In this CD-ROM, globalization is defined as a process of growing interdependence between all people of this planet. People are linked together economically and socially by trade, investments and governance. These links are spurred by market liberalization and information, communication and transportation technologies.
A global economy is an unprecedented phenomenon, not to be confused with economic internationalization. In fact, a world economy has existed since the 16th century, based on the development of international trade, foreign direct investment and migration. The engine of the world economy is the national state.
A global economy has the capacity to work as a unit, in real time, on a planetary scale (see M. Castells, The Rise of the Network Society, Blackwell Publishers, 1996). Four primary, interrelated factors have driven globalization: increased international trade; the growth of multinational corporations; the internationalization of finance; and the application of new technologies in all these operations, especially computer and other information technologies (see D. MacShane, Fabian Pamphlet No. 575, 1996).
Definitions of globalization vary according to approach and according to sentiments the word awakes in the definer. In this CD-ROM, globalization and globalism are treated as expressions of the same phenomenon - globalization being the process and globalism the approach. Some authors prefer to differentiate between these concepts, with the usual implication that globalization represents something bad, and globalism something good. For example:
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Globalization in the form of foreign direct investment (FDI) accelerated in the middle of the 1980s. Total inflow of FDI was $349 billion in 1996, and total outflow was $347 billion. This is compared to inflows of $10 billion in 1970. Inward FDI stock was $3.2 trillion and outward stock $2.8 trillion in 1996. (United Nations Conference on Trade and Development (UNCTAD) World Investment Report 1997)
FDI consists of funds invested directly abroad from the headquarters of the transnational corporation, reinvested earnings of a foreign affiliate, and funds borrowed by an affiliate from its parent (UNCTAD definition).
|The top investing countries in the 1990s have been the United States, the
United Kingdom, France, Germany and Japan. In 1995, US investment rose by 75.4% over the
previous year. Although the trend was declining in 1996, US direct investment abroad was
still $31 billion more than that of the United Kingdom, which had the second largest stock
of FDI held abroad.
More than half of FDI outflows from the US were financed by reinvested earnings over the period 1994-1995.
|In the 1990s, China has received more FDI inflows than most developed
countries. In 1996, it was the second largest host country to FDI, and received only $31
billion less than the United States.
Although the US is the largest home and host country of FDI, outflows clearly exceed inflows. Japan, the United Kingdom, Germany and France are also net investors. Especially striking is the difference between outflows and inflows in Japan (see below).
Developed and developing regions
Until recently, FDI flows have created interdependence between the developed countries, which are the main targets and sources of FDI. Developed countries are those with 1995 per capita incomes above $9,385 (World Bank definition).
Although FDI flows into developed countries continue to exceed those into developing countries by far, the gap has been narrowing. Inflows into developing countries in 1996 rose by 34%, to a record of $129 billion. At the same time, inflows into developed countries gained only slightly, rising to $208 billion. (UNCTAD, World Investment Report 1997.)
|In recent years, outflows from developing countries have also increased.
In 1996, developing countries accounted for 15% of all FDI outflows.
Also in 1996, outflows from developing countries rose to $51 billion, and from developed countries to $295 billion. Asia is rapidly emerging as an important source of FDI outflows. These rose by 10% in 1996, to $47 billion. The Hong Kong Special Administrative Region of China alone accounted for $27 billion. The recipient countries are mainly in Asia, but the EU also receives a rising volume of FDI from developing countries. (UNCTAD, World Investment Report 1997.)
