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World Trade & Globalization

World Trade & Globalization. Is world trade necessary?. Uneven distribution of resources in the world World trade can rearrange the distribution.

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World Trade & Globalization

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  1. World Trade & Globalization

  2. Is world trade necessary? • Uneven distribution of resources in the world • World trade can rearrange the distribution. • “in the past 20 years, LDC share of world trade has halved, income per person has fallen in 59 countries and the number of people living on less than $1 a day has risen dramatically”

  3. Gini coefficient • GC = 0  complete equality • GC = 1  complete inequality

  4. Gini coefficient

  5. WTO • Formed in 1995 • The ten benefits (http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm) • 1. The system helps promote peace2. Disputes are handled constructively3. Rules make life easier for all4. Freer trade cuts the costs of living5. It provides more choice of products and qualities6. Trade raises incomes7. Trade stimulates economic growth8. The basic principles make life more efficient9. Governments are shielded from lobbying10. The system encourages good government

  6. Opposition of WTO • Many LEDCs who feel that their concerns are largely ignored • Environmental groups concerned about WTO policies • Labour unions in MEDCs concerned the threat to their members as traditional manufacturing filters down to LEDCs + violations of workers’ rights in LEDCs

  7. some industries will be greatly hit TNCs will be keen to invest in China as there is a large market as China has to remove trade tariffs and barriers that have protected its economy for over 50 years. Tariffs on imported cars and parts will be cut. overseas competition many car factories are small and inefficient and may have to close down car-makers will have to reduce costs by 10-15% every year in order to compete car parts have to be bought from cheaper countries, e.g. Malaysia, Thailand some small- and medium plants may survive by merging / collaboration with big TNCs to carry out manufacturing production The retail market is likely to expand TNCs will be keen to invest in China as there is a large market Urban incomes are tempting. In 1998, urban incomes in Shanghai were 10 times higher than rural and increase 8.4% in the first 9 months of 2000 The rising income level means higher purchasing power WalMart, Carrefour, Metro and 5 of Japan’s top retailers have ambitious expansion plans China is lifting restrictions on retailers, raising the prospect of competition for local stores, many of which are unused to competition What are the impacts on local industries after China accession to WTO since 2001?

  8. Regional trade agreements (RTA) • European Union (EU) • North American Free Trade Agreement (NAFTA) • Association of Southeast Asian Nations (ASEAN)

  9. Significance of RTA • Can divert trade, inducing a country to import from a member of its trading bloc rather than from a cheaper supplier elsewhere. • Raise barrier against each other, creating protectionist blocks • Complicate the establishment of new global regulations

  10. Trade blocs • It is a group of countries that share trade agreements between each other

  11. Why do the countries join trading blocs? • Provide free-trade areas for members • Reduce trade barriers • Restrict international trade to non-members • Share production techniques

  12. Trade agreements in HK • Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) 更緊密經貿關係安排 • Asia-Pacific Economic Cooperation (APEC)亞太區經濟合作組織 • Organization for Economic Co-operation and Development (OECD)經濟合作及發展組織

  13. CEPA covers 3 broad areas: • Trade in goods - All goods of Hong Kong origin importing into the Mainland enjoy tariff free treatment, upon applications by local manufacturers and upon the CEPA rules of origin (ROOs) being agreed and met.  • Trade in services - Hong Kong service suppliers enjoy preferential treatment in entering into the Mainland market in various service areas. Professional bodies of Hong Kong and the regulatory authorities in the Mainland have also signed a number of agreements or arrangements on mutual recognition of professional qualification.  • Trade and investment facilitation - Both sides agreed to enhance co-operation in various trade and investment facilitation areas to improve the overall business environment.

  14. What is the significance of the trade agreement? • Does it affect industrial locations? • Does it help cost minimization? • Does it foster globalization? • Does it cause polarization of income?

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