INTRODUCTION OF THE MODULE
Course Code: CWORLD1
Course Title: The Contemporary World
Credit: Three (3) Units
Course Description:
This course introduces students to the contemporary world by examining the
multifaceted phenomenon of globalization. Using the various disciplines of the social sciences, it
examines the economic, social, political, technological, and other transformations that have
created an increasing awareness of the interconnectedness of peoples and places around the
globe. To this end, the course provides an overview of the various debates in global
governance, development, and sustainability. Beyond exposing the student to the world outside
the Philippines, it seeks to inculcate a sense of global citizenship and global ethical
responsibility.
Requirements of the Course:
1. Three (3) Major Examinations
2. Regular Attendance
3. Scheduled Quizzes, Seat-works, Home-works/ Assignments, Classroom-Based
Recitations
4. Critique Papers, Synthesis Papers, Essay Writing
5. Group Power-Point Presentations, Video Presentations
6. Research Paper Writing
Learning Competencies:
As the course progresses, the students are expected to:
1. write a personal definition of globalization based on a concept map
2. differentiate the competing conceptions of globalization
3. identify the underlying philosophies of the varying definitions of globalization
4. agree on a working definition of globalization for the course
5. define economic globalization
6. identify the actors that facilitate economic globalization
7. define the modern world system
8. articulate a stance on global economic integration
9. explain the role of international financial institutions in the creation of a global economy
10. narrate a short history of global market integration in the twentieth century
11. identify the attributes of global corporations
12. explain the effects of globalization on governments
13. identify the institutions that govern international relations
14. differentiate internationalism from globalism
15. identify the roles and functions of the United Nations
16. identify the challenges of global governance in the 21st century
17. explain the relevance of the state and globalization
18. define the term “global south”
19. differentiate the “global south” from the “third world”
20. analyze how a new conception of global relations emerged from the experiences of Latin
American countries
21. differentiate between regionalization and globalization
22. identify the factors leading to a greater integration of the Asian region
23. analyze how different Asian states confront the challenges of globalization and
regionalization
24. synthesize knowledge concerning globalization
25. analyze how various media drive various forms of global integration
26. explain the dynamics between local and global cultural production
27. explain how globalization affects religious practices and beliefs
28. analyze the relationship between religion and global conflict and, conversely, global
peace
29. identify the attributes of a global city
30. analyze how cities serve as engines of globalization
31. explain the theory of demographic transition as it affects global population
32. analyze the political, economic, cultural, and social factors underlying the global
movements of people
33. display first-hand knowledge of the experiences of OFWs
34. write a research paper proposal with proper citation
35. critique research proposals of classmates
36. differentiate stability from sustainability
37. articulate models of global sustainable development
38. define global food security
39. critique existing models of global food security
40. articulate a personal definition of global citizenship
41. appreciate the ethical obligations of global citizenship
42. write a research paper on a topic related to globalization with proper citations
LESSON 1
INTRODUCTION TO THE STUDY OF
GLOBALIZATION
Learning Objectives:
1. To differentiate the competing approaches to the study of
globalization
2. To understand the varying processes of globalization
3. To explain the different ideological dimensions of globalization
4. To appreciate the core claims of market globalism
5. To agree on a working definition of globalization for the course
SOURCE: https://www.pinterest.ph/christine06295/advantages-of-globalisation/
LESSON 1
INTRODUCTION TO THE STUDY OF
GLOBALIZATION
The first part of this lesson discusses the summary of the “Approaches to the Study of
Globalization” as presented by Manfred B. Steger (2014) which was adopted from the “SAGE
Handbook of Globalization” edited by Manfred B. Steger, Paul Battersby, and Joseph M.
Siracusa (2014). The succeeding discussion presents the work of Manfred B. Steger (2014)
entitled “Market Globalism” which was also adopted from the “SAGE Handbook of
Globalization”.
A. Approaches to the Study of Globalization
There are many different approaches to the study of globalization. The purpose of this
chapter is to provide a general overview of the various approaches to the concept as espoused
by several scholars since the 1990s.
Various scholars have advanced the concept of globalization by analyzing the changing
economic, political, and cultural processes that happened since the 1970s. Some of the
accepted definitions of globalization include the following: “increasing global interconnectedness”; “the expansion and intensification of social relations across world-time and
world-space”; “the compression of time and space”; “distant proximities”; “a complex range of
processes, driven by a mixture of political and economic influences”; and “the swift and
relatively unimpeded flow of capital, people, and ideas across national borders” (Giddens, 1990;
Harvey, 1989; Held & McGrew, 2007; Lechner & Boli, 2011; Robertson, 1992; Steger, 2013;
Waters, 2001).
