Global Top-20

PoliticaPoliticaMeasures of Globalization• Political Engagement• Technology• Personal Contact• Economic Integration

Kentucky ExportsKentucky Exports

NAFTANAFTAOTHEROTHER

FranceFrance

Bra

z.B

raz.

Ger

m.

Ger

m.

JapanJapan UKUK

$ 9.6 bill in 1999 … 9% Growth$ 9.6 bill in 1999 … 9% Growth

Orange = Percentage of exports to the U.S. by intra-firm trade to total exports (This is NOT volume of total exports)

What is Globalization?Perspective of Firms and Shareholders

Are customers culturally/nationally diverse? Large percent of foreign revenue? Large percent of foreign assets? Are competitors global? Are owners, partners, suppliers global? How big is globalization? Who’s doing it? How big is globalization? Who’s doing it?

Why?Why? Are all markets equally attractive? Why?Are all markets equally attractive? Why?

What is Globalization?Perspective of Workers, Consumers, and Regular Joes

Better prices and quality for products and services?

Jobs and wage rates? Does globalization lead to “happiness?”

Merchandise Exports(In $bill, 1999)

0

100

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700

Exports

U.S.U.S.

Ger

man

yG

erm

any

Japa

nJa

pan

Fra

nce

Fra

nce

UKUK

IreIreMexMexKorKor

Merchandise Imports(In $bill, 1999)

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Imports

U.S.U.S.

Ger

man

yG

erm

any

Japa

nJa

pan

Fra

nce

Fra

nce

UKUKIreIreMexMexKorKor

Foreign Direct Investment - Out(% of World Total, 1996)

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5

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15

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25

FDI Out

U.S.U.S.G

erm

any

Ger

man

y

Japa

nJa

pan

Fra

nce

Fra

nce

UKUK

Foreign Direct Investment - In(% of World Total, 1996)

0

5

10

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20

25

FDI Out

U.S.U.S.G

erm

Ger

m

Japa

nJa

pan

Fra

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Fra

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UKUK

Growth in Trade and FDIIndexed: 1950 = 100

1950 1960 1970 1980 1990 2000

1600

1200

800

400

100

Trade

GDP

FDI

Extent of Globalization for MNCs

Foreign Sales as

Percent of Total

Foreign Assets as

Percent of Total

Exxon 72% 64%

IBM 57% 44%

Ford 31% 44%

General Electric 32% 48%

Citigroup 35% 41%

Hewlett-Packard 55% 52%

Rank Firm or Country Value (in $bil)

1 United States $8,110.92 Japan 4191.53 Germany 2104.64 France 1394.15 United Kingdom 1288.26 Italy 1145.47 China 902.18 Brazil 802.19 Canada 618.3

10 Spain 531.311 Russia 449.912 South Korea 438.213 Mexico 409.614 Microsoft 407.215 Australia 390.8

16 India 380.817 Netherlands 360.518 General Electric 333.119 Argentina 326.420 Taiwan 283.421 Belgium 242.422 Sweden 227.823 IBM 214.824 Indonesia 214.625 Austria 207.526 Exxon 193.927 Royal Dutch Shell 191.328 Wal-Mart 189.529 Turkey 186.430 AT&T 186.131 Intel 180.232 Cisco Systems 174.1

Comparative Advantage Germany:

– 10 units of factor inputs (labor & capital) to produce 1 keg of beer

– 2 units of factor inputs to produce 1 box of pretzels

United States: – 15 units of factor inputs to produce 1 keg of beer;

– 5 units of factor inputs to produce 1 box of pretzels;

Which country should export beer? Which country should export pretzels?

Comparative AdvantageGermany:10 labor pretzels = 5 pretzels per beer beer 2 labor

US:15 labor pretzels = 3 pretzels per beer beer 3 labor

Comparative AdvantageGermany:10 labor pretzels = 5 pretzels per beer beer 2 labor

US:15 labor pretzels = 3 pretzels per beer beer 3 labor

Germany has absolute advantage in both beer and pretzels

U.S. has comparative advantage in beer, and should specialize in and export beer to Germany

What is Globalization?Perspective of Workers, Consumers, Regular Joes,

The Poor, Terrorists, and People Who Worry about Terrorists

Better prices and quality for products and services?

Jobs and wage rates? Does globalization lead to happiness? Does globalization cause or reduce poverty? Does globalization fuel or reduce terrorism?