Quiz 1 - Module 1 - 3: DUE 2/14/21
GATT - the General Agreement on Tariffs and Trade
- an international organization based in Geneva, Switzerland that negotiates reductions in trade barriers among its member nations. -First Five Rounds, 1947-1960; approx. 30 countries participated; reduced tariff rates from an average of 40% to 4%. -Over the next 20 years through the Kennedy and Tokyo Rounds up to 100 countries participated; addressed tariff concessions; non-tariff barriers; agriculture; textiles; anti-dumping; services; IPRs -In 1986 the Uruguay Round (8th) - negotiated for over 7 years; 123 countries continued to address the same issues; created the WTO and the CAIRNS Group -2001 Doha Round - over 13 yrs.; 159 participants; tariff concessions; non-tariff barriers; agriculture; labor standards; environment; investment; transparency ... TODAY NEGOTIATIONS ARE STALLED ...
NAFTA - North American Free Trade Agreement - CAN, MEX, US
-(1994) World's largest free trade area, 450 million people; $17 T in goods and services. -All duties and quantitative restrictions eliminated January 1, 2008. -Covers environmental and labor issues as well as trade and investment (U.S. unions and environmental groups argue that the safeguards are too weak). -Renegotiated as USMCA (greatest change - rules of origin) - July 1, 2020
Ocean and Water Transportation - Port Infrastructure - Cranes
-Large ships prevent cranes from having adequate reach -Post-Panamax ships need wider/taller cranes than Panamax ships -Crane modifications can be very expensive -An alternative is to allow ships to be loaded from both sides
NEGATIVE Globalization
-Leads to loss of cultural identity -Leads to homogenization within countries -Means of spreading disease and discontent, terrorism -Increases competition, job losses -Increases opportunities for nefarious activity (tax havens, cyber war, piracy) -Leads to environmental challenges
Ocean and Water Transportation - Canals and Waterways - Saint Lawrence Seaway
-Links Great Lakes to Atlantic Ocean -Narrow and few ships can pass through its locks -Ice closes it January to March -Shippers are forced to find alternatives and its business is down 45% from 20 years ago
Raymond Vernon - International Product Life Cycle Theory, 1966
-Over its life cycle, a product will be manufactured first in the country in which it was first developed, then in other developed countries, and eventually in developing countries. -Stage One - Product engineered, manufactured and distributed in developed country - factors of production and market are available -Stage Two - Product duplicated in other developed countries - some developing countries import product - sales grow and manufacturing becomes standardized -Stage Three - Product manufactured in developing countries - manufacturing process routine, pressure to lower production costs - products now exported from developing to developed countries
Utilities Infrastructure - Electricity
-Some developing countries have economic growth that outpaces availability and reliability of electric power. -In sub-Sahara Africa there are scheduled power blackouts. -Utilities are frequently victims of theft as people bypass meters or, as in the case of Russia, steal electrical wires for scrap.
What has facilitated the tremendous growth of international trade?
-The "Box" -Developments in Technology -Tools and systems now available -Reduction in transportation costs -Reduction in communication costs -Reduction in transit times -Expanded global travel -Greater acceptance of "things foreign" -Economic pressures -Increased competitiveness -Growth of trade pacts -The creation of multiple international institutions
Standards Infrastructure
-Unified standards of performance, design, and safety are useful to businesses. -The United States tends to be different from the rest of the world, with non-metric standards and standards that can vary from state to state.
David Ricardo - Theory of Comparative Advantage, 1815
-nations will trade with one another as long as they can produce certain goods relatively more efficiently than one another. -Most international trade today is explained by the Theory of Comparative Advantage.
•Worldwide globalization increased rapidly between ___________________
1990 and 2007
International trade has grown over _________ percent since the end of WWII.
3,000
Top 5 importers account for over ___________
35%
Top 5 total exporters account for ______ % of the world
35%
Global Trade has increased ________ over the last 20 years!
5X
Rest of World accounts for _____________
6,696 36.1%
Rest of World account for ________
7,077 38.6%
Trade Deficit
A situation where the total exports of a country are worth less than its total imports.
Trade Surplus
A situation where the total exports of a country are worth more than its total imports.
Distribution Channel Infrastructure - Agents and distributors
A strong network of agents and distributors allows an exporter to enter new markets and expand abroad.
Utilities Infrastructure - Water and sewer
Access to clean water (and sewer) is fundamentally important for many manufacturing processes.