The EU and the United States have by far the world's most important bilateral investment relationship, and are each other's largest investment partners. Over the period 1992-1996, the United States was the top contributor to extra-EU inflows, with an average share of 59%. In 1996, 74% (19.2 billion ECU) of extra-EU inflows came from the US. The main recipient of FDI from the United States was the United Kingdom. (European Commission, Report on United States barriers, July 1997 and Annual Economic Report 1997)
|The United States market remained the main destination of FDI from the
EU, receiving an average share of 41% between 1992 and 1996. Outflows from the EU to the
United States amounted to 13.7 billion ECU in 1996, or 30% of total EU outward flows. (European Commission, Report on United States barriers, July 1997)
Of the total outflows from EU countries in 1996, 49.3 billion ECU were invested between EU member states, while 45.6 billion ECU were invested outside the EU. Inflows were 40.9 billion ECU from within the EU, and 25.8 billion ECU from the rest of the world. (Press Release of the European Union Direct Investment Yearbook 1996)
|In 1996, United States direct investment stock abroad increased by 11% ($78.9 billion), compared with an average increase of 10% p.a. in 1982-1994 and of 12% in 1995. The position of Europe in FDI outflows from the United States has traditionally been strong. US outflows to the EU increased by 11% in 1996 (to $36.6 billion) and accounted for nearly one-half of total FDI inflows to the EU. Latin America and other countries of the Western Hemisphere received $16.0 billion, the Asia-Pacific region $14.6 billion, and Canada $6.1 billion. (Sylvia E. Bargas, Direct Investment Positions for 1996: Country and Industry Details)|
|The $69.2 billion increase in FDI hosted by the United States in 1996 was primarily sourced from parents located in Europe ($53.2 billion). The position of European investors increased 15%, and accounted for more than three-quarters of the overall increase. Outside Europe, the largest increases were by parents in Japan and Canada. (Sylvia E. Bargas, Direct Investment Positions for 1996: Country and Industry Details)|
|Japan receives much less FDI than it makes. Outflows have exceeded inflows by more than a factor of 10, and the gap has been growing. Outflows have a cyclical pattern that reflects fluctuations in the yen. The regional composition of FDI outflows has also changed significantly. (Finance & Development, Japanese Foreign Direct Investment and Regional Trade and Ministry of Finance, FDI Tables)|
|By the late 1980s, Japan was investing more abroad than any other country
in the world, with its FDI outflows peaking at $67.5 billion in 1989. Japanese companies
sharply increased their investments in North America in the 1980s. The United States alone
received 50% of total outflows from Japan.
In 1995, FDI abroad totalled 4.96 trillion yen, of which North America accounted for 2.24 trillion, Asia 1.19 trillion and Europe 828 billion yen. Inward FDI totalled 370 billion yen in 1996, of which the US accounted for 177 billion, the Netherlands 53.5 billion, and Germany 16.8 billion yen. (Ministry of Finance, FDI Tables)
Among developing countries, FDI inflows concentrate in a few countries and regions. The main recipient regions are East Asia and the Pacific, and Latin America and the Caribbean (LAC). In 1996, these two regions accounted for more than 80% of all FDI inflows into developing countries, with LAC receiving 30% and the East Asia-Pacific region over 50%. (UNCTAD, World Investment Report 1997 )
|Within East Asia and the Pacific, FDI inflows concentrated in China, Malaysia, Indonesia, Thailand, Vietnam and the Philippines. China alone accounted for $41 billion in 1996. The biggest investors in China were Japan, the United States, Hong Kong and Singapore, underlining that the Asia-Pacific economies are becoming even more closely interrelated. (World Bank, Global Development Finance 1997 and Managing Capital Flows in East Asia 1997)|
|The most notable recipients of FDI within Latin America are Brazil ($10 billion), Mexico ($8 billion) and Argentina ($4 billion). The main sources of FDI in the region have been the US, Britain, Portugal and Spain. (World Bank, Global Development Finance 1997)|
|Within the South Asia region, India and Pakistan have been the main recipients of FDI. The continuing upward trend in foreign direct investment to India has been offset in recent years by a decrease in foreign direct investment to Pakistan, and very small inflows to Sri Lanka and Bangladesh. A much broader spectrum of countries invested in India than was the case for most other Asian states. The major investors in India were Switzerland, the UK and Germany. (World Bank, Global Development Finance 1997)|
|FDI to developing Europe and Central Asia fell in 1996. The main recipient countries in the 1990s have been Hungary, Poland and the Czech Republic. Of these, only Poland managed to improve its inward FDI position in 1996. The decline was sharpest in Hungary. However, Hungary and the Czech Republic still receive more FDI on a per capita basis, and Hungary has accumulated more FDI since the beginning of the decade. The main sources of FDI in the region are Germany, the US, the UK, the Netherlands, and Italy. (World Bank, Global Development Finance 1997)|
