Why operate globally?

• Higher profits and a stronger position and market access in global markets
• Reduced technological barriers to movement of goods, services and factors of production
• Cost considerations – a desire to shift production to countries with lower unit labour costs
• Forward vertical integration (e.g. establishing production platforms in low cost countries where intermediate products can be made into finished products at lower cost)
• Avoidance of transportation costs and avoidance of tariff and non-tariff barriers
• Extending product life-cycles by producing and marketing products in new countries

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How does globalisation help the Indian economy?

To answer this we must define globalisation, of course

Globalisation allows the specialisation in goods where a country has a comparative advantage which will enable a gain in net economic welfare

There will be more FDI...multiplier...employment.....income rises...economic growth

Training and technology transfer...MNC....increase in prodyctive capacity of the economy

Incomes up...income tax up; corporation tax; expenditure tax

Wider choice but also greater competition

Some industries grow but some decline = structural unemployment

Environmental impact

Unequal distribution of benefits

Globalisation & the indian economy from Vinayak Mehrotra

Globalisation Vocabulary

Chermany 
Chimerica 
Chindia
Chindonesia 
emporiophobia
globophobe
glocalization
human cloud
inshoring
nearshoring
offshorable 
rightshoring
SIFI

Globalisation definitions

There are many suggestions and debates on the question of how to define the concept of globalisation. Here are some few definitions commonly used: 

"Globalisation is a multi-dimensional process characterised by: 

• The acceptance of a set of economic rules for the entire world designed to maximise profits and productivity by universalising markets and production, and to obtain the support of the state with a view to making the national economy more productive and competitive; 
• technological innovation and organisational change centred on flexibilisation and adaptability; 
  the expansion of a specific form of social organisation based on information as the main source of productivity and power; 
• the reduction of the welfare state, privatisation of social services, flexibilisation of labour relations and weaker trade unions; 
• de facto transfer to trans-national organisations of the control of national economic policy instruments, such as monetary policy, interest rates and fiscal policy; 
• the dissemination of common cultural values, but also the re-emergence of nationalism, cultural conflict and social movements." 
  R. Urzua, 2000¹

"Globalisation can be thought of as a process (or set of processes) which embodies a transformation of the spatial organisation of social relations and transactions." 
David Held et al. 1999 

"Globalisation refers to all those processes by which the peoples of the world are incorporated into a single world society, global society." 
Martin Albrow, 1990 

"Globalisation can [...] be defined as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa." 
Anthony Giddens, 1990 

"The characteristics of the globalisation trend include the internationalising of production, the new international division of labour, new migratory movements from South to North, the new competitive environment that accelerates these processes, and the internationalising of the state [...] making states into agencies of the globalizing world." 
Robert Cox, 1994 

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.

Globalisation refers to the integration of markets in the global economy, leading to the increased interconnectedness of national economies.  Markets where globalisation is particularly common include financial markets, such as capital markets, money and credit markets, and insurance markets, commodity markets, including markets for oil, coffee, tin, and gold, and product markets, such as markets for motor vehicles and consumer electronics. The globalisation of sport and entertainment is also a feature of the late 20th and early 21st centuries.

Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange. Globalisation has increased the production of goods and services. The biggest companies are no longer national firms but multinational corporations with subsidiaries in many countries.

Globalisation has been taking place for hundreds of years, but has speeded up enormously over the last half-century.

Globalisation has resulted in:

• increased international trade
• a company operating in more than one country
• greater dependence on the global economy
• freer movement of capital, goods, and services
• recognition of companies such as McDonalds and Starbucks in LEDCs

Although globalisation is probably helping to create more wealth in developing countries - it is not helping to close the gap between the world's poorest countries and the world's richest.

Trump and Trade

IT MUST seem to Donald Trump that reversing globalisation is easy-peasy. With a couple of weeks still to go before he is even inaugurated, contrite firms are queuing up to invest in America. This week Ford cancelled a $1.6 billion new plant for small cars in Mexico and pledged to create 700 new jobs building electric and hybrid cars at Flat Rock in Michigan—while praising Mr Trump for improving the business climate in America. Other manufacturers, such as Carrier, have changed their plans, too. All it has taken is some harsh words, the odd tax handout and a few casual threats.

