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Selling Korean tractors in Italy: Introducing middle school students to global linkages

globe with arrowsOn a plane from Atlanta to Milan a few years ago, I sat next to a friendly man who spoke with a distinctive accent. As a long-time Georgian, I was able to identify him as someone born and raised in rural north Georgia. I asked him if he was going to Europe on vacation. He said no, he was on a business trip. I guessed that he might be in the carpet business, given the concentration of carpet makers in north Georgia.

"No," he replied. "Actually, I sell tractors."

"Oh, do you represent John Deere?" I naïvely asked.

"No, I work for a Korean tractor company," he answered. "There's a big trade show in Bologna, Italy, this week."

"Interesting! Do you speak Italian?" I asked him.

He laughed. "No, I don't speak Italian or Korean. Don't have to. The buyers in Europe all speak English."
He proceeded to tell me the story of how he had started out as a farmer in north Georgia, gone to work part time at a tractor dealership, done well, and been offered a job as a regional sales representative by a Korean tractor manufacturer. It was obvious to me that he had a natural talent as a salesman. In fact, by the end of the flight, I was about ready to buy a tractor myself (for my small plot of lawn in the city of Atlanta). Now they were sending him to European trade shows.

He shook his head. "If you had told me 10 years ago, when I was trying to make a living as a farmer in north Georgia, that today I would be flying across the ocean to sell Korean tractors to the Italians, I would have said you had lost your mind. But things are changing fast."

The last two decades have seen more open markets, instant worldwide communication, dramatic improvements in transportation, and the rapid development of international financial relationships. As a result, goods, labor, and money are flowing around the world at a pace never seen before.

Middle school students sometimes complain that the subject of economics is too abstract and doesn't relate to them. So how can we get their attention? One way is to start with a concrete story illustrating economic globalization and ask them to think about how it relates to their own lives. Could they end up selling Caterpillars in Croatia? Medicine in Macedonia?

Globalization's second (or is it the third?) wave
Things are changing indeed, but actually not for the first time. Charles C. Mann describes one of the earliest waves of globalization in the book 1493: Uncovering the New World Columbus Created:

The Columbian Exchange took corn to Africa and sweet potatoes to East Asia, horses and apples to the Americas, and rhubarb and eucalyptus to Europe—and also swapped a host of less-familiar organisms like insects, grasses, bacteria, and viruses. The Columbian Exchange was neither fully controlled nor understood by its participants (p. xv).

Mann documents the powerful and disruptive effects of silver flowing from the New World to the Old World and devastating disease going in the other direction. Since middle school students in many states study world history and world cultures, teachers can point out that the current wave of globalization is actually the second time (or possibly the third, if you include the advent of air travel and the telephone 80 to 100 years ago) that technology and transportation have forged new links and created new conflicts among the world's economies.

We can introduce middle school students to the new global economy by focusing on two key linkages: trade in goods and services and the flow of labor.

In 2010, about 46 percent of the revenues of the S&P 500 companies came from outside the United States, according to Standard & Poor's 2010 Global Sales. That figure is up from 30 percent just 10 years ago. Many companies where your students might like to work, including Coca-Cola, IBM, Apple, Google, Caterpillar, Johnson & Johnson, and Procter & Gamble, derive more and more of their revenues from abroad.

The following charts (1–3) are from a July 2011 presentation by Mark A. Wynne, vice president, Federal Reserve Bank of Dallas, and are used here by permission of the author.

Chart 1 shows that the share of world gross domestic product (GDP) accounted for by exports has jumped from about 12 percent in 1960 to nearly 30 percent today.

chart 1

In Georgia, state social studies standards for sixth grade require students to be able to "analyze the benefits of and barriers to voluntary trade, compare and contrast different types of trade barriers, and explain why international trade requires a system for exchanging currencies between nations." The voluntary national content standards in economics require eighth graders to understand that "voluntary exchange among people or organizations gives people a broader range of choices in buying goods and services."

Chart 2 shows that falling tariffs have boosted global trade.

chart 2

Middle school students today need to understand that there is an excellent chance that they could end up like the north Georgia tractor salesman. They may one day be involved with the production of goods or services for sale to a foreign country, working for a foreign company in the United States, or actually living and working outside the United States.

To picture themselves in any of these scenarios, they must understand the fundamentals of how and why trade works. You can help your students understand that, although they will find themselves competing more and more for work with people from all over the world, they will also have more opportunities opening up to them.

Chart 3 shows the flow of laborers into the United States, drawn by the opportunity for higher wages. On the flip side, according to an October 17, 2009, article in the New York Times, an estimated 5.3 million workers in the United States now work for foreign employers.

chart 3

In the classroom
Once you've brought home to your students how they may one day be working for a foreign company or creating goods or services for international trade, you can discuss the topic of globalization in more detail. The Dallas Fed's Everyday Economics series has some excellent, age-appropriate resources for teaching global economics to your middle schoolers. Their Globalization handbook, for example, describes how goods and services, people, and money move around the globe. This handbook also provides an engaging history of international trade from the days of the Silk Road through modern times and introduces concepts, such as foreign currency exchange, in easy-to-understand terms.

International Trade is another booklet in the Everyday Economics series. It provides a deeper dive into the trade side of global economics. Like Globalization, it introduces concepts that are important to middle school teaching, such as opportunity cost, and explains them in clear, concise terms.

By Gary Tapp, director of economic education, Federal Reserve Bank of Atlanta, and editorial director, Extra Credit

February 14, 2012

Globalization: The increasing interconnectedness of the world's economies, characterized by free trade, international capital flows, and the movement of labor across borders.

Gross domestic product, or GDP: The total of all final goods and services produced in the economy during a given period, usually a year. (Definition from Ray and Anderson, Krugman's Economics for AP*, G-5.) According to Investopedia, the "GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living."

Tariff: A tax the government of a country places on imports or exports, usually to protect the country's economy from what could be viewed as unfair competition. Excessive tariffs can lead to protectionism, which is a term that describes a country's economic policy of restricting trade.

Trade: When individuals or countries provide goods and services to others and receive goods and services in return. (Definition adapted from Margaret Ray and David Anderson, Krugman's Economics for AP*, G-13.

Trade barrier: Something put in place, such as a tax or tariff, intended to limit the international exchange of goods and services. Sometimes referred to as a customs barrier.