Globalization as “Globaloney”.
Three groups of scholars argue that the existing accounts of globalization are incorrect
and imprecise. Their arguments fall into three differing categories. The first group disagrees with
the usefulness of globalization as a precise analytical concept. The second group contends that
the world is not really integrated as many proponents believe. The last cluster disputes the
novelty of the process while acknowledging the presence of moderate globalizing tendencies.
Rejectionists. These scholars believe that the term “globalization” is an example of a
vague word employed in academic discourses. Just like the term “nationalism”, “globalization” is
a complex and ambiguous phenomenon, thus both are hard concepts to define (Calhoun,
1993).
Sceptics. This group stresses the limited nature of current globalizing processes.
According to Hirst and Thompson (2009), our international economy is not really a global
phenomenon, since it only centered on Europe, Eastern Asia, and North America. They also
emphasized that most of the economic activities are still national in terms of origin and scope.
Modifiers. They entail that “globalization” has often been applied in a historically
inaccurate manner. Gilpin (2000) argues that our international economy in the late 1990s was
even less incorporated before the outbreak of World War I. According to the neo-Marxist
proponents of World-System Theory (Wallerstein, 1979; Frank, 1998), the modern capitalist
economy today has been global five centuries ago. Thus globalization can be drawn back to the
political and cultural relations that developed the ancient empires of Persia (Iran), China, and
Rome.
Globalization as an Economic Process
The evolution of global markets and international corporations led to global economic
interdependence among nation-states. The development of international economic institutions
such as the European Union, the North American Free Trade Association, and other regional
trading blocs are some of the examples (Keohane & Nye, 2000). This only shows that economic
globalization increases the linkage of national economies through trade, financial flows, and
foreign direct investment (FDI) by multinational or trans-national corporations (MNCs/TNCs)
(Gilpin, 2000).
Globalization as a Political Process
Political globalization includes the discussion and analysis of political processes and
institutions. Thus two questions are asked: (1) what are the political grounds for the immense
flows of capital, money, and technology across territorial boundaries?; (2) do these flows create
a serious test to the power of the nation-state? These dilemmas imply that economic
globalization might lead to the reduced control of national governments over restrictive policies
and economic regulations.
Globalization as a Cultural Process
According to Tomlinson (1999), cultural globalization signifies a growing linkage of
intricate cultural interconnections and interdependencies that define our modern social life.
These can be made possible through the emergence of powerful global media corporations that
develop new communication technologies which promote the Anglo-American value system.
This global dissemination of American values (Americanization), consumer goods, and lifestyles
promote the objectives of American “cultural imperialism” which is also termed by Ritzer (1993)
as “McDonaldization” which describes the ideals of the fast-food business that dominate the
American society and the rest of the globe.
According to Barber (1996), a type of cultural imperialism that was assembled in the
1950s and 1960s promoted an American culture of popular consumerism which he termed as
“McWorld”. This was driven by expansionist commercial interests which was evident in its
choice of music, video, theater, books, and theme parks which create exports that center
around common logos, advertising slogans, stars, songs, brand names, jingles, trademarks, and
the like.
As argued by Robertson (1995) global cultural flows also take place in local contexts
which result to “glocalization”. This refers to an intricate collaboration of the global and local
cultures characterized by cultural borrowing. These interactions lead to a complex mixture of
both cultures often referred to as “hybridization” or “creolization” which signifies processes of
cultural mixing that are replicated in music, film, fashion, language, and other types of social
expression.
B. Market Globalism
The Ideological Dimension of Globalization
During the early 1990s, the emphasis of globalization was dominated by the economic
and technological features of globalization. Later, the role of incorporating markets and new
information know-hows became part of understanding the process of globalization. This section
incorporates the ideological aspect of globalization and the
roles and purposes of political ideologies. It also integrates ideas on the six central claims of
market globalism.
Political Ideologies and the Global Imaginary
According to Steger (2014), “ideology” is a structure of broadly shared ideas or
philosophies, patterned beliefs, guiding norms, values, and ideals recognized as fact by some
collections of people. Every ideology is organized around core claims which differentiates it from
other contrasting ideologies.