|Compared with other parts of the world, the overall volume of FDI to Africa remains low, and thus a source of concern. Between 1991 and 1996, Africa attracted less than 5% of total FDI flows to developing countries. Western European investors still dominate FDI in Africa, with firms from France and the United Kingdom accounting for more than 80% of the Western European FDI stock. The US accounts for approximately 20% of inflows from developed countries to the continent. (World Bank, Global Development Finance 1997 and UNCTAD, African Investment - New Signs of Vitality 1997)|
|Within the Middle East / North African region, FDI inflows concentrate in three countries: Egypt, Morocco and Tunisia receive 80% of the region's net foreign direct investment. Many of the other countries in the region had net inflows of less than $100 million.(World Bank, Global Development Finance 1997 and UNCTAD, African Investment - New Signs of Vitality 1997)|
|In Sub-Saharan Africa, most FDI inflows are in oil-exporting countries: Nigeria, Angola, Gabon and Cameroon. Nigeria alone accounts for one-third of all inward FDI in the region. It is also a major source of outward investment in Africa, following South Africa, which is the region's leading source of outward investment. Together, South Africa and Nigeria have accounted for two-thirds of FDI from the region in the 1990s. (World Bank, Global Development Finance 1997 and UNCTAD, African Investment - New Signs of Vitality 1997)|
Related topics: Multinationals, Privatization
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Accompanying the FDI boom, foreign portfolio equity investment has also accelerated globally. Cross-border transactions in bonds and equities have soared in major industrialised countries, from less than 10% of GDP in 1980 to 150-250% in 1995. (European Commission, Annual Economic Report 1997)
By definition, foreign direct investment and foreign portfolio investment are distinguished by the degree to which foreign investors exercise management control in a company. Portfolio investors tend to limit their involvement to financial engagements, while direct investors have a significant and long-lasting management interest in the company targeted for investment.
Although portfolio investments can make an important contribution to the financing of equity capital for local companies, concerns have been expressed by host countries particularly regarding the volatility of these flows and their effect on exchange and interest rates. (See F&D, Stock Markets - A Spur to Economic Growth, IMF, Foreign Exchange Markets - Structure and Systemic Risks (http://www.imf.org), F&D, Interest Rates - An Approach to Liberalization)
The United States alone accounted for more than 35% of outward portfolio investments in 1992-1994, with Japan accounting for 15% and the United Kingdom 11%. (UNCTAD, World Investment Report 1997)
United States investment flows into foreign securities accounted for $74 billion in 1982 and for $1.27 trillion in 1996. Foreign portfolio investment flows in the United States (defined as investments in US securities other than United States Treasury securities) accounted for $93 billion in 1982 and $1.23 trillion in 1996. (Russell B. Scholl, The international Investment Position of United States in 1996 and Christopher L. Bach, U.S. International Transactions, Revised Estimates for 1974-96)
In Japan, outward foreign portfolio investment outweighs outward foreign direct investment. Japanese portfolio investments abroad in 1996 amounted to 108.7 trillion yen, compared to outward FDI of 30 trillion. Inward portfolio investments amounted to 64.8 trillion yen in 1996. (Ministry of Finance, International Investment Position of Japan)
|Portfolio investments received by developing countries moved ahead
strongly in 1996, following a pause induced by the Mexican peso devaluation and the rise
in short-term US dollar interest rates in 1994. Portfolio investments accounted for 38% of
all private investment flows into developing countries in 1996, with bonds accounting for
a further 19% and equity 18.8%. The distribution of inward portfolio investments among
developing regions and countries is very similar to the distribution of inward direct
investments. (World Bank, Global Development Finance 1997)
Looking at allocations on a regional basis, Latin America received the most portfolio investment ($16.5 billion), followed by East Asia and the Pacific ($12.9 billion), Europe and Central Asia ($6.7 billion), South Asia ($5.4 billion), Sub-Saharan Africa ($3.6 billion), and the Middle East / North Africa ($0.7 billion). (International Finance Corporation (IFC), Key Trends in Emerging Stock Markets in 1996)
Related topics: Investment Funds
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Over the period 1950-1973, the volume of world trade (in goods and services) increased at an annual rate of nearly 8%, while world GDP rose annually by 5% in volume. In the decade following the abandonment of the Bretton Woods fixed exchange rate regime and the first oil price shock, the rate of expansion of both world trade and world GDP slowed down substantially.
