Globalization and the changing world economy

1. Globalization and the changing world economy Joseph M Portera November 20th 2008

2. Overview: • Definition of globalization • A brief history of globalization • Globalization and the United States • Will the United States continue to benefit from globalization? • Obama and McCain’s views on globalization • Policy proposal

3. Definition of globalization: • the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets.

4. History of globalization: • Traits of globalization can be traced to as far back as the Roman Empire • The Silk Road started in China, reached portions of the Parthian Empire and ended in Rome • The trade route helped to integrate the three economies of the Han Dynasty, Parthian and Roman Empires.

5. History of globalization (Cont.) • The term globalization wasn’t used in an economical sense until the 1980’s • The integration of economies was seen as a slow process until after World War II • The Bretton Woods agreement created the ITO, IMF, World Bank, and the GATT • The ITO failed 1950 and was disbanded • The WTO was created and became an official trade governing body on January 1st 1995

6. History of globalization (Cont.) • The WTO currently has 153 member nations • The member nations represent more than 95% of all global trade • The WTO helps to lower barriers to trade and progress globalization • The WTO uses the GATT as an all encompassing treaty to help regulate trade

7. WTO member nations:

8. The U.S. and globalization • The United States has been a beneficiary of globalization through integrating its economy into the world economy and lowering barriers to trade • The U.S. has been a firm proponent of furthering global trade and lowering barriers to trade around the world • The U.S. continues to pursue FTA’s like the FTTA (Free Trade Area of the Americas) to promote free trade and globalization

9. The U.S. and Globalization (Cont.) • The U.S. is falling into a recession and domestic industries and markets are collapsing • Partly because of the integration of the U.S. economy in the world economy, the world is slipping into a global recession

10. Will the U.S. continue to benefit from globalization? • With the face of the world economy changing, current U.S. trade policies are in danger of becoming outdated • Do multilateral trade agreements such as NAFTA need to be re-negotiated? • The Doha round of WTO trade negotiations has stalled • If things continue on the current path, the U.S. will not continue to benefit from globalization

11. President-Elect Obama’s views on globalization • Obama believes globalization will continue to be beneficial to the U.S. if we pursue multilateral trade agreements judiciously • He believes that globalization will continue with or without the U.S. being a main participant • He believes we must “embrace” globalization

12. President-Elect Obama’s views on globalization (Cont.) • “ There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off. Rather than fear the future, we must embrace it. I have no doubt that America can compete--and succeed--in the 21st century. And I know as well that more than anything else, success will depend not on our government, but on the dynamism, determination, and innovation of the American people.”

13. Former Presidential hopeful John McCain’s view on globalization • He and Obama share a similar stance on globalization • McCain doesn’t feel the need to be as careful when entering into future trade agreements • Doesn’t believe that NAFTA should be re-negotiated

14. Former Presidential hopeful John McCain’s view on globalization (Cont.) • “We stand much to gain by harmonizing our energy policies, just as have gained by cooperating in trade through NAFTA. Since NAFTA was concluded, it has contributed to strong job growth and flourishing trade. Since the agreement was signed, the United States has added 25 million jobs and Canada more than 4 million. Cross-border trade has more than doubled since NAFTA came into force. We have established North America as the world's largest economic market and the integration of our economies has led to greater competitiveness of American and Canadian businesses. Because of our common market, our workers are better able to compete, and to find opportunities of their own in the global economy.”

15. Policy Proposal • 3 part proposal that would further world trade and protect domestic jobs and industries • Renegotiate NAFTA • Monitor domestic industries and insert transparent safeguards • Progress multilateral trade agreements and help to re-start Doha round negotiations

16. Renegotiate NAFTA • Include enforceable labor laws and environmental laws • Abolish the Chapter 11 “investor state” clause which gives investors the right to sue governments over profits lost due to measures taken in public interest

17. Monitor domestic industries and insert transparent safeguards • The government would monitor all industries using certain metrics to make sure they were acting fiscally and socially responsible. • The government would also incorporate transparent safeguards of which trade partners were fully aware.

18. Progress multilateral trade agreements and help to re-start Doha round negotiations • Enter into multilateral trade agreements in a responsible and judicious manner • The first agreement on the agenda needs to a re-pursuit of Doha round negotiations • Willingness to compromise on some agricultural subsidies. Tradeoffs? • Continue to pursue FTAA

19. Conclusion • It’s not a matter of will globalization continue, it’s what form will it take and who will benefit? This three part policy will help the U.S. to remain on the cutting edge of global trade and will allow the U.S. to help guide globalization so that everyone will benefit.

20. Questions?????

21. References • “The benefits of globalization” The Center for Trade Policy Studies 30 July 2008 • http://www.freetrade.org/issues/globalization.html • “Greasing the World Economy without Doha” The Center for Trade Policy Studies 30 July 2008 • http://www.freetrade.org/node/904 • “Global Issues” Free Trade and Globalization 2 July 2007 • http://www.globalissues.org/issue/38/free-trade-and-globalization • “Global Financial Crisis” Global Issues 29 October 2008 • http://www.globalissues.org/article/768/global-financial-crisis • “Globalization and Trade Policy” OED 24 July 2008 • http://www.ced.org/projects/globalization.shtml • “Barack Obama on Free trade” On the Issues 15 June 2008 • http://www.ontheissues.org/2008/Barack_Obama_Free_Trade.htm • “Trade and Globalization” Council on Foreign Relations 3 November 20, 2008 • http://www.cfr.org/publication/17656/ • “NAFTA’s Economic Impact” Council on Foreign Relations 21 March 2008 • http://www.cfr.org/publication/15790/ • “Doha Development Agenda” World Trade Organization 12 November 20, 2008 • http://www.wto.org/english/tratop_e/dda_e/dda_e.htm • “Principals of the Trading System” World Trade Organization • http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm