The Effects of Global Economic Integration on Countries - Essay Example

The Effects of Global Economic Integration on Countries In the modern world of economic and industrial relations among nations, the terms ‘Globalisation’ and ‘Global Economic Integration’ are so widely used that they have become components normal discussions and dialogues. A historical survey of the development of international trade and commerce confirms that the trade relationships among nations were prevalent even before the times of geographical discoveries. There are several crucial historical evidences which point to the fact that there existed significant trade and economic relationships among civilizations of the ancient period. Every nation of the world today is engaged in commercial, political, and economic relationships with other nations and it has become the basic strategy for the progress of these nations. In the course of time, such agreements and relationships among world-nations became essential to the economic growth and prosperity of every nation, paving the way for the current international organizations and associations for regional and global agreements. This paper examines, based on empirical research findings, the effects of global economic integration on countries and the world, focusing on both the positive and negative impact of global integration. Global economic integration is an important economic process affecting various nations of the world in the age of globalisation and it is essential to comprehend the basic aspects of this process. Thus, economic integration can be defined as the economic process “whereby markets and production in different countries become increasingly interdependent due to dynamics of trade in goods and services and flows of capital and technology” (Sparrow, Brewster & Harris 17). As Saskia Sassen (2006) maintains, “a good part of globalization consists of an enormous variety of micro-processes that begin to denationalize what had been constructed as national — whether policies, capital, political subjectivities, urban spaces, temporal frames, or any other of a variety of dynamics and domains’’ (Sassen, 1). Dominick Salvatore explains the theory of economic integration as “preferential trade arrangements to free trade areas, customs unions, common markets and economic unions’’ (Salvatore 321). A free trade area agreement reduces the trade barriers among the member countries even though every nation has its own trade regulations with non-members. NAFTA and EFTA are good examples. Customs union ensures that there are no tariffs or other barriers among member countries. But they have a common trade policy towards the other countries not that are not in the union as in European Union. In order to attract foreign investment each country allots duty free zones or free economic zones. Global Economic Integration has made changes in almost all the countries of the world irrespective of their political aspirations or the international leanings. There were many discussions and many are going on these days how the integration has contributed to the world nations and its adverse effects on the world economic and political scenario as a whole. (Mussa) All the economic problems of the world cannot be in connection with global economic integration or we can never take it to be the complete solution for all economic unrest. However, it is a fact that global economic integration can become a deciding factor in increasing income and bringing down poverty rates. Geithner, in this respect, observes that “the most effective policy response to the concerns of those who fear the consequences of further integration is to direct more political capital to the challenge of developing the economic and institutional infrastructure that will enable governments and their citizens to adapt more readily to change” (Geithner). Many factors have contributed to the growth of global economic integration. According to Coleman and Underhill, “the liberalization of domestic economies, the strengthening of (basically liberal) co-operative regimes in international trade and finance, and the trans-nationalization of corporate structures have all contributed to this dramatically accelerated growth of globally integrated market structures” (Coleman & Underhill 1). No doubt, global economic integration has offered a number of opportunities for world nations; however, on the other hand, it has also posed many threats and challenges to the global world. Notes, Greenspan and Hoenig argue that global economic integration not only “improve the allocation of resources, promote technology transfer, and enhance living standards” but it also results in “growing trade imbalances, increased financial market volatility and less effective domestic macroeconomic policies” (Notes, Greenspan and Hoenig xvii). The differences among nations and the economic disparity among world nations can make the low income nations at a disadvantaged point to benefit from the positive effects of global economic integration. Similarly, it is essential that the low income nations develop infrastructural facilities with the help of private and public investments, make timely changes to domestic policies and regulations, and that international organizations like WTO have a pivotal role in bridging the gap between the haves and the have-nots when it comes to global economic integration. Therefore, the greatest challenge before the policy makers is to take effective measures to ensure that each nation benefit from the multifaceted opportunities brought out by the positive impacts of global economic integration. Economic integration brings about a greater opportunity to expand production and opens bigger markets. But a counter point is that smaller firms and establishments get threats from bigger ones as they cannot withstand the competition of bigger companies. The second merit is that less developed countries get good access to new technological developments. The complaint against this is that the technological development do not come to other countries in fuller versions but come only in fragments. The third argument towards the merit is that economic integration increases employment opportunities through production. The threat on this kind of job opportunity is that foreign capital investment can be taken away