Mr Trump has consistently argued that globalisation gives America a poor deal. He reportedly wants to impose a tariff of 5% or more on all imports. To help him, he has assembled advisers with experience in the steel industry, which has a rich history of trade battles. Robert Lighthizer, his proposed trade negotiator, has spent much of his career as a lawyer protecting American steelmakers from foreign competition. Wilbur Ross, would-be commerce secretary, bought loss-making American steel mills just before George W. Bush increased tariffs on imported steel. Daniel DiMicco, an adviser, used to run Nucor, America’s biggest steel firm. Peter Navarro, an economist, author of books such as “Death by China” and now an adviser on trade, sees the decline of America’s steel industry as emblematic of how unfair competition from China has hurt America

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Globalisation

Import dumping

Customs Union

Slowdown in Global Trade

Threats to Globalisation

Gains from Globalisation

Exam Technique - Globalisation

Globalisation and the UK Economy

Globalisation and International Trade - Revision Videos

• Balance of Payments
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• Quotas and protectionism
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• Free trade and protectionism
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• Globalisation
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• Absolute and comparative advantage
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• Global economy

12 Scary facts about globalisation

A blog called The Economic Collapse today posted a list of 22 frightening facts about the U.S. trade imbalance. We thought we'd share the 12 that scared us the most. But first, we're sharing a bit of a good rant from TEC:

Since 1975, the United States has bought more than 8 trillion dollars more stuff from the rest of the world than they have bought from us.  We are the only economy on earth that could have had 8 trillion dollars drained out of it and still be standing.  Instead of leaving the country, those 8 trillion dollars could have gone to U.S. businesses and U.S. workers.

Now the stats:

1. In 2001, American consumers spent 102 billion dollars on products made in China.  In 2011, American consumers spent 399 billion dollars on products made in China.
2. The Chinese undervalue their currency by about 40 percent in order to gain a critical advantage over foreign competitors.  This means that many Chinese companies are able to absolutely thrive while their competition in the United States goes out of business...
3. A Jeep Grand Cherokee that costs $27,490 in the United States costs about $85,000 in China thanks to all the tariffs, according to the New York Times.
4. The U.S. trade deficit with China during 2011 was 295.4 billion dollars.  That was the largest trade deficit that one nation has had with another nation in the history of the world.
5. Back in 1985, our trade deficit with China was only about 6 million dollars (million with an "m") for the entire year.
6. U.S. consumers spend about 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.
7. The United States has actually lost an average of about 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.
8. According to the Economic Policy Institute, America is losing about half a million jobs to China every single year.
9. The United States has lost more than 56,000 manufacturing facilities since 2001.
10. During 2010 alone, an average of 23 manufacturing facilities closed their doors in America every single day.
11. 95 percent of the jobs lost during the last recession were middle class jobs.
12. Due in part to the globalization of the labor pool, only about 24 percent of all jobs in the United States are "good jobs" at this point.

Globalisation

1. When countries increased their level of globalisation by 1 percent the rate of GDP growth rose by about 0.10-15%, a material figure.

2. The value of cross-border goods flows between emerging markets increased from 6 percent of all global trade in 1990 to 24 percent in 2012.

3. Digital platforms can cut the cost of exporting by 83 percent as compared with traditional export channels.

4. The impact of foreign entrepreneurs in Silicon Valley is legendary: from 2006 to 2012, immigrants founded over 40 percent of all high-tech and engineering start-ups there.

5. Singapore has the world’s highest density of regional head offices relative to GDP: more than half of all large foreign subsidiaries in emerging Asia outside China are located.

6. Global e-commerce sales reached over $1.2 trillion in 2013, nearly 2 percent of global GDP.

7. The number of Fortune Global 500 companies with headquarters in developed economies will fall to less than 55 percent by 2025, from almost 75 percent in 2013.

Source...LINK

Global Economy

The world's economies have developed ever-closer links since 1950, in trade, investment and production.

Known as globalisation, this process is not new, but its pace and scope has accelerated in recent years, to embrace more industries and more countries.

