Market Integration
Definition of Terms
Market integration is a process by which economies are becoming more interdependent
and interconnected in terms of commodity flows including externalities and spillover of
impacts (Genschel and Jacktenfuchs, 2017).
-Combination of markets across the world. It is the process of connecting different markets
so goods, services, capital, and labor can move freely across borders.
International Financial Institutions or IFIs are institutions that provide support through
loans or grants and technical advice to promote a country's economic and social
development (Bhargava, 2006: 393).
Corporations are private institutions that produce or manufacture goods, products, and
services for a more expanded market usually at the reach of regions or the world.
-Transnational corporations (TNCs) have a more complex setting where each foreign
subsidiary is given some freedom to develop its own product lines and marketing
compared to multinational corporations (MNCs), which have more of a home or country
base taking care of the R&D and marketing, and focus more on exporting their products
and services (Iwan, 2007).
The European Union(UE)
-An organization of 27 European countries established to promote economic, social, and
security cooperation. Founded by the Maastricht Treaty in 1993, it aims to enhance
European integration through a single currency (the euro), unified policies, and shared
rights. The EU's origins trace back to post-World War II efforts, starting with the European
Coal and Steel Community (ECSC) in 1951 and the European Economic Community (EEC) in
1957, which created a common market and reduced trade barriers.
Countries in EU
- Austria, Spain, Belgium, Greece, Italy, sweden….
Purpose
- The aims of the European Union within its borders are: promote peace, its values and
the well-being of its citizens. offer freedom, security and justice without internal
borders, while also taking appropriate measures at its external borders to regulate
asylum and immigration and prevent and combat crime.
NAFTA (Now USMCA) NAFTA, now known as the USMCA (United States-
Mexico-CanadaAgreement)
- A trade agreement between the U.S., Mexico, and Canada that was originally
established in 1994 to eliminate trade barriers and promote economic cooperation
between the three countries. Renegotiated and replaced by the USMCA in 2020, the
updated agreement modernizes trade rules, strengthens labor and environmental
standards, and addresses new areas like digital trade, ensuring continued economic
integration and growth across North America
Asean Economic Community
- The ASEAN Economic Community (AEC) is a regional initiative by the Association of
Southeast Asian Nations (ASEAN), comprising 10 member countries: Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand,
and Vietnam. Established in 2015, the AEC aims to create a single market and
production base by promoting the free movement of goods, services, investment,
skilled labor, and capital across the region. Its goals are to enhance economic
integration, boost regional competitiveness, ensure equitable economic
development, and integrate ASEAN more effectively into the global economy.
THE IMPACTS OF GLOBALIZATION
POSITIVE
1. Access to new cultures
2. Economic growth
3. Job creation
4. Technology and innovation
5. Access to goods and
services
6. Lower prices
7. Enhanced global
cooperation
8. Access to new markets
9. Increased global awareness
NEGATIVE
1.Focus on other cultures over local traditions
2. Job losses and the loss of local businesses
3. Cultural homogenization
4. Economic dependency
5. Increased health risks
TYPES OF GLOBALIZATION
1 ECONOMIC GLOBALIZATION
- Economic globalization refers to the increasing interdependence of world
economies as a result of the growing scale of cross-border trade of commodities
and services, flow of international capital and wide and rapid spread of technologies
2 CULTURAL GLOBALIZATION
- Process whereby particular cultures, meanings, ideas, values, and experiences are
disseminated throughout the world through a variety of means, major among which
include trans-border movements of people, popular culture media, and
international communication.
3 POLITICAL GLOBALIZATION
- The globalization of politics refers to the absence of the absolute sovereignty of a
state’s political borders over a certain area as well as increased interaction between
the systems of government and increased external intervention and interaction on
the basis of democracy, non-governmental organizations, human rights, and
freedoms.
4 SOCIAL GLOBALIZATION
- Social globalization is the sharing of ideas and information across countries, often
through social media and the internet. It can include the exchange of knowledge
about cultures, values, and beliefs.