to better pastures ignoring the welfare of local employees leaving them nothing in their retirement. Regional unions of countries strengthen their power of bargaining with other customer countries to maximize their profit. OPEC is a good example for this. Sometimes it may create inflationary tendencies in non member countries. Another point is that global market is highly competitive and thus it improves efficiency and betterment of products with new innovative technologies. But cut throat competition kicks away minor and local enterprises. Even though there are merits and demerits it is seen that the fast growing economies in the world like China, Brazil and India are utilizing the meritorious sides of economic integration. Michael Mussa, in this respect, purports that “global economic integration is not a new phenomenon” and that ever since the expeditions made by Marco Polo seven centuries ago, “global economic integration—through trade, factor movements, and communication of economically useful knowledge and technology—has been on a generally rising trend” (Mussa). Mussa, thus, observes that factors such as the advancements in transportation, communication, and technology and the changes in the public policies of world nations have been instrumental in the development of global economic integration. To quote Michael Mussa’s own words: “The two fundamental factors that appear to have driven this increasing global economic integration are continuing improvements in the technology of transportation and communication and a very substantial, progressive reduction in artificial barriers to international commerce resulting from public policy interventions” (Mussa). The global economic integration has been making many changes in the economy and political set-up of nations in the world. The European countries have been making a thorough progress in the field of economic development. The formation of European Union and the currency Euro account for this. The Asian countries met difficulties of political unrest. But the gradual growth of integration moves into this continent and it brings about changes in the economic. The area of international transportations of goods and services led to the growth of a global market. The African countries also were making great challenges in various realms of economic aspirations. Similarly, global economic integration pause challenges to national and international policy makers. It was thought to improve the allocation of resources promote technological transfer and advance living standards. But the world economic integration has frequently seen associated with growing trade imbalances, increased financial market volatility and less effective macroeconomic policies (Greenspan and Hoenig, 165). Global economic integration has got multifaceted effects on all aspects of human life. It has brought about cultural changes in the world due to wider acceptability to goods and services from different areas of the world. It has brought changes in healthcare, pursuit of scholarly activities and it has even brought about changes even in the political aspirations of countries. The increasing list of migrations and its free accessibility to visa procedures paved the way for international cultural transmissions and development in the field of trade and related services. Growing technological advancements in aviation, telephone and internet contributed much to the rapidity of the integration. The language of integration is really English. The English language has even reached to the nook and corner of the world. Global economic integration has contributed to this fact. There are more learners of English in china than that of the native speakers of English. Of course it unites the people in the world. But UNESCO says that thousands of regional languages are becoming extinct. The cultural changes brought about with this language also are worth studying. General agreement on Tariff and Trade (GATT) was a multilateral trade treaty between countries to regulate international trade and tariff in accordance with specific rules, norms or code of conduct. This was only an international agreement. Later in January 1, 1995 WTO came in to existence fully replacing GATT. The areas of the WTO agreements “cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, and through regular reports by the secretariat on countries’ trade policies’’ (Overview: a navigational guide). WTO is considered to be a permanent agency to promote economic integration in the world. In conclusion, the global economic integration is interrelated with all the human activities in the current age in which we live. It has got significance with our political, economic and cultural sides of life. Almost all the countries in the world are associated with its agreements. The developing countries which are eager to utilize the merits of these agreements seem to be having greater economic development. WTO is the agency which to promote economic integration among the nations of the world. Works Cited Coleman, W.D & Underhill, G.R.D. Regionalism and global economic integration: Europe, Asia , and the Americas. Illustrated Edition: Routledge, 1998. Dominick, Salvatore. International Economics. John Wiley & Sons. 2004 Geithner, Timothy. Global Economic Integration: The Opportunities and the Challenges. Federal Reserve Bank of New York, 2007. 22 Aug. 10. < http://www.newyorkfed.org/newsevents/speeches/2007/gei070417.html>. Greenspan, Alan and Thomas M. Hoenig. Global Economic Integration: Opportunities and Challenges. The Minerva Group, Inc. 2001. P 165. Mussa, Michael. Factors Driving Global Economic Integration. Economic Counselor and Director of Research. IMF. 09 Aug. 2010. . Notes, S., Greenspan, A & Hoenig, T.M. Global Economic Integration: Opportunities and Challenges. The Minerva Group, Inc., 2001. “Overview: a navigational guide.” Understanding the WTO: The Agreements. World Trade Organization. 09 Aug. 2010. . Sassen. Saskia. Territory, authority, rights: from medieval to global assemblage. Princeton University Press. 2006. P 1. Sparrow, Paul., Brewster, Chris & Harris, Hilary. Globalizing human resource management. Illustrated Edition: Routledge, 2004. P 17. Sonntag, Selma K. The local politics of global English: case studies in linguistic globalization. Lexington Books. 2003. P 116. Read More