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
1700
1300
World GDP
World Trade
900
500
19
50
19
54
19
58
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
100
Ye a r
 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.
Percent of Imports Covered by NTBs
Un i t e d St a t e s
Swi t z e r l a n d
1966
No r wa y
1986
J a pa n
Fi n l a n d
UK
Ne t h e r l a n d s
It a l y
Ir e l a n d
Ge r ma n y
Fr a n c e
De n ma r k
B e lgium
EU
Al l C o u n t r i e s
0
10
20
30
40
50
60
70
80
P er c ent
 Percent
of Imports covered by NTBs is increasing
Anti-Dumping Measures
Anti-Trade: Summary of Anti-Dumping Actions, 1996
New Actions Measures in Force
South Africa
30
31
Argentina
23
30
EU
23
153
United States
21
311
India
20
15
Austrial
17
47
Brazil
17
24
Korea
13
14
Indonesia
8
na
Israel
6
na
Canada
5
96
Pure
5
4
New Zealand
4
27
Chile
3
0
Mexico
3
95
Venezuela
3
3
Malaysia
2
na
Colombia
1
7
Guatemala
1
na
Thailand
1
1
Japan
0
3
Singapore
0
2
Turkey
0
37
Total
206
900
 The
use of Anti-dumping measures is spreading…
Index of Capital Controls in
Emerging Markets
0.68
0.66
0.64
0.62
0.6
0.58
0.56
1982
 Limits
1984
1986
1988
1990
1992
1994
1996
on capital movement in developing
countries have significantly declined.
Total Net Capital Flows into
Emerging Markets as a % of GDP
3.5
3
2.5
2
1.5
1
0.5
0
- 0.5
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
 Money
is now flowing into emerging markets
more quickly than before.
Gross Product of Foreign
Affiliates, as a percent of GDP
Central and Eastern
Europe
North America
1994
1982
Western Europe
Africa
Asia*
Latin America and
the Caribbean
*Excluding Japan
 Today
0
2
4
6
8
10
12
3/5ths of FDI goes to wealthy countries
2/5ths to developing, but composition has changed.
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.
Inflows of Immigrants as a
percent of population
1.4
Germany
1.2
1
0.8
A ust ralia
Canad a
Swed en
0.6
B elg ium
0.4
Unit ed St at es
0.2
Jap an
France
B rit ain
0
1985
 As
1990
costs of globalization increase, labor
demands protection.
1995
Dimensions of Globalization
 Increased
International Trade
 Integration
 Increase
of Capital Markets
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
Step 1
Step 2
Step 3
Preferences
Institutions
Policies
 Preferences
derived from economic fundamentals,
 Aggregated
through political institutions,
 To
produce public policy outcomes.
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
What is Globalization?
 Levels
–
–
–
–
–
 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.
International
National Governments
Industries
Firms
Telecommunications