Trade and Globalization and Gains of Free Trade - Essay Example

Running head: TRADE AND GLOBALIZATION AND GAINS OF FREE TRADE Trade and Globalization and Gains of Free Trade Insert Insert Insert Instructor’s Name 17 May 2011 Trade and Globalization and Gains of Free Trade Introduction Globalization is such as force that influences operations the world over, positively or negatively. Issues to do with free trade in relation to globalization have occupied debates in economics for a very long time, in various tenets, including the national governments roles and the international stipulations. In a progressively more global world, a number of gains are there to write home. The various inter-governmental organizations are not as much effectual, and international businesses and entities continue to define stipulations. Governments’ role in controlling trade is still enormous and many governments are increasingly accepting it as the norm rather than the exception (Tung and Henry, 2009). Debates in recent times centre whether globalization is diminishing trade or increasing it. Questions have been raised on the state the traditional roles and national governments sovereignty play over trade, and the effects that these portend in promoting fairness or inequality among countries. Others have zeroed on the balance of trade and trade payments the less developed countries, the developing countries vis-à-vis the developed world, and the focus on the glaring policy intervention differences between the global north and the global south. This paper states at the outset that: Meaning of the term globalization Whereas globalization has been touching on every aspect of society today, scholars and thinkers alike have not agreed on a universal single definition of the term. Instead, a number of definitions, conceptualizations, and perspectives exist depending on which lens one views the concept. Q1. The classical ‘gains from international trade proposition’ In Kemp’s world, the gains must be examined within the confluence of world tarries such that no country in the pedestal of globalization would be worse off than in the smaller customs union (Kemp, 1987). Kemp (1987) observes that the phenomenon of globalization has been extensively used in the world, specifically in admired discourses and policy issues. For him, globalization is a term that describes ways in which the world is progressively more interrelated, organized, and interdependent through a set of socially reinforced processes that is controlled by customs. These processes include among others, integration of markets, nation states and technologies to a scale that is aiding individuals, corporations and distinct governments to access and ‘navigate’ the world much more, more rapidly, much deeper an by less costly methods (Kemp and Wong, 1995). Kemp further characterizes the global economy and trade as that which is based on spread and networking of data and knowledge, and which is predominantly borrowing from technology to focus on what he calls “post industrial and service oriented” outlook. In addition, cultural and pure political meaning of globalization cannot be authoritatively affirmed without bringing in the aspect of trade and economy. Moreover, cultural and political meanings are now under blockade by global financial and hi-tech reorganization. Kemp thus speaks of a mode that is data centered as a prelude to development. This happens in two ways: Through universal financial links and information, tailored connections and that these are made possible due to hunger for trade. He proceeds to assert that there is now a tendency to ‘renovate’ places and pressure to control restricted processes of cultural meanings of economies (Kemp, 1987). Q2. The classical GFITP and Proof provided by Grandmont and McFadden (1972). Grandmount and McFadden (1972) observe that businesses in globalization largely function at one of the four basic levels of globalization. The first level, is what they call the ‘’multi-domestic’’ company. This is where a business entity encompasses several autonomous units that work in a number of countries, often times, with some degree but restricted communication involving them. The second level is where a global corporation, business, or company retains its headquarters in one of the countries where it is present and has operational branches in other countries as well. The third level of globalization is a transnational company. This entails business entities floppily incorporated in several set of countries. He adds that, it is at this level that the company advances its effort to respond to the local needs of operations in each of the countries. The fourth level of globalization, according to him, is what he calls ’a truly global company’. He sees this as that company or business entity, which sees the world as a one market, and therefore puts efforts to build up a largely focused strategic means in executing its assortment of operations around the globe. This kind of company proceeds to, keep and implore the lessons that are distinct in each country for the purposes of its holistic success across the world. Indeed, as Giddens observe, it is often times, the fourth level in the description that qualify as “ideal globalization” (Grandmont and McFadden, 1972) The role of gains in globalization in respect to free trade in general is seen in three broad interrelated areas. These are trade policies, human capital development (education), and governance (Shy, 1989). Accordingly, the first is that there is momentous lessening of bottlenecks that had traditionally defined international trade, with the emergence of a lot more emphasis on the aspect of free flow of goods, free flow of services, and free flow of capital and raw materials. This has predominantly been experienced since the Second World War. The second reason is to do with technological advancement. These developments include advancement in communication methodologies such the internet, mobile phones (with reduction of call costs), information dispensation, and increased transport technologies and reliabilities in such with speed and convenience (Shy, 1988). Evidently, national governments have a number of roles to play in global trade and globalization at large. The distinct role that globalization assigns various national governments across the world is the endorsement and establishment of sustainable human development programmes. Pavilos and Yip (1999) believes that there exists a prevalent concurrence that most countries in their plans and quests to eradicate extreme poverty put insurmountable efforts in developments of human resources. They therefore put in place a number of efforts. These include among others, support of human capital development initiatives. In addition, a number of governments in response to international standards and millennium development goals for example, have placed in a number of programmes and incorporated widespread policies. For instance, integration of women and other traditionally marginalized groups into economic and political life and protection and restoration of the environment have been some key features in this front. Besides most governments are in concerted efforts in appreciation and back-up of sustainable livelihoods for all across different parts of individual countries (Pavilos and Yip, 1999). We also see a mounting accord on the imperative role of good governance in the promotion of sustainable human development in response to globalization economy in a number of other ways today. More and more, development practitioners, cream of political leaders as well as economists agree that, predominantly, it is the political setting that make the resolve and create a conducive environment for development programmes (international trade included) to be effectively promoted and sustained overtime (Pavilos and Yip, 1998). Pundits have argued that some of the major bottlenecks of globalization that brought about the current economic crisis embedded on