What Is Globalization Critical Issues For International Trade Liberalisation - Term Paper Example

?What is "globalization" INTRODUCTION Globalization has emerged in the past two decades as one of the major factors for growth in especially worldwide trade activities. Globalization can be defined as “a process that encompasses the causes, course, and consequences of transnational and transcultural integration of human and non-human activities” (Geneva Centre For Security Policy, “Program on the Geopolitical Implications of Globalization and Transnational Security”). It is a kind of international integration to exchange the products, ideas and views of the participating countries. Exchanges of cultural and national resources can be done with the advent of globalization. Globalization has further facilitated in enhancing the amount of cross-cultural trade activities which in turn has made the world to be regarded as a global village. This has enabled to reduce cultural barriers by a considerable extent. In this context, the International Monetary Fund (IMF) has propounded four basic kinds of aspects related to globalization. This can be distinguished as migration along with movement of people, investment and capital movements, trade and transactions and lastly diffusion of knowledge. Globalization generally refers opening up or liberalization of the countries. It generally includes deregulation of markets and privatization of the assets, the integration of capital markets and the inter-national distribution of the manufactured production also known as foreign direct investment. With the advent of globalization, the apparent benefits can be observed from the steep rise in import and export activities in countries such as the United States as depicted below: ? Figure: United States Imports and Exports in Goods along with Services in the Period 1960-2011 (The Levin Institute, “The Trade Balance”) THESIS STATEMENT The paper intends to throw light on the path of globalization and it’s affects on the world at large. The paper also discusses critical trade issues and the benefits that can be derived by a country owing to the advent of globalization with regard to trade activities. The paper will primarily aim to explore the term ‘globalization’ and its contribution towards the betterment of the society. DEFINITIONS FROM THE HISTORY In the book “A History of the World in 6 Glasses” Tom Standage described the continuous cyclical changes in the world through the different ages. He pointed out that the process of globalization has been a 20th century phenomenon which has certainly facilitated the globally operating companies to entertain major financial returns by becoming globally recognized brands. In this regard Standage highlighted that hunger can be less deadly than the thirst. A person may survive without taking food for a few weeks. But without taking liquid he/she cannot survive. Human generates drinking habits to live. Thus, in order to leverage this benefit entrepreneurs or inventors invented six different drinks for the human beings. According to the author, the invention of these drinks primarily caused the advent of globalization. These drinks include beer, wine, spirits, coffee, tea and cola. Among them caffeine contained in three drinks and alcohol contained in three. Initially, beer was made in 3000 BC. In the ancient Greece, wine was the main exportable product. After the invention of spirits coffeehouses were the main centers for the intellectual exchange. After 100 more years, the Chinese started taking tea which became quite popular in Britain in following years. Finally, carbonated water was invented for the very first time and Coca-Cola was the inventor. Cola started the flow of globalization. From the above discussion, it can be said that six different glasses started the age of globalization (Standage 1-100). In his book ‘Ways of the world: A brief global history Volume 2 since the 15th century’ Robert W. Strayer described how global economy has accelerated since 1945. The pace of globalization increased after the era of Second World War. Most commonly, it signifies internationalization of economic transaction. In 1970, many countries reduced a number of controls on global economic transaction, this process is also known as neo-liberalism. The mobility of money has become highly transferable with the introduction of Foreign Direct Investment (FDI), especially after the period of 1960. However, the protest movements emerged all over the world after 1990s which was represented by both the people of poor and rich countries because globalization brought in lower labor standards. Another consequence of globalization is the creation of the third world which differs in its characteristics from capitalism and communism (Strayer 1-120). PRE AND POST CONDITIONS OF GLOBALIZATION ERA To disclose the changes that have been made due to globalization, there is need to mention about the scenario prevailing in the post period of 1990s. Before the emergence of globalization, economy of world at large was not integrated with each other. In certain countries, import and exports and foreign investments were totally banned. However, after