chapter 1

• Government imposes limits on transactions.
• Transactions involve converting money into different currencies.
• The range of problems is wider and the problems are more complex.
• Globalization refers to the merging of historically distinct and separate national markets into one huge global marketplace, with falling barriers to cross-border trade and investment, global tastes, benefits small and large companies, significant differences between national markets, and products that serve universal needs are global like oil.
• The Globalization of Production involves sourcing goods to take advantage of differences in cost and quality of factors of production, with factors of production including labor, energy, land, and capital.
• Early outsourcing was confined to manufacturing, but modern communications technology has advanced outsourcing today for service activities.
• The Globalization of Production continued, with Robert Reich and “global products,” and impediments prevent optimal dispersion of activities include formal and informal barriers to trade, barriers to foreign direct investment, transportation costs, political and economic risk, and the challenge of coordinating globally dispersed supply chain.
• Global Institutions are needed to help manage, regulate, and police the global marketplace, with institutions such as the General Agreement on Tariffs and Trade (GATT), World Trade Organization (WTO), International Monetary Fund (IMF), The World Bank, and the United Nations.
• The World Trade Organization polices the world trading system, ensures nation-states adhere to the rules, and facilitates multinational agreements among members, with 164 nations that account for 98 percent of world trade as members as of 2019.
• The International Monetary Fund was established to maintain order in the international monetary system and often seen as the lender of last resort, with the condition for loans being the adoption of specific economic policies aimed at returning the economy to stability and growth.
• The World Bank promotes economic development and makes low-interest loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments, considered less controversial than the IMF.
• The United Nations promotes peace through international cooperation and collective security, with 193 member countries, and the UN Charter's four basic purposes being to maintain international peace and security, develop friendly relations among nations, cooperate in solving international problems and in promoting respect for human rights, and be a center for harmonizing the actions of nations.
• China is moving towards industrial superpower status.
• Barriers to the free flow of goods, services, and capital have been coming down due to the widespread adoption of liberal economic policies by countries that had opposed them.
• Globalization is not inevitable and countries may pull back.
• Theory and evidence suggest these fears may be exaggerated.
• Antiglobalization protests began with 1999 protests at WTO meeting in Seattle and typically show up at major meetings of global institutions.
• Critics argue that the gap between the rich and poor nations has gotten wider due to factors such as totalitarian governments, poor economic policies, corruption, lack of property rights, expanding populations in developing countries, and debt burdens, while supporters argue that the best way to change the situation is to lower barriers to trade and investment and promote free market policies.
• In Latin America, debt and inflation are down, more private investors, expanding economies.
• Protestors believe globalization causes detrimental effects on living standards, wage rates, and the environment.
• Supporters argue that benefits outweigh the costs and free trade will result in countries specializing in the production of goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently.
• Data suggests the share of labor in national income has declined over the past two decades, with the share of national income by skilled labor increasing and unskilled labor experiencing a fall in income.
• Managing an international business differs from managing a purely domestic business due to the differences between countries.
• Critics of globalization argue that falling trade barriers allow firms to move manufacturing activities to countries where wage rates are much lower, destroying manufacturing jobs in wealthy advanced economies.
• Critics argue that labor and environmental regulations increase manufacturing costs, while supporters argue that tougher environmental regulations and stricter labor standards go hand in hand with economic progress.
• Technological change has a bigger impact than globalization on declining share of national income enjoyed by labor.
• The Group of Twenty (G20) consists of finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank, representing 90 percent of global GDP and 80 percent of international global trade.
• The weak growth rate in real wage rates for unskilled workers is likely due to a technology-induced shift within advanced economies.
• Critics argue that the shift of power away from national governments toward supranational organizations, such as the WTO, EU, and United Nations, is a loss of sovereignty, while supporters argue that the power of supranational organizations is limited to what nation-states collectively agree to grant.
• Commercial jets, superfreighters, and containerization have all “shrunk the globe”.
• Multinational enterprise (MNE) is any business that has productive activities in two or more countries.
• More firms are dispersing production process to different locations around the globe.
• The value of world merchandised trade and world production increased 1960 to 2019.
• In 2003, 38.8 percent of the world’s 2000 largest multinationals were U.S firms, but by 2019, 28.8 percent of the top 2000 global firms were U.S multinationals, a drop of 201 firms.
• China and BRIC countries are growing more rapidly.
• Drivers of Globalization include declining trade and investment barriers, with barriers lowered by GATT in the 1920s and 1930s.
• The world has become significantly wealthier in the past two decades.
• The U.S accounted for 38.3 percent of world output in the 1960s, but only 24 percent in 2018, reflecting the faster economic growth of several other economies, particularly China.
• Trade in goods and services and the value of foreign direct investment have all been growing faster than world output.
• The rise of mini-multinationals is driven by the growth in the number of medium- and small-sized businesses.