Globalization in Terms of Trading - Term Paper Example

Globalization in terms of trading Hommud Yahya Moharrak number/ 100213202 IFP /KIM Reich (1998) definedglobalization as “a process through which events, decisions and activities in one part of the world can come to have a significant consequence for individuals and communities in quite distant parts of the globe” (Reich, 1998, p.5). Globalization is a multifaceted principle which can affect almost the entire life segments of human. When it was appeared in the horizon initially; countries like China perceived it as a deliberate attempt by the capitalist countries like America and Britain, to loot the wealth of other countries. However, at present China is the number exploiter of globalization whereas countries like America and Britain are struggling to counter the threats of globalization. It is often said that global wealth has shifted from the West to East as a result of globalization. In other words, global wealth shifted from less populated American and European region to heavily populated Asian region because of globalization. Countries like India, China are developing more rapidly than any other countries in the world at present as a result of globalization. The trade tie ups, exchange of workforce and mutual cooperation in other areas between different countries have been increased a lot because of globalization. This paper analyses different characteristics of globalization in general and increased trade tie ups between countries as a result of globalization specifically. According to Lauder et al (2006), many people tempted to think globalization as the “process of transportation of jobs, ethnic and cultural composition of nations etc from one country to another (Lauder et al, 2006, p.32). Lieber and Weisberg (2002) have visualized globalization as a “vital step toward both a more stable world and better lives for the people within it”(Lieber and Weisberg, 2002, p.274). Holst (2007) has mentioned that economic interpretations of globalization cantered around three forms of capital; financial, productive and commercial (Holst, 2007). It is evident from the above descriptions that globalization is a multifaceted concept and it is difficult to understand it, if we analyse it through a single perspective alone. The concept of a globalized world evolved in the 1980’s and 90’s in western societies because of the awareness that most of the political and social problems occurred in this world were the results of lack of trust and mutual respect between countries. Moreover, it was evident that most of the countries struggled to develop properly because of the huge expenditure they might have made in non-productive sectors. For example, India and China like countries struggled to develop properly until the 1970’s and 80’s because of their increased expenditure on non-productive sectors and the subsequent lack of funding in the productive sectors. These countries started to implement economic reforms in 1980’s and 90’s which resulted in the complete restructuring of many of the economic and commercial principles in these countries. These countries realised that it is difficult for them to develop properly using their internal resources alone. Globalization has opened an entry for increased foreign direct investments in these countries and as a result of that these countries started to grow much rapidly than other countries. “Globalizing processes can be identified in locations other than major business and financial centers, and involve subjects other than high wage, high skill workers” (Larner, 2002, p.656). Several new business concepts evolved from globalization. Outsourcing and offshoring were some of the unknown business strategies before the introduction of globalization. The introduction of internet and advanced digital technologies have enhanced the communication facilities between countries and as a result of that cross cultural business and trade activities were increased a lot. Economic reformation processes were undertaken by countries which accepted globalization as a mean to develop and because of that the barriers for establishing businesses in foreign soil were reduced a lot. For example, it was not easy for American companies to establish business units in China earlier because of the political and ideological differences between the administrations in these countries. However, these countries have realised that their differences are causing problems in their way to economic progress. China believes in bulk production of goods and it is necessary for Chinese companies to have easy access to American markets in order to sell out their products. Same way American companies faced saturation in their mother land and were looking for an opportunity to expand to foreign territories. For example, Starbucks had tea shops, virtually in every corner of America and it was difficult for them to expand their business further in America. Globalization opened the doors of opportunities widely in China for them and they accepted it with both hands. Thus globalization brought many opportunities to multinational companies and they grabbed it without showing any hesitation. According to William I Robinson (2003), “one of the distinctive features of globalization is the rise of transnational capital”(Robinson, 2003, p.12). The exchange of workforce and commercial goods were not much easier before the introduction of globalization. For example, Americans were reluctant in working in China earlier and Chinese people also showed the same hesitancy