Module 8 Weekly Writing Assignment OF PA 315

 

TWO OPTIONS THIS WEEK.  You have the option of completing the usual and boring Weekly Writing Assignment that includes the 3 questions OR you can write a “THANK YOU” letter to someone who has played a vital role in your education.  If you choose to write the THANK YOU letter, it can be addressed to a parent, friend, sibling, mentor, teacher – just someone who has played an important role.  Whether you choose to send the letter or not, is up to you .  Just make sure to submit it for a grade.  The idea is to reflect on your educational journey and take the time to say thank you.  Due by Sunday, March 8th no later than 11:59 p.m.

Writing Assignment – respond to the following questions.

 Module 8 Weekly Writing Assignment :

1. What are the three most important takeaways/lessons from the material provided in this module? (150 words or more)

2. Drawing on the material that was provided what else would like to know? What other related questions/ideas/topics would you like to explore in the future? (100 words or more)

3. From a business perspective, discuss in detail at least two challenges associated with globalization and managing its impacts. (100 words or more)

PA 315
Government Business Relations
Chapter 11

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Up till now, we have completed the first portion of class, which we focused on economic development policies and practices in domestic context. We examined the tensions between government business relations in the following dimensions:
market vs. government (how much role should government play in economic development)
public interest vs. private interest (how to balance the pubic and private interests in economic development)
Starting from today, we are going to the second half of the class, focusing on economic development policies in the international context. The tensions between government and business relations are examined in the following perspectives:
neoliberalism vs. protectionism (how extensive should government policies be promoting free trade and protecting domestic industries)
national interest vs. global responsibility (as a player in the global arena, how to balance the national interest and its global responsibility)

What’s left…
Globalization
Neoliberalism and Protectionism
North American trade agreements (examples of regional trade agreements) –NAFTA – North American Free Trade Agreement
Free Trade vs. Fair Trade –
European Union (regional economy and political integration) –
IFO: International Finance Institutions –

In the second half of the class, we will shift to analyze the international trading regimes and government’s role in managing them. Here are the topics as listed in your syllabus.
NAFTA – Mexico, Canada, and United States
CAFTA – Expansion of NAFTA – includes Central American countries of
1. Costa Rica
2. El Salvador
3. Guatemala
4. Honduras
5. Nicaragua
In 2004, Dominican Republic was added and the agreement was renamed CAFTA –DR
The free trade area of the Americas is an expansion to the NAFTA. Representatives from all countries in North, South, and Latin America, as well as the Caribbean are involved. The only country not represented is CUBA.
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What is globalization?
When you think of globalization, do you think of it in positive terms or negative terms?

Globalization
Globalization is an umbrella term
It is the free movement of goods, services, and people across the world in a seamless and integrated manner
Things to consider…
Most regions are self sufficient – locally produced foods, fuels and raw materials are generally processed for local consumption.
Even though trade has been around for centuries (silk traders), trade between regions was limited.
Today, economies of most countries are interconnected creating a single, interdependent global economy.
The term globalization includes change through the spread of ideas, information and perceptions which lead to cultural and social changes.

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The world is entered into an era of globalism or globalization, which is an umbrella term for a complex series of economic, social, technological, cultural and political changes. It is seen as increasing interdependence, integration, and interaction between people and firms in different locations.
The driving forces for globalism include the dominance of the neoliberalism philosophy. Ideologically, more nations have become in agreement in economic terms. The second reason is the technology advancement, especially the Internet and the WWW, which reduced the role of place. The third force is the greater global awareness. e.g. NASA astronauts brought back the picture of the earth  mother planet (Gaia [jia]) environmental movement.
Derogatory: tending to lessen the merit or reputation of a person or thing; disparaging; depreciatory: a derogatory remark.

Types of Globalization
Economic – Countries that trade with many others and have few trade barriers are economically globalized.
Political – The amount of political co-operation there is between countries.
Social – A measure of how easily information and ideas pass between people in their own country and between different countries (includes access to the internet and social media networks).
Cultural – transmission of ideas, meanings and values around the world.