Communication Infrastructure - Telecommunications - Internet
Access to the internet is still limited or cost prohibitive in some areas. In others, internet access is fast and inexpensive.
Distribution Channel Infrastructure - Advertising and promotion
Advertising agencies and media allow promotional activities critical to the success of many products and services.
Airport Infrastructure - Hours of operation
Airports need to be located away from of major cities if they are going to operate at night. Many airports do not meet this requirement
The _____________ allows businesses to move funds and documents quickly and reliably, both within a country and between countries. This requires a network of banks & secure transfer systems; bank branches and well-trained bank employees.
Banking Infrastructure
Banking Infrastructure - Document exchanges
Banks play a fundamental role in the exchange of trade documents between an exporter and an importer.
Andean Community - 1996
Bolivia, Chile, Colombia, Ecuador and Peru, Venezuela joined in 1973 but withdrew in 2006 and Chile withdrew in 1976
Other key waterways include the _________ Strait in Turkey which connects the Black Sea with the Mediterranean and the ________________ Seaway in North America which connect the Great Lakes with the Atlantic Ocean.
Bosporus Saint Lawrence
Business Services Infrastructure - Customs brokers
Brokers provide assistance to importers when clearing Customs.
Court Infrastructure - Protection
Businesses with intellectual property (patents, copyrights, trade secrets) want to make sure that the countries in which they operate will protect intellectual property. In some countries, competitors, police, and courts do not respect nor protect intellectual property, often considering that intellectual property laws favor big foreign corporations over the local entrepreneur trying to earn a living.
Rail Infrastructure - Multi-modal
Cargo rail transport has shifted from traditional railcars to multi-modal cars, carrying either containers or truck trailers
Business Services Infrastructure - Multiple other services
Carriers, delivery services, etc. are fundamental to implement good international trade practices, and must exist for exporters to be successful.
Largest Exporter:
China
The __________________ allows businesses to communicate clearly and quickly with partners along the supply chain. This requires reliable phone lines, cell phone networks, internet service, and mail delivery.
Communication Infrastructure
•Market Drivers
Companies enter foreign markets because their customers expect them to be present in those countries.
•Technology Drivers
Companies enter foreign markets because their customers use technology to make purchases from these markets
•Competition Drivers
Companies enter foreign markets to keep up with their competitors , retaliate against them, or enter a market first.
•Cost Drivers
Companies increase their sales worldwide to recover their high investment costs.
Standards Infrastructure
Countries have different standards for products and services offered for sale; these standards are specific and must be followed.
Court Infrastructure - Mediation
Disputes can also be resolved through mediation, and therefore a group of mediators is often useful to resolve disputes.
Court Infrastructure - Arbitration
Disputes can be resolved faster through arbitration. The existence of experienced arbitrators is important to the conduct of business.
The ___________________ allows businesses to find agents and distributors, to develop wholesale and retail channels, and promote their products.
Distribution Infrastructure
U.S. International Trade Balance (Goods & Services) APRIL 2020
EXPORTS --> USD 151.3 billion IMPORTS --> USD 200.7 billion DEFICIT --> USD 49.4 billion
OECD (Organization for Economic Cooperation and Development)
Economic Outlook
Distribution Channel Infrastructure - Retail distribution
Efficient access to consumers is important to a manufacturer of consumer goods, and is not available in all countries.
In 2014 the EEC was replaced with the _____________. Membership now includes Armenia.
Eurasian Economic Union (EEU)
Four Factors of Production
FACTOR Land Labor Capital Entrepreneurship
Distribution Channel Infrastructure - Trade shows
For most industries, trade shows present an unequaled opportunity to reach potential customers and trade partners
CAIRNS Group
Formed in 1986 - Members: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Peru, Philippines, South Africa, Thailand, Uruguay, Vietnam. It is named after the town in Australia where the first meeting took place. The Cairns group of agricultural exporting nations was formed to lobby at the last round of world trade talks in order to free up trade in agricultural products. Highly efficient agricultural producers, including those in both developed and developing countries, want to ensure that their products are not excluded from markets in Europe and Asia.
Module 3
Global Infrastructure
Module 2
Global Trade
CAFTA DR - Central American Free Trade Agreement - 2006
Guatemala, Honduras, Nicaragua, El Salvador, Costa Rica, Dominican Republic.
United Nations
Human Development Reports
BRETTON WOODS
IMF GATT = WTO WORLD BANK
Communication Infrastructure - Mail - Speed
In some countries, mail delivery is quick. In others, very slow.
