TRADE

GLOBALIZATION &
PROTECTIONISM

WHAT IS GLOBALIZATION?

Globalization (or globalisation)

describes the process by which regional economies, societies, and cultures have become integrated through communication, transportation, and trade.

It is most closely associated with the term

economic globalization:
the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence.

WHAT IS THE EFFECT OF GLOBALIZATION IN AN ECONOMY?

The

realization of a global common market, based on the freedom of exchange of goods and capital.

HSBC, the world's largest bank, operates across the globe. Shown here is the HSBC Global Technology Centre in India which develops software for the entire HSBC group.

As of 20052007, the Port of Shanghai holds the title as the World's busiest port.

London is a city of considerable diversity. As of 2008, estimates were published that stated that approximately 30% of London's total population was from an ethnic minority group. The latest official figures show that in 2008, 590,000 people arrived to live in the UK whilst 427,000 left, meaning that net inward migration was 163,000.

THE CONSTRUCTION OF CONTINENTAL HOTELS IS A MAJOR

CONSEQUENCE OF GLOBALIZATION PROCESS IN AFFILIATION WITH TOURISM AND TRAVEL INDUSTRY

GRAND HOTEL, KISH, IRAN

Globalization has influenced the use of language across the world. This street in Hong Kong, a former British colony, shows various signs, a few of which incorporate both Chinese and British English.

 In

the rich world, business process outsourcing has, like most other arms of globalisation, been a double-edged sword; it enables cheaper services but displaces some service-sector jobs. However, in poorer countries to which service jobs are outsourced, the benefits have been unambiguous; in India, the outsourcing industry is the "primary engine of the countrys development over the next few decades, contributing broadly to GDP growth, employment growth, and poverty alleviation".[

WHAT IS TRADE PROTECTIONISM?

Trade protectionism is an economic policy implemented by the government to safeguard its domestic industry from foreign competition.

WHAT IS THE ADVANTAGE OF HAVING A POLICY ON TRADE PROTECTIONISM

If a country is trying to grow strong in a new industry it will protect it from foreign competitors.

WHAT IS THE DISADVANATGE OF HAVING A POLICY ON TRADE PROTECTIONISM?

In the long term trade protectionism weakens the industry because without competition industry wont innovate and improve their products

2 WAYS TO IMPOSE TRADE PROTECTIONISM

1.Impose

Tariff

2.Set

Quota

WHAT ARE TARIFFS?

Tariffs are taxes that are levied on imported goods which enters the country.
$50 $50 $100

WHAT

WILL HAPPEN IF THERE IS AN

INCREASE IN TARIFF ?

There will be an increase in the prices of imported raw materials and a decrease in production and earnings.

Increase on tariff in foreign goods will mean an increase in cost of foreign goods compared to local goods.

WHAT ARE QUOTAS?

Quotas are measures that control the amount or quantity of products that enters the market. No more quota!

WHAT WILL HAPPEN IF QUOTA IS IMPOSED?

Imposing quotas limits the number of imported products that will directly compete with local products.

TABLE 20. A
Positive Effects Tariffs
Generate revenue for the government Provide additional investment in putting up domestic industries Provide employment since there will be an increase in production of local products by local entrepreneurs. Safeguard local products by limiting the number of counterparts imported products Provide employment to people

Negative Effects
Encourage smuggling of products to avoid paying tariffs Cause price increase of imported products and products using imported raw materials Penalize consumers while favouring producers May lead to administrative corruption since power may be used in setting and controlling quota of products. Cause price increase of imported products due to shortage of supply Encourage smuggling of products due to limited stocks

Quotas

TO APPLY WHAT WE JUST LEARNED: TARIFFS

If the Philippine government imposed a 15% tariff on Php 1 000 000 worth of imported mobile phone. The amount generated from the tariff would generate revenues for the government. How about if the tariff is too high. What do you think will happen?

TO APPLY WHAT WE HAVE JUST LEARNED: QUOTAS

If there is no restriction in the importation of cell phones in the Philippines it sells Php 5 000 000 worth annually. But due to inflation the government decided to set quotas lowering it to Php 2 000 000. This will prevent importers from meeting the high demand for cell phones. What do you think will the importers do?

"Over the same span of history, the slothful and incompetent protectionist has endlessly sought to erect barriers in order to prohibit competition thus, effectively moving communities farther apart. When trade is cut off entirely, the real producers may as well be living on different planets. "The protectionist represents the worst in humanity: fear of change, fear of challenge, and the jealous envy of genius. The protectionist is not against the use of every kind of force, even warfare, to crush his rival. If mankind is to survive, then these primeval fears must be defeated."
Ken Schoolland Former US International Trade Commission Economist, and Trade Advisor to the White House Member of ISIL's Board of Directors