Introduction to
Globalization, Development, and
Conditions in the Developing World
 Globalization
generally refers to
international integration in commodity,
capital, and labor markets. (WTO)
 It
not simply a post-WWII phenomenon. What
other eras in history have been marked by
expansions of trade, capital, and labor
markets?
http://www.wto.org/english/res_e/booksp_e/
anrep_e/wtr08-2b_e.pdf
What are key events in the latest round of
globalization?
 Originally,
concerned the trade of raw
materials, intermediary products, and final
goods
 Now


it can also include trade-in-services
Offshoring (a subset of outsourcing)
Element of the current Doha Round negotiations
 Foreign
Direct Investment
 Stock/Bond
 Even
investments across borders
being able to take your own money
across borders was once universally subject
to controls. What political ideologies and
structures might explain the origin of
controls?
 US-1/4

of American Doctors are foreign-born
France recruits at the top Senegalese medical
school
 Bottom-line
for Skilled Labor: movement is
much more common and financially they
become better-off in the developed world
 Integration
exist?
 Refugees?
is also at play. Where does this
http://www.wto.org/english/res_e/booksp_e/
anrep_e/wtr08-2b_e.pdf

There are winners and losers in trade
liberalization

For example, NAFTA caused issues on both sides:
Mexican stores and manufacturers struggled with the
„Walmart Effect‟ and some US/Canadian
manufacturing is now made in maquilladoras. Overall,
though total GDP increased in all countries.
Human Rights Concerns
 Environmental Concerns
 Fears of Neo-Imperialism

*Some misatribute their loses to free trade when it was
actually technological advances that made them
obsolete
 AIDS/HIV



Spread from a few remote villages to the new
factories of Kinshasa, following the colonization
of Cameroon (by Germany).
Brought by returning UN peacekeepers to Haiti
Quickly goes global via jet plane travel

“Tinderbox” by Dr. Halperin & Timberg
 “Dallas”


Effect
Senegalese television shows & film were very
advanced, then came the US soap opera “Dallas”
Suddenly, attitudes towards wealth changed and
more and more shows were imported rather than
locally produced!
 1970s-Jamaican
Government nationalizes the
bauxite industry (raw material for aluminum)


American companies continue to buy bauxite at a
higher rate, while they secure new sources in
Africa
THEN suddenly, the companies went elsewhere
and Jamaica‟s output went into free fall
 Lessons:

Commodities are hard to nationalize, but does
this mean countries must give up everything to
MNCs?
 Post-conflict
Liberia was desperate for
investment and gladly accepted Mittal‟s
subsidiary‟s FDI contract to mine to find iron
ore with nearly no regulations
 But as the Liberian economy became
stronger and a new government came to
power, it demanded the company to
implement environmental and human rights
regulations or leave. Did Mittal Leave?
 This
is referred to as the “obfuscating
bargain”
 Mittal had already spent a lot of money
building mines, processing facilities, and a
railroad to export the iron ore.
 The more fixed infrastructure, the more
power shifts more towards Liberia
 China
has also done very well by allowing
MNCs into the country by maximizing the
number of backward linkages.



Domestic Partners/Suppliers
Mandatory Education
Factories are part of global supply chain
 What
do all of these strategies have in
common
 Accept

Chile, Nigeria
 Some

Free Trade/Some Authoritarianism
China, Indonesia, Liberia
 Reject

Free Trade
Free Trade
Nationalize Industries

Jamaica in 1970s, Venezuela
 International


World Bank
IMF
 Free


Trade Agreements
What countries are most using these?
What trends are likely to occur in the future?
 Multilateral


Negotiations
WTO Rounds
Are there any alternatives?
 Investment

Financial Institutions
Promotion Agencies
Do differing Political Structures impact their
success?
 IMF

Keep international economic stability


Traditionally for the developing world
Loans are made in SDRs (a basket of major
currencies)

1 SDR = $.648
 World


Bank Group
Promotes Development through loans
Mostly to the governments

Now more loans through public-private partnership
 Role
is to reduce poverty through loans and
suggestions for policy choices

Includes IBRD & IDA
 Great
Source of Data:
http://povertydata.worldbank.org/poverty/ho
me
President Robert
Zoellick
Permanent Employees
Part-timers for a
maximum of 6 months
per year
 Lets
see how our case studies have
interacted with the IMF:
(http://www.imf.org/external/np/fin/tad/e
xtarr1.aspx)
 Zimbabwe
 Peru
 Indonesia
 China
Your country is not geographically near an
economic heavyweight like Mexico or Turkey.
Nor does it have a large abundance of Natural
Resources like Nigeria.
But unlike Zimbabwe, your country is wellgoverned and takes part in the WTO.
What policies can the Peruvian government put
in place to increase trade and thus its
development?
Eliminates tariffs, import quotas, and
preferences on most goods and services
traded between the countries
Do FTAs apply to imports from other countries?
 Signed
in 1994, with the intention of fully
implementing by 1996
 However, as often happens, implementation
of the politically sensitive Mexican Trucking
Provision, was not finish until a few months
ago (2011)!
 Maquilladoras
 Policy

Chile leads the world with over 50


priority in several countries
The Southern Tiger?
China has been increasing its array throughout
Southeast Asia (China-ASEAN FTA)
 Trans-Pacific


Partnership
Would include most countries around the Pacific
rim including US, Japan, Indonesia, & Mexico
But do all the political institutions have the
strength to implement controversial trade
liberalization?
 China-Peru
FTA
 Canada-Peru FTA
 US-Peru Trade Promotion Agreement (PTPA)

Not quite an FTA, but made legal frameworks for
investors regarding:



Intellectual Property Rights
Labor Human Rights
Environment
 1947-United
Nations negotiates the General
Agreement on Tariffs and Trade

45000 tariff concessions
 1964-8:
Kennedy Round
 1973-1979: Tokyo Round
 1986-1994: Uruguay Round

World Trade Organization
 2001-?:
Doha Round
 Most
tarriffs were reduced in the early
rounds
 Negotiations are now about technical issues
and last longer

This may explain the spread of FTAs that are
bilateral/multilateral – not global
Source:
http://www.wto.org/englis
h/thewto_e/countries_e/p
eru_e.htm
 IPAs
can be public, private or a public-private
partnership
 Most
public bureaus are more like
“investment prevention bureaus”
 Private
tend to not have power to make
things happen
 Public-Private

is rare but seems to work
Costa Rica convinced Intel to set up
manufacturing there in 1996
 Public
Agency
 Website is fancy

Unclear if the quality extends to face-to-face
 Can
you think of any changes to its political
structure that might boost its effectiveness?
Up to this point we‟ve dealt only with the
Formal Sector. The Informal Sector are those
jobs that are not taxed or monitored by the
government.
Income is NOT included in GDP figures.
The majority of jobs in the developing world
are in the Informal Sector.
Here are some I encountered in Africa..
While many in the Informal Sector do
legitimate business, a subgroup is committing
crimes.
The next three photos refer to one black
market I saw throughout Benin. What is it?
And make your best guess as to why it sprout
up in Benin.
Oil is illegal obtained from pipelines in the
Delta.
It is then transported on motorcycles to Benin
Benin turns a blind eye because its citizens get
lower prices at “the pump”
Nigeria‟s reasons are less clear: bribery? jobs
for the poor?
 Low
income countries lose out on a lot of
potential revenue that could be used for
development
 Most individuals rarely encounter the
government

Subject, Rather Participatory Relationship
 Bribery,

Bribery, and more Bribery
As a result the Millenium Challenge Corporation
(US), incentivizes countries to reduce corruption
as a prerequisite for funding