The ___________________ allows businesses to protect their intellectual property (copyrights, patents, and trademarks). Requires law enforcement services intent on enforcing intellectual property laws.
Intellectual Property Infrastructure
Political Dimensions
Membership/participation in international organizations (incl. peacekeeping), international agreements, foreign embassies and consulates
Airport Infrastructure - Space
Most airports are landlocked and cannot expand
Business Services Infrastructure - Packing services
Packing services allow exporters to rely on professionals to pack goods destined for export.
Largest ships that can get through Panama Canal are called __________________ ships.
Panamax
Who Measures Globalization?
Published economic, social and political data from government offices, international organizations, NGO's and private advocacy, political and research firms -
Communication Infrastructure - Telecommunications - Cellular phones
Some countries built cellular phone networks quickly, often because they did not have a good landline network. They leapfrogged the landline technology, often offering better cellular access than developed countries with reliable landline networks.
Court Infrastructure - International Agreements
Some countries have not ratified international agreements on intellectual property and therefore do not recognize some aspects of foreign patents and copyrights
Communication Infrastructure - Telecommunications - Leapfrogging
Some countries never build infrastructure in one technology, and "leapfrog" into the next one.
Court Infrastructure - Speed
Speedy resolution of lawsuits allows businesses to "move on." Some countries have slow and cumbersome court processes.
Airport Infrastructure - Warehouse space
Storage facilities protect cargo from the elements
Banking Infrastructure - Methods of payment
The ability of the banking partners to support alternative means of payment and to provide assistance to firms engaged in international trade is very important.
Banking Infrastructure - Foreign currency payments
The ability to quickly purchase and sell foreign currencies, either through wire transfers or currency purchases, is important to firms engaged in international trade.
Road Infrastructure - Quality
The existence of high quality roadways is important to the continuous flow of goods
Airport Infrastructure - Runways
The lengths of runways determines whether an airport can handle large cargo planes, and the number of runways determines its capacity
Ocean and Water Transportation - Port Infrastructure - Space Limitations
The location of most ports limit their ability to expand
Economic Dimensions
Trade openness (tariffs, non-tariff barriers, import restrictions); amount of cross border trade (including investments/capital flows, FDI), current account balance, exchange rates
The ______________ allows goods to move efficiently within a country and between countries. This requires well-maintained seaports, airports, railways, and roads.
Transportation Infrastructure
In July, 1944 world leaders of WWII's allied nations (the ____________, ___________, _______, ___________, ___________ and other small states) met in New Hampshire and created international institutions designed to facilitate world trade, including the IMF, GATT and the World Bank.
United States, Britain, France, Canada, the Soviet Union
Global Supply Chain Management
University of Missouri - St. Louis College of Business Administration Supply Chain and Analytics Department
Utilities Infrastructure - Electricity
Unreliable electricity grids and insufficient production capacity can cause blackouts or brownouts, limiting productivity.
Communication Infrastructure - Telecommunications - Land lines
While some countries have reliable, inexpensive phone lines, others do not have good landline telecommunication networks.
World Economic Forum, Davos
World Competitiveness Report
UN Conference on Trade and Development (UNCTAD)
World Investment Report
Infrastructure
a collective term that refers to all of the elements in place (publicly or privately owned goods) to facilitate transportation, communication, and business exchanges. -What makes commerce possible
ECCAS - Economic Community of Central African States
began functioning in 1985, but was inactive for several years because of financial difficulties and conflict (the DR Congo, Rwanda, Angola).
SACU - South African Customs Union
consists of Botswana, Lesotho, Namibia, South Africa, and Swaziland., established in 1910, making it the world's oldest Customs Union. The Member States form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the Member States for products originating in these countries; and there is a common external tariff that applies to nonmembers of SACU.
IMF - 1945
developed an international system of payments and oversight of currency exchange rates
Trade Balance
difference between the value of a country's exports and the value of its imports over a certain period of time.
Political Globalization
embassies & consulates; participation in U.N. peace keeping missions
Social Globalization
extent of cross border personal contact ( tourism, remittances0
ASEAN - Association of Southeast Asian Nations
formed in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand, and today includes Brunei, Vietnam, Laos, Burma, Cambodia.
ECOWAS - Economic Community of West African States
founded in 1975, Benin, Burkina Faso, Cabo Verde, Cote D'Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo.