while getting opportunities in America. The cultural and political differences between these countries were the major reasons for such hesitation. Globalization did succeed in evaporating these differences up to certain extent and exchange of work force and commercial goods started to grow between these countries. It should be noted that many educated people in India and China were struggling to find job opportunities in their mother land before the introduction of globalization. At present Indians and Chinese are getting jobs worth billions from America in the form of outsourcing. It is possible for an American company to completing jobs for cheaper prices using the services of cheap labour markets in India and China. A job worth $ 10000 in America can be completed for $ 5000, if an American company utilize the services of overseas labour markets in India and China. Manpower shortage is a big problem for America at present whereas excess manpower is a big problem for heavily populated countries like India and China. Globalization succeeded in opening a new way to convert these curses in to blessings. Economists were earlier argued that huge population is the major obstacle for heavily populated countries in their struggle to achieve economic prosperity. Now, economists forced to rewrite their principles after watching the growth in countries like India and China. In short, growth in countries like India and China was never possible in the absence of globalization. “Because of globalization, people and place are increasingly interlinked through the organization of work, the flow of goods and services and the exchange of ideas”(Perrons ,2004, p.1). The growth of Mexico after the introduction of globalization is a lesson to others. Until 1980’s, Mexico was only a weak exporter. However, at present Mexico is one of the largest exporters in the Latin American region. In 1981, Mexico’s export accounted only for 6.5% of its revenue whereas in 1993, it accounted for 71.9% (Bizberg, n. d, p.16-17). It was unimaginable for Mexico to achieve such tremendous growth if globalization was not implemented in their territories. It should be noted that international trade or cross cultural trade activities grown significantly over the last few decades because of globalization. The concept of free market, regional trade blocs etc entered the world as a result of globalization. North American Free Trade Agreement (NAFTA), European Union, Association of Southeast Asian Nations (ASEAN) etc are some of the regional trade blocs or cooperation developed as a result of globalization. European countries are currently trying to integrate themselves under the banner of European Union (EU), for exploiting the possibilities of globalization more meaningfully. They have already implemented a common currency Euro to strengthen their cooperation more meaningfully. “Rises in international trade openness have exerted some pressure on policy makers to lower business cost through tax reductions. Tax rate changes improve the international price competitiveness of firms regardless of their level of mobility”(Weiss, 1999, p.75). Dharam Ghai (1997) has mentioned that “free market and private enterprise were the principal mechanisms for promoting economic activities in the sphere of economic globalization” (Ghai, 1997, p.1). As part of the free trade agreements reached between countries, it is necessary to enforce a uniform tariff rates between countries. In other words, countries cannot enforce any tariff rates upon the goods imported or exported. In order to achieve uniformity in tariff rates, countries needed to implement reformations in their tax systems. It should be noted that tax reductions will help foreign companies tremendously and the domestic companies may face stronger competition and subsequent destruction. At the same time, stronger competition will help the public to get better quality products at affordable prices. To conclude, globalization is a multifaceted concept which can be understood properly only if it is analysed through different perspectives. Increased trade tie ups between different countries are one among the so many positive outcomes of globalization. References 1. Bizberg I. (n. d.). Globalization and Democracy in Mexico. [Online] Available at: http://www.colmex.mx/centros/cei/Paginas%20profesores/Articulos/Bizberg/Globalization%20and%20Democracy%20in%20Mexic1.doc [Accessed on 10 August 2011] 2. Ghai D (n. d) Economic globalization, institutional change And human security. [Online] Available at: http://www.unrisd.org/80256B3C005BCCF9/(httpAuxPages)/C458AA6EE636796C80256B67005B6ED7/$file/dp91.pdf [Accessed on 10 August 2011] 3. Holst J. D. (2007). The Politics and Economics of Globalization and Social Change in Radical Adult Education: A Critical Review of Recent Literature. Journal for Critical Education Policy Studies Volume 5, Number 1 (May 2007) 4. Larner W. (2002). Globalization, Governmentality and Expertise: Creating a Call Centre Labour Force. Review of International Political Economy, Vol. 9, No. 4 (Nov., 2002), Taylor & Francis, Ltd. [Online] Available at: http://www.jstor.org/stable/4177443 [Accessed on 10 August 2011] 5. Lieber R. J and Weisberg R.E. (2002). Globalization, Culture, and Identities in Crisis”. International Journal of Politics, Culture, and Society, Vol. 16, No. 2 (Winter, 2002), Published by: Springer [Online] Available at: http://www.jstor.org/stable/20020163 [Accessed on 10 August 2011] 6. Lauder H., Brown P., Dillabough J. 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