1. Globalization • The Story of Florence, Alabama • 1971

2. Globalization • Low wages combined with efficient production methods make Chinese goods highly competitive in American markets

3. Global Economy • The system of markets and trade that links the countries of the world.

4. Global Economy • Challenge of foreign competition • Ultimately benefits outweigh the costs

5. Why has global trade increased? • Try to think of three reasons:

6. Increased Global Trade - 1 • Advances in Transportation

7. Increased Global Trade - 2 • Improved Communications

8. Increased Global Trade - 3 • Shift in the type of goods being produced: • Old - (Grain, Coal, Steel) • New – (

9. Absolute and Comparative Advantage • Even rich countries benefit when they specialize in the production of some goods and services and TRADE those products for other goods and services

10. Comparative Advantage • America and Colombia • America and Italy • America and Canada • Brazil and South Africa • United States and Japan

11. Comparative Advantage • Differences in Climate – Tropical countries export crops such as bananas and coffee • Temperate climates grow grains such as wheat and corn • Seasonal as well (New Zealand)

12. Comparative Advantage • Differences in the factors of production • China (Clothes) • Japan (Cars)

13. Comparative Advantage • Differences in Technology • Japan (Cars) • U.S. and Europe (Software and Pharmaceuticals)