KOF Globalization Index
measures the economic, social and political dimensions of globalization. Based on 23 variables, reviews 187 countries, begins with data from 1970.
EAC - East African Community
organization of Burundi, Kenya, Rwanda, Tanzania and Uganda entered into force in 2000.
The World Bank
originally The International Bank for Reconstruction and Development
Module 1
the Global Supply Chain
Largest Importer:
the U.S.
Additional measures reported by
the World Bank, the International Monetary Fund (IMF), Transparency International, World Audit.org, Freedom House, Amnesty International, Human Rights Watch, ...
What is Globalization?
the act or process of globalizing: the state of being globalized; especially: 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
WTO - the World Trade Organization
- succeeded GATT. It was established in 1995 out of the Uruguay Round (1986-1994) and is located in Geneva Switzerland. As of June 2014 the WTO has 160 members. The system's overriding purpose is to "help trade flow as freely as possible" — so long as there are no undesirable side effects — in order to support economic development and well-being". (WTO)
Eli Heckscher & Bertil Olin - Factor Endowment Theory, 1933
-A country will enjoy a comparative advantage over other countries if it is naturally endowed with a greater abundance of one of the factors of economic production, such as land, labor, capital or entrepreneurship. -This theory explains why certain countries specialize in the production of certain goods.
Michael Porter's Cluster Theory (1980) (Silicon Valley)
-A firm can develop a substantial competitive advantage in manufacturing certain goods when a large number of its competitors and suppliers are located in close proximity. -The area attracts the most talented employees and the companies "feed" on each other's know-how, pushing them to innovate faster. They become so efficient and innovative that they become world-class suppliers.
International Trade Theories
-Adam Smith's Theory of Absolute Advantage 1776 -David Ricardo's Theory of Comparative Advantage 1815 -Eli Hecksher and Bertil Ohlin's Factor Endowment Theory 1933 -Raymond Vernon's International Product Life Cycle Theory 1966 -Michael Porter's Cluster Theory 1980 -Yossi Sheffi's Logistics Cluster Theory 2012
Ocean and Water Transportation - Port Infrastructure - Connections with land-based transportation services
-Adequate rail connections -Roads that are not clogged as they access ports
Ocean and Water Transportation - Port Infrastructure - Bridge clearance
-Air Draft -Bridge clearances also determine which ships can call
Sheffi's Logistics Logistics Cluster Theory (2012) (Singapore, Rotterdam)
-An area can develop a substantial competitive advantage by providing several logistics service providers in one area. The area then attracts export- and import-minded manufacturers. •The companies allow manufacturers to operate more efficiently, since all the services they need to ship are located in one area. The logistics suppliers, even though they are competitors, actually help each other attract new customers.
Court Infrastructure
-An efficient court system allows for disputes to be resolved quickly and fairly. -The average duration for the resolution of a contract dispute is 510 days in an OECD country. -Inefficient court systems lead companies to use mediators and arbitrators.
APEC
-Asia-Pacific Economic Cooperation forum is a loose grouping of the countries bordering the Pacific Ocean who have pledged to facilitate free trade. Members include the US, Canada, Japan, Russia, Australia; Brunei; Canada; Chile; China; Hong Kong; Indonesia; Japan; South Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Philippines; Singapore; Taiwan; Thailand. Its 21 members account for 45% of world trade. -... pledged to liberalize trade among themselves by 2010 for developed countries and 2015 for developing countries. •Recently China has begun signing bilateral free trade deals with a number of APEC members.
Original EEC members
-Belgium, France, Germany, Italy, Luxembourg, the Netherlands; today: 27 members (- U.K. Jan. 2020)
Ocean and Water Transportation - Canals and Waterways
-Canals and locks must be large enough. -Largest ships that can get through Suez Canal are called Suez-Max ships. -Largest ships that can get through Panama Canal are called Panamax ships. -Ships too large for Panama Canal are called post-Panamax ships.
Exporting Countries
-China 2,049 11.2% -United States 1,547 8.4% -Germany 1,407 7.7% -Japan 799 4.4% -The Netherlands 656 3.6% -France 569 3.1% -Republic of Korea 548 3.0% -Russian Federation 529 2.9% -Italy 500 2.7% -Hong Kong, China 493 2.7% -United Kingdom 468 2.6% -Canada 455 2.5% -Belgium 446 2.4% -Singapore 408 2.2% -Mexico 370 2.0% -Top Fifteen Exporters 11,246 61.4% -Rest of World 7,077 38.6%
Utilities Infrastructure - Water and Sewer
-Cities sometimes lose water through leaky pipes and illegal siphoning. -Some cities have impure water which needs to be boiled before use. -Some cities have inadequate sewage systems. -Striking sanitation workers can cause problems.