recession were to be found in the failure of governance at both the national and international levels in relation to trade regulations and building up of sound economies based on realistic and sustainable policies.. There has been as a consequent a grave focus on good governance coupled with factors such as effective educational policies that appreciate the understanding of the global economy. The understanding is that educational policies have been affected. He imagines that various governments and their agencies, under the conditions of globalization, have been changing a number of things. This include, not only the rationale for education but also getting actively involved in reconstructing the syllabi and approaches of teaching by also being cognizant of factors such as technology having been laid by use of the internet and other technological advancement associated with the world today. Largely, all this take into account the ever-changing aspects of international trade (Newbery & Stiglitz, 1984). The point here is that governments are involved in changing education to match two basic levels: equality and then the social issues that are associated with democracy. For him, the concept of democratic level-headedness suggests the call for a system of education that facilitates socio-economic progress and the appreciation of a culture of democracy among the citizenry, who can then meaningfully take part in communities and groups aligned on democratic ideals in an impartially and objectively informed approach. Arguably is the fact that National Governments across the world continue to hub on equality in the accessibility to education and other social institutions that promote sustainable development (Newbery & Stiglitz, 1984). The above point cannot be over-emphasized going by the design media have been doing it. Certainly, corporations and popular media have in particular been relentlessly promoting and exerting the position more so when calling upon various governmental authorities to institute various reform agenda to promote “not only more socially and economically efficient” but also recognizing the realities of the ’knowledge economy’ in an progressively more universal world (Hannesson, 2000). To reinforce the argument, most governments have now instituted policies in favor of free primary education, especially in the developing world. The fundamental idea behind free and universal primary education is that it is a way of facing the major issues of development. This certainly goes along way in acknowledging that poverty, hunger, and disease, which have been for instance confronting most developing countries, are dealt with. Unquestionably, global ideas such as the MDGs propose, “an essential role of government is to ensure that every kid in the world has the opportunity to complete primary education” (Kemp, 2005). Q3. The challenges posited by the classical GFITP and the extent of their success Governance in form and typology also plays a distinct role in appreciating that National Governments continue to play in globalization. Chia and Whalley (1997) observe that the global economy has led to a new outset of governance and leadership. This has prompted the requirement that a drastically revised analysis of the roles and responsibilities of national governments, which, reduces the need for their policy intrusion, with greater dependence on the market forces, be emphasized. Thus, the issue of trade liberalization has widely come into play. (Gray, 2006) Manifestly, the idea of good governance in so far as allowing free trade controlled by market forces has become a major course of action outline around the world today. In response to globalization, national governments are forced to hold democratic elections and uphold human rights, and to keep with the demands of the citizenry, even about trade, which has largely been espoused by the global economy (Chia, and Whalley, 1997). More than this, even the Transnational Corporations (TNCs), mainly from the developed economies, offering to put in and invest in some countries, forces the governments of such countries to give into to their conditional ties. Whereas TNCs usually call for those countries to make available the essential set of infrastructure network which support their establishment, they nevertheless, still go the full hog to demand other policies to be established, upon which they can ‘without stress’ chase their premeditated goals. This kind of stand usually means that the Transnational Corporations and governments are usually caught up in bargaining process as each tries to get utmost advantage from and sometimes over each other (Chia & Whalley, 1997). It is usually the TNCs (especially when establishing their companies in the developed world) that gain much, sometimes regardless of what the citizens/governments of those countries go through. As Kemp (2005) notes, states have turn out to be, increasingly “locked into a cutthroat competitive bidding process” for investments. This process in, his view, gives TNCs the opening to ‘’play off one bidder’ in opposition to another. Examples of such policies would be that they require education in those countries to be reorganized down the market angling of their investment, with policies more tweaked to promote a conducive design of human resource team better to meet up their labor requirements. A case in point would be the speedy growth of Export Processing Zones (EPZs) in Vietnam, to respond to such requirements (Kemp, 2005). Lastly is education in relation to communication technology. Ensuing from the foregoing arguments there has certainly been the need to juggle around with issues of educational syllabi in view of the changes propagated by globalization and economy. Information and Communication technology is one area, which has promoted these views (Kemp, 2008). The other way to understand the gains is through supply chains in relation to security. Hansen, exposed the meaning of supply chain in this context as the international principles of practice which facilitate administration and management of customs and their partners in order to enhance security of the ‘global trade supply chain’ while at the same time ensuring that lawful goods go through. He agrees that effective facilitation of trade is one of the key contributors to a sound economy is the global spectrum. Recognizing that as economic development marries with other demands such job creation, protection of the environment and elimination of poverty, he contends that trade at the ports should be well handled (Hannesson, 2000). In a global economy, there has been undying talk about the need to be security complaint at various ports given threats that terrorist posit, and issues such as money laundering, smuggling of items, and organized crime. All these have meant an increase in security concerns leading to stringent security measures being placed on international goods transit, to curb such menace and to promote effective revenue collection.. The dilemma posited by this development led to the World Customs Organization (WCO) initiating its own “Framework of Standards to secure and Facilitate Global Trade.” This development recognized international trade reality in the present times, and took care of such concerns as bringing in a tradition of safer and secured international trade and the WCO unanimously agreed for its adoption in Brussels, in 2005. It is believed that with this development, facilitation of international trade will be smoothly handled (Hannesson, 2000), Conclusion Conclusively, it is imperative to note that while it is a fact that globalization and its agents are diluting the traditional roles of various National Governments across the world, the roles and gains with free trade is enormous through the agents of globalization and governments as ‘intermediaries’. It is also true however that globalization especially with it trade tenet, is not a level playing field. . 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