There have been losers as well as winners from globalisation, with China the biggest winner, and blue-collar workers the biggest losers.

The changes have been driven by liberalisation of trade and finance, changes in how companies work, and improvements to transport and communications.

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Globalisation backlash

Food maker Mondelez Internat­ional says political turmoil, including a globalisation backlash, has caused disruption and uncertainty for its international business.

The maker of Oreo cookies and Triscuit crackers sells snacks in 165 countries and operates factories all over the world. If President Don­ald Trump followed through with planned changes to taxes and tariffs affecting global trade, Mondelez operations in Mexico and elsewhere could be affected, said chief executive Irene Rosenfeld.

“Taxation and tariffs are going to have a profound impact on us,” Ms Rosenfeld said in an interview.

“We are keeping a close eye on this.”

Mondelez yesterday reported an unusually low 0.6 per cent rise in comparable sales, excluding currency fluctuations, for the fourth quarter. Adjusted earnings per share rose 12 per cent, reflecting cost-cutting at headquarters and the supply chain.

Mondelez acknowledged the downsides of its global reach. Economic uncertainty in India since demonetisation policies were implemented there late last year and in Britain since the vote to leave the European Union have weighed on Mondelez’s business in those countries.

Mr Trump’s calls to adjust border taxes could affect operations in the US and abroad.

“To the extent that we face higher costs for imported products, we’d obviously need to look for ways to cover these costs, adapt our supply chain model,” said chief financial officer Brian Gladden.

Since it was created following a split from Kraft Foods in 2012, Mondelez has looked to emerging markets for growth, making it more susceptible to recent economic weakness in countries such as China and India.

The Illinois-based company has also struggled to keep up with a rapid shift toward foods perceived as healthier.

In the latest quarter, Mondelez’s comparable sales rose 0.4 per cent in North America, where it generates about a quarter of its revenue.

Ms Rosenfeld said Mondelez discounted its cookies in the US to compete with other brands, hurting sales and profit margins at the end of the year.

“The North America food and beverage environment has been very sluggish,” Ms Rosenfeld said. “We’re expecting more of the same in 2017.”

She said Mondelez would invest more this year in e-commerce sales and in renovating brands, as it did recently with non-GMO Triscuits.

The company said it expected comparable revenue to grow at least 1 per cent in 2017 and double-digit growth in adjusted per-share earnings, excluding currency fluctuations.

Over all, Mondelez posted a fourth-quarter profit of $US93 million ($122m), or US6c a share, compared with a loss of $US729m, or US45c a share, a year earlier, when the company posted a $US778m loss on the deconsolidation of its Venezuelan business.

Excluding certain items, adjusted per-share earnings were US47c, compared with US48c as expected by analysts polled by Thomson Reuters.

Revenue fell 8.1 per cent to $US6.77 billion, also short of analyst expectations of $US6.89bn.

Mondelez’s adjusted operating profit margin rose about 1 percentage point to 14.4 per cent in the fourth quarter.

Mondelez expects it to top 16 per cent this year.

Source is here...

Is globalisation coming to an end?

For most of the past 25 years, globalisation was seen as an unstoppable force, as sure to advance as the sun rises in the east. But increasingly, it looks more vulnerable than inexorable. Causes for concern are easy to find. For instance, the last set of World Trade Organisation negotiations over further trade liberalization, the Doha Round, was a failure; Donald J. Trump has disavowed free trade agreements such as NAFTA and the Trans-Pacific Partnership (TPP); 

Brexit will reduce economic integration between the United Kingdom and the European Union, and possibly between the U.K. and the world; and regional opposition almost scuppered the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Is the age of globalisation coming to an end?

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Globalisation is dying

Economics as the primary tool of engagement between nations is giving way to walls, some physical, most invisible, that will prevent the free flow of trade and capital. One country after another, one leader at a time, is shedding the weight of the past that knelt at the temple of GDP growth as a proxy for citizen well-being. This reversal would have been insignificant but for the fact that it is currently being led by the US and Europe, whose share in global GDP is significant.

Globalisation is dying. Autarchy is birthing.

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