Why do businesses "globalize" ?
-Cost Drivers -Competition Drivers -Market Drivers -Technology Drivers
•Bretton-Woods Conference (1944)
-Creates the International Monetary Fund (IMF) (1945) -First General Agreement on Tariffs and Trade (GATT) (Geneva, 1948) - Multiple reductions on tariffs over several "rounds" -World Bank, originally The International Bank for Reconstruction and Development
Communication Infrastructure - Telecommunications
-Demand for voice and data telecommunications service has been increasing. -In some countries the economy has grown but the communication infrastructure has not. -In those countries Leap Frogging has taken place; people have bought cell phones to replace slow, outmoded traditional telephone service (China) -Transoceanic cables are vulnerable to being snagged by fishing nets and boat anchors. -Satellite communications are vulnerable; single satellite failure can severely disrupt communications -Capacity is eaten up by television broadcasting. -Internet is dependent upon operability of root servers. -Despite commerce relying on fast internet access, only 8.6 percent of the world has a high-speed connection to the internet
Information and data source : The World Bank Group Data by Country http://data.worldbank.org/indicator#topic-9 Includes ratings for
-Ease of doing business -Number of documents needed to export and to import (3 -17) -Logistics Performance
Utilities Infrastructure - Energy Pipelines
-Easily accessible oil and gas fields are near the end of their life expectancies. -Energy resources are increasingly being piped from further away. -Distance makes for difficult operation. -There can be many obstacles: Weather Natural barriers Political issues Environmental challenges Bickering between oil companies and governments in countries where the pipelines are being built. -Infrastructure of world's pipelines is growing.
Rail Infrastructure
-Eighteenth century development of railroads often followed military strategies -Lines built for moving troops -Varied gauges in Spain and Russia to slow down invaders -China's rail infrastructure has been unable to keep up with economic growth -Europe and Japan's railroads have focused more on high-speed passenger service than on freight -Multi-modal emphasis
Globalization Today - Issues affecting Global Trade
-Elections - populism, nationalism, protectionism, tax reform -Brexit -Spain - Catalonia -China (Hong Kong) -Trade Deals - NAFTA - USMCA, TPP
Major Economic Trade Blocs
-Europe - EU - European Union -The Americas - NAFTA - North American Free Trade Agreement - USMCA; CAFTA-DR, Caricom; Andean Community; Mercosur •Asia and Pacific Region - APEC; ASEAN; Eurasian Economic Community •Middle East - Gulf Cooperation Council; OPEC •Africa - ECOWAS; ECOCAS; East African Community; South African Customs Union •CAIRNS - group of agricultural exporters formed in 1986, 17 members including the G20 •TPP - Trans Pacific Partnership
POSITIVE Globalization
-Fosters cultural diversity -Allows exchange of ideas and knowledge -Improves lives (human development) -Promotes free enterprise, expands markets, access to products & services, enables trade -Increases access to people (talent) worldwide -Increases availability and reduces cost of goods/resources
Ocean and Water Transportation - Port Infrastructure - Warehousing space
-If not available, probability of cargo exposed to elements is high -Need for refrigerated storage areas
Rail Infrastructure
-In Europe, freight trains have lower priority than passenger trains and use aging equipment -There are plans to modernize the trans-Siberian railroad for freight shipments from Asia (Vladivostok) to Europe by rail -There are plans for a trans-Asian railroad connecting Singapore and Seoul to Europe via Turkey -Increased U.S. rail modernization has resulted in Land Bridges, which allow Asia-Europe traffic to leave ships, be transported across North America, and be reloaded onto ships at the ocean on the other side of the continent -Journey is faster and cheaper than by ocean -Allows economies of scale by the use of post-Panamax ships on Atlantic and Pacific routes
Rail Infrastructure - Factors contributing to increased rail traffic:
-Increased road congestion -Concerns about pollution and noise -Development of multi-modal containers -Modernization of rail infrastructure: -Shift from boxcars to piggyback cars carrying truck trailers and to container cars -Increasing height clearances for tunnels and other obstructions to allow double stacking of containers -U.S. de-emphasis on passenger trains has allowed the development of freight railroading, including fast freight trains
Intellectual Property
-Intellectual property is not always protected in developing countries: -There are more urgent problems -A large foreign company is not going to be favored over a small local business. -Intellectual property defense has come to the forefront of countries' international agreements.