The concept “ideology” was first introduced by Antoine Destutt de Tracy in the 18th
century. For this Enlightenment thinker, the term means a positivistic “science of ideas” using
the empirical tools borrowed from the natural sciences. According to Paul Ricoeur (1986), the
first functional level of ideology (Ideology as Distortion) refers to the construction of contorted
descriptions of social truth. This process obscures the difference between things as they are
perceived in theory and things as they are viewed in reality.
Political Ideologies and the “Social Imaginary”
According to Charles Taylor (2004), “social imaginaries” are neither theories nor
ideologies, but are implied “background understandings” of a group’s shared customs. The
social imaginary explains how a group of people fit as one and their expectations of every
member within the community.
Each ideology organized its core concepts based on liberty, progress, race, class,
rationality, tradition, community, welfare, security, and others. The ideologies of liberalism,
conservatism, socialism, communism, and Nazism/fascism are all “nationalist” in character and
are promoted by the elites within the group which are evident in their political goals through the
concept of “national imaginary”.
The Core Claims of Market Globalism
With the downfall of Soviet-style command economy in Eastern Europe, power elites
from the global north (i.e., corporate managers, CEOs of multinational corporations, corporate
lobbyists, high-ranking military officials, remarkable journalists, public-relations experts, scholars
writing to a large public audience, state administrators and leading politicians) introduced their
idea of market globalism. For them, market globalism means an advocacy that advances the
deregulation of markets, trade liberalization, the privatization of government-owned and
controlled corporations, and the upkeep of the global “War on Terror” spearheaded by US
(Steger, 2014).
Claim 1: Globalization is about the Liberalization and Global Integration of Markets
This claim is buttressed in the neo-liberal philosophy of the laissez faire self-regulating
market economy as the foundation for a global market economy. According to Steger (2014),
the focal roles of the free market in order to foster more societal integration and material
advancement are only possible in a democratic society that values and protects individual rights
and freedoms.
Claim 2: Globalization is Inevitable and Irreversible
This claim contends that globalization promotes the expansion of unalterable market
forces motivated by technological improvements that facilitate the unavoidable worldwide
integration of state economies. Nation-states, political parties, and civil society organizations
have no option but to adapt to the inevitable forces of globalization.
Claim 3: Nobody is in Charge of Globalization
This argues that globalization is manifested through a “self-regulating market”. According
to Hormats (1998), what is attractive with globalization is that nobody is in control of the
process. Thus it is not regulated by any individual, any nation-state, or any organization. In
addition, Friedman (1999) contends that the international market is an Electronic Herd of
anonymous stock, bond and money traders and transnational foreign investors, integrated by
global screens and networks.
Claim 4: Globalization Benefits Everyone (... in the Long Run)
The benefits for all relate to material aspects such as “economic growth” and “prosperity”.
These benefits were according to the participating heads of state of the 1996 G-7 Summit in
Lyons, France, consisting of the world's seven most influential highly-developed countries that
issued a joint Economic Communique (1996) that exemplified the implications of this claim.
Claim 5: Globalization Furthers the Spread of Democracy in the World
This claim links the concepts on globalization and market with that of democracy which
provides individuals with economic choices. According to Freeden (1996), globalists treat
freedom, free markets, free trade and democracy as identical concepts.
Claim 6: Globalization Requires a War on Terror
The neo-conservatives who are committed to the American values of freedom, security,
and free markets added this sixth claim of market globalism. According to Kaplan (2003), you
need to possess both military and economic supremacy in order to spread your ideas
worldwide. This claim integrates idea of market globalism with militaristic and nationalistic ideas
linked with the American-headed global “War on Terror”.
As asserted by Barnett (2004), the globe is divided into three diverse regions:
The Functioning Core or Core. This is categorized by global network connectivity,
financial transactions, liberal media, cooperative security, nations having stable democratic
governments, practice of transparency, increasing standards of living, and more deaths by
suicide than by killings.
The Non-Integrating Gap or Gap. This refers to regions where globalization is thinning
or if not, absent. These regions are plagued by authoritarian political regimes, government
regulated markets, mass killings, prevalent poverty and diseases, and the breeding ground of
global terrorists.
Seam States. These states lie along the Gap's bloody borders.