the initiative of liberalization which is a part of globalization, the trade and economy changed rapidly and it gave fresh air to the world of business. Tremendous growth in the international trade has been both a primary cause and effect of globalization. The volume of world’s trade had jumped from US$296 billion to US$8 trillion in 2005. After globalization, it experienced a contraction in the year 2009 (The Levin Institute, “Trade and Globalization”). Because of globalization, consumers all over the world have been rendered with huge amount of choices of products which has in turn increased the purchasing habit of the global consumers. Nevertheless, it was not possible before the era of globalization. At the pre-globalized era, customs rate, tax rate and exchange rate were quite high. On the other hand, rules, regulations and respective laws were not lenient. As a result of the globalized demands, companies engaged in exporting goods also started producing more and more products; more demands resulted in more sales which facilitated them to earn more profits. General Agreement on Tariffs and Trade (GATT), North American Free Trade Agreement (NAFTA) and the European Union (EU) had taken a number of initiatives to reduce the tariffs between the member countries. To promote more and more business, GATT and the World Trade Organization (WTO) lowered the transportation cost above seas. It created subsidies for global transaction and reduced subsidies for local businesses. International trade has grown tremendously in the post globalized era and it helps in raising incomes, creating jobs, reducing prices, and increasing workers’ earning power across the globe (Rosson, Runge and Moulton, “Preferential Trading Arrangements: Gainers and Losers from Regional Trading Blocs”). ARGUMENT AGAINST TRADE LIBERALIZATION Owing to the fact that globalization is an integrated process, when large economies such as the US and the UK suffer its affects all over the world. For example, if stocks of National Association of Securities Dealers Automated Quotations (NASDAQ) and New York Stock Exchange (NYSE) crash then stock markets all over the world (including China, Japan, Hong Kong, The United Kingdom, India among others) will go down as well. Globalization can be a boost as well as a boon for the economy, and it affects jobs markets as well. It is observed that at times companies start terminating its employees due to recession. However, as the developing countries and the under developed ones are not connected with the world economics strongly so, they may not fall under the list of the countries which will face recession. Another devastating effect of globalization that is affecting the developing countries is retail marketing effect. The United States giant Wal-Mart wanted to enter in the Indian market but with the spread of the news, Indian retailers started protesting against Wal-Mart. Indian farmers thought with the introduction of retailing, Indian local market will lose its operating prominence. People protested against FDI in retail market as well. Because of globalization, there has been huge burning of fossil fuels and greens are being cut down on a regular basis for the development of urbanization (IBS Case Development Centre, “Strategy III”). ARGUMENT FOR GLOBALIZATION Globalization facilitates to keep the life of the people healthy. It broadens the chance to build an industrial segment which leads to create more and more jobs. As incomes are being generated at a more rapid pace, thus the gap between the poor and the rich is also diminishing. Multinational companies have started operating across the globe and setting up factories along with plants overseas to capitalize the cheaper labor costs. In 1980s and 1990s capitalist rich countries started moving their capitals from one country to another. It generally results in capital inflows to a country and brings in considerable amount of foreign capital to its balance of payment account. With the help of globalization, now the products made by other countries can be used by consumers of different countries. Conversely, various bailout packages from the governments for the companies motivate a company to set up more and more plants across the world. CRITICAL ISSUES FOR INTERNATIONAL TRADE LIBERALISATION Globalization also helps to increase gross domestic product of a country. Trade globalization is demarcated by dividing the countries total exports and imports with the Gross Domestic Product (GDP). On a global scale, it represents its total production as compared to the total production of the world. Globalization increases the per capita income of a country’s population. With the influx of benefits derived from globalization along with the opening up of new markets, it has created a requirement for a lot of professionals to the industry to handle different sorts of activities. In this regard, it can be said that globalization is a complete structure. If any country does not follow this structure then it will lose its economic stability. To promote globalization, the government officials need to reduce their imposed varied duties. In this respect, the example of the