Economic Globalization

Advantages and Disadvantages

Advantages –

Increase in productivity

Economic growth

International peace

Increased standard of living

Access to new markets

Introduction to newer technologies

Disadvantages

Depletion of local resources

Violation of human rights

Widening disparity in income

Lack of fair trade

Examples

Parts of automobiles being assembled in the United States while originating in Japan

Avocados being sold all year long in the United States – seasonal at one time

Asian restaurants in the United States

Fashion trends in Europe end up in Brazil

Political Globalization
Political globalization refers to the growth of the worldwide political system that includes national governments, their governmental and intergovernmental organizations.  

Examples
The European Union (EU) –
The European Union is a unified trade and monetary body of 28 member countries. Its purpose is to be more competitive in the global marketplace. At the same time, it must balance the needs of its independent fiscal and political members.
Intergovernmental agencies like the:
International Monetary Fund (IMF)- is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world
World Trade Organization (WTO)- deals with rules of trade between nations. Goal is to ensure that trade flows as smoothly, predictably and freely as possible.
United Nations (UN)- established to confront issues such as peace, security, climate change, sustainable development, human rights, terrorism, humanitarian and health emergencies, gender equality, food production, etc.
World Health Organization (WHO)- primary goal is to direct and coordinate international health

Pros of Political Globalization

Access to international aid and support

World peace

Smaller countries can work together and gain more influence internationally

International organizations are often committed to spread values like freedom and to fight abuses within countries

Governments can learn from one another

Cons of Political Globalization

State dominance is reduced

The functioning of international organizations is not always democratic in nature

Larger countries can dominate decisions within organizations

Smaller countries are not as represented

Social Globalization

Pertains to human interaction within countries

Defined as the intensification of worldwide social relations

Links distant localities in a way that local happenings are shaped by events occurring many miles away

The use of communication technologies, and the Internet in particular, has been widely credited as contributor to the mobilization of protests

Social Networking
Facebook – has more than 900 million active users allowing for a real world social connection
Communication can be delivered in the form of text, audio, or video
Global exchange of views, opinions, and ideas
Encompasses topics –
Family –
Religion –
Education –

Family – transfer of family values and concepts of people of different societies around the world

Role of women in society

Perception of a perfect life can have a negative affect

Religion – ideas and beliefs of different religions are portrayed to people around the world

Allows for greater religious tolerance and understanding

Can also portray negative images of religion

Education – ideas, values and knowledge, changing the roles of students and teachers

Increase access to the world

Introduction of technology changing the nature of delivering education

Western ideas are creeping into societies that want to appear more modern

Cultural Globalization
Refers to the transmission of ideas, meanings and values around the world in such a way as to extend and intensify social relations.
Comes through internet, popular culture media, and international travel.

Examples

Food

Fashion

Festivals

Westernized consumer culture – McDonalds and Coca Cola are examples of dominance of American products in foreign countries

Positive Influences
Acceptance of other cultures
Communication
People of different cultures
People of one culture can adopt other cultures
Cooking, music, and fashion

Negative Influences
Local cultures are ignored as people want to become more westernized
Song
Dance
Food
Exploitation of workers and markets
Influence of societal values
Cultures are diminished

Neoliberalism
Globalization has been accelerated by the adoption of free market principles
Neoliberalism – advocates for transferring control of the economy from the public to the private sector
Belief that it will lead to improved economic health
Create a more efficient government
Society should be shaped by the free market
Smaller government and more robust role for the market
Basically, what works in the private sector will work also in the public sector.

The term “globalism” is often used as a substitute for neolibralism, which is an abbreviation of “neoclassical liberalism.” It is sometimes described as an effort to revert to the economic policies of the 18th and 19th centuries classical liberalism, as articulated by the works of Adam Smith and David Richardo.
The movement emerged during the 1970s and has been lasted through at least the late-1990s, and possibly into the present (its continuity is a matter of dispute). In current economic crisis, we have observed many of the reverse neoliberalism signals already. The world is definitely at a turning point now.
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Neoliberalism
Policies Advanced by Neoliberalism (John Williamson’s “Washington Consensus“) :
Free trade: removal of trade barriers, like tariffs, subsidies, and regulatory trade barriers
Privatization: transfer of previously-public-owned enterprises, goods, and services to the private sector
Fiscal restraint: governments would cut expenditures and/or raise taxes to maintain a budget surplus
Competitive exchange rates: governments would accept market-determined exchange rates, as opposed to implemented government-fixed exchange rates
Undistorted market prices: governments would refrain from policies that would alter market prices
Limited intervention: (exception for promoting exports, education or infrastructural development)
Source: Wikipedia