LESSON 2
THE GLOBAL ECONOMY
This chapter discusses the summary of “The Globalization of Economic Relations” as
presented by Istvan Benczes (2014) which was adopted from the “SAGE Handbook of
Globalization” edited by Manfred B. Steger, Paul Battersby, and Joseph M. Siracusa (2014).
Introduction
This chapter discusses the definition, foundation, and effects of economic globalization.
While the second section tackles on the development of the key global monetary regimes that
include the gold standard, the Bretton Woods System, and European Monetary Integration. The
last segment talks about trade rules and relations, which will focus on the unilateral trade
system of the late 19th and early 20th centuries and the multilateral trade agreements of the
post-World War II period (Benczes, 2014).
According to Held et al. (1999), globalization may be claimed as the broadening,
deepening, and rapid global interconnectedness in all facets (political, technological, cultural,
and economic) of modern-day social life (Giddens, 1999). Thus globalization is a
multidisciplinary course.
What is Economic Globalization?
According to the International Monetary Fund (2008), this refers to a historical
progression, which is the consequence of humanity’s modernization and technological
development. It may also denote a growing interconnection of global economies via the mobility
of goods, services, knowledge, and all forms of capital around the world.
The following are the various interrelated scopes of economic globalization:
(a) the globalization of goods and services in trade;
(b) the globalization of monetary and capital markets;
(c) the globalization of know-how and communication; and
(d) the globalization of production.
Economic globalization differs from internalization since the former refers to functional
interconnectedness between globally isolated activities while internationalization speaks of the
extension of economic activities of one country to another (Dicken, 2004).
For hyperglobalists, nation-states are no longer the key economic institutions in the
global market. Humanity is now consuming extremely standardized international products and
services created by multinational corporations (Ohmae, 1995). According to Reich (1991),
globalization converts the local economy into an international one, thus products, technologies,
corporations, and industries are no longer treated as national.
The new actors of political
and cultural globalization today refer to the United Nations (UN) and non-governmental
organizations (NGOs) or civil society organizations (CSOs). While the key actors of this modernday global market economy are the multinational corporations (MNCs) or transnational
corporations (TNCs). This MNCs or TNCs are the key motivating powers of economic
globalization for the last 100 years, and they account for about 67% of world exports (Gereffi,
2005).
For realists, they argue that these MNCs/TNCs still represent national interests (Gilpin,
2001). However, for the pioneers of the Dependency School, they assert that these are the
vehicles through which the rich can exploit the underprivileged majority (Feenstra, 1998). On the
other hand, Gereffi (1999) introduced the idea on the “global commodity chains” which
emphasizes on the growing significance of international buyers in a global market of dispersed
production.
Is Economic Globalization a New Phenomenon?
Gills and Thompson (2006) assert that the process of globalization began since Homo
sapiens started moving from the African continent to the rest of the globe. Frank and Gills
(1993) argued that the foundation of globalization dates back about 5,000 years ago as
manifested by the Silk Road which linked Asia, Africa and Europe.
When Adam Smith wrote his book “An Inquiry into the Nature and Causes of the Wealth
of Nations in 1776, he regarded the rediscovery of the Americas by Christopher Columbus in
1492 and the rediscovery of the direct maritime route to India by Vasco de Gama in 1498 as the
two ultimate accomplishments in humanity’s historical accounts.
Other significant accomplishments were the technological developments of the British
Industrial Revolution after the Napoleonic Wars which spread to European and North American
continents. Monopolized trade during this period were controlled by the first transnational
corporations, the British East India Company (1600) and the Dutch East India Company (1602).
However, these TNCs did not favor global economic integration due to their idea of nationalism
(Gereffi, 2005).
The real global economic break-through came in the 19th century due to the transport
innovations via the use of steamships and railroads which decreased transaction expenses and
boosted both local and global economic exchanges (Held et al., 1999). The relatively short
period from 1870 to 1913 before World War I (1914 to 1919) is often regarded to as the “Golden
Age of Globalization”. This period is characterized by the presence of peace, free trade, and
financial and economic permanence (O'Rourke & Williamson, 1999).
The Neoclassical Solow Growth Model
Bairoch (1993) argues that the industrial revolution and global trade relations
strengthened economic growth and development among developed parts of the globe, the rest
of the world did not achieve such accomplishments. Thus, the industrialization of the developed
regions led to the de-industrialization of the poorer regions.
