The Rapid Globalisation of Trade - Essay Example

TRADE 6 “Critically discuss factors that have contributed to the rapid globalisation of trade. What opportunities do these factors present for emerging and less developed economies?” There are many factors that have contributed to the rapid globalisation of trade, including technology advances and deregulation. In a global world, free trade is becoming more important than domestic protectionism, with which unionization is often aligned. Without the formation of some sort of global union (which will be considered further in this report), this trend may continue into the future, fostering more interdependency among nations. Still, there are valid arguments for limited tariffs and non-tariff trade barriers that remain even in this increasingly international atmosphere. National spending and national employment remain government priorities, and protectionism can help to create solutions for national business by taxing extra-national business. Fewer industries may need this help, but protectionists argue that those that do should still be able to ask the government to intervene on their behalf. Unionization may view trade deficits in strictly negative terms. “It remains to be seen whether or not "localisation" is the appropriate term to describe current trends. But it is indisputable that more and more people are questioning that globalisation has delivered on its promises and benefits. In a recent survey, 57 % of the people polled in the G7 nations said that globalisation has moved too fast over the past few years” (Globalisation, 2010) This fosters a sort of crisis atmosphere in which protectionism is reassessed so as to shield threatened national industries, and may set up barriers within domestic organizations, as mentioned, without the formation of a global union structure or an accurate understanding of the global economics that underlie such current trends as outsourcing labor. Opponents of global regulation tend to argue that prohibitive regulatory measures ultimately hurt the state and national economy, whether it be from further regulation internationally or by raising the prices of commodities, which hurts the consumer. Those who favor deregulation state that regulations tend to lower the status of the economy, because they inhibit trade with other countries. For example, obviously companies under Russia’s new type of capitalism are on the side of free trade rather than protectionism from a regulatory standpoint, but this can often be difficult, especially in international markets with different regulatory practices, and access to old state enterprise structures. “The economic, political, and social significance of international trade has been theorized in the Industrial Age. The rise in the international trade is essential for the growth of globalization. The restrictions to international trade would limit the nations to the services and goods produced within its territories, and they would lose out on the valuable revenue from the global trade.” (Benefits of International Trade). Also, proponents of free trade tend to see the long-term costs incurred by protectionist measures and absorbed predominantly by consumers as being prohibitive to the general trade process, and may see some institutional trade barriers, former Soviet state trading enterprises, or former government telecommunications companies in India, for example, as being dubious by nature. Proponents of free trade are generally against measures that encourage domestic monopoly. They cite economists who state that the gains accrued by protectionism represent fiscal opportunity for a select few (certain producers and the government) and loss for the mass majority. Some economists claim that trade restriction, in turn, weakens productive capacity by setting unrealistic goals in an unrealistic climate. “International trade is regulated through a set of rules that the worlds governments have created over the years. In general, poor countries dont have access to markets in developed countries because of trade barriers and agricultural subsidies. Trade barriers make it difficult for poor countries to sell their products abroad and improve living conditions back home.” (What is it?) The public is also not subject to sudden mark-ups often engendered by protectionism in a free-trade marketplace. Those who are proponents of regulation would add that in certain situations, protection is necessary for the growth of industrial and technological capacity. A company may fail if it is threatened by entrenched extra-national competition in a budding national field of production. Forms of economic protection can sometimes be justified to foster the growth or development of young industries that would otherwise be overrun, but this type of protectionism is inherently transitory, and is not to be taken as a concrete phenomenon. This ongoing debate between protectionism and free trade has caused many problems in the forum of international economics. The domestic economy has been restructured many times throughout history, and right now, there are new technologies based on computers and the global economy, as well as job outsourcing and the decline of manufacturing in the face of an information and/or service economy. This has made new technological stratifications in the UK that increase the gap between the rich and the poor, and have also moved production and manufacturing sectors globally. Some think of this as the impetus for a global proletariat or the idea of a global union mentioned above. But there are many barriers to this formulation, not the least of which are the language barriers that exist between different countries, as well as the