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Globalization, Trade, Investment, and Environment

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Session Objectives: Debate risks and opportunities of economic globalization Identify SD requirements for trade and investment liberalization Session Agenda ... – PowerPoint PPT presentation

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Title: Globalization, Trade, Investment, and Environment


1
Globalization, Trade, Investment, and Environment
  • Session Objectives
  • Debate risks and opportunities of economic
    globalization
  • Identify SD requirements for trade and investment
    liberalization

2
Session Agenda
  • Globalization overview
  • Basic trade theory
  • Trade liberalization
  • WTO environment
  • FDI liberalization
  • Risks/opportunities
  • Discussions

3
What is Globalization?
A process in which increased amounts of goods,
services, investments, and financial capital move
across countries.
4
Major International Forces
  • Transnational corporations (TNCs)
  • OECD governments
  • WTO, OECD, IMF, World Bank

5
International Mechanisms
  • Uruguay Round, Millennium Round
  • Multilateral Agreement on Investment
  • Structural adjustment

6
Policy Instruments
  • Trade liberalization
  • FDI liberalization
  • Capital market liberalization
  • Currency market liberalization

7
Government Positions
  • OECD countries promote, selectively
  • Emerging economies embrace, selectively
  • Less developed countries hesitant

8
Civil Society Concerns
  • rise in inequality
  • erosion of jobs and wages
  • increased vulnerability of economies
  • plunder of natural resources
  • destruction of community
  • erosion of democracy

9
Some FiguresUNDP Human Development Report
  • 2/3 of the worlds people left out, hurt, or
    marginalized by globalization
  • 24 rich countries 12 emerging economies are
    benefiting from globalization
  • 140 countries have slower growth or no growth at
    all
  • 200 top TNCs account for
  • 28 of world output
  • 70 of trade, but hire
  • 1 of worlds labor

10
6 CommandmentsPerspectives of some NGOs
  • Globalization we are in one single global market
  • Liberalization remove all barriers and obstacles
    to free flows of goods, services, capital
  • Deregulation let the invisible hand work
  • Privatization government, hands up
  • Competitiveness be a winner, the best, the
    strongest
  • Technological innovations restless, innovate
    permanently, always ahead of others

11
Basic Trade TheoryAbsolute Advantage - Adam
Smith
12
Basic Trade Theory Comparative Advantage -
David Ricardo
13
Traditional Arguments for Free Trade
  • Win-win for trading partners
  • Efficiency from specialization competition
  • Economy of scale export market
  • Technological change expands PPF
  • Overall increase in welfare

14
Traditional Arguments against Free Trade
  • Job lost to foreign competitors
  • National defense
  • Infant industry
  • Falling terms of trade
  • falling TOT in raw materials in the long run
  • no major innovations in primary commodities
  • vulnerability of economy dependent on commodities

15

Trade Liberalization Measures
  • Reduce or remove import duty/export tax
  • Reduce or remove import/export restrictions
  • Reduce or remove subsidy for export and
    import-substitution industries

16
Opportunities of Trade Liberalization
  • Increase in goods and services available for
    consumption - increase in welfare
  • Jobs in export sector - poverty reduction
  • Removal of price distortion -gt efficiency
  • Technology transfer - cleaner/upgrade
  • More revenue for environmental investment
  • Demand for environmental quality

17
Risks of Trade Liberalization
  • Inequitable distribution of trade benefits
  • Trade-generated wealth not necessarily used to
    improve the environment, in time, and for all
  • Transitional social and economic difficulties
  • Increased scale of production magnifies
    externalities
  • One-way liberalization

18
GATT (1948) - WTO (1995)
  • 3 objectives
  • help trade flow as freely as possible
  • achieve further liberalization gradually through
    negotiation
  • set up an impartial means of settling disputes
  • 5 principles
  • Non-discrimination (MFN, national treatment)
  • Freer trade
  • Predictable policies
  • Encourage competition
  • Extras provisions for LDCs

19
WTO Environment
  • Conflicts between WTO agreements MEAs
  • Non-discrimination of like-products, regardless
    of their production methods and processes
  • Difficulty in biosafety negotiations
  • IPRs over biological resources benefiting OECD
    countries
  • Limited access to agricultural textile markets
    in OECD countries
  • Weak capacity of LDCs to benefit from WTO
    agreements/negotiations

20
FDI Liberalization Measures
  • Reduce or remove restrictions on FDI
  • Increase incentives to attract FDI
  • Allow currency convertibility

21
Opportunities of FDI Liberalization
  • Source of capital
  • More jobs if labor intensive
  • May reduce poverty if in poor areas
  • Transfer of clean technology standards
  • Management skills
  • Competition and efficiency
  • Global market connections

22
Risks of FDI Liberalization
  • Often focus on manufacturing service, little on
    agricultural rural development - polarization
  • Displacement of domestic industries - job loss
  • Tax holidays - produce more than justified by
    production costs
  • Environmental externalities

23
SD Requirements
  • Capital or labor intensive?
  • Sectors for liberalized trade and FDI?
  • Measures to mitigate transitional difficulties?
  • Distribution of benefits?
  • Control of externalities?
  • Are tax holidays justified?
  • Readiness of domestic industries for competition?
  • Transfer of clean technology?
  • Access to markets in OECD countries?
  • Gains from liberalization for environmental
    investment?
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