03 - MAJOR PLAYERS - TRIAD

Geo Economic Changes

Global Economy Structure

• Centered around the Global Triad

  • Tripolar, macroregional structure.

  • Internally diversified into three major regions:

    1. North America (Canada and Mexico included post-NAFTA)

    2. European Union

    3. Asian Pacific Region (China, Japan, South Korea, Indonesia, Taiwan, Singapore, etc.)

Characteristics of the Global Economy

• Organized in a hierarchical and asymmetrically interdependent web.

• Disparities in wealth, power, and technology influenced by the TRIO

• Competing countries and regions strive to attract capital, human skills, and technology.

Role of National Governments

• National governments significantly influence economic processes despite a globalized economy.

Foreign Direct Investment (FDI)

• Definition: Investment involving controlling ownership in a business in one country by an entity based in another.

• Differentiated from foreign portfolio investment by control aspect.

  • Video resource on FDI: Investopedia Article

FDI Trends

• The Global Triad: Increasing dominance in global productive activities, trade, and direct investments.

• Historical context:

  • In 1960, the US generated ~50% of global FDI.

  • Currently accounts for 21%.

• FDI destinations:

  • Europe remains the main destination, with significant investments in the UK.

  • Asia and Mexico are increasingly important.

Economic Performance and Trade in Europe

Europe as a Trading Bloc

• Diverse economies with varied growth rates.

• Germany:

  • Third largest manufacturing producer and largest merchandise exporter globally.

  • Significant FDI source.

• UK: Second major source of FDI and commercial services exporter.

• Trade Performance:

  • Differences in performance among countries; some have trade deficits (UK, Spain) while others have surpluses (Germany, Netherlands).

  • More than 66% of trade among European regions is intra-regional.

Economic Shifts: Focus on Asia

Japan and the 'Four Tigers'

• Post-WWII resurgence of Japan and rapid growth of:

  • Four Tigers: Hong Kong, Korea, Singapore, Taiwan.

  • Emergence of a second tier of East Asian economies (Indonesia, Malaysia, Thailand).

• China's re-emergence and potential dynamism of India.

Transitional Economies

Eastern Europe Post-Soviet Union

• Political collapse led to transitional economies moving from command to capitalist systems.

  • Difficulties faced during transition due to non-viable industries.

• Notable transitional economies: Russia, Poland, Czech Republic, Hungary; their combined GDP share is around 2%.

• EU membership improved economic growth for Poland, Czech Republic, and Hungary.

Latin America

Economic Overview

• Resource-rich with historical industrialization.

• Modest economic performance; notable growth in Chile and Mexico linked to US integration via NAFTA.

• Export failures compared to East Asia's economies influence global presence.

Persistent Peripheries

Characteristics and Challenges

• Regions with stagnant growth include parts of Africa, Asia, and Latin America.

• These areas face severe poverty and social challenges, needing focused developmental strategies.

Regional Trade Patterns

Intra-Regional Trade Dynamics

1. Western Europe: Major trading region; 66% of trade is intra-regional.

2. Asia: Second largest trade region, one-third intra-regional.

3. North America: 40% of trade; significant increase with Mexico.

Historical Shifts in Trade Networks

• 1960s-70s: Japan rebuilt through aggressive exporting.

• Recent Shift: China emerging as a significant trade force affecting all global regions.