The Importance Of Globalization And International Trade

The concern about natural and man-made disasters and the economic impact beyond United States and other countries is due to globalization and international trade. Past thirty years, the world has gotten more connected through globalization and through international trade more reliant on upon each other. Because of the complexity of world economics, there is increased economic risk for that country as well as the international community.

Countries who depend upon the global financial market, for which they have little control, they are essentially at the mercy of the global market. Of course, countries expect a greater return to offset the risk. To minimize risk countries invest in insurance. According to the article The Risk-Sharing Implications

The impact on the global financial market was rather muted because many of the damaged facilities were uninsured, minimizing the exposure of Western and Asian financial services companies to the tsunami destruction” (Athukorala & Resosudarmo, 2005)

According to Monica Escaleras and Charles Register who compared economically wealthy and poor countries that experienced disasters found “This is due to the fact that countries with high-quality infrastructure stand to have greater potential economic losses, even if they have relatively few deaths, when a disaster strikes than those without well-developed infrastructure. Conversely, a country may lose many lives due to poor infrastructure but have a relatively low economic loss from an event” (Escaleras & Register, 2016)

To sum up, countries that are poor and without a significate part in international trade disaster is limited to local destruction and will not have significate effect upon world financial markets. Important economic industries that survive a disaster will keep a country’s GDP stabilized and the international financial market fare well if a lower percentage of insurance claims are paid