Globalization | Economic Globalization | International Trade

[Note: The Following Article would cover all the above/stated topics comprehensively. However, if explained further, this could also be written in English Essay Examination. All of the given Topics are very important in respect of Current Affairs, International Relation and English Essay]

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Globalization is process of interaction and integration among people, organizations, institutions and governments of different states. The term globalization is very recent, although some philosophers trace its origin in history long before the European age of discovery. However, the term seized the peak in 20^th century when connectivity of world’s economy and cultures grew rapidly. In 2000, International Monetary Fund (IMF) mentioned four basic aspects of Globalization namely: (i) Trade and Transactions. (ii) Capital and Investment Movements. (iii) Migration and Movement of People. (iv) Dissemination of Knowledge.

International Trade:

            The contentiously increasing trend of globalization has escalated the international trade too. The term international trade refers to the exchange of capital, goods and services among different nations/states of world. International trade has become immensely important in this modern era of globalization because of its social, political and economical benefits. Silk Road, Amber Road and Salt Road are the best examples of international trade programs.

            Though the term seems beneficial for the world economy but Neorealist philosopher Mearsheimer opposed this term and stated that the globalization reflects the hegemonic influence of the major powers in international trade. Contrarily, Neoliberal philosopher Adam Smith advocates the International trade caused by globalization and says “no restriction on manufacturing, no barriers in commerce, and no taxes & tariffs are the best way for nation’s economy to develop".  

North-South Conflict & Global Inequality:

            The conflicts between poor countries living in the southern hemisphere and rich industrial countries living in northern hemisphere have been aggravated in past few years. Over past century seriously growing material inequalities have been noticed between affluent countries in North America, Western Europe and Japan (which persist of less than 18% of the world population and holds more than 60% of world income) and poor countries of Asia, Africa and Latin America (which persist of a major portion of global population and holds very little of the world’s income).

            The Neorealist put the burden of this major difference on rich/northern countries. Since in the age of colonialism the European states established industries and grew their economy by trading throughout the world, whereas the colonies of southern areas were not allowed to produce or manufacture the goods but to buy the same from Europe. This discrimination kept the countries of southern hemisphere unskilled and undeveloped for ages. However after decolonization southern countries started industrialization and growing but still there is definitely a big gap between the two.

            According to a report in 1820 the per capita income of Western Europe was 1:3 in respect of Africa but in 2000 it escalated to 1:13 which is definitely a huge difference and substantiation of global inequity. An Oxford research shows that 85 richest people hold money equals to the wealth of poorest-half of the world’s population.    

Free Trade Theory:

            Free trade, also called “Laissez faire” (Leave Alone) is economic policy based on the argument of Adam Smith (Neoliberal) in favor of international trade without barriers. It states that government should not discriminate imports and should not interfere exports by applying tariff to imports and subsidies to exports. However there are certain barriers in way of Free Trade e.g. Quotas, Taxes and Tariffs on Imports and Subsidies on Exports.

            However realist philosophers like Mearsheimer and Morgenthau believe that Free Trade is unreal, fantasy and a myth. They believe that rich and developed countries exploits poor states in the name of Free Trade where they subsidies their exports and enjoys the imports at cheaper costs. By this way the poor states are getting poorer and rich states are getting richer by the passage of time. Realists see trade agreements as one way through which nations seek to squeeze other nations and thus elevate their international power ranking.

World Trade Organization WTO:

            To regulate the international trade an inter-governmental organization was established in 1995 under the Marrakesh Agreement signed by 123 nations. Before WTO the GATT (General Agreement for Tariff and Trade) was established in 1948 for the same sake; however in 1995 it was replaced by World Trade Organization. The aim of establishing such organization was to provide the participants with a framework for trade negotiation and resolution of disputes thereof.    

            The base of WTO establishment is on liberalism approach where philosophers think the nations with the help of free-trade seek the absolute gain and develops a win-win situation. However contrarily the neorealist approach goes against the absolute gain and talk about the relative gain. Neorealist states that the nations would only go in agreement where their relative gain is higher than that of other, and if the other party/nation wins more they won’t go into the agreement.

Modernization Theory:

It is a version of market-oriented theory that describes that the low-income or undeveloped countries develop economically only in the case when they compromise their traditional way and adopt modern economic institutions.

Dependency Theory:

This is the Marxist theory of economic development that argues the exploitation of poor states by rich and developed states by Trade Agreements and Multi-national organizations. Since, the poor states are dependent on rich states for trade programs and economic growth so developed states put conditions on trade agreement to exploit them.  

World-System Theory:

            This theory argues that there is a world-economy system in which some countries benefit while others are exploited. This theory gives a hierarchy for explanation of this system. Three level Hierarchy:

(i)             Core: Rich industrialized, developed, urbanized, capitalist and dominant countries which exploits all other countries e.g. America, Germany etc.

(ii)       Peripherals: Capital dependant from core, undeveloped and suburbanized. Such countries are being exploited by Cores and Semi-peripherals. E.g. most African countries.

(iii)          Semi-peripherals: Less developed than core but higher developed than peripherals. E.g. India, South Africa, Taiwan, Korea, Mexico etc. 

Three Perspectives on Globalization:

(1)  Hyper-globalist: They believe that the economies are becoming denationalized because of globalization and so-called free-trade. The exploitation of rich states is declining relevance and authority/sovereignty of nation-states. However, Neoliberals negate this fact and state that greater global benefits are being achieved by globalization. 

(2)  Skeptical Perspective: They believe that the best globalization was practiced in 19^th century but now it is not globalization rather it is Regionalization where MNCs are taking well care of their regional/national interest and mostly belong to west region.  

(3)  Transformationalist: They say that the outcomes of the process of globalization are not determined and the economies are growing or declining on their own economic affairs which are unconcerned of globalization.