Since 1983, the pace of world trade has accelerated again, reaching an average annual rate of 5.7%. This well outpaces the expansion of world GDP, which has risen at an average of only 3.4% per year. However, the pace of world trade has been slower than the pace of FDI, which has risen at 14% per year since 1985.
|In 1996, world merchandise exports accounted for $5.1 trillion and commercial services exports $1.2 trillion. The respective figures for imports were $5.2 trillion (merchandise) and $1.2 trillion (services). (World Trade Organization (WTO) Secretariat, Report on Trade Developments 1997) In 1996, global trade (based on exports) rose 3.3% from the previous year. This represented a major slowdown compared with the 20.4% rise seen in 1995. (Japan External Trade Organization (JETRO), White Paper on International Trade 1997)|
|Developed and developing countries
With regard to the role of individual regions in the growth of global trade, there was a remarkable drop in the contributions of the EU and East Asia to export growth, compared to the previous year. The EU's contribution to trade growth was down from 8.9% to 0.9%, and East Asia's fell from 3.7% to 0.7%. Furthermore, Japan's contribution to worldwide export growth was negative in 1996. Even its contribution to import growth came in at a low 0.3%. Latin America, meanwhile, had little effect on overall trade growth since the region originally represented only a minor part of global trade.
|One of the reasons for the sluggish growth in global trade as compared with the growth rate of the global economy was a shift in the countries driving economic growth, both in industrialized and developing countries. Specifically, Japan became the major driving force among the industrialized countries in 1996, rather than the EU (with the growth rate of the EU falling from 2.5% to 1.6%, and that of Japan rising from 1.4% to 3.6%). Among developing countries, the growth rate in Asia slowed a bit, but this was made up for by faster growth in Latin America, the Middle East, and Africa. However, the trade of Japan and these other countries and regions did not grow commensurately. (JETRO, White Paper on International Trade 1997)|
Intra-regional trade continued to grow by a relatively high rate. The exceptions were the Asian newly industrialized economies (NIEs) and the ASEAN Free Trade Area (AFTA), both of which grew by only 1-2% percent from the previous year. However, the fastest growth in intra-regional trade was experienced in the four core ASEAN economies (Malaysia, Indonesia, Singapore, Thailand), at 23.4%.
Growth of regional and world trade (based on exports)
The EU is the only region which experienced a decline in contribution to world trade in the 1990s. The most dynamic region has been East Asia. The share of AFTA countries in world exports rose from 4.1% in 1990 to 6.3% in 1996, and their share in world imports rose from 4.2% to 6.3% (the table includes only Singapore, Thailand, Indonesia, Malaysia and the Philippines - not Brunei Darussalam, Vietnam, Laos or Myanmar). AFTA countries' share of world exports to the EU rose from 0.7% to 0.9%, and to the United States from 0.8% to 1.2%. China's performance has been most outstanding. It has doubled its exports to the EU and Japan, and more than doubled its exports to the United States. Its share of world imports has increased even more than its share of world exports. However, growth in share of world imports has been concentrated in the APEC region, especially in East Asia.
Regional share in world trade (based on exports)
Leading exporters and importers
The leading exporters and importers in world merchandise trade are the United States, Germany and Japan. However, if the European Union with its 15 member countries is considered a single entity (excluding intra-EU trade), it is a larger exporter than the US. The leading exporters of world commercial services are the US, France and Germany, while the leading importers of world commercial services are Germany, the US and Japan.(WTO Secretariat, Report on Trade Developments 1997)
The fastest-growing traders in 1990-1996, however, have been developing countries. In exports, the highest annual average growth rates have been in Malaysia (18%), the Philippines (17%), China (16%) and Thailand (16%). In imports, the highest average growth rates have been in Argentina (34%), Poland (22%), Malaysia (18%) and the Philippines (18%). (WTO Secretariat, Report on Trade Developments 1997)
For country specific information see JETRO's regional reports on the United States and Canada, Latin America, Asian and Oceanic Countries, EU, Russia, Central and Eastern Europe, Middle Eastern and African Countries.