Structuralism
Structuralism is a set of models which emerged from the 1950s to the 1970s and affirm
the notion that the North and South regions are in a structural association (Brown, 2001). The
most recognized critical theory to the prevalent social partition of labor and global inequities is
presented by the “World-Systems Analysis”, which argues that capitalism under globalization
strengthens the structural arrangements of unequal change.
According to Wallerstein (1983), capitalism produced the differing historical level of wages
in the global economic stage of the global system. Thus, rising disparity, coupled with economic
and political dependency, are not independent from economic globalization.
For Rostow (1960), underdevelopment (i.e. the absence of economic growth and
development, coupled with poverty and malnourishment) is not the primary phase of a historical
and evolutionary uni-linear progress, rather the effect of colonialism and imperialism.
Wallerstein (1983) acknowledged imperialism as the product of the global capitalist structure
which propagated imbalanced exchange.
The present capitalist structure produced political systems that ensure an infinite
appropriation and amassing of surplus products from less developed countries (the periphery) to
the industrializing countries (the semi-periphery) and the highly industrialized or highly
developed countries (the core or metropole) (Arrighi, 2005).
The International Monetary Systems
An international monetary system or regime (IMS) denotes the policies, practices, tools,
services, and institutions for carrying out global payments (Salvatore, 2007). In the liberal
custom, the key responsibility of an IMS is to assist international transactions on trade and
investment. An IMS is more than just money or currencies it also mirrors economic supremacy
since money is essentially political and is also considered as a vital aspect of “high politics” of
diplomacy (Cohen, 2000).
The Gold Standard
The foundations of the first IMS dates back to 19th century, when Britain assumed gold
mono-metallism in 1821. In 1867, the European countries, including United States, shifted to
gold at the International Monetary Conference in Paris. Gold was viewed to ensure a noninflationary, constant economic atmosphere, and a vehicle for hastening global trade (Einaudi,
2001). When Prussia won over France in 1872, Germany joined the global system. France
decided to join six years later. The gold standard developed to be the global monetary regime
by 1880 when United States joined in 1879. In 1894, Italy decided to participate and Russia
followed in 1897. About 70% of the countries took part in the gold standard prior to the eruption
of World War I (Meissner, 2005).
The gold standard operated as a fixed exchange rate system, which made gold as the
lone global reserve. Member countries ascertained the gold content of their national currencies
which defined fixed exchange rates (or mint parities). Monetary authorities were mandated to
exchange their national currencies for gold at the authorized exchange rate without restrictions
on global markets (Bordo & Rockoff, 1996).
Due to the outburst of World War I, the gold standard came to an end. Member countries
gave up convertibility and stopped gold export in order to halt the exhaustion of their national
gold reserves. The 1930s turn out to be the gloomiest era of modern economic history
(Eichengreen & Irwin, 2009).
The Bretton Woods System and its Dissolution
According to Destler and Henning (1989), the allied nations started to negotiate on a new
global monetary regime under the structure of the United Nations Monetary and Financial
Conference in Bretton Woods, New Hampshire (US), in July 1944. Forty-four countries decided
to adopt the gold-exchange standard. At that time, the US dollar was the lone exchangeable
currency of the time. Thus, United States devoted itself to trade and buy gold without limitations
at US$35 per ounce. All participating countries having non-convertible currencies were pegged
to the US dollar.
The participating countries also established two global monetary institutions: (a) The
International Banks for Reconstruction and Development (IBRD) which was responsible for
post-war reconstruction and development; and (b) The International Monetary Fund (IMF) which
encouraged global financial collaboration and international trade. The IMF also provided shortterm monetary assistance to countries in cases of transitory balance of payments difficulties.
During the middle part of the 1960s, the US dollar became overvalued along with other
major currencies. As a reaction, foreign nations started to exhaust the US gold reserves. This
forced the United States to abandon the gold-exchange standard on August 15, 1971. In 1973,
developed countries agreed to float their currencies (prices of currencies were determined by
demand and supply forces). This arrangement in the exchange rate policy was mandated by the
Jamaica Accords in 1976 (Destler & Henning, 1989).
The Plaza Accord
In 1985, the G7 countries decided to devaluate the US dollar as a consequence of the
heightening pressure of local US manufacturers and farmers to reinstate their global
competitiveness in the world market.
The Louvre Accord
In 1987, the Louvre Accord was agreed upon in order to protect the US dollar from further
devaluation in the world market. The United States might have profited from these
internationally, however, one of the main losers was Japan. The appreciation of the Japanese
yen proved to be devastating for the Japanese local economy (Destler & Henning, 1989).
