placed on national governments

Industries– The structure of industries and sectors – number of competitors– prices

Firms– The allocation of production and mar

What is Globalization?

Levels– International

– National Governments

– Industries

– Firms

– Telecommunications

Dimensions– International Trade

– Integration of Capital Markets

– Expanded role of international organizations

– Increase in Multi-national Firms

Point: This has lead to more complexities and more difficult for firms and governments to respond to changing environment.