GLOBAL CORPORATIONS
- A global corporation is a large company that operates in many countries and aims to
cover the entire world market. Global corporations can be small businesses,
partnerships, public corporations, or non-profit organizations.
Globalization Have Losers and Gainers
Increased trading may result in wider choices of consumer goods in the market. However,
international trading produces varying results. Restructuring of economy through
fast-paced flux of capital across different countries has impacts on places and social
relations. These restructuring in places and social relations can have disintegrating effects
for the development of communities (Katz, 2004). These kinds of global interactions
produce uneven development.
Unequal playing fields for local producers and foreign producers from developed countries
lead to losses for local producers.
INTERNATIONAL ORGANIZATION
- An international organization is one that includes members from more than one
nation. Some international organizations are very large, such as corporations.
INTERNATIONAL FINANCIAL INSTITUTIONS(IFIs) AND THEIR ROLE IN THE GLOBAL
ECONOMY
World Bank
● An international financial institution owned by 187 countries, providing funding,
advice, and research to support economic advancement worldwide.
International Monetary Fund (IMF)
● A global financial institution that provides short-term loans and promotes economic
stability by addressing balance-of-payment problems.
World Trade Organization (WTO)
● An organization that regulates international trade, ensures trade agreements are
followed, and resolves disputes among member nations.
International Financial Institutions (IFIs)
● Organizations that provide support through loans or grants and technical advice to
promote a country's economic and social development.
ORGANIZATION ROLE IN ECONOMIC GLOBALIZATION
WORLD BANK ● The World Bank provides financing
for large-scale development
projects, such as infrastructure,
education, and healthcare, aimed at
improving economic conditions in
member countries.
● Structural Adjustment Policies
(SAPs) - These policies impose
conditions on borrowing countries
that often require reductions in
government spending on social
services, prioritization of debt
repayment, and liberalization of
trade to encourage exports and
attract foreign investment.
INTERNATIONAL MONETARY FUND ● Provide short-term emergency
loans
● Help bring enormous flow of foreign
money through loans and
speculative investment
WORLD TRADE ORGANIZATION ● Create rules for global trade and
investment
● Aim to reduce tariffs
● Create agreements for member
countries regarding multilateral
policies that push
governments to relax regulations on
environment, food safety, and
product quality
● Encourage countries to deregulate
economies
THE GLOBAL ECONOMY
Mercantilism
● a system that focuses on increasing wealth by increasing exports while decreasing
imports of a mother country, often at the expense of its colonies (Findlay &
O'Rourke, 2007).
Global Trade
● the occurring transactions and exchange across the borders and in an international
level (Krugman & Obstfeld, 2015).
Industrial Revolution
refers to the period of significant technological, economic, and social
change(Stearns2013)).
Global Institutional Architecture
● the international institutions, frameworks and agreements that govern global
economic interactions (Ruggie, 2003).
International Economic Enabling Architecture
● conventions, agreements and organization imposing economic cooperation and
trade among nations, providing conditions for effective global integration (Mielants,
2005).
Digitalization
● The integration of modern information and communication technologies into
economic processes (Vishnevsky, et al, 2021).
THE FOUNDATION OF MODERN ECONOMY
- The modern capitalist world economy flourished between the 16th to 18th centuries
during the period of Western Colonialism where the world was drawn into an
economic and political order dominated by European capitalism
THE START OF MODERN GLOBAL TRADE
- The start of modern global trade emerged in Great Britain during the 19th century
until 1914 driven by the industrial revolutions
FIRST AND SECOND INDUSTRIAL REVOLUTION
- Mass production
- Long-range transpo
GLOBAL INSTITUTIONAL ARCHITECTURE
INTERNATIONAL TELEGRAPH (ITU)
● A convention signed in 1865 aimed at establishing borderless communication with
the use of telecommunication system
UNIVERSAL POSTAL UNION
● An international agency established by the UN in 1874 with the purpose of making
mail services more accessible and efficient.
