Globalisation vs Regionalism
By-Devika Rajeev
Introduction
The advent of international trade has helped economies all over the world. Be it a developed country which is looking for the best option in terms of skilled and unskilled labour, natural resources etc, or a developing country looking to increase employment opportunities, investments etc. Not only has this helped economies, but has helped to share popular culture around the globe. This started with the process of globalisation but recently there is increasing trend of regionalism in place. Even though technically both lead countries to open up it’s economies for trade there are some important differences between the two which will be identified here.
Globalisation
Even though it is
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Officially Globalisation can be defined as the “process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.”2 But if it’s that simple then why are some countries so reluctant in opening up their borders ?Today globalisation is much more controlled and there are many organisations present and active to help countries achieve globalisation. One of the main elements of the process of globalisation is the process of “Laissez Faire” or free trade. According to this principle, it is believed that the best option for countries is to engage in free trade and that state interaction should be kept to minimum. Economic principles like theory of Absolute Advantage and theory of
Competitive Advantage explain the concept of free trade and support that minimum state intervention is the best for any nation. But this does not always stand true. In theory free trade is the perfect model, but when a country opens up its economy to foreign competition there are cases when the local business suffers. Many a times the case is such that local small and medium producers are unable to compete with the large MNCs and have to close down
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The big players of the world invest capital into the developing countries in order to set up plants, factories and industries thus not only affecting employment in that sector but in related sectors as well. This usually leads to an overall growth of the economy. Also consumers get a far more varied choice of goods and services at competitive prices. Countries in the middle east with their large expat population or even the Silicon Valley where a lot of work is outsourced to countries like India are the best suited examples of the success stories of Globalisation.
But Globalisation would not be so encouraged, if not for the many international organisation who control and regulate it. The WTO, UNCTAD, ITC, to name a few, makes sure that the trade between member countries is regulated, free and fair. Their main aim is to provide trade related technical assistance to trade. These organisations understand that all the countries in the world do not have the same resources and competency and hence use their expertise to help maintain a balance of trade to make sure that everyone gets the benefits of Globalisation. The main agenda of these organisations is to protect weaker economies to be part of the process
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth.
All nations can get the benefits of free trade by being specialized in producing goods they have a comparative advantage and then trade them with goods produced by other nations in the world. This is evidenced by comparative advantage theory. Trade depends on many factors, country's history, institution, size and. geographical position and many more. Also, the countries put trade barriers for the exchange of their goods and services with other nations in order to protect their own company from foreign competition, or to protect consumers from undesirable products, or sometimes it may be inadvertent.
The global economy needs free trade. Countries need free trade. Trade with other countries occurs at some level in every country globally. There may be some indigenous tribes within some countries that can lay the claim that they are self-sufficient, however, there is not a single country that can say the same. Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers (Carbaugh, 2009, p26). Free trade is necessary. How do countries decide what to import and what to export?
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
We begin our study of free trade by understanding the four principles of individual decision making.... ... middle of paper ... ... Edge, Ken, “Free trade and Protection: advantages and disadvantages of free trade” NSW HSC online http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html#more Accessed November 29, 2011. Net Aparijita, Sinha, “What are the disadvantages of free trade?
The following essay aims at highlighting and analyzing the main political arguments for trade intervention and the rationale behind this.
...roducts through taxes and tariffs as to those who do not take part in it. Also, most products of Fair Trade are only available in specialty shops, such as health food stores, rather than stores who receive a wide distribution of goods.
...y supply and this causes the collapse in the U.S. and elsewhere (Pinnell, Lecture notes, 3/23). Consequently, countries become very protectionist to protect firms at home and international trade collapses (Pinnell, Lecture notes, 3/23). Therefore, states must make decisions with reciprocity and consequences in mind (Pinnell, Lecture notes, 3/23).
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.
Labor laws, wage disparities, intense competition and fluctuating currency values are the challenges that are making organizations worldwide to compete in marketplace with products requiring a great deal of labor, and it is now getting harder for some of these organizations to maintain employees abroad. As Mello (p. 610) mentioned that a greater percentage of United States workforces are moving their operations abroad to developing nations like China and leaving an increasing number of United States domestic workers without employment. The foreign markets for the products and services are not the only things enticing these organizations to enter these global marketplaces. There are other reasons these companies are joining the global market arenas. For example, the foreign labor markets, this has attracted interest in many organizations to expand globally (Gersten, 1991). The labor force growth rates in developing nations alone will continue expanding by approximately 700 million people by the year 2010, while the United States labor force will continue to grow by only 25 million. This shows that United States’ growth rate will drop and the opportunities for productivity growth rate will increase in developing countries.
...ll as private sectors have gone international with new ventures outside the country. These companies are generating revenue, though modest compared to their overall sales revenue, by deputing their expert personnel outside.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.
Although, international organizations are largely influenced by the powerful states they contain and reflect those states’ interests, international organizations provide essential forums for communication, and encourage education of new international norms, which in turn, shape the interests and behaviors of states.