Generally speaking, neoliberalim is market-driven. Policies advanced by neoliberalism is often called the Washington Consensus. One major policy of Washington Consensus is free trade.
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Neoliberalism policy implications…
enticement of foreign investment;
reduction of inflation;
reduction of public spending;
privatization of public services;
deregulation of industry and finance;
reduction and flattening of taxes;
restriction of union organization; and, finally,
enforcement of property and land ownership.
Politicians don’t necessarily have to profess faith in all of these norms to be considered neoliberal. Rather, they have to buy into neoliberalism’s general market-based logic and its attendant promise of opportunity..

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Free Trade

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The major policy pushed by neolibralism is free trade, the removal of trade barriers, like tariffs, subsidies, and regulatory trade barriers

Free Trade
Pro-Free Trade Arguments
A wider variety of goods to choose (choice)
Specialization in production of goods and services with advantages (efficiency)
Maximize consumer welfare (welfare)

In this class, we are going to discuss the arguments for and against free trade which is a major neoliberalism policy.
The pro-free trade arguments include:
It maximizes the interest of consumers throughout the world by giving them a wider variety of goods from which to choose.
Differences in the efficiency of land, labor, and capital make it profitable for nations to specialize in the production of goods and services in which their resource situation is the most advantageous, and exchange them for the goods and services of other nations with different resource advantages.
If there were no restraints placed on the movement of goods and services from one region to another, or from one nation to another, then in theory the welfare of consumers would be maximized.
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Theories of Trade
David Ricardo
Absolute advantage
When a nation can produce a good or service more efficiently than another nation, the latter should buy from the former
Comparative advantage
If a nation has an advantage over another nation in production of several goods, it should produce the good in which it has the greatest comparative advantage and buy the good in which it has the least advantage from the other nation.

David Ricardo (18 April 1772-11 September 1823) was a political economist, often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith.
He was also a member of Parliament, businessman, financier and speculator, who amassed a considerable personal fortune.
Perhaps the most important of his contributions was the theory of comparative advantage, an fundamental argument in favor of free trade among countries and of specialization among individuals.
Ricardo argued that there is mutual benefit from trade (or exchange) even if one party (e.g. resource-rich country, highly-skilled artisan) is more productive in every possible area than its trading counterpart (e.g. resource-poor country, unskilled laborer), as long as each concentrates on the activities where it has relative productivity advantage.
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Absolute Advantage, Comparative Advantage, and Opportunity Cost
Absolute Advantage = produced at lowest cost
Comparative Advantage = produced at lowest opportunity cost
Opportunity Cost = a benefit that a person could have received, but gave up, to take another course of action

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Advantages of Free Trade
1. Increased economic growth
2. More dynamic business climate
3. Lower government spending
4. Foreign direct investment
5. Expertise
6. Technology transfer.

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1. Increased economic growth. 
2. More dynamic business climate. Often, businesses were protected before the agreement. These local industries risked becoming stagnant and non-competitive on the global market. With the protection removed, they have the motivation to become true global competitors.
3. Lower government spending. Many governments subsidize local industry segments. After the trade agreement removes subsidies, those funds can be put to better use.
4. Foreign direct investment. Investors will flock to the country. This adds capital to expand local industries and boost domestic businesses. It also brings in U.S. dollars to many formerly isolated countries.
5. Expertise. ​Global companies have more expertise than domestic companies to develop local resources. That’s especially true in mining, oil drilling and manufacturing.
6. Technology transfer. Local companies also receive access to the latest technologies from their multinational partners. As local economies grow, so do job opportunities. Multi-national companies provide job training to local employees.