different regulatory, political, and economic systems between nations. The formation of some sort of internationally sanctioned controlling body, such as a United Nations type organization dedicated to labor, is possible, but in terms of the impetus (of which the UN was the failure of the League of Nations in the wake of a world at war), there seems to be a slim likelihood of the start-up costs and international agreement necessary. It is not the intention of this report to advance naïve criticism or pessimism, however. The issue of rapid trade globalisation is an issue to some because it is something which is increasing in the international marketplace. “We are seeing increased demands for solutions that leverage application outsourcing, business process outsourcing and offshore delivery to achieve significant cost reductions and business improvement” (Devraj, 2003). As mentioned, it is justified to foster the growth or development of young industries that would otherwise be unable to be competitive during the introductory stage on the global market, but this type of protectionism is again transitory, not permanent. and is not to be taken as a concrete phenomenon. Those who are proponents of regulation would add that in certain situations, protection is necessary for the growth of industrial and technological capacity, if it is threatened by entrenched extra-national competition in a budding national field of production. Also, in terms of background, in a post 9/11 world, “Clients, most of them large American companies and financial institutions, felt newly vulnerable: given global tensions--and the prospect of war--did it make sense to have mission-critical applications humming away on computers in India, China, Russia, and other far-off lands?” (McCartney, 2003). . Other countries depend on each other for food and often this means countries where there is lack or famine have new opportunities and access to more resources. “Food security has improved over the past four decades. Total food availability in developing countries was 27 percent higher at the end of the 1990s than in the 1960s, even though the world population almost doubled during that time. The number of malnourished children under five declined between the 1970s and the mid-1990s by about 37 million” (Shaping, 2007). Without global food trade, these numbers and statistics would not be as dramatic and there would still be more problems. Of course there is still hunger and poverty internationally because food trade does not always mean giving food out for free, and there are still disagreements between free trade and protectionism. The UK would be able to survive without the global food trade because there is a wide geographical area of the country and since it is such a fertile place, many different kinds of crops can be grown. The UK would be able to survive with a balanced source of food because it also has a lot of money to start with and already has established a strong food and agricultural infrastructure. Some more exotic items that people might be used to would have shortages, but overall there would probably not be mass famine and starvation in the UK without the global food trade. However, this doesn’t mean that the UK does not have a responsibility to still take part in the global food trade as both an importer and exporter. To look at rapid globalisation of free trade, one may look to India more than the UK, of late. Indian government, if the product line has already been established, and more focus can be placed on the external market than on the internal team in terms of developing and distributing the right products at the right price. South Asia and India are chosen to represent a dynamic environment in which similar deregulation efforts to the ones in the UK are being stressed and many former state-controlled enterprises are turning to direct foreign investment and facilitating a new economy. This economy began in the early nineties. India’s market remains closed in many ways; even with the deregulation, the country represents an opportunity in the relative speed of its economic development and openness to trade. This is perhaps a result of India’s past, before the early 1990s and the institution of the NEP, when the nation was ostensibly socialist. Since then, as one source states, “India has shed its socialist pretensions, especially after free market restructuring carried out under the tutelage of the International Monetary Fund” (Singh, 2002). This has affected the social dynamic of the country, leading the upper classes of the country to become more wealthy. The relative recentness of this change has meant that many of India’s internal departments are still in need of foreign direct investment. “Of those polled in 27 other countries, 64 % thought that the advantages and burdens of globalisation were shared unfairly. Only in a few countries (10 out of 34) did the majority of people consider globalisation a positive factor for local economic development” (Benefits, 2010). Overall, gloablisation has many benefits, because it represents free trade being chosen over domestic protectionism, which can lead to negative results. REFERENCE McCartney, L (2003). A shore thing? Risk and reward have always been major factors in offshore outsourcing. CFO Magazine. Singh, Mamata (2002). Govt Sees 9% Growth Till 2020. Rediff. http://www.rediff.com/money/2002/dec/09growth.htm. Benefits of International Trade (2009). Economy Watch http://www.economywatch.com/international-trade/benefit.html Benefits of globalisation (2010). http://www.globalpolicy.org/component/content/article/162/27987.html What is it? (2009). Youth Think! http://youthink.worldbank.org/issues/trade/ Read More