The Washington Consensus
The neoliberal, pro-market Washington Consensus became successful in the 1990s. Its
agenda were promoted and disseminated by the IMF as part of its conditionalities in exchange
for financial assistance. The IMF and the Washington Consensus (and its free-market ideology)
have been blamed for the unsuccessful progress of the periphery. For Wallerstein (2005), the
way for the periphery to develop is not to “import-substitute” but to export orient productive
activities.
The Morgenthau Plan
After World War II, the United States sought to carry out the Morgenthau Plan. The idea
was to downscale Germany’s economy to become a pastoral and agricultural one. This was a
reaction to USSR's (specifically, Russia) thrust for communism in the East European region
coupled with the growth of socialist and communist parties in the West. However, the plan did
not materialize and was abandoned by US. In contrary, United States shifted its plans and
promoted an economically and militarily powerful Germany and Western Europe.
The Marshall Plan and the European Monetary Integration
This was United States’ post-war reconstruction and development program in 1948 for
Western Europe, which was managed by the Organization for European Economic Cooperation,
the forerunner of the Organization for Economic Cooperation and Development (OECD). The
astonishing growth and development of Western Europe encouraged a closer collaboration of
Western European countries which consequently gave birth to the European Coal and Steel
Community in 1951. The ECSC was followed by the signing of the Rome Treaty in 1957, which
founded the European Economic Community (EEC) which consequently became the European
Union (EU).
The six founding member-countries (West Germany, France, Italy, Netherlands, Belgium
and Luxembourg) aimed at the formation of a common market for the freer movement of goods,
services, capital and labor. The downfall of the Bretton Woods System pressured the membercountries in 1979 to establish their own regional monetary regime (the European Monetary
System, EMS). Here, neither the US dollar, nor gold can function in the stabilization process of
exchange rates. Instead, the European Exchange Rate Mechanism (EERM) was created (Gros
& Thygesen, 1998).
In 1992, with the help of the late French President Francois Mitterrand and German
Chancellor Helmut Kohl, the foundations of a new European Economic and Monetary Union
(EMU) were established under the Maastricht Treaty. As early as 1999, member-countries of
the EMU replaced their national currencies and deputized monetary policies to a supranational
stage, managed by the European Central Bank (ECB). Consequently, trade and capital
transactions increased; local economies became more interconnected; macroeconomic stability
was reestablished, and the euro grew to become the second most globally used currency
(European Commission, 2008).
David Ricardo’s Comparative Advantage Theory
According to Ricardo (1817) as cited in Samuelson (1995), a country such as Britain
could profit from a voluntary trade with Portugal even if Portugal is more effective in producing
both wine and clothing. For Britain, it should concentrate in the production of the product with
less disadvantage and let Portugal produce the other product. The theory argues that every
country must possess a comparative (relative) advantage in the production of something
irrespective of its original situation.
International Trade and Trade Policies
Reformist and radical (new left and neo-Marxian) theorists, such as Emmanuel (1972) or
Amin (1976), argued that the social partition of labor adds to the economic development of the
highly developed countries (HDCs or core) and hampers progress of the less developed
countries (LDCs or periphery). The economies of HDCs have the finest of two worlds (as buyers
of cheap primary commodities and as sellers of costly manufactured products. On the other
hand, LDCs have the worst of both worlds, as buyers of expensive industrial products and as
producers of cheap raw materials (Singer, 1964). According to Amin (1993), if this global
economy only benefits the HDCs at the loss of the LDCs, then the periphery countries must
implement a protectionist policy in its extreme form of de-linking (i.e. to cut their ties with the
HDCS or core countries). Unilateral Trade Order
During the 17th to 18th century, global trade in Europe concentrated more on the
accumulation of gold reserves which encouraged nation-states to export and limit imports. This
mercantilist or protectionist policy was branded as a zero-sum game in global trade. Hence,
trade and trade policies only furthered the interest of the monarchs (royal family) from Portugal
to Great Britain (now UK), which utilized their accumulated bullions (gold) to support battles and
consolidate power over their domestic supporters (Dunham, 1930).
Bilateral Trade Agreements
Bilateral Trade Agreements also succeeded in Europe, one example of these is the mostfavored nation (MFN) policy. This policy demonstrates the principle which stated that any
negotiated mutual tariff cutbacks between two parties must benefit all other trading partners
without conditions (Lampe, 2008).