Banking Infrastructure
-International trade can only take place if there is access to competent international banks to process foreign-currency transactions and letters of credit. -International banks have created networks of branches to assist their customers.
Published economic, social and political data from government offices, international organizations, NGO's and private advocacy, political and research firms -
-KOF Swiss Economic Institute, Zurich -World Economic Forum, Davos -UN Conference on Trade and Development (UNCTAD) -OECD (Organization for Economic Cooperation and Development) -United Nations
Additional considerations in managing the Global Supply Chain ...
-Language and Culture -Number of partners and intermediaries -Distances, transportation and locations -Currency and payment -National requirements -Legalities and regulations -Risks and Security concerns -Costs -And,...
Ocean and Water Transportation - Port Infrastructure - Port operations
-Many ports have strong unions which limit operations -Work rules can hamper operations -Long Beach only operates eight hours per day -Strikes, work stoppages can be a problem
Ocean and Water Transportation - Canals and Waterways
-Maritime transportation is dependent on the existence of reliable canals. -The Suez Canal in North Africa and the Panama Canal in Central America are particularly important. The current trend of building ships too large to fit through these canals is creating new challenges for the industry. -Other key waterways include the Bosporus Strait in Turkey which connects the Black Sea with the Mediterranean and the Saint Lawrence Seaway in North America which connects the Great Lakes with the Atlantic Ocean. -Other canals are less frequently used, such as the Corinth Canal in Greece.
Transportation Infrastructure
-Ocean and Water Transportation - seaports -Air Transportation - airports -Railroad Transportation -Road Transportation -Other Means of Transportation
Ocean and Water Transportation - Canals and Waterways - Bosporus Strait in Turkey
-Only link between Black Sea and the oceans -Primary trade route for Russia and the world -Becoming congested and raising safety concerns for nearby Istanbul
Road Infrastructure
-Paved roads do not always mean good roads. -Some paved roads are in bad shape. -Some cities have extensive road congestion. -Cities in many countries do not have an easily determined street numbering or naming system. -High-speed limit access highways sometimes limit truck sizes and speeds and/or charge tolls. -Bridges, tunnels to overcome constraints of landscape. -Landscape constraints can have a major impact on international trade.
Ocean and Water Transportation - Canals and Waterways - Suez Canal
-Prevents requirement of sailing all the way around Africa -Too shallow -Costly tolls
Ocean and Water Transportation - Canals and Waterways - Panama Canal
-Prevents requirements of sailing all the way around South America -Slow—only one direction of operation at a time -Running at capacity with waits of 22 hours -Still important despite rail land bridges
The History: The Field of Supply Chain Management
-The Spice Trade of Roman Times and the Middle Ages - courageous traders; caravans of pack animals (issues: what to bring, political instability, roadblocks (literally) -The Military - What kind of ammunition, get it to the front lines in one piece! -Post WWII - Modernized transportation and infrastructure; global relations, Institutions -McLean's Shipping Container (1970's) - Reduced ocean transit times and Increased efficiency; led to Inter Modal service -Air Shipments (1980's) - Open sky agreements; cargo aircraft; "fedex it" -Interest Rates and Inventories (1990's) -MRP, DRP, JIT, VMI, Distribution Centers (Upstream and downstream partners, relationships with suppliers and customers) -Globalization - Customer Satisfaction; competitive advantage -COVID-19 - Lean, Agile, Responsive
European Union
-The Treaty of Rome - European Economic Community - Maastricht Treaty - shared currency - the euro - -single market without borders - goods, persons, services , capital can circulate freely. -the most powerful trading bloc in the world; GDP nearly as large as that of the US -largest importer of agricultural products from developing countries -maintains close links to its former colonies in the ACP group (African, Caribbean and Pacific Group of States) through trade preferences and aid deals.
Adam Smith -Theory of Absolute Advantage, 1776
-The Wealth of Nations: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage." -When a nation can produce a certain type of goods more efficiently than other countries, it is in its best interest to manufacture more of those goods than it needs, and trade with countries that produce other goods more efficiently than that nation can.
