Market Integration

By: Noelle M. Rodio

 Content
Chapter 2. The Structures of Globalization
Lesson 2. Market Integration
1. International Financial Institutions
2. Attributes of Global Corporation

Noelle M. Rodio
 Bretton Woods System

• Was set-up to ensure longer-lasting peace, this financial institutions

promotes economic independence and prosperity
• Inaugurated in 1944 during the United Nations Monetary and Financial
Conference
• Influenced by British economist John Maynard Keynes (1883-1946) who
believed that economic crises occur when money is not being spent and,
there, not moving. Governments have to revitalize markets with infusions
of capital (Claudio, 2018).

Noelle M. Rodio
International Financial Institutions
With the Bretton Woods Agreement that currencies were
pegged to the price of gold and the US dollar was seen as a
reserve currency linked to the price of gold.

International Monetary Fund (IMF)

• Created in 1945.
• The valuation of gold and foreign exchange rates introduced
remains important to this day.
• based in Washington, D.C. and currently consists of 189
member countries
• an international organization that aims to promote global
economic growth and financial stability to encourage
international trade and reduce poverty

Noelle M. Rodio
• activities are monitoring, capacity building, and
lending. Structural adjustment programs are
required when granting loans. These are known as
conditional loans which attracted a lot of
criticisms for aggravating poverty and reproducing
the structures of colonialism.
• Decisions are done by most powerful countries
having the most voting power since each
representation by member countries on the IMF’s
executive board is proportional to its financial
importance.

Noelle M. Rodio
The World Bank Group (WBG)
• was also created following the Bretton Wood agreements
to provide financial assistance to countries affected by
World War I for reconstruction projects in 1945.
• It has two ambitious goals to end extreme poverty and to
promote shared prosperity.
• A family of five international organizations—
a. International Bank for Reconstruction and
Development (IBRD);
b. International Development Association (IDA);
c. International Finance Corporation (IFC);
d. Multilateral Investment Guarantee Agency (MIGA); and

e. International Centre for Settlement of Investment

Disputes (ICSID)—it is the largest and well-known bank
in the world that is focused on granting loans and
assistance to developing countries.
Noelle M. Rodio
The first two organizations IBRD and IDA are
confusingly referred to as the World Bank that
give grants to the poorest countries in the
fields of human development; agriculture and
rural development; environmental protection;
infrastructure; large industrial construction;
and governance. But just like the IMF, World
Bank has long been criticized due to
corruption, the so called free market reform
policies are in practice harmful to economic
development, and or investing in projects with
human rights issues.

Noelle M. Rodio
General Agreement on Tariffs and Trade (GATT)
• An agreement to further eliminate all restrictions on the
use of its currency for international trade
• Twenty-three nations signed the legal agreement in
Geneva on 1947 and took effect on 1948 after World
War II.
• The promotion of reducing or eliminating trade barriers
such as tariffs and quotas in the international trade was
the overall purpose. Until 1995, it was superseded by
World Trade Organization (WTO). While GATT is focused
on trades in goods, WTO is also responsible for the
increasingly important trade in services. While the
former is just a forum for the meeting of representatives
of countries, the latter is an independent organization
(Aldama, 2018).

Noelle M. Rodio
World Trade Organization
• which has 164 members and 23 observer
governments, deals with the global rules of
trade between states and nations.
• Its main function is to ensure smooth,
predictable, and free trade flows as possible.
• Its goal is to help producers of goods and
services, exporters, and importers conduct
their business.

Noelle M. Rodio
However, the methods and actions of WTO evoke
strong antipathies. Though it claims to be fixing, it is
accused of being responsible in widening the social gap
between rich and poor. Martin Khor (2002) contented
that WTO does not manage the global economy
impartially, but is biased towards rich and multinational
corporations.

Hence, harming smaller countries which have less

negotiation power. Labor and environment are
consistently ignored. That in the absence of proper
environmental regulation and resource management,
increased trade might cause so much adverse damage
that the gains from trade would be less than the
environmental costs (Charnovitz, 2007).

Noelle M. Rodio
Attributes of Global Corporation
Global corporation is operating in two or more
countries and face a lot of challenges and opportunities
in their quest to capture value in the world market.
This includes multinational and transnational
corporations. It produces and sells goods or services in
various countries. It has a large scale operations and
dominated mostly by developed countries and MNCs.
There is a very strong sense of completion with the
other corporations. Although it contributed a lot to
science and technology, global corporation still has to
follow some restrictions set forth by the countries
where it sets its operation.

Noelle M. Rodio
• Cheaper labor is one of the advantages of global
corporation. It can operate in countries where labor is
not expensive.

• Broader market base where it increases the chances to

reach out more customers around the globe. More
customers mean more opportunities to develop and
cater products and services that fit the needs of the
consumers.

• Tax cut is one of the strategies implemented by most

countries to attract more foreign businesses to invest
in their countries aside from lowering the tariffs. With
investments pouring in the various countries, branches
are set up which lead to job creation. Thus, more
employment opportunities especially in developing
countries.
Noelle M. Rodio
 • Potential abuse of workers. Where a lot of people need
jobs, international corporation can demand cheaper
labor and lesser benefits.

• Threat to local business may arise. Giant corporations

may dominate industries due to better and affordable
product due to financial resources to buy in bulk. While
jobs are created in the developing countries where
offices and operations are set up by a global corporation,

• Loss of jobs may result for people living in developed

countries.

While global corporations are important, still there is a need to create policies to
create a balance between the developed and developing countries. Globalization has
become important in this contemporary world but there is the urgency to make it
equitable. Noelle M. Rodio
Let’s Watch Together:
“ The Corporation” directed by Mark Achbar and Jennifer abbott.”

Link: https://youtu.be/6SFLgtcD81E

Noelle M. Rodio
Thank You!

Noelle M. Rodio