The United States adopted a protectionist policy (import substitution industrialization)
which imposed tariffs on manufactured goods with an average of 45%. Even France, the
Scandinavian countries, and UK from the 1860s onwards, imposed protectionist measures due
to the entry of low-cost agricultural commodities from their foreign territories, Germany, and US.
UK persisted to be hegemonic economically and militarily. It also depended on the massive
reserves of its territories, especially India (Arrighi & Silver, 2003).
After World War I (1914-1919), the two World Economic Conferences in 1927 and 1933
did not succeed in reducing tariffs due to the refusal of US to take the lead as the hegemonic
descendant of a declining United Kingdom. In 1930, the Hawley Act in US amplified tariffs in the
country. As a consequence, trading partners of US retaliated which lessened international trade
by an average of 33 to 66 percent. To address the issue, US enacted the Reciprocal Trade
Agreements Act in 1934 which halted the further decline in global trade. This Law gave the US
president the power to decide on trade policies and lessened the burden put on the Congress
for determining protectionist trade policies. This trade policy was a return to the original notion of
MFN policy prior to the eruption of World War II (Irwin, 1998).
Multilateralism: From the GATT to the WTO
In 1950, the US dollar became an international currency, supported by 67% of the world's
gold reserve (Green, 1999). US was also the leading aid donor (i.e., the Marshall Plan). Owing
to the downfall of the European and Japanese manufacturing industries after World War II,
USA’s manufacturing industry amplified which accounted for about 60% of the world's total in
1950, and its export amounted to about 33% of the world's total (Branson et al., 1980).
At that time, the latest international trade regime must have been driven by the
International Trade Organization (ITO) agreement, which was one of the three pillars of the
Bretton Woods System, aside from the IMF and the IBRD, however, a series of rejections in the
US Congress obstructed its creation. In place of the ITO, nation-states dedicated to lower down
tariffs agreed to create the General Agreement on Tariffs and Trade (GATT) (Branson et al.,
1980).
The GATT encouraged international trade through a sequence of multilateral trade
negotiations called “rounds”. The first five rounds concentrated on tariff cuts: (1) 1947 Geneva
Tariffs; (2) 1949 Annecy Tariffs; (3) 1951 Torquay Tariffs; (4) 1956 Geneva Tariffs; (5) 1960
Dillon Round Tariffs; (6) 1964 Kennedy Round Tariffs and anti-dumping measures; (7) 1973
Tokyo Round Tariffs, non-tariff barriers, and “framework agreements”; and (8) 1986 Uruguay
Round Tariffs, non-tariff barriers, rules, services, intellectual, property, dispute settlement,
textiles, agriculture, and creation of the WTO (WTO, 2012).
The establishment of the European Economic Community (EEC) in 1957 forced US to
implement the Trade Expansion Act of 1962 and demanded for a new round, the Kennedy
Round. Its consequence was an across-the-board cutting (which replaced the practice of itemby-item cuts) and reduction of non-tariff barriers (i.e., anti-dumping measures) (Evans, 1971).
During the 1970s, the Tokyo Round besides tariff cuts, also approved a series of codes of
conduct (i.e., the “subsidies code” or the “government procurement code” (Deardorff & Stern,
1983). The most popular multilateral trade negotiations occurred under the Uruguay Round from
1986 to 1994. While previous trade arrangements were successful in reducing tariffs, a series of
other corrective measures (i.e., non-tariff barriers) were also implemented by nation-states. The
Uruguay Round stretched multilateral policies to current concerns and areas, such as
agriculture which concluded in a harsh dispute between the US and the EU.
According to Walter and Sen (2009), the foremost results of the trade arrangements were
the agreements on trade-related investment measures (TRIMs); trade in services (GATS) and
trade-related features of intellectual property rights (TRIPs). These agreements were promoted
by highly developed countries (HDCs) and targeted less developed countries (LDCs) with
massive service market potentials in finance and telecommunications.