project named special economic zone (SEZ) can be considered. SEZ is an investment project and an initiative taken either from the national corporate or through FDIs. To implement a successful SEZ operation, local government authority should provide certain facilities to the investors like cost reduction of electricity, construction of roads along with providing security personnel. Reduction of the value of the currency against foreign currency has enabled to attract more and more investments to the country. As an example, if the value of US Dollar decreases against UK Pound then the UK investors may become interested towards making investments in the USA because through the selection of such options they will have to invest low capital as the value of UK Pound has gone up high. Free movement of capital country by country facilitates globalization. It is not only a result of technical innovation, capital concentration and the geographic spread of production processes, but also done by the helpful hands of governments and with the help of GATT and WTO by lowering the international tariffs. At earlier stages, globalization used to occur by the FDIs in factories and enterprises in many countries but in 20th century, the outline of investment has changed. A few of the top globalized countries in the modern world include Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, Denmark and The United States (IBS Case Development Centre, “Strategy III”). ROLE OF WTO IN TRADE GLOBALIZATION The WTO represents a lot of rule based policies for economic globalization. The main concerns of the WTO are the smooth running of business throughout the world along with ensuring the movement of an organization’s products and services as freely as possible. It facilitates to remove the barriers of globalization and creates a platform where a country can negotiate with the other. It is the duty of the WTO to review national trade policies in case of global economic policy making. To liberalize and supervise the international trade, WTO was created. A well globalised country can show the world its financial power and by doing that it can sanction loans from the World Bank. The WTO represents the rule based regime for the smooth running of globalization. It imposed a number of rules and regulations for globalization which the participating countries need to maintain. The International Forum on Globalization (IFG) has focused on globalization since the year of 1999 and to the entire facet of economic globalization (IFG Publications, “The World Trade Organization (WTO)”). Despite certain detrimental impacts of globalization, it also true that without being globally exposed not a single country can standstill in the world because a country may not have all its consumption needs so it needs to import technologies and knowledge from the other developed countries and WTO has been trying to move investments easily by reducing the tariffs as stated in general agreement on tariff and trades. CONCLUSION From the overall discussion, it is determined that there are three aspects of the study of globalization. Firstly, it needs to define how it helps the world economy. Secondly, prospective benefits and cost emanating from the process of globalization need to be ascertained and lastly to know the process there is a wider need for international cooperation based agreement along with the development of new globally oriented institutions. There are several sources of globalization, one of them is technology. Proper process of technology reduces the cost of transportation and communication and also lowers the cost of data processing. Thus, it can be said that the process of globalization has really beneficial effects on economy but it has some detrimental aspects as well. With the integration of global economy, it helps investors to invest in a lot of investment projects. On the other hand, customers obtain large choices to choose from. It has become possible largely because of globalization. Therefore, in future days, in order to leverage such long-standing benefits of globalization the global nations need to embrace this phenomenon in a more positive manner. Works Cited “Program on the Geopolitical Implications of Globalization and Transnational Security.” Articles. Geneva Centre For Security Policy, 2006. Web. 07 May 2013. . “The World Trade Organization (WTO).” New IFG Publications on the WTO. IFG Publications, 1999. Web. 07 May 2013. . “Strategy III.” List of Case Studies. IBS Case Development Centre, n.d. Web. 07 May 2013. . Rosson, C. Parr, Runge, C. Ford, and Moulton, Kirby S., “Preferential Trading Arrangements: Gainers and Losers from Regional Trading Blocs”. Southern Agriculture in a World Economy. 1992. Web. 07 May 2013. . Strayer, Robert W. Ways of the World, Volume II: Since 1500: A Brief Global History. United States. Bedford/St. Martin's, 2008. Print. Standage, Tom. A History of the World in 6 Glasses. New York: Walker Publishing Company, 2006.Print. “Trade and Globalization”. A Project of Suny Levin Institute. The Levin Institute, 2013.Web. 07 May 2013. . “The Trade Balance.” Issues in Depth. The Levin Institute, 2013. Web. 07 May 2013. . Read More