Topic: MARKET INTEGRATION
LEARNING OUTCOMES
1. explain the role of international financial institutions in the creation of a global
economy
2. narrate a short history of global market integration in the 20th century; and
[Link] the attributes of global corporations
EXPECTATIONS
As you go through with your readings, it is important for you to understand the concepts of
this module. Learning those ideas will improve your views on the many factors the current world
market is evolving from past to current economic developments.
DISCUSSION
According to the Cambridge Business English Dictionary, market integration is a situation in which
separate markets for the same product become one single market. For example, when an import tax
in one of the markets is removed.
Integration is taken to denote a state of affairs or a process involving attempts to combine separate
national economies into larger economic regions (Robson, 1998, p.1)
Do This!
In your own definition, what is market integration?
Just like all other things, everything starts from a gradual development before it became popular.
The birth of market integration has played a vital role in various economies. Make a short narration
on global market history. Use the illustration below.
Do this! Market integration is significant particularly in a growing economy. Along with this
significance are market integration types that will widen your understanding. Find out the nature,
advantages or even the negative effects of these types.
Horizontal Integration
Vertical Integration
Conglomeration
THE ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS IN THE CREATION
OF GLOBAL ECONOMY
International Financial Institutions
- International non-profit agencies are one of the major sources of financing like regional
development banks or banks globally.
- To finance productive development projects or to promote economic development
World Bank
- multinational financial institution established at the end of world war II (1944) to help
provide long-term capital for the reconstruction and development of member countries.
- it provides much of the planning and financing for economic development projects
involving billions of dollars
International Monetary Fund
-IMF is a cooperative institution that 182 countries have voluntarily joined because they see
the advantage of consulting with one another on this forum to maintain a stable system of
buying and selling their currencies
-Its policies and activities are guided by its Charter known as the Articles f Agreement.
-IMF lends money to members having trouble meeting financial obligations to other
members, but only on the condition that they undertake economic reforms to eliminate these
difficulties for their own good and that of the entire membership.
-Contrary to widespread perception, the IMF has no effective authority over the domestic
economic policies of its members
OTHER ORGANIZATIONS
General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT), signed on Oct. 30, 1947, by 23
countries, was a legal agreement minimizing barriers to international trade by eliminating or
reducing quotas, tariffs, and subsidies while preserving significant regulations. The GATT was
intended to boost economic recovery after World War II through reconstructing and liberalizing
global trade.
The GATT went into effect on Jan. 1, 1948. Since that beginning it has been refined, eventually
leading to the creation of the World Trade Organization (WTO) on January 1, 1995, which absorbed
and extended it. By this time 125 nations were signatories to its agreements, which covered about
90% of global trade.
The Council for Trade in Goods (Goods Council) is responsible for the GATT and consists of
representatives from all WTO member countries. As of September 2019, the council chair is
Uruguayan Ambassador José Luís Cancela Gómez. The council has 10 committees that address
subjects including market access, agriculture, subsidies, and anti-dumping measures
World Trade Organization (WTO)
The World Trade Organization is a global membership group that promotes and manages free trade.
It does this in three ways. First, it administers existing multilateral trade agreements. Every member
receives Most Favored Nation Trading Status. That means they automatically receive lowered tariffs
for their exports.
Second, it settles trade disputes. Most conflicts occur when one member accuses another of
dumping. That's when it exports goods at a lower price than it costs to produce it. The WTO staff
investigates, and if a violation has occurred, the WTO will levy sanctions.
Third, it manages ongoing negotiations for new trade agreements. The biggest would have been the
Doha round in 2006. That would have eased trade among all members. It emphasized expanding
growth for developing countries.
Global Corporation
A corporation is an artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by law or incident to its existence (Batas
Pambansa Blg. 68 The Corporation Code of The Philippines, Section 2 – Corporation defined).
A global corporation is generally referred to as a multinational corporation (MNC), transnational
corporation (TNC), international company. An enterprise that engages in activities which add value
(manufacturing, extraction, services, marketing, etc) in more than one country (United Nations
Centre On Transnational Corporations, 1991).
Determine some issues related to establishing global corporations. Decide on whether they are
good in leading to the employees they served including the benefits of the community.
Do this! LEARNING SUMMARY
Write the purposes of the following institutions that has played an important role in economic
development.
World Bank
International Monetary Fund
World Trade Organization
REFLECTIONS
Write your views on the following questions. Your answers will encapsulate the ideas you have
learned from this lesson.
1. What is the essence of market integration?
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2. What is meant by market integration, and how can it be implemented effectively?
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3. How does integration help in business?
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4. Can multinational companies have a positive influence on developing countries? Support
your claim.
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