Global Interdependence

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Global Interdependence
Standard 7-7.6
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When the 1900s opened,

• Most people knew little about faraway places.
• Jet planes traveled around the globe.
• By the 2000s, however, revolutions in
  transportation and communication had put whole
  world within reach.
• Supertankers haled vast amounts of goods across
  the oceans.
• Communications satellites and the Internet open
  the door to new contacts.
• Email electronic communications or mail," sent
  over computer networksmade it possible to send
  messages almost everywhere in the world.

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Such developments,

• Brought about globalism.
• People worldwide began to think of themselves as
  part of one big economic and political system.
• They believed nations could no longer stand
  alone.
• People became more connected as tens of millions
  of people migrated, or moved, from one nations to
  another in the closing decades of the twentieth
  century.

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Tied together by Oil

• In the 1970s, developed nationthe worlds
  economic powerhousesdiscovered the meaning of
  interdependence, or nations relying upon one
  another for trade and economic stability.
• In 1973, the oil-rich Middle Eastern nations
  created an embargo, or ban, on petroleum.
• They convinced other members of the Organization
  of the Petroleum Countries (OPEC) to use it
  against the United States during the Yom-Kippur
  War.
• The embargo was an economic protest of American
  support of Israel.

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Tied Together by Oil 2

• The price of crude oil, which fell into short
  supply, shot up by 70 percent.
• The United States suddenly felt the clout of OPEC
  on the world economy.
• Oil-producing nations formed OPEC at a 1960
  meeting in Baghdad, Iraq.
• Today eleven nations belong to OPEC.
• Collectively, they greatly influence the price of
  crude oil in the world and have the power to
  affect economies of even the strongest nations,
  including the United States.

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The New Global Economy

• The oil crisis of 1973 made people aware of the
  new global economy.
• A global economy is a worldwide marketplace in
  which nation depended upon each other for raw
  materials to make goods and for markets to sell
  them.
• Today few nations can fully meet all their needs
  without global trade.

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Economic Interdependence

• Economic interdependence, which has increased
  since the collapse of the Soviet Union, has
  spurred the growth of large multinational
  corporations, or multinationals.
• These companies may have headquarters in their
  home countries, but they have business locations
  all over the world.
• More than 50,000 multinationals have come into
  existence during the past 20 years.

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Multinationals

• Multinationals assign work to subcontractors, or
  small businesses that work for larger ones, and
  to outside workers.
• This is known as outsourcing.
• In most cases, cheap labor drives the growth of
  multinationals.
• Cheap labor helps manufacture produce goods at
  lower costs, which in turn means lower prices for
  the consumers (buyers).

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High-tech

• High-tech companies, or businesses that work with
  sophisticated technology like electronics, also
  outsource jobs.
• India and China, for example, handle software
  development and provide technical support for the
  United States computer companies.
• As a result, the toll-free number you dial for
  assistance when you are having computer problems
  may actually be answered in India.

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Regional Trading Blocs

• The rise of global economy has made trade
  relations more important than ever.
• To achieve a favorable balance of trade, or trade
  in which exports equal or outnumber imports,
  often means working closely with trading systems.
• However, in the 1970s, the U.S. lapsed into trade
  deficits.
• Americans purchased more from foreign countries
  than what the U.S. sold abroad.
• The U.S. found it difficult to compete.

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Trading Blocs

• One way to increase international trade is to
  create large regional economic markets.
• Member nations share similar goals to increase
  trade and coordinate economic growth among member
  states.
• The European Union, or EU has a common bank and a
  common currency called euro.

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In 1994

• In 1994, the United States, Canada, and Mexico
  created a regional market by signing the North
  American Free Trade Agreement, or NAFTA.
• Under NAFTA, the three nations agreed to remove
  all trade restrictions for 15 years.
• From 1993 to 2000, United States exports to
  Canada and Mexico rose from 142 to 290 billion,
  and increase of 104 percent.

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Association of Southeast Asian Nations

• The creation of the EU and NAFTA helped Europe
  and North America compete with Asian nations
  along the Pacific Rim, a region linked by the by
  the Pacific.
• In recent decades, Japan, South Korea, Taiwan,
  Malaysia, Singapore, and Hong Kong have become
  trading giants.
• In the future, China, which now includes Hong
  Kong and the Association of Southeast Asian
  Nations (ASEAN), will have a powerful impact of
  global economy.

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The World Trade Organization (WTO)

• Efforts to make international trade-free and
  uncomplicated has led nations to sign the GATT
  treaties (GATT stands for General Agreement on
  Tariffs and Trade).
• The first treaty was signed in1947.
• In 1995, nations that had signed the GATT
  treaties over the years to create the World Trade
  Organization (WTO).
• Made up of 140 nations, WTO negotiates trade
  agreements and settles trade disputes.

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WTO

• Not everyone supports the WTO.
• Some people and groups criticize the WTO for
  putting commercial interests above environmental
  and health concerns.
• They also criticize the WTO for neglecting small
  and developing countries.
• Even so, the WTO remains the only global
  organization that deals with the rules of
  international trade.

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Streamlining Industry

• To compete in the global marketplace, the United
  States and other developed nations have found it
  necessary to rethink industry.
• They have downside heavy industries in favor of
  high-tech industry.
• In many cases, companies have shifted industrial
  jobs, such as manufacturing, to other nations.
• During the 1990s, for example private companies
  spent more than 1 trillion to build factories in
  developing countries.

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Streamlining Industry

• There is a wide gap, however, between developed
  and developing countries.
• A major challenge of the 21st century is to
  figure out how trade can bring enough wealth into
  all countries to close the gap between rich and
  poor nations.
• Experts hope other nations will follow Chains
  the footstep the ability of people in China to
  earn and spend money doubles ever ten year.