Ex: Globalization of the economy has led to transnational (multinational) corporations. Because of globalization there is more interconnectedness

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Alicia Scott
5 years ago
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2 Ex: Globalization of the economy has led to transnational (multinational) corporations. Because of globalization there is more interconnectedness across national boundaries. 2

Int l trade agreements are all about the money. Foreign products that enter countries have taxes (tariffs) placed on them to protect local products.

3 Int l trade agreements are all about the money. Foreign products that enter countries have taxes (tariffs) placed on them to protect local products. Int l trade organizations remove or reduce the tariffs. The result is that foreign products are now often as cheap as locally made products. Production (manufacturing) will often move to countries w/in a trade union that has the cheapest labor. This comes at the expense of manufacturing jobs in more developed areas. However, the consumer gets a cheaper product. In the end, there are pros and cons of international free trade. 3

4 Again, there are international trade organizations all over the world. Keep the basics in mind: make money; no/reduced tariffs; movement of manufacturing to lowest wages. 4

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9 Neocolonialsm is seen as a subversive version of colonialism. Core countries aren t actually using population or the military to control the periphery but they are so economically intertwined that, in reality, the periphery is controlled. 9

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11 Basic industries are synonymous with mfg, mining and other secondary economic activities. Basic industries generate money by sales outside of the community. For example, a Ford automobile factory in Michigan makes money by selling cars through out the USA. Non-basic industries are associated with tertiary economic activities and support and service the local economy. Non-basic activities recycle money with in the community. For example, you eat at a restaurant and tip the server. The serve spends the money to get a hair cut. The stylist then spends the money at the car wash and so on down the line. It is said that one basic industry job will result in 2-3 non-basic indusry jobs. 11

12 There are two ways you liekly see the Multiplier Effect defined. A. An increase in capital spending produces an increase in income an consumption greater than the amount of capital spending B. An increase in basic sector jobs ledes to a greater increase in non-basic sector jobs by a factor of 2:1 or 3:1 12

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14 Please keep in mind when we discuss the loss of manufacturing in core countries, we are talking about the number of manufacturing jobs. Core countries produce more volume of manufactured goods than ever before but core factories are more automated and extremely efficient than ever before as well. Thus there are fewer mfg jobs but more mfg volume. Manufacturing jobs that require non skilled labor have left core countries in droves. 14

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18 Industry follows cheap labor. As areas develop, labor prices rise causing mfg jobs to relocate. Mfg jobs first moved from core countries to the semi-periphery areas such as Mexico and China. As Mexico in China developed thanks to more secondary jobs, wages and other costs of doing business such as land rents. Eventually, it became more profitable for companies to relocate low skilled jobs to countries of the periphery. This explains the increase in mfg. jobs in countries like Guatemala and Vietnam. Should enough economic development occur in Guatemala and Vietnam, low skilled mfg jobs will once again relocate. 18

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21 To be really specific, EPZs are designed solely to promote the export finished products. The jobs associated with EPZs are often low paying with long hours. The infrastructure associated with EPZs do little to help the country as a whole develop. The port area surrounding the EPZ has good physical and digital infrastructure put little extends to other areas of the country. While periphery countries receive economic benefits from EPZs, the overall effect on a country is minimal. 21

22 SEZs are oriented to other businesses in addition to manufacturing. Zones established by many countries in the periphery and semi-periphery where that offer favorable tax, regulatory, and trade arrangements to attract foreign trade/investments. The idea is that countries in the periphery and semi-periphery need the capital and business know-how that can be offered by core countries. Core countries, in return, get access to cheap labor. In many SEZs there are regulations stipulating that a certain percentage of employees must be from the host country. Additionally, foreign companies are often restricted as to how much ownership they have of the factory in the SEZ. Often the factories in SEZs produce products for foreign companies with help from foreign companies but the name of the factory is different. 22

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Free-trade zone, also called foreign-trade zone, formerly free port, an area within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the

24 Free-trade zone, also called foreign-trade zone, formerly free port, an area within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers areas with many geographic advantages for trade. Examples include Hong Kong, Singapore, Colón (Panama), Copenhagen, Stockholm, Gdańsk (Poland), Los Angeles, and New York City. Alternative devices such as the bonded warehouse and associated systems are used in some large seaports (e.g., London and Amsterdam). The primary purpose of a free-trade zone is to remove from a seaport, airport, or border those hindrances to trade caused by high tariffs and complex customs regulations. Among the advantages of the system are the quicker turnaround of ships and planes through the reduction in formalities of customs examinations and also the ability to fabricate, refinish, and store goods freely. From the Enclyopedia Britannica 24

25 Women hold many manufacturing jobs in EPZs/SEZs. Women have greater have smaller hands and are often better suited physically for tasks requiring high manual dexterity. In many countries of the periphery and semi-periphery, women can be paid lower wages than men for the same jobs. Women are also less likely to complain or form labor organizations (unions). 25

Driving change. Achieving results.

Driving change. Achieving results. Proactively adapting to new tax realities. 2016 Latin America Tax Summit, Rio de Janeiro 29 February to 2 March Gaining Competitive Advantage Through the Use of FTZs