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What is Globalization?Globalization – the increasing
interconnectedness of all parts of the world in all areas, especially communication, commerce, culture, and politics
Examples: Many of the clothes you wear were made in Asia. You can eat a Big Mac in Moscow, Russia. You can watch American films in Rome. A German company can manufacture goods in Argentina and sell
them in the U.S.
History of Globalization For thousands of years people have been
traveling long distances to trade goods.
People had long interacted with each other based on established trade routes such as the Silk Roads and the trans-Sahara caravan routes
In the 1400s the process was accelerated when European mariners began exploring sea routes to the markets in Asia
By 1500 peoples of the world had established intricate transportation networks that supported travel, communication, and exchange between societies
History of Globalization Before 1500, contact between people of the
eastern hemisphere, western hemisphere, and Oceania had only sporadic contact with each other
From 1500 to 1800, networks linked all the world’s religions and peoples
From 1800 to the present, national states, heavy industry, powerful weapons, and efficient technologies of transportation and communication enabled “the West” to achieve political and economic dominance in the world
Modern Globalization The collapse of the Soviet Union and the end
of the Cold War abruptly opened up possibilities for trans-global connections that had previously been limited
What else has made our world more connected?
Global Economies
Developed Nations Industrialized nations with
strong economies and high standards of living
Ex – U.S., Japan
Includes 20% of nations
Good access to education, healthcare
Developing Nations Less productive economies,
lower standard of living
Ex – Guatemala Phillipines
Lack adequate education, healthcare
Mostly located in Africa and southern Asia
Growth and Outsourcing
Multinational Corporations
Increasing interdependence and dramatic growth of multinational corporations—large companies operating in multiple countries
Benefits to companies
Outsourcing—having work done elsewhere to cut costs, increase production
Manufacturing facilities in developing countries, where materials, labor relatively inexpensive
Outsourcing
Advocates say: creates jobs and wealth in developing countries
Critics say: fails to improve standard of living, outsourcing causes job loss in company’s home country
Global Economic Ties Certain events, actions can affect economies of many nations
Global interdependence particularly evident in times of uncertainty
Early 2000s, price of crude oil rose dramatically
Factors: rising world demand, concern over available supply
Oil Prices
All countries depend on oil for energy; rise in prices felt around world
Developed countries like United States faced with higher costs
Poor nations in Africa could not afford to import, faced shortages
Rise in oil prices led to increased demand for alternative energy sources, attempts to reduce consumption
Globalization often leads to or promotes free trade, the exchange of goods among nations without trade barriers such as tariffs. This can lead to consumers purchasing higher-quality goods at lower prices.
Global Trade
NAFTA was written to create a Free Trade Area in North America.
“Free Trade” means that countries may freely trade goods with each other without having to pay a tariff (tax) on those goods.
In other words, “free trade” means no trade barriers.
NAFTA: A Closer Look
The purpose of the agreement is to:Allow free movement of goods and services
among the countries.Promote competition in the free trade areas.Protect the property rights of people and
businesses in each country.Be able to resolve problems that arise among the
countries.Encourage cooperation among countries.
NAFTA: Why?
Free trade increases sales and profits for Mexico, Canada and the U.S.A., thus strengthening their economies.
Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices. This makes Mexican products more competitive in these markets and increases Mexico’s profits as it tries to develop its economy.
Free trade is an opportunity for the U.S. to provide financial help to Mexico by making jobs available in factories located there.
NAFTA: Pros
Free trade has caused more U.S. jobs losses than gains, especially for higher-wage jobs.
› Factories, called Maquiladoras, are built on the Mexican border and workers are hired there to make goods at a much lower wage than workers would be paid in the U.S.A.
NAFTA: Cons
Minimum WageMexico - $3.40 per day vs. US - $5.15 per hour
Example: Hourly compensation costs for production workers in manufacturingMexico - $1.21 vs US - $17.70
(Global Trade Watch, The NAFTA Index, October 1, 1998)
MAQUILADORAS:Wages
•Honda •Honeywell, Inc. •Hughes Aircraft •Hyundai Precision America •IBM •Matsushita •Mattel •Maxell Corporation •Mercedes Benz •Mitsubishi Electronics Corp. •Motorola •Nissan •Philips •Pioneer Speakers •Samsonite Corporation •Samsung •Sanyo North America •Sony Electronics •Tiffany •Toshiba •VW •Xerox •Zenith
Companies with
Think About it . . . What are the PROS and CONS of NAFTA and Maquiladoras?
One half of the room will list the PROS.
The other half will list the CONS.
United States
They can move their factories to Mexico and ship the goods to the US with no tariffs.
They would not have to pay the workers in Mexico as much as in the United States.
They would be able to sell their product for cheaper, but still make a good profit
Many American factory workers lose their jobs because the owners move the factories to Mexico. American factory workers cannot move to Mexico to keep their jobs.
Goods made in Mexico would cost a lot less because labor is cheaper there.
Mexico
They would not like foreign owned factories because they would create competition and hurt Mexican owned businesses.
Maquiladoras would provide jobs for Mexicans, but the profit made by maquiladoras would go back into the US economy, not into Mexico’s
It would provide a job in a country where there are not enough jobs
However, the wages are very low and the working conditions are not good
Building factories creates pollution. An environmentalist would want to make sure that Mexico had laws to protect the environment.
Maquiladors: Good or Bad?