INTERNATIONAL ASSOCIATION OF RAILWAY CONGRESS
● Was an organization founded in 1884, focused on innovating the transportation by
steam engines and railway systems.
INTERNATIONAL SANITARY CONVENTION
● Established in 1892 with the purpose of imposing health policies to address public
health concerns which has later contributed to the formation of World Health
Organization (WHO).
SECOND WORLD WIDE TO THE LATE 1990s
Establishment of Modern International Economic Enabling Architecture
● The emergence of international institutions, agreements and economic frameworks
such as IMF, IFI, GATT (Frieden, 2012).
The expansion of MNCs across the globe
● MNCs or Multinational Corporations started to rise into dominance and expand into
a global-scale supported by enabling policies and improved communications and
transport (Bhagarva, 2006)
Political changes and the fall of the Berlin Wall
● The fall of the Berlin Wall marked the end of the cold war which has caused
significant shifts in politics and world economy. Thus the end of all communist
regimes in Eastern Europe leading to its integration with the Western Europe
resulting in its conversion to capitalism.
Establishment of regional networks
● Regional Networks are trade agreements that allow economic cooperation between
countries within a specific region through free trade.
The 1994/95 Mexico crisis
● Amidst the North American Free Trade Agreement (NAFTA), Mexico’s economy faced
a dilemma handling the rapid economic liberalization due to overdependence to
foreign investment and imports while less on exports.
THE LATE 1990S UNTIL VERY RECENTLY
Digitalization
● characterized as the third wave of market integration (Bhavarga, 2006).
Despite the increased growth in the world economy, global issues arise such as:
-Integration of internet to trade
-formal entry of China to trade
● Global debt crisis - Debt levels which are deemed to be unsustainable
● Politics - rise in control of economic powers
● Civil Unrest - emerging protests aiming to address economic injustice
As the world enters what the World Economic Forum argues as the "Fourth Industrial
Revolution," Mueller (2010) predicted:
● Slower economic growth – due to transition to more advanced technologies
● Political destabilization – integration of technology raise sociological
● Diffusion of power – wider accessibility and reach causes influence to be more
easily spread, causing competitions.
e.g.
THE GLOBAL CORPORATION
-A global company is one that operates in at least one country other than its home
country. Realistically, expanding to one additional country is a major success for Global
Company. “Global” means “all around the world.” Because of this, a Global corporation
would need to do business globally.
Multinational Corporations (MNCs)
● MNCs are companies that operate in multiple countries but typically have a
centralized management structure in their home country. They establish
subsidiaries or branches in foreign countries to manage their operations, often
adapting their products and services to local markets
Ex APPLE,MICROSOFT,COCA-COLA,TESLA
Transnational Corporations (TNCs)
● TNCs also operate in multiple countries, but unlike MNCs, they do not have a
centralized management structure. Instead, they operate with a more decentralized
approach, allowing for greater local autonomy. This structure enables TNCs to be
more responsive to local markets and conditions.
ROLE OF MNCs AND TNCs IN GLOBALIZATION
Facilitating International Trade
● They help in the exchange of goods, services, and capital across borders,
contributing to the global economy.
Creating Jobs
● By establishing operations in various countries, they create employment
opportunities and contribute to local economies.
Technology and Knowledge Transfer
● They bring advanced technologies and management practices to host countries,
fostering innovation and development.
Cultural Exchange
● Through their global presence, they promote cultural exchange and understanding.
DIFFERENCES BETWEEN MNCS AND TNCs
Management Structure:
● MNCs: Centralized management in the home country.
● TNCs: Decentralized management with significant local autonomy.
Operational Strategy:
● MNCs: Often adapt products and services to fit local markets but maintain a strong
home-country influence.
● TNCs: Operate more independently in each country, allowing for greater flexibility
and responsiveness to local needs.
Decision-Making:
● MNCs: Key decisions are made at the headquarters.
● TNCs: Decisions are made at both headquarters and local levels, promoting a more
balanced approach.