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An indigenous element of global interdependence is global governance, although the word "governance" might be somewhat misleading in the global context. There is no global government or constitution. There are only regimes created by national governments for the regulation of global and international phenomena.
Traditionally, international affairs have been handled by arrangements between nation-states and their international institutions. The UN is the largest organization in history which is composed of nation-states, but it is not an institution of supranational governance. The UN Commission of Global Governance, in its report entitled Our Global Neighbourhood, concluded that although the governance of globalization also involves other actors, governments - and the UN as their forum - play the central role:
Internationally, governments have promoted the free flow of goods, services, money and work by concluding treaties and agreements on trade, investment liberalisation and global or regional economic integration. Arrangements including preferential tariffs, free trade associations, customs unions, common markets and economic unions (see definitions of these concepts) have multipled in recent years. Geographically, the most comprehensive of the recent arrangements is WTO, which, most probably, is going to serve as a forum for eventual negotiations on MAI (Multilateral Agreement on Investment), although the negotiations take currently place within the framework of OECD.
Regarding regional integration, three trends are visible:
The Latin American Free Trade Association (LAFTA) was replaced with the Latin American Integration Association (ALADI) in 1980.
System of Central American Integration (SICA), which was established in 1993 and is currently functioning as a customs union, developed from the Central American Common Market (CACM), which remains a free trade association.
Caribbean Community and Common Market (CARICOM) replaced Caribbean Free Trade Association (CARIFTA) in 1973.
Southern Cone Common Market (MERCOSUR) was established in 1991 to speed up the integration process of four ALADI members (Argentina, Brazil, Paraguay and Uruguay). Three other ALADI members (Mexico, Venezuela and Colombia) established a Group of Three in 1995. Venezuela and Colombia belong also to Andean Pact.
Within each of these groupings, swift steps towards economic integration are being taken in order to prepare the member countries to join a Free Trade Area of the Americas (FTAA).
Asia-Pacific Economic Cooperation (APEC), formed in 1989, is currently implementing the Manila Action Plan for APEC (MAPA). MAPA revolves around six themes: greater market access in goods; enhanced market access in services; an open investment regime; reduced business costs; an open and efficient infrastructure sector, and strengthened economic and technical cooperation.
The Association of Southeast Asian Nations (ASEAN), established in 1967, started with a degree of cooperation, which was initially limited to only a few economic activities in the 1960s. Since 1992, ASEAN has implemented the ASEAN Free Trade Area, AFTA, involving abolition of internal tariffs and non-tariff barriers and establishment of a common external tariff. In addition to trade liberalisation, other measures are being implemented, such as trade facilitation, non-border measures, activities in investment and services promotion, and intellectual property protection. Bold decisions have also been made to elevate and strengthen ASEAN industrial cooperation through a new scheme, which will take into account the present industrial needs and economic situation within ASEAN. Cooperation in private-sector development, small- and medium-sized enterprises, infrastructure development and regional investment promotion have also made considerable progress.
Since 1991, the South Asian Association for Regional Cooperation (SAARC) , established in 1985, has implemented its Preferential Trading Arrangement (SAPTA) and has agreed on the removal of para-tariff, non-tariff and other trade control barriers within specific timeframes. Eventual progression to the creation of a free-trade area in the region has been agreed.
The Southern African Development Community (SADC), which replaced the Co-ordination Conference (SADCC) in 1992, has promised to create a southern African common market of 130 million persons by 2000. This economic community is dedicated to the ideals of free trade, free movement of people, a single currency, democracy, and respect for human rights. The Common Market of Eastern and Southern Africa (COMESA), which replaced the former Preferential Trade Area (PTA) in December 1994, has promised to remove all internal tariffs and trade barriers by the year 2000. Then, within four years, COMESA will introduce a common external tariff structure to deal with all third-party trade, and will considerably simplify all trade procedures.