Importing Countries
-United States 2,335 12.6% -China 1,818 9.8% -Germany 1,167 6.3% -Japan 886 4.8% -United Kingdom 680 3.8% -France 674 3.2% -The Netherlands 591 3.0% -Hong Kong, China 554 3.0% -Republic of Korea 520 2.8% -India 489 2.6% -Italy 486 2.6% -Canada 475 2.6% -Belgium 435 2.3% -Mexico 380 2.0% -Singapore 380 2.0% -Top Fifteen Importers 11,871 63.9% -Rest of World 6,696 36.1%
Ocean and Water Transportation - Port Infrastructure - Depth of water
-Water Draft -The depth of water determines the size of ships that can call -Few ports have natural depth of 40 feet required for biggest ships. As a result they must dredge that depth
The WTO does the following
-administers WTO trade agreements; -is a forum for trade negotiations; -handles trade disputes; -monitors national trade policies; -provides technical assistance and training for developing countries; -works to establish cooperation with other international organizations
Information and data source : The World Bank's International Logistics Performance Index http://lpi.worldbank.org/international/global Rates Six Dimensions
1) Efficiency of the clearance process (i.e., speed, simplicity and predictability of formalities) by border control agencies, including customs; 2) Quality of trade and transport related infrastructure (e.g., ports, railroads, roads, information technology); 3) Ease of arranging competitively priced shipments; 4) Competence and quality of logistics services (e.g., transport operators, customs brokers); 5) Ability to track and trace consignments; 6) Timeliness of shipments in reaching destination within the scheduled or expected delivery time.
Global Infrastructure
1.Transportation 2.Communication 3.Utilities 4.Banking 5.Services 6.Distribution 7.Legal & Regulatory (Court, Standards ...)
Top Fifteen Exporters account for _______
11,246 61.4%
§Top Fifteen Importers account for ______________
11,871 63.9%
Caricom - Caribbean Community - 1973
15 member states
The IMF was created from the Bretton Woods agreements. It is an organization of over _________ member countries charged with stabilizing the international monetary system. The IMF makes loans - with conditionality (usually economic reforms) to member states to address severe current account (goods, services, financial flows) deficits. (Christine Lagarde)
150
In 2018, the global trade value of goods exported throughout the world amounted to approximately ________ trillion U.S. dollars
20 trillion U.S. dollars
MERCOSUR - 1985
Argentina, Brazil, Paraguay, Uruguay, Venezuela
The ____________________ allows businesses to find additional competent logistics help quickly. This includes freight forwarders, couriers, carriers, delivery services, packing services, and so on.
Business Services Infrastructure
Rail Infrastructure - Land bridges
Containers are shipped from Asia to Europe through the U.S. railroad network; they arrive in a port on the west coast and are transported to an east-coast port by rail
Business Services Infrastructure - Couriers
Couriers allow firms to ship documents and small parts using the "next available flight."
The ____________ allows businesses to settle disputes quickly and fairly. This includes not only an efficient court system, but also a network of mediators and arbitrators, and the existence of clear jurisprudence. Requires clear jurisprudence and rule of law
Court Infrastructure
The World Bank
Created at Bretton Woods, the World Bank, officially called the International Bank for Reconstruction and Development, originally worked on reconstruction after WWII; today it makes low interest loans to less developed countries to stimulate economic development.
Communication Infrastructure - Mail - Competition
Firms such as FedEx, UPS, and DHL are very reliable, but they are generally much more expensive than the public postal services.
Business Services Infrastructure - Freight forwarders
Freight forwarders provide significant assistance to firms engaged in international trade by helping determine the best shipping alternatives.
Road Infrastructure - Congestion
In many countries traffic congestion is stifling and prevents goods from moving quickly
Utilities Infrastructure - Theft
In some areas, theft of utilities is common, making it difficult for utility companies to earn a profit and invest in new infrastructure.
Communication Infrastructure - Mail - Reliability
In some countries, not all mail is delivered: it is lost, abandoned, or sometimes pilfered.
Communication Infrastructure - Mail - Delays
In some countries, postal unions have a lot of power and strikes can delay the delivery of important documents.
Court Infrastructure - Fairness
In some countries, the court system is perceived as corrupt or unfair, and that hinders good business relationships.
KOF Swiss Economic Institute, Zurich
Index of Globalization
Social Dimensions
Personal cross-border contacts (telephone calls, letters); tourism, foreign population, cross-border information flows (internet, foreign press), KOF's "Cultural proximity to the global mainstream" (McDonalds, IKEA's)
Standards Infrastructure - Design
Product designs are often dictated by local conventions (electrical supply and plugs, plumbing sizes and pressures, and telecommunication standards, for example).