After 50 years of trade negotiations, the Uruguay Round came up with a genuine global
trade institution, the World Trade Organization (WTO). The WTO was established on January 1,
1995 and become a formal forum for trade dialogs. Unlike the GATT, it is a formally constituted
association with legal personality. However, in 1999, the developing nations epitomized a united
movement for a new round of trade negotiations in Seattle. This event revealed the power of
NGOs/CSOs and anti-globalization movements. These movements objected in favor of the
LDCs and were against the current status quo of international trade affairs; the hegemony of the
US economy; the personal interests of MNCs/TNCs; and the discriminatory mechanisms of the
WTO in favor of HDCs (Narlikar & Tussie, 2004).
In 2001, the quasi-official Doha Round must have become a round on economic
development, however, it failed due to the interests of the opposing parties (HDCs vs. LDCs).
LDCs asserted on the proper and full execution of the Uruguay Agreement (especially in the
area of agriculture), however, US promoted to keep labor and environmental issues on the
agenda. The deadlock between the two opposing sides, motivated LDCs to cooperate and
strengthen their leverage within the WTO by creating a pressure group called the Group of 20
(G20). This conglomeration of countries accounts for almost 67% of the world's inhabitants and
25% of world-wide agricultural export (Narlikar & Tussie, 2004).
Developing Countries and International Trade
Developing (third world) countries did not partake aggressively in multilateral trade
agreements for quite a long period of time. The so-called East Asian newly industrializing
countries (NICs) embraced an outward-oriented development approach. However, a majority of
these developing nations were not able to integrate successfully into this trading scheme.
Rather, they promoted an inward-looking, import-substitution industrialization policy, which did
not encourage trade liberalization (Findlay & O'Rourke, 2007). Meanwhile, the HDCs were also
hesitant to open their markets to products (i.e., textile or agricultural) in which developing
countries have a comparative advantage.
The key transformation in this economic affairs occurred in 1964 when the United Nations
Conference on Trade and Development (UNCTAD) was institutionalized with the collaborative
stance of the developing countries. The objective of UNCTAD was to encourage trade and
mutual aid between and among the HDCs and LDCs (Salvatore, 2007). However, due to the
two oil crises dilemma which affected the economic activities of the HDCs, these countries
adopted highly protectionist measures (both tariff and non-tariff) in order to address the
damaging effects of the economic stagnation in the 1980s.
Developing countries started to aggressively participate in trade with the advent of the
Uruguay Round. This round was a grand bargain between the HDCs and LDCs (Ostry, 2002).
The HDCs were projected to open their markets to agricultural and textile products, while the
LDCs must accept the new rules on intellectual property rights and services. LDCS opened up
their service markets, however, their export of agricultural commodities is still blocked by the
HDCs. Agricultural products have a share of about 33% to 50% of the total economic production
among HDCs. Without trade liberalization in agriculture, it is difficult for LDCs to entirely
assimilate themselves into the international economy.
For Khor (1995), he saw the WTO as a medium by the HDCs to gain entry to the markets
of LDCs. While Wade (2003) criticized the three major trade agreements (i.e. TRIMS, GATS,
and TRIPS) saying that they constrained the set of industrial policies to achieve development for
the LDCS.
CWORLD1_QUIZ
Which among the following is not a
part of the G-7 countries with
advanced economy?
- United States
Which among the following is not a
globalization phenomenon?
Globalization
is;
an
ambiguous
phenomenon, old phenomenon, an
irreversible phenomenon, not a global
phenomenon
-
Globalization is an irreversible
phenomenon
Who among the following is not a
pioneer of Globalization's ideological
dimension?
- Francis Fukuyama
This is categorized by global network
connectivity, financial transactions,
liberal media, cooperative security,
nations having stable democratic
governments,
practice
of
transparency, increasing standards of
living, and more deaths by suicide
than by killings.
- Functioning Core
This consists of shares, traders
involved
with
currency,
bonds,
massive
companies
that
are
multinational and ready to get
distributed worldwide.
- Electronic Herd
Seam States are regions plagued by
authoritarian
political
regimes,
government regulated markets, mass
killings,
prevalent
poverty
and
diseases, and the breeding ground of
global terrorists.
- False
According to Kaplan (2003), you need
to
possess
both
military
and
economic supremacy in order to
spread your ideas worldwide.
- True
The evolution of global markets and
international corporations led to
global
economic interdependence
among nation-states.
- True
Fukuyama (2000) argues that our
international economy in the late
1990s was even less incorporated
before the outbreak of World War I.
- False
A complex mixture of both cultures is
often referred to as “hybridization”
which signifies processes of cultural
mixing that are replicated in music,
film, fashion, language, and other
types of social expression.
- True