European Union (EU) is moving towards a monetary union with a single currency.
In addition to economic aspects, most of these regional organizations also involve environmental and social aspects. These aspects are either incorporated into the treaties, charters or agreements establishing the individual organizations and associations, or they are included in side agreements or in the work of special institutions (working groups, technical groups, advisory bodies, etc.).
Mergers of regional organizations have taken place mainly in Europe and America.
The European Community (EC) and most members of the European Free Trade Area (EFTA) formed the European Economic Area (EEA) in 1994. In 1995, Austria, Sweden and Finland joined the EU. Similar developments are now taking place with the member states of the Central European Free Trade Area (CEFTA). Poland, Hungary, the Czech Republic, Estonia and Slovenia have been accepted by EU as new member candidates - except for Estonia, all are CEFTA members. Slovakia and Romania also belong to CEFTA, but are not among the current candidates for EU membership. All these countries have Europe Agreements with the EU.
In Latin America and the Caribbean, a number of mergers of organizations have already taken place, and more are expected. The draw of Mercosur in Latin America is growing stronger. The Andean Pact countries have been making swift moves towards provisional membership in Mercosur. But the biggest challenge is the Free Trade Area of the Americas (FTAA). This would create the world's largest free-trade area, with 750 million people, and is scheduled to come into being latest by 2005. The FTAA would have 34 member countries: Antigua and Barbuda, Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Dominica, the Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Vincent and the Grenadines, St. Lucia, St. Kitts and Nevis, Suriname, Trinidad and Tobago, Uruguay, the United States of America, and Venezuela. The membership of the FTAA would be similar to the membership of the Association of Caribbean States (ACS), which was formed in 1995 by CARICOM together with Colombia, Costa Rica, Cuba, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Surinam and Venezuela.
The SADC and COMESA have many common members (Angola, Namibia, Swaziland, Tanzania, Zambia and Zimbabwe).
The number of member countries has increased in most associations. In 1994, Mexico joined the US-Canada Free Trade Agreement of 1988, and NAFTA was created. The original members of CARICOM were Barbados, Jamaica, Guyana and Trinidad and Tobago, and eight other Caribbean territories joined thereafter. The Bahamas became the 13th member of the Caribbean Community on 4 July 1983. Suriname became the 14th member on 4 July 1995. The current member countries and territories are: Antigua and Barbuda, Belize, Grenada, Montserrat, St. Vincent and the Grenadines, Turks and Caicos Islands, the Bahamas, the British Virgin Islands, Guyana, St. Kitts and Nevis, Suriname, Barbados, Dominica, Jamaica, Saint Lucia, and Trinidad and Tobago. In July 1991, the British Virgin Islands and the Turks and Caicos Islands became Associated Members of CARICOM. Twelve other states from Latin America and the Caribbean enjoy observer status in various institutions of the Community and in CARICOM Ministerial bodies.
The original members of the EEC were Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands. Denmark, Ireland, and the United Kingdom joined in 1973, Greece in 1981, and Portugal and Spain in 1986; the former East Germany was admitted as part of reunified Germany in 1990. Greenland, a dependent state of Denmark that entered the EC when under full Danish rule, withdrew in 1985. Finland, Sweden and Austria joined in 1995.
The original member countries of ASEAN were Indonesia, Malaysia, the Philippines, Singapore and Thailand. Brunei Darussalam joined the Association on 8 January 1984. Vietnam became the seventh member of ASEAN on 28 July 1995. Laos and Myanmar were admitted into ASEAN on 23 July 1997. APEC has also grown, to involve 18 countries (Australia, Chile, Indonesia, Malaysia, Papua New Guinea, Chinese Taipei, Brunei Darussalam, China, Japan, Mexico, the Philippines, Thailand, Canada, Hong Kong, Korea, New Zealand, Singapore and United States).
Within each region, various cooperation agreements exist between organizations. There are also a number of regional cooperation organizations, such as the South Asian Association for Regional Cooperation (SAARC) and Latin American Economic System (SELA).