As the market potentially served expands from a national to world market, there are
Gains with declining per-unit production costs (greater efficiency)
Gains result from the reduction in the declining monopoly power of domestic firms (less market distortion) –
Consumers gain with increased product variety and lower costs (consumer focus)
Tax subsidies – an industry that the government wants to support – through loans, grants, procurement policies that pay more than the free market pricing and even stock purchases.
Farms – receive subsidies to guarentee our food supply remains stable and able to meet the needs of our country. Farmers of grains, corn, wheat, and rice.
Another is the Housing subsidies – comes in tow forms – interest rate subsidies and down payment assistance. One of the biggest interest rate subsidies is the mortgage interest deduction on the federal income tax. Low income families have certain tax exemptions. Down payment programs such as first time buyers if you qualify.
FANNIE MAE AND FREDDIE MAC – was the bailout
Cash for Clunkers program was a subsidy to auto dealers – they received a 3500 to 4500 subsidy from the federal government to encourage dealers to discount new vehicle purchases.
Obamacare subsidies –

Disadvantages of Free Trade

1. Increased job outsourcing. Reducing tariffs on imports allows companies to expand to other countries. Without tariffs, imports from countries with a low cost of living cost less. It makes it difficult for U.S. companies in those same industries to compete, so they may reduce their workforce.
2. Theft of intellectual property. Many developing countries don’t have laws to protect patents, inventions and new processes. The laws they do have aren’t always strictly enforced. As a result, corporations often have their ideas stolen. They must then compete with lower-priced domestic knock-offs.
3. Crowd out domestic industries. Many emerging markets are traditional economies that rely on farming for most employment. These small family farms can’t compete with subsidized agri-businesses in the developed countries. As a result, they lose their farms and must look for work in the cities.
4. Poor working conditions. Multi-national companies may outsource jobs to emerging market countries without adequate labor protections. As a result, women and children are often subjected to grueling factory jobs in sub-standard conditions.
5. Degradation of natural resources. Emerging market countries often don’t have many environmental protections. Free trade leads to depletion of timber, minerals and other natural resources. Deforestation and strip-mining reduce their jungles and fields to wastelands.
6. Destruction of native cultures. As development moves into isolated areas, indigenous cultures can be destroyed. Local peoples are uprooted. Many suffer disease and death when their resources are polluted. 
7. Reduced tax revenue. Many smaller countries struggle to replace revenue lost from import tariffs and fees.
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1. Increased job outsourcing

2. Theft of intellectual property

3. Crowd out domestic industries

4. Poor working conditions

5. Degradation of natural resources

6. Destruction of native cultures 

7. Reduced tax revenue

Free Trade vs. Fair Trade

Free Trade vs. Fair Trade

Main Goal
Focuses on
Major Actions
Cre
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Free Trade or Protectionism
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic systems. 
Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade.

Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic systems. Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade.
Marion Anne Perrine “Marine” Le Pen is a French politician and lawyer, and president of the National Front. She went against Emmanuel Macron – President of France – May of 2017
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Protectionism

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If free trade is as described, would there be anybody against free trade? What could be their arguments?

Protectionism
Protectionism refers to economic policies that restrain trade between nations, through methods such as
tariffs on imported goods,
restrictive quotas,
a variety of restrictive government regulations designed to discourage imports,
anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition.

Source: Wikipedia

Let’s now look at those arguments against free trade from the protectionism camp. Protectionism refers to economic policies that restrain trade between nations, through methods such as tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition.
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Forms of protectionism
Subsidies:
Tax credits, direct subsidies (loans)
Infrastructure subsidies or free resources such as water or use of public lands at little cost
Exchange controls:
currency values can be controlled and that affects the trading relationship.
Currencies with low valuation can encourage low imports and high exports by keeping value of money low against other currencies.
e.g., China today
Dumping: selling a product in another country at a cost lower than its production cost
*These three forms “unfairly” promote domestic goods in foreign markets.

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The second group refers to those “unfairly promote domestic goods in foreign markets.”
Subsidies: tax credits, direct subsidies (loans), infrastructure subsidies or free resources such as water or use of public lands at little cost
Exchange controls: currency values can be controlled and that affects the trading relationship. Currencies with low valuation can encourage low imports and high exports by keeping value of money low against other currencies. i.e. China today
Dumping: selling a product in another country at a cost lower than its production cost often made up by government subsidy. i.e. one Hyundai model that cost $3700 to produce was sold for $5000 in Korea and $2200 overseas. The car was overpriced in Korea and underpriced in South East Asia and Latin America. The intent was to establish a market for the car in these areas by selling below cost, with the Korean government covering the loss.