Utilities Infrastructure - Energy
Reliable pipelines have to be available to deliver natural gas or oil products to the locations where they can be used.
Standards Infrastructure - Safety
Safety requirements often differ from country to country. Such is the case for vehicles, appliances, and hotels, for example.
Standards Infrastructure - Performance
Several countries have performance standards for products, dictating what can be called "natural," "organic," "premium," and so forth.
The ___________________ allows businesses to determine the requirements that their products and operations must meet. This includes safety, design, and performance standards.
Standard Infrastructure
Road Infrastructure - Civil engineering structures
Structures such as bridges and tunnels need to be built in many places in order to conveniently navigate the landscape
The ___________ Canal in North Africa and the ___________ Canal in Central America are particularly important. The current trend of building ships too large to fit through these canals is creating new challenges for the industry.
Suez Panama
Largest ships that can get through Suez Canal are called ______________ ships.
Suez-Max
The _____________ allows businesses to sustain their daily operations. This requires reliable electricity, energy (natural gas), water, and sewer services.
Utilities Infrastructure
Competitiveness
WEF's level of productivity - Institutions, Infrastructure, Macro environment, health and education, efficient markets (goods, labor, financial), technology, market size, business sophistication, innovation
Rail Infrastructure - Gauge
When railroads were first built, countries installed unique railroad track gauges to prevent rival armies from using them. Today, these gauge differences prevent trains from traveling quickly between multiple countries
Eurasian Economic Community
originated from the Commonwealth of Independent States (CIS) and was established in 2000 by Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. In 2005 Uzbekistan joined. Freedom of movement without visa requirements has been implemented among the members. In 2014 the EEC was replaced with the Eurasian Economic Union (EEU). Membership now includes Armenia. The EEU has an integrated single market of 183 million people and a gross domestic product of over 4 trillion U.S. dollars The EEU introduces the free movement of goods, capital, services and people and provides for common transport, agriculture and energy policies, with provisions for a single currency and greater integration in the future. Note - Kazakhstan has insisted the union stay purely economic as it seeks to keep its independence and sovereignty intact.
Ships too large for Panama Canal are called __________ ships.
post-Panamax
Cultural Globalization
proximity to the mean (McDonald's and Ikeas)
Merchandise trade has almost ___________ times from $ 3,766 billion in 1992 to $ 18,323 billion in 2012
quintupled (5 times)
Services trade has almost _________ from $ 932 billion in 1992 to $ 4,347 billion in 2012
quintupled (5 times)
GCC- Gulf Cooperation Council
regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf, except for Iraq. Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. There have been discussions regarding the future membership of Jordan, Morocco, and Yemen.
GATT
through several multilateral negotiations focused on reducing tariff rates and non-tariff barriers among member nations - later becomes the WTO
Economic Globalization
trade and financial flows - restrictions (tariffs)
International trade has grown From $ 518billion per year (exports) in 1948 to $22,670 billion in 2012
true
OPEC - Organization of Petroleum Exporting Countries
was organized in 1960 to advance the interests of third world oil exporters. Members include Saudi Arabia, Iran, Iraq, Kuwait, Qatar, UAE, Algeria, Gabon, Libya, Nigeria, Indonesia, Ecuador and Venezuela.
International Trade Milestones
•Bretton-Woods Conference (1944) -Creates the International Monetary Fund (IMF) (1945) -First General Agreement on Tariffs and Trade (GATT) (Geneva, 1948) - Multiple reductions on tariffs over several "rounds" -World Bank, originally The International Bank for Reconstruction and Development -World Trade Organization (WTO) (1995) -The EU (1993); the Euro's in circulation (2002) (treaty of Rome 1957) -Other FTAs (NAFTA = USMCA), Trade Blocs develop
Port of YangShan, China
•Deep Water Port •Built from reclaimed land •Donghai Bridge connects the Port to the mainland
•Since 2008 (financial crisis, Great Recession), globalization has been declining -2017:
•Economic Globalization growing only slightly; Trade integration has declined since 2014 (U.S.-China; U.S.-EU trade conflicts, U.S. raising tariffs); •Social Globalization - little change in recent years; extent of cross- border personal contacts flat; information flows growing; •Downward trend in Cultural Globalization; Political Globalization continues to increase.