Cooperation agreements between organizations in different regions are also becoming more prevalent, and a new concept of "open regionalism" has emerged. Unlike the United States, the EU countries do not belong to any Asian grouping. In order to improve cooperation between Europe and Asia, therefore, an Asia-Europe Meeting (ASEM) was arranged in 1996. The Meeting agreed to develop a common vision of the future, foster political dialogue, reinforce economic cooperation and promote cooperation in other areas.
ASEAN has been very active in pursuing linkages with other regional trading arrangements. The AFTA-CER linkage was the first of these - its activities include creation of a customs compendium, information exchange on standards and conformance (including collaborative work on ISO 14000), and linkage of trade and investment databases. Similar initiatives are being pursued with other regional groupings such as the North American Free Trade Agreement (NAFTA), the Mercado Comun del Sur (MERCOSUR), the European Free Trade Association (EFTA), and the Southern African Development Community (SADC).
Cooperation between the European Union and the countries of Africa, the Caribbean and the Pacific dates back to the origins of the European Community. The Lomé Convention, which has been the framework for trade and development aid ties between the EU and 70 ACP states since 1975, is one of the most important facets of the European Union's external activities. This Convention expires on 29 February 2000, and negotiations between the contracting parties should start 18 months before that date, in September 1998. (see European Commission, Green Paper on Relations between the European Union and the ACP Countries on the Eve of the 21st Century)
In the globalization process, corporations are the actors who actually move their goods, services, money and work globally. Globalization began to boom in the aftermath of the oil crises in the 1970s, which:
All these developments were interrelated, and their effects were further strengthened through floating exchange rates. Before the first oil crisis in 1973, the most important stabilizing pillar of the postwar monetary system, the dollar-gold equivalence standard, had collapsed in 1971. Floating exchange rates vitalised speculation in currency markets and created insecurity within national economies and markets. When growth slowed and unemployment increased, protectionist tendencies also emerged.
This turmoil affected consumer behaviour as well. During the rapid growth of the 1950s and 1960s, mass production, mass sales and mass consumption became firmly established features. This allowed department stores, supermarkets, and speciality shops all to enjoy fast-expanding sales. But after growth slowed as a result of the oil crises, consumers became less interested in simply acquiring more possessions, and their desires began to show more diversity and individuality.
For companies, this new environment of continuous change meant restructuring, and in particular:
Technological advances made possible the efficient realisation and development of new business ideas. Information systems became a major tool for improving the cost-effectiveness of investments. They led to higher productivity, particularly in the industrial and service sectors - in the former through automation of manufacturing and related processes, in the latter through computer-aided decision making, problem solving, administration, and support for clerical functions.
Flexible production methods are realized through computer-integrated manufacturing (CIM). Computer-aided design (CAD) systems were first applied in the electronics industry. Today they feature three-dimensional modelling techniques for drafting and manipulating solid objects on the screen and for deriving specifications for programs to drive numerical-control machines. Once a product is designed, its production process can be outlined using computer-aided process planning (CAPP) systems that help to select sequences of operations and machining conditions. Models of the manufacturing system can be simulated by computers before they are built. The basic manufacturing functions - machining, forming, joining, assembly, and inspection - are supported by computer-aided manufacturing (CAM) systems and automated materials-handling systems. Inventory control systems seek to maintain an optimal stock of parts and materials by tracking inventory movement, forecasting requirements, and initiating procurement orders.
Teleprocessing transaction systems constitute the foundation of service industries such as banking, insurance, securities, transportation and libraries. They are replacing the trading floors of the world's major stock exchanges, linking the exchanges via on-line telecommunications into a global financial market.
Computer-based information systems have made possible the management of companies with units scattered around the world. The matrix organization, a structure in which departments and employees communicate directly with other organizational units, is an increasingly popular alternative to the traditional hierarchical structure. Information sharing and communication technologies are the principal factors bringing about flexible networks. They constitute the foundation that makes such sharing and communication effective.
In the first half of the 1990s, it was electronics equipment (office equipment, including computers; communications equipment; audio and visual equipment; and electronic components, including semiconductors) that contributed the most to the expansion of global trade in manufactured products.(JETRO, Global Information and Telecommunications Era Drives Trade in Manufactured Goods)
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Globalization and Workers' Rights